Divyashakti Limited has announced a temporary reduction in its production levels, effective September 29, 2026. This decision stems from substantial increases in raw material, freight, and logistics costs, exacerbated by international trade disruptions and geopolitical tensions. The company has absorbed significant cost hikes but finds it difficult to pass these on, leading to pressure on margins and cash flows.
Production Adjustment Due to Cost Pressures
Divyashakti Limited is implementing a temporary reduction in its production levels, a measure set to commence on September 29, 2026. This strategic operational adjustment is a direct response to significant and ongoing challenges posed by escalating raw material, consumable, freight, and logistics costs. These increases are further compounded by continuing disruptions in international trade and shipping.
Impact of US Tariffs and Geopolitical Factors
A substantial contributing factor to the increased costs is the additional tariff burden imposed by the United States on affected Indian-origin products, effective September 1, 2026. This includes tariffs of 12.5% and 25%, along with an approximate 4% countervailing duty (CVD), resulting in an overall effective duty burden of approximately 41%. This has adversely impacted the competitiveness of these products in the US market, affecting the Company’s export volumes, selling prices, and margins.
Furthermore, ongoing geopolitical tensions have led to a sharp increase in crude oil prices, rising from around USD 45 per barrel to approximately USD 108 per barrel. This surge directly and indirectly impacts the prices of petroleum-based and other key raw materials. For instance, the cost of resin, a primary raw material for the Company, has increased by about 72%, from ₹100 per kg to ₹172 per kg. Prices for other essential raw materials and consumables have also seen considerable hikes.
Operational Strategy and Outlook
While the Company has strived to absorb a significant portion of these cost increases to maintain operations, the combined effect of the tariff burden and prevailing market conditions makes it increasingly difficult to fully pass these costs onto customers. Consequently, Divyashakti Limited’s margins and cash flows are under considerable pressure.
Ocean freight rates have also seen substantial increases, with per-container costs escalating to as high as USD 9,000. This makes exports considerably more expensive and contributes to dispatch delays.
The temporary reduction in production is intended to align output with prevailing demand, input costs, raw material availability, and logistics conditions. The Company will closely monitor international trade, geopolitical developments, and market conditions. As these factors stabilise and costs become more sustainable, Divyashakti Limited will review the situation and progressively restore normal production levels. The company remains committed to operational efficiency and safeguarding stakeholder interests.
Source: BSE
