Kiri Industries Navigates Litigation While Forging a Future in Copper and Fertilizers

Kiri Industries Limited, a prominent player in the dyes and chemical sector, has presented a mixed financial performance for the second quarter and first half of the financial year 2026. While the company demonstrated robust top-line growth, its profitability was significantly impacted by substantial legal expenses related to the ongoing DyStar court case. This period marks a pivotal juncture for Kiri as it actively pursues a resolution to the protracted DyStar dispute while simultaneously embarking on an ambitious diversification into the integrated copper smelting and fertilizer sectors.

For Q2 FY26, Kiri Industries reported a consolidated revenue of INR 213.44 crore, reflecting a healthy 23% year-on-year increase and a 6% sequential growth. Standalone revenue also saw a strong uptick, growing 34% year-on-year to INR 194.62 crore. This growth was primarily driven by sustained demand recovery and focused commercial execution in its core dyes and intermediates business. However, the company faced considerable pressure on its bottom line, reporting a consolidated EBITDA loss of INR 13.05 crore and a net loss of INR 79.5 crore for the quarter. The half-year (H1 FY26) figures similarly showed a consolidated EBITDA loss of INR 29.9 crore and a net loss of INR 130.9 crore. The negative earnings to sales margins, -16.6% consolidated and -10.7% standalone for Q2 FY26, underscore the profitability challenges.

The primary drag on profitability stemmed from elevated non-operational and non-recurring legal and professional costs associated with the DyStar matter, coupled with high finance costs. Consolidated finance costs for Q2 FY26 stood at INR 60.52 crore, and for H1 FY26, they reached INR 120.1 crore. Despite these headwinds, the company maintained operational discipline, focusing on margin protection, cost optimization, and enhanced export competitiveness. The joint venture, Lonsen Kiri Chemical Industries Limited, continued to deliver healthy operational performance and contribute positively to consolidated results.

The DyStar Saga: Awaiting Resolution

The long-standing DyStar court case remains a critical factor influencing Kiri Industries' financial narrative. As per the Share Purchase Agreement dated May 29, 2025, the purchaser, Zhejiang Longsheng Group Co., Ltd., was to acquire Kiri's 37.57% stake in DyStar Global Holdings for a base consideration of USD 676.26 million, with an additional USD 20.28 million. However, the purchaser failed to secure the necessary regulatory approvals by the initial long-stop date of October 2, 2025, and the extended date of November 3, 2025. The long-stop date has now been further extended to December 1, 2025, subject to an additional deposit of USD 5.11 million into the escrow account.

Management expressed frustration over these delays but highlighted a significant development: a second financially strong bidder has been inducted into the sale process. This bidder has provided proof of funds, and discussions for a new Share Purchase Agreement are underway. Kiri's management is optimistic that if Longsheng fails to meet the December 1 deadline, the second bidder has a high probability (over 90%) of closing the transaction by December 31, 2025. The company is actively engaging with the court-appointed receivers to expedite the process and ensure a timely resolution.

Strategic Diversification: A Future in Copper and Fertilizers

Beyond its core business and the DyStar resolution, Kiri Industries is making a bold strategic move into the integrated copper smelting and fertilizer sector through its wholly-owned step-down subsidiary, Indo Asia Copper Limited (IACL). This diversification is aligned with India's self-reliance agenda and aims to capitalize on the robust growth prospects in these sectors.

The IACL project, located in Jafrabad, Amreli District, Gujarat, is strategically positioned near Pipavav Port for efficient logistics. It involves establishing a 500,000 MTPA copper smelter to produce copper cathodes, wire rods, and tubes, along with precious metal by-products like gold, silver, and selenium. Complementing this, an integrated fertilizer plant will utilize sulfuric acid, a co-product of the smelting process, to manufacture phosphoric acid and NP/NPK fertilizers, with capacities including 325,000 MT of Phosphoric Acid and 1,050,000 MT of NP/NPK fertilizers. The entire complex is designed as a Zero Liquid Discharge (ZLD) facility, emphasizing environmental sustainability through complete recycling and waste recovery.

The estimated project cost is INR 10,661 crore, with INR 1,036 crore equity already infused and the balance secured through a 70:30 debt-equity structure, projecting an attractive ~25% IRR. Construction commenced on October 1, 2025, with a 36-month completion timeline, targeting trial productions by December 2028. Significant milestones, including environmental clearances, basic engineering completion, and site development, have already been achieved.

Outlook and Management Focus

Kiri Industries is navigating a period of transformation. While the ongoing DyStar litigation continues to impact short-term profitability due to legal expenses, the company's core dyes and intermediates business shows resilience with strong revenue growth. The strategic diversification into copper and fertilizers represents a significant long-term growth driver, aligning with national priorities and leveraging integrated operations for efficiency and sustainability. Management's disciplined approach to capital allocation, focus on cost optimization, and proactive steps in resolving the DyStar case demonstrate a clear vision for enhancing shareholder value. The company remains committed to upholding high standards of governance and operational integrity as it builds a future full of colors and metals.