Diamond Power targets Rs 120 crore EBITDA from polymer project

Diamond Power plans a Rs 170 crore captive polymer-compounding complex, which management says could add Rs 120 crore of earnings before interest, tax, depreciation and amortisation, or EBITDA, at current volumes. The 84,500-tonne-a-year project is intended to replace purchased cable compounds and introduce super-clean insulation for 66 kilovolt, or kV, and higher-voltage cables.

What is Diamond Power building in the Rs 170 crore project?

Diamond Power is building an integrated polymer complex with 84,500 tonnes of annual capacity in a 1.5 lakh-square-foot building on land it already owns. Management said insulation and sheathing compounds account for 35% to 40% of cable cost, positioning the facility as backward integration for its cable operations rather than a plan to sell compound externally.

The complex has two phases. Phase 1 comprises six compounding lines costing Rs 78 crore and providing 66,500 tonnes of yearly capacity. It includes two polyvinyl chloride, or PVC, lines, two silane lines, a master-batch line and a peroxide-based line for PVC, flame-retardant, flame-retardant low-smoke, bedding and cross-linked polyethylene, or XLPE, compounds for cable applications up to 33 kV.

Management said all Phase 1 output is intended for captive use, replacing compounds Diamond Power currently buys. The PVC and catalyst lines are due to be commissioned first, followed by the rest of Phase 1 between June and December 2027. This sequence puts lower-voltage compound substitution ahead of the specialised extra-high-voltage, or EHV, insulation line.

How would the project change Diamond Power's cable production?

The project would expand Diamond Power's in-house compounding from some existing PVC production to materials used across medium-voltage and EHV cable. Management said Diamond Power does not make XLPE polymer for cable above 66 kV today, and said no Indian cable manufacturer currently makes this material for that voltage range.

Phase 2 is planned as a Swiss-engineered reciprocating line using low-shear mixing, supplied with know-how, formulation and cleanliness acceptance. Its 18,000-tonne annual capacity is designed for peroxide XLPE insulation used in 66 kV, 132 kV, 220 kV and 400 kV cables. Management described it as the first such facility in India and probably the sixth globally.

Management defined super-clean compound as material without impurities larger than 100 microns. It said electrical-field concentration is important in EHV cable, which it described as having a 40-year life, and that utilities approve both the cable and compound. The planned line therefore addresses utility qualification requirements alongside the cost of purchased material.

How much EBITDA does Diamond Power expect from captive polymers?

Diamond Power management expects captive use of the compound to add Rs 120 crore of EBITDA at current volumes, based on a stated compound margin of more than Rs 50 a kilogram. This is a management projection rather than reported earnings, and depends on construction, pilot trials, qualification and the intended level of internal cable consumption.

Management's project model indicates a 30% post-tax internal rate of return, or IRR, on a consolidated basis. In the call, management said it could pass 3% to 5% of polymer benefit to customers while retaining about 10% additional profit on the polymer portion. It also said the project could raise Diamond Power's EBITDA by 3.5% after implementation.

The expected benefit is linked to the cable mix. Management said polymer is about 35% of raw-material cost for medium-voltage and EHV cable, compared with 20% for low-voltage, or LV, cable. Diamond Power has 11 medium-voltage cable lines and said this installed base provides the minimum internal consumption needed for the intended XLPE compounding scale.

When will Diamond Power commission and fund the plant?

Diamond Power expects Phase 1 commissioning to occur progressively from June to December 2027, with Phase 2 targeted for early 2028 after pilot trials using its own raw materials. The timing means peroxide XLPE for 66 kV to 400 kV cables is scheduled after Phase 1 begins supplying PVC, silane and 33 kV peroxide compounds.

Management said it would fund the Rs 170 crore project with Rs 78 crore from the general corporate purpose account of its qualified institutional placement, or QIP, and Rs 100 crore from internal accruals. It added that a small amount of debt could be used if needed. The stated QIP and internal-accrual sources total Rs 178 crore, while management gave no explanation for the difference from the Rs 170 crore project cost.

The complex is part of a wider capacity programme. Diamond Power said its LV cable project would be commissioned before April 2027, while the single-core cable project for solar infrastructure is already operating. It also said its fifth and sixth continuous catenary vulcanisation, or CCV, lines are to be commissioned and a 1,000-kilometre-a-month 3.3 kV solar cable plant is planned within 18 months.

Why is Diamond Power connecting polymers with its EHV strategy?

Diamond Power is linking the project to its move toward medium-voltage and EHV cable, where specialised materials and utility approvals are relevant. Its firm order book was Rs 3,735 crore on 30 September, or about Rs 4,300 crore at current market prices under price variation clauses. Medium-voltage cable represented Rs 1,328 crore, or 36%, of that book.

The current cable portfolio remains more weighted to medium voltage than EHV. Management said 11 kV and 33 kV cables represented 79% of cable revenue excluding data-centre cable in the second quarter, and 33 kV was its largest product line. It also reported a Rs 164.5 crore EHV order for Jamnagar and said further 66 kV tenders were in the pipeline.

Management said the new compound capacity is intended for 100% captive consumption and that it has not assessed the external super-clean polymer market. The economic result will consequently depend on Diamond Power's own cable production, its ability to complete the scheduled plants and its success in obtaining approvals for higher-voltage cable applications.

Conclusion

Diamond Power's Rs 170 crore project is designed to internalise materials that management says account for 35% to 40% of medium-voltage and EHV cable cost. The planned 84,500-tonne capacity combines near-term replacement of purchased compounds with a later move into 66 kV to 400 kV super-clean XLPE, while the Rs 120 crore EBITDA contribution remains management's estimate.

The next disclosed milestones are Phase 1 commissioning from June to December 2027 and pilot trials before the Phase 2 early-2028 target. Management also said it would share its 2028 to 2032 capacity roadmap by the fourth quarter, after negotiating line quantities, pricing and delivery terms with global suppliers.