Keva Q4 FY26: Growth Holds Up, But Margins Turn Into the Main Watchpoint

S H Kelkar and Company Limited (Keva) closed FY2026 with steady revenue growth, but profitability came under visible pressure as operating costs rose and global raw material conditions remained volatile. On a consolidated basis, revenue from operations increased to INR 2,368.3 crore in FY26 from INR 2,123.4 crore in FY25, a growth of 11.5%. Q4 FY26 revenue from operations stood at INR 649.9 crore, up 14.6% year-on-year.

However, reported EBITDA declined materially. FY26 EBITDA was INR 241.8 crore versus INR 297.0 crore in FY25, and Q4 FY26 EBITDA was INR 60.0 crore versus INR 73.4 crore in Q4 FY25. The EBITDA margin compressed to 10.3% in FY26 from 14.1% in FY25. Management repeatedly pointed to “adjusted EBITDA” as a better indicator of underlying performance, citing growth-led strategic investments and incremental insurance costs. Adjusted EBITDA for FY26 was stated at INR 323 crore with an adjusted margin of 13.9%, versus INR 335 crore and 15.9% in FY25.

A notable item in the year was a one-off sale of about INR 35 crore of low-margin products, described as part of a portfolio optimisation exercise. The company indicated that the intent was to exit transactions that are structurally low margin or unsustainable in an inflationary environment and to protect the overall business mix.

Revenue momentum across core categories

Keva’s FY26 topline expansion was supported by both its Fragrance and Flavour businesses. In the investor presentation, the company disclosed segment performance excluding Global Ingredients. Fragrances revenue in FY26 was INR 2,052 crore versus INR 1,859 crore in FY25. Flavours revenue was INR 240 crore versus INR 185 crore.

Flavours stood out for faster growth and improving profitability. FY26 Flavour EBITDA increased to INR 60 crore from INR 45 crore in FY25, and management attributed the improvement to operating leverage as volumes grew, supported by robust international demand and deeper engagement with key customers.

Global Ingredients, in contrast, remained a weak patch. FY26 revenue was INR 67 crore compared with INR 68 crore in FY25, but EBITDA deteriorated to minus INR 1.4 crore from INR 6.6 crore. Management attributed the softness to persistent geopolitical headwinds, while maintaining that medium-to-long term prospects remain favourable given structural changes in global supply chains.

Financial summary (Consolidated)

The table reflects consolidated figures where provided in the presentation and transcript. Adjusted EBITDA was separately communicated by management in the presentation, as the company excludes certain items to present a like-to-like operating performance.

Margins, mix, and raw material volatility

The management call made it clear that FY27 begins under a more volatile raw material backdrop. The CEO stated that about 40% of raw materials are directly linked to crude and another 30% are indirectly linked, including logistics. The company noted that price moves can be frequent, sometimes changing materially even within a day if orders are not blocked.

While Keva indicated that Q4 FY26 did not see a meaningful impact from cost pressures due to inventory coverage, management warned that the impact could become visible in the coming quarters. In response, the company highlighted three levers.

First, pricing measures. Management stated it is in a position to pass on raw material price increases, and it is working closely with customers to ensure continuity of supply and operational stability.

Second, cost optimisation and disciplined mix. The company described active pruning of low-margin and cash-inefficient business. The one-off sale of about INR 35 crore was positioned as a step toward exiting structurally low-margin products, and management suggested it will continue reviewing the portfolio.

Third, supply security through inventory coverage. Management acknowledged that maintaining adequate coverage for select commodities may lead to higher inventory levels and, consequently, higher borrowing levels in the near term.

This trade-off between supply assurance and working capital discipline is one of the central operating variables for the next few quarters. The CEO stated that cash conversion cycle is around 140 days at present and may remain elevated while inflation persists, as the company keeps higher inventory levels.

Capacity and capability investments: Europe, India, and new markets

Keva’s strategy over the past year was described as strengthening the building blocks for the next phase of growth. This includes capacity expansion and global customer access.

In Europe, management highlighted that growth had been muted earlier due to capacity constraints, as European operations were approaching full utilisation. The company stated that the Almere greenfield facility in the Netherlands is operational, which should debottleneck European growth. Alongside this, a development centre in Germany has been fully established with laboratories and supporting infrastructure.

In India, the company discussed capacity additions and restoration work. Management referred to the commissioning of a facility in Maharashtra (Vanavate) in the coming months and rebuilding of the Vashivali facility after a fire incident, which management described as a temporary setback.

The longer-term expansion approach includes investments in Creative Development Centres (CDCs) across markets. On the concall, management described CDC-related spending as having a capex-like character because customer conversion and product embedding take time. Management stated that three centres together represent about INR 80 to 85 crore per year of investment, and the CEO indicated it can take roughly three years for such centres to break even.

Balance sheet and cash priorities

The presentation included a balance sheet snapshot as of March 31, 2026 showing net worth of INR 1,362 crore and net debt of INR 786 crore with net debt to equity at 0.58x. Cash and investments were reported at INR 65 crore.

In the historical ratio trend, net debt to EBITDA increased to 3.3x in FY26 from 2.2x in FY25. Management addressed leverage and liquidity explicitly in the call. The CFO stated that gross debt at end of March was around INR 851 crore and indicated that borrowings could rise temporarily due to inventory build for supply security. At the same time, management set a longer-term objective of reducing debt by about 10% each year.

Capex guidance for FY27 was provided. Management stated FY27 capex is expected to be around INR 140 crore, largely front-ended in the first two quarters. Borrowings were indicated to remain around the INR 800 crore mark, though management also noted that there could be a near-term increase before debt begins to reduce.

What to track from here

Keva’s FY26 narrative is straightforward: revenue growth held up across core categories, but profitability weakened under higher costs and strategic investments. Management is trying to stabilise margins through a combination of price actions, tighter portfolio discipline, and inventory-led supply assurance.

For investors, the next few quarters are likely to hinge on three data points.

One, whether gross margins and adjusted EBITDA margins hold as raw material inflation works through the P and L.

Two, how quickly the new European capacity translates into stronger growth, especially after management acknowledged earlier capacity constraints.

Three, whether working capital and leverage improve once supply-side volatility stabilises and capex completion progresses.

The management commentary remained cautious on providing a full-year outlook due to geopolitical uncertainty, but it conveyed confidence around the first half on raw material coverage and pricing actions. In a year where supply dynamics can shift quickly, execution on pricing, mix, and cash discipline is likely to be the defining theme for Keva’s FY27 performance.