COSMO FIRST LIMITED (COSMOFIRST) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the investor call of Cosmos Force Ltd. to discuss the Q3 and 9-month FY26 results. Today, we have from the management, Group CEO, Mr. Pankaj Pudar, and Group CFO, Mr. Nida Jain. Starting off with the statutory declaration, certain statements in the conference call may be forward-looking. These statements are based on the management's current expectations and are subject to uncertainties and changes in the circumstances. These statements are not guarantees of future results. As a reminder, all participant lines will be in the listen-only mode, 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 is being recorded. Now, may I request Mr. Neeraj Jain to take us through his opening remarks, subsequent to which we can open the floor for the Q&A. Thank you and over to you, Mr. Neeraj Jain.

Well, thank you. Very good afternoon, ladies and gentlemen. And thank you for joining Cosmo's December 2025 results conference call. Our financial results for the December 25 quarter and investors' presentation, both are available on the company's website. Hope you could go through the same. Well, we'll begin this call with a brief opening remarks from the management side, which may be followed by the questions. Let me begin the call providing a holistic level perspective, and then we will discuss the financial results for the quarter. The capex cycle of the company is largely complete now. The focus will be on setting the strategic capex done in recent years, almost close to 1,100 crore rupees. Focus will be on utilization of full capacity and continue to grow the specialty business. There is a very clear roadmap to reduce the net debt over the next two to three years, as no major capex is planned during this year. Our new businesses are scaling. This will lead to incremental return on capital employees, such as specialty chemicals and Cosmo Consumer. And, of course, the agreement. Focus is going to be on intrinsic value growth for each of the business in the coming quarters and years. Now, moving to financial results for the quarter. The consolidated sale for the December 25 quarter is 899 crores, which is higher by 28% from December 24 quarter. Primarily due to higher volume by 29%. Ibidita for the quarter has increased by 19% to 103 crores, compared to 86 crores in December 24 quarter. The Ibidita was favorably impacted by three factors. Higher sales volume by 29%. Number three, improved performance of specialty chemical subsidies. In fact, the EBITDA could have been much better had it not impacted due to five adverse factors. Let me explain all those five factors. The margin declined in the BOPP core firm post-increase in the imports in India during the mid-quarter too. The carry-on impact continued on the margins, although imports have been reducing very significantly. And now the imports level in India is very insignificant level. Generally, there is a seasonal impact as well in Q3, post-Diwali period, and due to Christmas holiday period. We see better demand scenario in the quarter four of current financial year. Second factor was higher USA tariffs. If you recall, there is an increase in the USA tariff that started impacting the margins from the mid-Quarter 2 of the current financial year. So, obviously, there is an additional impact in the Quarter 3, as the full quarter impact is there in the Q3, which was not there in the Q2. Third sector was volume loss of about 6% due to shutdown on one of our major VOPP lines, which, of course, got rectified. That's the end of the quarter, but the impact due to this factor was close to 4 crore rupees. Repetitive inventory loss of Rs. 8.4 crores due to drop in the raw material prices during this quarter. And, of course, the fifth factor is the one-time increase in the past period employee benefit gratitude liability by about Rs. 4 crore in line with the new labor codes. Besides this factor, other income includes a non-repetitive foreign exchange gain of Rs. 6 crores related to capital reduction in a wholly owned subsidiary of the company. The adverse factor, the non-repetitive factor, net impact is close to 20 crore rupees for the quarter three years. The pat impact compared to Q3 of last financial year is muted due to increased depreciation in interest related to new capacities. BOPP gross margin has been running during the quarter at 13 rupees per kg. On a comparative basis, it was 22 rupees per kg in September 25 quarter and 21 rupees per kg in December 24 quarter. Hello again to all of you. We are so sorry the call got disconnected. So please pardon me if I repeat some of the points. So we already explained the net impact of close to 20 crore rupees in the quarter three, which are one of items. Quarter 3 compared to last year's similar period is muted largely because of increased depreciation. The OPP Fund's gross margin has been running during December 25 quarter at 13 rupees per month. Twenty-one rupees. The proper film gross margin has been running at 12. Thank you. Thank you. One seat. Welcome to Business Vertical Wise Performance, first on the Specialty Chemicals. The Specialty Chemical subsidiary has continued to achieve Question and answer session.

Anyone who wishes to ask a question may press star and 1 on your touchstone telephone. From the question queue, you may press star and to. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Nirav Jumudia from Anvil Wealth. Please go ahead.

Yes, sir. Thanks for the opportunity and good afternoon to everyone. Sir, I have a few questions. So, sir, first you touched upon in your opening remarks about the U.S. tariff for third quarter. I think it started in mid of second quarter. So, first, if you can just quantify what was the impact of U.S. tariff in third quarter of FY26?

It's near to full impact. So, as we said, depending on the mark, 50 crore rupees back to our P&L.

More than that, all of our new growths have... Now, customers are coming back and want to discuss business again. So, this will have two positive impacts. One is the immediate profitability improvement, and the second is the growth in the business, which should also be a profitable business for us.

Correct. So, that's what I was coming to. Sir, one, you mentioned about the UFDA, but I think now UFDA also is in place. Unfortunately, it is not today, but let's say starting next year when the EU FTAs would be in place. So do you see a business case opening up for us in Europe? And last time you also touched upon Japan as a market where we have been trying to develop and try to improve our sales. So just wanted to have your thoughts on both these geographies, how this could help us in improving our specialty volumes.

Yes, if you really see, America and Europe are the biggest export region for us. And now India entering into FTA with both of them, this should be quite positive in the quarters to come. Coming back to the third question, we have also entered into a joint venture with PhilMax in Korea. So that is another region that we intend to grow over next couple of years. And similarly for Japan, Japan will be actually the slowest amongst all these because Japan is easy to enter, sorry, difficult to enter and difficult to exit. Customers take their quite a bit of time, but then if you can make the quality for Japan, you can be successful anywhere and everywhere. So we are taking that phased manner approach for Japan. Japan will not bring immediate results, but we should get very good results from both U.S., Europe, and four years back.

Sir, is it possible to quantify the amount of business which we are currently doing from Europe?

I won't have it immediately, but it's quite sizable out of our total exports.

Perfect. The second question is on the newer line of 81,000 tons, which we have commissioned. So, how much this new line has operated in third quarter, and also like with one of the lines now being corrected in terms of whatever shutdowns it had, how do you see Q4 versus Q3 in terms of the volume growth? Thank you.

As far as the new line is concerned, in quarter three, on an average, we could run it at 70% of potential capacity, not as much because of orders, but there is a phase-wise improvement or speed increase that the supply does. So, post-February, we should be able to run this line at full output. In January, already there has been some more output increase from this line. We have reached now close to 80% of the potential, and we expect that from March onwards, we should be able to get 100% out of this line.

Sir, with reference to the contribution margins in the BOPP, I think because of all those factors which you mentioned, seasonality and the holidays, there was some dampening effect on the demand in Q3, possibly because of which the margins were also lesser. But let's say in Q4 or let's say going into the season into Q1, how do you see these margins? So have they started improving again? Whether the margins have improved on the BOPP side as well?

The BOPP margins have also improved. They started improving from December, and right now January margins are even better than December margins. So, yes, they are also on an improvement side.

Sir, next question is on the window fins. Like you mentioned that... Lion is already working at close to around 30 crores of annualized sales. So, just wanted to understand from you that at what level of sales this window film would start breaking even? We have talked about 50% CAGR growth in that window film business, but let's say from a loss point of view, at what level of sales we can start seeing breaking even?

You see, there are two factors playing in this business. One is that month after month, our contribution margin is going up because we are able to produce more volumes. And second is we are able to cut down different types of cost in this business. The second critical factor is the amount of marketing that we are going to do in this business. So what we have projected right now is close to 15 crore of marketing cost next year, and we expect that this business, based on the current margins, should be roughly 80, 85 crore, at which it should start to break even.

Thank you. We have the next question from the line of Gaurav from Capital Farming Consultant. Please go ahead.

Yeah, hi. Thanks for the opportunity. So, my first question is on the strategy that we have said that in coming years, at least three, four years now down the line, we will be focusing not so much on the CapEx side and we would like to maximize Our already commissioned facilities, right? So I would like to understand from the management side that to what extent that we can expect maybe by FY27 and FY28, right, that what percentage of capacity utilization we can expect. And how much additional EBITDA margin, right, improvement in margin we can expect.

There are two parts to it. This without the assets, there's a potential of 25 to 30. potential is available in the BOPP line and the CPP line. BOPP line, we feel that it will be fairly easy for us to reach to the full capacity utilization. CPP is growing at a good speed, but it may take some more time to reach to full utilization because CPP is relatively a newer business to us than the BOPP as such. Coming to your second thing, our focus now remains on, because we've added very significant capacities in the recent years, so for next three years for sure, we are not going to invest on any significant capex or any significant VOPP asset. Our focus will be entirely to shift to speciality business. Because of our new line of speciality... Percentage to our total sales has come down from 70% to 50%. Our target will be to take this number to 75%. And the other beauty now about Cosmo is that earlier we were dependent only on one business. Now, first is within the film business, we have diversified into speciality polyester and CPP business. And then we have added newer businesses, which have a very high margin potential. So you will see that increasingly our... New business as a percentage to total business will continue to go up, and they have a better potential or better ROSI, and much more stable ROSI in the years to come.

Yeah, so before I ask my second question, a follow-up within this, if you allow. See, from a potential point of view, yeah, we all are optimistic, considering more than 1,000 crore plus years invested in the capex for the last 3-4 years, right? But considering the realistic situation that we now face in the flexible packaging, specifically in Bob, where some of the lines... Our fears have been commissioned in recent times, and some of them are already in pipeline over a period of time. And I'm not talking about in terms of the... It can be up and down depending on the raw material prices and all those things, but quantity per se, what is the realistic assumption that we can build in our models?

On a very realistic basis, we see no reason why we should not be able to fully utilize our BOPP and BOPED capacity. We should reach to our full potential. The only area where it is going to take us 12 more months to reach to full potential will be...

That's great. That's great. So, second question is on. Now, considering consolidating... Cash flow generation from the business, right, since our EBITDA might improve, right. Asset utilization might improve. So, what level of debt currently we are as on 31st of December 2025, and what debt we expect that year-on-year basis we would be able to reduce because of free cash flow generation from the business, because of all these positive factors that we are talking about?

You see, we are at close to 1,200 crore of the melt debt. And as we said at the beginning of the call, there's no man.

If you allow, what is our weighted average cost of debt ongoing as of now, and have we seen any reduction because of the rapporate reduction by the Reserve Bank of India in our weighted average cost of court? First of March, 2025.

So, weighted average means between 6.4 and 6.4.

Next question from the line of Jatin Damania from Swan Investments. Please go ahead.

Thank you, sir, for the opportunity and thank you for a very detailed presentation.

On BOPP, there is no ADD, neither on polypropylene nor on the BOPP, and India is quite competitive versus China when it comes to BOPP films.

I was talking about BOPP films.

On the pet, The Association has filed an application for anti-dumping duty because China has a lot of surplus capacity, and from time to time, they do dump goods into the country. Therefore, the Association has put this anti-dumping duty application, and it may take some time because what we have seen is that it normally takes 12 to 18 months for the course to decide on these matters.

Okay, so for at least another year, we are not getting any incremental news on that.

Yes, you are right, but the BOPIC margins are reasonably fair right now. They can certainly be better. But then the challenges we had 12 months back, I think China also has, to some extent, curtailed the exports into India.

So, how down have we gone with the imports? Like, in Q2, you were saying the imports have declined a bit, and in this quarter, it is at a very insignificant level, if you can quantify that.

Yeah, so, BOPP, there are 3,000 to 4,000 tons of imports happening. That is also largely to do with B-grade, C-grade material, and some of the material which India does not make, but most of it is B-grade, C-grade, and BOPIT also does not have any significant imports into the country.

Okay. So, nextly, if you can help us with the BOPIT films cross-margin. I guess you said in your opening remarks that there was some disturbance. Sorry, what is your exact question? What are the Bopet Films' gross margin? As you said that there has been an improvement in the Bopet Films' margins. So, if you can tell us with the numbers.

The Bopet quarter three gross margin was running at 12 rupees per kg as compared to 6 rupees per kg.

Okay, so it has nearly doubled from the last one. And this is majorly because of the low imports?

Yes, you are right that imports have come down because China in between was dumping into the country. That has now, I think China has significantly reduced its imports, and that gave an opportunity for the local players to somewhat improve the pricing. They are still not where we would love it to be, but they are certainly better.

Sir, as you said, okay, as you said that from 13 rupees per kg based BOPP films gross margin, it has started improving, it has started improving post that. So where have we reached right now?

So maybe 2-3 rupees higher compared to average of the previous quarter. Because generally, I mean, you will notice that there is a seasonal impact also, as we said earlier. Quarter 3 generally has been a lower quarter in terms of the demand because of the holiday period and the holiday period. And quarter 4 generally is a strong quarter.

So, sir, the next question is that we mentioned that our specialty business has come down to 60%, which was usually at 70% earlier, and we aim to take it to 75%. Like, if we can give a timeline to this and how we can do that.

So, specialty, I mean, the fair point will be to see at the CAGR growth, which in any case, specialty, we are growing by type of 10%, CAGR growth over the last six years or so, and this is a very strong pipeline of the new products for the specialty, so we definitely see there is scope for further improvement in the growth rate for the specialty at an overall basis. When you come up with a new capacity, largely you start first with the base film mode or core film mode, then over a period of time you move.

Sir, thank you for the opportunity. So, considering both our segments and the capacity utilization improvement that we are expecting, sir, on the 47-4800 crore revenue that we expect in next year, what kind of margins can we expect considering the mix of speciality and the commodity that we see heading?

See, in our industry, it is quite difficult to project that because on the core margins, I mean, on the core films, it's very difficult to know what will be the margins as such. We are trying to do two things. One is to continuously increase our speciality numbers, and second thing is to increase our export numbers. Both of our speciality and export are close to 50%, and we will target to take them to a higher percentage by the end of next year. The second improvement will certainly come from the improved utilization, not just in film, but also in other businesses. So all those will certainly add to the margins, but then it's very difficult to predict the core film margins.

Right. So, when do we expect to reach the 75% level of speciality?

See, if we go historically, it should take around four years.

Okay. Sir, so when we say that, sir, from our investor perspective, understanding that the production, the demand and supply is kind of in equilibrium in the BOPP industry in India, as well as there are no imports that are coming from China. Sir, so can you expect at least to reach a 25 rupees gross margin with better utilization for next year? Is that a conservative estimate that we can consider?

The full utilization, certainly yes. 25 rupees, as I said, I wish I can forecast that. But in general, the margins are expected. I can basically tell you about next two quarters, which are expected to remain reasonably strong.

Thank you. We have the next question from the line of Sashwat J. Jalan from Augmentor. Please go ahead.

Hi, sir. Thank you for the opportunity. My first question is regarding the USA margin impact. As we are seeing a reduction in the tariff, do we see any incremental margin increase from our base? And if we can quantify that for next year?

Yeah. So, for the full year next year, we should have two impacts. One is the margin improvement by close to 50 crores, and second is growth in our revenue and incremental margins coming out of that. You know, the entire growth had virtually stopped in the last few months, so we should be able to get back that growth rate, you know, and we have significantly aggressive plans for U.S. market.

This would be pretty much in the low double digit.

The growth perspective, we have much higher targets for the next year.

And so, just to clarify, I think from a previous participant's question, regarding capacity utilization, I think you mentioned currently we are at 70% and then we are driving it up to 90% for next fiscal. Is that understanding correct? For the new capacity? Yeah, you're right. And this is 90% of the main plate capacity or how are we looking at it?

It is a possible utilization. You know, so let's say capacity, as an example, if it's 50,000 tons and we feel we can reach to maximum 40,000, 45,000 tons based on microns. So we are saying what is the probable utilization we can reach and what is the utilization we can do from that probable capacity? So, right now, as I said earlier, that BOPP and polyester, we should be able to use the full capacity. Only the CPP line may take some more quarters.

Just to add to it, I mean, all this discussion is for the new capacities, means the BOPP line, CPP line, and the POPP line. On the old capacity, we are having already full capacity utilization.

Understood, sir. If you want to share the update regarding the power cost reduction, the project for the solar. Can we expect that for FY27, or will that run into FY28?

We are already getting some gains from renewables, and some more gains are largely expected to come in FY28.

Alright. And so, just last question, if I can squeeze in. Like, right now, the margin... The scenario, particularly if I talk about BOPP, like you mentioned, the 13 rupees for the last quarter, and right now it's slightly higher, maybe 2 to 3 rupees. And given next year, we are expecting some new capacity to come in. Now that we have a higher share of commodity films in our market. What is your question? We did not get that. Are we expecting the margin profile on the BOPP to expect to remain in the similar band for the next few quarters, given this new capacity also that is coming online from some of the peer set?

We can talk about quarter four and quarter one, where it is expected to remain in a range-bound manner. Beyond that, it is difficult to comment about it.

Thank you. We have the next question from the line of Vipal Kumar Shah from Sumengal Investments. Please go ahead.

Hi, sir. So what percentage of our revenue comes from U.S. now, sir?

U.S. is close to 400 crore rupees for us.

400 crore. So I heard you correct. So we will get 50 crore benefit. Only out of reduction in tariff in the U.S., or have I misunderstood your remarks?

Yeah, you are right, because there was a 50% tariff which was lavid, and we had to absorb quite a significant part of it, so you are right.

I'm sorry, the journey of reaching 75% of speciality and semi-speciality from 55% right now. So, each year, we will add how many percentages? So, if we can give some roadmap, it will be useful.

We have been growing at 10% CAGR, and we have no reason to believe that, you know, at least why we don't grow in double digits. Obviously, our attempt is to grow even more because we have more capacity to spread our wins.

So, 26, 27, 28, we can have a 65% speciality and semi-speciality mix?

Yeah, that is what we intend to target. Right now, we are sitting at close to 51, 52%, and our target will be to definitely cross 60% over the next two years.

Last question. This 81,000 BOPP film and recent BOPET line. So what is their speciality and commodity mix, if you can give any idea?

BOPET, we have been able to right now convert close to 20% into speciality. But many, because it was a new business for us, so it took us more time than it would have taken for the BOPP film. But now we have developed a good range of films, and we should be able to scale up faster in the times to come.

And regarding this 81,000 BOPP line, what percentage of that line is speciality, and what percentage is commodity right now?

See, we do not break it line-wise as much. We normally discuss about the overall numbers.

Okay, sir. Thank you very much.

Thank you. We have the next question from the line of Amar Kumar from AIK Securities. Please go ahead.

Yeah, good news. Sir, I have a few questions. The significant new capacity is coming up. There will be a previous segment. How do you see the demand supply balance evolving over the next two years? Your voice is not clear. Yeah, are you hearing my name? Is I am clear? Yeah, go ahead. With significant new capacities coming up in the BOPP segment, how do you see the demand-supply balance evolving over the next two, three years?

See, as far as world is concerned, we feel BOPP will be fairly balanced. When it comes to India, FY27 should be largely balanced, but FY28, supply could be more than demand.

So by that time, our value at this event will be much higher and export will be much higher. So we will not...

Sorry to interrupt in between, Aman. Your voice is speaking.

Yeah, yeah, you are right. You are right. Hello? You are right.

What you said... So, by 2-3 years, next 2-3 years, I think our specialty business will be much higher, and since we export most of the specialty business, so we will lose weight because of this overcapacity. You are right. My understanding is right. Yes. How do we see the company's consumer business setting up over the next 2-3 years, and specifically what is the growth potential in Europe for Sunsilfen?

So, this is a fast-going business for us. We are pretty happy with the progress that we have made, whether it is on the product side, getting the right people with us, start to build a brand in the market. So, we are going directionally very well, and we have some very aggressive targets for this business. This is a very high gross margin business for us, and it's more of a consumer product. Once you are able to scale it up, this should result in good profitability for the group.

What is the business scope and long-term potential of the tie-up with this Korean partner?

Which one?

Korean partner.

We have a joint venture. Korean and Japanese, I mean, Japanese take a lot of time to develop something new. Korea takes somewhat lesser. So immediate results may not happen, but you will start to see a lot of results coming from 12 months from now.

Sir, one thing you have done right, that Ziggly is a very high potential business, but it does not match with our core business. So, you are de-emerging this business from Cosmo. So, what is the timeline, sir, when we can expect this?

We have always stated FY27, and we maintain that.

Okay. And what is the current situation of this business?

If you see other players in the pet care industry, they're all getting very high valuations, close to five to six multiple of the revenue. And, you know, Zigly has already created a very good brand name, especially in the North India market, and we are trying to spread our wings in the West. We have grown 50% on a year-to-date basis, which is quite a decent growth. The good thing about our business is that we are the only players in the market who have a complete ecosystem where we are providing veterinary care service, grooming services, and a host of products, including many house labels. So, directionally, we are going well, and we are happy on the progress till now.

Okay. I said, since this business, this The trade has remained with the U.S. So, right now, we are doing around 400 crore of business in the U.S. So, what type of growth do we see over the next two, three years, since it's a great market for Cosmo?

Yes, so, I would say in the last few months, the growth was largely curtailed because of the anti-dumping. Customers are really welcoming, and so is us welcoming this change from the American government. And we would look for some aggressive growth, and we will share the progress in every quarter.

And sir, one last question is that I have gone through the CONCOL transcript of this SRF. So in that CONCOL, they have mentioned that in China, the government has asked the BOPIT players to reduce or cut in their production by 20%. So, how correct is that news and how it will impact the BOPED business in India?

You see, across certain sectors where companies are carrying older assets, and across sectors where China is not making money, government has been pursuing the private entities to curtail the sales. Now, obviously, government has given certain directions, and we have seen that China stick to the broad guidelines that it set for itself. So we have to see the progress, but you are largely right in terms of what you have heard from SRS. We do not have complete tracking of that, but you are right that in general, Chinese government is pursuing to shut down the older capacities, and we could certainly see that in the last few months, there is much lesser import from China.

And so, lastly, I consulate the management for three announcements. First, no major capex. Number two, all the capex in the value-added business, and I think the merger of this civilized business. So, all the best to the management for the coming quarters and the year ahead. Thank you. Thank you.

Thank you very much. Ladies and gentlemen, that was the last question for today's conference. I now hand the conference back to the management for closing comments. Thank you, and over to you, sir.

Sure. So to summarize, companies' focus will be on setting the best use of the strategic CapEx, which we did over the last three years or so, which means we reached the close to full capacity utilization. and enhance the specialty business. Each of our business verticals will focus on high margin and stable rosy. The key focus shall be on intrinsic value growth for each business and unlock value at its appropriate time. Future capital allocation in the business based on incremental rosy and value add in the intrinsic value. Further extension the financial resilience by reducing corporate net debt substantially over the next two to three years. Many thanks for joining. Thank you.

Thank you, members of the management. On behalf of Cosmo First Limited, that concludes this conference. Thank you for all for joining us, and you may not disconnect your lines. Thank you.