FINPIPE - Finolex Industries Ltd. Share Price

In the earnings call held on August 5, 2025, management provided an outlook highlighting modest growth amidst challenging conditions. The volume for pipes and fittings increased by 2% to 92,129 metric tons from 90,620 metric tons in Q1 FY '25. However, total income from operations fell 9% to INR 1,043 crores compared to INR 1,140 crores in the previous year due to weaker sales realizations driven by volatility in PVC prices.

EBITDA dropped to INR 94 crores from INR 207 crores, while PAT stood at INR 97 crores, significantly lower than the INR 505 crores reported in the previous year, which included an exceptional gain of INR 339 crores. The management emphasized a strong balance sheet with a net cash surplus of approximately INR 2,533 crores as of June 30, 2025.

Key forward-looking points included:

1. Despite a weak demand scenario, an upward trend in July suggested a potential high single-digit growth, with hopes to cross double-digit growth later in the year.
2. Guidance on revenue and margins remains contingent on the stability of PVC prices, which are anticipated to stabilize following the expected implementation of anti-dumping duties, likely leading to a price increase of INR 3 to INR 6.
3. The company is set to implement an additional 50,000 tons of pipe capacity by September 2025, fully operational to meet market demand.
4. Management intends to shift further towards a non-agri segment to balance the current agri-non-agri mix, currently at a 70-30 ratio, aiming for a more equitable distribution in future.

Management reiterated that the planning for capacity expansion continues, focusing on strategic growth while maintaining profitability through effective management of fixed costs.

1. Question: July and August demand outlook?

Answer: Due to the early onset of monsoon, our demand fell in June. However, since July, we have experienced high single-digit growth. While we avoid giving precise guidance, we anticipate this trend will continue and hope to reach double-digit growth soon.

2. Question: Agri vs. Non-agri performance this quarter?

Answer: Both agri and non-agri segments grew by approximately 2% this quarter. The volume split remains around a 70-30 ratio, consistent with the previous year's quarter.

3. Question: Pricing outlook in light of PVC price trends?

Answer: PVC prices have seen a decline. Our performance depends largely on their stabilization. Pricing guidance will become clearer post-October once the anti-dumping duty is clarified.

4. Question: Capacity additions for FY '26?

Answer: We've added 50,000 tons capacity this year, with implementation nearly complete by September. Future potential expansions will likely occur at existing sites due to infrastructure readiness.

5. Question: Impact of PVC/EDC prices on margins?

Answer: This quarter, margins were impacted by declining PVC prices despite inventory management. Although spreads improved slightly, they did not translate to proportional gross margin improvements.

6. Question: Guidance on capex for FY '26?

Answer: We revised our capex expectations to INR 200-300 crores annually. For this year, we anticipate spending around INR 150 crores, focusing on growth and maintenance of capacity.

7. Question: How is the transition to new management being planned?

Answer: The strategy remains board-driven and stable, regardless of leadership change. The new Management Director will focus on market penetration and expanding distribution.

8. Question: Involvement of Chairman and market share concerns?

Answer: The Chairman is actively engaged in strategic decisions. While some market share may fluctuate due to competitors, the board remains committed to the company's long-term performance aims.

9. Question: CPVC market trends?

Answer: CPVC prices have recently declined due to increased capacity. Our volume growth reflects market share gains, and we expect ongoing growth consistent with overall plumbing market trends.

10. Question: Strategy for cash reserves?

Answer: While we focus on expanding pipe capacity, we're also mindful of our cash reserves and will consider returning excess funds to shareholders when it's strategically viable.