Birlanu Ltd (BIRLANU) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Birlanu Limited's earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Meet Shah from CDR India. Thank you, and over to you, sir.
Meet Shah (CDR India): Thank you, Nirav. Good afternoon, ladies and gentlemen, and welcome to Birlanu Limited's Q2 and H1 FY27 earnings conference call for investors and analysts. Today we have with us Mr. Akshat Seth, Managing Director and CEO of the company, and Mr. Ajay Kapadia, CFO. We will first have Mr. Akshat Seth make his opening remarks. He will be followed by Mr. Ajay, who will take you through the financial perspectives. Before we begin, I'd like to point out that certain statements made in today's call could be forward-looking in nature, and details in this regard are available in the earnings presentation that has been shared with you earlier. I would like to invite Mr. Akshat Seth to present his views on the performance and strategic imperatives that lie ahead. Thank you, and over to you, sir.
Akshat Seth (Birlanu Ltd): Thank you, and good afternoon, everyone. Thank you for joining us today. At the outset, I want to share that Birlanu has delivered yet another strong quarter of growth and profitability. The revenue for our India business grew by 17% to Rs. 588 crores, and this is now the third consecutive quarter of double-digit revenue growth. EBITDA rose 3.3 times to Rs. 40 crores for the quarter. The margins for us strengthened across most of our categories, and our product mix continued to shift towards higher value offerings, and that's a key theme that you would see resonate across our product segments. This consistent performance delivered in a far from easy external environment reflects deliberate choices we have made over the last couple of years: strengthening our portfolio, building a sharper and more efficient execution engine on both sales and operations, and investing behind our brands. These efforts are now showing up in our numbers quarter after quarter, and we intend to build on them. I will walk you through the performance of each business before updating you on the strategic agenda and the progress on that. Our roofs business continued to be the strong growth engine for the company, with revenue up 28% over last year, and a volume growth of 21%. We are also selling a richer mix with the share of value-added products 35% higher than last year. There is a sharp focus on costs and the benefit of operating leverage helped us improve margins further, even as input costs were on a increasing trend. To make these gains structural, we have initiated a comprehensive value enhancement program internally for, specifically for the roofs segment. It is already bringing in savings with the full benefit expected to come through at a annual level from next year. We continue to strengthen our leadership in this category with market share gains during this quarter as well. In walls, our revenue grew by 5.4%, along with a significant step up in margins, which expanded by over 200 basis points over the previous quarter and 120 basis point over last year, and this was supported by better realizations, improved mix, and tighter cost management across all our products. We are also broad-basing our growth. Alongside our traditional institutional channels, we have significantly increased our retail presence, giving the business a wider and more resilient demand base. Pipes has delivered a strong turnaround this quarter, with revenue growing at nearly 20% over last year and also sequentially, while margins improved by 630 basis points. The quality of growth has improved as well. Value-added products, including fittings, now make up 47% of the portfolio, which is significantly higher than last year. Our focused market development efforts are clearly paying off, with our priority markets growing significantly faster and gaining share. We've also introduced new business segments such as manufacturing as a service within pipes, which lets us make better utilization of our assets, and we are building on these to further improve the overall margin profile of the business. Construction chemical grew by about 35%, despite severe cost and pricing pressure arising from the ongoing geopolitical situation. Growth was helped by focused market development and an expanding product portfolio. At Cleancoat, which is our most recent acquisition, revenue was up by about 50% compared to same period last year. Even as foundational work at Cleanclo-, sorry, 50% higher than last year, even as higher prices across all key raw materials continue to weigh on the margins. The foundational work at Cleancoat is now in place and it has built a
Akshat Seth (Birlanu Ltd): strong order pipeline for the rest of the year and beyond. As input costs stabilize, we expect the operating leverage to support a gad- a gradual recovery in margins as well. I'm now turning to Parador, for which it was a challenging quarter. Demand in key European markets remained weak, compounded by broader global sluggishness, and revenue declined about 4 point 4% over last year. Profitability was impacted by cost pressures and lower volumes. We are acting decisively to reset the business for recovery. There is a cost-out program being led by the BCG team in Germany, alongside a range of other measures to restore the margins. At the same time, we are not losing sight of the long term. Parador continues to build its presence in the new markets, notably the US, India, and the Middle East, and to win new customers in the commercial segment, and finally, to strengthen the core of DIY and retail business in Europe. These efforts will position Parador well as its markets recover. We remain confident in Parador's long-term potential as a premium flooring brand. At a consolidated level, revenue for the quarter [cough] grew 9.2% to Rs 885 crores. Overall profitability, however, was impacted by the weaker performance at Parador. Aside of Parador, the India business continues to deliver on our stated objective of value-building growth, with double-digit growth and steadily improving margins. Let me now update you on our strategic priorities and where we continue to make significant pro- progress. On the capacity front, our greenfield boards plant at Nellore is on track to begin commercial production in the fourth quarter of this financial year. We also expect to break ground on our second new project in Hyderabad by December. Together, these will significantly strengthen our position in the fast-growing premium boards category. On the go-to-market focused market development is delivering results in both pipes and construction chemicals, and our expanded re- retail presence is broad-basing growth in walls. We will extend these learnings across the entire portfolio. On product innovation, this quarter we launched several new products, such as the EcoRoof, QuickSeal, and Polytech waterproofing 2K in roofs and construction chemicals, and this has helped strengthen our presence in the higher value segments. Several other exciting launches are planned for the second half of the year. On sustainability, during the co- quarter we commissioned roof top solar at our Golan and Chennai units, and have also approved solar capacity at two more manufacturing units. We expect green power to exceed 20% to 25% of our energy mix within the next two years, reducing both our energy costs and our carbon footprint. Finally, we are seeding new engines for future growth and value creation. One such initiative is an AI-enabled materials discovery platform that helps architects and designers find, evaluate, and showcase design possibilities. It brings Birlanu closer to the specifiers who shape material choices, and we look forward to sharing more as this new business scales up. We, however, remain vigilant as external risks have only intensified in recent weeks. Geopolitical uncertainties and global supply disruptions continue to drive inflation in key raw materials, energy, freight, and currency. High inflation and tight liquidity are likely to weigh in on near-term demand, and the El Nino effect poses a risk to farm output and therefore rural demand. We are responding with discipline and agility, keeping a tight grip on costs through several cost-out programs and initiatives across our businesses, managing risks proactively, and building on the gains of the first half of the year. We will continue to pursue pricing and efficiency actions when needed
Akshat Seth (Birlanu Ltd): These risks notwithstanding, our strong performance in the first half gives us good, solid confidence for the second half of the year. With a stronger portfolio, richer product mix, and new capacity coming on stream and an unwavering focus on execution, we are well placed to sustain that momentum and deliver a strong second half of the year and, in aggregate, a strong FY27. With that, let me hand over to Ajay. Thank you for for dialing in and and your interest in Birlanu.
Ajay Kapadia (Birlanu Ltd): Thank you, Akshat, and good afternoon, everyone. Building on Akshat's comments, I will take you through our financial performance for the quarter and the half year ended on 30th September, 2026. Starting with quarterly performance, our India business, and here India business is basically Birlanu standalone business as well as Clean Coat's business, delivered another strong quarter with revenue growing 17.3% year-on-year to ₹588 crore. EBITDA increased to ₹40 crore from ₹12 crore in the corresponding quarter last year, while EBITDA margin expanded by over 400 basis points to 6.8%. This marks our fifth consecutive quarter of EBITDA margin expansion, reflecting sustained improvement in operating profitability and reinforcing our confidence in the strategic direction we are pursuing. At the consolidated level, revenue grew 9.2% to ₹885 crore. However, the challenging business environment at Parador weighed on overall profitability. Turning to our first half performance, our India business sustained its strong momentum with revenue growing 13.8% year-on-year to ₹1,422 crore. EBITDA doubled to ₹138 crore from ₹69 crore in the corresponding period last year, with margins expanding by over 400 basis points to approximately 10%. At consolidated level, revenue for first half stood at ₹2,059 crore, registering growth of 11% year-on-year. Consolidated EBITDA increased to ₹82 crore from ₹63 crore in the corresponding period last year, representing growth of approximately 30%. Let me now take you through the performance of individual business segments. Roofs segments delivered a strong performance with revenue growing 28% year-on-year to to ₹244 crore. EBITDA margin improved by 320 basis points to 11.5% compared to 8.3% in the corresponding quarter last year. The margin improvement was driven by operating leverage and focused cost management. We expect our ongoing value enhancement initiatives to provide further impetus to profitability as the benefits progressively materialize. The Walls segment reported revenue growth of 5.4% to ₹164 crore. Despite relatively moderate revenue growth, the segment continued to improve its profitability with EBITDA margin expanding by 120 basis point year-on-year to 12.3%, supported by better realizations and an improved product mix. With the Nellore boards plant expected to commence operations in quarter 4 of this financial year, we are confident of further strengthening the Walls segment revenue and revenue growth and profitability. Our Pipes business witnessed a strong recovery during the quarter, with revenue growing 20% year-on-year to ₹132 crore. EBITDA margin improved by 630 basis points compared to the corresponding quarter last year. The business recovered from a challenging quarter 1, when the industry witnessed degrowth amid abnormally volatile resin prices. The improvement in business momentum provides confidence as we enter the seasonally stronger part of the year. Construction Chemicals delivered revenue growth of 35% during the quarter, supported by strong traction across its portfolio. The business navigated elevated raw material costs and pricing pressures arising from the prevailing geopolitical environment. Moving to Parador, the business faced demand headwinds across key European markets, coupled with elevated raw material prices. Revenue declined by 11% in local currency terms and 4% in INR terms, which
Ajay Kapadia (Birlanu Ltd): with cost pressure adversely impacted profitability. We are progressing the cost optimization programs in partnership with BCG with a clear focus on improving the underlying cost structure and enhancing Parador's profitability. In view of the operating losses at Parador, we have recognized an additional provision of 90 crore towards diminution in the value of our investment in Birlanu International GmbH taking the cumulative provisions to rupees 164 crore as of September 30th, 2026. The assessment reflects the prolonged weakness in the key European market, geopolitical uncertainties, and their impact on Parador's operating performance. The carrying value of the investment will be reassessed on a regular basis considering Parador's financial performance. The provision has been recognized as an exceptional items in the standalone financial statements. Moving to our balance sheet, we continue to place strong emphasis on cash flow generation, efficient working capital management, and maintaining financial flexibility to support our growth ambitions. Our total debt stood at 896 crore as on September 30th as compared to 852 crore as of March 31st. The increase was primarily driven by investment in ongoing greenfield projects and other capacity expansion initiatives to support future growth. Our working capital position has strengthened significantly compared to both previous year and and the corresponding period of last year. Alongside this, we remain focused on strategic sourcing and prudent forex risk management to mitigate cost volatility, safeguard margins, and support stronger cash generation. As mentioned by Akshat, both the Nellore and Hyderabad boards project are on track as per our plan. We are closely monitoring project execution and capital deployment to ensure timely completion within the planned investment outlay. Before I conclude, let me also share an update on Clean Coats. The integration of Clean Coats with Birlanu is expected to be completed by end of this year subject to the requisite statutory approvals. We believe this integration will create further opportunities to realize synergies across operations, procurement, and other business functions while further strengthening our portfolio. Overall, H1 FY27 has been encouraging, particularly for our India business, with sustained double-digit revenue growth and significant improvement in operating profitability. While the external environment, particularly in Europe, remains challenging, our focus will be on sustaining growth momentum, driving further margin expansion, and strengthening cash generation through operational efficiencies, effective working capital management, and disciplined capital allocation. We remain committed to enhancing the quality of our earnings and delivering sustainable value for our shareholders. With that, I conclude my opening remarks and hand the call back to moderator to open the floor for questions.
Moderator: Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use headsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. First question is from the line of Jiten Parmar from Aurum Edge. Please go ahead.
Jiten Parmar (Aurum Edge): Yeah. Good afternoon, Akshat, Ajay bhai, and all. congratulations on good standalone numbers. There is definitely a improvement and I must commend the management for that. But my question is again on Parador. So FY27 guidance was of more than breaking-even and that is now followed That was in August 2026. 3 months later, we are again doing a 90 crore write-down and, you know, the first one was around 75 74 crores. So 45% value I think we have already kind of written off. Also you know, basically to break-even, you had guided that, you know, Parador need needs to do 140 to 144 million per year. I think we did around 60 million in the first year first half. So are we confident that we will do 80 million euros
Jiten Parmar (Aurum Edge): the second half. And also, you know, the best quarter we've had since FY '24 for Parador was 1.7 million which is in Q4 FY '25. For half, we have already got a hole of 4.5 million. So, in the second half, can we do more than that to make it, you know, EBITDA positive? So, that is one question. And I we've gone through all the con-calls since 2019 and we kind of basically we did a table and then 23 Parador financial commitments have been made on 11 con-calls. We find the delivery very, very low, maybe one or two and you know, 21 have been missed. And also if you remember, in FY '25 Q2 call, I had asked how long a rope will we give to Parador. So, my it's an angst also from us investors that you know, something needs to be done about this. And each time we hear that we will turn it around, but it is not happening. So, can you throw some light, you know? And and there should be some light at the end of the tunnel, right? Or or we have to abandon it. So, if you can throw some light on this. Sorry for you know, asking this hard questions, but I think it is high time that you know, something needs to be done about Parador.
Akshat Seth (Birlanu Ltd): Thanks, Jiten. And thanks for your question and your comments and I think I understand the sentiment. In terms of something that needs to be done, one one major activity we've undertaken is there is there is an engagement of BCG to come in and do a comprehensive cost restructuring. We are now in month three of that engagement. I'm also encouraged by the results that have come so far. The the team overall, the initiatives have identified a value envelope of additional about 9 to 14 million at an EBITDA line level. And that is what we are pressing on. Now, this is a comprehensive restructuring on the cost line across all possible line items. So, that's a major, major initiative that has already been undertaken and the first set of ideas are beginning to be implemented as well. So, we will see the results of that within within this financial year itself. The second positive and which we need to see the full results, the investments in the new markets, namely North America, Middle East, India, there is a lot of good, positive traction. If you recall, and as you recount many of the earlier calls, the whole thesis has been for us to diversify geographically and the activity in these markets is critical for that. I'm happy and confident to report that in these markets, the momentum is very good. For instance, in the US, already in these six months, we've done more almost twice as more as what we did in the in full financial year last year. We are on track to finish in North America for this financial year at nearly 4 to 5x of previous year's performance. So, there are those green shoots. We need to wait out and see the results before before any other decision or consideration is done on that.
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