BOROLTD - Borosil Limited Share Price

Borosil Limited's management provided an optimistic outlook during the Q1 FY26 earnings call, emphasizing resilience despite challenging market conditions. Consolidated revenues reached INR 232.7 crores, reflecting a year-over-year growth of 5.2%. Operating EBITDA was reported at INR 40.2 crores, a 16.1% increase compared to the previous year, and the EBITDA margin improved to 17.8% from 16%. The profit after tax surged 87.4%, reaching INR 17.4 crores.

Management outlined several forward-looking points. They anticipate recovery in sales across various categories, particularly following recent economic measures like GST rationalization and new tax schemes, which could act as demand drivers. They estimate a long-term revenue growth of 15% to 20% CAGR and emphasized that the expected stabilization in market conditions could rebound sales in the next quarters.

Key initiatives include the establishment of a new facility in Rajasthan with an estimated initial CAPEX of INR 40 crores for producing vacuum-insulated stainless steel products, expected to generate INR 120 crores in revenue upon completion. Additionally, investments of about INR 75 crores in expanding solar capacity will help lower operational costs, projecting savings of around INR 30-32 crores annually.

Management is also optimistic about the growth of the health-conscious product segments, including the INR 4,000 crore lunchbox market, where Borosil's offering is well-positioned. They noted significant shifts in consumer behavior towards glass and steel products in line with rising health and wellness priorities, indicating strong growth prospects for the brand.

Overall, Borosil remains committed to leveraging its strengths, expanding its product portfolio, and maintaining sustainable growth amidst short-term challenges.

Major Questions and Answers from the Borosil Q1 FY26 Earnings Call

Question 1:
"As Borosil's non-glassware portfolio now contributes over 60% of the brand revenue, how are you planning the next phase of brand evolution, particularly in expanding into adjacent categories like smart kitchen appliances and sustainable cookware?"

Answer:
We continuously evaluate the kitchen and table categories. We're not launching modular kitchens now, but we have strong plans for products like gas stoves and porcelain dinnerware this year. Our focus is on delivering everyday-use products that combine quality, design, and convenience, which aligns with our brand's vision. We're always innovating in various categories, looking for opportunities to expand.

Question 2:
"As Borosil scales across different categories, how do you prioritize capital between product innovation, digital distribution, and inorganic growth?"

Answer:
Capital allocation is based on the potential return each category can generate. We conduct detailed assessments monthly to decide where to invest. Priorities are driven by the size and growth potential of each category, ensuring we balance between innovation and maintaining profitability.

Question 3:
"What kind of margin expansion do we expect post-commercialization of the stainless steel glass unit? Any plans for external sales of stainless steel glass?"

Answer:
Currently, demand will be focused on internal consumption due to higher demand than supply. It's challenging to predict margin expansion precisely due to market dynamics. However, I expect our return on capital employed (ROCE) to exceed 20% in the stainless steel category over the next few years as we leverage efficiencies.

Question 4:
"We targeted 15% to 20% revenue growth this year but achieved only 5% in this quarter. How should we look at the revenue growth moving forward?"

Answer:
Our medium-term CAGR projection of 15%-20% remains intact despite the quarter's soft performance, largely influenced by macroeconomic factors. We expect a rebound as we launch new categories and leverage both ongoing demand drivers and consumer sentiment improvements.

Question 5:
"What has been the loss of sales in pharma due to the new gifting regulations?"

Answer:
It's difficult to quantify specifically for this quarter, but overall, we estimated a yearly loss exceeding Rs.50 crores in that segment due to the regulations affecting gifts to healthcare professionals.

Question 6:
"What is our market share in the opalware segment?"

Answer:
I estimate our market share in the opalware segment to be around 30%.

Question 7:
"When will the new Teal Flask facility be fully operational, and what annual revenue can we expect?"

Answer:
The initial phase is expected to generate around Rs.120 crores in revenue once operational, with a subsequently planned second phase to boost that further.

Question 8:
"We understand you're planning to raise Rs.250 crores. Is this an enabling resolution or do you intend to raise it soon?"

Answer:
This is an enabling resolution we take annually, allowing flexibility for potential acquisitions or investments. Unless an attractive opportunity arises, it likely won't be utilized.

Question 9:
"Could you elaborate on the savings from the solar projects and expected future annual savings?"

Answer:
We expect annual savings of Rs.13 to Rs.14 crores from existing solar projects, and with new projects, we anticipate total savings to rise to Rs.30 to Rs.32 crores annually as we expand our capacity.

Question 10:
"Can you provide insights about the demand trends across different channels? What about general trade vs. e-commerce?"

Answer:
E-commerce and large format stores are performing well, while general trade is struggling, especially impacted by regulatory changes in the pharma sector. We anticipate improvement in demand across channels in the upcoming quarters, especially approaching festive seasons.

These exchanges highlight Borosil's strategic considerations and efforts to navigate market challenges while aiming for sustained growth.