Cosmo First Navigates Growth and Innovation Amidst Market Headwinds in Q2 FY26

Cosmo First Limited, a diversified global conglomerate in specialty films, chemicals, rigid packaging, and petcare, has reported a robust operational performance for the second quarter and first half of fiscal year 2026. Despite facing certain market challenges, the company demonstrated strategic agility and commitment to long-term growth, driven by new capacities and diversified business initiatives. For Q2 FY26, Cosmo First achieved consolidated net sales of Rs. 919 crore, marking a significant 21% year-on-year increase. Consolidated EBITDA also saw a healthy rise of 19% to Rs. 128 crore, with the EBITDA margin standing at 14.0%. However, the consolidated Profit After Tax (PAT) was Rs. 47 crore, with its impact muted by increased depreciation and interest expenses associated with recent capacity expansions.

The improved performance was primarily fueled by a substantial 25% growth in sales volume, largely attributable to the newly commissioned capacities and the strong showing of its specialty chemical subsidiary. The specialty chemical segment posted a record EBITDA of Rs. 13 crore on a topline of Rs. 49 crore in Q2 FY26, indicating strong traction. While the core films business experienced margin pressures due to increased imports and high US tariffs on commodity BOPP and BOPET films, the company's strategic shift towards specialty films and diversified verticals helped cushion the impact. The rigid packaging (Plastech) segment achieved approximately 70% capacity utilization in Q2, with expectations for further increases. The consumer businesses, Zigly (Petcare) and Cosmo Consumer (Window Films, Paint Protection Films & Ceramic Coatings), continued their scale-up efforts.

Strategic Expansion and Innovation Driving Future Growth

Cosmo First's strategic narrative is centered on leveraging new investments and expanding its high-margin specialty portfolio. The company commissioned a new BOPP line in June 2025, significantly increasing its capacity by over 45%. This expansion is crucial for solidifying its position as a leading BOPP player in India with a low cost of production, with full utilization anticipated by Q4 FY26. Management expects an annualized cost rationalization impact of approximately Rs. 25 crore from these new film investments within the next 12 to 15 months. The Specialty Chemical subsidiary is also a key growth engine, having developed three new coating products slated for commercialization in the coming two quarters, reinforcing its commitment to innovation.

In a significant move to expand its global footprint and diversify its offerings, Cosmo First announced a strategic 50-50 joint venture with Filmax Corporation, a renowned South Korean Films & Chemical Company. This partnership aims to introduce and scale multiple Cosmo First business verticals in the South Korean market while also taking Filmax products to a global audience. This collaboration is expected to merge Cosmo First's technological expertise and global supply chain with Filmax's strong local market equity, setting new industry benchmarks.

Navigating Challenges and Sustaining Momentum

The company has been proactive in addressing market challenges, particularly the margin pressures on commodity films. Management acknowledged the impact of imports and high US tariffs, which resulted in a Rs. 6 crore adverse impact in Q2 FY26. To mitigate this, Cosmo First has partially passed on price increases to customers and is actively exploring new geographies and customer acquisitions. The focus remains on specialty films and exports to counter any oversupply situations. The company also highlighted its commitment to sustainability, with over 50% of its power consumption from renewable sources, targeting an increase to two-thirds in the next 12-18 months, which is projected to yield Rs. 20-25 crore annually in power cost savings.

While the D2C Petcare vertical, Zigly, is currently operating at a loss, management views it as a high-growth industry with significant future potential. The company plans to demerge Zigly into a separate entity by March 2027, believing this will unlock substantial value for stakeholders. Cosmo First's net debt position stands at Rs. 1230 crore, which management considers a peak level due to recent plant growth investments. They anticipate a reduction in debt in the coming years as these investments begin to yield full returns, with no major capital expenditure planned for the next 18 months.

Outlook and Investor Confidence

Cosmo First's management provided a positive outlook, guiding for an overall revenue between Rs. 3500-3800 crore for the current fiscal year, with the specialty portfolio expected to contribute Rs. 2200-2500 crore. The company's strategic focus on high-margin specialty products, operational efficiency, and diversified growth engines, coupled with its strong R&D capabilities and AA- Credit Rating with a stable outlook by CRISIL, underpins its confidence in sustained growth. The Q2 FY26 performance reflects Cosmo First's resilient strategies and expanding horizons, positioning it for continued value creation for its stakeholders.