Summary
Finolex Industries Limited - Q3 FY 2026 Earnings Call Summary Monday, February 02, 2026 4:00 PM
Event Participants
Executives 2 Chandan Verma (CFO), Udipt Agarwal (MD)
Analysts 4 Arun Baid (ICICI Securities), Divyansh Thakur (Finterest Capital), Shravan Shah (Dolat Capital), Utkarsh Nopany (Anand Rathi), Vipulkumar Shah (Sumangal Investments)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Sales Volume | 73,500 MT | -14% YoY; Impacted by extended monsoon and price volatility. |
| Income from Operations | ₹898 crores | -10% YoY; Decline driven by lower volumes despite better realizations. |
| EBITDA | ₹123 crores | +48% YoY; Significant margin expansion due to softening RM prices and operational efficiency. |
| PAT | ₹110 crores | +55% YoY; Improved operating profitability drove the bottom-line growth. |
| Net Cash Surplus | ₹2,430 crores | Strong liquidity position as of Dec 31, 2025; Management evaluating capex/payout options. |
| PVC/VCM Spread | $156 / MT | Average for Q3; Indicative of the margin environment for the resin segment. |
| PVC/EDC Delta | $449 / MT | -10% YoY; Management noted actual procurement costs outperformed indicative market deltas. |
Geographic & Segment Commentary
- Agri vs. Non-Agri: The sales mix for the quarter stood at 62% Agri and 38% Non-Agri. Management is intentionally pushing the Non-Agri segment to improve realization and reduce seasonal dependency.
- CPVC & Fittings: CPVC volume share reached 8%, while fittings contributed 12% to total volumes. Both segments continue to see higher appreciation and growth rates compared to the base PVC pipe business.
- PVC Resin: Approximately 65%-70% of resin requirements are met through in-house backward integration. This provided a significant cost advantage during the quarter as global PVC prices touched decade-lows of ~$600/MT.
Company-Specific & Strategic Commentary
- Backward Integration Advantage: Management attributed the 840 bps jump in gross margins to internal resin production. Cost savings from EDC procurement outpaced the decline in finished PVC pipe realizations.
- Pricing Strategy: The company shifted toward “profitable growth,” being selective with pricing even as volumes dipped. Net realizations improved through a higher share of non-agri products and CPVC.
- Operational Efficiency: Ongoing initiatives helped mitigate a 14% volume drop, allowing EBITDA to grow 48% through better cost management and reduced raw material landed costs.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Full Year Volume | Flattish to slight growth | Expects typical Q4 seasonal demand pick-up to offset 9M volume declines. |
| EBITDA Margin | ~12% for FY26 | Management aims to sustain current profitability levels despite market volatility. |
| Annual Capex | ₹100 crore - ₹200 crore | Continuous capacity addition (targeting 20k-80k MT increase) to support long-term demand. |
| Product Mix | Incremental Non-Agri shift | Strategic focus on increasing high-margin construction/plumbing segments by FY27. |
Risks & Constraints
| Risk | Context |
|---|---|
| Price Volatility | PVC prices bottomed at $600-$650/MT in Q3. While a ₹7/kg hike was seen in Jan, further geopolitical developments remain a threat to RM stability. |
| Chinese Dumping | Potential for pre-April dumping of PVC resin from China before new tax structures take effect. Management noted this could lead to price rollbacks. |
| Demand Seasonality | High reliance on the Agri segment (62%) makes volumes sensitive to monsoon duration and agricultural cycles. |
Q&A Highlights
Pricing & Market Dynamics
- Question: When will PVC prices stabilize? (Divyansh Thakur)
- Answer: Prices saw historic lows of $600-$650/MT in Q3 but improved by 8-9% toward the end of December. January saw a ₹7/kg price hike (Udipt Agarwal).
Margin Sustainability
- Question: How did margins improve despite falling PVC/EDC deltas? (Utkarsh Nopany & Sonali)
- Answer: It is a combination of better product mix (Non-Agri/CPVC) and internal resin manufacturing. Actual landed costs for EDC saw a significant decline vs. last year, providing a cost advantage not captured by market indicators (Chandan Verma).
Volume Targets
- Question: What is the outlook for Q4 and FY27? (Shravan Shah)
- Answer: January has shown good traction. For the full year, the company expects flattish volumes compared to FY25. For FY27, the focus is on maintaining market share rather than giving specific double-digit targets (Udipt Agarwal).
Capital Allocation
- Question: Why is the cash balance of ₹2,430 crores not being distributed? (Vipulkumar Shah)
- Answer: The company is evaluating capex opportunities. Dividend decisions for the current year are pending board review, following the ₹3.6/share payout in FY25 (Udipt Agarwal/Chandan Verma).
Key Takeaway
Finolex Industries delivered a resilient Q3 FY26, characterized by significant margin expansion despite a 14% contraction in volumes to 73,500 MT. While revenue fell 10% to ₹898 crores due to monsoon-led volume pressure, EBITDA surged 48% to ₹123 crores, supported by a 65-70% backward integration in PVC resin and softening EDC prices. Strategically, the company is shifting toward a 38% non-agri mix and expanding CPVC volumes (8% share) to drive profitable growth. Management maintains a strong balance sheet with ₹2,430 crores in net cash and guides for flattish volume growth for the full year FY26, banking on a seasonal Q4 recovery. The primary watch point remains the potential for Chinese resin dumping prior to April 2026 and the sustainability of recent PVC price hikes in the domestic market.
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