Summary
Fairchem Organics Limited - Q3 FY26 Earnings Call Summary Monday, February 9, 2026, 4:00 PM
Event Participants
Executives 2 Bhavesh Shah (CFO), Nahoosh Jariwala (Managing Director)
Analysts 6 Aman Singh (Individual Investor), Devash Jain (Eternal Capital), Kripa Kandar (Individual Investor), Madhur Rathi (Counter Cyclical Investments), Ritesh Poladia (Girik Capital), Yash Naik (Kamayakya Wealth Management)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹100 crores | -12% YoY; Impacted by lower paint segment demand and US export discontinuation. |
| EBITDA | ₹4 crores | -65% YoY (9M basis); Significant margin compression due to elevated RM prices and Chinese dumping. |
| EBITDA Margin | 4.2% | -580 bps YoY; Pressured by aggressive Chinese pricing on Dimer acid and high import duties. |
| Adjusted PAT | ₹60 lakhs | Before exceptional items; 0.6% PAT margin reflects severe bottom-line pressure. |
| Exceptional Items | ₹88 lakhs | Related to the implementation of the new Labor Code. |
| Volume Throughput | 9,850 tonnes | Management noted 55% capacity utilization; current capacity can support double this volume. |
| Domestic Sales Mix | 91% | Reflects current reliance on India; strategic goal is to increase exports to 50%. |
Geographic & Segment Commentary
- Domestic Market: Contribution remains high at 91% of revenue. Performance was hampered by lower off-take from the paint segment due to market-share disruptions from new entrants.
- US & Europe: Exports were severely impacted by trade policy uncertainties and high tariffs. However, management expects a recovery following the new level-playing field tariff structure in the US and proposed FTAs with the UK and EU.
- China Competition: Significant pressure on Dimer fatty acid margins due to 13% export incentives provided by the Chinese government to its manufacturers, leading to aggressive pricing in India.
Company-Specific & Strategic Commentary
- Product Diversification: Developing newer products from existing streams for diverse applications to reduce reliance on the paint sector.
- Operational Efficiency: Undertaking detailed energy audits and trials using domestic catalysts to replace expensive imported ones to lower cost structures.
- Isostearic Acid: Recovery expected in H1 FY27; US customers have resumed sample approval requests following tariff structure changes.
- Animal Feed Plant: Facility is ready for forward integration of the palmitic acid stream; awaiting GMP certification to begin commercial production.
- Buyback Rationale: Conducted to increase promoter holding and signal confidence; management noted no cash flow pressure as no major capex is required for the next 2 years.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Recovery Timeline | H2 FY27 | Management expects gradual improvement in numbers, with significant recovery starting H2 FY27. |
| Export Mix | 50% target | Strategic shift to move from current 9% to 50% export revenue via US/EU trade deals. |
| New Product Launch | Q3 FY27 | Small capacity launch initially to secure buyer approvals before scaling; 3rd or 4th global manufacturer. |
| Volume Growth | 2x current levels | Capacity is in place to double current 9,850 MT throughput without additional capex. |
Risks & Constraints
| Risk | Context |
|---|---|
| Duty Inversion | Raw materials carry 16.5% import duty while finished Dimer acid carries only 7.5%, making domestic production less competitive against imports. |
| Chinese Dumping | 13% Chinese export incentives allow for aggressive pricing; if removed in April, Fairchem realization would rise by a corresponding 12-13%. |
| Customer Concentration | The paint sector’s market-share churn and lower demand are directly impacting linoleic acid volumes. |
| Export Lead Times | New product approvals in global markets (Isostearic/Animal Feed) take 2-3 years, delaying the revenue cycle for new capex. |
Q&A Highlights
Dimer Acid Profitability
- Question: Are we currently making profits on Dimer acid? (Ritesh Poladia)
- Answer: Margins are currently very marginal; the company is essentially “keeping its head out of water” on this product due to Chinese competition. (Nahoosh Jariwala)
US Export Recovery
- Question: When will we see the uptake in isostearic acid exports to the US? (Yash Naik)
- Answer: Mails for sample approvals have already started arriving following the tariff changes; confidence is high for a recovery within 6 months. (Nahoosh Jariwala)
Raw Material Strategy
- Question: Why not import soybean oil directly from the US at zero duty? (Madhur Rathi)
- Answer: Since the waste byproduct used as RM is only 1% of the oil volume, the company will not take the commodity risk of the remaining 99%. (Nahoosh Jariwala)
Pricing Power & Competition
- Question: Why can’t we pass on the high import duty costs to customers? (Kripa Kandar)
- Answer: If domestic prices are raised, customers will simply import from China; the company must match landed Chinese prices to remain the preferred domestic supplier. (Nahoosh Jariwala)
Key Takeaway
Fairchem Organics faced a difficult Q3 FY26, with revenue declining 12% to ₹100 crores and EBITDA margins compressing to 4.2% due to a toxic mix of duty inversion, Chinese dumping, and sluggish domestic paint demand. Strategically, the company is pivoting toward a 50% export mix by leveraging new US tariff structures and diversifying into animal feed and specialized value-added products (Isostearic acid) where it is one of only 3-4 global players. Management has paused significant capex, focusing instead on sweating existing assets (currently at 55% utilization) and optimizing costs through energy audits and catalyst substitution. While FY26 remains a transition year, a material recovery is guided for H2 FY27, contingent on the removal of Chinese export subsidies and the successful ramp-up of US-EU export volumes. Management remains cautiously optimistic that the worst of the pricing cycle is behind them.
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