S H Kelkar Navigates H1 FY26 with Strategic Investments and Steady Growth

S H Kelkar and Company Limited (SHK), a prominent Indian-origin Fragrance & Flavour Company, has announced its financial results for the quarter and half year ended September 30, 2025. The company reported a consolidated revenue growth of 12% year-on-year for H1 FY26, reaching ₹1,135 crore. Despite this top-line expansion, profitability saw some pressure, with Adjusted EBITDA standing at ₹164 crore, reflecting a margin of 14.5%. The management attributes this impact to ongoing strategic investments in growth initiatives and additional insurance costs incurred during the period. The company remains focused on building a stronger foundation for sustainable long-term growth, with key initiatives progressing as planned.

Segmental Performance and Market Dynamics

The company's core segments, Fragrances and Flavours, demonstrated robust performance. The Fragrance business sustained its growth momentum, largely supported by stronger relationships with small and mid-sized clients. The Flavour division also delivered a healthy performance across both domestic and export markets. However, the European Fragrance business experienced a soft environment, leading to muted sales in the first half. Similarly, the Global Ingredients segment faced a muted quarter due to demand softness and geopolitical uncertainties arising from tariffs. Management noted that while the underlying raw material situation is improving, the full benefit of these decreases is yet to be factored into the results, with gross margins currently at 42.4% for the first half.

Strategic Initiatives and Future Outlook

S H Kelkar is actively pursuing several strategic initiatives aimed at driving future growth and enhancing operational efficiency. A significant development is the appointment of Mr. Jagdish Agarwal as the new Group Chief Financial Officer, effective December 02, 2025. Mr. Agarwal brings over 28 years of experience across manufacturing, telecommunications, and banking, and his appointment is expected to reinforce the company's financial discipline and execution capabilities. Ms. Deepti Chandratre, the outgoing Interim CFO, will continue in her role as Global Legal Counsel and Company Secretary.

Capacity expansion projects, including a greenfield facility at Vanavate and a brownfield expansion at Holland Aromatics, are progressing well and are expected to be commissioned by Q4 FY2026. These projects are crucial for enhancing capacity, improving operational costs, and supporting future growth in both domestic and international markets. Additionally, the company has established new creative development centers in the UK, US, and Germany, with the US center now operationalized to penetrate global MNC accounts and capitalize on domestic business momentum due to tariffs. These investments, totaling ₹32 crore in H1 FY26, are expected to contribute meaningfully to performance over the next 15-18 months.

Management Commentary and Investor Confidence

Mr. Kedar Vaze, Whole Time Director and Group CEO, acknowledged the steady performance and the impact of ongoing investments. He emphasized that the second half of FY26 is expected to show better growth than the first, with gross margins improving by 1-1.5% and EBITDA margins projected to reach 14-15% in H2 FY26, eventually moving towards 18% over the next 2-3 years. The company is also focused on reducing inventory levels from 145-150 days of sales to 130 days. While acknowledging past volatility and increased debt, management assured investors of careful monitoring of new initiatives and a commitment to improving returns on investment. The sale of a 40% stake in NuTaste Food and Drink Labs Private Limited also demonstrates a strategic pruning of assets.

S H Kelkar's H1 FY26 performance reflects a company in transition, strategically investing for future growth while navigating current market challenges. The management's focus on capacity expansion, R&D, and strengthening leadership positions the company for sustained growth and improved profitability in the coming years. The commitment to innovation and disciplined execution remains central to their long-term vision of becoming a globally recognized leader in Fragrances and Flavour solutions.