Tarsons Products Limited

Tarsons Products reported resilient performance for Q2 and H1 FY26. Standalone revenue for Q2 FY26 stood at ₹81 crores, with EBITDA at ₹26 crores, reflecting an 11% Y-o-Y growth. The standalone EBITDA margin for Q2 FY26 improved by 320 basis points to 32.5%. For H1 FY26, standalone revenue was ₹152 crores, and EBITDA was ₹48.4 crores, growing 19% Y-o-Y with a margin improvement of 390 basis points to 31.9%. Consolidated revenue for Q2 FY26 was ₹102 crores, a 3% growth, with EBITDA at ₹27 crores and a margin of 26.8%.

Despite strong EBITDA growth, standalone PAT for Q2 FY26 declined to ₹6.5 crores from ₹12.9 crores in Q2 FY25, and H1 FY26 PAT fell to ₹10.1 crores from ₹19.4 crores in H1 FY25. This decline is primarily attributed to higher depreciation expenses of ₹20 crores arising from the partial capitalization of the Panchla facility, coupled with high borrowing costs. Management expects PAT margins to return to normalized levels once the new facilities are fully commissioned and revenue contribution commences. Peak depreciation is projected to be ₹85-90 crores for FY26 and ₹100-105 crores for FY27.

The Panchla and Amta facilities are nearing completion and are expected to be fully operational by Q4 FY26. The total capex program for these facilities, along with existing plants, is estimated to be ₹550-650 crores, with ₹300 crores for Panchla, ₹150 crores for Amta, and ₹100 crores for existing plants. These expansions will significantly enhance addressable market and enable deeper penetration, focusing on new products like PETG bottles, roller bottles, and cell culture products. The ramp-up for full capacity utilization is expected to take 3-5 years overall, and 2-3 years for existing products.

The export business faced challenges in Q2 FY26, with a drop attributed to withheld shipments due to non-issuance of Bill of Lading. Global uncertainties and trade tensions, including a 50% US tariff, also impacted exports. However, management remains optimistic, citing a healthy order book and strong relationships with US customers, with hopes for tariff reductions. The company is also exploring opportunities in new geographies like Europe and Asia, leveraging its diverse product portfolio and cost-efficient manufacturing base.

The domestic market is experiencing increased competition with new players entering the segment, and some products are being treated as commodities. Tarsons aims to counter this by continuously launching new products and leveraging its strong brand recall to gain wallet share. Management stated that domestic revenue is not stagnant, having increased to ₹215 crores in the last year, and they are focused on maintaining margins by offering volume-based discounts rather than aggressive price cuts.

The Nerbe acquisition, made almost two years ago, was strategic rather than financial, aimed at leveraging product overlap and brand recall in Germany. However, its performance has been flat due to the challenging German economic environment, which has seen degrowth in other larger companies. Tarsons has not yet started supplying to Nerbe, prioritizing organic capex completion and external customer demand, but plans to push new products through the Nerbe brand to boost sales in the future.

The company's capital work in progress (CWIP) stands at ₹251 crores, with capital advances of ₹64 crores, all expected to be capitalized by Q4 FY26. The total capex program is estimated at ₹550-650 crores. Standalone peak debt is projected not to exceed ₹350 crores, and consolidated peak debt is estimated at ₹425-450 crores, including the Nerbe acquisition. The company is focused on disciplined loan repayment and expects improved operating leverage and margin expansion as utilization levels ramp up.