Finolex Industries Limited (FINPIPE) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Finalex Industries Limited Q3 FY26 Earnings Conference Call hosted by ICICI Securities Limited. 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 check on an operator by pressing star then zero in a touch-tone phone. Please note that this conference has been recorded. And now hand the conference over to Mr. Arun Bhait from ICICI Securities. Thank you. And over to you, sir.

Thank you, Shuram. Good afternoon, ladies and gentlemen. On behalf of I-Chair Securities, I welcome you all to the Q3 FY26 post-reserve on-call of the Newt Industries. On the environment side, we have Mr. Udip Agarwal, Marion Director, and Mr. Chandan Manumar, CFO. Now, I'll hand over to Mr. Agarwal for his OMAX. Post switch with the floor will be open for Q&A. Over to you, Mr. Agarwal.

Thank you, Arun. Ladies and gentlemen, good afternoon. Welcome to our investors' conference call for quarter 3 of FY26 and also for the nine-month ending financial year 26 earnings release. We thank you for your continued support and interest in the Phineolex industries. We give summing over to some of the numbers for the quarter. We see a little dip in our volume numbers for the quarter and also correspondingly for the nine months ended for the current financial year, mainly on account of the monsoon season. However, our operating performance has seen a notable improvement during the same period, largely supported by softening of the raw material prices and also the operational efficiencies, Which we have been pushing through the organization over the last, over the period of time. Let me also take you through some of the performance indicators for the quarter, quarter 3, FY26. So the numbers are like for this quarter, the volume decreased by about 14% to 73,500 metric tons against 85,767 metric tons in quarter 3 of last year. Our income from operations was at 898 crores for this quarter. This is a 10% decrease against. Note that EBIT in quarter three years. Accordingly, PAT also has improved to three of previous. For the nine months ended December 25, overall, our volume is lower by about 6% to 230,960. Our income from operations was at 2,800 crores, down about 6%. EBITDA improved to 347 crores, again, an increase of profit after tax also from the operations I am talking about. But all in all, we continue to have a very strong balance sheet with a net cash surplus of around 2,430 crores as on 31st, December 25. I think with this, we look forward to answer.

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 your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use the handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Divyansh Thakur from FinTrust Capital. Please go ahead.

Sir, congratulations on a great set of numbers.

So, what we have been saying for the past few months has been that everyone is saying that PVC prices should bottom up. So, can you provide us some guidance on how the market has been behaving and when is it going to stabilize? Thank you, sir.

I mean, all the commodities market have been affected by what is going on with respect to the geopolitical developments. And also, so that has an impact on not only on the polymer prices, but also on other commodities as well. So from that standpoint, we had our own share of volatility in the raw material prices and also on the prices of PVC. During the quarter, Sir, we saw that the price is going very, very low. I think we have never seen these kind of prices in the recent past. The PVC prices have gone down to as low as in the range of $600, depending on the origin, where it is coming from. However, the situation has improved a little bit. We look into this quarter a little more positively.

Okay, sir, sir, can you, yes, sir, that answers my question.

Sir, can you also provide us with a visibility on what prices can we see going ahead or something like that?

Nobody knows what is going to happen, but prices in the month of December have started improving or towards end of December. As I said, last quarter, we saw prices going as low as 650. And we saw, we see some 8-9% improvement in that. So, they are more likely, more like 650-660 dollar range currently.

Okay, thank you so much, sir, and all the viewers. Thank you.

Thank you. The next question comes from the line of Utkarsh Nupani from Anand Rati. Please go ahead.

Yeah. Hi. Good evening, sir. My first question is again on the PVC resin side. So just wanted to know, given large PVC resin surplus capacity is there in China, So, do you see any possibility of the prices going back to the historical range of around $80 to $900 per ton over the next 18-month period, sir?

Sir, there is not only in China, but globally there is a capacity quotient, and we also see in the recent past capacity adjustments of the Western companies announcing shutdowns of their plants. We see this kind of a trend in China also. But I think China also, there are two different technologies which operate. And not everywhere, everything could be used. We also heard the news that there is going to be a different access structure or the incentive for exports in China. So that is also going to have an impact on the PVC resin prices from exports. We'll see how does it play out.

But we are waiting for the fine print to come out. Still it is at a speculative stage. Let the fine print come out, then we will have to be able to conclude whether actually we are getting impact by the reduction in the PVC prices or not. We are waiting for the further later in this regard.

I think it

is a combination In addition of different factors, one thing is that during this quarter, we had a higher share of non-agree segment, so that also helped us to keep the prices a little bit on the higher side, so realization is also better. Second thing is, we have been also careful on our pricing side. And I think, as you know, that we have always been saying that we are looking at also profitable growth, and this is what is the impact, what we see.

Okay. And sir, on the margin side, like the margin for PVC resin producer or the plastic pipe company has been coming under pressure, but for us it has actually improved over the past. Okay. So, could possible reason for that, sir, in a falling resin price environment?

So, if you know that we are the company which is having advantage of backward integrated plant for the PVC resin, now of a total consumption of, say, 100 in a year, in a given period of time, roughly we get a share of 65 to 70 percent from the in-house manufacturing of the resin. Now, if the in-house manufacturing resin, we have cost advantages in comparison to the other producers who are purchasing the PVC price directly from the market. So this, having a backward integration plant and in-house manufacturing of tourism, we are having a certain cost advantages that is getting reflected in our margin.

No, sir, what I was, what I meant to say is that as per your presentation only, if we see the PVC ADC delta or the PVC VCM delta has gone down sharply in this December quarter on both QonQ and YOY basis. Okay, so how come our margin has improved, sir? That's my question, sir.

Number two, though there is a decline in the EDC, BVC, EDC Delta, but that's actually not got converted while we actually negotiated in the market, that's the advantage you're also having. The way we have in the advantage from the sales realising side as well.

Okay, sir. Lastly, sir, what would be our sales volume guidance for the current March quarter, and what would be the EBITDA margin guidance over the medium-term period, sir, for us? That would be my last question.

You know, historically, the quarter 4 has been the quarter where the demand picks up, and this is true not only for us, but also for the industry. So, we hope that the trend also continues this year, and we see a better volume number in quarter 4. And if we are able to see…

If you can see any growth, we are looking at any range.

As compared to the previous year, for the full year, we will see more of a flattish to slight increase in the volume for the full year. This is what our expectation is. We will see how the demand picks up and how the market behaves in the next two months.

Sir, what would be the beta margin guidance on a fiscal basis for us?

We would like to continue with the same margin. Let's see how things unfold over the period of time. We would like to maintain our margin level.

Okay. Thanks a lot, sir.

Thank you. The next question comes from the line of Shravan Shah from Dalat Capital. Please go ahead.

Hi. Thank you. Sir, I have a couple of questions. Before that, just a couple of data points to get it right. So, agree, non-agree share, CPVC share, and fitting share for third quarter.

So, agree, non-agree, currently we are at the 60 to 38, during current quarter. 60, 60. 60, 62, 62 versus 38. CPVC share is 8% in terms of volume.

Okay.

Fitting share 12% in terms of volume.

Okay, got it. And PVC-VCM spread for third quarter?

PVC-VCM spread for the third quarter, 156.

156. Okay, 156. Yeah, got it. So now, sir, coming to the main questions. So, sir, as you just now said that we are looking at a margin, a flattish to marginal growth for fourth quarter. That means in the last year, Q4F25, we did close to 1,000,000 plus kind of a volume. So if we want to have even flattest also, we need a 39% kind of a QOQ growth, which is a significant kind of a 30,000 extra that we need to sell in the fourth quarter. So, in the January, did we have seen that kind of a growth? Just trying to understand.

Shavan, good to meet you, although virtually. I would like to say I would not, we would refrain from making any forward-looking statements here, but there is a good traction in the market as far as January is concerned.

So, does that mean good traction that, oh, no, no, not the number, but was that a growth on YY basis for us in January?

So, Shravan, we are about to wrap up the number, but things are looking positive in January month as well. So, let us wrap up our, let us, let us, allow us to wrap up our number, then we will be able to comment on that, because January is just closed yesterday only. So, we are about to look at the number. But yes, overall, on a direction basis, as our India has just communicated, we are looking somewhere around slightest to slightest growth in the year on a portfolio basis.

Got it. So, then from FY27 onwards, broadly, if you can help us, how one can look at the industry-level growth, and for us, how can we expect kind of a 5-7% kind of a growth, or are we looking at kind of an 8-10% kind of a growth from FY27 onwards?

Shavan, we have just kicking starting our budget planning for the next year. But overall, if we look at the industry and how the markets are behaving, I think having anything, growth which is double digit, I don't know if that would be something which I can comment on at this moment.

But is it fair to say, can we see a 5% at least plus kind of a growth for us and for industry? That's the broader thought process.

I think our endeavor would be that we keep our market share.

Okay. And then, sir, just on the margin front, so last quarter also and this quarter, so if you can help us in terms of accounting entry particularly, this change in inventory particularly, so last quarter it was 172 crore and this time 168 crore. And that's why there is a significant improvement in the margin is there. So, try to understand me. So, whatever the closing higher inventory, which was there in the Q2, similar was there in this quarter. And let's say this gets sold in the fourth quarter. So, then can one can expect kind of a 8-9% kind of a margin.

So, if you see 7, quarter 3, we have ended with a EBITDA margin of roughly around 14%, right? So, now, we are, and on a yearly basis, it's 12%. So, as we have just, I have replied to a previous question, we would like to maintain our EBITDA 12% around in that trajectory, our full year EBITDA margin as well. So, this is number 1.

Yeah, but still not able to understand, how come we have the similar kind of a higher closing inventory at the end of the second quarter and the similar number 170 odd crore in the third quarter itself? So, because that's the one which is actually have a significant delta on the margin.

No, no, sorry, Shavan, you have to keep in mind, though number more or less looks in terms of parity from our previous, price is always changing. So if you compare the, how the industry.

But that doesn't get reflected in the number. So, correct me if I am wrong. Simple basicness, I am not able to understand. This minus 168 crore, how this number comes? If we have the 168, does that mean that the closing inventory as on December is higher by 168 crore versus the Q2 and that's why it is resulting or something I am missing?

Yeah, yeah. So, it's basically a difference between the opening stock at the beginning of the quarter and the closing stock at the end of the quarter. So, that is what this number gets affected, changes in the inventory.

No. So, then the question arises is similar. Then, why the closing inventory of 2Q did not get sold in the third quarter and why we kept again the similar kind of inventory?

Good to inventory because every company has a continuous production process. So inventory gets liquidated over the period of time. Then again, no material availability, what kind of future forecast we are having, saying that inventory has been driven, whatever is driven, yet there is a built up inventory.

Lastly, sir, what we heard, just to correct me if I am wrong, from the 1st January till now, what we have seen is there is a 7 rupees hike in the PVC prices, so first if it is yes or no, and then if you, have we also seen the similar kind of pass-on to the consumer levels?

Yeah, you are right. We have seen a price increase in the PVC prices here in India, and you know it ours is primarily a pass-through business, so quite a bit of it is passed.

So, at the channel level, have you started seeing the significant improvement at the inventory level, which was kind of below average? So, have the channel has kind of seen a normal level of inventory, or still it is below the normal?

I think channel has started building up the inventory slowly, slowly in the month of January, after the prices have started increasing, I think because sentiment has changed, right? But I don't think so it is at a level where it should be. There is still room for improvement.

Okay. I have more questions who will come up in queue. Thank you and all the best.

Thank you, Sherwin.

Thank you. A reminder to all participants, anyone who wishes to ask a question may press star and one. The next question comes from the line of Vipul Kumar Shah from Sumangal Investments. Please go ahead.

Hi. Thanks for the opportunity and congratulations for a very good set of numbers. So my question is regarding the cash balance. So we have very modest capex every year and we are building cash. So we are neither taking any big capex nor we are sharing it with shareholders through dividend or buyback or any other route. So, what we are going to do with this cash?

So, Vipul, as you are saying, yes, we have been saying there is a quota of increase in the cash balances over the year. So, last year, I think we have a, for the financial year, 25-26 roughly around 100 to 150 crore over the KPX plan for the current year, 25-26, basically. So, that is all the KPX spending already on. And if you can recall last year, we have declared a dividend of 3.6 rupees per share. So that amount still will, that was a huge dividend that we have declared last year. We are waiting for the current year's number, then we will have to take and call on that. Number one, even saying that, yes, there will be still a sufficient balance of cash will remain. So the discussion is around, we are yet to conclude upon what to do with this cash over the period in time. So once something will be frozen out, then we will be able to conclude upon.

And a company of our size in this, I mean, we always keep looking at opportunities for the capex. And there are different discussions which happen at a board level. We all are working under the direction of board, and as soon as we have some more decisions around it, we are happy to communicate.

This standard answer is given in every call, sir. Anyway, so what is the current data? CPVC volume was 12% of the overall volume, right?

The question comes from the line of Shuravan Shah from Dalit Capital. Please go ahead.

Hi, sir. Sir, this, what last time we said that we are looking at, so currently, pilot 20,000 capacity, we are looking at 50,000, 80,000 kind of addition. So, is it fair to say that in FI 27, we will be able to add this to 80,000 kind of capacity

Shavan, for us, the capacity addition is a continuous process, and as you know, that we recently, in the last one year, we have increased our capacity, and the discussions are on to increase the capacity further to support the growth, right? So, this is an ongoing exercise, but typically, we end up doing a capex of between 100 to 200 crores year-on-year basis. So, we will continue to see that direction.

Okay. So, roughly one can say similar kind of a 50,000 to maybe a 70,000 kind of a yearly business, one can look at if it finds the demand is growing. But there also, we are not kind of confidently saying that we can see a double-digit kind of a growth. So that's what I'm trying to, wondering how one can look at.

Yeah, so you build capacities also with a little outlook of the demand, not only for a period of short, but also maybe over a horizon of two to three years, because capacities also do not come up immediately. They also take their own time in coming up. So, you always have excess capacity than what you can sell. And it is a continuous process. You keep evaluating, keep evaluating year on year.

Yeah, got it. And given, let's say, if there is a 7 rupees price hike and PVC, and let's assume that it remains constant till the March 31st, though we will be passing on to the customers, but given if we have the similar volume, But if we are selling at, let's say, previously 100, now at 107, so is it fair to assume that we will be having some operating leverage and then our margin should be better, but at the same time, we are seeing our margin for fourth quarter, we are looking at a 12%. So, yeah, if you can clarify.

Yes, everyone, so as the prices, so long as the PPC prices will show the upward trend, there will be definitely an advantage in terms of our operating margin, not only for us, but for the industry as well, across the industry. But if you will see the stress in the PPC price, then the things will again, the more the PPC price level is stable, the more the...

Before this, the China, whatever the extra tax they are, they are putting up for the export, particularly to, let's say, India, but this is applicable for, I think, from the 4th April onwards. So, is there a possibility that before that, there will be some dumping will be happening and that may lead to some rollback in the prices? Is there also a fair probability?

I think that is one of the reasons that we see a price increase here in India with the lead time into consideration that expectation is that the prices would be sustaining here on.

Okay, okay. So, prices will sustain. So, there will be a less probability that there will be a dumping from China before April. And so, it should not be impacting the prices. So, more or less the prices from here on should stay stable, if not increase further.

Yeah, but I would like to always have a caveat here that we do not know what would be the reaction or how the producers in that country would look at their book accounts and the under-utilization of their capacities. So, I cannot say it with 100% certainty, but the plan looks like that way.

Okay. Yeah, and for us, the CPBC, the 8% share, so there also we have continuously seen the double-digit growth.

Yes, because CPBC, we are getting a good expectation in volume, so that is going in higher rate.

Okay, okay, okay, okay. And then broadly, our long-term target, 50-50, agree, non-agree. So, how do we, so that long-term, so structurally, let's say by FI 27, on an average basis, if one has to see, can we see 3%, 3%, 4%, 4% kind of improvement there, or how one can look at it?

Ravan, though our overall ambition is also to increase our non-agree share, because there are a lot of variety factors that keep to play, while though there is a great emphasis going on from our side to push our non-agree sales, things will unfold over the period of time, but it's still difficult to comment what is the time horizon, when will it be already on, to improve our share for the...

Got it. And then broadly, for third quarter, the CPVC prices more or less has remained stable or still doubled also, some decline in the CPVC prices?

In tandem with the PVC prices, but yes.

Got it, sir. Thank you.

Thank you. The next question comes from the line of Sonali from Jeffrey. Please go ahead.

Sir, thank you for the opportunity. Sir, sorry, but I have to ask this question on margins here again. So, if I look at our gross margin from Q2, FI 25 to Q1, FI 26, we were somewhere always at about, you know, so our raw material cost to sales was somewhere between 65 to 70 percent. Suddenly, over Q2 and Q3, FI26, it has dropped to 57%. So now, if I look at the last two quarters, the volume growth has not been as great, and the PVC prices are also weakening, also suggesting that the realizations are getting lower. So could you help us reconcile what exactly are we doing right or what has changed in the past two quarters That our gross margin has suddenly improved by, you know, about 700 to 800 bits year on year. Thank you.

Okay, Sonali. So, if you see, consider our structure of business, roughly our 75% of total consumed raw material cost comes from the in-house, and 25% comes from the outside procured. When I am saying 75% on an average comes out from the in-house procurement, it consists of prices of imported raw materials, which is though move in line with the PVC prices, but there is no absolutely spread always remains same. So, if the PVC prices, I am giving you an example, if it goes by the 10 basis point, goes down by the 10 basis point, it is not always necessary that prices of EDC or ethylene will also go in the same period, in the same number. So, it always keeps a lag sometimes, and sometimes it remains. Like, if I see a decline in the PVC prices of 10%, we have seen a decline in the EDC prices by 8 rupees, 8 percent, 8 basis points. So, in a way, so our raw material prices, if so long as it is not getting affected the way the PVC prices are getting affected, we are finding a cost advantage, number one. Number two, though there is a declining in the overall PVC prices, we have improved our realization, increased our realization, but we have improved our reach.

If I may just extend this question, we do understand that, you know, PVC and EDC are not exactly correlated to each other as both are global commodities. But would you agree that whatever the delta is, is captured in that one ratio of PVC to EDC spread? If I look even at that ratio, that ratio has come down from $500 per MT in Q3 last year to $449, which reflects the movement of both PVC and ADC. So I'm just still trying to understand that if your realizations are lower, if your volume growth is not as great, plus we did add this new employee cost as per the new labor code, It's certainly a great surprise that, you know, the gross margins and the EBITDA margins are growing so well year on year. So, just wanted to reconcile these bits. Thank you.

Just to add, so, Nali, the employee benefit cost is not forming part of the gross margin. It is forming part of the EBITDA, not the gross margin.

Right, sir. Yes, I was meaning the EBITDA only, but my main question is regarding the 840 BIPs jump in the gross margin.

Yeah, so gross margin, as I just wanted to reiterate, the prices that you see in the PPC, it is delta. Delta, that is more or less indicative. But when we go actually...

Sure, sir. Thank you. That's all from my side.

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

Thank you. Thank you, everybody, for participating in the call and asking the well-researched and deeper-level questions. We'll meet you next time in the conference call. Thank you. Have a good evening.

Thank you, all participants from the Phenolis site.

On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now discuss, Nikola. Thank you.