Sudarshan Chem.

Sudarshan Chemical Industries reported a robust Q4 FY26, with the acquired Heubach group delivering Euro 11 million in Business EBITDA, exceeding the projected Euro 9-10 million. The company also successfully reduced inventory by Euro 29 million, surpassing its target of Euro 20 million. This strong performance contributed to a reduction in group net debt from INR 934 crores in December '25 to INR 755 crores by March '26, resulting in a healthy net debt-to-equity ratio of 0.3x.

The integration of the Heubach and Clariant businesses, acquired in March '25, is progressing well, despite initial challenges from integrating three entities. The company is focusing on value capture initiatives, which have significantly contributed to positive EBITDA for the acquired group. The 'One SAP Drive project Integra' is underway to integrate 4 systems and 180 applications, aiming for completion by year-end, which is expected to drive further efficiencies and value.

The RIECO business demonstrated a strong turnaround in FY26, with revenue from operations growing 17.5% to INR 268 crores, up from INR 228 crores in the previous year. More significantly, RIECO's EBITDA turned positive, reaching INR 10 crores, a substantial improvement from a negative INR 17 crores in the prior year. Management expressed confidence that the transformation is ongoing and expects continued improvement in its performance in the coming years.

The company is actively managing the impact of the Middle East crisis, which has led to increased costs for petroleum-derived raw materials, energy, and logistics, alongside supply constraints. Management is leveraging its global footprint to ensure supply continuity and is implementing value capture efforts to pass on cost increases to customers, balancing volume maintenance with margin protection. This strategic approach aims to mitigate the adverse effects of the challenging working environment.

Sudarshan has made significant strides in streamlining its supply chain processes and rebuilding customer trust, which was impacted by broken supply chains post-acquisition. The substantial inventory reduction of Euro 29 million in Q4, with a further target of Euro 15-20 million, reflects improved supply chain efficiency and a return to normalized inventory levels. This optimization is expected to lead to a convergence of reported and business EBITDA going forward^⏳.

The reported depreciation for Q4 FY26 was INR 50 crores, a notable decrease from previous quarters. This was clarified as a one-time^📎 reduction due to the fair value remeasurement of assets and liabilities under Business Combination Accounting (Ind AS 103) during the measurement period. The annualized depreciation for FY26 is now stated as INR 347 crores. The effective tax rate (ETR) for the acquired group is currently slightly higher due to accounting bases, with similar ranges expected for the year.

The Legacy Sudarshan business experienced flattish revenue in FY26, primarily due to rationalization of go-to-market strategies, particularly in Europe and LatAm. For FY27, management anticipates an 8-10% growth for the legacy business, driven by customer centricity and agility. The company aims to maintain healthy margins in this segment by effectively passing on cost increases to customers, ensuring profitability despite market volatility^🌐.

Sudarshan Chemical Industries confirmed it has sufficient capacity headroom in both its legacy and acquired businesses to support future growth. The company's projections for EBITDA over the next 3-4 years do not require significant new investments for volume expansion, indicating that existing capacities are adequate to meet anticipated demand and growth targets. This strategic positioning allows the company to focus on operational efficiencies and integration benefits.