DCM Shriram Limited analyst Q&A

Thank you. Ladies and gentlemen, we will now begin the question -and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment whi le the question queue assembles. Ladies and gentlemen, if you wish to ask a question, please press star and one. We take the first question from the line of Pujan Shah from Molecule Ventures. Please go ahead.

Yes. My first question pertains to the PVC side. So right now, if you look the government has now decided that they will not announce the ADD. So is there any possibility of MIP being implemented? Or is there any discussion going on because PVC industry is suffering a lot. So what are your views on this one?

So we are actually working with the government on this year, right after the A DD was not done, which was, I think, around the end of November, we have actually been to the government and various ministries to look at MIP and have meetings with the Chemical Ministry, with the Commerce Ministry and in the Finance Ministry. And we talked about looking at MIP because we fit in the last 5 years, the average import price was about $800, $820, but in the last 3, 4 months, it has come down by $600, $620. So, we have taken the issue MIP very actively with the government. Our own ministry, the Chemical, Petrochemical ministry, we have submitted a lot of data. They are also working on it, and we are really aggressively moving for the MIP coming in at a short period of time. The second part, we are also working on QCOs because ultimately, a lot of the PVC is used for potable material like for filling water or soft drinks or others. And there is a need to balance out the quantity of residual VCM in the PVC. So we are working with the government on that also to have QCO implemented which will ensure that the right quality product is used for the potable products. So we have had a discussion with the Jal Shakti ministry industry also and working with them. So we hope that with our steps we are taking for the rational benefits to the PVC industry something will happen.

Got it, sir. So is there any timing you want to put in for the MIP or it is too far to understand this?

Yes. I think timeframe is a little difficult when we are dealing with government ministries, but we are actively on the job.

Got it, sir. And you have been hearing the news about China revoking VAT benefits, that will help us in terms of inching up the realization because our benefit will be gone from 1st April and continuing with the same might be we see a Q4 dumping, a very severe dumping because inventory might get built up at a cheaper level. So, is that possibility happening on industry?

Well, actually, when the government of China announced the removal of subsidy of 13% on PVC from 1st April, it straightaway had a positive impact on the industry. And the prices have gone up three - four rupees already. We are hoping that once it is implemented, it will benefit a little more. So that is something we are actually hoping will be an advantage. And if MIP comes along with it, it will be an advantage with the industry really needs.

Okay. Got it. Last question, p ertains to the same that is PVC, we have been posted INR38 crore of PBIT and we have performed very well compared to the impact happening in the industry. So have you seen easing of pricing in RM that helps in the PBIT or it was more like the operational efficiency?

See, one, our power costs have come down. So as you know, power is the almost 60%, 70% cost of production. So we have seen reduction in our power cost and that is continuous, if you see last 1, 1.5 years, our power costs have been coming down. So that is one key reason. Other than that, the other materials, carbon materials, which have been more or less stable. So, it is the power cost that has helped us.

Okay, got it. I will join back in the end. Thank you so much for answering my question.

Thank you.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. We take the next question from the line of Raj Vyas from Bonanza Portfolio. Please go ahead.

So, I just wanted to have a brief update with respect to the demand scenario that we are having across the product and also any tariff impact that we are seeing , that has impacted the performance in certain verticals?

So which product are you talking about?

Across the products?

All our products.

Yes.

So, all of them have different duties, different structures. So that is moving as -- with the government, as I just mentioned about PVC, what is already moving on PVC that you are a ware of what we are looking at. I think on the other products really on caustic soda, there is some import duty, which is there at a very low level that is moving over there. On epoxy resins , the government has implemented some anti -dumping duty in November 2025, which is advantage in that industry. So government is aware, but we need to -- government needs to actually take some more corrective action for some of the products, which will make a difference to not only us, but to many other factories or companies who are in similar businesses.

Right. And we have also seen this margin pressure cont inuing for the Fenesta vertical right and last quarter also you had mentioned that it was primarily because of the product mix and this time also it was because of product mix and higher fixed costs as well. So I mean ballpark number that we are looking at, for example, to see where the margins can stabilize? And also, what was the reason behind the order book going slightly down for the quarter?

Yes. So see, one c oming on the margin reduction. See margins, as was mentioned in the Chairman speech, when you ideally put it that this is product mix. But one another reason that has happened is that one our facade business is picking up. So there were larger volumes and revenue coming from facade. And currently that busines s is we are entering the market, right, a nd so we a re not really wanting to earn any significant margins there. That is one. And then aluminum prices went up significantly. So that does impact, that has a lag impact because your older orders, which were taken especially in retail, they may not have the linkage to price. So therefore, that was one additional factor this quarter, which led to a reduction in margin. That is your answer to your first question. What was the second question, please?

So any -- where we are seeing the s tability in the margins, right b ecause earlier it was at double -digit margins. If I see on a yearly basis, right? And this quarter, it was -- it has come to single digit. So any stability in margins where we can see that going forward. Or, this is the ballpark number that we – we can look forward to?

So see currently we are investing in growth, right . As I mentioned, facade is doing well, our aluminum extrusion plant will come online in next 3 to 4 months. So , there is -- this business is in the investment in the growth phase right now. So margins -- I would not say they are under pressure, it i s like building up for better margins going forward, which should be there, let us say, 6 months down the line we should see margins in ching up. Once all these investments that we a re doing, acquisition that we have done, looking at a few more. So all these things will add up, but then if we take one or two -- two quarters at least for m argins to add up and help grow.

As the volume grows.

As the volume grows, yes and the cost efficiencies come in.

Okay. Understood. And coming to a question with respect to the acquisition. So on Hindusthan Specialty Chemicals that we have acquired, right? So we were expecting to break even the losses that we were having from that company by year-end. So are we sticking to that timeline?

So see, we said it will take about a year. We acquired this business in end of August, right.

Yes, yes.

So yes, by within -- by end of the year we should be nearing by the end of these 12 months since acquisition, we should be nearing the breakeven or maybe better than that.

Okay. And lastly with respect to the demerger of our consumer facing products, any update that we can get?

Yes. So we are in the advanced stage s. See, it is a very old organization, over 100 years old organization. So there are a lot of inter linkages. And the idea is when we separate the companies, there should not be any inter linkages. So those having clarity on that takes a bit of time. We have large part of the clarity and we are moving in that direction. We have clarity internally. So we are moving in that direction.

Okay. And any kind of guidance before I -- like I end my questions, any kind of guidance on the top line or bottom line for the next say 2 years d own the line or 3 years down that we as a company are aspiring to reach that level?

So we as an organization h ave been making investments. You have seen we invested close to about INR4,000 crore, INR5,000 crore in last 3 years, 4 years. And these should accrue to our cash profits going forward, once they stabilize. So let u s say from FY '27 onwards we should see a profit better and we wi ll continue to grow. So our endeavor is to g row each of these businesses, add to the value chain in each of the businesses. So we will continue to do that.

Okay. Thank you so much.

Thank you.

Thank you. Ladies and gentlemen, if you wish to ask a question please press star and one. We take the next question from the line of Ahmed Madha from Unifi Capital. Please go ahead.

Thanks for the opportunity. F irstly, on taking the previous participant on the restructuring/demerger spin-off, can you give broad sense of timelines? I think we announced this Board meeting about I think 9 or 10 months ago. So there has been a bit of time. So any broad timelines you can give to finalize the structure?

Ahmed our intention is to do it as early as possible, frankly. As I said when answering the last question, we have a lot of clarity now, right. Certain loose ends just have to be tied and we hope to do it as early as possible. If all goes well, maybe next 3 months, 4 months we should be there. But we are pretty muc h -- as I said, a lot of loose ends have been tied up, f ew -- are left, which we should complete in the next 3 months, 4 months, hopefully.

Can you elaborate a bit on what all things are sort of leading to a sort of a delay. It helps us to appreciate what all, what are the moving factors?

Sure. So see it comes from the fact that there are like, for example, Fenesta business, it has its roots in Kota itself, right . Now Kota has particular kind of lease structure. So all those have to -- we need to have clarity even with the government we need to have clarity whether we can do that or not. So which means we need to speak to government channels and all that. So those are the kind of things which take time and have clarity. And at tim es, given that it is government it takes a little more time and a few such other things.

Sure. Got it. And on the chemical business, we have been investing. We have invested a lot. On ECH business and epoxy business, specifically, if you can give some sense where are we in Epichlorohydrin as of now in terms of the product trials, approval, operating capacity what stage we have reached so far. And in foreseeable future what kind of utilization are sort of fair to achieve or practical to achieve in next few quarters. And in the current quarter, what sort of losses or the incremental stabilization costs we incurred for Epichlorohydrin business, then I will come to epoxy second?

So as you will be aware the Epichlorohydrin plant was commissioned in Q3 FY '26. Two-thirds of the capacity approximately has been commissioned. The plant is now under stabilization, ensuring the right efficiencies. And we expect that in the current quarter, we will be doing some further work to ensure that we are able to run the plant steadily. And by the end of this quarter, we expect to commission the remaining capacity. And therefore, after that run smoothly. The effort on the market side has been ongoing continuously, whether it is domestic markets or export markets. Our quality has been approved and accepted by the key customers, largely the epoxy players themselves. So, we are very optimistic that by the end of this quarter, we will run the plant efficiently, and then ramp up the capacity soon after that.

Okay. And will the balance capacity be commissioned by the end of this quarter or will take more time?

Yes. By the end of this quarter, we expect the balance capacity to be commissioned.

Got it. On epoxy business, sort of -- I am assuming you would have consolidated the entire company for the first time in this quarter. So in terms of changes to be made in terms of processes, vendors, where are we in the overall process? And what was the contribution from the Hindusthan Chemicals entity in terms of revenue and profits or other losses in Q3? And where do we see it going in the next financial year?

So, the acquisition that we did in August 2025 has now been completed. We are in the process of integrating the operations, improving efficiencies, improving the safety practices standards, running the entire plant and the business along the lines that we expect. So that takes some time, some stabilization. What we are doing also is actually focusing more on the higher value part, which is what is called formulated resin. So we have LER capacity, and we have FR , formulated resin capacity. So we are looking to grow that part of the business more aggressively. That of course takes time. You have to get approvals from customers, work on application development etc along with the R&D teams. But we expect that with that, we will be able to grow the verticals, and we expect a healthy profitability start in the coming quarters. So in the next year, FY '27 onwards, we should see a good profitability from this vertical.

And can you please spell out the revenue / losses number for epoxy business as well as ECH business. We can give a broad range , it help us to understand how the base caustic business has done considering the volumes have been better compared to last year. Prices have declined year -on-year, but sequentially, it has been okay. So just to understand the base business a little better, if you can give the numbers. Broad range will be okay.

Yes, yes. So revenue was in the range of around INR90 crore to INR100 crore for the quarter from HSCL which is currently a subsidiary, and there were marginal losses at EBITDA level.

ECH, I do not have the exact numbers. We see ECH, we started only in the month of October , right. And in ECH, I think by now in the first week of January is when we reached almost 100 tons per day, which is like two-third of the capacity which we commissioned. However, we are still working on the efficiencies because it takes time. We are doing for the first time and stabiliz ing the technology takes time. So we are not very efficient right now. So , we are not making money in ECH right now. But we do expect that by Q4 end, we should have solved a large part of our efficiency issues. So yes, that is where we are.

Okay. Got it. Moving to the sugar business, considering there has been meaningful increase in the SAP prices for the season and the sugar prices have gone up compared to last year, but not enough, and you have been very vocal about it in both in terms of making policy decisions as well as in investor calls. Going by the current season, would you like to provide some comments on how do you see the season -- upcoming season in terms of both volume production yields as well as our profitability with higher cost?

See, on volume and production, production as of now is good. It is a little better than last year also because the recoveries are better than last year. So that is encouraging. But what will be the total production, it is a little early. I think by February is when we get more clarity on how the overall production will pan out. So that is one. In terms of cost, you are right, costs will be higher. I mean straight away INR 3 get passed on, although the recovery is better. Then it is a matter of what the product prices will be. But then yes, we are actively pursuing government to look at the minimum support price for sugar. If that comes up, it helps if something happens on sugar exports that can help and also on ethanol. So we are working a lot of framework with the government, a lot of policy advocacy with the government. So we should support prices. But as of now, yes, margins will be lower than what they have been till now at current prices.

Sure. Last question on Fenesta. You explained it should take a couple of quarters for margins to sort of stabilize and again , improving with volumes. Based on whatever investments we have made, what should be the normalized margin which we assume for Fenesta business in terms of EBITDA ? Last year, it was 18, 19 . This year it was 12 -14. So will it be somewhere between the number or it will be like 13%-14% kind of number with expanded capacities and products?

I would say this business should be around 14% once we have the scale and cost advantage is coming from backward integration. I feel we should be at around 14%. That is what guidance I have been giving for last couple of quarters. That was never an 18 %-19% margin business given what we were planning to do. And now that planning is taking shape. So, we will continue to target around 14% margin.

Sure. I get it. Sure, sure. Sorry, last question I had on the Agri business. So assuming this season was slightly average for Rabi, are we sort of carrying any major inventories for Farm Solutions business which sort of creates a problem later or next season, something of that sort? Is it fair to assume? Or the channel is clean and we do not have major inventories. Would you like to provide any comments on that?

Yes. There are no channel inventories. S ee, our biggest business is wheat seed , research wheat. And we are glad to say that we -- last year, we did about 93,000 metric tons. This year, we have increased by about 20% in terms of our sales to the farmers, which is about 113,000-114,000 tons. What is impacted is we had targeted about 125,000, 130,000 tons. So that product could not be sold. And in wheat, you cannot store. So you have to sell it in the mandi, which goes below cost.

Okay.

So that is what has hit the profitability. Otherwise, and , you know, some bit of the margins overall. But otherwise, I would say the segment has done well in terms of volumes. And just to answer your question, there is no pipeline of inventory.

Okay. So, basically, whatever the incremental volumes have been cleared up and there is no baggage going into the next.

Yes. Absolutely.

Okay, sure. Perfect. Thank you so much.

Thank you.

Thank you. We take the next question from the line of Rajakumar Vaidyanathan from RK Invest. Please go ahead.

Yes. Good evening. Can you hear me?

Yes, we can hear you.

Yes. Thank you. Thanks for the opportunity. So the first question is on the caustic soda segment. I just want to know what is your outlook for this segment for the upcoming quarters? This quarter, you have done very good on the volume side, but the margins have dipped. So, given this tariff situation, are you seeing any softness in demand? Can you just give some color on the outlook?

So, I think in the coming quarters, we do expect a fairly stable to positive outlook for the caustic soda and chlorine business. The demand fundamentally is robust for us in India, a large percentage of the demand is domestic itself. As an industry, we have moved from being net importers to net exporters, but bulk of the demand continues to be domestic demand. So we feel that while there are some large capacities coming up in the next 1 to 2 years, we expect stable to positive o utlook in the coming quarters.

Okay. Thank you sir. And sir, second question is on the hydrogen peroxide segment. Can you give some outlook, how is the pricing and the margins looking?

So currently, our plant itself is running at close to capacity. As an industry in India, it is an oversupply scenario at this point. There are other players also who have commissioned capacity. So prices are under pressure. So we will have to see how it evolves in the coming quarters. But we are working on various avenues to help improve margins.

Okay. And moving to the Sugar segment, I want to know what is the current recovery levels compared to last year? And do you expect the recoveries to be better in the upcoming quarter?

Yes. So compared to last year, we are better by about 0.4%, 0.5%. Now if the trend continues, yes, we should be better in the coming quarters as well.

So what is the absolute number?

I would not have the number right away, but we are better by that number.

Okay. And you expect this to improve further in the current quarter, right?

Yes. If the trend continues, yes. See, these are climate driven. So we do expect it should continue.

Okay. And the last question is, you recently signed a JV or an MOU with Bayer India. So I want to know what is the short- to medium-term benefits we will be getting in terms of sales and margins?

So see, the MOU with Bayer is largely to explore what we can do together. So currently, like there are one or two products. One product, we have already tied up in the crop protection space, which we will be launching for Bayer. So it is like those kind of things . it is more futuristic to see how both the parties can come together with their technical prowess, their product prowess and our distribution prowess we can work together and create value for the farmers.

Okay. And are you looking at furthering this relationship or it will be only restricted to do whatever you have mentioned the press.

Yes. As of now, it is more transaction based. If something comes up, we are open to lookin g at working together as well.

Yes. My question is, will there be any outsourcing opportunities with Bayer? Will you be supplying to their entities overseas?

No. As of now, there is no such plan.

Thank you so much.

Ladies and gentlemen, if you wish to ask a question, please press star and one. We take the next question from the line of Pujan Shah from Molecule Ventures. Please go ahead.

Yes. So just wanted to understand caustic soda part. So in caustic soda, has the realization been cooled up or if the ECU has been cooled because of the impact of chlorine?

See there is no significant reduction, I would say, in ECUs. They are marginal INR400 , INR500 here and there. So I do not think I would attribute to any particular factor. In month -on-month, it keeps waiting whether chlorine goes down or caustic soda price goes down or the flakes prices are better. So there is no fundamental shift in where I am coming from.

Got it and so amplifying the question, in terms of China is implementing this VAT, so do we see the benefit in caustic as well?

So to the best of our knowledge, China has not implemented this for caustic soda . It is for PVC and for other products. So there wo uld not be a direct impact -- but the PVC and the caustic soda industries are closely linked. So we will have to see how it plays out, the impact of this on PVC and therefore, on caustic.

Okay, got it sir. Just want to understand the PVC. So let us sup pose if you consider if AD D gets implemented, the China duty was ranged around $122 to $232 per ton. So now if MIP comes up -- so it is equivalent significance of the duty. So then we are not going to apply for ADD, right? Because MIP might be for a limited time. So until that time we might result fo r AD or it wo uld not be that case?

I think the approach to -- MIP is the priority right now because ADDs already being rejected once by the government. And the ADD approval process is fairly long. It does not happen as fast as we, hopefully, the MIP well. So MIP is a focus right now. We wi ll see what the market situation is like after that and then take up the ADD work also if necessary.

Okay. And if MIP gets implemented, it would be for 6 months?

We do not know. We do not know. We have asked for a longer period. We do not know what the government will do.

Got it, sir. Thank you sir.

Thank you.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. Ladies and gentlemen, we take that as the last question and conclude the question -and-answer session. I now hand the conference over to the management for their closing comments.

Thank you . Ladies and gentlemen, thank you very much for your participation in our earnings conference call. As new trade barriers emerge across developed economies, the imperative for Indian corporates is towards realignment. True progress lies in building internal strength through sharper cost focus, operational efficiencies, continuous innovation and deep er technological adaptability. At DCM Shriram, we are building this resilience through number one, relentlessly optimizing our operational core to ensure we remain lean and agile. By focusing on efficiencies , we are working towards ensuring that our margins remain healthy. Number two, strengthen the value chain in our businesses; and number three, digital transformation as technology is the backbone of our evolution, and we are leveraging data -driven insights and automation to enhance our adaptability efficiencies and to sharpen our decision -making. And environmental stewardship is no longer a peripheral goal , it is a firmly embedded in our investment philosophy. We are making our businesses greener that deliver long -term value to all our stakeholders. Thank you very much once again.

Thank you. On behalf of DCM Shriram Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.