DCW Limited (DCW) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to DCW Ltd. Q3 and 9 months FY26 Earnings Conference Call hosted by Arihan Capital Markets Ltd. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Mukta Chandani from Arihan Capital Markets Limited. Thank you and over to you, Ms. Mukta Chandani.

Hello, and good afternoon to everyone. On behalf of Arihans Capital Markets, I thank you all for joining into the Q3 and 9M FY26 Earlings Conference Call of DCW Limited. Today, from the management, we have Mr. Sathvik Jain, President, Mr. Sudarshan Ganapati, Chief Operating Officer, Mr. Pradipto Mukherjee, Chief Financial Officer. So, without any further delay, I'll hand over the call to Mr. Sathvik Jain for his opening remarks. Over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining our earnings call for the third quarter of FY26. As always, I appreciate your time and continued interest in DCW. I will begin with a brief perspective on the broader industry environment before moving on to our operating performance and outlook. The global chemical industry continued to operate in a challenging environment during the quarter. Pricing across most commodity value chains remained under pressure, and demand recovery was uneven. Supply discipline globally was limited. A key factor continues to be the elevated operating rates in China, where capacity additions and state-supported production have kept global supply high, despite the weak economics. This has constrained pricing recovery across products such as PVC, soda ash, and caustic soda. In India, underlying demand has remained stable, supported by housing, infrastructure, and water management-related consumption. However, domestic producers continue to face significant import competition. Lower freight costs and global oversupply resulted in materially higher imports during the year, which directly impacted domestic realizations. At a broader level, global trade flows are also undergoing realignment due to geopolitical shifts, tariffs, and supply chain diversification. Over the medium term, this may create opportunities for Indian chemical manufacturers, particularly in export-oriented and specialty segments, but in the near term, the industry continues to navigate margin pressure. Against this backdrop, DCW delivered a resilient operating performance during the quarter. Despite the price erosion across all product segments, our revenue grew approximately 10% year-on-year. Driven primarily by strong volume momentum and increasing contribution from our specialty chemicals. Our performance this quarter once again reinforces what we have been communicating over the past few quarters. The transition of our portfolio towards specialty-led growth is steadily improving our business stability. Within the basic chemicals portfolio, most products recorded healthy volume growth. The only exception was PVC, where incremental volumes were largely diverted towards captive consumption for our cPVC production. While this reduced our market PVC sales, it improved integrated value realization and supported downstream specialty growth. Though there was volume improvement, the operating environment for basic chemicals remained particularly difficult, again specially for PVC. Where price erosion was not matched by a similar reduction in input costs. As a result, the basic chemical segment reported operating pressure during the quota. The specialty chemical segment, however, continued to show strong momentum. CPVC volumes expanded significantly following the ramp-up of the recently commissioned capacity expansion. The ramp-up has progressed well, and the quarter recorded our highest-ever CPVC sales. Although realizations declined significantly during the quarter, the higher volumes largely offset the pricing impact. Our synthetic iron oxide pigment business also recorded healthy growth, further strengthening the specialty segment's contribution to the company's overall profitability. Importantly, investments made in the specialty chemicals over the past few years provided stability to the company's overall performance. This segment generated strong operating profitability and effectively offset the weakness in our basic chemicals business. On a nine-month basis, our EBITDA has improved approximately 14% year-on-year, reflecting improved operational efficiencies. Disciplined execution and benefits of our portfolio rebalancing. Moving to the outlook going forward, as previously communicated, the balanced 10,000 ton CPVC expansion is progressing on schedule and is expected to be completed next month. Upon commissioning, our annual CPVC capacity will increase to 50,000 tons. This will further... Strengthen our downstream integration and specialty positioning. We expect quarter four to be stronger, supported by higher dispatches of our pigments and synthetic rutile. Additionally, the recent policy developments in China, specifically the withdrawal of the VAT rebate on PVC exports effective April, could improve export pricing discipline. And is a constructive development for domestic PVC producers. The SIOP business continues to demonstrate steady growth momentum, and we are expanding our product portfolio with new grades, including black and orange pigments. We expect this to improve both our market reach and margin profile over time. Beyond the operating performance, we continue to invest in strengthening the organization itself. Over the past year, we have focused on capability building, digital integration, governance processes, and technology adoption. The SAP S4 HANA implementation, process standardization, and internal systems development are not short-term initiatives. They are foundational steps intended to support scalable growth. By the end of this financial year, The current phase of projects will be completed, and our balance sheet will continue to strengthen with ongoing debt reduction. As I mentioned in the last quarter, we are not only preparing for cyclical recovery, we are preparing for the next phase of growth. With a stronger specialty chemicals portfolio, expanded CPVC capacity, leaner balance sheet, DCW is entering FY27 with a far more resilient and scalable base. Our focus now is to convert this stability into growth. Multiple downstream and value-added specialty opportunities are progressing internally, and we believe the coming years will mark a structural shift in both our earnings quality and growth trajectory for the company. With that, I'll hand over to Pradeepto, our CFO, to discuss our financial performance in detail. Thank you.

Thank you, everybody. Thank you, Satvik, and welcome you all to the Q3 earnings call. Q3 F526 revenue for the company stood at 520 crores, which is 9.6% higher on a YOY basis. The increase in revenue is driven by speciality chemical segment, which reported a revenue of 156 crore, a 27% increase, whereas the basic chemical revenue... The increase in top line has been driven by sales volume growth across all the product segments with CPVC and SIOP sales growing at a pace of 80% and 19% respectively. The CPVC sales volume. It is important to note that the CPVC sales on a comparable period is lower due to captive consumption of its own PVC for increased CPVC production. The price erosion is also witnessed across all product segments with CPVC and PVC. Demonstrating severe cuts of 26% and 17% respectively on a YOY basis. Despite that, the company at an overall level have shown a top-line growth of 10% on YOY basis for the quarter. On a sequential basis, the revenue dipped by 3.6% from 539 crores to 520 crores, again due to price erosion ranging from 6% to 8% across all its product segments. At YJD in nine months, the revenue clocked at 1535 pros, which is up by 5% from 1462 pros. This increases despite severe price erosions of PVC, CPVCs of 15 and 24% respectively. The price erosion was more than compensated by higher sales volume across all product segments, with standout volume increase in our synthetic rutile and CPVC. The EBITDA including other income for the quarters stood at 50 crods which is 19% lower on a YOY basis down from 61.8 crods. While Speciality Chemical showed a growth of 4.2%, this was pretty thin growth compared to the YOY volume increase both in SIOP and CPVC. While the net realization of SIOP on a YOY basis remained stable, the CPVC, as mentioned earlier, had a severe pricing pressure of 26% downward reduction. The basic chemical, Cebeta, stood at 14 crores in the previous year, got completely wiped And I had reported a breakeven number for F526Q3. This is predominantly due to wide swing in net realisation of PVC, a dip of 17%, putting pressure on the PVC-VCM spread and consequently on the EBITDA basic chemicals. Further, the soda ash also showed a 9% price erosion on a YOY basis. On a sequential basis, the EBITDA fell from 62.6 crocs to 50 crocs, a dip of 20%, while the specialty chemicals again grew. By 9.4%, the basic chemicals reported a break-even number against the 17 crore EBITDA in the preceding quarter. This was again due to the price erosion of PVC of 8% followed by soda at 6% without any comparable reduction in the input costs. EBITDA including other income for 9 months basis stood at 170 crores as against 155 crores a year back and increased by 10%. The finance cost stood flat at around 16 crores for the quarter, totaling to 46.8 crores for 9 months, which is a reduction of 9% YOY. Depreciation remaining more or less flat with slight increase. The PBT reported by the company for Q3 F526 is 7.5 crores, totaling the 9 months number to 46.2 crores. This is an increase of 61% over the previous year's 9-month PBG of 28 crores. On the balance sheet side, the company is steadily deleveraging itself by making its scheduled repayment of long-term borrowings and is expected to close the year at 225 crores of long-term legacy loans. The company maintains a healthy cash and cash equivalent of 220 crores. Against which it is running a working capital borrowing facility to tide over the undergoing commodity down cycle. With this, we would request the floor to be open for Q&A. 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 the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Pujan Shah from Molecule Ventures. Please go ahead.

Hello, am I ready to go?

Yes, please go ahead.

Yeah, yeah. Hi, sir. First of all, congratulations, showing a resilient performance in this very weak demand scenario. So, congratulations on all fronts. So, my first question is due to in the PVC side. So, do we expect, so we have seen a 9 rupees hike in January and February. So, I just wanted to know that are we, right now, we are expecting a break-even in this specific quarter, and if the similar prices pertains, do we expect the similar for profitable price? Segment for PVC next year because the shift is a key shift happening in the industry. So just wanted to know your view.

So, I think there has been an increase post, I mean, from 1st of January onwards, multiple price upward revisions have happened for PBC. This obviously would enable us to reach a break-even, if not a bit better number for the quarter. Having said that, see, at a static level where you have a price static and you have VCM coming at a particular price, the margins are fixed. We will be getting a break-even or a better-done break-even this quarter because of the VCM-PVC lag which will play in a positive way for this quarter. Maybe we have to see as we get into quarter 1 of next year how things shape up because it's been very volatile over the many quarters now in either side.

Right, sir. So, we do expect quite a surge in price of EDC VCMS. It is mostly moved in a tender way. So, we do expect kind of move in EDC, right?

Yes, yes.

Okay, working. And then with the increase in the price of the PVC, are we seeing any increase in the price of CPVC in this quarter which ultimately helps to benefit in our overall realization?

So, in CPVC, again, like, you know, in VCM-PVC, we have a price lag. In CPVC, again, there will have PVC-CPVC price lag. We expect the prices have not yet increased for CPVC, but we expect the last month that we would be able to sell our produce at a higher price, which is much.

So, we do expect there is an increase in realization right now in the industry.

Yeah, I mean, we can expect that. We're keeping off English trust.

Okay, so that effect would be expected in Feb and March, right?

Feb would be a bit too early. Maybe, yeah, mid of Feb and March, yeah. 40, 40, 40 days we can.

And sir, I just want to understand, in the synthetic rutile division, so how we have been planning to get with the Japanese agreement, so how it's been going right now? We have been full-fledged, placed, very well placed in terms of supplies or still under discussion about SR?

No, I will tell you quarter four, we will have dispatches more than our production, and we will definitely see a reduction in our inventory. And as we talk now, we are also in a very advanced stage of concluding our contracts with our traditional customers for next year. So I think overall we are placed in a, I would say, in a favorable position as far as this product is concerned.

All right. Coming to the bookkeeping question, I just want to understand as we stated out that considering the end of FY26, we will conclude the debt with 230 crores. So I just wanted to understand what is the repayment schedule for FY27?

So by end of FY27, we would be around 80 crores on the legacy loan, which basically is not a legacy loan, it's a loan which has been taken, you know, in the last couple of one or two years, which is basically to fund our CPVC project. So legacy loan gets all over by FY27.

So, as we speak, right now we are not considering the JPEG scenario. So, do we expect that we would be net debt negative by 150 crores because ultimately we have a cash of 220?

Yeah, you can say that. That's assuming that we don't do any growth and any borrowings to support the growth. Theoretically, that number is correct.

Got it, sir. So what do we expect the interest cost saving for FY27 for a full year?

So I think on a steady state basis, it should go, I mean, not an exact number we can say, but on a steady state basis, we should be a number of around 45 crore's interest. 45.

Okay, 45 and in next year, because ultimately we have cleared all our dues, so we might be having a 25 crore interest yearly. Only reason because we have tied up with working capital, right? That would be correct. Got it, sir. Thank you. Congratulations. I will just join back in the queue. Thank you so much.

Thank you.

Participants may press star and one to ask a question. The next question is on the line of Ashish from Leo Capital. Please go ahead.

Yeah, so I wanted to know how does the management view the CPVC capacity addition by the peers, and how does this impact the market dynamics? Has there been any impact on the price or utilization as yet? And how do you expect this to play out over the years?

As far as we are concerned, we are at full capacity utilization, and more availability will replace imports coming, and it will also propel more demand. So I don't think there will be any situation of an overcapacity. There could be a temporary lag of the supply and the demand, but I would say in the long run, Availability will propel more demand and already we are working on creating new demands from the fire sprinkler and other applications. So, maybe in the next 2-3 years, once additional capacity comes, there will be enough demand to take that additional quantity. So, we don't foresee any big challenge in placing our volume or for any volume which is going to come from our competitors.

Thank you. Thank you. That's all for my sake.

Thank you. A reminder to all participants to press star and want to ask a question. The next question is from the line of Amit Kumar from Determined Investments. Please go ahead.

Thank you so much for the opportunity. I hope you can hear me.

Yes, you are audible.

Thank you. So just one point, I mean, you mentioned at the beginning in your initial commentary that, you know, the dumping from China on the PVC side still, you know, continues and there is still overcapacity in China. And also you're saying that, you know, there are some PVC hikes, you know, from January, you know, itself. So I mean, just slightly dichotomous. So Haishu, how should we sort of read into this? Two points specifically. One is that, you know, this entire anti-involution campaign going on in China, does this have any sort of impact on the PVC side? Or the chemical industry in general. I mean, something that you are sort of seeing, you know, on the ground, if you have any sort of...

No, I think you did not hear the opening remarks made by Satvik. What we said is that, finally, China has removed the export incentive on the TVC. So, it's in line with their overall direction of, you know, having a cap on the dumping or overselling by the Chinese producers. So, there has been a 13% VAT on the Chinese exports, which was given to them as a subsidy, that has been withdrawn. So, with this, there will be some restriction and there will be some cost increase on the Chinese exporters, which we feel will help other producers. In outside China, including India, to get a better realization, because the prices were mostly matched based on the prices at which China was selling.

Understood. I missed it. So, thanks so much for the explanation on that. My second point was that, you know, with respect to, you know, PVC business, what is the kind of seasonality, you know, in this, you know, business because, you know, seemingly, you know, 2Q, 3Q, you know.

Seasonality is, if you really see the seasonality, the PVC demand is usually at a low end during the monsoon, because for us, even today, agri pipes are a big factor in our demand. So, during monsoon, the demand is usually on the lower side as far as the sale of the PVC pipes are cancelled. Having said that because of the prices getting reduced on a continuous basis, there has been a significant de-stocking of inventories at all levels which was happening the last 3-4 months, right from the consumer's level to the pipe dealer's level. So, Now that there is a clarity on the price direction, directionally there is an improvement in the prices and prices are moving up as we are talking now right from 1st January till date we have seen over 10,000 rupees increase in the price. So now there is a positive momentum with regard to restocking. So we expect the demand to be good because end of the day there has to be stocking of the product at all levels then only you can have a proper supply. So, I think we have settled the year on a good note, and if the pricing remains in the same direction, we should have a reasonably good time to come.

That's good to hear. Thank you. Thank you so much for this.

Thank you. The next question is on the line of Helisha, an investor. Please go ahead.

Hello.

Yes, please.

Am I audible?

Yes, go ahead.

Thank you for the opportunity, and congratulations for the number. So, my question is, what is your target revenue and EBITDA contribution from specialty over the next two, three years?

I think when we started the journey into specialty chemical, we told our specialty profit should be contributing around 50-60% of the total bottom line. We have never guided on a specialty top line to the total top line of the company because it's very difficult, you know, to estimate that. The idea of getting into speciality for DCW was to bring stability to the bottom line. And if you see the numbers this time, the quarter EBITDA is 50 crores and all of it has come from speciality. Having said all of this, putting a number on percentage of total EBITDA to, you know, to speciality EBITDA becomes a bit difficult because Like now, this water, while PVC will show a good amount of profit, at the end of the day, DCW has roughly 1 lakh tons of capacity for all the basic chemicals, right? The soda ash, the PVC, and the caustic. And our specialty volumes are still lower because of the nicheness and its demand. So, to put a number as a percentage will be difficult, but we are doing capacity expansions, and our focus is more on the specialty or value-added segment. Last leg of investment, as Mr. Satri Jain also told, of last NKT is underway. The volume, the benefits of that would come from, you know, mostly next quarter, that is from next financial year. So, we will be on the growth trajectory so far as, you know, speciality is concerned. That much we can say. But to put a percentage to the total would be difficult.

Okay. So, I have another question that says that beyond CPVC Phase 3, what is the CAPEX pipeline for FY27 and FY28, and will the CAPEX remain focused only on specialty chemicals?

I think it will be a bit premature to talk on that. As I mentioned, we are in discussion of various ideas for growth. And at the opportune time, we would communicate it. There is definitely growth planned and growth planned in value-added chemicals. So once we are ready with those projects and approved by the board, we will communicate it to the market.

Okay, and can I ask another question?

Please go ahead.

Yes, we reported that export contributes to 22%. So, can you explain how is the demand in U.S. and Europe and any impact on the global system?

Could you repeat the question, please?

Okay, that export contributes to 22%. Can you explain how the demand exactly is in Europe, and is there any impact on the global slowdown?

So, I think, you know, so far as that, if you are talking of a tariff and its effect on our supplies, our U.S. supplies of SIOP was never impacted by the tariff because it was under exclusion. Now, when the tariff has come down or has been proposed to come down, it is not going to impact, you know, the prices of the product in the end market, which is U.S. So, we don't see much change in terms of the demand of the product going into the US, which is SIOP. So, that's the way we see. Obviously, we have to see how the Europe fact plays out, because it is not only about our exports, it's also about import of products coming into the country. But we think that if Europe is... Zero tariff, this may benefit us more than impacting us because we don't sell everything to the Europeans.

Okay. Thank you. Thank you so much.

Thank you.

Thank you. Ladies and gentlemen, may press star and 1 to ask a question. The next question is from the line of Ahan Khan, an individual investor. Please go ahead. Sorry to interrupt you, sir. Your voice is breaking. Can you please speak to the handset?

Is better, no? That's very better. Please. Thank you for this opportunity. I need to ask you, how are the government cost changes really passed on to the customers, and what is the general, usual timeline for that?

Would you please come back again with a question? Your voice is breaking.

Yeah, I'll just go slow this time. How are raw materials and cost changes really passed on to the customers and what are the usual things like that?

So if you are talking about our raw materials, you need to understand DCW is basically an upstream B2B company. Our impact of profitability is more driven from the top-line price changes rather than our raw materials because most of our key starting materials of our products are natural resources or mind resources. So, we do not have consumerate decrease or increase in price with the consumerate front-end prices or our sale prices. Barring an exception of VCM, which obviously moves in with a time lag of couple of months following PBC.

Okay. Fair enough. I have another question to ask. May I?

Yes, please.

So, another question is on the line, like, is there any clarity or guidance on the implementation of ADD or some measures to, you know, address Excel dumping from the company, like any guidance on that?

No, as you may be aware, the LED petition for both PBC and Sodaash has not been approved by the finance ministry. So as of now, we have no petitions in the pipeline. As and when there is any possibility, we will explore.

Alright, no worries. Thank you for the opportunity.

Thank you.

Thank you. A reminder to all participants to press star and 1 to ask a question. The next question is from the line of Jilmit Mehta, an individual investor. Please go ahead.

Hi, sir. Good evening. Thanks for the opportunity. So, my first question is, are there any plans to increase the renewable power substitution beyond 25% to further insulate the company from volatile coal or grid prices?

We are exploring because there has been a change in the renewable policy of Tamil Nadu government which is not very conducive to add any renewable capacity at this juncture. And there are a lot of court cases that have been filed challenging the policies. So we are waiting for clarity on the policy of the government. Based on that, we will plan our next leg of renewable expansion. As of now, based on the current policy that has been announced, it is not economically viable without a battery, and the battery prices are still not economical. So, we are exploring, we are waiting for a proper policy guidelines to plan our next leg of renewable expansion.

Okay, sir. Okay, sir. Understood. And my second question would be, so, like, how do you assess the remaining headroom for capacity expansion in the CPVC and SIOP?

Come again. Come again.

How do you assess the remaining headroom for capacity expansion in CPVC and SIOP?

So the plant has enough

You know, enough area for doing, and the utilities more or less are in place, so

it's only a matter of we deciding on which capix to pursue, as Mr. Sathik Jain is told, we will, at an opportune time, let you know at which projects or value-added products we are getting in. It's a bit premature for us to discuss now.

Thank you. Thank you for the opportunity.

Thank you.

Thank you. Participants may press star and want to ask a question. Ladies and gentlemen, you all may press star and want to ask a question.

Ladies and gentlemen, you all may press star and one to ask a question.

The next question is from the line of Pujan Shah, Molecule Ventures. Please go, Arun.

Hello. Thanks for the opportunity, sir. Sir, my first question pertains to the power agreement, and we are drawing from the renewables. So, what is the cost saving we have benefited for this quarter and expecting for a year?

Bye-bye. Cost savings for an yearly basis would be roughly around 25 to 26 crores. Having said that, it will not be even in all the quarters because unlike the west, in the south we have monsoon between October and December. So those months the solar generation may not be great. So we will have uneven cost savings on a quarter-on-quarter basis. So hopefully the next quarter, quarter 4, we will see the more benefits because it's a pretty sunny season and we expect a maximum generation. So the PPA is for that year as a whole. It is not on a monthly basis or on a quarterly basis.

Right, sir. And just want you to know, so I understand the PVC prices might be so dynamic and it might not be fair to assume anything, but considering the current scenario of European region and they are suffering from energy crisis right now, With expectation of China reviving and ultimately capacity shutdown from carbide capacity due to their own norms and expecting this rebate. So in all cases, do we expect that the price has been bottomed out and that could be ranged from 800 to 150 at least for a year?

I wish what you say come true because it is too, you know, it is too difficult to speculate the prices because no one thought the prices will go to 600 levels because even during the COVID time the lowest price record was 680. So considering that it is too premature to put any number. But having said that, we have bottomed out on the pricing and... I personally feel prices will be range bound maybe between 750-800. I don't think we can speculate more than that. Because you should also see from the overall perspective, the crude prices are also not high. They are lowering at $60. So are the NAFTA and other prices. So I think prices may not go back to the $600 levels, hopefully. And that will be the big takeaway that we should consider that we have seen the bottom of the PBC prices.

Got it, sir. Thank you so much. I will join very quickly. Thank you.

Thank you. Ladies and gentlemen, we take that as the last question of the day. And now I would like to hand the conference over to Ms. Mukta Chandan for closing comments.

Thank you to the management and participants for joining the Q3 FY26 conference call of DCW Limited. I would now hand over the call to management for the closing remarks.

Thank you, everyone, for taking out the time to join us today and hearing us out. I hope we've been able to answer your questions. If there is anything further, I request you to reach out to our... Investor Relations at Valorim and look forward to talking to you again next quarter. Thank you.

On behalf of Arihan Capital Markets Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.