Epigral (NSE:EPIGRAL) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Epigral Limited q two and FY twenty seven earning conference call hosted by MK Global Financial Services Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation conclude. I now hand the conference over to mister Gautam Deshit from AMK Global Financial Service Limited. Thank you, and over to you. Yeah. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today, mister Malik Patel, chairman and managing director, mister Kaushal Subarkar, executive director, mister Rakesh Agarwal, chief financial officer, and mister Milan Pukicha, investor relations and strategy. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

0:59 Good evening, everyone, and welcome to the call to discuss Epigral's Quarter two FY 'twenty seven performance. I believe you had an opportunity to review the earnings presentation that was released earlier today. As we go through quarter two FY 'twenty seven, the chemical industry continued to face a complex, volatile and highly challenging operating environment, with headwinds expected to persist into the upcoming quarters. While we are seeing a positive recovery in volume demand and forming product realization, overall margins remain under pressure. This strength is a direct result of a lag on time to pass through, volatile feedstock prices and the normalization of previous inventory late gain.

1:46 Furthermore, external vulnerability, including the ongoing West India crisis, extended lead times, increasing global freight rates and rising domestic transportation costs continue to squeeze the industry's bottom line. Even in this challenging operating environment, we delivered revenue growth of 28%, driving by volume growth and improved realization. Our Derivatives and Specialty business contributed 57% of our total revenue in quarter two FY twenty twenty seven. However, the EBITDA margin were impacted by high raw material prices from the volatile situation in West Asia. However, looking at the first half of FY twenty twenty seven, our performance remained resilient with revenue growth of 21% and EBITDA margin of 22%.

2:38 Historically, the second half of the fiscal year outperforms the first as is typically on off season for a few of our products. Consequently, we maintained positive outlook for as to FY twenty twenty seven. While the current environment is challenging, India's growing demand for chemicals keeps us positive about the industry's long term outlook. In line with this, we have sustained our CapEx plan to ensure we are ready to meet this expanding market. Our capacity expansion for CPVC and EC Epichlorohydrin are now in the final stages with currently underway. We expect to commission both plants within a quarter time.

3:27 Additionally, following the Board's approval for the Epoxyrazine and Formulations and Multipurpose Plant project, last quarter, we are moving ahead with both initiatives as planned. The final plans for epoxyrazine and MPP multipurpose plant are now ready and we will soon begin the customer approval process. This proactive step will help minimize qualification timeline once commercial production begins. As conveyed earlier, the revenue contribution from derivatives and specialty business stood at 57% in quarter two FY twenty seven. This transition will accelerate going forward driven by capital expenditure that we just discussed, ultimately, the broadening our customer base to diversify and to strengthen our business model.

4:15 EPIGRAL remains committed to strengthening our integrated manufacturing platform and expanding into high value chemical products, firmly believing that this ongoing portfolio diversification will enable us to deliver consistent growth over a longer period of time and secure long term value for our stakeholders. I now hand over the call to Mr. Rakesh Agrabal, who will take us through the financials. Thank you. Let me take you through the quarterly numbers. Year on year revenue increased by 28% to INR $7.52 crores compared to INR $5.89 crores in quarter two FY 'twenty six. This increase is on account of increase in sales revenue, value of 6% and because of the improved realization for majority of the products, EBITDA increased by 3% to INR 136 crores compared to INR 132 crores in Q2 FY 'twenty six. EBITDA margin stood at 18%.

5:09 It was impacted on account of high cost of raw material for Q2 FY 'twenty seven on account of global uncertainty impacting raw material and finished goods prices. PAT grew by 26% to INR 64 crores compared with PAT of INR 51 crores in Q2 FY 'twenty six. Now let me take you through half yearly numbers. In first half year of FY 'twenty seven, our revenue grew by 21% to INR $14.61 crore compared to INR $120.04 crore in FY 'twenty six. Growth is on account of volume growth and improved realizations. EBITDA stood at INR $3.15 crores compared to INR $2.96 crore. Even in this challenging and volatile raw material and finished goods prices, we are able to maintain margin of 22%.

5:57 PAT stood at INR 164 crore compared to INR 131 crore. PAT margin stood at 11% similar to H1 FY 'twenty six. ROCE stood at 15% on 02/30/2026 on account of lower EBIT for trailing twelve months, also because of sizable capital work in progress, which is yet to be contribute to profit and loss. If we remove capital work in progress, then our ROCE stand at 18% as on 09/30/2026. Net debt to EBITDA stood at 0.9% as on 09/30/2026 versus 0.8% on 09/30/2025. Our net debt stood at INR $5.14 crores versus INR $4.96 crores as on 09/30/2026.

6:43 We are at comfortable level in terms of our debt. We have spent INR 88 crore on the CapEx in the first half of twenty twenty seven. With this, we can now open the floor for questions. 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 press 1 on their touch tone telephone. If you wish to remove yourself from the question queue, you may press 2. Participants are request to use handsets while asking question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question comes from the line of Nirav Jamodiya with Annual Wealth. Please go ahead.

7:33 Yes, sir. Good evening. So a few questions from my side, sir. So first is on the call side. Like, what we have seen over the last three, four months is that there has been close to around 60%, 70% increase in the coal prices. So possibly, it could have an affected lot many coal based caustic soda plant. So if you can share your thoughts here, like have we seen the commensurate increase in the caustic soda prices in the recent months to cover this cost increase? And also on the chlorine side, like very recently, we have seen prices improving a lot, like they've been close to around positive. So is it more towards covering the cost because of higher energy prices? Or do you believe that the downstream demand has also improved, which has led to this price improvement?

8:30 So I think the coal prices increased and coal most of the chlor alkali plants in India is based on coal. Even gas has more increased than the coal in terms of fuel prices in the current environment. So the caustic soda prices is globally and I think globally, it has not moved as much as the required according to the energy prices. So the entire load transfer of increased energy prices has come to on chlorine side, which is easy to increase in terms in India because the chlorine derivative side, the demand and the new plant and demand has increased in last six months and next six months also further is going to increase.

9:18 So I would say it is a new move in the chlor alkyl industry, new environment will begin where the chlorine is almost like we used to give a chlorine and the chlorine price was negative in the past. Now I think going forward, we will not see the chlorine prices in the negative zone going forward from year onwards. And that is much easier to increase the price pass on because caustic is globally decided in terms of the pricing, but the chlorine is domestic based only. So I think it is easy to transfer the energy cost, which has increased in the chlor alkali in the chlorine side compared to caustic side. And I think demand has also increased as many of the people had a value addition and the downstream product is commissioned that has resulted and it is easy to increase on the chlorine side.

10:10 Perfect. Sir, if you can share what was the ECU realization for second quarter? And what is it currently? And if you can give the range for chlorine prices, that would be very helpful. So the ECU for cost of EBITDA for quarter two is around INR 31,000, INR 32,000 and chlorine is somewhere around zero. This is for Q2, you are saying? Yes, ECU was for the Q2 and chlorine will be somewhere in that range only, maybe zero minuteus one, but overall put together, it's around zero. Okay. And what it would be currently? So currently, it's zero. That's what I'm saying for chlorine. I'm talking about the ECU. ECU again will be in the same. ECU, it will be in the range of INR 32,000, 33,000.

10:59 Slightly, it is increased because we believe that in the quarter three and quarter four, the caustic global price will increase further because of the high energy cost in Europe because of the winter season. The demand of caustic probably should start an increase in terms of the index also going forward in quarter three and quarter four. Perfect. Sir, just a follow-up question. So A, on hydrogen peroxide, is there a possibility that we can move the ladder in terms of value added grades, possibly on the electronics side, which is a better realization. And on the profitability side, it gets a better profitability table also. So your thoughts on hydrogen peroxide? And b, on chlorotolines, where are we currently? Like is it possible for us to capture the initial side of benzyl chloride or benzyl alcohol before we start moving to OCT, PCT? So if you can share thoughts on both these aspects, that would be very helpful.

12:03 Yes. So hydrogen peroxide, yes, we are moving into the value addition in terms of solar application. Hydrogen peroxide, we are going to start manufacturing soon probably from the quarter four onwards. But compared to the volume, it's a niche application, but the volume is not substantial compared to the size of the manufacturing, which is there according to the plant size. But yes, we are going into the value addition in terms of the hydrogen peroxide for the solar application in the coming in quarter four, we will commission the plant. And the second question regarding the benzyl alcohol and benzyl value chain, we are not going in that line. Our focus is orthogorotolene and paragorotolene, which is nobody is manufacturing in India. And we are going forward in terms of the value added chemistry for the pharma intermediate and the agro intermediate, which can consume this right now.

13:04 And so we are going value added chemistry of chlorotolate what we produce, OCT, PCT, but we are not going on the other chlorotolate value chain, which many people other people are manufacturing. So sir, where are we currently in terms of chlorotolines like have we started seeding the market or our products are getting placed in the market? So when can we see the real benefit of chlorotolines started accruing to us? So this year, probably, we are going to have almost close to 100 crore revenue generation from the chlorotolines plant. So our volume is increasing on quarter on quarter basis. And as we understand correctly, we are going to have more value added product as we announce multipurpose plant in the future.

13:53 But yes, our volume is increasing quarterly on the Gronolith side. So sir, on a peak basis, how much this business should contribute? Like you mentioned INR100 crores, but let's say, whenever we scale up this business, what could be a right assumption this business can contribute to Epigral's top line? Around 300 to $3.50 crores of at optimum relation levels. So, Chlorotol inside as of now is around 300 crores, but as we are doing value addition, probably in the future, it may increase further based on the what kind of value addition we are doing it. But currently, we are working on the chemistry in the R and D level as well as the pilot plant we also commissioned in last quarter. So our customer approval is going to take place in the value added chemistry much faster than what we have done in our chloroform business in the past.

14:46 Perfect, sir. Perfect. Thank you so much, sir. I wish you all the best. I'll join back in the queue. Thank you. Thank you. Our next question comes from the line of Abhinav Mandavara with Equities Investments. Please go ahead. Hi. Thanks for the opportunity. My first question was regarding how has the CPC prices have been in last Q2 and currently? And what are the spreads, PVC, CPC spreads? And what is the utilization at which we are operating? So in terms of CPVC relations have been in the range of around INR 120,125 a kg.

15:32 And in terms of it has moved in line with the raw material price increase. So quarter one, the prices were on a very volatile side. It was high, it went down, again it went up. And again in Q2, the raw material PVC price had went up and currently also it's on a higher side. So that's where it is higher on the CPVC side as well. And inflation levels have been in the range of around 60%, 65%. And we are seeing further increase in terms of the PVC price and the CPVC price in the quarter three and quarter four onwards also. Okay. And how are our nature of contract? That is how do we adjust our prices? Is it it is directly pass on or we have a monthly quarterly? How are the nature of contract? Contract prices in some big customers, we are on the quarterly basis and the smaller customers is on the monthly basis. So we have both kind of models based on the volume of the customer.

16:35 Thank you. Thank you. Thank you. Our next question comes from the line of Rakesh, an individual investor. Please go ahead. Hi, sir. Hi. Yeah. Am I audible? Yes. Yes. Yeah. Thank you for the opportunity for... And I want to know that there... Is there any impact on... Of this El Nino on our company revenue and maybe product? Yes. See, we are into products, which is majorly not into the agrochemicals or the pharmaceuticals, so we are not directly impacted. But definitely, indirectly, when it impacts the overall economy, at that time it comes, but we are not into any such product which would have a direct impact of El Nino.

17:28 Okay. And one more thing regarding that tax demand, which is a submission and two days before. Can you tell me a lot of that? It's nothing. It's a routine thing that has come. So it comes and then we rework, and it's a normal thing. Nothing specific. Okay. Okay. Thank you. And one more thing. Like, actually, the stock price is beaten so much maybe by the market situation. But is there any chances of, like, a promoter buying for... In... To increase the interest in... For a retail investor? Like Rakesh, this call is majorly discussing on the performance of the company of the company. Okay.

18:14 Okay. Okay. Yeah. So... Yeah. Thank you. Thank you. Thank you. Ladies and gent... Gentlemen, anyone who wishes to ask a question may press star and 1. Our next question comes from the line of Venkatesh, an individual investor. Please go ahead. Yes. Thank you. My question is on the chlorotylline. What will be the realization margin? So we generally don't share product wise margins. As the company put together, we would be earning, I mean, margin in the range of 20% to 23%, 22% kind of margin. So that will that will be there for all the products. So we won't be sharing the product wise margins.

19:07 Okay, sir. Thank you. Thank you. That sounds... Next question comes from the line of Neeraj Jamuria with Annual Wealth. Sir, just wanted to have your thought like this quarter, our operating profit was down 43 crores on a sequential basis. So if you can share your thoughts in terms of which of the products in our product portfolio had a positive contribution and which of the products had a negative contribution because of which we have seen our EBITDA coming down on a Q on Q basis. So some thoughts here.

19:53 So in this volatile situation, I mean, we were able to maintain overall profitability of the company. But specifically, if you look at the chlor alkali side because of the as you rightly said in the starting of the call, the increase in the coal prices, the energy prices had impacted particular the chlor alkali where the profitability would have gone down. So that is the major case. Otherwise, overall business is good. Perfect, perfect. And sir, in terms of capacity utilization, if you can share for ECH, hydrogen peroxide and caustic soda for second quarter, that would be helpful. So ECH would be around 75% to 80% utilization levels and hydrogen peroxide would be again 95 utilization levels.

20:44 And caustic soda was? In the range of 75% utilization levels. Got it. Sir, last question from my side is on the power side. So like if we in one of our earlier conference call, you mentioned that our total power requirement for the complex as a whole is close to around anywhere between 120 megawatts to 140 megawatts depending upon the utilization levels of our products. So are we doing anything in terms of reducing our exposure to the coal based power plant through renewables? And if yes, how this should shape up over next two, three years so that the impact could be minimized? So currently, I think you are aware about it that we have already done a solar and wind hybrid project. We have commissioned one. So and we have already announced for the second project also.

21:43 So going forward, at least, we see that in down the line two, three years' time, I think our 30% or 30% to 35% of our demand of total will be kept from solar and wind hybrid. That's the model people are using it in terms of the chemical industry for reducing their energy cost. So we do not need to invest. We are not going to invest substantially on this. Only we are going to invest 26% of the equity of the SPV company and we just giving a commitment for the long term of twenty years. That's the only requirement from our side. So it is not a major CapEx and that's how we are planning to reduce the financial cost in going forward in next two to three years' Perfect, sir. Thank you so much and best of all wishes to the entire team of EPIGRAL.

22:32 Thank you. Next question comes from the line of Manan Mundra, an individual investor. I just wanted to know what is going to be approximate maintenance CapEx as a a portion of your gross fixed assets that that we have invested in. Maintenance CapEx is generally in the range of 1.5% of the gross block every year.

23:25 Okay. And another question is, are we seeing any pressure on CPVC margins also because of the new capacities coming in from the competitors? See, again, the competition capacities are coming, but at the same time, the demand for this product is also increasing. So demand for CPVC is increasing in the range of 13% CAGR every year. So one year can be here and there, but considering the way demand is growing, any new supplies that are coming by us or even with others, India's demand will be enough to absorb all the supplies. So one year can be here and there because the supply comes in a big way, whereas the demand grows gradually. But considering that situation over a longer period of time, when I say longer, maybe in a three to four years' time, the capacities will be absorbed by the growing demand.

24:19 Okay. Okay. And just one one more thing. We have all our chemicals, and we have an integrated plant, and that's... That helps us in maintaining economies of scale. I completely understand that. But do we see if any... Do we have any disadvantage, Joe? I mean, logistically, if we have to send that, you know, CPVC, Epigral, or any other products that we are making to other parts of the country. I know there are large manufacturers in Gujarat itself, but suppose if we have to sell sell those things down to South or in the North or in the Eastern part of the country. Do we face any negative advantage because of the logistics cost?

25:07 See, as of now, if you see, there are only two or three selected players in India, and majorly everyone is on the Western part, I mean removing one particular supplier. So in terms of it's not that there is someone else who is an advantage and we are not. So considering that situation, we are in par with everyone else. So I don't see anywhere any disadvantage in terms of we having our plant in Western part or we have to sell the protein based in part of the India. That's not the case as of now. Okay. And again, just coming back to CTVC and ECH, is there a customization for each customer so that even if a new competitor comes in, he can... They cannot, you know, replace us from day one just on the basis of cost. And they will also have to, you know, take approvals from the customers in in case of CPVC and ECH.

26:04 Yeah. So see, in terms of every product, the approval is definitely that is required. In CPVC case, the approval is longer considering it goes into pipe, so it takes a longer period of time to get approval and then the gradually volume increase. Similarly, on the ECS side, it's not that rigorous, but again, is something which is required for even for that product. But CPE society takes a bit longer because you have to make pipe, then all the testings are done on the pipe, and then finally it gets approved. So it takes time. But again, it's not that simple as it seems. So I mean, people will enter, but not like everyone can do that. Yes. So, you see, I'm not from chemical industries. I'm just trying to understand from you what kind of mode we have here, what kind of competitive advantage we have here.

26:53 So if you can just elaborate from your side on this, it's... That's it. Yeah. So see, we have our own chlorine, and we first started our CPVC. I mean, we have the largest capacity in CPVC. So we have we are almost catering to all the customers in India. And plus, this technology is not something that is easily available like what is there in the case of ECH. So it's not that easily available. Plus also, it takes time to get approval, then you get the volumes from the customers. So it's a gradual process. So it's not that easy. So first, more advantages will always be there. Plus, we have our chlorine in house, which comes through pipeline. So managing chlorine of that much quantity is something that we don't have to do through runners or any other thing. It it is done through pipeline. So these small things all add up to the benefit of the company.

27:46 Okay. Okay. Thank you. That's it for now. Thank you very much. Sure. Thank you. Next question comes from the line of Gurgan Dixit with Amke Global Financial Service Limited. Please go ahead. Sir, this I have a question for the FY 'thirty one guidance. Earlier, the CMD has this guided INR 2,900 crore revenue by FY 'twenty seven and INR 5,000 crore by FY 'thirty one. As per I recall, this epoxy and NPP together are guided at around INR 1,300 to INR 1,500 crore peak revenue. So how does this INR 2,100 crore gap split across CPVC, ECH expansion, epoxy, MPP?

28:34 So that's my first question. And subsequent question is, does FY thirty one need another CapEx beyond the 600 crore? And that's that's that's the 2% there. So I'll I'll put like this. See, currently, we have a gross block of around 3,000 CER. We are already working on the CPEC and the ECH, the lag which will get commissioned in a quarter's time. So once that is commissioned, there will be an additional maybe INR 500 crores, INR 600 crores of gross block. So it will be INR 3,500 crore of gross block. And that itself is good enough to fetch an optimum level duration. It can fetch a revenue in the range of around INR 3,603 thousand 700.

29:22 And post that, we are doing CapEx for the MPP and the Epoxy resin, where the CapEx is around 600 crores again. So this cross block of INR 3,600 crores or INR 3,500 crores will go to INR 4,100 crores or INR 4,200 crores. So that much of CapEx is good enough to fetch a revenue in the range of around 5,005 thousand 100 kind of revenue by FY 'thirty one. This is what we are estimating based on current realization, then a gradual ramp up of the utilization gradual ramp up of the CapEx that we will commission this year as well as next year. Hello? Yes, sir. Sir, my second question is about the ECH.

30:09 Your capacity doubles in q three FY twenty seven. So... But the captive... That's the demand for for... I mean, for the epoxy plant only comes in the second half of the FY '28. So to then, sir, what share of the ECH will be exported? And when you expect the full utilization, I mean, for FY 'twenty eight and when do you expect the full utilization for these plants, sir? See demand for the ECH is also growing in India and plus there is an export opportunity as well for the ECH. So we once we double the plant of ECH, we have estimated the ramp up will be gradual for the coming in the coming months. And what you said is to Epoxy resin is something that will be commissioned.

30:55 I mean, we are targeting to get commissioned by the March 28, so maybe it will drive the revenue in FY 'twenty nine onwards. So at that time, it should be at reach at optimum level. And considering the capacities and everything, we are estimating that around, you can say, percent of what ETH we will have will be consumed capital and the balance 50% will be selling in the market. Yes, that's from my answer. Thank you. As there are no further questions from the participant, I now hand the conference over to the management for the closing remarks. Thank you, and over to you, Tim. Ladies and gentlemen, we have Gargan Dixit from Amke Global Service. Yes. Yes. Thanks for everyone for joining this conference, and happy to all it to all. Thank you so much, Gargan. Ladies and gentlemen, on behalf of MK Global Financial Service Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.