SK Minerals and Additives FY26: Scaling Up While Building a Manufacturing Core

/n# SK Minerals and Additives FY26: Scaling Up While Building a Manufacturing Core/n/nSK Minerals and Additives Limited closed FY26 with a sharp acceleration in scale and profitability. Revenue from operations rose to INR 317.89 crore versus INR 211.67 crore in FY25. EBITDA increased to INR 32.14 crore from INR 19.10 crore, and PAT improved to INR 18.12 crore from INR 10.94 crore. The year also showed a steady improvement in margins, with EBITDA margin at 10.11% and PAT margin at 5.70%./n/nThe second half was the turning point. H2 FY26 revenue from operations reached INR 208 crore compared with INR 109.89 crore in H1 FY26. EBITDA in H2 rose to INR 20.21 crore and PAT to INR 11.11 crore. Management attributed this jump in the concall to a mix of volume-led growth and improved realizations, supported by strategic sourcing and better working capital availability. They also flagged that raw material prices rose sharply from January onward, which compressed second-half margins even as absolute profits expanded./n/n## A business still led by trading, but pushing manufacturing/n/nThe company describes itself as transitioning from a trading-led model to a manufacturing-driven business. However, the segment-wise revenue mix in the presentation shows trading still dominating. In FY26, trading contributed 76.99% of revenue and manufacturing 23.01%. The company positions this hybrid model as a strength that broadens the portfolio, offers sourcing agility, and supports resilience across cycles./n/nOperationally, the company reported a combined installed capacity of 6,600 MT. Management said in the concall that food and feed lines were operating at around 95% utilization, indicating limited headroom without new capacity. In contrast, the polymer additives plant is still stabilizing, with management citing teething issues and a trial period with customers./n/n| Metric | FY25 | FY26 |/n| --- | ---:| ---:|/n| Revenue from operations (INR crore) | 211.67 | 317.89 |/n| EBITDA (INR crore) | 19.10 | 32.14 |/n| PAT (INR crore) | 10.94 | 18.12 |/n| EBITDA margin (%) | 9.02 | 10.11 |/n| PAT margin (%) | 5.17 | 5.70 |/n| Debt equity (x) | 1.9 | 1.3 |/n/nThe longer-term ambition is clearer in management commentary. In the concall, management stated that manufacturing currently contributes about 23% of revenue, but the company aims to raise this to 50% over the next two to three years. If achieved, the mix shift could reduce reliance on lower-margin trading and raise operating leverage, but execution will depend on capacity expansion and the ramp-up of new products./n/n## HOFNIL: the defining product bet in polymer additives/n/nA key pillar of the manufacturing pivot is polymer additives, led by the company’s halogen-free flame-retardant additive branded as HOFNIL, launched in November 2025. The investor presentation positions it as Indias first halogen-free flame-retardant additive in this category, designed for XLPE wire and cable applications. It also cites demand drivers such as regulatory pressure against halogenated alternatives and rising fire safety requirements./n/nThe presentation states a current capacity of 400 MT per month for this product line and an expectation of cumulative revenue of INR 200 crore by the end of FY28. In the concall, management clarified that commercialization is underway but the ramp has been slowed by teething issues and customer testing requirements. Trials were stated to be ongoing with five customers, with NDAs signed with two. Management suggested that the plant could be live in about three months, with a full utilization path over about three to six months, subject to successful trials./n/nOn profitability, management stated that manufacturing gross margins are around 30% while trading gross margins are around 21%. They also indicated that polymer additives could deliver around 40% manufacturing margins. These statements are directional and not presented as audited segmental margins, but they signal why the company is emphasizing polymer additives as a margin expansion lever./n/n## Capacity expansion and capex: the next 12 to 18 months/n/nCapacity constraints were a recurring theme. In the FY26 management commentary, the company stated it operated at near 100% utilization during the year and that it has acquired land for expansion. The company expects overall production capacity to increase to approximately 19,000 MTPA over the next 12 to 18 months./n/nIn the concall, management discussed capex of about INR 20 crore over the next two years (FY27 and FY28), focused specifically on the polymer additives and compounding facility. The expansion is linked to a land parcel referenced as about 9.6 acres in the concall and about 10 acres in the investor presentation. Funding is expected to come from a mix of IPO proceeds earmarked for capex and available bank credit lines./n/nAlongside capex, the company also highlighted its R&D engine. The presentation notes a DSIR-recognized in-house R&D unit, and management stated in the concall that the R&D team includes 11 people, including three doctorates. Products such as Omega-3 and Vitamin D2 were described as being in the R&D phase, with management stating they are in the final stage of pilot or industrial trial, but without a committed commercialization timeline./n/n## Working capital and execution discipline will decide the outcome/n/nThe concall offered a realistic view of operating constraints. Management said the working capital cycle is around 110 days and is trying to reduce it through mechanisms such as invoice discounting for customers. However, they also noted that many overseas suppliers require upfront payment, and shipping timelines can be affected by geopolitical conditions. This creates a structural working capital burden, especially when raw material prices and availability shift suddenly./n/nThe company also acknowledged the impact of raw material price inflation on margins. While H2 FY26 profits rose, margins softened versus H1, and management attributed this to higher input costs from January onward. This matters because the company’s model includes significant trading exposure and import-linked sourcing, where pricing cycles can be sharp./n/nOn the positive side, the presentation shows customer concentration trending down. Top 1 customer contribution fell to 9.30% in FY26 from 20.90% in FY25, while top 10 contribution fell to 52.40% from 61.30%. Debt equity also improved to 1.3 in FY26, suggesting a deleveraging trend alongside growth./n/n## Takeaways/n/nFY26 shows that SK Minerals and Additives can scale quickly while improving annual margins. But the company is still predominantly trading-led in revenue, and the next phase depends on converting polymer additives from an innovation story into a stable, high-utilization manufacturing line. Management has articulated a clear direction with capacity expansion toward about 19,000 MTPA and a capex plan focused on polymers, while also acknowledging near-term commissioning and working capital challenges. The next 12 to 18 months will be defined by execution on the polymer ramp-up, the pace of the manufacturing mix shift, and the company’s ability to manage raw material volatility within its import-linked supply chain./n