Borosil Limited (BOROLTD.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Borosil Q1 FY '26 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities Limited. Thank you, and over to you, sir.

Yes. Thanks, Nidhi. On behalf of ICICI Securities, we welcome you all to Q1 FY '26 Results Conference Call of Borosil Limited. We have with us today senior management represented by Mr. Shreevar Kheruka, Managing Director and CEO; Mr. Rajesh Kumar Chaudhary, Whole-Time Director; Mr. Anand Sultania, CFO; Mr. Rituraj Sharma, President, Consumer Products; and Mr. Balesh Talapady, Vice President, Investor Relations. Now I hand over the call to the management for the initial comments on quarterly performance. Then we will open the floor for question-and-answer session. Thanks, and over to you, Shreevar, sir.

So thank you, Aniruddha, and ICICI Securities for arranging this call. Good afternoon to every one of you. We are all delighted to be communicating with you once again. I'm pleased to inform you that Borosil Limited's Board has approved the financial results for Q1 FY '26 during our meeting on 14th August 2025. We've submitted our results and an updated presentation to the stock exchanges, and they're also available on our company's website for your review. I'm pleased to report that Borosil Limited has delivered a steady performance in Q1 FY '26 with consolidated revenues from operations reaching INR 232.7 crores, up from INR 221.2 crores during the last year. This represents a 5.2% year-over-year growth. This steady growth achieved against challenging market conditions reflects the resilience of our business model, the strength of our execution and the continued trust and loyalty of our customers. This also places us on a strong competitive footing alongside our peers. In Q1 FY '26, the company achieved an operating EBITDA before investment income and onetime items of INR 40.2 crores, up from INR 34.6 crores in Q1 FY '25, which is a 16.1% year-on-year growth, reflecting our continued focus on efficiency and growth. The operating EBITDA margin for Q1 FY '26 stood at 17.8% versus 16% during last year. Other operating income includes INR 6.03 crores from shared service support income for Q1 FY '26 and INR 4.21 crores for Q1 FY '25 with the associated expenses captured under total expenses. Profit before tax for Q1 FY '26 was INR 23.5 crores, up from INR 12.9 crores in Q1 FY '25. Q1 FY '26 includes a onetime stamp duty expense provision reversal relating to demerger of INR 7.2 crores, which is shown under the head Other Income and also includes onetime expenses of INR 1.6 crores towards professional fees for a strategic assignment. The net impact of onetime items is INR 5.6 crores. At the same time, during Q1 FY '26 as compared to Q1 FY '25, depreciation has increased by INR 2.6 crores and finance costs decreased by INR 2.7 crores, largely due to repayment of debts. The profit after tax grew from INR 9.3 crores in Q1 FY '25 to INR 17.4 crores in Q1 FY '26, which is a growth of 87.4%. As on 30th June 2025, Borosil Limited has a net debt of INR 5.1 crores. Now let's take a closer look at our category-wise performance for this quarter. Borosil's Consumer division continues to expand across both glassware and non-glassware categories under the Borosil brand, along with our Opalware range under the Larah brand. The Larah Opalware segment reported sales of INR 76.2 crores in Q1 FY '26 versus INR 76.1 crores in Q1 FY '25. Larah's performance in this quarter mirrors the overall market softness during the quarter with sales impacted by slower demand; however, we expect a strong recovery in the following quarters. In our glassware segment, which includes microwavables, serving wear, glass tumblers, lunch boxes and storage solutions, we recorded a muted year-over-year growth with revenues reaching INR 56.2 crores compared to INR 55.7 crores in Q1 FY '25. As mentioned in the earlier quarters, our performance was also influenced by UCPMP 2024 which restricts incentives to health care professionals. This weighed on our B2B business by curbing bulk orders and limiting distributor engagement. The non-glassware segment encompassing a wide range of small home appliances, insulated bottles and flasks, cookware and other kitchen essentials performed strongly, posting a 10.7% increase in revenue. Turnover for this segment reached INR 94.2 crores in Q1 FY '26 compared to INR 85.1 crores in Q1 FY '25. BIS compliance requirements affected our Hydra bottle sales as some of the channels are only accepting BIS-certified steel products. Our team has recognized these headwinds and is actively reshaping the overall strategy to mitigate this impact. As part of this, in the previous quarter, we had announced the establishment of a new manufacturing facility in Rajasthan through our wholly-owned subsidiary, Stylenest India Limited for vacuum insulated stainless steel glass, bottles and containers. This project entails an estimated initial CapEx of approximately INR 40 crores and will have an annual production capacity of approximately 2.4 million units with commercial operations targeted for Q4 FY '26. In parallel, amid a muted revenue quarter, we implemented cost control initiatives, notably a sharper focus on marketing efficiency and reducing performance marketing spend online. And therefore, overall marketing spend dropping from INR 18 crores in Q1 FY '25 to INR 14.1 crores in Q1 FY '26. Additionally, power and fuel costs declined from INR 20.4 crores to INR 17.5 crores over the same period, substantially contributed by the solar projects that we have already installed in Rajasthan. It is important to note that the softness in the short term in Q1 does not overshadow Borosil's proven record of consistent long-term growth. Between FY '18 and '25 and FY '25, our revenues have grown at a 23.5% CAGR, while EBITDA expanded at a 34.3% CAGR. Since acquiring Larah in 2016, its revenues have risen from INR 48 crores to INR 384 crores in the last year, developing a 26% CAGR. Likewise, our non-glassware portfolio has grown from INR 23 crores in FY '17 to INR 453 crores in FY '25, reflecting an exceptional 45% CAGR, clear evidence of our ability to deliver sustained growth and value creation even over challenging time periods. Now while Q1 was challenging, we, as a company, have the skin in the game for the long term. The long-term story for our categories is as strong as ever. India's per capita GDP has been rising steadily from about INR 1.1 lakh in FY '22 to nearly INR 1.4 lakhs estimated for FY '26. Private final consumption expenditure, PFCE is also growing. And over the next few years, per capita PFCE is expected to reach the $4,000 mark. That's important because higher income means more spending on lifestyle and home and kitchen products. With our premium yet accessible positioning, Borosil is ideally placed to capture a share of this expanding consumer spend. The brown goods market in India, which includes microwave ovens, kitchen appliances, home appliances and personal care appliances is on a strong growth trajectory. Valued at approximately $5 billion in FY '24, the market is expected to reach $9 billion by FY '30, translating into a robust CAGR of around 10%. A major driver of this expansion is the rising demand for kitchen-centric appliances such as microwaves, choppers, mixers, grinders and toasters. These products align closely with evolving consumer lifestyles where convenience, efficiency, health and modern design play increasingly important roles in household purchase decisions. Over the last few years, we've seen a remarkable shift in consumer behavior in India, a shift that's now becoming a powerful tailwind for our business. Health and wellness are no longer niche priorities. They are central to the way people live, eat and make purchase decisions. The Indian health and wellness market, which was about $50 billion in FY '24 is expected to grow to $90 billion in FY '30. Two trends stand out. First, rising health awareness. More Indians are paying attention to what they eat and drink, and that naturally extends to how they store, cook and serve their food. There's a strong move towards toxin-free, safe and durable products, exactly the space that Borosil as a brand operates in. Secondly, the accelerated rejection of plastics, concern around BPA, microplastics and other harmful chemicals are prompting consumers, especially urban millennials and Gen Z to move away from plastic. Add to that government-led single-use plastic bans and growing sustainability awareness, this would make the shift towards materials like steel, glassware and opalware inevitable. We are excited about the Indian lunch box market as well, which is worth more than INR 4,000 crores. More and more consumers are looking for safer, microwave-friendly and sustainable options. This is exactly where Borosil has an edge. Our premium glass lunch boxes combine toughness, leak-proof performance and microwave compatibility, all in a product that looks great and is built to last. This is also one of our hero products. One of the pillars of our long-term strategy is our commitment to Make in India. We already operate one of the largest opalware capacities in India with 84 tonnes per day and India's only 25-tonne per day borosilicate glassware plant, which we commissioned in March last year. But we're not stopping with glass. As already mentioned, we are now expanding our manufacturing footprint with a new facility being set up to producing vacuum insulated stainless steel bottles, glass and containers. Borosil is on a transformational journey to address key ESG opportunities and create long-term value for all our stakeholders. One of the strategic priorities of ESG is to lower our operational carbon footprint and meeting decarbonization targets. Borosil has successfully commissioned 2 captive solar power plants in Bikaner, Rajasthan with a capacity of 8.6 megawatts commissioned in December '23 and 7.2 megawatts commissioned in September '24. The existing plants cater to approximately 30% of our overall power consumption. The recent introduction of Green Energy Open Access Regulations 2025 permits further expansion of our solar capacity. As a result of this, the company will be further investing about INR 75 crores in the current financial year towards expansion of our solar capacity by setting up another 20-megawatt captive solar plant in Bikaner. The project shall be funded with an appropriate mix of debt and equity and has already been approved by our Board of Directors. Borosil is at the forefront of India's shift towards healthier, eco-friendly kitchen solutions, replacing plastic with microwave-safe, BPA-free glass and stainless steel products. Rising disposable incomes and growing health awareness are accelerating this transition, and we are successfully converting plastic users to glassware and opalware. With aspirational designs, educational marketing and an emphasis on hygiene and elegance, Borosil is redefining the modern Indian kitchen. Our omnichannel presence across general trade, modern retail, leading e-commerce platforms, along with strong B2B and export channels have delivered a deep market penetration. Today, with products available in over 24,000 retail outlets, we have built a diversified revenue base that connects with both urban consumers as well as international markets. In summary, despite near-term challenges, Borosil's strong brand equity, diversified portfolio, expanding manufacturing base and omnichannel reach position us well for sustainable growth. Thank you for listening, and I would be happy to take your questions.

[Operator Instructions] The first question is from the line of Sucrit Patil from Eyesight Fintrade Private Limited.

My question is, as Borosil's portfolio now contributes over 60% of the brand revenue, how are you planning the next phase of brand evolution, particularly in expanding into adjacent categories like smart kitchen appliances, sustainable cookware or even, say, modular dining solutions? Is there a road map to position Borosil as a full stack home utility brand beyond its legacy in glassware model?

Yes. Thanks for the question. Look, as far as our brand is concerned, we continuously look at kitchen as a whole and the table serving and even on-the-go storage as a whole category to evaluate where our products -- where we should launch products. As a part of that, not only do we evaluate the size of the market, we also look at trends and growth rates as well as the competitive intensity of these markets. So definitely, there is a future in which we could consider modular kitchens as an example, although that's not something we are doing right now. But we do have other categories which we are focusing on this year. For example, gas stoves is one such category where we've done quite well this year. And this is -- let's say, in the last 12 months, we've launched a product, which has been reasonably well-accepted already in the market. We'll also be launching products in, say, dinnerware like porcelain this year. But this is a continued work-in-progress. And I believe that we have a very strong team, which understands trends quite well and is also able to develop products to meet those trends. So yes, to answer your question, we would be looking into the whole kitchen and the table as a market opportunity. We do believe that we are an everyday use brand. So people who like quality, but also want to use -- have a good life, everyday use product where they feel happy to use these products. There's a design aspect to it. There's a convenience, there's a force multiplication aspect to it. That's the kind of brand positioning that we aspire to. And the product categories will keep coming, new and new innovations will keep coming. But specifically, I don't believe that we are launching modes of kitchens per se at this time, but we'll keep looking at new categories.

My second question is to Mr. Anand. I believe he is on the line. Yes?

Yes, I'm there.

My question to you is as Borosil scales across the different categories and channels, I would like to understand how do you internally prioritize capital between product innovation, digital distribution and inorganic growth. Is there any kind of a framework that balances near-term margin impacts with long-term brand and portfolio diversification?

No. So as far as the capital allocation is concerned, we look at basically each category, like the glassware. Within the glassware, the pressware as well as whatever is procured from the scientific business. And then within the non-glassware, you have other categories like your Hydra and then your appliances as well as your steel serve fresh and of course, Larah, which we acquired in 2016. So the capital allocation, depending upon the size, the scale of the business and the requirements of the business probably is allocated. We have a very detailed in-house study probably that we do on a monthly basis. Sorry, what is your next question?

No, I just wanted to understand how do you decide to where to allot -- your major chunk of the capital? Is it between product innovation, digital distribution or inorganic growth? What is the plan of action that you follow? I just want to understand that.

No. So the capital allocation is on the basis of the ROCEs that the potential business can generate, and that is the way probably the capital is allocated.

The next question is from the line of Mohit Jangir from InVed Research.

Yes. First of all, congratulations on a good set of numbers. Sir, my first question is on the non-glassware side as we are doing CapEx in stainless steel glass. So what kind of margin expansion do we expect post the commercialization and optimum utilization of the unit? And how much of demand do we have captively? And are there any plans for external sales of stainless steel glass? And any plans for further CapEx in non-glassware segment in further product categories?

Okay. Well, thanks for that. As far as our demand is concerned, our entire capacity will be for internal consumption only because I think we have more demand than supply at the moment. So as far as margin expansion is concerned, it's a very -- it's a dynamic market right now because there's antidumping duty, which is there in play for steel as well, that's for the raw material. And as well as there are certain, let's say, pricing that the competition is offering in the market. So I would say that the exact margin expectation would be very clear only in the next 3 to 6 months as the market kind of settles with this ADB, which has come. Hard to give an exact number for that. As I've always maintained that our ROCE expectation will be north of 20%, and that's what we expect to achieve even here in this stainless steel category. But obviously, there's also a learning curve. It's the first time we are making steel to get the full efficiencies to the level that, say, more established players who have been doing this for quite a few years achieve, may take us a couple of years. But I think if I look at it from a couple of year, 2-year horizon, I definitely expect that we will achieve that 20% plus ROCE.

Okay. And sir, any plans for further CapEx in non-glassware category in any other product segment?

At this moment -- when there's a plan, we'll update you. But right now this is the category that we are focused on.

Okay. Sir, my next question is on the EBITDA numbers or any margins that you can tell in opal or glass segment? And are there any plans to demerge opal plus glass into one company and non-glass into other? And what is the capacity utilization of our borosilicate glass unit?

We don't share the margins by category. So I'm sorry, I can't share that with you. But -- and there's no plans to do any structural changes in the company. We're very happy where we are. And as far as the capacity utilization is concerned, I would say we are lower than expected this year because of muted first quarter sales. So opalware may be around 80% capacity utilization. Glassware may be around 50%, 60% -- 60%, 65%, I would say, capacity utilization. So we do expect to rebound in the next 3 quarters. And Opalware, we would ideally like to go to closer to 100%. And glassware, if we can cross 80%, it will be very good for us.

[Operator Instructions] The next question is from the line of Akshat Mehta from Seven Rivers Holding.

Sir, first question is on the revenue side, sir, that you were targeting 15% to 20% revenue growth this year, and you've come up with 5% in this quarter. How should we look at the revenue growth for the rest of the year? And what would be the key drivers for that?

So just to correct you, I think when we speak about revenue growth, we have always said over a 3-year period. And it's never any projection for a single year because there are many factors, which can happen in any quarter or any year, which can derail that, case in point being COVID. But coming back to your question, I don't believe there's any change in our medium-term revenue CAGR of 15% to 20%. I'm still quite bullish that we'll achieve that. We are launching, as I mentioned before, new categories, which we have done this year, although obviously, new categories take time to establish. But even in our existing categories, I think the first quarter has been challenging for the whole industry and not just kitchenware, tableware, if you look across the board, consumer demand has been muted. So it's a reflection of that. And we do have 2, 3, 4 quarters sometimes in a row like this, but I don't expect that to derail our medium-term growth. And we do hope to rebound in the next few quarters as well. But I can't give you a specific number for this year, hard to predict. So yes. Sorry, is that -- did I miss something?

Yes. Sorry, sir. So is there a doubt that we can grow 15%, 20% for the full year? Any near-term demand drivers that you see that can help us grow better than quarter 1?

Yes. Look, there's no doubt that we'll grow, but putting an exact number this year is hard to say. We still hope that we'll continue our growth trajectory as we're having in the last few years this year as well, but there's no guarantee of that. The demand driver is there. I mean, we are -- Prime Minister has announced a GST rationalization on 15th August. We need to understand how that will impact our goods. If GST comes down on any of our products, definitely, that will be passed on to the customers. And definitely, that will be a demand driver. Plus, of course, the income tax scheme, which was passed in the budget will also be a demand driver. So those 2 from a macro perspective are demand drivers. Obviously, any positive impact of customer sentiment will also be a good demand driver for us. So these are all generic things, I'm saying, are applicable to probably all consumer product companies. But we -- with our -- from our side, specifically, I would say, we keep looking at marketing as a demand driver for us, product introductions as a demand driver for us. And those are continuing as before. And nothing has changed compared to last year, the year before. So we don't expect to have a poor outcome. We are still gunning for that growth, as I already shared. Whether we'll get exactly that this year, it's hard to predict.

Okay, sir. Second question would be on the margins. This -- on a year-on-year basis, we've seen glassware and opalware being almost flat, while non-glassware has grown by 11%, which is a comparatively lower margin category. I just want to understand how have we managed to grow our margins by more than 200 bps year-on-year on a basis? What are the drivers for that? And how should we look at the margins from a full year perspective as well?

Again, I won't answer for this year. In principle, we have always indicated that in the next 2 to 3 years, we should hit a 20% EBITDA margin. And that's something that we have said many times in the past, and we stick to that. So it's a part of that journey. As far as the margin expansion, I did cover it in my call that we had some savings in power and fuel expenses as well as rationalization of marketing spend and more specifically towards performance marketing spend this year. As we get better at targeting customers, we are able to reduce our overall marketing expenditure to that level. So these are the 2 main drivers for the margin enhancement. Even though actually -- as you rightly pointed out, the product mix from a margin perspective has actually worsened for us given that the sales increase has come largely from products which are lower margin.

Okay, sir. Can you share what has been the loss of sales in pharma due to the new gifting regulation that has come in, in this quarter?

Hard to say for this quarter. But overall, I think more than INR 50 crores per year we were doing in that segment.

[Operator Instructions] The next question is from the line of Bhavin Rupani from Investec.

My first question is related to Hydra. In the last call, you mentioned about the risk of going out of stock due to lack of outsourcing partners in India. Would you like to throw some light here on our progress on getting new outsourcing partners on board?

Yes. I think that's been a success story. We have been able to get more and more customer suppliers on board. I would not say we are where we need to be. we are still not able to procure as much material as there's demand for. And that sale loss will be there this year from that category. However, the quantum of sale loss is likely to be substantially less compared to what we had originally thought because of our ability to onboard new suppliers. I don't want to get into detail of -- because these things are fluid and also the issue is, frankly speaking, that the predictability of supply is still lacking because some are able to deliver more in 1 month than others, and they also have challenges, ramp-up challenges. So it's hard in the first couple of years to have a very predictable answer in terms of how much we'll actually get because even the suppliers are struggling to kind of streamline their manufacturing. But overall, I would say the prognosis is better than where it was 3 months ago and will likely improve further in the next 3 months.

Got it. And sir, what I understand is this category is SKU-driven category. So can you please tell us how many SKUs we have introduced recently from this outsourcing partner? And what are the plans going ahead?

I don't want to get into details how many SKUs have been introduced. But overall, I think we have close to 100 SKUs, if I'm not mistaken, in this category. But that's too much information to share at this stage.

Got it. Fair enough, sir. And sir, on A&P spends, historically, our A&P spend has been in the range of 7.5% to 8% of sales. Do you think we'll continue to maintain similar run rate for the year? You did mention that in Q1, we had reduced it, but what are your expectations for the full year?

So look, A&P has 2 types of spend. One is a general brand spend, which will not reduce. And second is performance marketing spend, which depends on your efficiencies of and your learning of how to draw in more customers or get more bang for the buck. So on the brand spend, we will not reduce even INR 1. If anything, they will be increased. But on the performance marketing spend, as we get better, naturally, the percentage will come down. And that is what we are seeing. So we've been -- our team has been continuously learning. And I think we have done quite a good job there and we'll continue focusing on that. What it means overall is that the spend may come down by 1 or 2 percentage points over the -- overall 8% spend may come down to, say, 6%, 6.5% of our sales.

For the current year, you're saying?

That's -- again, look, these numbers may go off. Again, it's hard to say. Because these are tactical calls you take on a daily basis. And when we are talking about taking tactical calls at that time, we don't worry about what we've told our investors because we do what we need to do for the business. So it's hard to say for any one current year. But in general, yes, that's a trend, which will happen that 8% will come down to 6%, 6.5%. If we can achieve it in this year, we'll be very happy.

Got it. Sir, next question is related to PAF and fuel. You did mention that our cost reduced from INR 20 crores to INR 17 crores this quarter. Can you please help us understand what could be the annual savings from solar projects on our current capacities right now? And are there any possibilities of further cost reduction in -- for the full year?

So INR 13 crores to INR 14 crores per year, this year, we will be getting as a saving overall, although the projects were there even in play last year. So it cannot be compared to last year, it's compared to maybe the year before, I would say. But the other point is that with the new power and fuel, the new solar project, that number will add up to another INR 17 crores, INR 18 crores, so the number will go to INR 30 crores, INR 32 crores per year saving compared to not having done this project.

So sir, post this new capacity that we have announced in solar, our power and fuel will be 100% renewable?

It will still be 65% renewable, although there will be a road map to get to 100% in the near future after that again. So right now we are 30%, we'll go to 65% with this project, and then we'll do a Phase 4, which should take us closer to 100%.

Got it. Fair enough, sir. And sir, our gross margins, if you look at, we have -- it has declined by almost 200, 220 bps year-on-year. How should one understand this? Is it due to additional incentives in the market to push volumes?

No, it's a product mix issue. It's purely a product mix issue. We have not increased the discounts on any front.

All right. Sir, also, our channel checks indicated there was demand continues to be tepid in Q2. So have we increased our incentives for the channel partners to make it more attractive for them or we have increased any discounts?

No.

No. No increase?