Sudarshan Chemical Industries shared the transcript for its Q3 FY26 earnings call, detailing the ongoing integration of the Heubach/Clariant business. Management acknowledged a tough Q3 driven by subdued demand and customer destocking, particularly in Europe and North America. Key focuses remain on value capture, achieving INR40 crores in realized savings to date, and rebuilding customer trust post-acquisition, which is now showing positive signs in January and February.
Q3 FY26 Performance and Acquisition Integration
Sudarshan Chemical Industries hosted its Q3 FY26 Earnings Conference Call on February 13, 2026. Chairman and Managing Director, Mr. Rajesh Rathi, reflected on the completion of 11 months of integration following the acquisition of Heubach’s global business, including Clariant’s pigment division.
The management described Q3 as a very tough quarter for the specialty chemical industry, attributing subdued performance primarily to low demand across sectors like household paint and automotive, coupled with significant destocking by customers who held high inventory from the prior Heubach insolvency period.
Value Capture and Operational Synergy
A major focus has been on value capture across operations, procurement, IT, and fixed costs. The company has already captured INR40 crores of this synergy, realized in Q3, compared to Q1.
Key integration achievements include:
- Inauguration of the Global Capability Center (GCC) on February 4 to enhance productivity and response time.
- Progress in harmonizing systems, aiming to consolidate 4 SAPs into 1 SAP by December ’26.
- Rebuilding customer confidence, which has led to assurances that global accounts would resume buying to the full extent starting in January and early February.
Financial Performance and Inventory Strategy
CFO Mr. Nilkanth Natu detailed the financial results, noting that the acquired group saw an EBITDA loss of INR38 crores for the quarter, partially due to an approximate INR46 crores provision related to the Labour Code.
Mr. Rathi clarified the EBITDA outlook for the coming quarters, expecting business EBITDA of EUR 9 million to EUR 10 million in the next quarter. However, the company is intentionally reducing finished goods inventory, targeting a reduction of EUR 30 million to EUR 40 million over the next three quarters. This inventory reduction is expected to negatively impact reported EBITDA by EUR 9 million to EUR 12 million in the short term due to overhead allocation but will provide a very positive impact on cash flow and net debt.
Outlook and Long-Term View
Management expressed confidence that the worst is behind them. Demand is expected to return as destocking ends, with sales in January and February already showing the promised uptick.
Regarding the legacy Sudarshan business, while growth was subdued in the first nine months, management expects a return to the 10% to 11% long-term CAGR post-FY26, noting that the portfolio transformation thesis remains intact.
On the cost side, the long-term target for employee cost across the merged entity is 12% to 13% of the overall cost profile.
Source: BSE
