DCMSHRIRAM — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to DCM Shriram Limited Q2 FY '26

Thank you.

The first question comes on the line of Ahmed Madha with Unifi Capital.

Please go ahead.

Ahmed Madha

Yes, thanks for the opportunity.

I have a few questions.

To start with the Farm Solutions business, the Q2 was very strong.

Is it fair to assume there is some pre- buying or channel inventory filling for the next quarter's performance in Q2?

Is there any pre-buying that sort of a trend has been playing out, or is this organic for Q2 and the season is ahead of us?

Ajay Shriram

Well, in Shriram Farm Solutions actually on our wheat seeds, every year we do have a pre-sale.

That is part of the strategy we adopt.

Because we have to give an advance even for the purchase of seeds from the farmers who source and grow it for us, as well as from the entire dealership network whom we sell the seeds to.

So we do have a pre-sale, which is part of our business strategy.

Ahmed Madha

Okay.

Understood.

Regarding to the Hindusthan Chemicals acquisition, can you give some sense of the contribution?

I know there has been just 1 month of consolidation.

But what was the contribution in Q2 from the business in terms of revenue as well as I am assuming there will be some losses?

So, that contribution will help.

And secondly, how do you see the ramp-up happening for the epoxy plant in the near future and even probably next year or so?

Amit Agarwal

So, Ahmed, the acquisition was completed on the 26th of August, 2025.

So the company was with us for only about a month.

And as informed earlier, the company was making losses under the previous management.

So it will take us some time to turn it around.

We do expect that by this year-end, we should turn it around and we should be breaking even by the year-end.

Ahmed Madha

Understood.

But what will be the run rate of losses one should assume for the next two quarters, roughly?

Amit Agarwal

Marginal, not very significant, Ahmed.

Ahmed Madha

Okay.

And in terms of utilization levels, we should be operating at 40-50% utilization or higher, lower, any range, that would be helpful.

Aditya Shriram

The capacity itself is currently not a very large capacity.

So, with the strong leadership team that we have in place, we expect it to reach close to full capacity utilization of its current capacity.

And then we are working on internal plans and once the Board approves, we will then further look at expanding the plant.

Ahmed Madha

Okay, in terms of salt fields we have acquired, can you give some sense of what kind of cost benefits can we achieve from this?

And also, what can be the peak production of salt for us?

And unit economics in terms of advantage you get per ton, something of that sort can help?

Amit Agarwal

Well, Ahmed, what is most important to understand in this salt acquisition is that given that we foresee that in future salt will be scarce, the objective is to protect ourselves from the price volatility and as well as to secure the supplies.

So that's the fundamental thing.

Now coming to margin, see, one, it is still a very small salt acquisition because as we mentioned, it is covering only 13% of our total requirement.

But still answering your question, the ballpark margins as we saw, because we are new to this business, but the ballpark margins as we saw, if I remember correctly, the margins that they earn are in the range of around 30% types, 30%-40%.

But we still have to see what the actual is.

I mean, we have not even acquired, we have just signed the definitive agreements.

But we should get the cost advantage definitely.

Ahmed Madha

Okay.

And for us, the current cost of acquisition from salt will be what?

Realization it will be somewhere around 2,000 per ton, something of that sort?

Amit Agarwal

Yes, so the current prices of salt, if we go take it from the market, are in the range of 2,300 per ton.

Yes.

Ahmed Madha

2300 per ton, okay.

Got it.

Lastly, on sugar business, I mean, if we consider everything around, probably economics will be better for next season, but again, the sugarcane prices have gone up.

Would you like to give some sense how you are looking at sugar business as a whole?

And in terms of exports, you have mentioned in the call, in the press release, but considering the prices in the exports market, do you think exports will be remunerative?

Just broad things on your views on the sugar business as a whole will be helpful.

Thank you so much.

Ajit Shriram

See, given the additional production or surplus production this year, we do expect government to allow an export of about 2 million tons.

So that is one, which will, you know, also give support to prices.

But our request to the government is that they need to incentivize exports as well.

Given that the export prices are, you know, exports today, they would be around INR38-INR39.

So therefore, I mean, they are lower than domestic prices.

That also needs to be incentivized.

You see, these developments are new.

SAP came in only day before yesterday.

Things will evolve.

So we'll get to know how things will pan out in the business.

But yes, we will have to look at more policy advocacy to help the business.

Moderator · Conference Operator

Thank you.

Mr. Madha, please rejoin the queue for more questions.

Next question comes from the line of Nirav Jimudia with Anvil Wealth.

Please go ahead.

Nirav Jimudia

Yes, sir.

Good afternoon and thanks for the opportunity.

Ajay Shriram

Good afternoon.

Nirav Jimudia

I just wanted to understand from you, like, since we have recently commissioned 800 TPD caustic soda plant, I believe they would be all comprising of newer electrolyzers.

So I just wanted to understand, like, how frequently we need to change the electrolyzers for the older ones because as they become old, they start consuming the higher amount of power.

So, A, on that, and B, let's say, if we change those electrolyzers whenever they are coming up for the change, what sort of advantage we get in terms of savings in power cost and also the fixed cost once our caustic soda capacities are ramped up, if you can share your thoughts here.

Adtiya Shriram

So, the electrolyzers have a critical part called the membrane.

These membranes are replaced every 4 years.

So that is standard practice across the industry.

And the rest of the electrolyzer components, which is known as the cathode and anode, is replaced every 8 years.

Again, this is standard practice for the industry.

And typically when we do, you're absolutely right that there is some increase in power consumption as time goes by.

So whenever we do this replacement, it has a good return of its own in doing that replacement.

And in any case, the team, you know, is technically working on how to optimize and ensure that the power efficiencies are optimal even over the course of 5 years.

Nirav Jimudia

Got it.

And, sir, generally, because we have a total capacity of, let's say, close to around 2,750 TPD of caustic soda spread across both the locations.

When can we see, let's say, out of that, because 850 has been recently commissioned.

So, let's say, for the balance capacity when are those old membranes or let's say cathodes and anodes are coming up for replacement and normally when we do such exercise, what sort of capex we need to incur to replace them?

Amit Agarwal

Yes, so see these are very operational aspects.

Frankly, I don't have the number right away.

Ajay Shriram

Membranes are changed periodically.

We've got at the moment between both the plants, you would have almost 30, 35 electrolyzers.

So the changeover happens periodically depending on the aging of each electrolyzer.

So it's an ongoing process.

And this is a cost which is like a replacement cost, which one has to do to maintain the plant efficiency.

And one doesn't do it based on return.

One does it based on the efficiency one is getting.

When you reach a particular level, you just have to change it.

So these are ongoing activities which is there across the board in any caustic soda plant.

Nirav Jimudia

Got it, sir.

Fair point.

Sir, secondly, let's say, out of our current requirement of 225 megawatts for our caustic soda current utilization, last time you mentioned that we were around 25 megawatts so far as the renewables is concerned.

So how do we see this share of renewable power moving in FY27 and 28?

And generally, what is the difference between, let's say, the grid power or the captive power generation through coal and what we source through a renewable power?

If you can share your thoughts here?

Aditya Shriram

So just very fundamentally, sustainability is a very key part of our thought process.

So in all our efforts and businesses, we are always seeing how to be more and more sustainable.

So the direction of increasing renewable energy, whether it is through wind, solar, whether it is through use of biomass in existing power plants, we are continuously focusing on that, whether it is at our Bharuch site or at our Kota site.

We are actively exploring further tie-up.

We have already tied up approximately 68 megawatts of power which is due to come into our Kota site.

And we are actively exploring further opportunities.

So as and when that is approved by the board, we will be able to share that.

Nirav Jimudia

Got it.

And what difference if you can share in terms of per unit cost between, let's say, the grid as well as coal and the renewables?

Amit Agarwal

Yes, I'll give you the order of priority.

Obviously, the grid is most expensive followed by coal and then renewable.

Renewable is the cheapest, but one has to remember that when we take renewable, we also need to take grid power.

So the average has to be looked at.

So that's the flow of cost.

Nirav Jimudia

Got it.

Sir, one of the statements in your opening remarks, you mentioned that we have seen a strong ECH demand in India, more possibly because of maybe the commissioning of, let's say, the recently commissioned Kukdo chemical epoxy plant, as well as by the existing two players who also expanded their epoxy capacities.

So I just wanted to understand from you, like with the filing of anti-dumping duty request with DGTR, can you share your thoughts in terms of the demand for epoxy in India as well as how much of the cheaper imports are coming to India, which is actually pursuing us to file that anti-dumping duty?

Ajay Shriram

I think there's a clarity here.

The anti-dumping duty is for PVC and ECH.

Nirav Jimudia

I think for liquid epoxy also we have filed an anti-dumping duty.

Industry has initiated.

So I was just trying to understand from epoxy point of view, because ECH ultimately depends upon the utilization levels of epoxy.

So I just wanted to have your thoughts on the epoxy part?

Aditya Shriram

Yes.

So the current domestic demand for LER, liquid epoxy resin is in the range of 200 KTPA and we expect it to reach 300 KTPA by FY28. So we see a healthy demand growth in the epoxy, in the advanced materials business.

So what we have done with an ECH plant and an acquisition in the epoxy space is we are getting more and more vertically integrated.

And we expect that with the demand increase, as you rightly mentioned of existing epoxy players as well, that the demand for ECH will continue to be robust.

So we will be completing our commissioning of the entire capacity.

There might be other competitors who will continue to put up capacity of ECH as well, but we expect it to be absorbed in the market with this increase in the epoxy demand.

Moderator · Conference Operator

Thank you.

Mr. Jimudia, please rejoin the queue for more questions.

Next question comes from the line of Pujan Shah with Molecule Ventures.

Please go ahead.

Pujan Shah

Thanks for the opportunity, sir.

My question it is, so recently we have been hearing a lot about this anti-involution policy from Chinese.

Ajay Shriram

Can you kindly just repeat what you are saying?

I'm sorry, we can't understand.

If you are a speaker phone, can you just get on to a without the speaker handset or something?

I'm sorry, we can't understand.

Pujan Shah

Am I clear now, sir?

Ajay Shriram

Please go ahead.

Pujan Shah

Yes, sir.

Recently we have been hearing about this anti-involution policy by these Chinese.

And we are also hearing off that they are also including PVC.

So do you see a long-term structural change in terms of pricing stability going forward?

Because we have been seeing a weakness in dumping from the Chinese guys.

And I just want to understand the context that if it happens what percentage of capacity will get shut down, which will help to at least stabilization in terms of pricing?

Ajay Shriram

This you are referring to PVC?

Pujan Shah

Yes.

Ajay Shriram

Okay, well, actually speaking today India imports almost 60% of its PVC requirements.

So our production and our local manufacturing is fairly low.

And you may have heard in the next three, four years, we expect Reliance as well as Adani Group also putting up PVC plants.

So I think then the domestic production capacity will go up, but it will actually still not meet the total requirement, because the PVC requirement was going up 7%, 8% a year.

So with that sort of a growth, I think the efficiency of industry is most important.

And you're right, what we are taking up also, as I mentioned earlier that there is dumping going on of PVC.

That's where we have moved with the government very aggressively with anti-dumping duty, hopefully that will come shortly.

That will give the domestic industry some protection from dumping, vis-à-vis what they sell in their own markets.

And I would say frankly with geopolitics of the world, it's very difficult to predict what's going to happen in a commodity business down the line.

With the duty structures, taxes and each country looking at what's best for them.

So that's where I think the government of India is fully aware also.

That's how the anti-dumping duty issue has come up for PVC and we expect that to come into force, hopefully in the near future.

Pujan Shah

Okay, got it.

And can you just quantify what is the chlorine negative pricing currently per kg?

Aditya Shriram

So the current chlorine price is in the range of minus 7,000, minus 8,000.

Pujan Shah

Okay, minus 7,000, minus 8,000.

Okay.

And should we expect to remain range- bound because ultimately as we have been flooded with the capacity and we are operating at 75%, if we ultimately go to 80%, we will ultimately, we have a challenge to dispose the chlorine.

So do you feel this 7, 000, 8,000 would remain range-bound or do we expect much more negative to go once the capacity gets ramped up by other players?

Ajit Shriram

We actually expect that over time the demand for chlorine downstream products is increasing broadly linked to the GDP growth rate.

So we expect the demand for chlorine to increase.

So over time, we actually expect the prices to improve.

They might still remain in the negative range for some time, but it will be a lower negative number that we expect going forward.

Pujan Shah

Okay, sir.

Thank you so much.

That’s all my questions.

Ajay Shriram

Thank you.

Moderator · Conference Operator

Thank you.

Next question comes from the line of Rohit Nagraj with B&K Securities.

Please go ahead.

Rohit Nagraj

Sir, the first question is on PVC.

So in our presentation, we have mentioned that the imports were impacted during the quarter because of the impending ADD.

But normally what we see that before the ADD comes into force, there is incremental dumping, and that usually keeps the inventory buildup in the system.

So what is your understanding of the current inventories in the domestic market and why particularly these imports have been impacted during this quarter?

Thank you.

Amit Agarwal

See, I would not have the inventory in the system right now.

However, the key reason why the imports got impacted, one was that there was shrinkage of demand, as was mentioned in the CMD's message as well, because of the rains.

Second also was because ADD was supposed to be imposed, and if they enter the country and it is imposed, then there is a challenge.

So it was largely from that perspective that it was very close to the date of the imposing of ADD is when people were apprehensive to import.

So it is more about, not about people supplying from China, it is more about people importing in India who were apprehensive and therefore they were not placing orders.

Rohit Nagraj

Sure, sure.

That's helpful.

And the second question on ECH, given that domestic there is an overcapacity and probably all the players will have to find some exports market.

Which in all are the geographies where we are looking at in terms of the exports for some of our quantities?

Thank you.

Aditya Shriram

So currently ECH is not in oversupply in the domestic market.

There is adequate demand in the domestic market.

So we expect demand for ECH to continue to grow, as you mentioned earlier, due to the epoxy growth rate as well.

So I think it is in a favorable position for the times to come.

However, we are still exploring all markets and there will be some export opportunities as well.

And we are exploring across globally and wherever we are able to get the right kind of pricing, we will look at that.

Rohit Nagraj

Sure.

Thanks a lot and all the best, sir.

Moderator · Conference Operator

Thank you.

Next question comes on the line of Vignesh Iyer with Sequent Investments.

Please go ahead.

Vignesh Iyer

Hello.

Thank you for the opportunity.

So my question is on the chlorine utilization.

If you could share what our chlorine utilization was for Q2, our pipeline utilization plus our downstream.

Aditya Shriram

So actually chlorine utilization or chlorine integration is a very core part of our strategy because that often becomes a constraint across the industry.

And we are focusing very actively on that.

For that purpose, we have already commissioned aluminum chloride plant.

We have commissioned our ECH plant.

In Kota, of course, we have PVC and SBP.

And further, we are expanding aluminum chloride and we are also putting up calcium chloride capacity.

And the ECH capacity will also become fully operational.

So in the coming two quarters, we actually expect our chlorine integration to reach a level of about 45% across both our Bharuch and Kota sites.

And in addition to that, actually, we have grown over the last many decades along with our pipeline customers, along with their growth as well and it's a very strong strategic partnership that we have.

And our pipeline consumption, therefore, is also approximately 30% in our Bharuch site.

So overall, about three-fourths of our chlorine will be integrated in the form of either captive use or pipeline use or strategic contracts.

Vignesh Iyer

Okay.

Got it.

So 75% utilization is more or less what is the levels as of now, right?

Combined.

Aditya Shriram

Yes.

We will reach that level in a couple of quarters.

Vignesh Iyer

Right.

A couple of quarters.

Got it.

Sir, my second question is on Shriram Farm Solutions.

I wanted to understand, I mean, there is a 27% growth in this quarter on the revenue part of it.

So for the H1 part of it, I just wanted to understand can we share the data on what is the contribution coming from the new products versus contributions from the other products?

I mean, if you could share the mix.

Amit Agarwal

So see, the new products which we have launched in the last two to three years, almost 20 products is what we have launched across categories, whether seeds, plant nutrition, and crop care.

Out of that, the good part is that eight products have been from our own research in our plant nutrition business.

So that's the kind of launches that we have made in the last two to three years.

And the revenue from these new products is in the range of around 20% of our total revenue.

And as we understand from the industry, that's a good benchmark to be at 20%, 25% of the new products introduced.

Vignesh Iyer

Got it.

That's all for my side.

Thank you.

Moderator · Conference Operator

Ladies and gentlemen, as there are no further questions, we have reached the end of question and answer session.

I would now like to hand the conference over to the management for closing comments.

Ajay Shriram

Thank you.

Ladies and gentlemen, thank you very much for your participation in

Moderator · Conference Operator

Thank you.

On behalf of DCM Shriram Limited, that concludes this conference.

Thank you for joining us.

You may now disconnect your lines.