DCM SHRIRAM LIMITED

Written by Jainam Resources

Last Updated on: November 5, 2025

Q2FY26 RESULT UPDATE

Introduction

DCM Shriram Limited’s Q2FY26 numbers stood out as a solid performer in a largely volatile quarter for commodities and agri-linked sectors. The company reported an impressive 11% YoY revenue growth and a 152% jump in PAT, driven primarily by its Chemicals & Vinyl and Shriram Farm Solutions divisions.

What caught my eye as a trader was the clear shift toward margin efficiency — OPM expanding from 6% to 9% — reflecting disciplined cost management and operational leverage. With caustic soda volumes up 22% YoY, improved ECU margins, and new capacities like Epichlorohydrin (ECH) coming online, DCM is positioning itself smartly in the specialty chemical cycle.

Even in the face of ethanol pricing pressure and global sugar oversupply, management’s focus on backward integration and high-value materials signals a structurally stronger earnings outlook ahead.

Result Update

• The company reported robust consolidated performance, driven by strong growth in the Chemicals & Vinyl and Shriram Farm Solutions (SFS) segments. This includes an 11% YoY revenue growth and significant profitability improvements, with PAT surging 152% YoY in Q2.
• The OPM of the company increased from 6% to 9% YoY and remained constant at 9% sequentially.
• Higher caustic volumes (+22% YoY) and improved ECU margins (+9% YoY) boosted Chemicals. Government incentives (₹76 Cr in Q2) and lower input costs supported margins.
• Net debt stood at ₹773 Cr, with ROCE at 15.0%.
• QoQ Revenue slightly down 0.6% (from ₹3,456 Cr), but PAT up 39.5% (from ₹114 Cr), indicating sequential profitability improvement.

Segmental Performance

Chemicals & Vinyl (29% of Revenue)

• Q2 FY26: Revenue ₹913 Cr (+50% YoY), PBDIT ₹254 Cr (+195% YoY), Margin 27.9% (up from 14.2%).
  • Drivers: Caustic volumes +22% YoY (to 202,325 MT), ECU realizations +9% (₹28,171/MT). New capacities (850 TPD Caustic, H₂O₂, AlCl₃) and HSCL acquisition contributed. Vinyl revenues +15% YoY to ₹195 Cr, despite softer PVC demand.
  • Capacity Utilization: 81% (up from 70% YoY).
• H1 FY26: Revenue ₹1,818 Cr (+47% YoY), PBDIT ₹476 Cr (+119% YoY).
• Strategic Updates: ECH plant (35,000 TPA) commissioned in Oct 2025; balance 17,000 TPA soon. Proposed acquisition of Gujarat salt works (2.1 lakh MTPA, ₹175 Cr investment) for backward integration (13% of salt needs), expected by Q1 FY27.
• Outlook: Volume-led growth to continue; volatile ECU prices due to global factors, but chlorine downstream projects to enhance utilization.

Sugar & Ethanol (61% of Revenue, Agri Rural Segment)

• Q2 FY26: Revenue ₹933 Cr (-6% YoY), PBDIT ₹33 Cr (+144% YoY), Margin 3.6% (up from 1.4%).
  • Drivers: Sugar sales volumes -9% (14.9 lac qtls), but realizations +5% (₹4,046/Qtl). Ethanol volumes -13% (383.6 lac liters), realizations -6%. Positive impact from UPPCL power tariff revision (₹15.5 Cr). Offset by higher production costs and retrospective ethanol duty provision (₹36 Cr in Q1).
  • Inventory: 12.7 lac qtls (valued at ₹3,673/Qtl) as of Sep 30, 2025.
• H1 FY26: Revenue ₹1,757 Cr (-10% YoY), PBDIT ₹27 Cr (-47% YoY) – impacted by Q1 duty provision.
• Outlook: Crushing to start Nov 2025. Global surplus (4 MMT) may pressure prices; exports needed due to expected 8.5 MMT closing stock in India. Ethanol blending at 19.2% (on track for 20% target).

Shriram Farm Solutions (SFS)

• Q2 FY26: Revenue ₹471 Cr (+27% YoY), PBDIT ₹106 Cr (+47% YoY), Margin 22.5% (up from 19.4%).
  • Drivers: Strong growth in research wheat and crop protection verticals. 11 new products launched in H1 (4 from in-house R&D). Higher prices across verticals; fixed costs up due to R&D and branding.
• H1 FY26: Revenue ₹821 Cr (+28% YoY), PBDIT ₹130 Cr (+43% YoY).
• Outlook: Positive Rabi sowing sentiment; focus on science-based inputs for Indian farmers.

Fenesta Building Systems (Value Added, 7% of Revenue)

• Q2 FY26: Revenue ₹283 Cr (+28% YoY), PBDIT ₹43 Cr (+2% YoY), Margin 15.2% (down from 19.0%).
  • Drivers: Project vertical growth; order book +71% YoY (₹489 Cr). Diversification into aluminum, facades, and hardware (53% stake in DNV Global acquired in May 2025). Volumes up, but margins hit by product mix and fixed costs for capacity/brand expansion.
  • Presence: 975 cities in India; international in 4 countries; 7 fabrication plants operational.
• H1 FY26: Revenue ₹532 Cr (+25% YoY), Order book +44% YoY.
• Outlook: Aluminum extrusion plant (Kota) by Q4 FY26; focus on service excellence and wallet share.

Other Segments

• Fertilizer (Urea): Q2 Revenue ₹357 Cr (-8% YoY), PBDIT ₹20 Cr (-18% YoY). Volumes +2%, but lower gas prices reduced savings. Subsidy outstanding ₹187 Cr.
• Bioseed: Q2 Revenue ₹86 Cr (-46% YoY, seasonal), PBDIT -₹7 Cr. H1 flat YoY; focus on Rabi crops like wheat and mustard.
• Others (Cement, Hariyali): Revenue ₹56 Cr (-12% YoY), PBDIT -₹8 Cr.

Strategic Investments and Sustainability

• Completed in FY25/FY26: 850 TPD Caustic, 120 MW Power Plant, 52,500 TPA H₂O₂, 2,100 TCD Sugar expansion, 12 TPD CBG, HSCL acquisition, 35,000 TPA ECH.
• Under Implementation: Fenesta Aluminium Plant, 68 MW Renewable (with JSW), 100 TPD AlCl₃, 225 TPD CaCl₂, Salt Works acquisition (by Q1 FY27).

What Moved the Result?

• Positive Factors
  • Volume-Led Growth in Core Businesses: Higher production and sales volumes across Chemicals (caustic +22% YoY) and SFS (+27% YoY) drove 11% overall revenue growth. Capacity utilizations improved (e.g., Chemicals at 81% vs. 70% YoY), aided by recent expansions like the 850 TPD Caustic Soda plant and 300 TPD Flexi-fuel Flaker.
  • Margin Expansion from Cost Efficiencies: PBDIT jumped 74% YoY to ₹408 Cr (margin 11.9% vs. 7.5% YoY) due to lower input costs, better operating efficiencies, and favorable product mix. Government incentives added ₹76 Cr (vs. ₹20 Cr YoY) in Chemicals.
  • Strategic Acquisitions and Commissionings: Full acquisition of HSCL in Aug 2025 and commissioning of 35,000 TPA ECH in Oct 2025 boosted advanced materials entry, contributing to Chemicals’ +195% PBDIT growth.
  • Policy and External Tailwinds: Upward revision in power tariffs by UPPCL added ₹15.5 Cr to Sugar & Ethanol margins. Lower global input prices (e.g., in Chemicals) and stable demand in building materials supported Fenesta’s +28% revenue rise.
  • Balance Sheet Resilience: Net debt at ₹773 Cr and ROCE at 15.0% enabled capex continuity.

• Negative Factors
  • Volume Pressures in Agri Segments: Sugar sales -9% YoY and Ethanol -13% YoY due to lower offtake and timing differences, dragging overall revenue growth. Global sugar surplus (expected 4 MMT) and domestic stock buildup (projected 8.5 MMT closing stock) added pricing uncertainty.
  • Higher Fixed and One-Time Costs: Increased R&D, branding, and sales promotion expenses in SFS and Fenesta offset some volume gains. Finance costs rose to ₹43 Cr (+12% YoY) due to reduced interest capitalization on completed projects.
  • External Headwinds: Wet monsoons impacted PVC demand (-8% in India), leading to 12% price declines in Vinyl. Retrospective levy on ethanol exports (₹36 Cr provision in Q1 FY26, sub-judice) hurt Sugar margins. Geopolitical tensions and trade protectionism kept caustic ECU prices volatile (+9% YoY but QoQ -9%).
  • Seasonal and Mix Effects: Bioseed’s Q2 revenue -46% YoY due to Kharif seasonality and channel shifts. Product mix in Fenesta (more low-margin projects) compressed margins to 15.2% from 19.0% YoY.

• Net Impact on PAT: Tax expenses rose to Rs.87 Cr (+165% YoY, equivalent to MAT), but strong PBDIT growth more than offset this, driving 152% PAT expansion. EPS rose to Rs.10.14 from Rs.4.04.

Management Commentary

“Despite global challenges, our caustic business delivered strong, volume-led growth with improved margins. A milestone this quarter is the company’s acceleration into advanced materials, highlighted by the acquisition of Hindusthan Speciality Chemicals Limited and commissioning of Epichlorohydrin capacity.” The company maintains a resilient balance sheet (Net Worth ₹696 Cr in FY25) and eyes adjacent high-value segments amid geopolitical risks and policy uncertainties.

Conclusion

DCM Shriram Ltd reported a strong Q2 FY26 performance with 11% YoY revenue growth and PAT up 152% YoY, led by robust results in the Chemicals & Vinyl and SFS segments. The operating margin improved to 9% (vs. 6% YoY), driven by higher caustic volumes, government incentives, and lower input costs. The Chemicals segment was the key growth driver with revenue +50% YoY and PBDIT +195%, supported by new capacities and the HSCL acquisition. SFS grew 27% YoY with margin expansion, while Fenesta and Sugar & Ethanol saw recovery in profitability despite demand challenges.

The company maintained a healthy balance sheet with net debt of ₹773 Cr and ROCE of 15%, while continuing major capex in advanced materials, aluminum, and renewables. Overall, DCM Shriram delivered broad-based growth, margin expansion, and strong cash generation, positioning it well for sustained earnings improvement, though volatility in sugar prices and global chemical markets remain key risks.