Kiri Industries Limited (532967) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '26 Earnings Conference Call of Kiri Industries Limited. [Operator Instructions] I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Good evening, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Kiri Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the second quarter and first half of the financial year '26. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Manish Kiri, Chairman and Managing Director; Mr. Jayesh Hirani, Vice President, Finance and Accounts; Mr. Suresh Gondalia, Company Secretary; and Mr. Ranjit Singh Chugh, CEO, India Asia Copper Limited (sic) [ Indo Asia Copper Limited. ] Without any delay, I request Mr. Manish Kiri to start with his opening remarks. Thank you, and over to you, sir.

Good evening, everyone, and welcome to the earnings conference call for the second quarter and first half of the financial year 2026. I will begin with a brief overview of our quarter 2 performance, followed by key operational highlights and strategic updates. On a stand-alone basis, revenue from operations for the quarter stood at INR 195 crores, reflecting a growth of about 34% year-on-year and 8% sequentially. The company reported an EBITDA loss of INR 10 crores and net loss of INR 21 crores, primarily due to elevated legal expenses related to the DyStar case and higher operating costs. Despite these headwinds, the company maintained strong sales momentum and achieved improved capacity utilization across key product categories. For the first half of 2026, stand-alone revenue from operations stood at INR 375 crores, registering a growth of 20% year-on-year. The company recorded an EBITDA of INR 7 crores and net loss of INR 14 crores during the period. The profitability was impacted by continued legal costs associated with the ongoing litigation which are nonoperational and nonrecurring in nature, leading to an adverse effect on overall earnings. On a consolidated basis, revenue from operations during the quarter under review stood at INR 213 crores, a growth of 23% year-on-year and 6% sequentially. The company reported an EBITDA loss of INR 13 crores and net loss of INR 18 crores before considering the state of profit from associates and other operating companies. The consolidated performance was impacted by higher finance cost of INR 61 crores and elevated input cost during the quarter. For the first half of FY '26, consolidated revenue from operations stood at INR 416 crores, higher by 17% year-on-year, while the company reported an EBITDA of INR 6 crores and net loss of INR 131 crores before the share of profit of associates and other companies. The share of profit from associates and joint venture during first half FY '26 stood at INR 161 crores compared to INR 203 crores in the corresponding period last year. On the operational front, dyes and intermediate industry continued its gradual recovery during quarter 2 FY '26, supported by improving downstream textile demand and normalized global freight conditions. Reactive dyes maintained positive momentum, aided by firm export inquiries and steady consumption across key geographies. However, intermediates such as vinyl sulfone, H-acid remain affected by intermittent raw material volatility, particularly fluctuations in naphthalene-based feedstocks and other petrochemical derivatives. Despite these challenges, the company continued to demonstrate operational discipline and strategic focus, building upon the resilience exhibited in previous quarters. We remain focused on margin protection, cost optimization and operational efficiency across our manufacturing operations, ensuring stable performance amid a volatile external environment. As part of our value-focused strategy, we continue to rationalize the product mix within the specialty and dye intermediates segment while enhancing our export competitiveness. Our continued focus on cost control, liquidity prudence and long-term value creation helped mitigate the impact of external volatility during the quarter. Our joint venture, Lonsen Kiri Chemical Industries Limited, sustained healthy operational performance, supported by improved capacity utilization and steady domestic demand. The joint venture continued to deliver strong profitability metrics, contributing positively to the consolidated results. Now moving to DyStar case update. As you are all aware, under the share purchase agreement dated May 29, 2025, executed between the court-appointed receiver and Zhejiang Longsheng Group Company Limited, who is the purchaser, agreed to acquire our entire 37.50% stake in DyStar for a valuation of the company at $1.9 billion for a base consideration for Kiri of USD 676.26 million, an additional USD 20.29 million was also agreed to be paid by the purchaser to cover any shortfall or specific obligations under the SPA, taking the total potential consideration to approximately USD 696 million. The completion of transaction was subject to customary closing conditions and necessary regulatory approvals. The long stop date initially set for October 2, 2025, and later extended to November 3, 2025, has now been further extended to December 1, 2025, as the purchaser could not obtain the required approvals, mainly from NDRC and Ministry of Commerce within the stipulated time. The extension was granted subject to an additional USD 5.11 million being deposited into the escrow account, over and above USD 3.48 million already paid earlier. The company resisted and objected the first extension, which was given on October 2, 2025. And the company also strongly resisted again, objected the extension, which was given on November 3, 2025. So now till December 1, 2025, the company is going to continue to liaise and coordinate with the receiver to review situation on a daily basis and try to understand how the movements of -- and the developments of the approval take place till December 1, 2025. The enbloc sale process of DyStar continues to be managed by the court-appointed joint receivers in accordance with the directions of the Singapore International Commercial Court. Turning now to our strategic diversification initiatives. Kiri Industries step-down subsidiary Indo Asia Copper Limited is advancing the development of its integrated copper and fertilizer complex at Jafrabad, Amreli District in Gujarat, strategically located near Pipavav port for efficient logistics and proximity to key industrial corridors. The project is designed with very high ESG profile as zero liquid discharge, fully integrated facility with advanced systems for effluent recycling, desalination, waste recovery, underscoring our commitment to sustainability. The copper smelter with a capacity of 5 lakh tonnes per annum will produce copper cathodes, rods, tubes along with other byproducts such as gold, silver and selenium. The integrated fertilizer plant will utilize sulfuric acid, a byproduct of smelting process, to manufacture phosphoric acid and NPK DAP fertilizers. Significant milestones have been achieved, including receipt of environment clearances, completion of basic engineering, initiation of site development and foundation work, while detailed engineering and procurement activities are currently underway. The IACL project represents Kiri's strategic move into high-potential sectors that align with India's industrial and agriculture growth ambitions. It embodies our philosophy of responsible diversification, combining technological excellence, sustainability and long-term value creation. With that, we can now begin the question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of [ Khem, ] an individual investor.

Can you hear me?

Yes, can hear you well. Go ahead, please.

So basically, my question was that on what basis the receiver has given this extension if the long stop date earlier was 2nd November. So did they disclose any reasons why this extension has been given? And also, if Longsheng does not pay by 1st December also, then as per the court directions, what would be the next step? And can receiver even in that case also extend it further?

Right. So on November 3, when the extension was given, the reason which was explained to us was not being able to obtain NDRC approval and Ministry of Commerce approval, which Longsheng was supposed to obtain to conclude the transaction. So these are the reasons explained and indicated by the receiver. Now there is no guarantee that by December 1, these approvals would be obtained, right? And today, we are not privy to the information and documents which pertain to the exchange of correspondence, which is taking place between the receiver and Longsheng and the regulatory authorities in China. So all these documents belong to the receiver, which means they belong to the court. And it is receiver's assessment on which we are relying that they would be able to obtain the necessary approvals by December 1. So in case if the approvals are not obtained by December 1, we are going to continue to strongly recommend the receiver to discard and terminate Longsheng from the process and terminate SPA, which receiver can very well do now. We pleaded and we requested the same to the receiver on November 3, not to give any extension and terminate Longsheng from the process with immediate effect. So against the recommendation and request from the company, receiver with their own knowledge and the information available to them decided to give this extension, which is very much within the discretion of the receiver. And we hope that receiver has taken a prudent and sensible decision to give this extension. At the same time, in case if it is defaulted on December 1, the company's efforts today are to make sure that no more extension is being given. If necessary, company is going to exercise all its rights to approach the Singapore Court to make sure that the court is sensitized and the court is intervening if required to ensure that the next bidder can be given a chance. So our request to the court as well as to the receiver will be to select the next bidder and try to then give the chance to the next bidder to conclude the transaction. So that would be our strategic move. Of course, we will take all actions based on the legal advice from our Singapore council.

And just one follow-up question, sir. So in that case, let's say, when you do approach the Singapore Court, will the receivers have to explain their logic to them in terms of -- because you may not be privy toward the reasons why they have done it now. But then when the court puts the same question to them, they need to show some credible evidence that why they think that this extension should be given to them, considering that already it has been more than 6-plus months. And so is that something that the court will basically pull them up for?

Exactly. Exactly. Exactly. What, you said, is the reason. And today, we are not able to see the evidences based on which the receiver has taken the decision. But court very well can ask receiver to provide and to prove that the evidences based on which the decisions were taken for two extensions were reliable evidences, the evidences which they trusted on. So all this explanation, of course, would need to be given to court by the receiver.

[Operator Instructions] The next question is from the line of Manoj Bhura from Adinath Financial Services Private Limited.

My question was, since I have served on AI and other platforms also, NDMC (sic) [ NDRC ] and Ministry of Commerce, they require mostly maximum 45 days for any approval.

Right. So I thank you for doing this, sir. Thank you for spending your time. And we have received your e-mail by the way. So...

I have given all the inputs in my e-mail. You just can throw light on that.

Yes, you have given your inputs in your e-mail, and I will address those. Part, I have already explained earlier.

Yes, yes, yes, you have covered many items.

Many items which you raised. So particularly for NDRC and Ministry of Commerce and China, we are not able to get this 45 days time line in which they have given the historical approvals. Based on what we have been informed by the Chinese counsel and also the Chinese counsel of the receiver and coming inputs from the receiver, it appears that NDRC responds within 45 days or within 30 days, but then the queries can continue and the question-answers along with the scrutiny can continue for 6 months, a year or 2 years. Not necessarily they would need to complete within 45 days. They may raise query and questions and then it further continues. So that's what we understood, and we were informed that is happening with Longsheng. But that said, it is their problem. It is -- correct. And whatever is the reason, if there is a stipulated time line by the court, within this time line, if you are able to get the approvals and if you are able to conclude the transaction, good luck for you. But if you're not able to get your approvals within this time frame, right, it is not possible to wait for them. So Kiri's interpretation of the order is a very time-bound process. If you are able to execute within that time-bound time frame, you are welcome, you finish it, you have been chosen. If not, bad luck for you. So then you get out of the process. So that's what we are saying. So that's what we are requesting to the court that throw these guys out. They have not been able to do it. Not only the approval which we are talking now, they could have taken this approval long ago, they had 7 years to do so.

My next question will be, sir, who is the second bidder and what is the bid amount? And how much time they will take? Because Longsheng has taken 6 months. The other bidder might also ask for a similar time line.

So here are a few inputs for your consideration: number one, the court is not expected to give much time to the second bidder. We would not be able to disclose who is the second bidder because we also are bound by confidentiality agreement not to disclose the name of the second bidder. But I can only tell you that the second bidder is financially very strong, commitment of proof of funds has been given, accepted, approved by the receiver, correct? And as we speak today, the second bidder has already been inducted into the process. Okay? So on November 3, good thing with receiver has done has already inducted the second bidder. Second bidder has been now receiving the answers of their questions. The confirmatory due diligence of the second bidder parallelly has already started. So on November 3, Longsheng doesn't have exclusivity anymore. Now you will be happy to hear, and credit to the receiver, that receiver has already started exchanging draft sale-purchase agreement with the new bidder. Okay? So the process is already on as we speak. And I'm sure that the receiver is going to ensure and try its best to still conclude transaction before 31st of December 2025. And all the inputs which receiver is trying to give us, trying to expedite this process, work on a daily basis with expanded team, receiver is doing its best to conclude this transaction within the court stipulated time line.

Sir, to summarize, you are still very much confident that the total transaction can get completed within 31st of December, even if Longsheng deal fails. The second bidder will be able to complete it by 31st of December, although last week of December is a holiday in Singapore.

Correct. So that is the reason that the receiver has given at least 8 weeks to the new bidder who is already in process. But saying so, let me be conservative. And if the extension is required, let us say, for the second bidder, and if that extension receiver is not able to legally grant without permission of the court, correct? So the receiver has to approach the court with sound reasons. Receiver has to explain to court why the extension is needed, and receiver will need to document that it was Longsheng who wasted this much of time and because of which we did this extension, correct? So receiver will have to do convincing to the court. And also the new time frame that the receiver is asking, why that is required. So court in all certain terms when gave this judgment, court said, the judge is mentioned, and it is documented in the order that beyond 31st 2025, court and the judges will exercise the nuclear option, okay? Nuclear option discussed was to liquidate DyStar and pay Kiri in the end. So that -- we don't think that is going to be outcome. But even if extension is required, there might be stop -- there might be a short extension, if that can be, that is what we can expect, but nothing much beyond that.

The next question is from the line of [ Aditya Shay from Fusion Capital. ]

My question was in the situation of this litigation, in any case, can the Deloitte go to the court and say we want to give an extension to Longsheng Group itself for, let's say, 31st January? Or like is it the case after 31st December, Longsheng is for sure removed from the process? So any clarity on it?

So it is up to the discretion of the receiver based on the documentary evidences that the receiver would have at a particular time when receiver files to the court for an extension. If you -- the order of the court clearly states that receiver needs to apply within reasonable time frame before the end of long stop date, correct? So as soon as receiver comes to a kind of opinion that they are expecting 31st December to extend, they will have to approach to the court. And that extension can only be approached by the receiver. Neither Longsheng nor Kiri can go to the court for applying that extension. And I'm sure when receiver goes to the court for such kind of an extension, whether that is an extension to Longsheng to complete or whether that is for the new bidder, to give the sufficient time line to the new bidder, it all depends on what is the situation that the receiver is evaluating to conclude the transaction at the earliest. So either of these two is possible. It is logically possible, correct? And that we would need to rely on the decision of the receiver. As far as Kiri's stand is concerned, we have conveyed in very certain terms and a strong appeal has been made to the receiver to discard and to terminate Longsheng now on November 3 itself. And against the request of Kiri, receiver has taken its own judgment, its own decision to give more time to Longsheng. Let's see what receiver decides on December 1 or before that.

Okay. Got it. But after 31st December, can Kiri Industries go to Singapore Court and claim for that liquidation option because the time line is over, right?

Well, yes, that eventually may not arise because at certain level, Kiri itself is a bidder, then give it to Kiri and finish this off. There's no need for liquidation.

Okay. So yes, I read on that. $1.1 billion, we have put a bid, right? So how like our planning is for to arrange the funds in short time?

Well, the -- as you have asked the question, the -- everything has been arranged. Everything was arranged on November 1. Let me put it this way.

Okay. Great, that sounds great. And just...

Sorry to interrupt, sir, but I may request you to rejoin the question queue. The next question is from the line of [ Yash Dantewadia from Dante Equity. ]

So just a couple of questions needed some clarity on. One thing is very clear. As far as Longsheng is concerned, it's kind of Chinese related. So we don't know the regulatory environment, how it kind of works because it's all very opaque. But the second buyer or the second bidder who you said you can't disclose, you said they would close the process much sooner, right? And none of your manufacturing -- none of DyStar's manufacturing facilities are in China, right? I think, one is in -- I think both are in U.S., if I'm not mistaken, right?

So there is no manufacturing facility in China, but DyStar has 16 plants in 12 countries.

Right. So I just wanted to understand the Singapore Court, how eager are they to close this? And also, because Deloitte is the receiver, who's paying the receiver? Who's paying Deloitte in this case? And is it possible that Deloitte is acting in the interest of Longsheng?

So the second question first, the Deloitte is getting paid or will be paid from the sale proceeds, okay? So court order says that whenever the funds -- whenever funds are received, the sale proceed is received, the first payment would be made to the receiver, okay? The second payment will be made to Kiri and then whatever is left goes to Longsheng or Senda. So that's your answer how this payment will follow. But before the sale proceeds come, Kiri and Longsheng both are paying to receiver, right, half and half, 50-50 okay? And part -- and whenever the sale proceeds will be realized, Kiri's payment to receiver would be paid back along with interest. So for last [ years ], Kiri and Longsheng both are paying half-half -- I mean, Senda, to the receiver. Receiver would then pay back to Kiri along with the court stipulated interest when the sale proceeds will arrive. So this is how the payment mechanism is. Now your first question, with regards to the Singapore jurisdiction. Now Singapore jurisdiction pertains to DyStar Global Holdings shares. The shares of DyStar, which belongs to Singapore, all the subsidiaries globally, including China, outside China, I think there are more than 25 subsidiaries as on today. All of them are subsidiaries of holding company in Singapore, correct? So when Singapore holding company shares are sold to the new buyer, right, automatically, everything, the entire conglomerate is sold to the new buyer.

Right. And just one more question...

Sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up.

There is no need to sell its subsidiary separately to a new buyer.

The next question is from the line of [ Raj ] from PhillipCapital.

Yes. So actually, like Kiri has also bidded in the process. So is Kiri the second bidder? Or how much is like Kiri's position in the bidding?

Well, I would not be able to say that at the moment, Raj ji. But I can tell you one thing is Kiri is a last stop, okay? So Kiri -- if something is not working out, then Kiri is always there. But I would not be able to disclose at the moment where Kiri is in the ranking because, again, it's part of the confidentiality that we have agreed to, and we would not be able to disclose either the bid amount number or who is the second or a third bidder. So -- but be rest assured that we are solidly standing there.

Okay. And since the first bidder is from China, so can you tell the country of the second bidder at least?

Well, second bidder, let me put it this way. It could be based on the market information, the private equity company.

Okay. From U.S. or like the country?

Global.

The next question is from the line of [ Ansh Palrecha ] from 10X Ventures.

I would firstly like to congratulate you on such a hard-fought battle. I mean, I'm sure you're much more eager than we are to wrap this up as investors.

Of course. We have been for 11 years in the litigation. Thank you for recognizing that.

I have 2 questions. Firstly, how did the investor meet on September 18 go? And have mutual funds begun showing interest? That's my first question. And secondly, when do you see the copper project beginning like -- and when -- because that would decide when the company starts getting valued as a rising copper company, right? That's when us investors would be the most beneficial. Because right now, it seems like the market is pricing it as a dyes company. But whenever the copper project begins, I guess, then there will be a humongous value unlocking for all of us.

So we presented ourselves to the funds, including mutual funds. And I think there was a lot of interest in understanding the current situation of the company. We very well explained our future growth plans also. And we see positive interest, and we also see a number of queries coming after our meetings. And that indicates that there is ongoing interest in the company, and we are trying to educate to more and more funds about where we are today, what are our future plans and how DyStar unlocking is expected in what time frame. So I think these are the main areas and concerns where we updated them and be rest assured...

Saying that once the DyStar thing goes through, there will be an inflow from mutual funds. In fact, you mean that?

We don't know when would be the inflow, but I can see the increasing interest coming up right now. So they will have to decide on their side when they want to invest. But our -- from our side, we are trying to continuously engage them with us and trying to update them and trying to also appraise as we are approaching near end to the process. So that's what is happening today. So that regards to our activities to update the funds and the market, right? Now when the copper project will be operational, I would hand over to Mr. Ranjit Singh Chugh, who is the CEO of Indo Asia Copper Limited. And based on the request of the market and the investors, he will now be joining the Board -- the conference calls with us, and he will be happy to answer your questions, who would be leading along with our key management team, the copper business. Over to you, Chugh.

Good evening, Mr. Ansh and everyone, who's part of this session. The -- while the proceedings related to DyStar in progress, notwithstanding that, the copper project is going at its own pace, meaning that we have completed and the selection of technology was done in June from Chinese, let's say, company who have given us the -- who were interested to give basic engineering and detailed engineering of the complete smelter project. Right now, I will be more focused on the smelter and copper-related downstream products. On the byproduct and fertilizer, I think so I will give you a better feedback the next time because fertilizer, the downstream is sulfuric acid being a co-product and downstream NP, NPK fertilizers, which we are putting up [ $1 million ] as a complete setup. Typically, that project requires around 26 to 28 months. that we have sufficient time to do the complete detailing, et cetera. On the copper front, once the project, the basic engineering partners were signed off. We have got the basic engineering package in first week of -- in fact, last week of October. Obviously, for such a large project, the package is to the tune of 500-odd documents, drawings, everything. And in the meanwhile, for last 2 months, we were continuously trying to engage Tata Consulting, TCE, Tata Consulting Engineers, their metal group stationed at Kolkata. The background of TCE is that they have been owner's engineer for Kutch Copper Plant. And at the same time, they were also part of PTMR's 4 lakh tonnes of copper smelter, which has just started a few months -- I mean, okay, 7, 8 months back. So they are afresh from being an owner's engineer, being EPC contractor for two copper smelters. That was one of the underlying reasons we went to them. And in both the cases, they have -- the technologies have come from China, the detailed engineering, all the partners and a lot of -- and let's say, 60% of equipment sourcing also has been done from China for both the projects. In fact, for Adani, it could be around 60-odd percent, but for PTMR, it was 80-plus percent. So that was the USP, and that is how it is. So right now, we are -- we have completed basic engineering, TCE is on board. And let's say, next week onwards, we'll have kickoff meeting with TCE. And from that point onwards, we'll embark upon detailed engineering as a process.

So when do you think the copper project is beginning...