/** Title: TANFAC FY26: Record sales, margin normalization, and a contract-backed push into downstream fluorinated products */

TANFAC FY26: Record sales, margin normalization, and a contract-backed downstream push

TANFAC Industries ended FY26 with its highest-ever revenue from operations of INR 711 crore, capped by a record INR 193 crore in Q4. The year was shaped by two parallel realities. On one side, volume growth and improved realizations helped the company scale revenue by 27.7% year-on-year from INR 557 crore in FY25. On the other, profitability moderated as raw material costs rose and operating expenses expanded, pulling EBITDA to INR 112 crore from INR 129 crore and PAT to INR 70 crore from INR 88 crore.

Management described FY25 as an exceptional year on realizations and margins. In FY26, the company saw higher sulphur prices and higher operating costs, along with the impact of increased depreciation from recent capex. In the earnings call, management also highlighted a Q4 mark-to-market loss linked to the rupee’s movement against the US dollar and disclosed production loss in the older HF unit due to unplanned maintenance and a distillation column bottleneck.

Despite the margin reset, FY26 was not a year of drift. It was a year of building blocks. TANFAC commissioned both phases of its Solar Grade DHF project, strengthened its long-term order visibility, and advanced a large downstream capex plan that aims to move the company deeper into value-added fluorinated products, including HFC-32 refrigerant gas.

FY26 financials: growth led by scale, profitability weighed by costs

The topline was clearly strong. Revenue from operations increased from INR 557 crore in FY25 to INR 711 crore in FY26. Q4 revenue rose to INR 193 crore versus INR 172 crore in Q4FY25, and was also higher sequentially compared with INR 173 crore in Q3FY26.

Profitability, however, normalized. FY26 gross margin fell to 37.5% from 45.2% in FY25. EBITDA margin reduced to 15.8% from 23.1% and PAT margin to 9.9% from 15.8%. Management attributed the change primarily to higher sulphur prices and a less favourable realization environment versus the prior year.

The financial statements in the investor presentation also show the impact of the capex cycle. Depreciation and amortization rose to INR 17.5 crore in FY26 from INR 10.5 crore in FY25. This contributed to lower PAT even as the business achieved record revenue.

Operations and working capital: high utilization in core plants, improvement in cycle

Operationally, TANFAC reported strong utilization in its two large capacity blocks. In FY26, sulphuric acid utilization was 101% and hydrofluoric acid utilization 95%, indicating robust demand and stable operations in the core lines. Specialty fluorides utilization, however, stood at 41%.

The company also reported an improvement in its working capital cycle. Net working capital days reduced to 91 in FY26 from 99 in FY25. Debtor days improved from 65 to 57 and inventory days from 59 to 48, but creditor days fell sharply from 25 to 13, partly explaining why the overall cycle remains working-capital intensive.

On cash flows, net cash from operating activities improved to INR 43.4 crore in FY26 from INR 32.8 crore in FY25. Investing cash flow was negative at INR 90.6 crore, reflecting expansion spend. Financing cash flow was positive at INR 38.1 crore.

The balance sheet expanded meaningfully with capex. Total assets rose to INR 527.7 crore at March 2026 from INR 426.4 crore at March 2025. Current borrowings increased to INR 92.8 crore from INR 41.4 crore, and the company disclosed net debt of INR 47 crore in its FY26 highlights.

Strategy: Solar Grade DHF ramps up, and HFC-32 becomes the next big bet

Two strategic initiatives dominated management commentary.

Solar Grade DHF: commissioned capacity and a multi-year order book

TANFAC commissioned both phases of its Solar Grade DHF project in June and October 2025, taking total annual capacity to 20,000 metric tonnes. The company stated it has already secured orders of INR 1,068 crore, to be executed over the next 3.5 years. In the earnings call, management added that these orders cover about 85% of the 20,000 MTPA capacity each year through FY29.

The call also offered a view on product economics. Management stated Solar Grade commands an additional INR 15 to INR 20 per kg realization versus normal industrial grade HF, with an incremental conversion cost of about INR 3 to INR 5 per kg, implying a meaningful uplift in per kg contribution.

Downstream fluorinated products and HFC-32: INR 495 crore capex with contract visibility

The larger bet is the planned downstream expansion into fluorinated products, including HFC-32 refrigerant gas. The company announced a capex plan of about INR 495 crore to set up a 20,000 MTPA downstream fluorinated products facility at its existing Cuddalore site. Management split this into about INR 405 crore for HFC-32 and about INR 90 crore for other value-added fluorinated products.

The headline comfort for investors is that demand visibility is being built before the plant comes online. Management stated that three consecutive long-term supply arrangements for fluorinated products were signed with leading global customers, aggregating to about INR 3,612 crore over 5 to 7 years, along with an additional agreement valued at about INR 61 crore per annum for an indefinite duration. On the call, management added that contracts cover about 65% of the proposed capacity and the company is attempting to take this to 80% to 85% before commissioning.

Management also indicated payback expectations. The CFO stated payback for the proposed HFC project is expected to be less than four years, based on the current demand and realization environment.

Funding was also discussed on the call. For the capex, management said it plans to raise about INR 400 crore, including about INR 100 crore from promoters via preferential allotment and the balance about INR 300 crore through a mix of QIP and term debt.

Guidance and what to track next

Management guidance was limited but clear on a few points. It expects operating EBITDA margins for the existing business to remain range-bound around 15% to 18%. The downstream plant remains targeted for commissioning by Q3 FY27. Management also spoke repeatedly about the HFC quota framework to be decided by the government, indicating that quota would be decided in 2027 and applicable from January 2028.

The investor presentation also stated the Board recommended a final dividend of INR 4.50 per equity share (face value INR 5) for FY25-26, subject to shareholder approval.

Closing view

FY26 was TANFAC’s record revenue year, but also a year that showed how sensitive profitability can be to sulphur pricing, operating costs, and post-capex depreciation. The strategic direction, however, is consistent. The company is trying to shift from upstream acids and commodity-linked lines towards higher-value fluorinated products where it can use its backward integration into AHF as a structural advantage.

The next year is mainly an execution story. Investors will likely track three things: the Solar Grade DHF ramp-up against the disclosed order book, progress on commissioning the 20,000 MTPA downstream facility by Q3 FY27, and clarity on the HFC quota framework that will shape the medium-term industry structure.