GHCL Limited (GHCL) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to GHCL Limited Q3 FY '26 Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Meet Vora from Emkay Global Financial Services Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Thank you for joining us on GHCL's Q3 FY '26 results conference call. I would like to welcome the management and thank them for giving us this opportunity to host them. We have with us today Mr. R.S. Jalan, Managing Director; Mr. Raman Chopra, CFO and Executive Director of Finance; Mr. Manu Jain, General Manager, Investor Relations and Finance. Before we begin this call, I would like to point out that some statements made in this call may be forward-looking, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I shall now hand over the call to the management for their opening remarks. Thank you, and over to you, sir.

Thank you, Meet. Good afternoon, everyone. A very warm welcome to GHCL's Q3 FY '26 earnings call. I hope you had a chance to look at our results as well as the investor presentation uploaded earlier. Let me start with the industry landscape. The global environment remains dynamic and challenging. However, the domestic story continues to be resilient. We are in the -- seeing the healthy demand growth for soda ash in India, hovering around 5%. This is a positive sign for the long term. On the supply side, the market continues to be oversupplied. We have witnessed a steady influx of import. For the first time in 9 months of this fiscal year, import volume has noticeably increased by 10% compared to the same period of last year. This high level of import continues to put pressure on market realization. While this creates a challenging competitive landscape, our focus remains on what is within our control. We are focusing on enhancing our operational efficiencies and cost leadership to navigate these headwinds. Coming to our performance this quarter, I'm pleased to share that we have successfully completed our planned maintenance shutdown during Q3 FY '26. While this shutdown resulted in some loss of production volume, we managed the inventory and supply chain effectively. As a result, our top line for the quarter was not impacted. This demonstrates the strength of our customers' relationship and our planning capabilities. We remain committed to creating value for our shareholders. I'm happy to report that we successfully completed our shareholders buyback program of INR 300 crores. This reflects our strong cash generation ability and our confidence in the company's future. Moving to our growth initiative. We are in the final stage of our expansion projects, bromine and vacuum salt. Both projects are in the last leg of completion. We expect commissioning to happen towards the end of current quarter, that is Q4 FY '26. These projects will diversify our business and provide new growth avenues. Greenfield soda ash project progress has been slower than expectation. This project is a significant strategic investment and part of our long-term goals. In summary, while external factors like import present challenges, GHCL stands on a strong foundation that is backed by strong cash flow through volatile industry scenarios and our emphasis on the driving operational efficiencies. Bromine and vacuum salt represents a change in product mix and diversification. With safety, sustainability and operational excellence as key driver, we are in the position to deliver to our shareholders and all stakeholders. I would like to thank all our shareholders and our investors for their continued trust in GHCL. I will now hand over the call to Raman to walk through the financial highlights. Thank you.

Thank you, sir. Good evening, everyone, and a very warm welcome to our earnings call for the third quarter and 9 months ended 31 December, 2025. Our performance remains steady. This is a result of our focus on operational excellence and efficient manufacturing. We achieved this despite the challenging pricing environment in the industry. I will now walk through the key financial highlights. Revenue for the quarter came in at INR 773 crores compared to INR 807 crores in the corresponding quarter of last year, an increase from INR 739 crores in Q2 of the current year. This reflects a tough global market condition, resulting in cheaper imports into India, which has adversely impacted our realizations. EBITDA for the quarter stood at INR 175 crores compared to INR 259 crores in Q3 of last year and INR 175 crores in Q2 of this year. We reported EBITDA margin of 22.7% in the current quarter. On a Q-on-Q basis, EBITDA margin declined by 100 bps, mainly due to fall in realization. Our ability to protect profitability even in this environment is a direct result of our deep-rooted philosophy of cost control and operating efficiencies. PAT from continuing operations stood at INR 107 crores compared to INR 168 crores in the corresponding quarter of last year and a similar profit in Q2 of this year. During the quarter, we have undertaken the planned maintenance shutdown, which led to temporary reduction in production. Despite the shutdown and subdued domestic realization, we maintained steady quarter-on-quarter performance, driven by strong operational efficiency and effective cost management. For 9 months period 31 December 2025, we generated INR 443 crores in cash profit after tax. Out of this, we spent almost INR 226 crores on CapEx and INR 29 crores on repayment of loan, while working capital was released by INR 109 crores. During the quarter, we have successfully completed INR 300 crores buyback. This is in addition to INR 115 crores dividend payments made during the financial year. In total, we have rewarded our shareholders by distributing INR 415 crores during the 9 months period of this financial year, which is 116% of PAT for the 9 months period. In a period of external volatility, this moves reflects the strength of our balance sheet and our commitment to consistently rewarding the shareholders. We have net cash surplus of around INR 890 crores as at the end of 9-month period FY '26. This financial agility supports our strategic CapEx execution and provides significant growth headroom. With this, I conclude my comments and now request the moderator to open the forum for question and answer. Thank you.

[Operator Instructions] The first question is from the line of Aditya Khetan from SMIFS Institutional Equities.

Sir, just a couple of questions. Sir, recently, we know that antidumping duty on soda ash has not been imposed. Coupled with this, we are witnessing 10 lakh tonnes import of soda ash consistently. How you see the growth story of the company panning out in this headwind? And considering the near-term expansions of bromine and salt, is this enough to like to diversify the company from mere soda ash into these smaller businesses? How you see the story panning out for the next 2 to 3 years in brief, sir?

Aditya, a very valid question, first and foremost. First and foremost, yes, you are right that antidumping duty has not been confirmed by the Ministry of Finance. And -- but the positive side of this entire soda ash business is that the growth story in India itself is, like I mentioned to you, growth story has been very significant. Just to give you a number, next year, what looks like is that the way the green energy initiatives are being taken and this will kind of enhance the demand perspective of the Indian soda ash. Last year, means the current year looks to be around 5%. And this number could be better than this 5% in the next year. So demand definitely takes care of some of the import which is happening, along with some of the additional capacity, which has been built into the domestic industries. The second part, yes, at this point of time, there is a headwind, as I mentioned in my opening remarks as well because of the global demand-supply situation. But a couple of things which are spanning out, and we don't know how this will shape up in the coming forward, like the rupee devaluation versus the Chinese yuan appreciation versus dollar. This is kind of, I would say, this is a positive sign. Second, the Chinese government's philosophy of evolution, which they have introduced and probably many of the chemical and some of our consumer like what you call solar panels, those kind of people, there will be kind of a competitive advantage to them will also happen. The third, I would say, at this point of a time, the way the cost structure which we are seeing globally, I see that these kind of numbers looks to be kind of a pretty on the bottom of the pyramid. So hopefully, in the next 2, 3 years, demand growth, coupled with the economic recovery of some of the economy, we see a kind of a good situation could happen to this industry. And last but not the least, so far as the GHCL is concerned, as I mentioned, in spite of such a high reduction in the selling price, we have been able to significantly operate our plant and efficiently operate the plant, and we have been able to mitigate to a large extent our margin erosion because of the cost advantage which we have done in the operational efficiencies. And this is going to be permanent in our, what we call, benefit. Once the recovery starts happening, this will have an advantage. Both the advantage we'll have to us. In terms of your second -- the related question, diversification of bromine and what you call vacuum salt. See, this is a strategic move. And I just wanted to highlight, we started thinking about this 4, 5 years back. And on the continuous possibility of explaining and getting a new technology, we have been able to navigate this into the diversification first time in the GHCL. And this is a kind of, I would say, an add-on advantage because both these projects are more of a part of the GHCL because salt what we are doing is we are using the waste energy. And this will significantly help us to kind of improve our bottom line. Of course, the number will be smaller, but these are the kind of a strategic move. Same way bromine. From the existing salt capacity what we have, we have been able to build this bromine project. And this, again, will have an advantage of kind of a margin. And broadly, my understanding is both these businesses, of course, the top line will not be very significantly higher. However, the margin percentage are going to be higher. And this definitely will add on to our bottom line. It will help us to improve our bottom line.

Got it. Sir, you had mentioned in your opening remarks that this quarter there was a shutdown. So ideally, sir, like prices are similar to last quarter or I think they are slightly lower only, coupled with lower volumes. So ideally, top line should decline on a quarter-on-quarter basis. It seems to be like on a higher side, 5% up. Is there any like something which is missing here?

No, Aditya, I'll just explain you. Though my production is down, but my revenue is higher because my volume sell to the customers has been higher.

Okay, okay. So selling volumes have been higher, which is why your top line has moved up?

Right.

Okay, okay. Sir, when we look at the financial in this quarter, sir, the cost of raw materials seems a good steep jump roughly on quarter-on-quarter and Y-o-Y basis, some 20% jump we are witnessing. But on the health side, the top line has only grown by roughly 4%, 2%. So is there any component of inventory losses or like we have not been able to pass on the prices of RM?

No, I don't know, Aditya, which number you are talking about. If you can give me specific where you're talking.

Cost of raw material. Cost of raw material.

Cost of raw material, Aditya will always have a kind of a component of the inventory adjustment also, right?. Inventory adjustment, I'm talking about finished goods inventory adjustment.

Okay, okay. [indiscernible] inventory losses figures?

No, no, there is no inventory losses. I said inventory adjustment. See, cost of raw material represents the production which we have done during this quarter, right? And the inventory adjustment happens on the finished goods. So you have to look at in totality of both these things put together. And if you have any specific detailed question on this, we will always answer you on it offline. But rest assured, there is no such kind of inventory losses into the system.

Got it. And sir, in the presentation you mentioned Phase 2 bromine of 10,000 tonnes. Like earlier, sir, it was some 12,000 tonnes capacity expansion. There is some change into that?

Bromine, see bromine, Aditya, there are 2 components. One component is the existing salt field what we have. There we have added -- we have created a capacity of 2,800. In the new project which we have got, this government land, which is far off from here, there once we commission, there will be another 10,000 to 12,000 tonnes of the additional volume will come in. But that will take a few years maybe then only that will get added. On an immediate basis, it is only 2,800 tonnes.

Sir, just one last question. Considering this bromine and new salt field, at peak utilization, how much of EBITDA diversification we can take place from these newer businesses?

See, newer businesses, as I said, Aditya, if you look at the current what these 2 businesses, vacuum salt and the bromine, the numbers of the top lines are not very significant. Though margins are significantly higher, but the top line is not very significant. So the diversification from the revenue perspective is not going to be significantly higher.

Our next question comes from the line of Rohit Sinha from Sunidhi Securities.

Sir, just I missed out on listening to that ADD thing. So are we now completely in the phase like this ADD is now ruled out completely or still there is a scope that after some time maybe Ministry will consider?

Rohit, so far as our understanding is concerned, the government -- the Finance Ministry has to approve that within 90 days. That 90 days already passed. They don't communicate whether they approved or they have rejected. But since the 90 days has been passed and as per the customary, we need to assume that they are not in favor of approving it.

Got it. Got it. Sir, secondly, on the solar side, I mean, we have been quite positive on the solar industry in terms of demand for the soda ash. So how much improvement basically we have seen in last maybe 3 to 4 quarters or 5 quarters since we have been focusing? And I mean, from 5 or 6 quarters back, what was the kind of volumes which we were going for the solar side and now at what percent? I know it would be very small, but still -- I mean, have you seen a decent improvement?

See, Rohit, I'll just tell you my understanding. See, at this point of a time, there are all the projects which are getting commissioned or are in the process of getting commissioned, currently at this point of a time, the demand per month is around 11,000 tonnes. And in next 1 year, by March '27, that will go to 28,000 tonnes. That means almost around, you can say, 17,000 tonnes of the extra demand. And these are all projects which are final, which are under implementation.

Extra per month.

So 17,000 means we are talking about something around 240,000 or something of that number will be the extra demand will happen. Of course, it will happen on a -- every quarter, the increment will happen. But peak of the demand in March '27 will be 28,000 tonnes per month. So that's a very significant demand. So far as your question of in the last few quarters, you remember that a couple of quarters back there was a kind of a duty and there was a kind of a duty on the -- exemption on the duty of the solar panel and solar glass import into -- solar glass import into India. That has been removed a few quarters back, only 2 quarters back, if my memory is correct. And after that, the new -- all these new projects have started getting commissioned. But still, I would say that this 11,000 tonnes, I don't have a specific number, but probably maybe this was around 5,000 to 7,000 tonnes maybe a few quarters back. Now it is around 10,000 to 11,000 tonnes.

Okay, okay. Got it. And lastly, on this bromine project. I mean, from next quarter onwards, what sort of revenue contribution you would be expecting? And I mean, my point is that we are seeing bromine prices quite increasing in the recent time. So have we started any interaction with the customers? Or how this thing will be translating into the revenue?

Rohit, first and foremost, let me say that this bromine project will get commissioned by end of March '26. So benefit of this project will be in the next quarter, first quarter of next year. The total capacity what we have is around 2,800 tonnes. However, that will take some time to kind of stabilize. Quality gets needs to be established because you know that the first time we are going for the bromine project, we need to establish the quality also and things like that. Once everything gets settled down, then probably the number will be coming. Like I said, revenue will not be very significant. You have the number and you know the market price. Based on that you can always easily kind of look at that number. But it all depends on how this ramp-up happens and how the quality gets established. But we are positive that in '26, '27, a good amount of bottom line addition should happen from the vacuum salt as well as from the bromine.

Our next question comes from the line of Jainam Ghelani from Svan Investments.

Sir, since you had a shutdown in the previous quarter, what was the volumes lost because of that?

Approximately around 20,000 tonnes.

And how much of our inventory did we liquidate during the quarter?

See, the sales has been higher than the production. And so to that extent, the inventory has been liquidated.

Yes, sir, precisely because if we look at the overall realization, the realization for the soda ash has been on the declining trend in this quarter also. But when you compare our revenue, our revenue has seen a marginal improvement or flat on a sequential basis. So is that the inventory liquidation is to the tune of 10%, 20-odd percent? Or how shall one look at the scenario at this point of time? Or what sort of inventory are we holding it right now on soda ash front?

See, in terms of -- like I said, production is down by 20,000 tonnes. Sales has not been impacted. The sales is better than the last quarter as well. And therefore, the inventory reduction has been there. Specific numbers, the quantitative number we don't have at this point of a time. And yes, you are right, the sales price has been dropped during this quarter as compared to the last quarter as well. But because of, like I said, operational efficiencies and the higher sales, we have been able to maintain the top line as well as the bottom line.

Sir, when we say that there is a significant improvement in the operational efficiency, which has resulted into a better performance on the EBITDA level or flat performance. So what sorts of levers do we have now to further improvise on the efficiencies or we have capitalized almost all the cost levers that we had in the last quarter?

See, I would just like to highlight here is that this is a culture which we have built over a period of time in the GHCL, where we never say that all levers has been exhausted. You know that when you become more better, then it becomes more harder for the further betterment, but that journey continues. If I remember correctly, last year, '24-'25 versus '23-'24, we have highlighted that we have almost saved around INR 140 crores in the sales by the operational efficiencies. Same way, the continue of journey of this year also continues. And at this point of time, I don't have a number that how much operational efficiency we have been able to build. But this journey will continue. How much that amount will be, sometimes it can be higher, sometimes it can be lower. But I'm very -- I would say that proudly, I would say that we have been able to implement all the cost reduction projects or the optimization over a period of last many years. And this journey will continue in the future as well. And many opportunities are there, let me tell you. There are many opportunities in the raw material consumption, on the -- what you call, on the power consumption or on the steam consumption or the efficiency improvement. There are many, many such opportunities are there and it will continue.

Sure, sir. And now it looks -- assuming that if the price of the soda ash remains at its current level, the next 2 years, we'll see a marginal growth coming from the bromine and the vacuum, which is a smaller project at this point of time. So once we scale up, definitely, it will take time. But there is a significant delay that is happening on a greenfield, on a regulatory approval. So can you highlight where and at what area which is getting stuck in terms of the approvals and when can we see an improvement on that level?

See, like very rightly you highlighted the point, you see any project when the greenfield project, when you go, the major hurdle comes in the land. And currently, at this point of a time, our major hurdle is on the land side only. We have got the environmental clearances. We have got all other approvals. The land acquisition and the land uses change. There are some technical hurdles are there and that we are trying to sort out. How much time it will take? It is very difficult at this point of a time because we are -- ourselves, we don't know how much time it will take.

Our next question comes from the line of Rohit Nagraj from 361 Capital.

Sir, first question is on the ADD front. So do we -- are we planning to reapply for the ADD? And allied question to that, till December, we had the minimum import price restriction. So has it continued from January or has it lapsed?

See, Rohit, first and foremost, from the industry side, all efforts are there to look at some kind of a protection from the government, either in the form of ADD or in the form of other protection. There are many other opportunities are there and we are working on that. So far as the MIP is concerned, this has got expired in 31 December, because at the time, the expectation of the antidumping duty was alive, but we have reapplied and the things are under consideration of the government.

Sure. That's helpful. Question is on the broader industry perspective. So we have seen generally that Asia is a market where soda ash demand and consumption has been growing. Just wanted your perspective, given that you track all the markets, is there any structural stagnation or decline in Europe and U.S., which are the developed countries? And because of which, at least for the short term, there will not be any material improvement as far as pricing is concerned given that whatever volumes will be lost from these geographies, the incremental supplies will be able to take care of demand from the growing geographies like, say, Asia?

See, Rohit, let me give you a slightly broader understanding of mine. See, there are 2 things which has happened. And you know that China is the leader in terms of the -- out of the total capacity, I think almost around 50% each in China itself, okay? The 2 developments which has happened in the last 2 years, first and foremost, is the new additional green -- what you call natural soda ash commissioned, almost around 10, 11 million tonnes of the new addition has been done. At this time, the demand in the China was booming because of the solar and the lithium ion. And like I said, last year, it was around 14% demand growth. However, in '25, the demand growth in the solar as well as the real estate has been on the slower side. And '25, the demand has been degrown by around 1% or 2%. So there is a demand-supply mismatch in China, which has led to the oversupply. The second part, because of the geopolitical situation, even Europe demand has been not -- right now, I would say that they are more on a -- not growing. Even in the last few quarters, it has not gone down as well. U.S. is slightly improving, demand of the U.S. However, because of China, because of Europe, there is a surplus situation. So far as the India is concerned, as I mentioned in my opening remarks also, that Indian demand has been significantly better. So if you look at in terms of the demand side, I don't see in this part of the world, Asian part of the world, there is any concern. The moment the slightly balance happen between this demand-supply and slightly recovery in the Chinese demand happens, the things would -- will be looking better.

Sir, the line for the participant seems to be disconnected. Shall we move on to the next participant?

Please do that.

Our next question comes from the line of Darshita from DSP Asset Managers.

Sir, could you help us out with the sales volume growth for the quarter?

See, Darshita, we have -- I've already given you the number in terms of the revenue. And we don't generally talk about the volumes.

Could you just give at least a number as to how much of the volume growth? You said it was positive for the quarter. So if you don't give out the volume number as such, but if you could just help us out with the percentage growth?

Volume growth is roughly around 5% to 6% -- plus 5% higher as compared to the same quarter of last year.

Okay. It's about 5% higher.

5% to 7% kind of a number will be there.

Our next question comes from the line of Darshan Deora from Indvest Group.