DCW Limited: Navigating Challenges with Strategic Growth and Deleveraging

DCW Limited, a prominent player in the Indian chemical sector, has demonstrated a resilient performance in the second quarter and first half of the financial year 2026, despite a challenging global environment. The company's strategic focus on specialty chemicals and operational efficiencies has yielded positive results, as highlighted in its latest investor presentation and concall transcript.

For Q2 FY26, DCW reported an operational income of INR 539.2 crore, marking a 10.3% year-on-year increase. The first half of FY26 saw operational income reach INR 1,014.7 crore, a 2.7% rise compared to the previous year. A significant highlight was the robust growth in EBITDA, which surged by 64.1% year-on-year in Q2 and 38.7% in H1, with EBITDA margins expanding to 10.78% and 11.02% respectively. This strong performance underscores the company's ability to enhance profitability amidst market pressures.

Segmental Performance and Strategic Shifts

The specialty chemicals segment continues to be a primary growth driver for DCW, contributing significantly to margin stability. The company successfully commissioned its CPVC capacity expansion, increasing it from 20,000 to 40,000 tonnes per annum (KTPA), ahead of schedule on July 22, 2025. This new capacity was immediately ramped up to full utilization, leading to the highest-ever CPVC sales volume for the quarter. However, the segment faced a steep 15% price erosion in CPVC due to increased import competition and market-led corrections. Despite this, the specialty segment recorded EBITDA growth, demonstrating the resilience of its multi-product portfolio.

Basic chemicals also showed a positive trajectory, with a 15% revenue growth in Q2, primarily driven by higher sales volumes of synthetic rutile. The segment's EBITDA turned positive, moving from a loss of INR 0.9 crore in Q2 FY25 to a profit of INR 1.4 crore in Q2 FY26. This improvement was largely attributed to increased captive usage of renewable power, which helped offset the impact of weak pricing in products like caustic soda, soda ash, and PVC due to aggressive dumping from China.

Operational Excellence and Future Outlook

DCW's commitment to operational excellence is evident in its strategic initiatives. The 44.5MW group captive renewable power project, completed in April 2025, now fulfills 25% of the power requirements at its Sahupuram facility, contributing to substantial cost savings. The company also successfully completed its transition to SAP S4 HANA, a move aimed at strengthening institutional capabilities and ensuring long-term scalability.

Looking ahead, DCW anticipates a stronger second half of the year, buoyed by the full contribution of its expanded CPVC capacity, sustained export momentum in pigments and synthetic rutile, and continued savings from renewable power. The next phase of CPVC expansion, targeting an overall capacity of 50,000 tonnes, is on track for commissioning by the end of FY26. The company is also actively exploring new specialty chemical opportunities to drive future EBITDA growth.

Financially, DCW is on a robust deleveraging path. Gross debt reduced by INR 61 crore in H1 FY26, bringing net debt to INR 155 crore, its lowest level in 19 years. Management expects the net debt to EBITDA ratio to fall below 0.5x by the fiscal year-end. With all ongoing projects expected to be completed by the close of this year, DCW is poised to enter FY27 with a lean balance sheet and a fully utilized asset base, aiming for an annualized top line of INR 2,500 crore.

Conclusion

DCW Limited's Q2 and H1 FY26 performance reflects a strategic clarity and disciplined execution. By focusing on high-margin specialty chemicals, leveraging renewable energy for cost optimization, and aggressively deleveraging its balance sheet, the company is building a strong foundation for sustainable growth. Despite external challenges like price erosion and import competition, DCW's proactive measures and strategic investments position it favorably for future expansion and enhanced shareholder value.