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

Ladies and gentlemen, good day, and welcome to the Himadri Speciality Chemical Limited conference call. [Operator Instructions] Please note that this conference is being recorded. Today on the call, we have with us Mr. Anurag Choudhary, CMD and CEO; and Mr. Somesh Satnalika, EVP, Tyre and Strategy. Before we proceed with the call, I would like to give you a disclaimer that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations as of today. Actual results may differ materially. The statements are not the guarantee of the future performance and involve risks and uncertainties that are difficult to predict. A detailed safe harbor statement is being given on Page Number 2 of the investor's presentation of the company, which have been uploaded on the stock exchange and on the company website. I now hand the conference over to Mr. Anurag Choudhary. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and thank you for joining us today. We deeply value your continued trust, confidence and engagement with Himadri. Q2 FY '27 was another important quarter in Himadri's transformation journey. Several initiatives we have spoken about over the past several quarters are now translating from research to qualification, from capacity creation to customer engagement, and from strategic intent towards commercialization. Before discussing these developments in detail, let me briefly touch upon our financial performance for the period ended 30th September 2026. For H1 FY '2,7 on a consolidated basis, revenue surpassed INR 3,000 crores. EBITDA exceeded INR 600 crores and profit after tax crossed INR 450 crores. This performance reflects the strength of our business and optimized product mix, operational efficiencies, and our continued focus on value-added products. Over the years, we have invested consistently in research and development, process engineering, manufacturing capabilities, customer relationships, and strategic partnerships. These investments are increasingly expanding our addressable markets, strengthening our competitive position and creating the foundation for next phase of Himadri's growth. Let me begin with the area where this transformation is perhaps most visible, specialty and advanced materials. Across our new material platforms, our focus remains clear, develop differentiated technologies, validate them rigorously with customers, and scale them in a disciplined manner. Our 200 metric ton carbon Nano Tube Facility remains targeted for commissioning in Q4 FY '27. Carbon Nano Tubes represent an important next-generation material with application across lithium-ion batteries, semiconductors, electronics, conductive applications, and other high-performance users. In Super Specialty Carbon Black, our planned 6,000 metric ton capacity remains targeted for Q4 FY '28. This represents the next step in our journey from Specialty Carbon Black to Super Specialty Grades, towards highly engineered niche products designed for demanding applications. Our LFP cathode active material road map is also progressing well with the initial 2,000 metric ton capacity targeted for commissioning in Q3 FY '27. The initial capacity is designed to support customer qualification and early commercial engagements, while also establishing the foundation for a significantly large scale-up opportunity. The progress in customer engagements together with strong visibility on future demand gives us confidence to move into the next phase of expansion with 40,000 metric ton per annum capacity planned for commissioning in next year. On the anode side, our capabilities continue to progress across synthetic graphite and next-generation silicon carbon technologies, strengthening our objectives of building a comprehensive battery material portfolio. We have already provided materials to leading domestic and global customers for their qualification process. Customers' feedback and engagements have been very encouraging. In anthraquinone and carbazole, our in-house engineering team has enabled us to accelerate execution with full capacity 5,300 now targeted for commissioning together in Q4 FY '27. The reason we are doing 2 phase together is there, that so in order to avoid any shutdown of 3 months during the commissioning of Phase 2. This allows us to bring the entire capacity to market in one shot, enabling faster market penetration and market share gains. As you all are aware, these expansions are focused largely on very high value-add categories and are therefore expected to have meaningful impact on company's profitability and margins. Importantly, let me inform you, all these developments are increasingly being complemented by deeper and more frequent customer engagements. During the quarter, we have entered into NDAs with Indian and international customers across Battery Materials, Carbon Nano Tube, and Super Specialty Carbon Black segments. Our ENERGEX specialty carbon black grades received approval for high-voltage cable and battery applications followed by commercial orders. For us, this progression from research to qualification to customer relationship and commercial adoption thereafter is particularly important. It validates both the technology and the market opportunity. We continue to build ecosystem across lithium-ion battery value chain through our strategic investments and partnerships with a focus extending from material innovation and technology development to cell-level validation and eventual commercial deployments. During the quarter, we invested further in Sicona Battery Technologies. Sicona has also completed the acquisition of 100% of Advano in United States, adding valuable silicon anode intellectual property, a U.S.-based pilot plant facility and additional R&D and cell-testing capabilities, further strengthening its commercialization road map. Sicona has secured AUD 45 million in funding from Australian Renewable Energy Agency to advance its next-generation silicon carbon anode technology. These developments add significant technological and execution depth to the platform and reinforce our conviction in silicon carbon as an important next-generation anode technology. Our strategic investment in International Battery Company further complements this ecosystem in a unique way. Through IBC, Himadri has access to a platform that bridges material innovation, cell-level validation and commercial deployment, providing us with a strategic advantage as we strengthen our presence across the lithium-ion value chain. Together, Sicona, IBC, and our in-house capabilities are creating a collaborative innovation system that spans material science, technology, development, validation, and application. This gives us a differentiated position as the lithium-ion battery value chain continues to evolve. As our portfolio becomes increasingly sophisticated and global, our commercial architecture must evolve alongside it. During the quarter, we incorporated Ardent Impex FZCO in Dubai Airport Freezone Area as a wholly owned subsidiary. This provides a dedicated platform for global sales, marketing, strategic trading, and procurement, thereby enhancing our proximity to customers and suppliers across Middle East, Africa, and Europe. Simply put, as Himadri becomes more global in what it develops and manufactures, we must also become more global in how we reach markets. Global supply chain realignment is also creating a significant opportunity for India, building domestic capabilities in advanced materials can reduce import dependence while creating global competitive manufacturing platforms. Our investments across CNT, Super Specialty Carbon Black, LFP, synthetic anodes, and silicon carbon technologies align closely with this opportunity and with the larger vision of Atmanirbhar Bharat. Another significant development during the quarter was the proposed merger of Birla Tyres business with Himadri. Following the acquisition of Birla Tyres in October '23, we focused on restoring operations, modernizing the manufacturing infrastructure, upgrading equipments, rebuilding the distribution network, and refreshing the product portfolio. Commercial production resumed on 29th May 2025. And since then, the business has steadily strengthened into operating foundation and market presence. The Board has proposed the demerger of tyre business from Dalmia Bharat Refractories Limited into Himadri Speciality Chemical Limited, subject to the requisite statutory, regulatory, creditor, and shareholders' approvals. Strategically, the proposed transaction brings together complementary capabilities across feedstock, specialty carbon black, R&D, manufacturing, and finished tyre production. Direct ownership should enable closer alignment across capacity utilization, modernization, capital allocation, and product development. More importantly, it creates opportunity to bring our understanding of carbon material closer to tyre engineering, particularly in a specialized application where material performance can play meaningful differentiation. We, therefore, see this as a natural next phase in the journey of Birla Tyres and an important step towards building a more integrated and scalable mobility platform. As we enter the second half of FY '27, our priorities are clear. We'll continue to strengthen our core business, accelerate customer qualification, commercialization across new material platforms, expand international presence, and progress the proposed merger of Birla Tyres. We remain confident in achieving our previously guided target of INR 1,100 crores plus PAT by FY '28. This will be supported by the sustained performance of our core business and commissioning of new capacities over the coming periods. Our philosophy remains unchanged: Invest patiently in science, execute with discipline, and scale when the technology and the market are ready. I would like to thank every member of Himadri family, our customers, business partners, shareholders, and stakeholders for their continued trust and support. With that, I'll now hand over the discussion to Mr. Somesh Satnalika for further details on financial performance and business outlook. We look forward for your questions to an engaging discussion. Thank you.

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 2026. On a standalone basis, our revenue from operations for Q2 FY '27 stood at INR 1,543 crores compared to INR 1,070 crores in Q2 FY '26. EBITDA for the quarter came in at INR 308 crores, a growth of 27% year-on-year compared with INR 243 crores in Q2 FY '26. PAT stood at INR 240 crores, reflecting a 28% increase year-on-year compared to INR 187 crores in the same quarter last year. For the first half year of FY '27, revenue stood at INR 2,817 crores while EBITDA reached INR 610 crores, up 28% year-on-year from INR 477 crores in first half of FY '26. Profit after tax for the half year stood at INR 463 crores, up 25% year-on-year over INR 369 crores reported in H1 FY '26. On a consolidated basis, revenue for Q2 FY '27 stood at INR 1,691 crores versus INR 1,071 crores in the same period last year. EBITDA for Q2 FY '27 stood at INR 303 crores, recording a growth of 27% year-on-year and PAT at INR 231 crores with a growth of 31% year-on-year. Our half year revenue stood at INR 3,123 crores, EBITDA at INR 616 crores, PAT at INR 460 crores, reflecting strong performance across all business segments. We continue to maintain a healthy liquidity position with a comfortable leverage profile. That is all from our side. We will now open the line for questions and answers. Thank you.

[Operator Instructions] The first question is from the line of Sagar Jethwani from PhillipCapital PMS.

Firstly, what explains the sharp moderation in the gross margins during the quarter? Are there any one-offs? And when can we see the recovery? So that is my first question. I have a few more questions.

So if you actually see, the margins are stable. And if you compare with the corresponding quarter last year, there has been significant growth in the margins. So as we told last time also, the right way to look at is per metric ton EBITDA. So per metric ton EBITDA is around INR 21,000, which in the sequential quarter was at around INR [ 27,800 ] and in the corresponding quarter, that is the last year, it was at around INR 17,900. So if you see on a year-on-year basis, it has gone from INR 17,900 to 21,000 level. But if you look on a sequential basis, it has come down, which is normal adjustments, which happens in a business, and there is nothing significant. So we are confident of achieving EBITDA above INR 20,000 crores on a sustainable basis, and this will strengthen in the quarters to come.

And secondly, what drove this 58% revenue growth?

So 2 factors. One was volume growth. If you see, there has been 11% volume growth on quarter -- corresponding quarter from last year. And comparatively, the value of finished product and raw material, both has gone up. And consequently, there has been increase in the top line.

Any specific segments would you like to point out?

No, it's general. All the segments, the value of raw material has gone up. And with more focus on value-added products, the selling price is also going up.

So third is all related to the Birla Tyres business. What was the revenue during the quarter? And are we on a track to attain breakeven during this year?

So Birla Tyres basically is under Dalmia Refractories Bharat Limited. We do a trading sales from Himadri and we achieved a top line of INR 140 crores on which we have an EBITDA of INR 1 crore as a trading margin. And once it is consolidated with Himadri, we will see the numbers being added to Himadri figures. And we are on track to achieve breakeven.

And sir, on these new products such as LFP cathode, anthraquinone and carbazole, will these products be margin accretive from the start of operations? If you could confirm that. I'm not asking for any margin number here, but just want to understand from the start of operations, whether these products would contribute towards the incremental margins?

Yes, definitely, these products will start from the start only. They will add to the incremental margin. Like anthraquinone and carbazole, they are very high value-added products. We are converting from oil, we are going to extract these products. So like for LFP also, once we attain a particular capacity, you will see the margins coming in significantly.

And on this anode capacity that commenced in the previous quarter, how has been the initial response from the customer?

I'm very happy to share with you, the response has been fantastic. We have shared -- we have supplied sample B to a host of customers globally and in India. And their response has been very encouraging.

Could you throw some light on the realizations?

Realization for?

Anode.

No. See, realization is not a plan because now we are supplying samples. So we are in sample state now.

And any color on the spreads between coal tar and coal tar pitch you can share the trends may?

This is standard. There is no significant difference in spreads in coal tar and coal tar pitch, which has been historically there, that is there only.

The next question is from the line of Bhavin Chheda from Enam Holdings.

Congrats on overall good set of numbers and overall very good presentation, which covers a lot of data. So I was seeing the Slide Number 15, where you have given investments for various projects, LFP, specialty chemicals, carbon, and a few. So overall, I think CapEx is roughly around INR 1,500 crores. How much has been spent till date? And what is the plan to be spent in FY '27 and FY '28?

So, till date, if you look at this quarter, the spend has been around INR 250 crores in terms of Birla Tyres and other CapEx investments. And we expect in this year to be around INR 800 crores to INR 900 crores of spend in total.

So this year would be INR 800 crores to INR 900 crores. Okay. Okay. And all these projects will have commercial date before FY '28, right?

Right, right.

So full impact of most of the capacities would be visible from FY '29?

That's right.

Congrats, Anurag, and congrats to the team.

The next question is from the line of Rohit Sinha from Sunidhi Securities.

One thing on the mining segment, as in the last quarter also, we have indicated that some licensing are pending in that side. So the profitability was impacted. So this quarter also, I think there's no such contribution from the mining side. So where we are progressing there? And what sort of fixed cost we are having in the mining business?

Yes. So last quarter, in fact, the current quarter, we had negative EBITDA from the mining segment because expenses were there and it was not operational because environmental clearance was pending. I'm happy to announce that we have received environmental clearance during the current month and the mining will be operational during the current quarter. So if you look at the previous -- current quarter, there was a drop in the profitability from standalone to consolidated. And it was basically because the mining segment from INR 240 crores PAT, it came down to INR 231 crores. So expenses in the other entities where there was no revenue generation led to this. But in the current quarter, with mining operations start -- we have got the clearance, environmental clearance for starting the mining operations. So there will be upside in terms of mining revenue and profitability.

And sir, in a longer time frame, what sort of annual revenue we can expect from this mining business?

See, this will depend on the volume we are able to generate year-on-year. But on a broader basis, we look at around INR 500 crores of top line from this.

And sir, a follow-up question from one last participant on the gross margin side. Although on the standalone basis, as you rightly said that the EBITDA per tonne or EBIT per tonne has improved on Y-on-Y basis. But still, if we look at the gross margin side, it has contracted almost 500 bps on Y-on-Y basis. So is it all the -- I mean is there any product mix change or raw material pass on has been still pending how to look at -- since as you already indicated that raw material prices has increased. So all these are passed through or some are still yet to be passed, maybe would be reflecting in the Q3 numbers?

See, what happens, the raw material, we have a pass-on model in which we transfer the increase in price. But it happens at times in a quarter when the raw material increase is there in the previous month, and it has to be passed in the next month and the next month falls in the coming ensuing quarter. So that price is not passed on. And if you look at our inventory levels, inventory levels, we have moderated to a great extent. We are only having 9 days, 10 days of raw material inventory in order to take care of this volatility. So if overall, if you look, INR 17,910 was the EBITDA margin on corresponding quarter last year. And today, it is INR 20,990. So INR 3,080 increase in EBITDA margin. It is basically because the high value-added products we are going. Some dip is there compared to sequential quarter, which is normal high INR 1,500 to INR 1,800 per metric ton. And this -- there are many factors which attributed to this. One is the last quarter, some pricing was not able to pass on, which will be passed in the next quarter. Then export has increased as a percentage of total sales. Corresponding quarter last year, we had 26% as export. Today, we have 33%. You know with the geopolitical situation, the freight rates have gone up on the top of the roof. Because of that, there has been some hit. So these are temporary phenomenons, which has no medium -- short-term to medium-term business of the company.

And sir, as for you, you have maintained the guidance for INR 1,100 crores PAT for FY '28. With all these -- just wanted some clarification on all the new segment like for Carbon Nano Tube and Super Specialty Carbon Black, would that all be coming in a separate segment or it would be in the carbon black business only? And how we'll be reporting the numbers going forward?

It will be coming in the carbon segment only because all things are related to carbon. So on the carbon segment only everything will be reported.

The next question is from the line of Harsh Motika from SKP Securities Limited.

Congratulations on a great set of numbers. Sir, my question is more on the macro side because you covered pretty much everything on your opening remarks. So sir, from a pricing perspective, with respect to both Carbon Black and CTP and coal tar pitch, how has the West Asia crisis and the ongoing stalemate affected the prices? And whether it is only the supply chain constraints that are driving the realizations up? Or do we also see a lot of demand pull coming in now?

See, we see the volume growth is there. This itself signifies there has been demand upside is there. And as I have been always telling, the business model which Himadri has developed is resilient to geopolitical situation. And that we are proving quarter-on-quarter with the current quarter also with so much of geopolitical tension, issues happening, but you see our numbers are very strong. People are only looking at some contraction in margins. But the bigger picture is that, that we have grown margins after the specialty by 3,000 metric ton compared to corresponding period last year. And this will strengthen further, 1,000, 1,500 is not at all issue. There are so many geopolitical situation impact. But if you look at the overall story, compared to last year, we have a top line growth of 58%. We had a PAT growth of 31%. So even in kind of this kind of difficult times, Himadri is able to sustain and grow the business. That is the strength of the business model.

And sir, on the side of Birla Tyres, so do we still maintain our guidance that we had given earlier with respect to top line? Or do we expect some more upside on that?

No, no, definitely, we maintain our guidance what we have given.

[Operator Instructions] The next question is from the line of Raghav Angra from Money Stories Asset Management.

First of all, congratulations on the quarterly numbers. My question would be regarding the Himadri Silicon Carbon Anode Technology. So what is the commissioning time line and capacity that this company is targeting? And what premium it could command over the graphite anode? Like it's part of the anode capacity altogether?

Yes. So we are at the advanced stage of announcing CapEx for the project. We have not made any formal announcement as such. The product has been well accepted in the market, and we have got very good results from our customers. So we are working on the engineering side of it. And once it is completed, we'll make a formal CapEx announcement with the time lines. The product is very high end of anode technology. So the normal anode has 360 milliampere per gram of capacity and silicon carbon has 4,000 plus. So it is 10x of it. And the price, there is no comparison between the price of synthetic anode and silicon carbon. It's far, far higher than that. So at the right point of time, once we are completed with this, good thing is that we are moving ahead in the right direction and in very high speed. I have made announcement that our partner, Sicona Batteries, they have secured AUD 45 million as a package from Australian government. So this itself certifies that we are moving in the right direction.

And one more question. Like with the emerging battery technologies like sodium ion and solid state, what's the company targeting in the future? Do you have any future plans?

We are working on the raw material cathode and anode for that also. So at the right point of time when that matures, we'll announce CapEx for that also. There's no problem. So all these technology will coexist.

The next question is from the line of Preet Nagarsheth from Wealth Finvisor.

My question is regarding the Carbon Black business. So I wanted to understand how is the capacity utilization that you are experiencing and which you are guiding for the next quarter relative to the current quarter? If you can share some light.

So Carbon Black business is doing strong. The demand is very robust. And during the current quarter, we had a capacity utilization of 88%. And we are looking forward at these levels only 88% to 90%, 95% capacity utilization.

And sir, on the realizations, are you seeing an increase in realizations over quarter 2? How is the trend basically shaping up is what I'm trying to understand.

With the increase in raw material prices, the realization is also improving.

So the point I'm trying to make is that almost INR 21,000 EBITDA that you had in quarter 2, do we anticipate an increase in this for quarter 2? Or is this a run rate that we should go with going forward?

See, you should factor in EBITDA per metric ton from INR 20,000 to INR 24,000. So in some quarter you will have INR 20,000, in some quarter INR 21,000, INR 23,000. See, this will keep on varying depending on what happens during a quarter. Like in the current quarter, there was so much -- the freight rate just went on the top of the roof, container freights went skyrocketing. So because of that, some cost element was additional cost element, which is not normally there, that came into play. Other than that, some -- at the end of the quarter, you see the price increase in the raw material. So you buy at a higher price, but that you get in the next month. So that little hit is there. So these are very small things. But on a macro basis, I think anything between INR 20,000 to INR 24,000, this should be the level which it should play around.

The next question is from the line of Amay Sharda from Purnartha Investment Advisers.

I just had a question regarding the mining business. So can you just like explain or shed some light what products are we mining over here? Where are the mines located? Who will be our customers in this segment? Anything will help?

We are basically into sand mining in Bengal. And it will be the construction industries [indiscernible] customers.

The next question is from the line of Paras Chheda from Purpleone Vertex Ventures LLP.

[Indiscernible].

Paras, your voice is breaking.

Am I audible now?

Yes, now you're audible. Please proceed.

Yes. So sir, I understand there has been a short-term impact on the EBITDA margins for this quarter. But I mean, more broadly, on a sustainable basis, on an annual basis for FY '28 and beyond when some of these new projects also come in, can we work with 20% plus sort of EBITDA margins or that will be difficult to sort of underwrite?

I'll tell you. So the right way to look at Himadri is not as a percentage. At some quarter, you'll find 20%, you will find 25%, 26% also. So the right way to look at is not a percent, but as I told you, absolute margin per metric ton. If the raw material -- suppose tomorrow, the raw material prices comes down, then you will find 28% margin. If the prices go up, you will find 20% margin. So that will not be the right way to look at it. The right way is to look at the per metric ton margin, which will hover from around INR 20,000 to INR 25,000. And this is a journey in which depending on what specific incidents happen in the quarter, it will keep on changing.

Right. So then how do we look at the margins for LFP and specialty chemicals, sir?

So LFP margins, that -- it's premature now because it will commence in FY '29 only. So there is no point discussing the margin from now onwards for LFP. Now we are setting up our 2,000 metric ton plant, will be commenced in Q3. We'll supply the samples and have commercial discussions. I think after that, we'll be able to guide you on the right way to look at it. But one thing I will say, see, look at from the perspective of ROCE, for us, ROCE is an important factor. If you look at the current quarter also for half year, we have ROCE of 30%, and that is the baseline we want to maintain for all our projects at optimum capacity utilization.

Sir, just for this 2,000 metric tons, do we have some sort of commitments now with customers or it is still premature?

Definitely. We have already engagement with the customers, we have to supply them samples from our 2,000 metric ton plant. Definitely, we have a host of customers globally and in India, all of whom we have to supply the samples.

And sir, just one thing on the trade receivables and working capital thing is negative for the first half. How do you expect -- I mean, do you expect this to turn positive for the end of the year on an annual basis? And just on a little bit on the trade receivables, if you can comment, please.

Yes, sure. So if you look at the working capital, Q1 FY '27, our net working capital as a percentage of sales was 41%, which has come down to 37% in Q2 FY '27. If you compare it to Q2 FY '26, it was 31.3%, which has gone up to 37%. So in fact, on a quarter-on-quarter basis, if you look, the working capital has come down. But compared to corresponding quarter last year, it has slightly gone up, which I think in next coming 2 quarters will normalize and will come down further. Regarding receivables, if you see, the sales have gone up by 58% in this quarter. And that is the reason. But in terms of days, if you see, last quarter, it was 63 days, this is 65 days. So there is hardly any variation in terms of days of debtors.

Right. So on an annual basis, we'll turn cash flow positive from operations, I mean, hopefully, with these next 2 quarters normalizing?