DCM Shriram Ltd. (NSE: DCMSHRIRAM) Q1 2026 Earnings Call dated Jul. 23, 2025
Corporate Participants:
Unidentified Speaker
Siddad Rangakka — Moderator
Ajay S. Shriram — Chairman & Senior Managing Director
Ajit S. Shriram — Joint Managing Director
Aditya A. Shriram — Deputy Managing Director
Amit Agarwal — Chief Financial Officer
Analysts:
Unidentified Participant
Ahmed Mada — Analyst
Pujan Shah — Analyst
Vignesh Iyer — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the DCM Sri Lam Limited Q1 FY26 earnings conference call. As a reminder, all participant lines will remain 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 the conference call, please signal the operator by pressing Star then zero on your touchstone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Siddharth Rangwekar from CTL India for opening remarks. Thank you. And over to you.
Siddad Rangakka — Moderator
Thank you, Ryan. Good evening and welcome to DCM Sriram Limited’s Quarter 1 FY26 earnings conference call. Today we have with us Mr. Ajay Sriram, Chairman and Senior Managing Director, Mr. Ajit Sriram Joint Managing Director Ms. Aditya Sriram, Deputy Managing Director and Mr. Amit Agarwal Group CFO of the company. We shall commence with remarks from Mr. Deshweram and Mr. Ajit Sriram. Members of the audience will get an opportunity to ask their questions to the management following these comments during the interactive question and answer session. Before we begin, please note that some of the statements made on today’s call could be forward looking in nature and a note to that effect has been included in the conference call invitation that has been circulated earlier and is also available on the Stock Exchange website.
I would now like to invite Mr. Adel Sriram to give us a brief overview. Over to you sir.
Ajay S. Shriram — Chairman & Senior Managing Director
Thank you, Siddharth. Good evening ladies and gentlemen and a very warm welcome to all of you. Thank you for taking our time and joining us today to discuss the company’s performance around first quarter of financial year 23. Results 26 results. Sorry. I shall commence with views on the industry dynamics and our strategic direction following which Ajit will share the financial perspectives. The global economic growth projections continue to be lower while headline inflation is soft across most regions. Tariff driven cost pressures and geopolitical rifts continue to challenge policymakers with significant risks to market disruptions. Many emerging and developing economies faced headwinds from reduced exports, lower commodity prices, tighter financial conditions and elevated debt burdens putting the growth perspectives and development goals at risk. While India is impacted by these global developments, there is higher resilience given the domestic demand policy fundamentals and strategic fiscal interventions.
The RBI’s rate cuts and the government’s continued support for infrastructure creation and manufacturing have created economic momentum. Our company is well positioned to benefit from India’s growth and has over the years taken steps to fortify presence across its business. Our investments have been aimed at augmenting capacities and adjacencies through integration, optimizing costs and staying competitive across business cycles. We continue to leverage digital platforms to enhance customer experience, streamline operations and deliver more efficient services across all touch points. We remain committed to follow sustainability as a guiding principle in all our existing and proposed investments. I will now share with you the industry dynamics across our businesses.
First, I’ll take up chemicals with uncertainties on US tariffs and deepening geopolitical conflicts, Global cosmic soda market was impacted with demand reducing from key end use industries such as aluminium, textile and paper. China continued to participate aggressively in the international market leading to oversupply. The prices of caustic soda that had reached about 500 per metric ton FOB last year has retracted to US dollars 450 per metric ton, signaling softness in prices. India’s Kotic soda market continued to be oversupplied with current capacity of approximately 6.5 million metric tonnes operating at 80% capacity utilization. Chlorine prices also have been under pressure going to oversupply coupled with subdued demand chlorine derivatives.
Our Capacity utilization is 80% and is ramping up gradually. We are also witnessing benefits in our cost saving initiatives especially in power Hydrogen peroxide with both in the existing cosmic use segments like pulp and paper, textiles and water treatment is growing at a healthy rate. We are focusing on building our market share. The plant is operating at about 65% capacity utilization. Our target this year is to reach over 80% capacity utilization. The trial runs of the ECS plant have started and the utilities like Lisle, Beautification et cetera are fully operational. We will be commissioning within this quarter and the capacity ramp up will happen within the next few quarters.
Our acquisition of Hindustan Specialty Chemicals limited Marks our foray into advanced materials and epoxy resin segments. The transaction is in line with our policy of growing into adjacencies through backward and forward integration. This acquisition shall help in giving us a jump start into this business and provide us a platform for faster growth. Work on aluminum chloride and calcium chloride capacities at Baruch continues as per timeline in line with our objectives. Our green initiatives and cost efficiency programs continue to underscore growth initiatives. The additional injection of 6.6 megawatts of green power at Baruch has started in this quarter, taking the total peak renewable power availability at Baruch to 50 megawatts.
The 68 megawatt renewable power project for Kota is progressing as per schedule. The benefits of the CAPEX program in our chemical businesses have started showing results by providing volume driven growth. Successful Successful completion of the plans under implementation along with capacity utilization reaching optimum levels shall further aid in this growth. Global PVC demand has remained subdued and global trends continue to indicate softer prices of pvc. While India remains a spot of confidence support by construction and agricultural activities, China continues to redirect surplus PVC to global markets impacting domestic Indian PVC prices negatively. The Supreme Court’s interim order has cleared the way for a comprehensive anti dumping investigation into imports PVC by djtr, the Director General of Trade and Remedies overruling the Gujarat High Court State.
Once imposed it will bring some respite to the low cost import prices. The cost structure in our vinyl business has improved. We will continue to optimize production between PVC and carbide in order to derive optimal margins from this business Sugar and Ethanol Global sugar demand for sugar season 2425 is expected to be higher than the supply, leading to a reduction of 4 million metric tons in the inventory levels for the current year. This was mainly due to lower production in India over the previous year by 5.8 million metric tons. The Indian sugar season 2425 is expected to end with a stock of 5.2 million metric tons reflection estimate of 26.3 million metric tons after diversion of approximately 3.3 million metric tonnes for ethanol production, consumption of 28 million metric tons and export of about 1 million metric tons.
Current prices are around Rs 4020 for quintal and are expected to remain range marked. The demand in Q1 was subdued and is expected to pick up in the coming quarter. On the ethanol front, the Government of India is planning to increase the target of ethanol blending in petrol and start its mixing with diesel. As of 31 May 2025, ethanol blending in petrol has reached 19%. This bodes well for the ethanol industry. However, in a regressive move, the UP government has recently levelled export fees on ethanol exported outside the state of Uttar Pradesh, retrospectively from 2018 in view of a judgment from the Supreme Court.
Further, the increase in sugar and ethanol prices has not fully compensated for the increase in sugar cane and grain spices for ethanol. These steps are regressive in nature and stall the growth of the industry. In this backdrop, it is important to review the overhaul to review and overhaul the sugar policy framework in order to make it generative in the long run for the farmers as well as manufacturers. Our complex biogas plant commissioned in March 25 is operating at about 90% capacity utilization. Finessa Building systems the company remains committed to expanding its market footprint by deepening the reach of its current offerings and broadening its portfolio through the development of new platforms.
Our sales strategy is focused around enriching the customer journey through ensuring long term sustainable growth. Meanwhile, our aluminum extrusion project is is advancing as per schedule. We have successfully acquired 53% equity stake in DNB Global Private Limited, a company operating in the hardware space. These strategic actions are set to reinforce our position as an integrated solution provider in the building materials domain and support the creation of of enduring stakeholder value. Moving on, the agri input businesses portfolio comprises of Chinhab Farm Solutions Fertilizer and the bioseed business Chinhab Farm Solutions first. This is a consumer facing business and it continues its growth momentum.
The company’s growth trajectory was led by both robust volume expansion as well as better pricing. Demonstrating agility amid climatic fluctuations, the company ensured timely deployment of need based solutions and introduced scientifically developed crop nutrition products that strengthened the crop tolerance to stress conditions. Notably, in the current quarter, SFS has launched eight new products in crop protection and specialized plant nutrient verticals including two new products from our own R and D. The business continues to focus on its own R and D collaborations and exclusive arrangements to bring the new age products and global technologies to Indian farmers.
Fertilizer on the backdrop of early onset and monsoon, higher rain expectations and lower imports, the urea demand is expected to be healthy. As the stability in the urea industry persists, we are committed to energy efficiency and boosting operational effectiveness. India has seen stable allocation to subsidies translating into smooth transfers to producers. Bioseed Bioseed turnaround is gaining momentum underpinned by a broader hybrid range seed range that is fueling growth across core sectors. The expansion in farm cultivation driven by attractive crop economies and rising ethanol demand along with strong paddy performance has boosted overall results. However, cotton acreage is likely to drop for third consecutive year with organized sector in cotton seed taking a deeper cut in volumes.
I will now request Ajit to provide the financial perspective. Ajit, over to you. Thank you.
Ajit S. Shriram — Joint Managing Director
Good evening everyone. I will now take you through the financial highlights for the quarter. Net revenues for Q1FY26 were at 3262 crores versus 2876 crores last year, an increase of 13% year on year. PBDIT for Q1FY26 was at Rupees 326 crores versus 274 crores in Q1FY25, an increase of 19% year on year. Chemicals the business reported an increase in revenue of 43% year on year led by Cosix water volumes that were up 20% on account of the new 850 tons per day that was made operational in May 2024. PBTIT increased by 68% owing to lower input prices, particularly energy prices and efficiencies from the 120megawatt power plant.
The excess capacity in India is creating pressure on product prices, especially clothing. However, the downstream projects such as hydrogen peroxide aluminium chloride commissioned last year has also supported the revenue growth. We expect volume driven growth to continue with operationalization of our projects under implementation and capacity ramp up. Vinyls the vinyl business had flat revenue at rupees 209 crores in the quarter versus 211 crores in the quarter last year. The volumes of both PVC and carbide were higher. However prices were down by 17% for PVC last year. There was a one time positive impact of rupees 16 crores each because of reversal of electricity duty on auxiliary consumption in vinyl as well as chemicals.
Sugar and Ethanol Sugar and ethanol business revenue net of excise duty was lower by 14% in the quarter. Domestic sugar volumes were lower by 23% due to lower offtake. Volumes of ethanol were in line. Prices for both ethanol and sugar were slightly better. The BDIT for the segment was lower at negative rupees 7 crores versus a positive 30% crores in last year as increase in prices did not compensate for the increase in cost of production. There was also a one time negative impact of roughly rupees 36 crores on account of provision for levy of duty on ethanol exported outside the state of up effective 2018.
The industrial is exploring legal recourse against this levy. Finista Building Systems Finista Building Systems revenue increased 21% year on year led by volumes across project and the retail segment. The growth was better than the same period last year. PVT for the quarter was similar to last year due to higher fixed expenses for setting up new adjacent businesses, higher marketing expenses and acquisition related costs. We anticipate continued higher levels of expenditure to support the strategies, the strategic scaling of our operations and our expansion into newer adjacencies. The order book continues to be healthy. Sriram Farm Solutions Sriram Pharm Solutions revenue increased by 29% year on year supported by volumes across verticals, especially crop protection.
The prices were also better across the verticals except slight moderation in crop protection. Vertical PBDIT for the quarter was higher by 22% on account of better margins despite higher marketing expenses focused on strengthening of the street ARM brand and higher R and D expenditure. Fertilizers the fertilizer revenue was higher by 19% year on year. PBDIT was also higher by 65% led by volumes and better energy efficiency as there was a maintenance shutdown in the last year. In the current quarter there’s a one time positive impact of roughly 24 crores on account of revision in the retention price of financial year 2023.
Last year also there was a one time positive impact of roughly 20 crores on account of recovery of marketing margin. Outstanding fertilizer subsidy was at rupees 236 crores as against 133 crores in the last year. Bioseeds the segment saw revenue increase of 30% year on year. Some of it, especially in Philippines is a timing difference. PBTIT increased by 46%. The improvement is led by better margins across crop segments of corn and padding. The company’s net debt at rupees 1481 crores as on June 30, 2025 as against 1459 crores as on June 30, 2024. Return on capital employed for June 2025 came in slightly lower than 13% as compared to 14% for June 2024 since capex incurred on the projects will start yielding returns in the forthcoming quarters.
By maintaining rigorous financial discipline, we ensure a robust balance sheet that supports agile investments in strengthening existing and adjacent better businesses and cost saving initiatives. That concludes my opening remarks and I request the moderator to please open the forum for the Q and A session. Thank you.
Questions and Answers:
operator
Thank you ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their 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 Neeram Jamudya from Anvil Wealth Management. Please go ahead.
Unidentified Participant
Yeah Good afternoon team and congrats for a superb performance. A few questions to ask on the chemical side. So when we see our Q1 performance for the caustic soda business, our PBDIT has improved by close to around 3 rupees 20 paisa per kg as compared to 2 rupees 40 rupees 2 rupees and 40 paisa per kg in Q1 of FY25. So just wanted to Understand like the pbdit improvement of 3 rupees 20 paisa vs eco improvement of 2 rupees 40 paisa the difference comes to around 80 paisa per kilogram. So if you can just help us understand was it all because of the savings in power or some fixed cost optimization also would have helped us in the improved performance.
Amit Agarwal
The improvement in EBITDA is function of two things essentially. One is the improvement in product prices which as you mentioned has been better than last year. Second is and even the variable costs have been lower. The variable cost ballpark have been lower by about 10 to 12%. So these are the two key reasons and within variable cost the major reason is the power cost. Power cost also had two components. One because the power rate was lower given that the fuel rate was lower than same period last year and the efficiencies as was mentioned in the CHMS message as well from the 120megawarbah plant that also added so mix of quite a few factors.
Unidentified Participant
And sir, when we have commissioned the plant for the expansion of 850 tpd caustic soda and 120 megawatt power plant at Bharuj. Let’s say before that our fixed cost was 100 how much our fixed cost would have gone up with the commissioning of these two capacities.
Amit Agarwal
It’s difficult to give you a number on by how much pertaining to these two facilities. The overall the chemicals business is in a growth mode now. Therefore again it has to hire for newer capabilities. Like for example if we are looking at growing in epoxy, the capabilities for epoxy were hired almost about a year back at either critical capabilities. So it’s a mix of creating an entire infrastructure of capabilities and as we move more these expenses will go up overall.
Unidentified Participant
And sir, just an add on on this like just we divide the production volumes. Possibly we would have required 220 megawatts of power for our caustic soda business in Q1 of FY26. So what was the mix of power between the renewables and our captive power plant?
Amit Agarwal
Our renewable average that we get in Q1 was about 2425 megawatt against the total requirements. So what we produced during the quarter averaged at about 2200. You’re right. So therefore that only about 2526 megawatt came from renewable.
Unidentified Participant
Correct. The second question is on the epoxy side. Like the acquired asset has a capacity of 17,000 tons. So it is all predominantly the LER capacity or does it also include some downstream capacity as well?
Ajit S. Shriram
You’re right, yes, it does include some downstream capacity as well. But again this would be the starting point for us and we will use this acquisition for entry into the business and also for further growth. So we expect to grow the capacities. Relatively soon.
Unidentified Participant
One of the interview statement, you also mentioned that we intend to almost triple our capacities for the epoxy business. So given the kind of expansion what we are looking at, what could be the timeline one could expect on for this expansion A and B what sort of capex would be required if we decide to go ahead with the expansion?
Ajit S. Shriram
So it will be hard to share some of those details at this point but the team is evaluating various technologies and of various capacities and once the board approves these expansion that will be announced.
Unidentified Participant
Got it. The last bit from my side, if you can share the market size of LER as well as the specialized epoxy market in India, that would be very helpful.
Amit Agarwal
The total market size of epoxy, the liquid epoxy resin and its formulations put together is about 200 kilotons per annum as on date and expected to grow to about 300 in next three years.
Unidentified Participant
Got it sir. Thank you so much sir and wish you all the best at Jonathan. Thank you for further questions.
Ajay S. Shriram
Thank you.
operator
Thank you. We take the next question from the line of Ahmed Mada from Unifi Capital. Please go ahead.
Ahmed Mada
Thanks for the opportunity sir and congratulations on good set of numbers. I’ll carry the question of the epoxy side. Can you give a little more explanation in detail regarding the business? On few aspects. One is you mentioned about the increasing capacity but what we understand is there is enough supply in India to sort of cater the domestic market. So how do you see the exports side of the epoxy and what countries, if you can give some sense how you are pursuing the business in terms of increasing the capacity and utilizing it and secondly, how much of the ECH which we have planned capacity will be used internally? Yeah, so that’s my question on epoxy.
Ajit S. Shriram
So epoxy, there is adequate supply of epoxy in the market right now. But what we are seeing is that there is a healthy growth in the market for epoxy. So as was mentioned already by our cfo, we expect the demand for epoxy to go up from roughly 200kt to 300kt per annum in the next three to four years. So I think that will help in absorbing the increased capacity which we will also be coming up with. Additionally we, we will of course focus on domestic demand, but we will Also focus on exports, so we’ll cater to the global market.
And I think with our cost structure being relatively competitive and we’d have to closely monitor the tariffs that are being levied across globally, I think it positions us well for growth in the years to come.
Unidentified Speaker
Ahmed, just to add you lot of capacities in Europe from players like Khansmann, Westlake, Holland, they are being proposed to shut down, to be shut down, especially the liquid epoxy resin facility. And they probably would like to focus more on formulation. So that will also make liquid epoxy resin from India a global product. And further, a lot of these wind manufacturers are coming to India to manufacture blades and things like that. I think there is a lot of growth which is expected to happen within Indian market and global market for India to be a key player.
Ahmed Mada
Got it. And can you answer on the epichlorohydrine part, what percentage will be using internally and roughly what kind of margin range you think is sustainable in epoxy business?
Ajay S. Shriram
So I think it will depend as our capacities grow. Currently it will be a smaller percentage of our ECH which will be consumed captively. But as we expand our capacity for ecoxy then a larger percentage of the ECH will be consumed captively. So and therefore we will grow ECH as well in the time times to come. Since this is a growth vertical for us, it will be a dynamic number. But the advantage of being across the value chain helps position us reasonably well for this business.
Ahmed Mada
Got it. On the margin improvement part, you explained about the cost structure in terms of reducing coal cost as well as variable cost. I had a question on the increase in the captive chlorine consumption. So if I do the numbers, I mean your costly volumes are of 20%. But if I look at the value added business in the caustic chlorine segment, it looks the number is up 70, 80% because we have commercialized new capacities for aluminum chloride, hydrogen peroxide and so on. So in terms of percentage terms, has our chlorine captive use increased materially in last three to four quarters? If you can quantify the percentage number or you can even give the from the base of 100 how it is moved.
Ajit S. Shriram
So we actually look at it in two parts. One is the captive chlorine consumption directly, but secondly also is our pipeline customers. So in the last 30 odd years we have grown and our pipeline customers have also grown. They are our valued customers and we have a very strong relationship with them. So after, after the current expansions we expect approximately 40% of our chlorine to be consumed captively in Gerardia, in baruch, and approximately 30% will be with pipeline customers. So roughly 70% across captive and pipeline customers will be consumed in the complex.
Ahmed Mada
This 70% increase includes the commercialization of ECH as well.
Ajit S. Shriram
Yes.
Ahmed Mada
Okay, got it. And in March we had a board meeting regarding the corporate restructuring and we had some update in last call as well. Would you like to comment how the timelines are seeping up? How is the discussion going on the board level? If you can give some sense at what level we have reached and when can we assume that it will be formalized?
Ajay S. Shriram
See, this is under discussion at the board level as well as internally. Our own management of this entire exercise. It is a major exercise where our finance team and other teams are working with consultants and others. What is the best way, what is the best time? How can we take it forward as rapidly as possible? So we are hoping the next few months we take it up to the board and then apply to the government for various permissions and clearances, which is a fairly unfortunate, lengthy and complicated process, but we hope in a couple of months to take it to the board.
Ahmed Mada
Okay, got it. Last question on the epichlorohydrin part. I mean we had a delay of nearly two years. If I go back to the original timelines. But is it fair to assume that all the process related, component related issues have been resolved and it will be fully commercialized from Q3 or do you think still 12 pieces are yet to be done?
Ajit S. Shriram
Yes. So the timeline for completion of the project has been longer than what we had originally anticipated. But we are happy to note now that we have started trial runs of the plant and we expect to announce commissioning in the next couple of weeks and then ramp up in the next few quarters.
Ahmed Mada
Noted, noted, noted. Just one question on the farm Solutions business.
operator
If you could please join back the queue as there are others waiting for their chance.
Ahmed Mada
Sure. Definitely. Definitely. Thank you. Thank you. I’ll come back.
Ajay S. Shriram
Thank you.
operator
Thank you. The next question comes from the line of Poojan Shah from Molecule Ventures. Please go ahead.
Pujan Shah
Hello. Thanks for the opportunity. Sir. My first question pertains to the PVC side. So in the industry perspective we have seen there was a hike of 3.5 rupees per kilogram in April and May. While in our PPT we are mentioning there is a price correction of 17%. So I’m not able to gauge. So can you just please correct my understanding?
Ajit S. Shriram
Yeah, so the PVC prices have been soft. If you see in our presentation itself we have mentioned that PVC prices from April onwards and actually if you look at even Q4 of last year where they were very good in January 76 and then 76,000 and they came down in, in. In April and May May they came down to 66, 67,000 so they are currently continuing at that level.
Pujan Shah
So can we read that stuff that initially what the price hike was being announced has been. Has been again sent back to the previous levels because there is a continuous jumping from the Chinese and.
Unidentified Speaker
I’m not very clear. Can you repeat your question? Or maybe you can if you’re on the speaker. If you can be on the phone.
Ajit S. Shriram
Yeah, that’s better.
Pujan Shah
Yeah. So just wanted to understand that. So if there was a price hike of 3.5 rupees per kg so can we just read out that the price increase has been. Has been again came back to the same level as there is a continuous jumping from the Chinese end.
Ajit S. Shriram
See 1 I am certainly not aware of this price hike because these prices what we are giving you is giving you demonstrate we are also giving you international prices as well and prices as well. But yes you are right the major reason for this is we continue jumping from China and the delay in position of anti dumpling duty in India.
Pujan Shah
And in the today’s outcome we have seen there is a precursor has been announced from the DGTR the EDD purpose and soon might it get converted into a final findings. So just wanted to understand in a broader perspective that how much PVC prices from Chinese and I understand the duty may be vary from country to country but just wanted to understand the dumping continues from the China So is there is if the dump if it comes so what could be the industry pricing can like it would be around 7374 rupees a kilogram and if it happens what margins which we will able to pertain so it will be a break even or flattish around 1 to 2% EBIT level or how.
How. How it will we should read on that part.
Unidentified Speaker
Well frankly on this issue of ADB what you said is right. DGPR in fact has made out the report today and they have actually now made it public today or they are going to make it public this evening or tomorrow and waiting for I think maybe a week 10 days to get a feedback on that report. Thereafter it is expected that the report will go to the finance ministry and the Finance Ministry we hope will take action on it quickly. As you are aware there is a court case also been filed by one of the users and there the issue in that is that they are talking or they had talked about a couple of grades of pvc.
So the industry is saying that the decision on the grades of PVC had to be taken by the bgtr. They are the ones who are qualified and and educated to understand the various grades and the uses of those grades. So that has now come to the dgtr. They are taking action on it. We sincerely hope that in the next couple of weeks time it goes to the Finance Ministry and from there then they take action so that we are protected. Our expectation is that the price increase should be in the range of at least 6,7 rupees a kilo to start with.
Once the AGG comes in, which all countries they bring it in. We are not sure as yet, but I think China is the main concern right now for the industry which we are working on with the government.
Pujan Shah
Okay.
operator
And I would request you to please join the queue. Thank you. We take the next question from the line of Raj Vyas from TM Investment Technologies Private Limited. Please go ahead.
Unidentified Participant
Thanks for the opportunity and congratulations on a good side of numbers. So I guess last time you had given a revenue guidance of around 10 to 15%, right? And I guess margins are around 11 to 14%. So for FY26 for the remaining quarters, do we see the numbers in line or we are making some bit of changes with top line as well as the margins.
Amit Agarwal
We do expect our numbers to be in this range for the rest of the year. Especially Q3 and Q4 should help us make up because there is seasonality in our business. So Q3, Q4 should help us make up the deficit.
Ajay S. Shriram
I just want to add ladies and gentlemen that you are seeing the geopolitics of the world. You are seeing the way and US is moving on the trades on the tariffs and they make one level today, another one tomorrow. So we are hoping that India can come to some agreement with the US on the @ least some fundamental trade terms so we have some stability and policy. Otherwise the uncertainty is very high.
Unidentified Participant
Okay, so coming to the tariff point, like how you’re looking at the chemical business because in the press release you have mentioned that the global cost of solar supply chain is disrupted because of the tariff. So how we are looking things presently currently, how it is like shaping because it will shape up for next quarter’s performance as well.
Ajit S. Shriram
So as we have said there is unpredictability going forward for all types of businesses, including Proclustic soda. India was not exporting any caustic soda directly to the US Neither was China exporting any caustic soda directly to the us. So there is no direct impact. But there will be second order and third order effects in terms of the demands from the consuming industries including aluminium. Or if China exports more to other countries which it has started doing so that impacts the global flow of caustic soda. So we’ll have to see how this all plays out. But fundamentally if the demand supply remains balanced then we expect it to be a reasonable situation for the coming quarters and years.
Unidentified Participant
Okay, so lastly my question is with respect to the acquisition that you have made in specialty chemicals. So though it was a loss making company, so why we have picked up a loss making company. And second question with respect to same is when do we see the company like breakeven come into profitability in numbers.
Ajit S. Shriram
So for us actually this is a strategic decision and a strategic acquisition. The board had approved previously that we will be investing 1,000 crore into the advanced materials which is the epoxy business. So this is the first major step in that direction. You’re right that today some of the cost structures of this organization are not optimal. Luckily for us, with all the backward integration that we have, we will have our own ECH which will move by pipeline. We have our own caustic which will move by pipeline utilities which are at optimal cost. So these initiatives or these advantages will help us improve the cost structure for this for the company.
And as we grow, so we will look to grow. So with growth we will get benefits of scale, we will cater to new markets which are higher value added markets. So we expect this becomes an important starting point for our advanced materials business.
Unidentified Participant
That’s it. From my side. Thank you for answering my questions. Thank you.
Ajay S. Shriram
Thank you.
operator
Thank you. We take the next question from the line of Vignesh Iyer from Sequent Investment. Please go ahead.
Vignesh Iyer
Thank you for the opportunity. And my two questions are from the Freedom Palm Solutions vertical. If I’m not. Wrong, we have launched around 78 products last financial year under this segment. Wanted to understand how much percentage of our total revenue has come from. I mean especially the growth part of 29% volume has come from our new product launches.
Ajay S. Shriram
Yeah. So the way to look at the new product launches is as you rightly said, we have launched about 17 products in crop protection and crop nutrition vertical in seeds vertical. Within that business we keep launching new products to maintain the life cycle of seeds and to add to the revenue now within crop production and crop nutrition. These new products that are launched, they obviously take time to gather momentum which is about, let’s say it takes about one to two years to gather momentum. So they reassess and benchmark. Our success of new product is how they performed over the product which have been introduced in last two, three years.
What has been the revenue of that? Now that is if I see in FY25 for the full year basis that is about 20% of the product that were launched in last. Now that’s a very good benchmark. So generally industries put that benchmark at about 20 to 30% of the revenue. So we are pretty much there and we are getting more aggressive on that. So out of those 17 products, eight products were launched in Q1. So yeah, we have got a good pipeline. So we look forward.
Vignesh Iyer
Also sir, wanted to understand capital employed base has almost doubled when it comes to free time solutions. I wanted to understand is it primarily because of any new capital expenditure that we have done or is it because some part of R and D expenses are getting capitalized?
Amit Agarwal
So it is neither of the two. It is essentially all working capital and it depends on the seasonality and various factors of the business. They will all be on an average basis we will be more or less at the same level as last year. But the other point is we are growing the business. We are expecting higher volumes and research feed. So overall higher volumes in the business and therefore the working capital also is higher along with some bit of timing differences.
Vignesh Iyer
Okay, okay, I’m in confusion. Quarter two is the strongest quarter amongst all quarter and we have enough idea of how how the business would be in quarter two primarily because of that. Any inventory stocking, etc is it the right way to read it?
Amit Agarwal
If I understood you correctly you mentioned quarter two is the strongest quarter for sfs. Right?
Vignesh Iyer
Right, right.
Amit Agarwal
But actually it’s quarter three which is the strongest quarter because some of its major products get sold in quarter three. Ravi season.
Vignesh Iyer
Okay, okay, got it, Got it. Yeah, that’s also nice.
Ajay S. Shriram
Thank you.
operator
Thank you. We take follow up questions from the line of Neelav Jimuria from Anvil Wealth Management. Please go ahead.
Unidentified Participant
Thanks for the opportunity. Again sir, two clarifications. One on the value added products for the caustic chlorine business. So what does it all include? If you can just correct me here like my assumption shows, that also includes our flaker plant hydrogen peroxide, the hydrogen what we sell in the outside market and chlorine derivatives. So is it the right assumption to work with?
Ajit S. Shriram
Yes, that’s right. Absolutely. That’s right.
Unidentified Participant
Correct. Correct. And sir, what would be a rough contribution from these value added products in Q1 of FY26.
Amit Agarwal
See I did not have the numbers right away but just to mention that Caustic and Flakes may continue to be the major contributors and Hydrogen, these three products continue to be major contributor others that we recently introduced. So they are going through their life cycle of market development and cost capacity ramp up.
Unidentified Participant
Correct. Second question is on the chlorine realizations for for Q1 of FY26 because last quarter you mentioned that it was close to around 6 rupees 50 paisa negative. So if you can share the similar figures for this quarter as well.
Amit Agarwal
That’S about similar level. On average if you put both our quota and Baruch units together it’s in the same range of around 6.57 rupees as part of Q1.
Unidentified Participant
And the last bit is on the ECH plan. So what I could make out from the annual report is that we are also having our own refined glycerine plant. So we will be importing the crude glycerine converting into refine and then possibly to ech. So just wanted to understand from you what sort of benefits it could accrue to us if we haven’t put up this plant and would have bought directly the refined glycerine without converting crude to the refined one. If you can share your thought process here would be very helpful.
Amit Agarwal
So there is a margin which comes in when you convert from crude glycerine to refined glycerine. So in a way that is like a backward integration for us. So we hope to capture that margin as well and then do further value addition to ECH and to epoxy and beyond. So we will actually be across this value chain.
Unidentified Participant
Sir, is it safe to assume that it accrues close to around anywhere between 5 to 10 rupees on a depending upon the prices of what the products put together on a run rate basis is a benefit of 5 to 10 rupees per kg benefit which could occur to us if we keep on converting crude to the refining GF is the right assumption to make.
Amit Agarwal
I think it will be hard to share an exact range of numbers at this point. But yes, it enables the business to be much more robust and allows us to optimize our purchase decisions.
Unidentified Participant
Got it. Got it. Thank you so much sir and wish you all the.
Ajay S. Shriram
Thank you.
operator
Thank you. We take the next question from the line of Rohit Nagaraj from BNK Securities. Please go ahead.
Unidentified Participant
Thanks for the opportunity and congrats on good set of numbers. First question is. First question is in terms of the capital allocation. Now we have also gone ahead with downstream integration in terms of the inorganic initiative. How are we looking at from individual business perspective where the incremental capital will likely be deployed and in regards that are we building up any capabilities in house to get into maybe further or making inroads into certain other streams or other areas. Thank you.
Ajit S. Shriram
You see Capital Allocation 1, for us there are, you know the capital intensive businesses are essentially chemicals and sugar and ethanol. So you have two capital intensive businesses. The other two businesses which are more focused in terms of growth are Farm solutions and Finesta. There the capital requirement is lower. So that is point number one. Now the second is the capital allocation can be for organic or inorganic route and it will all be a function of need of the business, our growth agenda and the return. So we have particular financial principles or the hurdle rates before we make investments.
So the capital allocation, so there’s fundamental which is chemicals, sugar and dear two businesses. But then each of the businesses can have the capital requirement depending on the opportunity and that becomes the basis to decide. But we want to grow all these four businesses very aggressively.
Unidentified Participant
Got that? The second question, historically we have been only focused from the domestic market perspective. Given all business segments have been catering to the domestic market, is there any change in terms of thought process that we are also looking at the exports market And I mean what gives us confidence that we will be able to make our mark in the exports market in any of the product streams? Thank you.
Ajit S. Shriram
So again that is again based on the opportunity like what we mentioned in epoxy we do see export market picking up and therefore we’ve invested in epoxy and we feel that some part of our production will get into exports. But yet we will still continue to be largely a domestic player, whatever product we have right now. But we are open to opportunities for exports. I think Finesta, we are growing our exports market in a small way in seeds, we are growing our export market. So we are looking at this opportunity opportunities. But yes, majority still continues to be domestic.
Unidentified Participant
Thanks for answering all the questions and all the best.
Ajay S. Shriram
Thank you.
operator
Thank you. The next question comes from the line of Sneha from SKS Capital. Please go ahead.
Unidentified Participant
Hello sir, thank you for the opportunity. I just wanted to ask a very specific question regarding the UP tax on sugar that you talked about. Could you elaborate on that a bit more? And how much impact did we see and was it for like the companies who are based out of up? Like what is the thing that’s. I wanted to understand that.
Ajit S. Shriram
So see there was a nine bench Supreme Court judgment in a particular case wherein you know, the Supreme Court decided that the denatured alcohol, which is, it’s an always kind of a denatured alcohol is at par with the potiver alcohol which is fit for human consumption. So they’re put in the same list which empower the state to levy charges on or regulate the denatured alcohol as well. Earlier the denatured alcohol was in control of the center. So as soon as the judgment came, which also reversed her judgment which came in 1990, so the state government came out and the UP state government, they came out with notification to levy 1% export duty on any this ethanol which is exported out of the state of Uttar Pradesh with a retrospective from 2018.
So that’s where it stands now whether we are looking at the, you know, legal recourse if available. So we will take it accordingly as an industry.
Unidentified Participant
This was the first quarter we were impacted by that.
Ajit S. Shriram
Yes, because we made a provision on a conservative basis because the demand also was raised by the state also we have not paid the demands but on a conservative basis we thought we will account for it from 2018. So this entire amount that we have mentioned in our results, about 36, 37 crores pertains to amount from 2018 onwards till date.
Unidentified Participant
That’s it. Thank you so much.
Ajay S. Shriram
Thank you.
operator
Ladies and gentlemen, if you wish to ask a question, please press star and 1. We take the follow up question from the line of Ahmed Madha from Unified Capital. Please go ahead.
Ahmed Mada
Yeah, thanks for the opportunity again for the palm solution business. I had a question. What I understand is our portfolio today is still majority wheat and ruby focused. Is there any thinking on building a Kharif crop portfolio and any views on the same, please.
Ajay S. Shriram
You know our entire range of products of seeds, we are expanding it continuously. So at the moment wheat is of course the major crop. Research wheat which is a major crop which we are selling. But we are also getting into vegetables in a stronger way. We are also getting into other crops in a stronger way. So. So our plan is to have a range of products which will be able to be sold throughout the course of the year depending on the seasonal requirements based on the planting season. So we’re going to expand our range, we are moving ahead with that and that’s part of our growth plan.
Ajit S. Shriram
And if I may just add, it is also that there are two other verticals which we want to grow more aggressively than what they are right now. So even plant nutrition where we set up our Own manufacturing about a year back and crop protection there also we started our own formulation unit on a lease basis. So I think we will focus on them as well to grow a little more aggressively. So I think that will balance out the revenue quarter on quarter.
Ahmed Mada
Okay, got it. And for the capex part obviously we made two good acquisitions for Hindustan Specialty and DNV Global. On the organic side with the renewable power plant, aluminium chloride capacity and Fenesta what will be the broad organic capex expected in FY26?
Ajit S. Shriram
So you’re saying in terms of the cash outflow on organic fx?
Ahmed Mada
Yeah, cash on, yeah.
Ajit S. Shriram
So that should be in the range of around 600 to 700 crores.
Ahmed Mada
Can you give the breakup of the same if possible.
Ajit S. Shriram
About 300 odd crores is because on aluminum chloride and calcium chloride and I think about 100 crores should be on aluminum extrusion and then there’ll be few others.
Ahmed Mada
Okay, got it. That’s it from my side. Thank you so much.
Ajay S. Shriram
Thank you.
operator
Thank you. We take the next question from the line of Poojan Shah from Molecule Ventures. Please go ahead.
Pujan Shah
Hello. Hello.
Ajit S. Shriram
Hello.
Pujan Shah
Yeah, so just continuation with the previous question. So, so let’s suppose I understand the carbide. We manufacture PVC from the carbide route. And let’s suppose the RM prices remain the same and let’s suppose the add comes through the place and let’s suppose the hypothetical example that the price of what we have assumed of 6,7 rupees per kg it becomes a realization for us. So do you think that we can make an EBITDA margin of 5 to 7 rupees 5 to 7% on a blended basis assuming capacity utilization remains 100%.
Ajit S. Shriram
So see even today, even in Q1 my EBITDA margin was about 7%. So I think it should only increase from here by about 4 to 5% if the prices go grow by 6,7 rupees.
Pujan Shah
Okay so so basically assumption is so there won’t be any hike in the car. So RM for the pvc. Right. Right now because we for the enough capacity has been available for the RM purposes. So that makes a better sense so that at least our EBITDA margin would reach around in 10 to 11% in once it comes into place.
Ajit S. Shriram
In our business both input prices are largely the carbon prices. It’s anybody’s guess that what they should be. We would always expect them to be stable. So it’s very difficult to say whether or not prices will remain at these levels or not. We do work on improving EFFICIENCIES and improving our cost structures. But input rates can vary.
Pujan Shah
Right, Right, got it. And my last question on the caustic soda part. So we have seen a price increase. So could you state a reason? So do you think it’s a structural and and this price would stable from here on or it would might impact because industry is already running at 80 capacity utilization and we are currently we are also operating at 80% now the industry doesn’t have a more room to at least grow at increase in the capacity because that will deploy more chlorine and that will impact the margins ultimately. So do you feel that the price will remain stable from here on and it might be inch up coming quarters.
Ajit S. Shriram
So it’s of course hard to predict how prices will evolve for commodities including Costa Soda. There are many factors including domestic and global factors at play. But we do expect prices again in the medium term to be range down or to move up in the medium term.
Pujan Shah
Okay. Okay. Thank you so much. That is from my side.
Ajay S. Shriram
Thank you.
operator
Thank you ladies and gentlemen. If you wish to ask a question please press star and 1. As there are no further questions I would now hand the conference over to the management for their closing comments.
Ajay S. Shriram
Thank you. Ladies and gentlemen, thank you very much for your participation in our earnings conference call. In a world marked by economic fragmentation, shifting trade flows and geopolitical instability, businesses must remain agile and forward looking. Our company is well positioned to capitalize on these strengths. We have consistently invested to expand capacities, improve integration and enhance competitiveness across cycles. We harness digital platforms and embedding sustainability across operations. Our recently customers concluded CAPEX programs sets the stage for the next chapter of volume driven profitable growth anchored in operational excellence and a strong balance sheet. Thank you very much Once again.
operator
Thank you on behalf of DCM Sriram limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.