Vishnu Chemicals Limited (516072) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Vishnu Chemicals Q3 FY '26 Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Meet Gada from Emkay Global Financial Services Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Welcome to the earnings conference call of Vishnu Chemicals Limited for Q3 FY '26. I would like to welcome the management and thank them for giving us this opportunity to host them. We have with us today Mr. Siddartha Cherukuri, Joint Managing Director, and Mr. Hanumant Bhansali, Vice President, Finance. Before we begin this call, I would like to point out that the discussion during this call may contain forward-looking statements reflecting the company's current view of future events and their potential effect on Vishnu Chemicals' operating and financial performance. These statements involve uncertainties and risks, which could cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. I shall now hand over the call to the management for their opening remarks. Thank you, and over to you, Siddartha.

Thank you, Meet. Good afternoon, everyone. Vishnu Chemicals continued to deliver resilient performance during the quarter despite a soft macroeconomic environment globally. Tariff-related uncertainties and cautious customer sentiment continue to influence demand patterns in quarter 3 FY '26. However, our cost discipline, diversified market presence, and customer-focused approach enabled us to navigate these headwinds effectively. Quarter marked the achievement of several important strategic milestones for our company. We successfully completed the acquisition of mining complex in South Africa. This is the third acquisition undertaken by the company in the last 3 years following Ramdas Minerals and Jayanshree Pharma. Integration process is progressing as planned, and we expect the commencement of operation in phased manner from quarter 1 FY '27. This acquisition represents a key backward integration initiative aimed at securing long-term supply of our crucial raw material. While it is early to quantify the financial benefits, we believe it will contribute to improved margins, stability at consolidated levels post stabilization. On growth initiatives front, Vishnu Strontium Private Limited successfully commercialized operations in quarter 2 FY '26. Company has launched strontium carbonate, a new specialty chemical with applications across magnets, ceramics, metallurgical industries, including zinc electrolysis. The company is now focused on introducing new range of specialty chemicals aligned with our manufacturing capabilities and with a strong R&D support, which we have been working for over the last few years. Company has initiated plans to foray into new production lines for dimethyl sulfoxide, also known as DMSO and select specialty derivatives of related chemicals. These projects are expected to be commercialized by end of financial year '27 and represent forward integration opportunities that should enhance our product portfolio and profitability over the medium to long term. Overall, Vishnu Chemicals entered quarter 4 with healthy business momentum. Our relentless focus on manufacturing, operational excellence, and strategic investment positions us well for sustained and profitable growth. Now I'll ask Mr. Hanumant to walk you through financial highlights. Over to you, Hanumant.

Thank you, Mr. Siddartha, and good afternoon, everyone. Compliments of the new year to all of you. Let me now take you through the financial highlights for the quarter ended December 31, 2025. On a consolidated basis, the company reported operating revenues of INR 411.3 crores in Q3 FY '26 as compared to INR 401.1 crores in Q2 FY '26, a growth of 2.5% quarter-on-quarter. Gross margins improved during the quarter and stood at 44.8% in Q3 FY '26 compared to 43.1% in Q2 FY '26, an expansion of 170 basis points approximately on a quarter-on-quarter basis. Our absolute gross profit at a consolidated level increased to INR 184 crores, up 6.5% Q-on-Q. The EBITDA for Q3 FY '26 was INR 61.7 crores, reporting an increase of 6% growth on a quarter-on-quarter basis. The EBITDA margin also improved to 15% from 14.5% in Q2 FY '26. The profit after tax for the quarter stood at INR 33.7 crores compared to INR 32.8 crores in Q2 FY '26, reflecting a growth of 2.6% sequentially. Moving on to the 9-month performance. For the 9 months ended December 31, 2026, the consolidated operating revenue stood at INR 1,159 crores compared to INR 1,053 crores in 9 months FY '25. This is a healthy year-on-year growth of 10%. The gross profit for 9 months FY '26 increased to INR 515.2 crores, up 9.2% year-on-year from INR 471.9 crores in the corresponding period last year. The EBITDA for 9-month period stood at INR 175.6 crores, reflecting a 6.9% year-on-year growth. The profit after tax for 9 months FY '26 was INR 98.8 crores compared to INR 87.7 crores in 9 months FY '25, a growth of 12.7% year-on-year. Our revenue mix remained well balanced with a domestic to export sales mix of 49:51 on a consolidated level during 9 months FY '26, reflecting the strength of our diversified market presence. With this, I conclude my opening remarks, and we can now commence the Q&A session. Thank you.

[Operator Instructions] The first question is from the line of [ Raghav ] from KamayaKya Wealth Management.

Congratulations to the management on good set of numbers. Sir, looking at the growth ahead with the strontium carbonate plant coming live and South Africa mine acquisition completed, sir, what kind of top line addition can we expect, and especially when can we expect because I know approvals take time and it's a new product, it's an import substitution kind of story playing out? So when can we expect top line addition from strontium carbonate plant?

Good afternoon. So we're expecting to receive customer approval before end of quarter 4 FY '26. While we see good traction, especially coming from battery, I mean, the magnet side of the application, especially the ferrite magnet being a good substitute for neodymium magnets, and we're going to see some volumes coming mainly from the magnet application, so expecting regular sales starting from FY -- quarter 1 FY '27, for strontium carbonate.

And sir, my next question would be on the competition landscape in the PBS segment, sir. PBS dumping by China has been a bit of a concern. So what is the status of that? And overall, what are the dynamics in this?

Well, I mean, over the years -- it's been 3 years since we have launched PBS, and we are having a strong order book and consistent supply from our side to the clients. And we see that we are able to demonstrate a resilient supply chain over the last 2 years. And especially the top 6 customers are very happy with the quality and the rigorous supplies what we have established. So today, in terms of the demand and our market share, we have already got to 60% market share in India. We continue to work with few other customers and going to increase the market share in FY '27 for PBS as well. Again, there is a bit of capacity constraint as well from our end. Currently, we are operating at 70%, 80%. So we are also contemplating on adding capacity during FY '27. We are still looking at it. We have not taken a decision on whether we're going to do it in FY '27 or FY '28. I'm talking about PBS capacity expansion.

The next question is from the line of Nirali Gopani from Unique PMS.

Sir, my first question is in regard, last call you had mentioned that during the course of the year, you will see some pent-up demand coming back. So the growth that we see in the quarter, does it reflect any of it or it is yet to come?

Well, I mean, we all know -- I mean, with this tariffs coming down, this is definitely positive news for our chrome chemicals because in the last 6 months, we could not export chrome chemicals to United States, mainly on account of close to 53% tariffs. So now we are quite confident that we are going to get back the volumes what we have already had with the few clients there and hopefully increase it over the few quarters. In terms of volumes, last 3 quarters gone by, the domestic market remained quite resilient. In terms of volume, we have managed to increase market share both in electroplating, wood preservative as well as pigment sector. Although macroeconomic conditions were not favorable, but domestic market remained resilient as well as the rupee -- dollar-rupee has definitely been supportive to improve the realizations for mainly in the export market. So with this U.S. tariffs coming down, we are hoping that the volumes will increase in North America in the coming quarters.

So as such, we don't have a huge exposure to U.S. We're talking about the ripple effect that it might have on the overall export, right?

Our overall exposure is close to 9%. So I mean, it's still a good share, and we have been actually growing in that side of the world with our volumes, with the portfolio of products what we had. So these high tariffs have created roadblock. And we are confident that our share in North America over the year or 2 will go up to 14% to 15% in overall revenue of Vishnu Chemicals, because we have been working with -- I mean, even during this time, we were working very closely with the customers for the product approvals. It takes slightly longer than rest of the other markets, in generally speaking. So we remain positive, especially with the U.S. market opening up and having some -- a few approvals during this phase. So definitely, volumes are going to increase. And also it's a more value-assertive market in terms of better margins. And we do have an edge in terms of the overall tariffs compared to our other peers in Turkey and South Africa. And definitely, that's going to put us in a better position in the quarters to come.

And when you mentioned about DMSO and other chromium derivatives, can you give some more details of what are the CapEx that we are looking at? What kind of capacity we would intend to put? Anything that you would like to highlight?

Yes. I think company continues to focus on niche products, which are import replacement. So we've been working very closely with our R&D, especially on this DMSO project for the last 2 years. And there is definitely a synergy, and it's a kind of a forward integration what we are doing. Dimethyl sulfoxide is a very important solvent going into agrochemicals, pharma, and few other applications. And we'll be the only producer in India now. And this market is growing close to 12% to 13% year-on-year. Regarding CapEx, this year, I mean, we still have a quarter to go. We are going to do about INR 180 crores to INR 190 crores of CapEx. This includes DMSO and our investment into mine in South Africa. And next year, we're planning to invest close to INR 300 crores into CapEx. This includes chrome oxide green, chrome metal expansion as well as dimethyl sulfoxide, because certain CapEx have been done for dimethyl sulfoxide during this year, already.

And on this chrome metal side also like [Technical Difficulty]

Hello?

Siddartha, can you hear me?

Yes, I can hear you.

Yes. So my next question is on the chrome metal side. So when do we start see the revenues start coming in? Will we see some of it in FY '27?

I would expect it to be in FY '28 because it's linked to our chrome oxide expansion project. So we'll be going to work on it parallelly as we move forward. So I will say FY '28 is when we would expect to see revenues coming from chrome metal.

And last -- one last question on the strontium carbonate. So will it be possible for us to ramp up the full capacity in FY '27, given we had this -- the Mexico plant, which went off and it was larger than what the capacity that we have put in? So will it be possible to ramp up in FY '27 itself?

We remain positive. It all depends on the customer approvals. It is taking slightly longer than we expected, but we remain positive to ramp up the production. But largely, this product has to be exported as well. So the approvals have to come from the Indian customers as well as clients who are outside India. So the marketing team is working very closely on both fronts.

The next question is from the line of Sagar Jethwani from PhillipCapital PMS.

So imports from China for barium will now attract a heavy import duty in Europe given that there is only one player in Europe competing with you in a huge market. How do you see the opportunity for barium exports to Europe given China competition has now vanished? How do we read this development?

So let me just correct it. It's mainly for barium carbonate. Europe has levied 84% antidumping duty on Chinese products, Chinese barium carbonate coming into EU. So this is very -- quite positive. And it's been applied. It's been 2 months since it has been effective. We see a lot more demand coming from Europe, a good order pipeline as well as improved realizations. That's all I could say. As on today, our main market for barium carbonate outside India is Europe and United States and Japan. That's where we are quite focused on given the production and given our market share [indiscernible].

So what will be our pricing strategy then in this case because we have a significant pricing advantage now. And one more follow-up on that is Kandelium, that is a local player adding the capacity for barium too. Any news on that?

So our pricing strategy will be aligned to the application market as well. So we don't want to take our clients for granted. Of course, we will see price increases coming, but in tranches, and slowly understanding what's happening in Europe. Already there is pressure on the costing in the manufacturing side. So we don't want to add a lot, but we will see what needs to be done at appropriate time. And we've already managed to get 10% to 15% price increase, and we'll take one step at a time on what needs to be done and not to do it in a very high -- very much high. What was your other question?

Yes. So I was asking, is Kandelium also adding the capacity for barium to barium carbonate?

Not that I've heard of. I think they do have sizable capacity, and it's a fungible asset, which is based in Bad Honningen, Germany. So they can switch between strontium carbonate as well as barium carbonate in the same facility, in Bad Honningen. So not that I've heard about, they're adding capacity at the moment.

And lastly, do you expect the benefit to come from Q4 itself? Are you witnessing any client touch up on this?

So we -- what I can say is that we are seeing a very strong order book with improved margins, and we'll see how things progress in the quarter 1 FY '27. That's all I can say at the moment.

[Operator Instructions] The next question is from the line of Raghav from KamayaKya Wealth Management.

This is a follow-up question. So I wanted to understand with this chrome mine acquisition. Sir, what kind of margin benefits are we expecting from Q1, if it's completing by Q1? So what kind of margin benefits are we seeing in this particular segment and also on a consolidated level?

Hanumant with you on this. The chrome ore mine acquisition comes with a string of benefits that are very long term in nature. Though on the financial side, we are quite confident that it is going to improve our overall margins in the medium to long-term at a consolidated level. But it's very early for us to share those numbers with the markets when the operations begin, which we are expecting it to start sometime around Q1 of FY '27. That's just 1 quarter away.

The next question is from the line of [ Kush Joshi from Suyash Advisors ].

It is Suyash Advisors. So I just want to understand about where we stand our CapEx program for strontium carbonate? And when we are targeting the -- when we are starting the customer approvals for the same and commercial supplies for the same?

The strontium carbonate plant is already operational. We commenced operations in Q2 FY '26. And as mentioned during the call earlier, we are already discussing with clients both in domestic market as well as export market, which we are quite confident that given our quality and given the parameters that we are providing -- given the pricing that we are providing to our customers, we are quite confident of getting the necessary approvals in a quarter or so. The project has already been capitalized in our books. And we have spent close to about INR 110 crores approximately, which was -- which is a total of both the acquisition of the erstwhile Jayanshree Pharma Private Limited and the additional CapEx that we did to bring the product on stream. Right now we are operating at about 20%, 25% levels. But like I said, it's early days for the product. And we are quite confident that next year, we are going to see a significant scale up in this product depending on the approvals that we are expecting.

And can you just brief me about the competitive scenario in this particular product for us, where we stand today?

Sure. See, there is -- the major update is that we are the first manufacturers of strontium carbonate in India. And India's demand is close to about 4,000 tonnes per annum. It's a complete import substitute product, and it is exported from -- majorly from Mexico and Belgium into India. Mexico and Belgium combined are close to about 77% of total exports to India, followed by China about 9%, Spain about 5%, and Germany about 4%. The others are around 5% to 6%. So this is the breakup of where the product is coming into Indian market so far.

And how about the pricing scenario for this? How will be the pricing comparative compared to this import pricing?

We are quite competitive because we are new entrant in the market. Having said that, our product quality is at par with the other players which are already exporting their products in the Indian market. We had access to technology. We have spent quite a bit of time in bringing the product at par with the currently available products in the market, thanks to our R&D. And that's why our pricing, though in the initial stages, we are competitive to the exports being done to India. But yes, in the long term, we will be at par with them, depending on how this -- how the overall market cycle turns in favor of this product.

And you mentioned that the customer approval takes time. So how long is that cycle?

It takes close to about 3 to 6 months to get customer approvals. While we started the operations in Q2 FY '26, we commercialized the operations and started sharing samples with the customers towards the end of Q2 and early Q3. And everybody knows that most of the Western markets especially go on a prolonged annual vacation during the Christmas time. So the efforts are [indiscernible]. We are expecting any time during the current quarter most of the approvals to come through.

And you mentioned -- what is the 4,000 tonnes? I just missed out, 4,000 tonnes is our imports or it's our capacity?

India's demand. India's total demand.

And what is the growth rate of this demand?

The market in this product is growing in the range of about 5% to 6% on an annual basis.

And just last question. Industry-wise, can you just break up which is the main industry which you're focusing for these products?

Not necessary. The product has been designed to meet the requirement of all the customer applications, including magnets, be it ferrite, be it permanent or flexible magnets, which goes into electrical appliances such as motors, speakers, goes into all the automobiles, white good appliances. So quite open to meeting the customer requirements across the industry.

[Operator Instructions] The next question is from the line of [ Srishti Jain from Monarch AIF ].

Sir, are there any capacity expansion plans for SDC anytime in the near future?

Well, I mean, we've already updated during the last call that we are planning to expand SDC from 82,000 tonnes to 92,000 tonnes, put together both our facilities in Visakhapatnam and Bhilai. And this will be completed during quarter 3 FY '27.

Sorry, I must have missed that. And what are the current utilization levels in the chromium segment? If you could share that.

This year's operating levels are over 90%. We actually set a milestone in terms of reaching the highest production ever in terms of SDC, also other related products.

The next question is from the line of Raghav from KamayaKya Wealth Management.

Sir, just a small question. Sir, what kind of -- since now we have started talking to customers, what kind of revenue potential are we targeting with the optimum capacity utilization from our strontium carbonate plant? And if that's not a clear number, then what kind of asset turn do we have on this CapEx?

We are expecting, I think -- at 80% operating level, we are expecting an asset turn of close to 1.5 to 1.8. Although the asset turn looks slightly less, the gross margins will be close to 50% to 52% in the strontium business.

That's 50% to, sorry, how much?

Gross margins will be at 50% to 52% is what we are expecting.

[Operator Instructions] The next question is from the line of Mahek from Agility Advisors.

Am I audible?

Yes. Very clear. Thank you.

Sir, in strontium chemical, what is the total installed capacity?

The total installed capacity for strontium chemicals that we are currently operating right now is about 10,000 tonnes, which is expandable to about 17,000 tonnes once we do the phase-wise expansion upon achieving the current scale.

And sir, you mentioned you're operating [indiscernible] chrome metal, chrome oxide, and DMSO. So what are -- what is the capacity which we are planning and what is the domestic [indiscernible] of this product?

For DMSO, we are going to come up with a capacity of 10,000 tonnes, but it will be in a phased manner. First phase will be operating at 5,000 and thereafter to 10,000. And chrome oxide, we're going to come up with a capacity of 20,000 tonnes in Visakhapatnam. And chrome metal capacity will be 6,000 tonnes. Of course, these are installed capacities and will be operated in a phased manner. Based on the market demand, will be scaled up.

And what is the [ peak ] revenue potential? And how much is the domestic demand of these products?

I would say we are expecting -- instead of numbers, I can give you an idea on the asset turn. Today, Vishnu Chemicals' net asset turn is almost 3 and gross asset turn is close to 1.7, 1.8. So I mean, with this investment close to a CapEx of INR 150 crores this year and INR 300 crores next year, we are expecting an asset turn of 1.5 to 1.8 on a gross asset basis.

And in terms of domestic demand of these products, because you would be exporting also, right, [indiscernible] they are for domestic market?

It will be very similar to what we are doing today, a balanced approach. So today, 51% is export and 49% is domestic. So we'll be in range bound those level, like 50-50 levels.

And how are we [indiscernible] to stay put for INR 500 crores?

It's a combination of internal accruals and debt.

And sir, last question was, if we see the margins, EBITDA margins of our chromium segment, they have been sub 15% for the last 4 to 5 quarters. So what are the specific reasons behind the same?

Subdued demand in the global markets and the elevated chrome ore price over 2 years have been impacting our EBITDA margins. But we are addressing that not just through chrome ore acquisition, which definitely will improve EBITDA margins from FY '27, also the better economies of scale in terms of chrome oxide addition and chrome metal coming up. And DMSO also supporting Vishnu Chemicals' overall revenue numbers. We are positive that the EBITDA margins will continue to get to the 20% level by FY '28, which we have been targeting. It's not just on account of chrome ore benefit, but also on better economies of scale, value addition, and improved product mix.

[Operator Instructions] The next question is from the line of Kush Joshi from Suyash Advisors.

Can you hear me?

Yes, sir.

I just want to understand what is our current capacity for strontium carbonate today?

We have about 10,000 tonnes operating capacity at current levels today.

And you also mentioned that you would like to target export markets for this particular product. So any key export markets which you have shortlisted as of now?

Mainly we are looking at the flexible market, which is -- we see based on the statistics, based on the peer analysis, the main market is in the Far East. We'll be focusing in that part of the world.

I just want to ask because the point here is that China is very competitive in this particular product. So how we'll be catering to this product in the international markets?

Based on our analysis and what we are seeing, they are not that competitive because even they have to import the raw material. And they do have logistics issue wherever the barium strontium facility is a bit far away from the major seaport. Most importantly, the China -- there is a sizable demand for ferrite magnet. And whatever strontium produced in China is sold in China. So they're not really aggressive to export strontium carbonate out of China. So that was one of the reasons, I would say, [indiscernible] also for us to look at this product.

Understood. And...

If you see globally, the German producers who is also having a subsidiary in Mexico, is having 70% market share. Actually, a little over 70%. Yes. I mean the Kandelium, which was formerly Solvay. Yes.

Okay. Understood. And this 10,000 tonnes capacity, so when we want to -- what period will be likely to peak that capacity utilization?

I reiterate what I said, I think we are waiting for customer approval. Probably in the next con call we'll be able to update you. But we remain positive, especially on account of domestic demand as well as way things are progressing with the client approvals in Far East Asia.

The next question is from the line of [ Harshal from ITI ].

On this chrome metal 6,000 tonne capacity, when is it expected to be online?

FY '28.

And what kind of realization is there in this metal?

I think I would not be able to talk about numbers. But in general, I'm saying -- I mean, in terms of product mix, in terms of value addition, we see it's going to improve our EBITDA margins and also gross margins as we progress. And again, it's an import substitute product.

So what are the dynamics over there? How much is being imported?

Sorry?

How much of this metal is being imported?

Based on the statistics, close to 2,000 tonnes is being imported. And it's year-on-year, if I see, there is almost 14% to 15% growth. Especially the defense and aerospace as well as welding electrode market has been growing in India, as we all know. So it will be growing parallelly with the demand.

And what is the demand in India for this metal?

The demand in India is based on imports line. There's no producer in India at the moment. The demand in India is 2,000 tonnes.

And any ballpark number on what kind of gross margins can we make on this?

Again, I reiterate what I said that it will improve our overall gross margin because we look at a consolidated basis. We don't go by the product. We look at blended realizations and blended EBITDA margins. That's how we look at the business overall, not at a particular product.

The next question is from the line of Raghav from KamayaKya Wealth Management.

Just a clarification, sir, what kind of raw -- what raw material do we have in strontium carbonate and where do we procure it from?

Main raw material, it's called celestite, majorly imported from Spain and Mexico. And there are other related raw materials like carbon fuels and certain solvents, which are used in the process. Main raw material, which is a key variable cost driver, is celestite ore. And if you have seen the recent budget, they have given preference for this particular raw material, and there is no custom duty on this product coming into India in the recent budget update. This is very positive for us moving forward.

And then also from this recent budget and also the EU FTA that's signed and that's going to be implemented soon. What kind of benefits -- in which segments we are seeing the benefits? Like when you said that raw material imports for strontium carbonate are now custom duty free, so that's a good thing. What else are we targeting, sir?

This is one major benefit we have seen is the celestite ore, they have revoked custom duty. And in terms of EU FTA, I mean, we are very happy to see this happening. But again, the time lines are not clear, though. It could take a year or 2, but we are working very closely with the customers. And this is going to give us a lot more leverage in terms of negotiation because today, the customers are paying close to 6% custom duty in Europe, which will eventually come down to 0 in a year or 2. So with this thing in place, we'll be working very closely with certain clients who are relatively price sensitive. And hopefully, we can convert them in the near future.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you very much. In conclusion, kindly note that our results, investor presentation, earnings release have already been uploaded on the stock exchanges and the company's website. If you have any further questions, feel free to reach out to us on [email protected]. Thank you so much for your valuable time.

Thank you, sir. On behalf of Emkay Global Financial Services Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.