Q1 2027 Sudarshan Chemical Industries Ltd Earnings Call

August 14, 2026

Speaker #1: Good morning, everyone. We already have 80 participants, so please let us know when to begin the call.

Speaker #2: Oh, Ranjit, we have got the notification that we can begin in around a minute or two from now, once we have 100 participants.

Speaker #1: Okay. So let's say we can start.

Speaker #2: Thank you. Ladies and gentlemen, good day, and welcome to the Sudarshan Chemical Industries Limited earnings call for Q1 FY27 financial results. Please note, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

[Company Representative] (Sudarshan Chemical Industries): Thank you. Ladies and gentlemen, good day, and welcome to Sudarshan Chemical Industries Limited earnings call for Q1 FY27 financial results. Please note all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. With that, I hand over the call to Mr. Ranjit Chirumalla from IIFL Capital. Thank you, and over to you.

Operator: Thank you. Ladies and gentlemen, good day, and welcome to Sudarshan Chemical Industries Limited earnings call for Q1 FY27 financial results. Please note all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. With that, I hand over the call to Mr. Ranjit Chirumalla from IIFL Capital. Thank you, and over to you.

Speaker #2: Please note that this conference is being recorded. With that, I hand over the call to Mr. Ranjit Chirumala from IIFL Capital. Thank you, and over to you.

Speaker #1: Thank you, Supril. Good morning, everyone. Ranjit Chirumala here from IIFL Capital. We are pleased to host the conference call with the management of Sudarshan Chemical Industries Limited to discuss earnings performance, followed by an interactive Q&A session, post-declaration of its Q1 FY27 results.

Ranjit Chirumalla: Thank you, Sunil. Good morning, everyone. Ranjit Chirumalla here from IIFL Capital. We are pleased to host the conference call with the management of Sudarshan Chemical Industries Limited to discuss earnings performance, followed by an interactive Q&A session, post declaration of its Q1 FY27 results. From the management, we have with us today Mr. Rajesh Rathi, Chairman and Managing Director, Mr. Amitabha Mukhopadhyay, Non-Independent Non-Executive Director, Mr. Nilkanth Natu, Chief Financial Officer, and Mr. Ramayya Thale, Vice President, Finance. I now request Mr. Rathi to begin the proceedings. Thank you, and over to you, sir.

Ranjit Cirumalla: Thank you, Sunil. Good morning, everyone. Ranjit Chirumalla here from IIFL Capital. We are pleased to host the conference call with the management of Sudarshan Chemical Industries Limited to discuss earnings performance, followed by an interactive Q&A session, post declaration of its Q1 FY27 results. From the management, we have with us today Mr. Rajesh Rathi, Chairman and Managing Director, Mr. Amitabha Mukhopadhyay, Non-Independent Non-Executive Director, Mr. Nilkanth Natu, Chief Financial Officer, and Mr. Ramayya Thale, Vice President, Finance. I now request Mr. Rathi to begin the proceedings. Thank you, and over to you, sir.

Speaker #1: From the management, we have with us today Mr. Rajesh Rathi, Chairman and Managing Director; Mr. Amitabh Mukhopadhyay, Non-Independent, Non-Executive Director; Mr. Neelkanth Natu, Chief Financial Officer; and Mr. Amay Athale, Vice President, Finance.

Speaker #1: I now request Mr. Rati ji to begin the proceedings. Thank you, and over to you, sir.

Speaker #3: Thank you, IIFL Capital, and Ranjit ji for hosting us. It's a pleasure, and thank you all for sharing your valuable time and joining this call.

Rajesh Rathi: Thank you, IIFL Capital and Ranjit for hosting us. It is a pleasure. Thank you all for spending your valuable time and joining this call. Truly excited to share our journey with you. Giving a small introduction to people who have joined the first time on the call, giving you some background. More than 18 months ago, 25 March, Sudarshan kind of merged their business with Clariant, worldwide Clariant and Heubach together to form one of the most value-creating pigment leader rooted in customer centricity and agility and innovation. This new entity would really create a new benchmark for the color industry. In total, just to give you a footprint, now totally globally, we have 19 manufacturing sites in 11 countries in five continents. We have products, more than 1,600, more than 4,000 global customers.

Speaker #3: I'm truly excited to share our journey with you—our journey with you. To give a small introduction to those who are joining the call for the first time, let me give you some background.

Speaker #3: More than 18 months ago, on March 25, Sudarshan kind of merged the business with Clarion Birchwhite, Clarion, and Pibox together to form one of the most value-creating pigment leaders, rooted in customer-centricity, agility, and innovation, right?

Speaker #3: And this new entity would really create a new benchmark for the color industry. In total, just to give you a footprint, now, globally, we have 19 manufacturing sites: 11 in 11 countries across 5 continents, right?

Speaker #3: We have more than 1,600 products, more than 4,000 global customers, and a turnover close to $1 billion. And, you know, we're on the way to really boost our EBITDA.

Rajesh Rathi: Our turnover is close to 1 billion, and on the way to really boost our EBITDA. If you see, our plants are very well spread across the globe. The most competitive advantage for Sudarshan against any other player is that more than 60% of our assets, 55% to 60% of our assets are based in Asia. That is a big competitive advantage for us, and this is the spread of our global manufacturing footprint. We also are very proud of our technical marketing centers, and we are able to, again, this provides us to provide a differentiated solution to our customers. Giving you all some flavor on. Before I actually go into the Q1 performance, I wanted to give you a flavor on how the integration is going and what gives us the confidence that it has really laid down a very strong foundation.

Speaker #3: If you see, our plants are plants of very well-spread across the globe, but the most competitive advantage for Sudarshan against any other player is that more than 60% of our assets, 50% to 60%, 55% to 60% of our assets are based in Asia.

Speaker #3: Right? And that's a big competitive advantage for us. This is the spread of our global manufacturing footprint. We are also very proud of our technical marketing centers.

Speaker #3: Technical marketing centers, and we are able to, you know, again, this provides us the ability to provide a differentiated solution to our customers. Before I actually go on to the Q1 performance, I wanted to give you all some flavor on how the integration is going and what gives us the confidence that it has really laid down a very strong foundation.

Speaker #3: It's been a remarkable transformation journey for Sudarshan, and I've been blessed to lead this journey. If you go back two to three years ago, our sales were to the tune of about ₹2,000 crore, with EBITDA in the range of ₹200 to ₹250 crore.

Rajesh Rathi: It's been a remarkable transformation journey for Sudarshan, and I've been blessed with leading this journey. If you go two to three years ago, our sales were in the tune of about INR 2,000 crores with the EBITDA in the range of INR 200 to 250 crores and a net debt of about INR 800 to, at a peak, let's say INR 950 to 1,000 crores. Today, what we are, we are almost four times the revenue, four times our EBITDA, and our net debt is reduced by 60%. What we aspire to be is really seven times of what our EBITDA was in 2023, and also reach a debt-free level, and that's our aspiration going forward. Just to remind you, when we took over this business, this business was driven by silos, regions, and there was no unified culture or a unified approach.

Speaker #3: And a net debt of about ₹800 crore to, at a peak, let's say, ₹950 to ₹1,000 crore, right? Today, we are almost 4 times the revenue, 4 times our EBITDA, and our net debt is reduced by 60%.

Speaker #3: What we aspire to be is really seven to seven times what our EBITDA was in '23, right? And also reach a debt-free level, and that’s our aspiration going forward.

Speaker #3: So, just to remind you, when we took over this business, it was driven by siloed regions, and there was no unified culture or a unified approach, right?

Speaker #3: What we feel very proud of is that we created this one Sudarshan, one Sudarshan culture, one aim, one goal for every one of us to work towards, right?

Rajesh Rathi: What we feel very proud that we've created this one Sudarshan culture, one aim, one goal for every one of us to work towards. We are very happy and proud to say that we have opened our second global headquarters in Frankfurt. There were critical gaps in the leadership pipeline. If you look at finance, HR, legal, IT, supply chain, there were very big critical gaps, and we've been able to get very good talent now and set up a very good organization structure. Again, that gives us a great confidence and to boost our governance and our performance. There were complete lack of harmonized reporting systems. We were still working on more than four different SAPs, 130 different applications. This adds to a lot of complexity and very difficult to get any financial information this.

Speaker #3: We are very happy and proud to say that we have opened a second global headquarters in Frankfurt. There were critical gaps in the leadership pipeline.

Speaker #3: If you look at finance, HR, legal, IT, supply chain—you know, they were very big, critical gaps. And we've been able to acquire very good talent now and set up a very good organizational structure.

Speaker #3: And again, that gives us great confidence and, you know, boosts our governance and our performance. There was a complete lack of harmonized reporting systems. We were working—we're still working—on more than four different SAPs and 130 different applications.

Speaker #3: So, this adds a lot of complexity and makes it very difficult to get any financial information, a list of what we are moving towards. We've set up a very good interim MIS, but we are moving towards an advanced one—an SAP project.

Rajesh Rathi: What we are moving towards, we've set up a very good interim MIS, but we are moving towards our advanced One SAP project. We are well advanced with the One SAP project. We call it Project Indica, and we expect to go live with our integrated system and reducing a lot of complexities in this financial year. When we started looking at the business, the EBITDA was almost zero. Today, we have registered a strong EBITDA in Q1 of the acquired group of INR 146 crores in Q1 and feel very happy and satisfied with this performance. There were big cash flow issues, very high debt in the books when we acquired the business. Very glad to tell you that we have already been able to reduce the debt to 5.

Speaker #3: We are well advanced with the One SAP project. We call it Project Integra, and we expect to go live with the integrated system, reducing a lot of complexities in this financial year.

Speaker #3: When we started looking at the business, the EBITDA was almost zero. Today, we have registered a strong EBITDA in Q1 of the acquired ₹2,446 crores.

Speaker #3: In Q1, and feel very happy and satisfied with this performance. There were big cash flow issues, very high debt in the books when we acquired the business, very glad to tell you that we have already been able to reduce the debt to 5 from the peak when we took over the business peak was at 922 crores.

Rajesh Rathi: From the peak of when we took over the business, peak was at INR 922 crores, and we have brought this down in less than 18 months to INR 531 crores, and this journey will continue. Some of the priorities which we have kind of looked at, customer centricity has been at the core and we have been expanding, co-developing our products. Our technical marketing is doing a great job, and product management, to build partnership with our customers. This makes a big difference. We have now set up a customer service world-class organization to ensure that the customer service is top-notch. In terms of value capture or cost reduction, this has been a continuous focus and one of the most important areas along with customer centricity which we've been driving. Today's performance which we see is majorly backed by this initiative.

Speaker #3: And we have got this down in less than 18 months to ₹530.1 crores, and this journey will continue. So, some of the priorities we have kind of looked at—customer centricity has been at the core.

Speaker #3: And, you know, we have been expanding, co-developing products, and our technical marketing is doing a great job. Product management also does great partnership with our customers.

Speaker #3: This makes a big difference. We have now set up a world-class customer service organization to ensure that the customer service is top-notch. In terms of value capture, as well as our cost reduction initiatives, this has been a continuous focus and one of the most important areas, along with customer centricity, which we've been driving.

Speaker #3: And today's performance, which you see, is majorly backed by this initiative. In terms of the organization and operating model, we've set up a Global Capability Center in Pune.

Rajesh Rathi: In terms of the org and operating model, we've set up a global capability center in Pune. We are also ensuring that we build center of excellence in this global capability center. One culture, I described this, what we are doing, and we've also set up second global headquarters. I spoke about SAP, and I think we are very happy that we would be going ahead and kind of lodging, completing Project Indica or the One SAP project in this financial year. Coming now actually to the Q1 numbers. First, I think looking at a little bit of the Middle East crisis. As you all are aware, we are not very different to face these issues. We faced energy cost spikes everywhere in Europe, in India, substantially where our substantial assets are based. We've seen substantial increase in raw material costs.

Speaker #3: We are also ensuring that we build a center of excellence in this global capability center. One culture—I described what we are doing—and we've also set up a second global headquarters.

Speaker #3: I spoke about SAP and I think we are very, very happy that we will be going ahead and kind of launching, completing Project Integra or the One SAP project in this financial year.

Speaker #3: Coming now, actually, to the Q1 numbers. First, I think looking at a little bit of the Middle East crisis—as you're all aware, we are not very different to face these issues.

Speaker #3: We've faced energy cost spikes, you know, everywhere in Europe, in India, substantially—where our substantial assets are based. We've seen a substantial increase in raw material costs.

Speaker #3: Logistic costs have increased some, but more importantly, this whole logistics cycle has increased by two weeks, right? And because of so many uncertainties, many customers across industries have been kind of delaying their purchases, right?

Rajesh Rathi: Logistic costs have increased some, but more importantly, this whole logistics cycle has increased by 2 weeks. Right? Because of so many uncertainties, many customers across industry have been kind of delaying their purchases, right? They don't want to create stocks, et cetera, from that perspective. That has been one of the areas, right? What we've done to address each of them is our procurement has ensured that we have enough safety stock so that the continuity of business is there. At the same time, supply chain is ensuring that we have the right inventory at the right place so that we don't overstock and have high-cost inventories. Logistics, we had to increase some of our inventories in our subsidiaries because the longer logistic times, and sales, we are working very closely with customers to ensure that we deliver the best solutions.

Speaker #3: They don't want to, you know, they don't want to create stocks, etc., from that perspective. And that has kind of been one of the areas, right?

Speaker #3: What we've done to address each of them is our procurement has ensured that we have enough safety stock so that, you know, the continuity of business is there.

Speaker #3: At the same time, supply chain is ensuring that we have the right inventory at the right place, so that we don't overstock and have high-cost inventories.

Speaker #3: Logistics—we had to increase some of our inventories in our subsidiaries because of the longer logistics times. And same as sales, we have been working very closely with customers to ensure that we deliver the best solution.

Speaker #3: If you look at our Q1 performance, the Q1 performance has been very robust. There are three areas. One is, first, you know, the first four columns talk about legacies, Sudarshan.

Rajesh Rathi: If you look at our Q1 performance, the Q1 performance has been very robust. There are three areas. One is first, the first four columns talk about legacy Sudarshan, then the blue shaded column talks of acquired group, and then the pigment as global. Right? That's just been very happy to share that now the numbers, what we've delivered looks solid, and we are now confident that we can continue building on this journey. Right? Legacy Sudarshan, you see a good increase in sales. I would say we should be able to continue our performance in the region of 12% to 13% in that watermark figure from that perspective. In terms of acquired group, given all the geopolitical situation, we've still been able to grow by 5%.

Speaker #3: Then the blue-shaded column talks about the acquired group, and then the pigment as global, right? And I am very, very happy to share that now the numbers we've delivered look solid, and we are now confident that we can continue building on this journey, right?

Speaker #3: Legacy, Sudarshan, you see a good increase in sales. I would say, you know, we should be able to continue our performance in the region of 12% to 13% in that workmark figure from that perspective.

Speaker #3: In terms of the acquired group, given the current geopolitical situation, we've still been able to grow by 5%. The good part is, if you look at the reported and business EBITDA, we've been able to do a very good job in the acquired group.

Rajesh Rathi: The good part is, if you look at the reported and business EBITDA, we've been able to do a very good job in the acquired group. We've grown the EBITDA from, the business EBITDA from INR 65 crores to INR 128 crores, and of course, the reported EBITDA from INR 78 crores to INR 146 crores. As one Sudarshan deliver EBITDA for the pigment business of INR 275 crores. Madhuki, you want to add anything?

Speaker #3: We've grown the business EBITDA from ₹65 crores to ₹128 crores, and, of course, the reported EBITDA from ₹78 crores to ₹146 crores.

Speaker #3: And as Sudarshan delivered EBITDA for the pigment business of ₹275 crore. Another thing I want to add is, thank you, Mr. Raxi. So, as Mr. Raxi has mentioned, we started this year with a strong Q1 with ₹2,600 crore plus and with the business EBITDA of ₹257 crore.

Nilkanth Natu: Yeah. Thank you, Mr. Rathi. As Mr. Rathi has mentioned, we started this year with a strong Q1, with a revenue of INR 2,600-plus crore and with the business EBITDA of INR 357 crore. As we mentioned in the couple of quarters earlier, we started reporting the business EBITDA. Just to remind, the business EBITDA is the operating profit from the actual sales without the impact of any inventory changes. Reported EBITDA for the acquired group for the quarter under consideration is INR 146 crore, and the inventorized overhead impact due to increase in inventory is INR 18 crore. The business reported EBITDA, business EBITDA number is INR 128 crore. For the RIECO business, we had one of the tough quarters to start with.

Speaker #3: As we mentioned in the couple of quarters earlier, we started reporting the business EBITDA. Just to remind, the business EBITDA is the operating profit from the actual sales, without the impact of any inventory changes.

Speaker #3: So, reported EBITDA for the acquired group for the quarter under consideration is ₹146 crore, and the inventorized overhead impact due to increase in inventory is ₹18 crore.

Speaker #3: And so the business reported EBITDA business EBITDA number is 128 crore. For the Rico business, we had one of the we had one of the tough quarters to start with.

Speaker #3: The revenue from operations is at ₹38 crore, and we had three challenges in the execution due to delays in the customer-side readiness, and also at some sites due to the subcontracting manpower availability.

Nilkanth Natu: The revenue from operation is at INR 38 crore, and we had faced challenges in the execution due to delays in the customer site readiness and also in some sites due to the subcontracting manpower availability. This reduction in the revenue has relate to the EBITDA drop. As we mentioned earlier, we are in the transformation journey for the RIECO business. We remain confident about the business and recovery in the coming quarters. This slide gives the business performance for one Sudarshan, including RIECO business. Just to recapture the key numbers, the revenue from operations is INR 2,642 crore, with the business EBITDA of INR 247 crores and a reported EBITDA of INR 206 crores for the quarter under review, showing around 60%-plus growth year-over-year and 5% increase of the revenue.

Speaker #3: And this reduction in revenue has led to the EBITDA drop. As we mentioned earlier, we are in the transformation journey for the Rico business.

Speaker #3: We remain confident about the business and the recovery in the coming quarters. This slide gives the business performance for one Sudarshan, including the Rico business.

Speaker #3: So just to recapture the key numbers, the revenue from operations is ₹2,642 crore, with the business EBITDA of ₹247 crore and the reported EBITDA of ₹266 crore for the quarter under review, showing around 60% plus growth year on year and 5% in terms of the revenue.

Speaker #3: In terms of the key financial ratios for Sudarshan, we are in a very healthy situation as far as the balance sheet is concerned.

Nilkanth Natu: In terms of the key financial ratios for one Sudarshan, we are in a very healthy situation as far as the balance sheet is concerned. The earning per share for the quarter, which is not annualized, is INR 12.3 per share. Return on capital is at 22.7%, and this is a very strong number. However, just to mention here, the return on capital employee number reported is based on the annualized number. We have a strong quarter to start with, and we expect the year to be also better subject to the seasonality, which we normally see in the Q3. As far as the net debt number is concerned, we are at INR 5 million, and that gives us the good leverage ratio of 0.2 in terms of net debt we equity. Net working capital on an annualized number is at 23.6%.

Speaker #3: The earning per share for the quarter, which is not annualized, is 12.3 rupees per share. Return on capital is at 22.7% and which is a which is a very strong number.

Speaker #3: However, just to mention here, the return on capital employed number reported is based on the annualized number. We had a strong quarter to start with, and we expect the year to be better as well, subject to the seasonality which we normally see in Q3.

Speaker #3: As far as the net debt number is concerned, we are at ₹531 crore, and that gives us a good leverage ratio of 0.2 in terms of net debt to equity.

Speaker #3: And net working capital on an annualized basis is at 23.6%. So overall, on the balance sheet and the key ratios, the performance is good and shows a solid position on the balance sheet.

Rajesh Rathi: Overall, on the balance sheet and the key ratios, the performance is good and shows a solid position on the balance sheet. Thank you, Raghunath. Looking at the outlook, I think as we mentioned, we've entered FY27 with a strong profitability momentum and a growing conviction in its long-term position as one of the largest global pigment platforms, backed by a very broad technology depth and a global manufacturing footprint. I think this kind of sets up on the stage. We also feel much better in control of our global business now, and it's set up a very strong foundation for our growth. On an ongoing midterm basis, we have to navigate through the challenging market environment given the current geopolitical situation, and we will do that with our focus. Our priorities still remain very strongly embedded for the year.

Nilkanth Natu: Overall, on the balance sheet and the key ratios, the performance is good and shows a solid position on the balance sheet.

Speaker #3: Thank you, Dr. Keats. Looking at the outlook, I think as we mentioned, we've entered FY27 with strong profitability momentum, and a growing conviction in our long-term position as one of the largest global pigment platforms, backed by a very broad technology depth and a global manufacturing footprint.

Rajesh Rathi: Thank you, Raghunath. Looking at the outlook, I think as we mentioned, we've entered FY27 with a strong profitability momentum and a growing conviction in its long-term position as one of the largest global pigment platforms, backed by a very broad technology depth and a global manufacturing footprint. I think this kind of sets up on the stage. We also feel much better in control of our global business now, and it's set up a very strong foundation for our growth. On an ongoing midterm basis, we have to navigate through the challenging market environment given the current geopolitical situation, and we will do that with our focus. Our priorities still remain very strongly embedded for the year.

Speaker #3: I think this kind of sets us up on the stage. We also feel much better in control of our global business now, and it has set up a very strong foundation for our growth.

Speaker #3: On an ongoing mid-term basis, we have to navigate through the challenging bucket market environment, given the current geopolitical situation. And we will do that with all provenance.

Speaker #3: Our priorities still remain very strongly embedded for the year. Value capture remains very, very important. Cost reduction still remains a very important driver, which will drive the growth.

Nilkanth Natu: Value capture remains a very important. Cost reduction still remains a very important driver which will drive the profitability growth. We want to ensure that we are able to release some cash also from the working capital in the remaining year. SAP and GCC again remain a very important priority for us. We feel very confident to deliver the numbers which we had stated, and we had given a guidance earlier in the year of INR 700 million for the acquired group and INR 35 million EBITDA. Though the Q1 performance has been much stronger, currently we are not revising our guidelines given the geopolitical situation. We want to do a wait and watch situation and come back to and reconsider this after Q2. Thank you. Thank you very much.

Rajesh Rathi: Value capture remains a very important. Cost reduction still remains a very important driver which will drive the profitability growth. We want to ensure that we are able to release some cash also from the working capital in the remaining year. SAP and GCC again remain a very important priority for us. We feel very confident to deliver the numbers which we had stated, and we had given a guidance earlier in the year of INR 700 million for the acquired group and INR 35 million EBITDA. Though the Q1 performance has been much stronger, currently we are not revising our guidelines given the geopolitical situation. We want to do a wait and watch situation and come back to and reconsider this after Q2. Thank you. Thank you very much.

Speaker #3: Profitability growth—we want to ensure that we are able to release some cash also from the working capital in the remaining year. SAP and GCC again remain a very important priority for us.

Speaker #3: We feel very confident to deliver the numbers which we had stated. We had given a guidance earlier in the year of 700 million for the acquired group and 35 million EBITDA.

Speaker #3: Though the Q1 performance has been much stronger currently we are not revising our guidelines. Given the geopolitical situation we want to do a wait and watch situation and come back to and reconsider this after Q1.

Speaker #3: Thank you, thank you very much. Team, can we begin with the question and answer session now? Management team, can we begin with the question and answer session?

[Company Representative] (Sudarshan Chemical Industries): Team, can we begin with the question and answer session now? Management team, can we begin with the question and answer session?

Operator: Team, can we begin with the question and answer session now? Management team, can we begin with the question and answer session?

Speaker #3: Yes, yes, we can. We can. Thank you so much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may click on the Raise Hand icon from the participants tab on your screen.

Nilkanth Natu: Yes, we can.

Rajesh Rathi: Yes, we can.

[Company Representative] (Sudarshan Chemical Industries): Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may click on the raise hand icon from the participants tab on your screen. We request participants to restrict to two questions each, and then return to the queue for more questions. To rejoin the queue, you may click on the raise hand icon again. We will wait for a few minutes until the question queue assembles. We are taking our first question now. We have Sanjesh Jain of ICICI Securities. Sanjesh, please go ahead.

Operator: Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may click on the raise hand icon from the participants tab on your screen. We request participants to restrict to two questions each, and then return to the queue for more questions. To rejoin the queue, you may click on the raise hand icon again. We will wait for a few minutes until the question queue assembles. We are taking our first question now. We have Sanjesh Jain of ICICI Securities. Sanjesh, please go ahead.

Speaker #3: We request participants to restrict themselves to two questions each and then return to the queue for more questions. To rejoin the queue, you may click on the 'raise hand' icon again.

Speaker #3: We'll wait for a few minutes until the question queue assembles. We are taking the first question now. We have Sanjayesh Jain of ICICI Securities.

Speaker #3: Sanjayesh, please go ahead. Yeah, good morning, sir. Thanks for taking my questions. I have a few of them. First, on the Q1 numbers, I just wanted to understand the underlying growth. Because if I adjust for the currency depreciation—we now have a very large international business which has a translation gain—and the price increase due to raw material inflation, it appears that this quarter, at least, the underlying volume has declined. In this backdrop, we are expecting very solid growth over the next two years, which is over 20% growth at the lower end of the guidance.

Sanjesh Jain: Yeah, good morning, sir. Thanks for taking my questions. I got few of them. First, on the Q1 number, just wanted to understand the underlying growth, because if I adjust for the currency depreciation, because we now have a very large international business which has a translation gain, and the price increase because of the raw material inflation, it appears that this quarter at least, the underlying volume has declined. In this backdrop, we are expecting a very solid growth over next 2 years, which is over 20% growth at the lower end of the guidance. What gives it a confidence that being a number one player, we will grow at least 2 to 2.5x that of an industry growth rate, while this quarter implies some decline in the volume? That is my first question.

Speaker #3: Now, what gives us the confidence that, being the number one player, we will grow at least two to two and a half times that of the industry growth rate, while this quarter implies some decline in the volume?

Speaker #3: That's my first question. So I think firstly I think great question. I would say that I would say that the the inference that the volume as a decline may not be very accurate given a very broad spectrum of our product range right we sell a product range right from one euro to 130 40 euros we are not able to kind of set that aside however given given that we've seen we've seen a modest growth of 6% this quarter in spite of the geopolitical situation.

Nilkanth Natu: So, firstly, I think great question. I would say that the inference that the volume has a decline may not be very accurate given a very broad spectrum of our product range. We sell a product range, right from €1 to €130, €140. We are not able to kind of set that aside. However, given that we have seen a modest growth of 6% this quarter in spite of the geopolitical situation. We must remember that the last Q1, last year, the Q1 included a lot of sales from the March onwards when we had taken over the business because on the acquired entity, we were going live with some of the SAP.

Rajesh Rathi: So, firstly, I think great question. I would say that the inference that the volume has a decline may not be very accurate given a very broad spectrum of our product range. We sell a product range, right from €1 to €130, €140. We are not able to kind of set that aside. However, given that we have seen a modest growth of 6% this quarter in spite of the geopolitical situation. We must remember that the last Q1, last year, the Q1 included a lot of sales from the March onwards when we had taken over the business because on the acquired entity, we were going live with some of the SAP.

Speaker #3: We must remember that last year in Q1, the quarter included a lot of sales from March onwards, when we had taken over the business. Because on the acquired entity, we were going live with some of the SAP areas.

Speaker #3: So, the growth is better than that. What gives us confidence in delivering growth and EBITDA? I would say, let me first talk about the EBITDA.

Rajesh Rathi: The growth is better than that. What gives us confidence in delivering the growth and EBITDA? I would say, let me talk about first the EBITDA. As I mentioned, it is a lot of value capture still coming in. You have not seen the full value capture still going into the numbers. That journey will continue, and that is completely in our control. In terms of growing of the business, this is a business which has lost a lot of business, and we are looking to recover the business. We are not saying that we will try and grow completely out of line, et cetera, but there is a lot of scope where we can regain some of the lost business. The business was lost because of various reasons, lack of focus, the insolvency issue, et cetera.

Speaker #3: As I mentioned, there is still a lot of value capture coming in. We have not seen the full value capture flowing into the numbers yet, right? That journey will continue, and that is completely in our control.

Speaker #3: In terms of the growth of the business, this is a business which has lost a lot of business, and we are looking to recover the business.

Speaker #3: So we are not saying that we will try and grow our business completely out of line, etc. But there's a lot of scope where we can regain some of the lost business. The business was lost because of various reasons—lack of focus, the insolvency issue, etc.

Speaker #3: So this gives us the confidence of why we would deliver the loss. Got it, sir. There's one related question to this. You said that there's a lot of value yet to be captured.

Rajesh Rathi: This gives us the confidence of why we would deliver those numbers.

Sanjesh Jain: Got it, sir. There is one related question to this. You said there is a lot of value yet to be captured. When you are talking about the value, these are the cost efficiency benefit. If it is, then how much of this journey from 800 to 1,400, 1,500 will be led by the revenue growth, and how much of it is the benefit of the value capturing that we are talking about?

Speaker #3: When you talk about the value, these are the cost efficiency benefits, and if it is, then how much of this journey from 800 to 1,400 or 1,500 will be led by revenue growth, and how much of it is the benefit of the value capture that we are talking about?

Speaker #3: I think the numbers are very clear. I mean, a substantial portion of this would come from cost reduction or value capture. Got it. Got it.

Rajesh Rathi: I think the numbers are very clear. A substantial of this would come from cost reduction or value capture initiatives.

Sanjesh Jain: Got it. My second question is on the CapEx plan. We have a large capacity. Can you help us in terms of where are we in the utilization cycle, and do we envisage any large CapEx requirement, either from a product development category, new product or backward integration that we foresee in, say, next 12 to 18 months?

Speaker #3: My second question is on the capex plan. We have a large capacity. Can you help us in terms of where we are in the utilization cycle, and do we envisage any large capex requirement either from a product development category, new product, or backward integration that we foresee in, say, the next 12 to 18 months?

Speaker #3: From a volume perspective, we do not need any new capex, right? We have enough capacities to grow on the numbers. However, we are looking at some special initiatives, either backward integration or special projects, and these are determined by the ROI. If the return is good, we are going to do this.

Rajesh Rathi: From a volume perspective, we do not need any new CapEx. We have enough capacities to grow on the numbers which we have indicated. However, we are looking at some special initiatives, either backward integration or special projects, and these are determined by the ROI, right? If the return is good, we are going to do this. We do not expect anything substantial. There would be some moderate CapEx.

Speaker #3: We don't expect anything substantial. There would be some moderate capex. Got it. One last question on the gross profit margin.

Sanjesh Jain: Got it. One last question on the gross profit margin. This quarter, we did probably one of the highest margin, which is 54%. How do we see gross profit margin, and was there any benefit of lower inventory which we were carrying, which may normalize, say, going in next one, two quarter? What would be the impact if raw material prices start reversing again, and there have already been a few prices which have fallen down substantially from the peak.

Speaker #3: This quarter, we did probably one of the highest margins, which is 54%. How do we see gross profit margin, and was there any benefit of a lower inventory which we were carrying, which may normalize going into the next one or two quarters? And what would be the impact if raw material prices start reversing again, and there have already been approved prices which have fallen down substantially from the peak?

Speaker #3: Yeah. So actually if you if you were to look at the if you look at the business gross margins right the gross margins will not be that high right.

Rajesh Rathi: So actually, if you were to look at the business gross margins, the gross margin will not be that high. The gross margin movement from last quarter to this quarter on a basis will be about 2%.

Speaker #3: The gross margin movement from last quarter to this quarter on a basis will be about 2%. Out of this 2% movement I would I would attribute I would attribute this to kind of looking at some cost some cost reduction areas which have come in yields in utilities production etc.

Sanjesh Jain: Okay.

Rajesh Rathi: Out of this 2% movement, I would attribute this to kind of looking at some cost reduction areas which have come in utilities production, et cetera, from that perspective. There's some very minor, I would say one-off areas which we are looking from that perspective. So I would say that we should continue to be in the range of 50-plus percent of gross margin.

Speaker #3: Right, from that perspective, there are a very minor, I would say, one-off areas which we are looking at from that perspective.

Speaker #3: So, I would say that we should continue to be in the range of 50-plus percent gross margin. Thanks. Thanks. So, just one question to add here.

Sanjesh Jain: Thanks. Just one question to add here. In last one year-

Speaker #3: In the last one year, just a request: would you please rejoin the queue if you have any follow-up? We have other partners.

[Company Representative] (Sudarshan Chemical Industries): Sorry, Sanjesh. Just a request, would you like to please rejoin the queue if you have any further?

Operator: Sorry, Sanjesh. Just a request, would you like to please rejoin the queue if you have any further?

Speaker #3: I'll come back in the queue. I'll come back on the queue. Thank you. Thank you. Thank you for answering all the questions, and best of luck for the coming quarter.

Sanjesh Jain: Yeah, that.

[Company Representative] (Sudarshan Chemical Industries): We have other participants.

Operator: We have other participants.

Sanjesh Jain: No, I will come back in the queue.

[Company Representative] (Sudarshan Chemical Industries): Yeah, sure.

Operator: Yeah, sure.

Sanjesh Jain: I will come back on the queue. Thank you.

[Company Representative] (Sudarshan Chemical Industries): Thank you.

Operator: Thank you.

Sanjesh Jain: Thank you for answering all the questions, and best of luck for the coming quarter.

Speaker #3: Thank you. Thank you, Sanjesh. We'll take our next question now. Before that, just to remind all the participants: please restrict to two questions each, and then return to the queue for a follow-up.

Rajesh Rathi: Thank you.

[Company Representative] (Sudarshan Chemical Industries): Thank you, Sanjesh. We will take our next question now. Before that, just to remind all the participants, please restrict to two questions each, and then return to the queue for a follow-up. We have Ankur Periwal of Axis Capital. Ankur, please go. Please unmute your microphone. Yes. Please go ahead.

Operator: Thank you, Sanjesh. We will take our next question now. Before that, just to remind all the participants, please restrict to two questions each, and then return to the queue for a follow-up. We have Ankur Periwal of Axis Capital. Ankur, please go. Please unmute your microphone. Yes. Please go ahead.

Speaker #3: We have Ankur Perival of Axis Capital. Ankur, please go ahead. Please unmute your microphone. Yes, please go ahead. Yeah. Hi, sir. Thanks for the opportunity. Am I audible?

Ankur Periwal: Hi, sir. Thanks for the opportunity. Am I audible?

Speaker #3: Yes, we can hear you. Great. Yeah. Hi, sir. Thanks for the opportunity, and congratulations on a good set of numbers. First question on the guidance: now, while we are building in 5% to, let's say, 7% sort of a revenue CAGR depending upon the range that we are looking at over the next, let's say, two to three years, how much of this will be volume and how much of this will be value? Value could be, you know, more premiumization, etc.

[Company Representative] (Sudarshan Chemical Industries): Yes, we can hear you.

Operator: Yes, we can hear you.

Ankur Periwal: Great.

Rajesh Rathi: Very clear.

Ankur Periwal: Yeah. Hi there. Thanks for the opportunity, and congratulations on good set of numbers. First question on the guidance. While we are building in 5% to, let's say, 7% sort of a revenue CAGR, depending upon the range that we are looking at over the next, let's say, two, three years, how much of this will be volume and how much of this will be value? Value could be here more premiumization, et cetera. Related on the question on the margin side, the synergy benefits of the value capture that you mentioned is still pending. Over what timelines are you going to achieve that? Is it 2028 only, or probably it will sort of flow through in 2029 also?

Speaker #3: And related to the question on the margin side, the synergy benefits of the value capture that you mentioned are still pending. Over what timelines are you going to achieve that? Is it FY28 only, or will it also sort of, you know, flow through in FY29 as well?

Speaker #3: Great question sir. Ankur sir Ankur sir like as I described it is our our product portfolios very complex now right as I said we sell a product which is one euro and we sell a product which is 130 euros so kind of looking at whether value growth or volume growth will not I mean it's important that we grow and the growth is profitable right it should not hamper our gross margin the growth should not hamper our gross margin and that's what we are really focused and looking at right from that perspective.

Rajesh Rathi: Great question, sir. Ankurji, as I described, our product portfolio is very complex now, right? As I said, we sell a product which is €1, and we sell a product which is €150. So looking at whether value growth or volume growth will not. It's important that we grow and the growth is profitable, right? It should not hamper our gross margin. The growth should not hamper our gross margin, and that's what we are really focused on looking at, right? From that perspective. So that's the first area. The second is the value capture will be continuous. We will be delivering more value capture in terms of FY27, FY28. A major portion will be FY27, FY28. Some will be, of course, some of the FY28 value capture will also flow into FY29.

Speaker #3: So that's the first area. The second is that value capture will be continuous. We will be delivering more value capture in FY '27 and '28.

Speaker #3: Major portion will be FY 27 28. Some will be of course you know some of the 28 value capture will also flow into the 29.

Speaker #3: Sure sir. Thanks for that. And a second question on you know our on the balance sheet side on the debt repayment. You know what are our plans on the debt repayment side given that you know a lot of debt also sits on the global side.

Ankur Periwal: Sure, sir. Thanks for that. A second question on the balance sheet side, on the debt repayment. What are our plans on the debt repayment side, given that a lot of debt also sits on the global side? Secondly, on RIECO, earlier we had plans to hive off that business. Any revised thoughts on the same? Thanks.

Speaker #3: And, you know, secondly on RICO, earlier we had plans to hive off that business. Any revised thoughts on the same? Thanks. What was the debt?

Amitabha Mukhopadhyay: The acquisition debt what we had availed, partly we have repaid. Very small part of it we have repaid, and we will be repaying some of the loans. As our net debt position is improving, as is visible in the presentation, we think we will be able to accelerate repayment of the acquisition debt.

Speaker #3: Yeah. The acquisition debt which we had availed, we have partly repaid—a small part of it we have repaid—and we will be prepaying some of the loan. As our net debt position is improving, as is visible in the presentation, we think we will be able to accelerate the payment of the acquisition debt.

Speaker #3: On the RICO, sir, you want to continue. On RICO, this first quarter we faced certain execution challenges, primarily because some of the subcontractors have faced difficulty with labor availability.

Rajesh Rathi: On the RIECO, sir, you want to continue?

Amitabha Mukhopadhyay: On RIECO, this Q1, we had faced certain execution challenges, primarily because of some of the subcontractors have faced difficulty with labor availability. We expect things to normalize from this current quarter onwards, and we are confident that RIECO will be positioned by before the year-end, it will be posting a positive number. That is the work that we are trying to do.

Speaker #3: We expect the things to normalize from the current quarter onwards. And we are confident that RICO will be by the year before the year end it will be posting a positive number that is the work but we are trying to.

Speaker #3: So Ankurji, the summary is that the transformation of RICO will continue. We will continue to see how we can get to better numbers. Sure. Thanks a lot, and all the best.

Rajesh Rathi: Ankurji, summary is that our transformation of RIECO will continue. We will continue to see how we can get to better numbers.

Ankur Periwal: Sure, Rathi ji and Tawa ji. Thanks a lot and all the best.

Speaker #3: Thank you sir. Thank you. We have our next question coming in from Rohit Nagaraj of 361 Capital. Rohit please go ahead. Again unfortunately on the guidance front given that for FY 29 for the consolidated business we have significant improvement from FY 27 to 29 almost 17 16 17 percent CAGR at the higher end and on the EBITDA front also it's closer to doubling on the EBITDA front do we expect that the acquired business will have margins of almost touching to double digits and historically have they anytime done that.

Rajesh Rathi: Thank you, sir.

[Company Representative] (Sudarshan Chemical Industries): Thank you. We have our next question coming in from Rohit Nagraj of 360 ONE Capital. Rohit, please go ahead.

Operator: Thank you. We have our next question coming in from Rohit Nagraj of 360 ONE Capital. Rohit, please go ahead.

Rohit Nagraj: Again, unfortunately, on the guidance front, given that for FY29 for the consolidated business, we have significant improvement from FY27 to FY29, almost 16%, 17% CAGR at the higher end. On the EBITDA front also, it is closer to doubling. On the EBITDA front, do we expect that the acquired business will have margins of almost touching to double digits? Historically, have they any time done that? Thank you.

Speaker #3: Thank you. Historically, they did do double digits always consistently and, as I described the journey earlier to the earlier question, on the sales side we are looking at a lot of business regain, and on the EBITDA side we are looking at a lot of value capture, which will kind of come in as we drive.

Rajesh Rathi: Historically, they did do double digits always consistently. As I described the journey earlier to one of the earlier questions, was on the sales side, we are looking at a lot of business regain. On the EBITDA side, we are looking at a lot of value capture, which will come in as we guide. This guidance, FY29, we have been holding this from day one, right? This is not a new guidance which we have come up with.

Speaker #3: And this guidance for FY29, we have been holding this from day one, right? So this is not a new guidance that we've come up with.

Speaker #3: Right. Right. Got that, sir. Sir, second question: In the last three to five months, have we taken any material price increases, and have they been completely absorbed? Obviously, there will be an element of the raw material cost inflation, but we don't expect that the pricing should again correct, and that may lead to some impact on the margins.

Rohit Nagraj: Right. Got that, sir. Sir, second question is, in the last three to five months, have we taken any material price increases, and have they been completely absorbed? Obviously, there will be an element of the RM cost inflation, but we do not expect that the pricing should again correct, and that may lead to some impact on the margins. Right.

Speaker #3: Right. Can you are you saying I didn't follow your question Rohitji are you saying yeah. I'll repeat it. Thank you. So in the last three to five months in our portfolio have we taken any price increases across our product portfolio obviously there will be one element which will be because of the input cost inflation and another element could be from the demand supply dynamics is it that these prices will sustain going forward or if the demand supply situation again gets impacted we'll have to reverse a part of that.

Rajesh Rathi: I did not follow your question, Rohit ji. Are you saying-

Rohit Nagraj: Yeah. I will repeat it. Thank you. So in the last three to five months in our portfolio, have we taken any price increases across our product portfolio? Obviously, there will be one element which will be because of the input cost inflation, and another element could be from the demand-supply dynamics. Is it that these prices will sustain going forward? Or if the demand-supply situation again gets impacted, we will have to reverse a part of that? Thank you.

Speaker #3: Thank you. Understood. So most of our recent price increases have been solely to pass on the cost increases we have experienced.

Rajesh Rathi: Understood. Our price increases right now have been only to pass on whatever cost increases we have experienced. In order to build the trust with customers, we have been very particular

Speaker #3: Right. We have not—we have been very, in order to build trust with customers, we have been very particular not to take any advantage of the demand and supply situation.

Rajesh Rathi: not to take any advantage of the demand and supply situation. If the raw material prices soften, oil prices soften, these, at that point, we will only reverse some of the pricing.

Speaker #3: So if the raw material prices kind of soften etc. oil prices soften etc. these at that point we will only reverse some of the pricing.

Speaker #3: Sure. Thanks a lot and all the best. Thank you, Rohit. We'll take our next question now. We have Nitesh Dhut of Anand Rathi. Nitesh, please go ahead.

[Company Representative] (Sudarshan Chemical Industries): Sure. Thanks a lot. All the best. Thank you, Rohit. We will take our next question now. We have Nitesh Dhoot of Anand Rathi. Nitesh, please go ahead.

Rohit Nagraj: Sure. Thanks a lot. All the best.

Operator: Thank you, Rohit. We will take our next question now. We have Nitesh Dhoot of Anand Rathi. Nitesh, please go ahead.

Speaker #3: Yeah. Hi. Hi team. Good morning, and congratulations on a good set of numbers. My first question is: if you could lay down the strategy behind acquiring the 70 percent stake in Sudarshan Colorins from the overseas subsidiaries, what is the rationale behind that?

Nitesh Dhoot: Yeah. Hi, team. Good morning, and congratulations on a good set of numbers. My first question is, if you could lay down the strategy behind acquiring the 70% stake in Sudarshan Colorants from the overseas subsidiaries. What is the rationale behind that? Is it any cash transfer that we are probably looking at from the parent to the European entities for any de-leveraging purpose? Or what exactly is the thought process behind that?

Speaker #3: I mean, is it like any cash transfer that we are probably looking at from, you know, from the parent to the European entities for any deleveraging purpose, or what exactly is the thought process behind that?

Speaker #3: So in this decision that it was NBSARCH right at the beginning at the time of acquisition we had gone for indirect acquisition that is because of financing reason it became simpler to acquire the this entity through its earlier holding structure but that time itself it was a plan that eventually we would like to hold these shares directly from the from Sudarshan and we are now just carrying out it is only an within the group holding structure rationalization which was planned earlier itself.

Amitabha Mukhopadhyay: This decision that it was emphasized right at the beginning. At the time of acquisition, we had gone for indirect acquisition, that is because of financing reason. It became simpler to acquire the 70% through its earlier holding structure. But that time itself, it was a plan that eventually we would like to hold the shares directly from Sudarshan Chemical. We are now just carrying on. It is only within the group holding structure rationalization, which was planned earlier itself. There is nothing further to that, and we do not see this will have any impact on the controlled business or any

Speaker #3: There is nothing further to that, and we don't see this will have any impact on the control business or— All right, sir.

Speaker #3: And my second one is, you know, if you look at the notes to the consolidated financial results—note number nine—that's, you know, after 30th June, a fully owned subsidiary signed an agreement with an employee representative body for an employee restructuring program, and the impact has not been quantified.

Nitesh Dhoot: All right, sir. My second one is, if you look at the notes to the consolidated financial results, note number 9, that is after 30 June, wholly owned subsidiary signed an agreement with an employee representative body for an employee restructuring program, and the impact has not been quantified. Is that a European Works Council deal, and does it mean that a restructuring charge is coming up in Q2 or Q3? If that is the case, how much would that charge be, and whether that is built in your EBITDA guidance for FY27.

Speaker #3: So is that a European works council deal and does it mean that a restructuring change you know restructuring charge is coming up in Q2 or Q3 and if that is the case how much would that charge be and whether that's built in your EBITDA you know EBITDA guidance for FY 27.

Speaker #3: As was mentioned in the note that we will be right now the quantification was not possible. By end of Q2 I think we should have clarity on the quantification of this as of now we cannot provide anything more than that.

Amitabha Mukhopadhyay: As mentioned in the note that we will be Right now, the quantification was not possible. By end of Q2, I think we should have clarity on the quantification of this. As of now, we cannot provide anything more than that because the numbers are quite tricky. By next quarter, we will be able to provide more color.

Speaker #3: Because the numbers are quite tricky. So by next quarter, we will be able to provide more. All right, sir. These are my questions.

Nitesh Dhoot: All right, sir. These are my questions. I wish you the best for the coming quarters.

Speaker #3: Wish you the best for the coming quarters. Thank you, sir. Thank you, Nitesh. We have Arijit Joshi of Nivama with his question now.

Amitabha Mukhopadhyay: Thank you, sir.

[Company Representative] (Sudarshan Chemical Industries): Thank you, Nitesh. We have Archit Joshi of Nuvama with his question now. Archit, please unmute your microphone.

Operator: Thank you, Nitesh. We have Archit Joshi of Nuvama with his question now. Archit, please unmute your microphone.

Speaker #3: Arijit, please unmute your microphone. Yeah. Hi, good morning everyone. Thanks a lot for the opportunity. Sir, if you can share your thoughts on the four key application areas, industry-wise, that we cater to—your outlook on that from a near-term perspective. How are we seeing demand in, let's say, paints, packaging, plastics, inks, and some of the other specialty applications that you have started to cater to now, especially after the Holbeck's acquisition?

Archit Joshi: Yeah, hi. Good morning, Hemant. Thanks a lot for the opportunity. Sir, if you can share your thoughts on the four key application areas industry-wise that we cater to, your outlook on that from a near-term perspective, how are you seeing demand in, let's say, paints, packaging, plastics, inks, and some of the other speciality applications that you have started to cater to now, especially after the Heubach's acquisition. Just your thoughts, sir.

Speaker #3: So your thoughts sir. So thank you. So if you look at if you look at the codings market the current you know the current situation in US both the decorative market which is the house paint market and the automotive have been subdued right and we both in US and Europe right from that perspective.

Rajesh Rathi: Thank you. If you look at the coatings market, the current situation in US, both the decorative market, which is the house paint market, and the automotive have been subdued. Both in US and Europe from that perspective. If you look at plastics, and this is probably short term, given the whole geopolitical situation, there has been a substantial increase in polymer prices. And that's where I think our customers, the whole value chain has tied up. They do not want to keep high-cost inventories and there's a hand-to-mouth kind of supply situation, and that's why you've seen the cycles in plastics. In printing inks, the volume-driven printing ink has been a little bit on the decline market, in general, as a long-term trend given the digitalization. So the volume-driven market is declining.

Speaker #3: If you look at plastics, given the— you know, and this is probably short term given the whole geopolitical situation— there has been a substantial increase in polymer prices.

Speaker #3: And that's where I think our customers are running, you know, the whole value chain is tied up. They do not want to keep high-cost inventories and, you know, there's a hand-to-mouth kind of supply situation, and that's why you see the cycles in plastics, right.

Speaker #3: In printing inks, the volume driven—you know, printing ink has been a little bit on the decline market, right? In general, as a long-term trend, given the digitalization.

Speaker #3: So the volume-driven market is declining, you know. However, some of the specialty markets, where there are stringent regulations for packaging, etc.—that market has been, from that perspective.

Amitabha Mukhopadhyay: However, some of the specialty markets where there are stringent regulations for packaging, et cetera, that market has been growing from that perspective. If you look at, we kind of divided the special applications, which is several applications there, which is agro, which is digital inks, et cetera. That market there is using a good.

Rajesh Rathi: However, some of the specialty markets where there are stringent regulations for packaging, et cetera, that market has been growing from that perspective. If you look at, we kind of divided the special applications, which is several applications there, which is agro, which is digital inks, et cetera. That market there is using a good.

Speaker #3: If you look at, you know, we kind of divided the special applications, which is several applications there, which is agro, which is digital inks, etc.

Speaker #3: That market is where we are seeing good growth. Got it, sir. So my second question is on the RM basket. I mean, prior to the acquisition, a few important RMs that we used to track as analysts, like Beta Naphthol, 2B acid, 4B acid. Firstly, how are they placed in terms of the existing supply chain, and after the acquisition, how has your RM basket widened?

Archit Joshi: Got it, sir. My second one, on the RM basket, prior to the acquisition, a few important RM that we used to track as analysts like beta-naphthol, 2B acid, 4B acid. Firstly, how are they placed in terms of the existing supply chain? After the acquisition, how has your RM basket widened? Which would be the critical raw materials that we would be requiring now, let's say for these specialty pigments or even if we have broadened our azo pigment portfolio. If you can share, that would be really helpful. Thank you.

Speaker #3: I mean, which would be the critical raw materials that we would be requiring now, let's say, for these specialty pigments, or even if we have, you know, broadened our ESO pigment portfolio?

Speaker #3: So if you can share that, it would be really helpful. Thank you. Sure. So, I think we look at various categories, right, of raw materials.

Rajesh Rathi: Sure. I think we look at various categories of raw materials. The categories would not have changed. Like for example, let's say benzene, toluene-driven, acetic acid or aniline-driven, naphthalene-driven benzene. I think what are phosphorus-driven market or categories. But what has changed in our product mix is there is a good, azo is good, but I think high performance has grown substantially, and our pigment dispersion business has grown substantially, and those categories then become more important.

Speaker #3: So the categories the categories would not have changed right. For example let's say benzene toluene driven acidic acid or analyte driven nicotine driven benzene but I think what phosphorus driven market or categories but what has changed in our product mix is there is a good you know ESO's is good but I think high performance has grown substantially and our pigment dispersion business has grown substantially and that those categories then become more important.

Speaker #3: Sure. So any any good would the same RM be used for these ESO's and specialties? Would that be a fair assumption? No. No. They are they are different.

Archit Joshi: Sure. Would the same RM be used for these azos and specialties? Would that be a fair assumption?

Rajesh Rathi: No, they are different.

Speaker #3: Okay. Okay. So those are also certain special polymers or something that you would require. I mean, if you can name them, that will be really helpful to track the underlying RM.

Archit Joshi: Okay. So those are also certain special polymers or something that you would require? If you can name, that will be really helpful to track the underlying item.

Speaker #3: It's the categories, sir. For example, a phosphorus-driven category becomes important there. And then, there are very specific categories which we can share with you offline later with our team, showing how we track that.

Rajesh Rathi: It is the category, sir. It is like phosphorus-driven category becomes important there. Then there are very specific categories which we can share with you offline a little bit about how we track them. Yeah.

Speaker #3: Yeah, sure. That works, sir. Thanks, and all the best for the coming quarters. Thank you. Thank you, Arijit. We have Rashmi Gohil of Arihant Capital with a question.

Archit Joshi: Sure. That works, sir. Thanks and all the best for the coming quarters.

Rajesh Rathi: Thank you.

[Company Representative] (Sudarshan Chemical Industries): Thank you, Archit. We have Rashmi Gohil of Arihant Capital with a question. Rashmi, please go ahead.

Operator: Thank you, Archit. We have Rashmi Gohil of Arihant Capital with a question. Rashmi, please go ahead.

Speaker #3: Rashmi, please go ahead. Hello, good morning. Thank you for giving me this opportunity. Q1 revenue stands at approximately ₹10,600 crore, which is already above the top end of your ₹9,800 to ₹10,200 crore FY27 guidance.

Rashmi Gohil: Hello, good morning. Thanks for giving me this opportunity. Q1 revenue analyzes to roughly INR 10,600 crores, which is already above the top end of your INR 9,800 to INR 10,200 crores FY27 guidance. While business EBITDA margin 9.4% is running ahead of what INR 800 crores EBITDA, which implies on that revenue base. Are you reaffirming FY27 guidance as is, or is there upside bias? How much of this Q1 strength was one-off versus churn?

Speaker #3: While business EBITDA margin of 9.4% is running ahead of what ₹800 crores EBITDA would imply on that revenue base, are you reaffirming FY27 guidance as is, or is there upside bias? And how much of this Q1 strength was one-off? As I mentioned in my presentation, ma'am, that's a great question from your side. But as I mentioned, I think our results are solid.

Rajesh Rathi: As I mentioned in my presentation, ma'am, great question from your side, but as I mentioned that I think our results are solid. There aren't many one-offs. There may be a few areas, and that's why we are kind of talking, we are bringing out the business EBITDA from that perspective. However, as I said, given the current geopolitical situation, we want to do a wait and watch. We want wait and watch, look at how Q2 comes out, and hence we are not revising our guidelines currently. We will revisit this end of Q.

Speaker #3: There are not any, not that there aren't many, one-offs. There may be a few areas, and that's why we are kind of talking—we are bringing out the business EBITDA, right?

Speaker #3: From that perspective, however, as I said, given the current geopolitical situation, we want to do a wait and watch. We want to wait and watch, look at how Q2 comes out, and hence we are not revising our guidelines currently.

Speaker #3: We will revisit this at the end of Q. Okay, my next question is: What is the phasing assumption for acquired group margin improvement through FY27? Is 6 to 7% the new steady state, or is there a path back towards Sudarshan legacy-like margins of 15% plus?

Rashmi Gohil: Okay. My next question is, what is the phasing assumption for acquired group margin improvement through FY27? Is 6% to 7% the new steady state, or is there a path back towards Sudarshan legacy like margins 15% plus?

Speaker #3: For our guidance, which we have been given, I don't think we—you know, the guidance would be 15%. But the area where we would want to look at for the acquired group is in high single digits or low double digits.

Rajesh Rathi: For our guidance, which we have been given, I don't think the guidance will be 15%, but the area where we would want to look at for the acquired group is in high single digits or low double digits.

Speaker #3: Okay, thank you so much. All the very best for the upcoming quarters. Thank you. Thank you, Rashmi. We'll take our next question now.

Rashmi Gohil: Okay. Thank you so much. All the very best for the next upcoming quarters.

Rajesh Rathi: Thank you.

[Company Representative] (Sudarshan Chemical Industries): Thank you, Rashmi. We will take our next question now. We have Gatha Jayen of Monomer Capital. Gatha, please go ahead.

Operator: Thank you, Rashmi. We will take our next question now. We have Gatha Jayen of Monomer Capital. Gatha, please go ahead.

Speaker #3: We have Gatha Jayan of Monumer Capital. Gatha, please go ahead. Hi sir, thank you so much for the opportunity. I'm a little new to the company, so my question might be very basic.

Gatha Jayen: Hi, sir. Thank you so much for the opportunity. I am a little new to the company, so my question might be very basic. I just wanted to understand the contract part of our business. How do we have the contract with our clients? Is it like a long-term contract or a short-term contract? Are we able to pass on the raw material prices in terms of contract?

Speaker #3: I just wanted to understand the contract part of our business. How do we have the contract with our clients? Is it like a long-term contract, or a short-term contract?

Speaker #3: And are we able to pass on the raw material prices in terms of contract? Ma'am, with your questions, it does not seem you're new to the company.

Rajesh Rathi: Ma'am, with your questions, it does not seem you are new to the company. I think great questions. I think our business is quite a repetitive business. To change any of the pigments in the coating industry is a substantially long period, and it will depend from customer to customer, but it may take anywhere between one to two years. If it is automotive paint, it will even take five years. So that way it is a sticky business from that perspective. Generally, what we like to do is we love to negotiate quarterly prices with our customers. Given any in a steady state of the business, that business kind of flows in, but when there are these current ups and downs in the geopolitical and raw materials move and costs move, we look at passing on those increases.

Speaker #3: Those are great questions. I think our business is quite a repetitive business, right? So, to change any of the pigments in the coating industry, you know, is a substantially long period, and it will depend from customer to customer. But it may take anywhere between one to two years, right?

Speaker #3: And if it's automotive paint, it would even take five years, right? So that way, it's a sticky business from that perspective. Generally, what we like to do is we love to negotiate quarterly prices with our customers, and given any, you know, in a steady state of the business, you know, that business kind of flows in. But when there are these current ups and downs in the geopolitical and raw materials move and costs move, we look at passing on those increases.

Speaker #3: All right. Thank you so much. That's all from my side. Thank you, Gatha. We have Pratham Kankaria of Quantum AMC. Pratham, please unmute your microphone.

Gatha Jayen: Okay. Thank you so much. That is all from my side.

Rajesh Rathi: Thank you.

[Company Representative] (Sudarshan Chemical Industries): Thank you, Gatha. We have Pratham Kankaria of Quantum AMC. Pratham, please unmute your microphone.

Operator: Thank you, Gatha. We have Pratham Kankaria of Quantum AMC. Pratham, please unmute your microphone.

Speaker #3: Thanks, sir. Sir Nitin, just one question. So, you know, India business has grown much faster. In the past, you have mentioned that you would be transferring some products from the Germany base to the India base.

Pratham Kankaria: Thanks, sir. Sir, I think it is just one question. India business has grown much faster. In past you have mentioned that you would be transferring some products from the Germany base to India base. Is that the same effect which we are seeing in the India business?

Speaker #3: So is that the the same effect which we are seeing in the India business? There is some business which there is some business which are intercompany businesses too which have which we have gained from from that perspective.

Rajesh Rathi: There are some business which are intercompany businesses too, which we have gained from that perspective. Partially that is correct. Either we have been producing here and selling in, and vice versa. It does have that impact.

Speaker #3: So, partially, that is correct. You know, either we've been producing here and selling in, and vice versa. So, it does have that impact.

Speaker #3: Okay. And how should we see margins going forward, you know, like assuming there might be some gain with the low-cost inventory that we had, like on the raw material front?

Pratham Kankaria: Okay. How should we see margins going forward, assuming there might be some gain with the low-cost inventory that we had, on raw material front?

Speaker #3: As as we described at a one Sudarshan level if you see both together there aren't many there aren't many one offs right. Going forward we've already given the guidance of how we look forward to this year.

Rajesh Rathi: As we described, at one Sudarshan level, if you see both together, there aren't many one-offs. Going forward, we've already given the guidance of how we look forward to this year.

Speaker #3: Okay, thanks. Thank you, Pratham. We have Viraj Mahadevia of MoneyGrow with his question now. Viraj, please unmute your microphone. Hi, sir. I'm new to the company, but congratulations on an astute bit of deal-making here with Hoibac.

Pratham Kankaria: Cool. Sir, thanks.

[Company Representative] (Sudarshan Chemical Industries): Thank you, Pratham Kankaria. We have Viraj Mahadevia of MoneyGrow with his question now. Viraj, please unmute your microphone.

Operator: Thank you, Pratham Kankaria. We have Viraj Mahadevia of MoneyGrow with his question now. Viraj, please unmute your microphone.

Viraj Mahadevia: Hi, sir. I am new to the company, but congratulations on an astute bit of deal-making here with Heubach. Quick question, sir. Before Heubach started its struggles a few years ago, it used to be a billion-euro top-line business. Sudarshan, more recently, has done INR 9,000 crores in top line. The combination of the two, do you see a more aggressive revenue growth going forward as you can build effectively another Sudarshan out of this acquisition in terms of top line? Or are you being more selective and measured in your revenue growth because you are cutting off unprofitable business or you have excessive China competition in certain product lines? Can you give us some view around why the revenue growth won't be more aggressive in the next two to three years?

Speaker #3: Quick question, sir. Before Hoibac started its troubles a few years ago, it used to be a billion-euro top-line business. Sudarshan, more recently, has done ₹9,000 crores in top line.

Speaker #3: So, with the combination of the two, do you see more aggressive revenue growth going forward as you can effectively build another Sudarshan out of this acquisition in terms of top line? Or are you being more selective and measured in your revenue growth because you know you're cutting off some unprofitable business, or you have excessive China competition in certain product lines?

Speaker #3: Can you give us some perspective on why the revenue growth won't be more aggressive in the next two to three years? That's a great question, sir.

Speaker #3: So, just talking about—just talking about—just one second. Just looking at, if you look at Hoibac, Hoibac was made of two companies.

Rajesh Rathi: So, a great question, sir. Just one second. If you look at Heubach was made of two companies, Clariant and the Heubach business, right?

Speaker #3: That's why Claryn and the Hoibac business, right? Right. That was integrated, and that was integrated, and you're right, it was about $1 billion. But I think as soon as the integration happened, a lot of business was lost, right?

Viraj Mahadevia: Right.

Rajesh Rathi: That was integrated, and you are right, it was about EUR 1 billion. But I think as soon as the integration happened, a lot of business was lost. Right? The business was lost. That is where, I think, when we look at our projections, what we are looking at is, given our current market share, it is difficult to grow beyond what the market size is going. But we have put in a lot of numbers here because we believe there is a substantial opportunity in capturing lost sales. Right? That is where I think we are looking at it. I think from an EBITDA perspective, also looking at how do we reduce costs and ensure that there is a lean operations, right? That is where I think we improve the EBITDA margins.

Speaker #3: And the business was lost, and that's where I think, when we look at our projections, what we are looking at is, given our current market share, it is difficult to grow beyond what the market size is going.

Speaker #3: But we have put in a lot of numbers here because we believe there is a substantial opportunity in capturing lost sales. Right? And that's where I think we are looking at it.

Speaker #3: And I think, from an EBITDA perspective, also looking at how do we, you know, reduce costs and ensure that there is a lean operation, right.

Speaker #3: That's where I think we improve the EBITDA margins. Yeah, sir, I agree on the cost side and the synergies, and the, you know, China Plus One coming from India.

Viraj Mahadevia: Yeah. So I agree on the cost side and the synergies and the China plus one coming from India. But on the revenue side itself, even if Heubach was doing INR 5,000 crores equivalent of revenue after the acquisition, that leaves substantial growth potentially to recapture some of that lost business. Is that on the agenda? Because you should be able to grow your market share faster than the overall market.

Speaker #3: But on the revenue side itself, even if Hoibac was doing ₹5,000 crores equivalent of revenue, after the acquisition that leaves substantial growth potential to recapture some of that lost business.

Speaker #3: Is that on the agenda? Because you should be able to grow your market share faster than the overall market. Absolutely, sir, and that's where if you see slide number nine, that's where I think we've done our projection on the investor deck from that perspective, where we said we could reach—you know, we could reach ₹12,000 crores plus, right?

Rajesh Rathi: Absolutely, sir. That is why if you see our slide number 9, that is where I think we have done our projection on the investor deck from that perspective, where we said we could reach INR 12,000 crores plus.

Viraj Mahadevia: Right. Okay, great. Thank you very much.

Speaker #3: Okay, great. Thank you very much. Thank you, sir. Thank you so much. Requesting participants to please click on the 'Raise Hand' icon from the Participants tab.

Rajesh Rathi: Thank you, sir.

[Company Representative] (Sudarshan Chemical Industries): Thank you so much. Requesting participants to please click on the Raise Hand icon from the Participants tab if you wish to ask a question. Any participants? All right. So, ladies and gentlemen, we will take that as the last question. I will now hand it over back to the management team for their closing remarks. Over to you, management team.

Operator: Thank you so much. Requesting participants to please click on the Raise Hand icon from the Participants tab if you wish to ask a question. Any participants? All right. So, ladies and gentlemen, we will take that as the last question. I will now hand it over back to the management team for their closing remarks. Over to you, management team.

Speaker #3: If you wish to ask a question, any participants? All right. So, ladies and gentlemen, we will take that as the last question. I will now hand it over back to the management team for their closing remarks.

Speaker #3: Over to you, management team. Thank you. Thank you, Ranjit and ISS Capital. And thank you, participants, for joining the quarterly earnings call. We remain confident in our journey going ahead and look forward to interacting with you in the coming quarter.

Nilkanth Natu: Thank you. Thank you, Ranjit and IIFL Capital, and thank you, participants, for joining our quarterly earnings call. We remain confident in our journey going ahead and looking forward to interacting with you in the coming quarter. Thank you.

Rajesh Rathi: Thank you. Thank you, Ranjit and IIFL Capital, and thank you, participants, for joining our quarterly earnings call. We remain confident in our journey going ahead and looking forward to interacting with you in the coming quarter. Thank you.

Speaker #3: Thank you. Thank you so much. Ladies and gentlemen, as there are no further questions, on behalf of Sudarshan Chemical Industries Limited, that concludes today's conference call.

[Company Representative] (Sudarshan Chemical Industries): Thank you so much. Ladies and gentlemen, as there are no further questions on behalf of Sudarshan Chemical Industries Limited, that concludes today's conference call. Thank you all for joining us, and you can now click on the leave icon to exit the meeting. Thank you all for your participation.

Operator: Thank you so much. Ladies and gentlemen, as there are no further questions on behalf of Sudarshan Chemical Industries Limited, that concludes today's conference call. Thank you all for joining us, and you can now click on the leave icon to exit the meeting. Thank you all for your participation.

Speaker #3: Thank you all for joining us and you can now click on the leave icon to exit the meeting. Thank you all for your participation.

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Q1 2027 Sudarshan Chemical Industries Ltd Earnings Call

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