Chemplast Sanmar Limited (CHEMPLASTS) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Chemplus Sanmar Limited, Q4, and FY26 earnings conference call. As a reminder, all participant lines will be in the listen-on-emote, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference call is being recorded. Before we proceed, this conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. I now hand the conference over to Mr. S. Ganesh Kumar, Managing Director, Kempla Sunmar Ltd. Thank you and over to you, sir.

Thank you, Swapnali, and good morning, everybody. On behalf of Kempla Sunmar Ltd., I extend a very warm welcome to everyone joining us on our call today. On this call, we are joined by our CFO, Mr. A. R. Balaji. Dr. Krishnakumar Rangachari, who heads our Custom Manufactured Chemicals Division, Mr. N. Murghli Dharan, Executive Director of Finance, and SDA, our Investor Relations Advisor. I hope everyone has had an opportunity to go through the financial results and investor presentation, which have been uploaded on the stock exchanges and on our company's website. The financial year 25-26 turned out to be a very challenging year. During the year, the company reported consolidated revenue of Rs. 4,224 crores and EBITDA of Rs. 198 crores. The year was marked by persistent rice pressures, excess global capacities, geopolitical disruptions, volatile feedstock and energy costs, and continued dumping of suspension PVC and face PVC into India from China, Europe, and Japan. Getting into the details, the speciality segment recorded one of its strongest, stronger quarterly sales at Rs. 475 crores, reflecting 13% year-on-year growth. Sales volumes also registered a healthy 17% year-on-year increase, mainly driven by face PVC. Now, getting into the details of speciality products within this segment. Starting with space PVC in quarter 4 FY26, demand conditions remained relatively stable from the footwear segment while the automotive and upholstery segments continue to see healthy traction. On the regulatory front, we have received the final findings from DJTR in the ongoing anti-dumping duty investigation against imports from the European Union and Japan. We await the notification by the Finance Minister. This has already resulted in relatively lower import bookings from Europe, while implementation of the ADD is now expected during the first half of FI 2026-27. The Gadalud Paste PVC facility operated through the year at 100% of capacity, reflecting a very strong operational performance. The realizations and margins also saw a steady uptake in future. Overall, we remain positive on the Pace PVC business given the strong demand, relatively lower pressure on feedstock side, and potential upsides via implementation of ADD on imports from the EU and Japan. The ongoing war in the Middle East has had both its positives and negatives. While prices and margins have improved, there have been some temporary concerns around demand due to the non-availability of NP. Coming to the custom-manufactured chemicals business, Q4 saw healthy dispatches despite some sales getting deferred to the current financial year. Performance during the quarter continued to be impacted by the slowdown in global agrochemical markets, led by pricing pressure from low-cost generic supplies from China and slower ramp-up of new molecules by innovators. However, we believe the current weakness is temporary in nature. And we are encouraged by the early signs of recovery, supported by a strong order book for FI27. On the expansion side, progress on MPB 3 Phase 3 continued as planned during the quarter. The pipeline continues to gain momentum with 45-plus molecules progressing across various stages of development. Our customer engagement and diversification efforts have started yielding results. We are further accelerating our business development efforts in the markets where we participate. This includes recruiting senior resources in these geographies. On our refrigerant gas project, we are happy to announce that the commercial production of R32 refrigerant gas at our 2KT swing plant in May 2 has commenced recently. Further, the commissioning of the new plants is expected to be undertaken in phases over the course of the year. Moving to our value-added chemicals business, during the quarter, caustic soda and chloromethane market remained under pressure in the first two months due to weak demand and continued pricing pressure. Caustic soda volumes improved sequentially, supported by better sales and inventory liquidation at the Karakal facility. Volumes, however, remained lower year-on-year due to reduced production at the Matur facility on account of the membrane change activity. There was a temporary spurt in caustic prices immediately after the war, which had started tempering down. Hydrogen peroxide and chloromethane volumes were impacted by lower hydrogen and chlorine availability linked to reduced caustic soda output. However, demand from key end-user industries and pharma customers remained largely stable during the quarter. Moving on to the suspension PVC business, Water 4 FY2526 began on a positive note, supported by dealers restocking ahead of the seasonal demand cycle and expectations of improving prices. The Chinese government's announcement to withdraw the export rebates on PVC also helped in pushing PVC prices further up. However, the commencement of the war in the Middle East led to a chaotic situation on the prices and availability of both PVC and feedstock VCM. The Middle East war situation has had consequential impact on the availability of VCM in Asia, given the acute shortage of naphtha and ethylene. This led to a sharp spurt in VCM prices. While this increase in VCM prices were matched initially by similar increase in PVC prices, the latter did not last as carbide PVC from China, which was largely immune from the impact of the war in the Middle East, started flooding India at very low prices. This, therefore, led to a sharp disconnect between PVC and feedstock VCM prices. As a result, the broader industry outlook continues to remain very subdued. The industry had expected relief through anti-dumping duties, higher customs duties, or other import control measures to counter persistent low-priced PVC imports, especially from China. However, none of these measures have come through. In fact, regulatory support has weakened, including the rescinding of UCOs and the recent reduction in customs duty, though only till June 2026. While the removal of export rebate in China acted as a flip in the first two months of Q4-F526, the same has been completely nullified with the volatility seen post the commencement of the Iran war. These developments together created a more structural reset in the earnings outlook, necessitating reassessment of the carrying value under India 36. The assessment has resulted in an impairment loss of Rs.898 crores vis-a-vis the book value of the investments at Rs.1556 crores. This is a non-cash adjustment that aligns the book value of the investment with the current economic reality. It does not affect liquidity or the company's ability to operate the business. Also, CCVL recorded a charge of Rs. 150 crores as an exceptional item for the year ended March 31st, 2020. Towards provision for onerous contracts and write-down in the carrying value of raw materials in line with the applicable accounting standards. At this juncture, I wish to communicate that the board has constituted a committee of three independent directors to examine the strategic priorities for the company with a view to enhance the long-term value creation for stakeholders. The company may evaluate potential reorganization and M&A opportunities, and will table their findings to the board for review and appropriate decision-making. The committee may engage advisors to support them in this engagement. As we move into FY2026-27, the commodity business, including CCVL, is expected to face volatile near-term operating environment. Driven by the ongoing geopolitical developments, fluctuations in global raw material and energy prices, and continued uncertainty in international supply chains. However, we are positive in our specialty business, where we expect a stronger performance given the better fundamentals and prospects. Our focus will remain on operational efficiency, cost optimization, and improving capacity utilization across our manufacturing facilities. We will also continue to strengthen customer relationships, ensure timely execution of the ongoing expansion projects, and enhance our speciality portfolio to drive more stable and value-accurative growth going forward. Now, I would like to invite our CFO, Mr. Balaji, to walk you through the financial performance of the company.

Thank you, Ganesh, and a good morning to all the participants on the call. Coming to a performance in Q4 F526, on a consolidated basis, the company reported revenues of 1,256 stores, registering 9% year-on-year growth. EBITDA for the period stood at 194 crores compared to Rs. 37 crores in the same quarter of the previous year. The net loss for the quarter stood at Rs. 45 crores. Now coming to the quarterly segment-wise performance. The specialty chemical segment reported revenues of Rs. 475 crores. Marking a 13% year-on-year increase and volumes registered a healthy 17% year-on-year growth. The value-added chemical segment reported revenues of 120 crores for the quarter compared to Rs. 169 crores in the corresponding period last year. The suspension PVC business housed in TCVF reported revenues of Rs. 661 crores for the quarter registering an 18% year-on-year growth compared to Rs. 560 crores in the corresponding quarter last year. In line with the applicable accounting standard, CCVL has recorded a charge of Rs. 150 crores as an exceptional item for the year rented, 31st March 2026, towards provision for onerous contracts and write-down in the carrying value of raw material. This inventory write-down of Rs. 150 crores is expected to be reversed in the current financial year. Looking at the revenue mix for the quarters, specialty chemicals contributed 38% of the total revenue, value-added chemicals accounted for 9%, while the suspension PV series segment contributed to the remaining 53%. For FY26, the company reported revenues of 4,224 crores, with every draw of Rs.198 crores, while the net loss for the period was Rs.280 crores. As of 31 March 2026, the company's consolidated net debt stood at Rs. 1419. On the stand-alone front of Kemplaster March for FY26, the company reported revenues of Rs. 2170, with EBITDA standing at Rs. 108, while the net loss for the period stood at Rs. 1003. After the impairment provision, as Ganesh mentioned, the business environment has been challenging, and in the light of significant regulatory and market development, we carried out a detailed evaluation of the carrying value of the investment in CCVF with the help of an independent valuer. Based on this assessment, the company has recorded an impairment provision of Rs.898 course as an exceptional item for the quarter and year ending 31st March 2026. This should be viewed as an accounting entry and has no impact on the cash flow of the company. Further, this also has no bearing on the consolidated financial. With this, we conclude the presentation and open the floor for further discussion. Thank you.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself or the question queue, you may press star and 2. Participants, you are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take the first question from the line of Sanjeej Jain from ICC Security. Please go ahead.

Yeah, good morning. Thanks for the opportunity. First on the suspension PVC, how is the...

Sorry to interrupt in between. Sanjeej, I would request you to please use your handset mode and speak.

No, I am on handset, but hopefully you can hear me properly now. Hi, sir. Good morning. First on the suspension, PVC, can you help us understand now that things are settling down, how is the trend for the spread as we speak in the Q1? Because I think last quarter, or probably in the month of March, one can understand the volatility hasn't been in our favor considering that we signed certain onerous contracts. Which has taken away all the profitability in the suspension PVC. How is it looking now? The spreads are still weak, considering that the carbide export continue to remain unabated. In that scenario, how should we expect the performance of CCVL in FI27?

Thank you, Sunjesh. You are right that there are still uncertainties looming around the market, and with China bringing in the carbide PVC at lower prices. We are, as we speak, we are looking at a spread which is at a neutral level on a replacement cost basis, given the current VCM price. But we are also seeing some softening on VCM prices. It may not be significant at this stage, too early to talk about it. But at the same time, we may get into a positive side. But having said that, while we have taken the broad impairment on the onerous contract, what you say, the 150 crores hit on the... And the P&L, we still may have some in-between, between the today's price and the onerous contract, there are still a couple of other contracts which will hit the production line between May and June. So there could be uncertainties as we go into this quarter. But we are hopeful that at the... The geopolitical situation stabilizes and the production comes back. We will be able to move to the spreads that we have been talking about.

Assuming if crude remains elevated and gas prices remain elevated for a while, Chinese will keep having that advantage of having a much lower cost. And it doesn't look like they want to make profit out of the situation. This means that even FI27 can remain as stressful for CCBL.

On a very, what you say, pessimistic end of the assumptions, yes, it is possible. But however, from what we also hear is the Chinese producers are also going through the stress. Second is end of June, we hope that the 7.5% duty comes back. So, that would add another 60-70 dollars to the pricing and the realization. And Chinese also, we feel that from what we are hearing is not all of them, but some of them are going through tremendous cost pressures at this price.

Got it, got it. Now, coming back to page PVC, how different the behavior in page PVC versus suspension PVC?

See, page PVC, A, the size itself is very small compared to what we are talking about in suspension. So, a 4.3 million suspension, we are talking of a 200,000 ton, roughly a 200,000 ton market. Second, the pace has always traditionally been at a higher price. Further, there is already anti-dumping on five countries, which is levain, which also brings in some pressure on how the product is entering the market. Fourth point is, given that the ADD investigations are finalized and the file is with the Ministry of Finance, Import, we have seen a slowing down of imports from Europe, especially which is the other alternative. So, overall, we expect that at least this time around, we are hopeful that the government will take a fair approach, and we should be able to manage the pace with this.

One last question on the gas and the speciality. How has been the speciality this year, the growth versus the previous year, and we were expecting 1100 crores kind of a revenue in 27-28, now considering agrochemical supply chain being a little stressed. How should we think growth in next two years? And what does this 45 product mean? What is an opportunity size? What is the probability? If you can give some color on that. And number two on the R32, there is a lot of debate on it, but we have started 2000 metric ton now. By end of this year, where do we see ourselves in the R32 capacity?

So, I will first take the R32 and then give it to Dr. Krishna to respond to the speciality chemicals. We have, as in earlier calls, the quantities have been specified. So we are now on the verge of getting into the expansion. We are already progressing very well, and by the end of the year, as committed earlier, the 14 kt capacity, but we are also providing design opportunities to be bottleneckers further as required, as the opportunity may arrive.

So by this calendar year, we should be having the 14,000 metric ton?

Yes.

Hi, Krishna.

Hi, Sanjish. Good morning. So, in responding to your question, our projections on the custom manufacturing continues to be strong. The 45 molecules that we talk about include 17 commercials, so the balance of what we call which are at the various stages of development, and for us, we keep monitoring that particular number, the overall basket. Which, you know, continues to grow quarter on quarter. And the reason for that is the engagement with all our customers is quite strong. And all of them continue to indicate and intend to diversify their supply base in India. And when they look for reliable, good partners, they continue to consider. Some are as a very reliable partner. So overall, the outlook is strong, and as we indicated in the last call, you know, we've had the temporary, you know, issue, you know, in the near term, primarily driven by the slowdown in the active space, and because of which, you know, many of the new molecules that... Our customers are launching, are not ramping up as quickly as they originally anticipated in the near term, but the medium term to long term.

Thank you.

I'll take the next question from the line of Angkor Perival from Access Capital. Please go ahead.

Yeah, hi, sir. Thanks for the opportunity. Continuing with, you know, Krishna, sir, there, on the CDMO side, we have been highlighting on, you know, the pricing pressure in the global markets, which had led to some deferment in terms of, you know, the innovative demand here. So, any, you know, updates there in terms of, you know, given the current macro, is there any revival given that pricing pressure would have used a bit? And how is the product pipeline sort of, you know, looking like both in the egg chem as well as in the other segments across slides?

So, you know, so our model is innovators, right? And we have not been impacted by, you know, what's been going on in the generic space.

Sure, sir. And from a ramp-up perspective, any timelines for that 1,000-odd crores revenue that we were looking at, or we still keep that number intact?

We still keep that intact. I mean, last quarter we indicated hopefully next year we will be at that number based on what I have in the pipeline and the products we have commercialized.

Thanks for that. Secondly, on, you know, the SPVC side, you did alluded towards, you know, Chinese import being sort of, you know, picking up, which is where, you know, the prices or the spreads overall are under pressure. The 7.5% duty that you were talking of, right? So the comeback of that duty, is there any talks with the government on that or, you know, how are we looking at that?

Hankur. Hankur Ganesh here. We have been representing to the government under the Aakmanirbar, the recent announcements by the Honorable Prime Minister, where he said that we have to manage forex outgoes, we have to add value back in India. So we have been representing as industry bodies with the government, different sectors in the government about the 7.5 percent. Minimum import price, etc., which we are still talking with the government. But ultimately, to provide a level playing field and not being used... The anti-dumping duty is the only long-term solution which is compliant with the WTF.

Sure, sir. But, you know, where I'm coming from is, you know, earlier also there have been multiple times, you know, hits and misses there on the anti-dumping duty on SPVC especially. We are hopeful of, you know, that getting implemented on PPVC. But will that be the only way out for the, you know, the business economics to be stabilized? And till then we will have to be sort of, you know, the profitability will have to be slightly under pressure. Will that be a fair way to look at it?

As of today, under the given circumstances, yes, but then there are other measures, non-trade measures like QCOs, which was presented, which is now, we are representing back again saying that this is a different, you can't paint all products with the same brush. This is another effort which is being taken with the government. So, whereby idea is to bring in a level playing field to the domestic manufacturers, and that should be the approach which will help us in the short to medium term. Today, as we look at it, it's all there. Tomorrow, if, for example, the supply chain stabilize, the war situation goes away, the VCMPC and PVC spread is back to normal, then things would be different. But as of today, as we see, this is where we are.

Ankur, this is only just to add to what Daneesh said. In the suspension and PVC business, as you know, last two years have been a struggle primarily because of excessive dumping from China. And regulatory support there is very critical. One, it could be ADD, it could be QCO. In some form, regulatory support on the suspension PVC side is very critical from the medium to long term point of view. Of course, the short term is more driven currently by the war situation that is happening. But if you look at the medium to long term, it's important that the regulatory support, some form or shape comes.

Sure, sir. That's helpful. Just one last question, if I may. On R32, what is the thought process here? Whether, you know, we are looking to sell this in the domestic market itself, or is there some tie-up or maybe some global sort of, you know, tie-up there is where this ultimate capacity will go into?

So, regarding the go-to-market strategy for R32, domestic, of course, is one of the destinations for the product. But apart from that, we are also looking at serving the global market. And we are exploring with a few partners on how to take this to the market in the international space.

Okay. That's helpful, sir. Thank you, and all the best. Thank you.

Thank you. Before we take the next question, ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participants in the conference call, we request you to kindly limit your questions to two per participant. If you have a follow-up question, please rejoin the queue again. We will take the next question from the line of Nikhil Khandi from Bajaj Live Insurance. Please go ahead.

Hello. Hope I am audible. Thank you for the opportunity. Just wanted to understand more on the exceptional item of that bar 50 crores, which we have taken. And since we are expecting it in the reversal in F.27, the nature of it and how should we see it? The extended question to that is that the management has also highlighted that there will be two more containers in Q1. So how should we see the Q1 moving out from the exceptional item perspective?

No, this is the difference between the actual cost and the net reliable value. Which we have provided as of 31st March, and it's getting reversed during the current quarter. What Ganesh told us, maybe one or two more consignments will come for the current quarter, where there could be some difference in contribution. One kind of thing. So, hopefully, things If the situation improves, it should be better. Till then, it may be kind of a break-even, as Ganesh told earlier.

Okay, okay. The second thing is mainly on the impairment loss, which we have taken on SPVC business. So, since we have estimated the future cash flow for the segment, are we not expecting any meaningful improvement in the SPVC business for 27 and 28, considering this impairment loss of around close to 900 crores?

Nikhil, this is Murali. As you would appreciate, empowerment exercise is always done based on, at a point in time, what is your view? And at the current point in time, with the volatility is around, and the uncertainty around regulatory support, the best estimate has been used, and that has been used for the valuation purposes. And as it stands today, the margins today, currently, if you look at the Chinese, the BBC is coming at $8.90 here for India, and the FOB Japan, DCM is landing at almost around $7.50, $7.60. So, taking the conversion cost account, effectively, we are just meeting the cost, the variable cost. That is where we are today. So, that is the outlook that we can see as of now, given where we are today. And if things improve over a period of time, obviously, this environment will get reviewed on a periodic basis.

Okay. Thank you. Thank you so much.

Thank you. We will take the next question from the line of Rohit Nagraj from 361 Capital. Please go ahead.

Yeah, thanks for the opportunity. First question again unfortunately delving on to SPVC. In terms of a couple of questions under that, one is that how has been the domestic demand in the wake of the current volatility in prices and second in terms of the sustainability of our operations given that there have been challenges even from the raw materials sourcing and And we are dependent on imported raw material and a third aspect of from the ADD perspective, have we filed for an application? Because I think after filing the application, there will be a processor for one year, three months before any decision comes in.

Thanks, Royce. Regarding the domestic demand side, I think if I look at the full year that has passed by, the demand has been muted rather probably about a percentage point below last year, which was at 2.3 million tons for SPVC. We can say that demand is more or less the same as for over the last two years. We see that as of today, there is no indication of it growing significantly, but we are optimistic that it should catch up maybe after the first quarter. Once the global geopolitical situation settles down, we'll take one or two quarters for the demand to bounce back. So that is our estimate given today's environment that we are looking at. Regarding sustainability of operations, you are right. You are right. We are, to that extent, VCM is critical for us to run the SPVC business, and we are constantly looking at different ways and means of mitigating this risk. And I think you may appreciate that to the credit of the team, when one of the suppliers declared that they are going to, will not be able to supply post the contract period, the team managed to secure the same supply without any disruption before the contract period expired. So, to that extent, the ability of ChemPlus to... To be able to understand the market, get the supplies is very high. Is that a long-term solution? No, it is a short-term solution. For long-term, we are exploring various avenues to see how to secure feedstock on a more sustainable manner. When I say sustainable, both from a qualitative and from a commercial point of view. So we are working on that exercise.

Yeah, and just a clarification on ADD.

Yeah, sorry, yeah, you had a third point. The third point on ADD, we are working on the data for the ADD to be filed. Have we filed as of now? No. But we will be filing in the near future for the ADD to be re-looked at for imports from China.

Right. And again, sorry to delve again on R32. So, we initially plan to have, you know, focus on the domestic market, but given that there will be multiple players who will be also tapping and the demand will be limited at least in the near term. What is the strategy that we are looking at from tapping the exports market? Have you already started seeding it? And how are we planning to do over the next one and a half, two years? I mean, the window is open until December 26. Thank you.

So, Rohit? From an R32 perspective, the go-to-market strategy always considered a combination of domestic and export, because we were looking at the multiple capacities that would be coming up in the country, and it was always on the radar. We are working with a few partners, we are working with a few of them, trying to see in what way can we collaborate in the export market, which is we are pretty sure that we should be able to...

Just one clarification on the numbers part. Was there any inventory gains and forex gains during Q4?

No, there is no inventory gain because we have made the provision for the inventory. Forex, all our imports we have covered. So on the market, we are positive. But it's cost already recognized and we have taken forward cover for all our imports.

Thank you a lot for answering.

Thank you. We will take the next question from the line of Madhur Rathi from Counter-Cyclical Investments. Please go ahead.

Well, thank you for the opportunity. Sir, I wanted to understand regarding the spreads that we, that is actually, it seems that currently around $100 for the variable, the gross spreads. So, how do we see the spreads improving with first, the anti-involution drive, and second, with the energy called the renewable energy JV that we have done with GSW. So, how should we see at The stretch for suspension PVC may be over the next one year, if things normalizes. And second was, with anti-dumping duty, how should we look at the stretch on page PVC moving versus what it were? And sir, what were they in FY26?

On the day's review power contract and its impact on the suspension PVC spread, As you represent, the suspension PVC is not power intensive. It's more caustic soda that is power intensive. So that contract will more benefit the VAC business, not the suspension PVC business. It will not have any significant impact on the spreads of suspension PVC. And how we see going forward? Actually, the current situation is reasonably sort of volatile. As you know, like I said, currently the prices are more or less at variable cost level. We are breaking even. That is where we are. And the future outlook would depend on how the Iran war situation sort of pans out and how soon the feedstock availability becomes much more easier. So it's slightly difficult to predict at this point in time.

Sir, I'm not asking you to predict, but sir, can we see the 13% whatever difference delta from anti-involution drive in China and the 7.5% import duty that is expected in India? It should have some impact, like 10-12% impact. Can we expect that is a reasonable expectation from this spread improvement or that is still uncertain right now?

The 13% benefit that came through, it actually improved the profitability in January and February. Post the work that's been completely subsumed in the overall market scenario, that currently we are not seeing the impact of that spread at all in our margins.

Got it. And, sir, one question on the CNC business. Sir, we used to give LOI of the products that were in commercial stages. Sir, what would be the revenue potential from the LOI or the 17 LOIs that we have currently? So, if you could help us on that. Like, where has the business moved maybe from, I think, earlier you used to give, like, it was 13, 1400 crores closer to FI24 and FI25. So, where it is right now?

So, just to clarify, the LOs is not on the 17 molecule commercial. We, you know, we announced LOs on 6 out of those 17, if I recall. So, it doesn't cover all the 17. And, you know, as I indicated earlier, you know, we are behind by probably 12 months or so in terms of. Meeting our revenue targets of 1000 crores. So, we are still comfortable with what I stated earlier that we anticipate getting to that level next financially.

What would be the revenue potential of these 17 LOAs altogether over their life period or the peak revenue potential you can expect? I don't want the timeline, but this is the intent that the innovator has given us that should be 2,000 crores, 2,700 crores. Any number would be helpful.

We wouldn't sort of, we would refrain from giving guidance on what would come out of the LOI. Like Krishna said, we have signed LOIs for six products. The rest of them are sort of commercial products, but not everyone, everything has an agreement or an LOI. I would sort of refrain from giving a guidance on how the total value of business that is possible for us. Broadly, the trajectory is positive. Like Krishna said, the trajectory is positive. Of course, the business has gone through some pain because of the agrochemical slowdown, but the trajectory is quite positive.

Right. Sir, thank you so much and all the best.

Thank you. We will take the next question from the line of Poojan Shah from Molecule Ventures. Please go ahead.

Thanks for the opportunity, sir. My first question pertains to the duty of which government has removed. So, just to understand the V1 stance, is it possible that if the duty comes back, it also impacts the VCM prices as well because that will also impact the duty? Or the duty won't be impacted on VCM?

No, if it comes back, maybe it will come back for all the products. That's what we are looking at. But the duty on VCM is about 2.5% versus 7.5% on PHS. Okay, got it, sir.

And second question pertains to this cost of soda division. So, in our earlier remarks, we have stated that the prices have been softening up because, so I understand in the Jan to March, there were some plant shutdowns as well, due to which the price has been injured, as well as the global prices have been increasing. But for to look at a year, this is how we are looking at the prices. It will remain firm or it will gradually be on a declining mode again.

Today, we are seeing the price stabilizing back from the short-term highs, which was a blip during the Jan-Mars period. We expected to achieve the normal level, which has been continuing over the last couple of years.

My last question is, on the longer term side, as we see, China real estate prices have been a 20-year lower, and that's where it has been impacting the PVC demand. And that's where you stated also that the PVC producers are not able to cope up at the prices, and they have been queen on dumping. But to frame it along, are we seeing a gradual recovery in China, or it will remain elongated over the year or two?

China factual situation is always a mystery. Whatever we can discuss, but at the end of the day, we will never be able to know the real situation was happening there. Rather, we should focus on, our approach is to focus on our government, our regulatory system, and make sure that we get the adequate protection, or rather protection is not the right word, the adequate support to bring us on a level playing field.

Thank you.

We will take the next question from the line of Deepakajmira from IGE India. Please go ahead.

Do we have any quota allotment from the government for, let's say, R32 for yet now?

The government is still working on it. I think the entire country is operating on belief that we will be getting the quota. The government is still not, because the period for the quota calculation is not yet over. It will be till end of 2026 for the baseline survey.

Why do we think it will be getting clear that we have the quota allotment?

We hope so. We strongly believe that we should be getting the quota. We have a right to some volumes that we will be able to play in the market.

Isn't this a very risky strategy to go after that much great size of a plant without the quota allotment?

No, we are reasonably confident. I think the reason that we are reasonably confident of the allocation, like we had said earlier, I think the overall formula is, we believe, is for the country, and we believe the recent circular also sort of highlights, notification also highlights that. And I think with the capacity in place, we are reasonably confident of the availability of COPA.

Any timeline by when it will be getting clear?

By next year, by 2027, because people have time till then to put up the capacity.

Okay, thank you.

Thank you. We will take the next question from the line of Siddharth Gadhikar from Aquarius Securities. Please go ahead.

Hi, it's a good morning. The first question is on R32 raw material processing. So how are we looking at processing our HF for the R32?

So, you're right. This is a good question because R32 hinges around HF. We have tied up with a couple of sources to meet our short-term demand, and as the business progresses and as the business generates a profitable contribution, we can even look at setting up our own support system.

So, but do we have a logistic place to actually transport that much HF, given that you would be setting up 14,000 tons of R32?

Yeah, we still, for 14,000 tons to be completely up and running, it is going to be a while. By that time, we already have. We have our existing productions, we have logistics in place. The rest of it, we are already in the discussion to keep it ready.

And from chloro-methane also, we will have enough capacity for the R32 capacity.

Pardon?

For the chloro-methane side. So, on the close of methane, also, we will have enough capacity for consumption for art, for making art again?

Yes, yes, yes, we will have it.

Okay, so that's it. Thank you.

Thank you. We will take the next question from the line of Chetan Thakkar from M3 Investment, Private Limited. Please go ahead.

Hello. May I be audible?

Yes, your audible. Please proceed.

Yeah. So just a question on the committee that is being formed. Is there any particular mandate that is in mind which is being provided to the committee to look into from a more longer term perspective?

Yeah, as you would appreciate, Kempos currently has three distinct portfolios. One is a speciality portfolio, and the others are primarily commodity, which is the VAC and the suspension PVC business. Well, the speciality portfolio, the output is quite strong. The VAC is caustic soda, chloromethine, hydrogen peroxide, and the suspension PVC. The market is quite volatile and the route route is also not that great. So, given that we thought it was important that we look at the business as a whole and see how best we can reorganize the business going forward and create value, unlock value for all the stakeholders. That's the broad objective. And that's the mandate. Beyond that, we have not given any mandate to the company. So, it's a clean state. They will look at the businesses and see how they can reorganize the businesses to create value for all stakeholders. And we are also given a mandate that would also include looking at possible M&A opportunities. All of that has been considered as part of this exercise. We thought it's important that at this stage, we evaluate the business portfolio as a whole, and see how much they can be reorganized to create value. That's the only objective.

Understood. Because the question was coming from the fact that even pre-IPO, we had essentially seen that we had invested in Egypt, and it was a similar situation where it was a commodity business, and the reorganization happened. Post which there was deleveraging of the balance sheet once we got listed, and it appears we are again in the same situation looking forward right now as we see it. So, I just wanted to understand, is there a structural rethought from the management to say that what kind of future businesses or capexes we would do so that this does not repeat because commodity cycles can keep repeating? So, that is the underlying objective of the question.

Thank you. No, just one point to correct. Egypt was never part of Kemplast Sanmar. That investment was never part of Kemplast Sanmar. There was always Kemplast Sanmar and the suspension PVC business in India together. So it was never part of it. It was never taken away from Kemplast also to a restructuring. That was not the case. So that's just to highlight that. And what are your second questions?

The second question was just to understand the future CAPEXs. Hence, the committee will be looking at capital employment from that perspective as well to ensure that we go ahead and invest in businesses which create more long-term value and get a bit away from the strictly-faced commodity underlying nature of the business. Is there anything to do with the mandate?

Actually, if you had seen our earnings call earlier guidance as well, our focus has been capital allocation for speciality is our priority. That is what we've been communicating even earlier. We expected the space for EPC capacity last year, and we have invested in the customer manufacturing business. We are investing in dev cases, which broadly consists of our portfolio of speciality businesses. That's been our capital allocation priority. I think that will continue to be our capital allocation priority. And as far as the committee is concerned, it's more to holistically look at our business portfolio and to see whether is there a need for reorganization. I don't think we can prejudge today that whether this will be done, whether a structuring will be done. I think it's too premature to prejudge. Basically, the idea is to see what are the existing businesses, how are they doing, either way that we can reorganize so that we can create value for all stakeholders. That's the mandate.

Sure. Thank you so much. I understand that. All the way. Thank you.

Thank you. We will take the next question from the line of Darshita Shah from DSP Asset Manager. Please go ahead.

Hi, sir. Thank you for the opportunity. I had a question on the PVC market. If you could just touch upon how the PVC demand has been, I mean, how was it last year in CY25? How are we expecting it to be for CY26? And secondly, if you could touch upon how the demand, I know you briefly mentioned about the demand, but if you could just give more details as to how do you see the demand for PVC as we move forward, especially in the light of higher diesel costs, which could result in higher transportation. Are we seeing any postponement of demand from the end user side?

Okay, so as we said in 25, the market size was around 4.3 million tons and got a percentage drop in this Fi 26. As we go ahead, we are assuming that the demand should be either stable or marginally move up. The diesel price hike, these are transportation, typically, as a percentage of the overall cost, whether it is construction, etc., will not be significantly impacting it. And construction, once started, nobody will put it back. Second is also the consumption of where does the PVC go? A majority of it goes into the pipes, which is on different applications, whether it is irrigation, whether it is electrical pipes, whether it is different types of applications. But there it is, we don't see a construction of demand. As of now, indication is not there because if the GDP is supposed to continue to grow at even at a low 3.5%, 4.5%, at a very, very pessimistic level, the PVC consumption follows that because infrastructure follows GDP growth.

Okay, and the increase in PVC, sorry, sorry, sir, yes.

Plus, coming back to pace, sorry, just to complete it, to pace, pace as we have seen a sustained growth, there is still a long way to go because as long as the sectors of automobiles, footwear, etc. continues to have a robust demand, PVC will be a pace, PVC will have a role to play. And that's somewhere we see this to continue the long-term average of growth. To take place.

Got it. And more so from a near-term perspective, because of prices going up from historical levels last year with somewhere close to, say, 60 rupees, now trading at about 80, 50 rupees, are we seeing any demand destruction coming in from the agri side, irrigation side specifically, especially, you know, when we have concerns around El Nino, around rainfall, any demand destruction happening on the agri front?

See, in fact, the demand gets augmented by the agri side because most of the irrigation project in the agri is actually refinanced under the NABAD scheme. Okay, this goes under priority for the lending, and whereby most of the subsidy that is offered is based on the landed cost. So there, I don't think the demand destruction will happen. Second is, logically, with depleting water levels and... The challenges in agriculture, everyone is moving towards either sprinkler or drift. So the demand for pipe will be reversed there. If you look at India's data, we have about 36% irrigated land, out of which 80% of 36% is irrigated through rainfall. So there is still a lot of scope for people to approach this irrigation side in agriculture.

Got it. And just lastly, are we seeing, I mean, we've heard about some capacities coming in from Adani and Reliance, starting with CPVC, but then moving on to PVC as well. Any update on that, anything that you would have heard on when these capacities are expected to come through?

We are hearing what you are hearing from the market. Okay, so it's better that Reliance and Adani respond to this question.

Great. Okay. Sure. Thanks. Thanks a lot.

Thank you very much. Ladies and gentlemen, we will take that as a last question, and with that concludes the question-and-answer session. I now hand the conference back to the management for the closing comments. Thank you, Norma Jeevita.

Thank you. Thank you, everyone, for joining us today on this earning call, and thank you so much for the questions that you have asked. We really appreciate your interest in Kemplast & Mark Limited. If you have any further queries, please do contact SGA, our investor relations advisor. Have a good day.

Thank you, members of the management. On behalf of Kemplar Sunmar Limited, we conclude this conference. Thank you all for joining us today, and Neumina, disconnect your lines. Thank you.