Chemplast Sanmar Navigates Challenging Waters with Strategic Expansions and Improved Q2 FY26 Performance

Chemplast Sanmar Limited, a key player in India's chemical manufacturing sector, has reported a mixed yet improved performance for the second quarter of fiscal year 2026 (Q2 FY26). The company, known for its diversified portfolio spanning specialty chemicals, value-added chemicals, and PVC resins, posted a consolidated revenue of INR 1,033 crore, marking a marginal increase from INR 993 crore in the same quarter last year. This improvement was largely attributed to better margins in the Suspension PVC business, alongside signs of recovery in domestic demand for Paste PVC.

Despite a challenging global environment characterized by low-priced imports and regulatory uncertainties, Chemplast Sanmar's EBITDA for the quarter stood at INR 43 crore, a significant jump from INR 26 crore in Q2 FY25 and INR 17 crore in the preceding quarter. However, the company reported a net loss of INR 51 crore for the quarter. The management highlighted that while business conditions remain tough, ongoing strategic initiatives and new capacities are expected to bolster future performance.

Segmental Performance: A Closer Look

The company's performance across its key segments presented a nuanced picture. The Specialty Chemicals segment, which includes Paste PVC, Custom Manufactured Chemicals, and Refrigerant Gas, delivered a revenue of INR 372 crore in Q2 FY26, reflecting a robust 22% year-on-year growth. This was primarily driven by increased volumes from the new Paste PVC plant at Cuddalore, which is now operating at full capacity. Domestic demand for Paste PVC showed recovery, led by strong demand from the automotive and footwear sectors.

Conversely, the Value-Added Chemicals segment, comprising Caustic Soda, Chloromethanes, and Hydrogen Peroxide, reported a revenue of INR 138 crore, a 12% decline year-on-year. This was mainly due to lower caustic production, influenced by temporary operational issues and strategic make-or-buy decisions. While demand for Caustic Soda remained stable, prices saw a marginal decline. Chloromethanes experienced modest volume growth but faced steady pricing.

The Suspension PVC business recorded revenues of INR 523 crore, remaining flat compared to the previous year. Despite an 11% year-on-year increase in sales volumes, softer demand during the monsoon season and intense price volatility due to unchecked dumping from China and other regions impacted overall revenue growth. The company noted that low-priced imports, particularly from EU-based suppliers, continued to pressure Paste PVC margins.

Here is a financial summary of Chemplast Sanmar Limited's Q2 FY26 performance:

Strategic Initiatives and Future Outlook

Chemplast Sanmar is actively pursuing several strategic initiatives to drive future growth and enhance profitability. The company's Custom Manufactured Chemicals Division (CMCD) is a key focus area, with Phase 3 of MPB 3 and civil works for MPB 4 progressing well, slated for completion in Q3 and Q4 FY26, respectively. These expansions are critical for increasing capacity, supporting new product leads, and strengthening customer engagements. The company has already commercialized 17 products in CMCD, with a healthy pipeline for future growth.

Another significant initiative is the expansion into Refrigerant Gas (R32) production. The company plans to establish a total R32 capacity of 14 ktpa, including converting an existing R22 plant into a 2 ktpa swing plant, setting up another 2 ktpa new plant, and planning a 10 ktpa new plant with an estimated capital expenditure of INR 250 crore. This move is a logical extension of its R22 expertise and aligns with global trends towards more environmentally friendly and energy-efficient refrigerants.

Here is a segment comparison of Chemplast Sanmar Limited's Q2 FY26 performance:

Management remains confident about the long-term prospects, particularly for the CMCD business, guiding for INR 1,000 crore in revenue by FY27 with an EBITDA margin of 20-25%. The company also anticipates that its debt levels have peaked, with gearing expected to reduce in the coming quarters due to benefits from higher capacity utilization and ongoing green power initiatives. These initiatives are expected to improve profitability through cost savings and enhance the company's sustainability profile.

Navigating Regulatory Headwinds

A major point of discussion during the earnings call was the regulatory environment, specifically concerning Anti-Dumping Duties (ADD) on PVC and the withdrawal of BIS quality control orders. Management expressed strong concerns that the non-implementation of ADD, despite a thorough two-year investigation recommending it, would be detrimental to the domestic industry. They also highlighted that the withdrawal of BIS quality control orders, particularly for PVC resin used in drinking water pipes, is a setback for public health and safety norms, potentially allowing low-quality imports.

Chemplast Sanmar has a strong track record of over five decades, state-of-the-art manufacturing units, and a high degree of backward integration, which are key strengths in navigating these challenges. The company's unique position, including proprietary technology for Paste PVC manufacturing and long-term relationships with feedstock suppliers, provides a competitive edge. Its commitment to sustainability, evidenced by pioneering Zero Liquid Discharge facilities and numerous awards, further reinforces its resilient operational framework.

Conclusion: Strategic Resilience Amidst Volatility

Chemplast Sanmar Limited's Q2 FY26 performance demonstrates strategic resilience in a volatile market. While facing significant external pressures from imports and regulatory uncertainties, the company's focus on capacity expansions in CMCD and R32, coupled with operational improvements and green power initiatives, positions it for future growth. The management's proactive approach to addressing market challenges and commitment to sustainability underscore its long-term vision, aiming for improved performance and sustained value creation despite the prevailing headwinds.