Himadri Speciality Chemical Limited (500184) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to Himadri Speciality Chemical Limited Q2 and H1 FY '26 Conference Call hosted by MUFG Intime. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Pooja, Swami from MUFG Intime. Thank you, and over to you, ma'am.

Thank you, Shalini. Good evening, everyone, and welcome to the Q2 and H1 FY '26 Earnings Conference Call of Himadri Speciality Chemical Limited. Today, on the call, we have with us Mr. Anurag Choudhary, CMD and CEO; Mr. Somesh Satnalika, EVP, Tyre & Strategy; and Mr. Kamlesh Agarwal, CFO. Before we proceed with the call, I would like to give a disclaimer that this conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations as of today. Actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. A detailed safe harbor statement is given on Page 2 of the investor presentation of the company, which has been uploaded on the stock exchange and company website. With this, I now hand over the call to Mr. Anurag Choudhary. Over to you, sir.

Thank you, Pooja. Good evening, everyone, and thank you for joining us today on Q2 FY '26 earnings call of Himadri Speciality Chemical Limited. It's always a pleasure to connect with you all and share our progress. This quarter has been another milestone for Himadri, a period where our strategy, execution and innovation have come together to deliver record results. I am pleased to say that in Q2 FY '26, we have achieved our highest ever quarterly EBITDA and PAT, reflecting the strength and resilience of our business model. Our EBITDA stood at INR 243 crores, up 21% year-on-year, and PAT came at INR 187 crores, a 39% growth compared to last year. For the half year, we delivered INR 477 crores in EBITDA and INR 369 crores in PAT, both our highest ever levels. Strategic emphasis on high-value specialty and advanced materials drove a strong margin performance in this quarter, delivering quarter -- year-on-year improvement in both EBITDA and PAT. The impact of softer raw material prices was marginal, and with a large export order scheduled to recognition in Q3, we are poised for continued growth. Over the past few months, we have made steady progress across multiple initiatives, from advancing our pipeline of new product developments and pilot trials to executing capacity expansions, deepening global collaborations and strengthening sustainability frameworks. At the heart of this progress lies our in-house R&D and technological capability with continuous drive to innovation, integration and value creation across the business. We have continued to expand our international engagement, showcasing our capabilities as major global platforms. These events not only helped strengthen Himadri's brand visibility, but also deepened partnership with global leaders in specialty chemicals and new energy materials. We were proud to partner with Asia's premier cricket tournament as the official tire partner of Asia Cup 2025. Just as the champions on the field post boundaries and overcame every challenge, Birla Tyres continues to stand for performance, reliability and an unwavering spirit on the road and in life. Through our campaign Rolling with Champions, we celebrated the passion of the game, the unity opinions of fans and our commitment to delivering strength and trust in every mile. This association marked a proud chapter in the brand journey. Before I move to other updates, I want to highlight an initiative that fully embodies our culture at Himadri, Vihaan. This platform brings Himadrians from across levels and functions together to engage, learn and exchange ideas in a collaborative environment. Vihaan fosters a culture of continuous learning by facilitating meaningful interaction between one young talent, passionate professionals and senior leadership. Through this initiative, emerging talents gain exposure to real business challenges, receive valuable mentorship and benefit from the collective vision of our experienced leaders, helping shape the future leaders of Himadri. Vihaan is a powerful catalyst for innovation, fresh thinking and leadership development that drives long-term value for our organization. Building on the robust performance and strategic execution, we have demonstrated so far, Himadri is accelerating its journey towards long-term financial milestone. Our focus on high value-added segments and operational excellence has positioned us well ahead of schedule to achieve our ambitious target. We have earlier guided that our ambition was to double our PAT from FY '24, which was INR 411 crores by FY '27. Today, with our progress in just 2 years, we are already nearing this milestone, well ahead of plan. This momentum not only strengthens our belief that FY '27 will far exceed our original expectations, but also set stage for Himadri to establish industry-defining benchmarks and shape the next era of growth. On our strategic roadmap, we are moving steadily towards FY '28, guided by a clear ambition to build our diversified and future-ready portfolio, anchored in high-value growth. Over the next 3 years, we expect meaningful contributions from our Specialty Carbon Black Expansion, the ramp-up of Birla Tyres, the forward integration into Specialty Chemicals and the commercialization of our Lithium-ion Battery Material business. Having shared a snapshot of our strong quarterly performance, I would now like to walk you through the detailed progress and exciting developments across our core business segments and strategic initiatives. Let me begin with our core specialty value chain, where we continue to see robust growth and on track expansion. Our Coal Tar business remains our trusted supplier to global aluminum and electrode consumers. While we are actively expanding our footprints in liquid pitch exports with newly commissioned terminal at Mangalore port, in Specialty Carbon Black, the brownfield expansion project is progressing well, set to more than double our capacity to 130,000 metric tonnes per annum by the end of Q3 FY '26, positioning Himadri as the world's largest single-site producer of Specialty Carbon Black. This expansion will take our total carbon black capacity to 250,000 metric tonnes per annum. With over 60 new grades launched, we are strengthening our leadership and product diversity in this critical segment. In parallel, our new Specialty Chemicals segment is gaining momentum with the upcoming facility of anthraquinone and carbazole production that is expected to be commissioned by Q2 FY '27. This forward integration from existing coal tar distillates will not only reduce import dependency, but also enhance value addition across the dye, pigment, pharmaceutical and agrochem industries. Moreover, the introduction of Durofresh mothballs with its industry-leading purity of 99.5% represents a new chapter where Himadri's decades of technical expertise translate directly into a consumer-facing product. It's not just a diversification, but it's about capturing greater value within our existing value chain while enhancing our brand presence in a fast-growing retail market. One of the most transformative areas for us is lithium-ion battery material. There, we are making strides to establish India's first commercial manufacturing footprints. As India rapidly emerges as a key player in the global clean energy value chain, Himadri is proudly contributing to the Atmanirbhar Bharat vision by investing to become the world's first commercial scale manufacturer of LFP cathode active material outside China, targeting our base capacity of 200,000 metric tonne per annum. The initial 40,000 metric tonne per annum plant is already under development and on track to commence operations by Q3 FY '27. Concurrently, we are advancing research across anode technologies, including both natural and synthetic graphite to build a comprehensive, self-planned battery material portfolio that drives long-term growth, innovation and energy independence of India. Our partnership with Sicona Battery Technologies in Australia gives us exclusive right to commercialize this advanced silicon-carbon anode technology in India, a technology that offers over 20% higher energy density and reduces charging time by nearly 40%. Alongside this, our strategic investment in Sicona, 17.6%; International Battery Company, 16.2%; and Invati Creations, 40%, give us access to cutting-edge technologies, R&D capabilities and a presence across the entire LiB value chain for anode and cathode materials to cell manufacturing. Another important development this quarter has been our Birla Tyres. The business is on course of revival, and we are building a comprehensive product portfolio catering to off-highway tires, commercial vehicles, agri and industrial segments. For the Passenger Car Radial unit, designed for EVs and SUVs, the installation of plant and machinery is scheduled to commence within the next 12 months. Today, Birla Tyres operates through 29 distributors and over 350 dealers across India and global markets, including Asia, Africa and Middle East. The new brand identity and digital presence reflect a strong, modern and consumer-driven direction for this iconic brand. Sustainability means and remains deeply embedded in our strategy with several important milestones, recognitions and forward-looking commitments, reinforcing our responsible manufacturing philosophy. Sustainability remains at the core of everything we do. This quarter, Himadri achieved the ISCC PLUS certification for our Mahistikry plant, reaffirming our dedication to responsible manufacturing and circular economy principles. We earned an A rating in CDP's Supplier Engagement Assessment, reflecting a strong supplier collaboration on environmental performance. It's also worth highlighting that we have been -- previously received the prestigious Platinum rating from EcoVadis, which placed us among the top 1% of companies globally for sustainability performance. Our net zero ambition for 2050 is backed by measurable science-based targets across Scope 1, 2 and 3 emissions. All our manufacturing sites operate a zero liquid discharge facility, and we utilize in-house clean power for 100% of our electrical energy needs. For Himadri, sustainability is not merely a compliance, it's -- in the core business philosophy that wealth innovation drives efficiency and builds long-term trust with our stakeholders. With our strong balance sheet, robust cash generation and disciplined capital allocation, Himadri is well positioned to deliver sustainable value to all stakeholders. Before I conclude, I want to thank our team members, partners and our investors for their continued trust and support. With that, I would like to hand over the proceedings to our CFO, Mr. Kamlesh Agarwal, to walk you through the financial performance in details.

Thank you, Anuragji, and good evening, everyone. Now, let me take you through the key financial highlights for the quarter and half year ended 30th September 2025. On a stand-alone basis, our revenue from operations for Q2 FY '26 stood at INR 1,070 crores compared to INR 1,135 crores in Q2 FY '25, primarily impacted by the correction in raw material prices, increased focus towards high value-added products and deferment of sales recognition for export shipment to Q3. Driven by our strategic emphasis on value-added offerings and operational efficiency, profitability continued to strengthen even as topline remained soft. EBITDA for the quarter came in at INR 243 crores, a growth of 21% year-on-year over INR 201 crores in Q2 FY '25. PAT stood at INR 187 crores, reflecting a 39% increase year-on-year compared to INR 134 crores in the same quarter last year. For the first half year of FY '26, revenue stood at INR 2,171 crores, while EBITDA reached INR 477 crores, up 23% year-on-year from INR 389 crores in first half of FY '25. Profit after tax for the half year stood at INR 369 crores, up 43% year-on-year over INR 258 crores reported in H1 FY '25. On a consolidated basis, revenue for Q2 FY '26 stood at INR 1,071 crores versus INR 1,137 crores of same period last year. EBITDA for Q2 FY '26 stood at INR 238 crores, recording a growth of 17% year-on-year and PAT at INR 176 crores with a growth of 30% year-on-year. Our half yearly revenue stood at INR 2,189 crores, EBITDA at INR 473 crores, PAT at INR 356 crores, reflecting strong performance across all the business segments. We continue to maintain a healthy liquidity position with a comfortable leverage profile. Our debt-to-equity ratio remains low despite ongoing capital expenditure. In summary, Q2 FY '26 was another strong quarter with record profitability, robust margins and a healthy balance sheet, laying the foundation for sustainable growth in the upcoming quarters. That's all from our side. We will now open the lines for question and answer. Thank you.

Pooja, you can start the Q&A session.

[Operator Instructions] The first question is from the line of Sanjesh Jain from ICICI Securities.

A couple of questions from my side. First, on the volume growth, if I look at the volume growth for last -- since Q4 '24, we are stuck between 135,000 to 140,000. It's because we don't have capacity or the demand remains soft. What's leading that the volume has been in that range of 135,000 to 140,000 metric tons for almost 7, 8 quarters now?

The volumes are at the same level basically because we are more or less at peak capacity utilizations. And with the new capacity being added in next quarter for Specialty Carbon Black and debottleneck for the coal tar pitch also happening, then we can see volume growth from Q4 onwards.

Okay. So just basically, we are capped by the capacity constraint, you don't see issue on the demand side of it?

No, no, no, not at all.

Got it. Got it. So how much are we adding or debottlenecking the coal tar pitch distillation capacity?

So our current capacity is 500,000 metric tons. We are going to become 600,000 metric tons.

So how should we think this utilization because around 40%...

So this utilization, from Q4, it will start. Q3 will have some impact and Q4 and then from Q1 next year. So from Q3, you will start seeing the impact.

But from a demand perspective, aluminum capacity in India is not going up, so 40% of this incremental 1 lakh need demand from the aluminum and the remaining will go as a raw material into carbon black manufacturing. How should we think the capacity which can come as a sales out of this addition we are doing?

So for coal tar pitch, as we highlighted previously also, we have started export of liquid coal pitch, and we have recently started Mangalore terminal also. And this month, November, we are effecting our first shipment from Mangalore terminal. So with this, now we'll be supplying to the global market. The new capacity will basically cater to the global market.

So why can't we export it from our Kolkata port? And why we need to come to Mangalore port?

So we have one unit in Visakapatnam also. So for that, we are using Mangalore port. From Kolkata, we are using Haldia port.

Haldia port. Got it. Got it. And how much -- do we have the visibility for this incremental 40,000 metric tonne of coal tar pitch demand from the export market?

Yes, yes, we have very clear visibility.

Got it. Second, from the carbon black -- and sorry, just to complete that, which geography are we seeing this incremental demand coming in for the coal tar pitch?

Middle East.

Largely Middle East.

Largely Middle East, because a lot of smelters are there in Middle East, significant capacities, and all of them are importing coal tar pitch.

And we are approved there?

Yes, yes. Yes.

Or the approved process will start now?

No, no, we are approved.

We are approved. So just we need to manufacture and supply, that's it.

Right, right.

Got it. Got it. Second, on the carbon black side, if I look at carbon black, we got 2 piece, right, one is rubber grade, the other one is the specialty grade. Now, if I look at your peers' number globally and India, they are seeing a significant stress in the overall spread, both specialty and the tire grade. While if I look at our number, it shows a very different trajectory here, though we don't get product-wise, but we have increased in last 1 year the EBITDA per kg from INR 15 to INR 17. Now, how are we able to buck this trend, as in how are we able to improve the spread while globally and the peers are showing a decline? Anuragji?

Yes. So to answer your question, the biggest difference between any other carbon black player and Himadri is that we have always focused on our specialty portfolio. And in commodity also, we focus on very niche applications, where quality marks are very significant requirement. So in difficult times, this is -- what happens when doing testing times, actually, the business model of Himadri is put to test. And there is where we prove that the strategy we took over the years is paying yielding results. The market demand and prices are in constraint globally for carbon black, but Himadri has very limited volume of carbon black to sell compared to any of its peers who have significant volume. So they have to compromise on different aspects. But we select our customers on a long-term basis, reliable customers who support us in difficult times, given our loyalty in terms of delivery schedule, pricing -- clarity in terms of pricing formulas, in terms of quality, consistency, and that is how Himadri differentiates itself from its peers.

No, that I appreciate. We don't have such a low capacity. We are sitting at about 150,000 metric tonne of capacity. It's...

We are at 180,000 tonnes.

180,000, correct.

Right.

Sale level capacity of 150,000 metric tons assuming 80% utilization. So it's not small. We are fairly decent sized. And why would in a commodity, anybody pay premium, right? Anybody and everybody is selling the carbon black, correct? We got players like Cabot, Orion, everybody is reporting stress. Now, I can understand we are smaller than them, but we still have a very decent capacity. Is it sustainable? We had some contract which has flowed through, or you see this as a sustainable number?

We definitely see this as a sustainable number. And if you look at any other players, their volume of tire is significant compared to Himadri. So in Himadri, the volume of tire is significantly less compared to our peers. That makes the difference.

No, no, that mix has always been there. I'm saying if I look at Orion, who reports both specialty and rubber separately in terms of gross profit per kg, we can see clearly stress in both the segments.

See, when you compare us with the companies in the Western world, they have different cost economics. Their cost, their raw material costs, their overheads are totally different from ours. The operating cost -- and Himadri over the years, through its operational efficiency, improvement in yield, better waste heat recovery systems have made so much progress that, that has always helped us to improve on the margin.

Fair enough. Fair enough. Does this backward integration helping us having our own carbon black oil? Is that a differentiator?

Definitely, that's our USP. So when we use -- we make product from our own carbon black oil, the quality consistency is very much there because like we also use petroleum-based oil, but in petroleum-based oil, what happens, consignment to consignment, there is a variation in the quality of the raw material. In our case, since it's our byproduct, there is absolute consistency in the raw material, which gives a big, big advantage. And our raw material is very clean material. That adds to the other advantage for specialty carbon black.

Got it, sir. Got it.

And this also -- our power, raw material gives better yield also. So all these factors taken together makes -- takes us in a different league altogether.

No, no. But that difference was there a year back also, right, when we were reporting an INR 15 a kg, or there is a change in the yield over the last 1 year for us?

Yes, consistently, there is change, improvement. If you see our quarter-on-quarter commentary also, we have been saying that the yield improvement is there, operational efficiency is there, waste heat recovery systems are improving. So we work on a consistent improvement program on operational efficiencies, which also yield results on quarter-on-quarter basis.

Got it, sir. Got it. Very clear. Very clear. Now, next on the tire side, if I look at consol minus stand-alone, which I believe largely will be tire, there, the number appears to be a sharply declined. Last quarter, we reported a revenue of INR 18 crores. This quarter, it is just INR 60 lakh. What am I missing here? Or if you can just give us what was the tire sales this quarter and last quarter?

So tire sales this quarter was INR 26 crores. And last quarter, it was INR 5 crores.

Then, what explains this consol?

So revenue, if you look at it, the revenue has come down in Q2 compared to corresponding quarter last year because of the fall in raw material prices. The average raw material prices at that point of time was around INR 45,000. Now, it's at around INR 39,500. So because of this...

Consolidated revenue minus stand-alone revenue, not looking at cost. I'm just looking at the revenue line. So our tire is on the subsidiary company, right?

Right, right.

So if I subtract the consol minus stand-alone, that sales largely should reflect the tire company sales?

Tire and one small company, Invati, also. That's a small number.

That's a small number, right? But if I look at consol minus stand-alone, that number appears to have sharply declined. Last quarter consolidation -- consolidated revenue minus stand-alone revenue was INR 18 crores. This quarter, it is only showing INR 60 lakh, INR 6 million.

So what happened during this quarter, we have opened a subsidiary overseas, and the sales to that has been knocked off since the sales has not affected in the subsidiary -- from the subsidiary. In the stand-alone, that has been considered as a sales. But on a consolidated basis, that has been knocked off because of dispatch during the last -- the cutoff, it has been knocked off.

No, no, no, I understood. I understood what happened. So this quarter, we have sold INR 26 crores worth of material in the tire business.

Right, right, right.

Got it. Got it. And when we say 29 distributors, if I just want to benchmark the supply chain of the competition, where are we in our region as in the Eastern region, which we started initially in the Central India? What is the penetration right now for us?

So penetration, other than South India and parts of West India, we are present now in pan-India basis, and -- but these numbers are going to substantially increase quarter-on-quarter.

When you say this number, you're talking of revenues, right?

No, I'm talking about distributors and dealers.

Distributors and dealers. Okay.

Particularly dealers because our model is to have distributor and below distributor have dealers. So suppose one dealer is having, say, 10 to 12 dealers now, it will go up to 30 to 40 dealers per distributor. So that will also increase significantly.

So we are saying we right now has 29 dealers...

Distributors.

Distributor, then we can easily go up to 900 retailers or the dealers.

Yes, yes. Plus we will have more distributors also.

Got it. Got it. So next year, assuming when we will have a full-year number in the tire, what is the revenue number we are expecting there?

So this year is the start-up. To be very frank, we are not considering this as any revenue. But next year, we'll be ramping up the capacities. So currently, suppose we are running at 10% capacity utilization, next year, we expect at least 30% to 40% capacity utilization.

Got it. And when should we commission the PCR plant?

So we'll start the installation of the machineries. We have the machineries in place. We are getting the machinery tested and checked. After that, we'll start the installation in next 12 months' time. And after that, I can give you a commissioning date.

Got it. Got it. So next year, it will all be the Bias side only, the PCR...

OTR/OHT.

OTR/OHT.

Bias and OTR/OHT, both.

Got it. Got it. And last question on the battery side of it, sir. Where are we in the LFP supply chain? Have we started the pilot plant or it is still under the construction phase?

The pilot plant is still in the construction phase. It will start in next quarter.

Okay. And 40,000 metric tonnes, we said, will start in Q3 '27.

Right, right, right.

Any initial samples which we have sent and any reviews you can share from the customer side?

Definitely, the reviews have been very good from our pilot scale plant. So we have got very encouraging results. And IBC is a clear example. So IBC is coming out with a cell Prabal 2000 with LFP cathode material, for which we send them sample, and they tested the material, and they were so pleased to see the quality of the material that we had detailed discussion and interaction, and then, we collaborated also. So IBC has already launched Prabal 1000, which is NMC-based cathode material cell. Now, they will be launching Prabal 2000, which will be LFP-based, in which Himadri's LFP will be used.

Got it. Got it. One last question on the anode side. We first time spoke about anode natural and synthetic and also silicon that we want to integrate there. We haven't announced any CapEx. So where are we in that anode development? And when can we expect any CapEx announcement on anode side?

So we have done a lot of investment in terms of research and development in technology for all the 3 types of anodes. We have made significant investment in this. And we are very happy to say that the results have been very encouraging. So once we are in a position to commercialize the technology, which will take another few quarters, then we will announce the CapEx program.

Got it. Got it. That's very clear. Thanks Anuragji for patiently answering all those questions, and best of luck for the coming quarters.

Thank you. Thank you.

The next question is from the line of Yash Gupta from Asit Koticha Family Office.

Sir, can you throw some light on the earlier participant's question on the tire business? Which segment we are focusing on in the tire, particularly once you say the South India and the Central India? And how big is the opportunity in the next 2 to 3 years in terms of EBITDA? It could be like INR 10 crores to INR 20 crores of quarterly EBITDA or like INR 50 crores of quarterly EBITDA.

See, tire is going -- our focus on tire will be on OHT and OTR segment along with that EV segment and passenger car radial segment. So this will be the focus area. We are starting with Bias, and we'll continue with some capacity of Bias in our portfolio. So there is a huge potential in this tire market. And in next 3 to 4 years, I see huge opportunity for Himadri in terms of top line and bottom line, both. And the numbers which you told will be significantly higher than what you told.

Okay. Sir, have we done any tie-up with any EV company? I think, EV, we have not launched as of now.

No, no. So what happened, so we are in the process, like I told, in next 12 months, we'll start the installation of our PCR plant. And after that, we'll do the commissioning. Post that, we will have the tie-up. Now, it is in development stage.

And we will look for the OEMs, not for the retail?

Definitely, we'll look for retail and OEM, both. In the retail, margins are much better than OEMs.

Okay. And sir, second question is on the EBITDA margin. In the last 6, 7 quarters, if we look at, the EBITDA margin is going up despite the volumes are almost at the same level. So which raw material prices have gone down in last 4, 5 quarters? And what's the reason for the decline? And whether we expect this decline to be sustainable?

See, the margins has not improved because of decline in the price of raw material. So in our case, any increase or decrease in the price of raw material is passed on to the customers. So no improvement has taken place because of any movement of fluctuation in the price of raw material. The margins what we have achieved are clearly sustainable margins, which has been -- which the company has been able to achieve through a lot of operational efficiency projects we are driving in our company, starting from yield improvement, energy saving, waste heat recovery system and a host of other -- we have different, different initiatives, which we take. And basis that, we have been able to improve on our margins. Plus, in addition to that, the company is moving towards high value-added products. So this transformation from normal products to high value-added products is giving higher margins with the same volumes.

So we are expecting this margin to be sustainable.

Definitely.

These are sustainable margins.

Okay. Sir, last question on the specialty carbon black forward integration part. Q3 FY '26 is intact. We are not -- we are on time line.

Yes, yes. I've already announced in my commentary that Q3 -- end of Q3 FY '26, we will see the commencement of our specialty facility.

So maybe for Q4, there will be some impact, but moreover, the full impact will come in the next year only?

Yes. Q4, you will see some impact, and Q1, you will see the full impact.

[Operator Instructions] The next question comes from the line of Riya Jain from SGA Finance.

So my first question is, given the revenue decline and the inventory receivables movement, what is the current working capital cycle? And how do you see it evolving in the next 2, 3 quarters?

See, current working capital is 31% of the top line, and we expect this to remain in the same levels.

For the next 3 quarters, right?

Yes, yes.

Got it. Also, looking at the short-term borrowings, we observed an increase of INR 300 crores to INR 800 crores on a consolidated basis. So could you please help us understand the rationale behind this rise? And what is the target debt-to-equity ratio or leverage level the company is comfortable maintaining?

So actually, these are commercial papers we have issued, against which we have done deposits with bank. So there is no leveraging we are doing. All the future expansion of the company will be funded through internal accrual only. So currently, if you look at net debt, it is only INR 113 crores.

Got it. Got it, sir.

And we expect to be cash positive in March in terms of our debt.

Okay. So you'll be net debt positive in March...

Definitely.

Got it. Got it. Also, the company achieved ISCC PLUS certification and emphasized sustainability credentials, so congratulations for that, firstly. And could you elaborate on how sustainability initiatives are translating into business advantage like pricing premium, market access, cost savings and so on?

Definitely. See, sustainability has been our motto since last more than 15 years when people were not that much focusing on ESG practices. So -- IFC Washington, World Bank invested in Himadri in 2009. And after a detailed diligence of 14 months, they invested in terms of environmental practices. And we had private equities in our company for the last 15 years, so which -- who are no longer there. But those corporate governance, best practices, sustainability practices are embedded in the core of the company now. We have been following these practices over last 14 to 15 years. And the result of this is what you see, like what is Platinum rating. It's a very, very prestigious ranking, which only 1% of the manufacturing companies globally have. So Himadri has a unique positioning among those 1%. Now, regarding when we work so much on sustainability in terms of environmental -- best environmental practices, in terms of governance practices, in terms of social goals, so when we interact with our customers, these customers also want these practices to be very strong in their suppliers because on their Scope 2 reduction, they have also highlighted about these things so that they get an advantage dealing with Himadri. So following these practices, we get a pricing premium from -- compared to our peers. That is also one advantage Himadri is having.

The next question is from the line of [ Viraj ] from Asit Koticha Family Office.

My first question was on the Durofresh brand that we have launched. So how are we navigating the naphthalene balls B2C market with our brand Durofresh? What is our strategy there to grow and gain market share from the existing players? And how much -- how big is the market? And how much revenue do we expect to make from this market -- from this business segment in FY '27?

See, we have been selling to this market not directly, but to others, like we have been suppliers to Willert, which is the largest mothball player in U.S. for years. 80% of their requirement was met by Himadri, like that with other players. So now we did a forward integration by introducing our own mothball. So the quality of the product has been very well appreciated by the market. We started with a very small capacity to test the market, and the results have been very encouraging. So now, we are setting up a larger capacity for which in next 3 to 4 months, equipment will be installed, and then, we will see the ramping up in production and sales of Durofresh mothballs. So next year, we expect -- in terms of revenue, you will not find significant change, but in terms of profitability, because whatever addition will be there, that will directly go to the bottom line.

Okay. Got it. And my second question was, we still expect the battery chemical business to contribute INR 2,500 crores to INR 2,700 crores in revenues in FY '28. And like have we signed any contract with an OEM or a bigger player, which would help us to achieve this revenue?

So what happened? We have -- at 100% capacity utilization, we will achieve INR 2,500 crores to INR 2,700 crores top line. But whether it will be '28 or '29, that we have not made any announcements or commitment on that.

Okay. So just wanted to understand like is the product being accepted? Or how is the quality of product or some feedback?

Yes. The feedback has been very encouraging, and that is the reason we have -- we are going ahead with the CapEx program.

The next question is from the line of [ Darshan Shah ] from [ M&S Associates ].

Sir, I had a couple of questions more on the macro front, specific to the industry and demand. First was, are you witnessing any demand recovery in Europe, in East Asia after -- there's been history -- recent history of the slowdown in demand? So how is now the demand shaping up there?

See, for us, demand has been strong only. Reason being that we have -- our volumes of carbon that are fully sold. So we don't see any significant positivity or negativity in the demand side earlier also and even today. For us, the demand remains strong only as before.

Okay. Got it, sir. And sir, if -- then the natural extension to the question is that the demand remains strong, how do you see the competitive intensity in coal tar pitch and carbon black with new entrants coming in, possibility of new supply and pricing pressures?

Coal tar pitch, there is no new entrants who are coming in because coal tar pitch for -- to establish a product also, it takes 2 years' time. So coal tar pitch, I don't see any new players coming in. And if someone comes also, then it will take 2 years first to establish their quality. For carbon black, the existing players are only expanding their capacity. I don't see any new player coming in.

Got it, sir. So you don't see -- you see that there's still enough comfortable demand, no problems of supply -- larger supply, pricing pressures that you will have to deal with in the market in terms of your clients and customers?

No, no, no, nothing like that.

Okay. And sir, the competitiveness of Indian carbon specialty versus Chinese and Korean producers in the export market, so any thoughts on our competitiveness versus the other peers, Chinese and Korean peers?

China basically produce carbon black using coal tar oil. And the cost of coal tar oil is higher in China because the cost of coal tar is higher in China compared to India. So we don't see any competition from China as such in the international market.

Right, sir. And Korean -- sir, Korea?

Koreans are not that focused on specialty. They are more on the commodity side.

Got it, sir. And sir, finally, do you expect double-digit growth resumption in FY '27 once capacity addition starts contributing?

Yes, yes. Definitely, we see double digit growth.

The next question is from the line of [ Priti ] from SK Associates.

I would like to know that the revenue for Q2 declined to INR 1,071 crores despite strong margins and profit growth. So among your major product segments like coal tar pitch, carbon black, advanced materials, which saw the largest pressure? And is this temporary or structural?

No, no, there was no pressure. In fact, if you see the decline, as we clearly mentioned, it was basically because of 2 factors; number one, corresponding quarter last year, the raw material prices -- average raw material price was 13% higher than current prices, 13% to 15%. So when the prices came down, the realization also came down. That resulted in lower turnover. In addition to that, there was a significant export volume, which was not considered in this quarter because of cutoff date. It went to the next quarter. So the volume and the turnover went to next quarter. That was the result. It's nothing to do with any pressure or anything.

Understood. And a portion of the revenue was also impacted due to the export orders that were executed during the quarter, but not recognized in Q3.

Yes, that's what I said.

Sorry, but will be recognized in Q3, right? So could you give...

That will be recognized in Q3. Yes.

Okay. So, given your presence in the 50-plus countries, could you share insight on the overseas demand trends observed in Q2 and highlight the key geographies you expect to drive growth in the second half of the year?

See, the momentum has been strong. And looking forward also, we feel that the demand is going to remain strong only. We are supplying to various geographies, like 54 countries globally, we are supplying our materials.

Understood. And the crude oil and coal tar derivatives remaining volatile, how effective is your pricing pass-through mechanism in both domestic and export markets?

100%. Whether price goes up or down, what difference it will make is only in terms of percentage of margin and in terms of top line, not in terms of absolute margin.

[Operator Instructions] The next question is from the line of [ Santosh Kesari ] from [ SK HUF ].

Okay. Just one query, and that is about the impact of U.S. tariff on our exports. So is that impacting us too much? Who is bearing the duties? Is it the buyer or we are bearing the duties? How is it happening? If you can also give a detail of demand scenario there?

See, this is already reflected in our Q2 results. You can see there is no impact.

Yes. That's what I'm surprised that other players have really -- their exports have plateaued and their profits are not that much, but in our case, it's not happening. So is it the buyers -- are the buyers bearing the duty? How is it happening?

See, because of our nondependence on a single geography. So if there is a challenge, we move our product to some other geography. And the material we supply to the challenge geography also, that is also very high quality where the impact is not -- where the customers want the material. So that's why we are not impacted.

Okay. So we are saying that our demand is so huge and we have so much diversity in supplies that we can supply to any geography we can choose.

Yes, yes. And the volumes are low.

The next question is from the line of [ Dhiraj Shah ] from RK Investments.

I have a couple of questions. While the revenue has fallen, margins have improved significantly, and PAT margins are also up strongly. Could you break down how much of the margin improvement is due to the product mix shift versus the cost control or raw material tailwinds?

See, because of the raw material prices, there is no impact because that is passed on to the customers, any increase or decrease. But yes, there's been significant improvement in terms of operational efficiency, yield improvement and energy efficiency, waste gas treatment and recoveries, which has led to improvement. And in addition to that, what you told high value-added products. So high value-added products contributed around 65% to 70%, and 30% was on account of operational efficiencies.

Understood, sir. Also, secondly, given the stagnation in revenue, but improvement in margin, what is your guidance for FY '26 growth, perhaps volume or revenue? And any margin targets that maybe we could look up to?

See, 2 quarters is already there. So you can see we are already at a PAT of INR 369 crores. A year back, we projected to double our profitability from FY '24 to FY '27 from INR 411 crores to INR 800-plus crores in the next 3 years. But if you look at the actual performance, we are already on that track in 2 years. So we are going to deliver what we promised in 3 years and around that in 2 years. And third year, we will be even better.

Understood, sir. Understood. And lastly, given the emerging EV ecosystem in India, where do you see Himadri strategic fit as a raw material -- would it be as a raw material supplier or as an integrated advanced materials player?

Definitely, Himadri is going to play a key role in the EV and ESS storage and tire technology ecosystem, which is going to play out in India because Himadri is going to be the key supplier for raw material components for making lithium-ion batteries. And it is going to play a predominant role in this field in the years to come. We have been investing in this for last over 12, 13 years. It's not that today everyone is talking about lithium-ion battery, Himadri has started discussing and talking about lithium-ion batteries. You go back to our 10, 12 years track report, also that time also we have been talking. And now, the fruits of all those investments will yield results.

As there are no further questions from the participants, this concludes this conference. On behalf of Himadri Specialty Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.