Vishnu Chemicals Limited

Vishnu Chemicals reported Q1 FY26 consolidated operating revenues of Rs. 346.9 crores, a 2.4% increase year-on-year from Rs. 338.9 crores in Q1 FY25. Despite this growth, the company experienced a moderation in sequential performance, primarily due to demand deferment and tariff uncertainties impacting export markets. Consolidated gross margin improved by 81 basis points YoY to 46%, while EBITDA margin remained stable at 16.1%. PAT increased by 5.8% YoY to Rs. 32.2 crores, with the domestic:export sales mix at 55:45.

The company's consolidated exposure to the US market is approximately 7% of total sales. For Barium chemicals, which constitute 12% of Barium sales to the US (Rs. 44 crores last year), there are no tariffs, and the company expects continued volume growth. However, Chromium exports to the US, representing 5% of Chromium sales to the US (Rs. 60 crores last year), face a 28% tariff (25% plus 3.5%). While customers are currently bearing the 10% duty on existing shipments, future tariff implications (potentially 25-50%) remain fluid and are under discussion.

Vishnu Chemicals is progressing with its foray into Strontium chemistry, with the Strontium carbonate project underway. Production is now expected to commence in Q3 FY26 (September/October), a delay of approximately two quarters from the initial Q1 FY26 target. The plant will have a capacity of 12,000 tons per annum, and management highlighted strong demand from Asia, especially given a 24,000-ton market gap due to a fire at a Mexico facility.

The company's consolidated manufacturing expense as a percentage of revenue declined by 100 basis points YoY to 6.2% in Q1 FY26, driven by ongoing process improvements. Capacity utilization for Chromium chemicals is expected to surpass 80% this year, with a target of 10% volume growth. Barium capacity utilization, which was in the mid-60s in FY24, is targeted to reach 80-82% by the end of FY26, indicating strong operational leverage.

As of June 30, 2025, Vishnu Chemicals has spent Rs. 46 crores on CAPEX for Vishnu Strontium Private Limited. The company's net debt stood at approximately Rs. 250 crores as of the same date, resulting in a healthy net debt to equity ratio of about 0.25x. Future CAPEX plans for Chromium and Barium verticals will be strategized once clarity emerges post-tariff stabilization.

Vishnu Chemicals' R&D expenditure, which is outsourced to a third party, is approximately 0.5% of its total consolidated sales. The company is actively focusing on diversifying its Chromium derivatives portfolio towards higher value-added products like metal plating, wood preservatives, pigments, and dyes, reducing its exposure to the leather industry to 15-20% of Sodium dichromate volumes. This strategic shift aims to mitigate cyclicality and enhance margin stability.

The acquisition of the South Africa mine is still awaiting statutory approvals and clearances, with completion anticipated on or before November 2025. Management expressed hope for pent-up demand to flow through the rest of the year, covering the sequential decline experienced in Q1. They also noted that while the 10-15% top-line growth guidance is currently 'academic' due to market uncertainties, the non-substitutable nature of their chemicals provides long-term resilience.