Ladies and gentlemen, good day and welcome to Meghmani Organics Limited Q2 FY27
Earnings Conference Call hosted by Arihant Capital Markets 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 signal an operator by pressing
star then zero on your touch-tone phone. Please note that this conference is being recorded. I
now hand the conference over to Ms. Rushali Sadani from Arihant Capital Markets Limited.
Thank you, and over to you, ma'am.
Rushali Sadani:
Thank you. Good morning, everyone. Welcome to you all to Meghmani Organics Limited for
Q2 H1 FY27 earnings con-call. On behalf of Arihant Capital Limited, I would like to thank
the management of Meghmani Organics Limited for giving us this opportunity to host this
call.
Today, from the management side, we have Mr. Ankit Patel, Chairman and Managing
Director; Mr. G.S. Chahal, Chief Financial Officer; Mr. Pratik Shah, Deputy CFO; and Mr.
Nishant Vyas, Investor Relations. Without any further delay, I would like to hand over the
call to the management for the opening remarks.
Ankit Patel:
Thank you Rushali Ji. Good morning, everyone. And thank you for joining us on our Q2
FY27 earnings call. I believe you have had a chance to go through the financial results and
investor presentation uploaded on the stock exchanges and the website. Before we move to
the quarterly and half-yearly financial performance review.
I would like to share that we have received the Honorable NCLT's approval for the
amalgamation of our two wholly owned subsidiaries, Kilburn Chemicals Limited and
Meghmani Crop Nutrition Limited, with Meghmani Organics Limited, creating a single
unified legal entity. This approval marks an important milestone in our journey. The scheme
will enable us to achieve optimal utilization of existing resources through consolidation of
operations and derive operational and financial synergies.
Moving to our quarterly performance review. During the quarter, we delivered a healthy
revenue growth with revenue increasing 18% year-on-year basis and 26% quarter-on-quarter
basis, reflecting a continued positive momentum.
However, due to a sharp increase in input and logistics costs and realization remaining
broadly flat, our margins during the quarter were impacted. While the near-term cost
environment remains challenging, we are taking focused measures to optimize our product
mix, enhance operating efficiencies and strengthen profitability.
We remain focused on navigating the current environment while sustaining the underlying
growth momentum of the business.
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On a standalone basis, in Q2 FY27, revenue stood at nearly INR658 crores, up by 18% yearon-year basis. Net profit for the quarter increased by 6% to INR45 crores on a year-on-year
basis, while our EBITDA remained flat at INR70.9 crores. Our EBITDA margin for the
quarter was impacted by elevated input and logistics costs.
If we talk about the revenue mix in Q2 FY27, the Crop Protection segment constitutes about
75% of the total revenue, while the balance 25% was from the Pigment segment.
Now let us look at the segment-wise performance. In the Crop Protection segment, production
stood at nearly 10,000 metric tons, and the capacity utilization for the segment stood at 72%.
Revenue and EBITDA stood at nearly INR496 crores and INR54 crores, respectively.
EBITDA margin for the segment was at about 11%.
For the Pigment segment production stood at 4,252 metric tons, and capacity utilization for
the segment stood at 51%. The segment reported revenue and EBITDA of INR161 crores and
INR16 crores, respectively. EBITDA margin for the segment was at about 10%.
For the half year ended 30th September 2026, revenue from operations stood at INR1,181
crores, which is up by 3% year-on-year basis. Net profit increased by 23% to approximately
INR103 crores, and EBITDA grew by 9% to INR164 crores.
Moving to our Crop Nutrition segment. We have commenced the production of our newly
introduced Nano fertilizer products like Nano DAP, Nano NPK, and Nano Zinc at our existing
manufacturing facility in Sanand. These products complement our existing product portfolio
and position us well to participate in the growing adoption of next-generation crop nutrition
solutions. We remain optimistic about the long-term growth prospects of this business.
In titanium dioxide, operations continue to remain suspended due to commercial unviability
arising from the elevated raw material costs and weaker price realization following the
withdrawal of antidumping duty.
Recently, on 24th October 2026, the Ministry of Finance re-imposed antidumping duty on
titanium dioxide imports from China for a period of 5 years. While this is a positive
development and should support a gradual improvement in the price realization, the
economics of restarting the plant remain challenging. Sulfuric acid, a key raw material, is
currently at a significantly elevated level, with prices having increased by nearly 7 to 8x from
the normal levels.
Considering these factors, restarting operations is not commercially viable.
Now, if we look at our financial performance on a consolidated basis in Q2 FY27, revenue
stood at nearly INR666 crores, up by 16% on a year-on-year basis, and net profit grew by
193% to INR33.9 crores. EBITDA grew by 40% to INR73 crores. EBITDA margin on a
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consolidated basis stood at 11% compared to 9% in the corresponding quarter of the previous
year.
For the half year ended 30th September 2026, our consolidated revenue stood at INR1,209
crores, up by 2%. Net profit increased by 239% on a year-on-year basis to INR82.1 crores,
and EBITDA grew by 44% to INR171 crores. EBITDA margin on a consolidated basis stood
at 14.1% compared to 10% in the corresponding previous year.
As of 30th September 2026, on a standalone basis, our total debt stands at INR497 crores,
comprising INR435 crores in the short-term debt and INR62 crores in the long-term debt.
Debt-to-equity ratio on a stand-alone basis stood at 0.27x.
On a consolidated basis, our total debt stands at INR661 crores, which includes INR438 crores
in short-term debt and INR223 crores in the long-term debt. The debt-to-equity ratio on a
consolidated basis stood at 0.41x.
Till 30th September, we have made a debt repayment of approximately INR64 crores.
So, to conclude, while the near-term environment remains challenging, we remain focused
on navigating the current environment while sustaining the underlying growth momentum of
our businesses. With this, I hand over the call to the moderator to open the floor for questions
and answers.
Moderator:
Thank you very much. We will now begin the question-and-answer session. The first question
is from the line of Ayush J an Individual Investor.
Ayush J:
I have 2 questions. The first question is on trade receivables. They've gone up by INR220
crores. So could you give some explanation or throw some light on that please?
Ankit Patel:
Yes. Thank you, Ayush Ji. The trade receivables has increased significantly in the current
quarter. Reason being in the markets where we are operating over there, there has been
increasing in the credit what we are offering. Current market is a little bit challenging where
we need to push more and we need to support our customer base and to have a growth and
have a sustainable increase in the sales, we have been giving a little more credit to the market.
Ayush J:
And sir, when do we expect this to normalize?
Ankit Patel:
See, normally, we were in the range of about 100 to 110 days. It has increased to about 125plus days. So we will try to improve. But for that, the market and the demand have to improve
so that we can demand the situation. So in the near term, it looks a little difficult. Going
forward, we'll try to improve by a few days. But it will always be in the range of somewhere
between 110 and 115 days.
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Ayush J:
Sir, my second question was on the pigments part of the business. It seems that exports have
reduced and domestic sales have increased quite a bit. Could you please explain why? And
the margins have seen an increase. How do you foresee this part of the business going ahead?
Ankit Patel:
So Ayush Ji, I think one of the quarter here and there, but where overall export will be in the
range of approximately 75% to 80% for the Pigment segment. Wherever we get better
realization, we focus on that segment. And sometimes there is an opportunity arising from
the domestic market or the export market. We continuously focus on doing that. So, in the
last few quarters or few years, our profitability for the Pigment segment was quite impacted,
and we were working on it to improve the profitability of the Pigment segment to a reasonable
level. So I think in the two quarters, we have reached nearly a 10% level now.
Ayush J:
A couple of more questions, if I may. We've seen prices increase in raw materials and
logistics. Are we planning or are we trying to increase our realizations for the agrochemical
business?
Ankit Patel:
We keep on doing that, but the current market scenario is a little bit volatile because every
day, there is a lot of volatility in the raw material cost. The energy cost has increased
drastically. At the same time, in the global market, because we are indirectly related to the
agriculture business, the sudden price acceptance takes a little longer. So people would like
to wait, understand the supply situation, and there is no problem as far as the agrochemical
supply is concerned. So, there is no panic.
So, the pressure is currently on the manufacturer level, like us. We try to showcase the
scenario, make people understand that this is what we have been trying to do, but it's been
challenging. Going forward, we believe the logistics cost in a few months' time should start
going back to the normal level. It has already started going down a little bit.
So we believe that in a few months, it will be back to the normal level. And let's hope the war
in the Middle East area, if it gets subset, then we believe that the raw material prices will also
get stabilized. That will indirectly help us.
Ayush J:
And my last question would be, sir, any guidance for FY28?
Ankit Patel:
So, from the growth perspective for the next 2 to 3 years, the agrochemical segment will grow
in double digits from the top-line point of view. We will also try to improve profitability. As
we have been saying for the agrochemical segment from a long-term perspective, we try to
maintain the industry average somewhere in the range of 15% to 17% EBITDA margin.
For the Pigment segment, there will not be significant growth potential. It will be more or less
in the range of INR600 crores to INR650 crores top line. We have been working on
optimizing profitability, which we have been able to do in the first and second quarter. We
will keep on trying to improve it, and we'll try to maintain somewhere near 10% to 11%
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EBITDA margin for the Pigment segment.
For the Crop Nutrition segment, we are very optimistic. We believe that going forward, the
developmental activity and the product mix, what we are introducing will give a very positive
result going forward over a period of next 3 years' time. It will also grow in double digits,
though the base is small.
Titanium dioxide segment for the time being, too early to mention about it, though there has
been positive momentum of regaining re-imposition of the antidumping duty. But still, the
raw material scenario, which is the key, is that the sulfuric acid price is still significantly high,
making it unviable to restart the operation for the time being. We are closely watching it, and
we can give guidance once the scenario improves on that.
Moderator:
The next question is from the line of Yash Somani from Somani Family Office.
Yash Somani:
So my question was regarding the crop protection margin. So in May, you guided the Crop
Protection margin to about 15% to 17%. Q1 came in around like 19% to 20%. But the Q2
margins fell to around 11%. So is the guidance still valid? And what drove the drop was it
raw material prices or Chinese technical pricing, product mix, something?
Ankit Patel:
So, Yashji, the raw material prices increased significantly in the second quarter. The thing is,
because of the war, the raw material started going up even in the first quarter itself. But we
were holding some low-priced raw material inventory, which helped us in the first quarter. In
the first quarter, we were again able to pass on a little bit of a price increase because people
were a little bit panicked. And they did not know what was going to happen from the supply
chain point of view. But as time moved on, people understood the supply is more or less
stable. There is no issue from India or China. So then again, there was pressure on the
manufacturing side. At the same time, the raw materials, the basic raw materials, which are
directly or indirectly linked to crude oil, have gone up significantly.
At the same time, the utility cost and energy cost have also increased. The coal price has also
gone up significantly. And adding to one more factor in the second quarter, we faced a lot of
problems from the logistics cost point of view as well. So all those factors created a major
problem.
Now, going forward, we believe the logistics cost has started going down gradually. It will
be normalizing in the next few months' time. As far as the raw material is concerned, we
believe the disturbance in the global market should get normalized. The news we have
recently received is that the war with Iran should be normalized soon. Let's hope for the best.
If it happens, then the raw material prices will become normal. That will help us indirectly.
At the same time, we try to play with a different product mix. We try to convince the customer
about the scenario. But if there is a stability in the raw material prices, stable increase in the
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raw material price, then we are able to pass it on. But if there is a lot of volatility, increases
and decreases in terms of the war situation, then it is very difficult to take a call at the customer
level as well.
So that is the scenario. So, we have been passing through challenging times, but we have been
taking optimistic steps in the current scenario, and we are very positive that in one of the
quarters, there has been a reduction in profitability. But on the long-term perspective, we are
very optimistic about maintaining the EBITDA margin of 15% to 17% for the Crop Protection
segment.
Yash Somani:
Sir, my next question would be regarding our TiO2. So are you considering any strategic
options for that like such as any partnerships, divestment or something or any other strategy?
Ankit Patel:
So we have been working on this project. We have been applying different strategies to look
at what to do with this current asset that we have created. At the same time, we have been
exploring different options. But the market currently is a little bit challenging. If the situation
is better, normal, then you can attract different projects, different companies, all put together.
So we are exploring all the possibilities for this asset. So going forward, if there is any positive
improvement, we'll be informing the investors from the betterment point of view.
Moderator:
The next question is from the line of Khushi Solanki from Agrawal & Co.
Khushi Solanki:
So, I had a question regarding the revenue. Revenue grew from 40% year-on-year, but
margins were down to 10.1% from 12.1% in Q1. Was this a deliberate volume or margin
trade-off? What margin should we expect in the medium term?
Ankit Patel:
Khushi Ji we have been trying to maintain the growth momentum in the top line along with
the volume growth. That's what we have been doing. The current situation is a little bit volatile
as far as profitability is concerned because input costs have increased significantly. So in the
near term, it looks a little bit challenging.
But on the long-term perspective, we are very optimistic to bring back the profitability for the
Crop Protection segment in the range of 15% to 17% and in the Pigment segment to the nearly
10% to 11%. So on the consolidated basis, somewhere in the range of about 13% to 14%.
Khushi Solanki:
Production grew 13% year-on-year to 50; revenue grew 40%. How much came from the
product mix and currency?
Ankit Patel:
So currency, we already know the kind of momentum it has happened in the last 1 year. So
that is one factor. But mainly it is because of the different product mix, where we get better
realization and better profitability. So we focus on that. Sometimes we look at the formulation
where we get better realization. Sometimes we look at the different technical products where
we get better realization. So based on that, we have been trying to maintain it. So it's partly
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because of the dollar-rupee rate, partly because of the different product mix.
Khushi Solanki:
Okay, sir. Another question. How many new registrations or high-value products are in
pipeline for FY27 and FY28? And what revenue could they add at peak?
Ankit Patel:
So there are many registrations in the pipeline in different markets. The product what we
introduced in the last 3, 4 years, those products we have been registering into various markets
in Latin America, in North America, in Africa, Asia, everywhere. As a company, we have
been exporting to more than 70 countries. And so, depending on country to country, there
have been different regulations, and each country takes a different timeline for getting the
approval and registration.
So we have a pipeline of products for registration up to 2031. So every year, we will keep on
getting new product registrations in different markets, which will drive the growth forward.
That is why we are very optimistic to have a double-digit growth in the Crop Protection
segment over a period of next 3 to 5 years.
Khushi Solanki:
One more last question. How are the demand trends in Europe and the U.S. across inks and
plastics? Is the global overcapacity easing?
Ankit Patel:
Europe is passing through a very very challenging time. We all know we have been getting
the news in the media. So the cost in Europe has gone up. The viability is not there in those
markets. We have been trying to pass on the price increase, but demand is being impacted
significantly in Europe.
So in the U.S., there is still a good margin and good demand. We have been doing business.
Last year, there was a tariff-related issue, which impacted the pigment business in the U.S.
market. But this year, so far, it is not there.
Let's hope it doesn't come again. So Europe is a challenging market going forward. Whatever
business we can get, we have been doing. But otherwise, we are focusing on all other markets.
As far as agrochemical is concerned, we do hardly 1% or even less than 1% business in the
Europe market.
It's a very highly, highly regulated market and very difficult to predict because they keep on
banning the product and if you spend money on doing the registration, if they ban the product,
then we lose the money. So as far as the agrochemical is concerned, we are not focusing much
on Europe market. Apart from that, we have been doing business in the rest of the world.
Moderator:
The next question is from the line of Rushali Sadani from Arihant Capital Markets Limited.
Rushali Sadani:
Just a question: are you planning to enter any new chemistries, such as fungicides or any
special pigments or any other adjacent categories?
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Ankit Patel:
So, we keep on doing the development for new products. We don't announce the new product
names till we do the commercialization. We do under coding, our R&D development activity
remains everything under coding. But we keep on looking at it. And once we get commercial
success as well as viability from a viability point of view, then only we launch the product.
Rushali Sadani:
And the next question is: how much do byproducts and co-products sale contribute to
revenue? And how much did the price move?
Ankit Patel:
Byproducts or Co-products are not even 1%. It's a very, very small amount. So we don't focus
on that. It's a very, very small amount.
Rushali Sadani:
Okay. And are there any contingent liabilities or any legal matter that could have become
material?
G.S. Chahal:
No. We don't have any major contingent liabilities.
Rushali Sadani:
My last question would be: the Q2 pigment realization worked out roughly about INR380 per
kg. So how did this change year-on-year and quarter-on-quarter, and what is the impact for
H2?
Ankit Patel:
For the segment, so far, the market was accepting the price increase along with the raw
material price increase. So that was a positive thing. So whatever increase in the raw material
was happening in the Pigment segment, so far, we have been able to pass it on. But in the
Crop Protection segment, it was very difficult.
G.S. Chahal:
And just to add, actually realization per ton calculation is not the right method because we
have product mix, which range category is different actually. For each product, there is a
different realization. So we cannot average it out. So the best method is to measure the
EBITDA percentage.
Moderator:
The next question is from the line of Shayan from Make Money Organic.
Shayan:
I just wanted to understand what is the kind of outlook that we have for the crop nutrition
segment, the Nano urea what is happening in India? I think there are some adverse reports
that India is going back to maybe urea fracturing, correct? So, because Nano urea thing is not
working as much. So, first question is what is your outlook on that? And if you can share any
sales or margin guidance for the next 4 to 6 quarters?
Sir, my second question is on the agrochemical export growth in terms of the Latin American
and the U.S. markets. I think we are operating at 72% capacity utilization. And do you see
that now, with things stabilizing, we can move up to 85% or 90% capacity utilization?
Ankit Patel:
So, as far as the Crop Nutrition segment is concerned, earlier, when we started the launch
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only in Nano urea, we have got a couple of more products in the market; more than 10
products we have got in the basket. Nano urea, if you look at the media or if you do a Google
search, you will find a lot of negativity about the product. But as far as the product is
concerned, it is working very well in the field.
And initially, when the product was launched, it was a wrong marketing campaign by 1 or 2
companies that it could replace urea. At the field level, at Meghmani, we have been doing the
right field activity, giving the right guidance to the farmer, where we have been telling it
cannot replace urea 100%.
It can only replace urea to some extent because based on the application. And we have been
giving the right guidance on how to use the product application-wise. Unless if you guide the
farmer how to use the product, when to use product with what dosage, if they don't use proper
protocol, then they will not get the result. And that's what happened. Initially, when IFFCO
started marketing, it was like one bottle could replace 1 bag of urea, which was a completely
wrong campaign.
It has got strength equivalent to a bag of urea, but it cannot replace urea. So now it's been a
little bit challenging. We have been doing a lot of field activity. We have been showcasing
the trial and giving the right protocol to the farmers. So that's what we have been doing, and
now they have been getting good results. In different crops. So slowly, gradually, the adoption
is increasing. At the same time, the Nano DAP has had a much more positive impact in the
Indian market, which we have already introduced in this financial year. So that will also have
a positive impact. At the same time, we have been doing a lot of developmental activity for
this product in the export market, meaning we are taking the help of our presence in more
than 70 countries in the crop protection segment.
We have got a huge customer base. So we are leveraging that infrastructure. And we are
introducing this product into the export market as well by showcasing the new trials to them
and doing the registrations. Again, in the global market, it's a new concept. So it takes a little
bit of time. But the kind of the result and what we are seeing on the field, it is very encouraging
and it gives confidence to the customer and the farmer.
So going forward over a period of next 3 years, there will be good amount of growth
happening in the top line of Crop Nutrition segment and it will add a healthy profitability to
the overall company somewhere in the range it has got EBITDA in the range of 20% to 22%.
Shayan:
And sir, this was reflecting basically the consolidated line, right, where we are showing under
other, right?.
Ankit Patel:
Yes, correct.
Shayan:
I think I have one or two more questions, for small investors like us, we have been associated
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with the company for a long time. And we have seen the fantastic growth of the company
over the last 10 years. Both of these companies put together net PAT of around INR120
crores, INR130 crores a quarter, but after the demerger, I think Meghmani suffered a bit
because of the adverse cycle. So are you thinking of rewarding shareholders through
dividends, etc, in the foreseeable future, sir?
Ankit Patel:
Shayan Ji we were giving regular dividends. But the last 2- 3 years were a little bit volatile,
so we need to focus on cash flow. So I think going forward, if the market improves, if we
have a good amount of cash flow, then definitely for the betterment of the investors, we'll be
announcing the dividends.
Shayan:
Thank you Sir. And Happy Diwali and great comeback, sir, on this year. And I think with the
logistics cost and everything looking a bit -- we hope that we are able to have a great H2. And
many congratulations on the great results.
Ankit Patel:
Thank you very much and Happy Diwali to you as well.
Moderator:
Ladies and gentlemen, that was the last question. I would now like to hand the conference
over to the management for closing comments. Over to you, sir.
Ankit Patel:
On behalf of the management, we thank you for joining us today. We hope that we have been
able to address most of your queries. In case of further queries, you may reach out to Mr. G.S.
Chahal or Mr. Nishant Vyas and they will connect with you offline. Wishing you all a very
happy Diwali and a prosperous new year. Thank you.
Moderator:
Thank you. On behalf of Arihant Capital Markets Limited, this concludes this conference.
Thank you for joining us, and you may now disconnect your lines.
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