Cosmo First: Navigating Growth with Specialty Focus and Strategic Shifts in Q3 & 9M FY26

Cosmo First Limited, a diversified global player in specialty films and emerging consumer businesses, has reported a dynamic performance for the third quarter and nine months ended December 31, 2025 (Q3 & 9M FY26). The company's consolidated sales for Q3 FY26 stood at Rs 899 crore, marking a robust 28% year-on-year increase, primarily driven by higher sales volumes. For the nine-month period, the net revenue reached Rs 2,618 crore. EBITDA for Q3 FY26 improved by 19% to Rs 103 crore, supported by increased sales volume and enhanced performance from its specialty chemical subsidiary. Despite facing certain headwinds, Cosmo First is strategically positioning itself for sustained growth by leveraging its completed capex cycle and focusing on higher-margin segments.

The company's performance in Q3 FY26 reflects a concerted effort to optimize its operational footprint and pivot towards value-added offerings. While the overall EBITDA saw an improvement, it could have been higher had it not been for several adverse factors. Margin decline in BOPP and BOPET core films, influenced by increased imports in India, and the full quarter impact of high USA tariffs significantly affected profitability. A temporary shutdown of one BOPP line also led to a 6% volume loss, which was rectified by quarter-end. Additionally, a non-repetitive inventory loss of Rs 8.4 crore due to a drop in raw material prices and a one-time increase in employee benefit liability further impacted the quarter's results. However, the management anticipates improved profitability from its USA operations starting Q1 FY27, following a recently announced reduction in tariffs.

Strategic Pivot to Specialty and New Verticals

Cosmo First's strategic direction is clear: a structural shift towards a higher-margin specialty portfolio. The company's INR 1,140 crore strategic capex across films and new verticals is largely complete, and the focus is now on maximizing asset utilization to drive operating leverage and cash generation. The goal is to significantly increase the contribution of non-film businesses to EBITDA over the next three years. This involves scaling up specialty chemicals, which already operate at a 20%+ EBITDA and ROCE, and nurturing high-margin consumer and petcare businesses.

In specialty chemicals, the company reported a 9M FY26 revenue of Rs 150 crore, with Q3 FY26 sales at Rs 52 crore and a 25% EBITDA. Three new products are slated for commercialization in the coming quarters, reinforcing the target of Rs 350-400 crore topline by FY30 with 20%+ EBITDA and ROCE. The rigid packaging vertical, Cosmo Plastech, achieved positive EBITDA in December 2025, with 9M FY26 revenue of Rs 65 crore. The company aims for a Rs 350-400 crore topline by FY30 with double-digit EBITDA and ROCE for this segment.

Expanding Consumer and Petcare Ecosystems

Cosmo Consumer, encompassing window films, paint protection films, and ceramic coatings, commenced operations in Q1 FY26 and currently has an annualized topline run rate of Rs 30 crore. The company projects a 50% CAGR sales growth for this segment over the next three years, driven by new product launches like Cosmo Guard and Luster Film series, and an expanding nationwide distributor network. The petcare vertical, Zigly, continues to demonstrate strong traction, posting over 50% topline growth in Q3 FY26 on a year-on-year basis, with a current GMV run rate of Rs 76 crore (annualized). Zigly's strategy focuses on services and private label sales, aiming for a Rs 300 crore+ topline by FY30. The company also plans to demerge the Petcare vertical from Cosmo First into a separate entity by FY27, a move expected to unlock significant value given the high valuations in the pet care industry.

Financial Resilience and Sustainability

Cosmo First is committed to strengthening its financial resilience through deleveraging. The net debt as of December 2025 stood at Rs 1,215 crore, a reduction of Rs 20 crore from September 2025. With no major capex planned, the company has a clear roadmap to reduce net debt by Rs 200-250 crore annually over the next 2-3 years. This reduction is expected to translate to 15-18% of the net debt position each year, thereby bolstering equity value. The company's dedication to sustainability is evident in its CareEdge 'Good' ESG Rating. It utilizes over 50% renewable power and aims to increase this to two-thirds in the next 12-18 months, alongside significant R&D in sustainable products like green graphic PVC-free films and synthetic paper.

Cosmo First is navigating a period of strategic transformation, moving from an investment-heavy phase to one focused on maximizing returns and value creation. The company's emphasis on specialty products, scaling new high-margin verticals, and disciplined capital allocation, coupled with a strong commitment to sustainability, positions it for robust and resilient growth in the coming years. The management's focus on full capacity utilization for the film business and faster scaling of new ventures in FY26 underscores its strategic clarity and forward-looking approach.