DCMSHRIRAM - DCM Shriram Limited Share Price

Management's outlook for DCM Shriram Limited emphasizes a cautious yet optimistic perspective in light of the current global economic climate, characterized by lower growth projections and ongoing geopolitical challenges. They highlight India's resilience due to strong domestic demand, supportive fiscal policies, and ongoing infrastructure initiatives.

Key forward-looking points from the management include:

1. Revenue Growth: For Q1 FY '26, net revenues rose to Rs.3,262 crore, reflecting a 13% year-on-year increase. Management anticipates maintaining a growth trajectory, with further volume-driven growth expected through ongoing projects.

2. Chemicals Sector: The chemicals segment has shown promising performance, with a 43% revenue increase driven by caustic soda volumes. They aim to continue this momentum with operational improvements and the ramp-up of new capacities.

3. Ethanol Expansion: Ethanol blending in petrol has reached 19%, with further government plans to increase support for the ethanol industry. This could boost sugar and ethanol business dynamics.

4. CAPEX Plans: The management outlined an organic CAPEX forecast of Rs.600-700 crore for FY '26 to support growth in key projects, including aluminum chloride and renewable power capacities.

5. Market Strategy: The company plans to leverage its acquisitions, such as Hindustan Specialty Chemicals, to enhance product offerings and enter adjacent markets, particularly in advanced materials.

6. Sustainability Focus: There is a strong commitment to sustainability, with initiatives aimed at reinforcing green power capacities, enhancing cost efficiencies through digital platforms, and improving overall operational viability.

7. Margins Guidance: Management expects margin improvement due to favorable pricing, operational efficiencies, and stabilizing input costs, targeting EBITDA margins to rise as business conditions improve.

This holistic strategy showcases the company's proactive stance to navigate market challenges while capitalizing on growth opportunities.

Q&A Summary from DCM Shriram Earnings Call Transcript (July 23, 2025)

Question 1: Can you help us understand the PBDIT improvement in the Caustic Soda business?

• Our PBDIT improvement stems from two factors: improved product prices and lower variable costs, which have been reduced by 10-12%. The major contributor to this was reduced power costs due to lower fuel rates and efficiencies from our new 120-MW power plant.

Question 2: How much have the fixed costs changed with the commissioning of the new caustic soda and power plants?

• It's challenging to quantify the exact increase in fixed costs due to those facilities. Overall, growth necessitated hiring new capabilities for expansion, which implies an increase but in alignment with growth strategies.

Question 3: Regarding the Epoxy plant acquisition, what capacity does it have?

• The acquired asset has a capacity of 17,000 tons, including some downstream capacities. This acquisition is a strategic entry point for growth in the Epoxy business.

Question 4: What is the expected timeline for the expansion of capacities in the Epoxy business?

• While it's difficult to provide specific timelines, we are evaluating various technologies and capacities, and will disclose details upon Board approval.

Question 5: Can you provide insights on the market size and growth prospects for Liquid Epoxy?

• The market size for liquid Epoxy resin is currently about 200 kilotons per annum, projected to grow to approximately 300 kilotons in the next three years.

Question 6: What are the expected margins for the Epoxy business?

• It depends on capacity growth; currently, the percentage of ECH consumed internally is small, but as we expand, that will increase.

Question 7: How are you facing the challenges posed by the tariffs impacting the Chemical sector?

• There is unpredictability due to tariffs, but we anticipate that demand supply balance will remain stable if global disruptions are managed.

Question 8: Could you elaborate on the Supreme Court ruling affecting ethanol exports from UP?

• The ruling allows UP to levy a 1% retrospective excise duty on exported ethanol from 2018. This resulted in a provision of approximately Rs. 36 crore in our financials, and we are exploring legal recourse against it.

Question 9: What is the guidance for revenue growth and margins for FY '26?

• We maintain our previous guidance of 10%-15% revenue growth and expect margins to be in the range of 11%-14%. Seasonal demand in Q3 and Q4 should help meet these targets.

Question 10: What is the expected cash outflow for organic CAPEX for FY'26?

• We project a cash outflow of Rs. 600-700 crore for organic CAPEX, including around Rs. 300 crore for aluminum chloride and calcium chloride.

This Q&A set delivered a concise overview of key concerns and strategic directions for DCM Shriram.