S H Kelkar and Company Ltd (SHK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to S H Kelkar and Company 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 the conference call, please signal an operator by pressing star and then zero on your touch-tone phone. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, Mr. Poojari.
Anoop Poojari (CDR India): Thank you. Good afternoon, everyone, and thank you for joining us on S H Kelkar and Company Limited's Q2 and H1 FY '27 earnings conference call. We have with us, Mr. Kedar Vaze, Whole-Time Director and Group CEO, Mr. B. Ramakrishnan, CEO, Fragrances, Asia and USA, and Mr. Jagdish Agarwal, Group Chief Financial Officer of the company. We'll begin the call with opening remarks from the management, following which we will have the forum open for a question-and-answer session. Before we start, I'll point out that some statements made in today's call
Anoop Poojari (CDR India): sincerely to see all here. I would now like to invite Kedar to make his opening remarks.
Kedar Vaze (S H Kelkar and Company Ltd): Good afternoon, everyone and thank you for joining us for the SH Kelkar and Company earnings call for second quarter and first half of financial year 2027. Our first half performance has been encouraging with good momentum across our businesses. The fragrance segment reported revenue growth of 11.9% in the first half '27 driven by India and the international markets. Excluding the impact of the low-margin business we hive off in quarter four '26, the annual revenue of which was roughly 50 crores, the underlying growth was about 14%. Our priorities remain to leverage our creative and technical expertise, respond to evolving customer requirements, and strengthen our presence across key markets, especially new investment areas in Europe and America. The flavor business continued to perform well recording strong growth of 47% during the first half. Business has benefited from demand across domestic and international markets. We continue to see significant long-term potential in this segment and remain focused on expanding our contribution to this business to innovation and continued development in application centers. Over the new over the past few years, you know we have invested significantly in building the global creative, technical and manufacturing capabilities across developed markets in Europe and America. Our focus now to consolidate these gains, harness them for sustained growth by bringing new products to the market at a faster pace. Looking ahead, while the external environment is likely to remain dynamic, our strategic direction remains unchanged. We remain focused on reinforcing our position as a globally competitive, technology-led fragrance and flavor company to leverage our innovation capabilities and scientific expertise and integrated global platform to deliver sustainable, profitable growth over the long term. Our continued research in proprietary molecules, formulation technologies, and sustainable ingredients will be our key differentiator as we grow confidently to the new geographies that we are expanding. With that, let me hand over to Jagdish to take you through the financial performance in greater detail. Over to you, Jagdish.
Jagdish Agarwal (S H Kelkar and Company Ltd): Thank you, Kedar. Good afternoon, everyone, and thank you for joining us. Let me take you through the financial performance for the second quarter and first half of FY27. The consolidated revenue from operations grew by 15% Y-o-Y to Rs. 636 crore in second quarter FY27, taking H1 revenue to Rs. 1,299 crore, an increase of 14%. EBITDA for the first half increased by 33% to Rs. 168 crore, with EBITDA margins improving to 13%. At the consolidated level, gross margins remained broadly stable during first half of FY27 amid volatility in raw material prices and global sourcing conditions. Protecting profitability has remained a key priority, supported by proactive raw material planning, appropriate pricing actions, operational efficiencies, and continued cost optimization. These measures have helped us manage input cost pressures and maintain operating performance in a challenging environment. Within the fragrance segment, H1 revenue grew by 11.9% Y-o-Y to Rs. 1,088 crore. Growth was broad-based across geographies. The flavor segment maintained its strong growth trajectory with H1 revenue increasing by 47% on Y-o-Y basis to Rs. 184 crore. Flavor performance was supported by sustained demand and deeper customer engagement across domestic and international markets. The higher revenue base also contributed to an improvement in segment profitability. While we remain encouraged by the performance of this business, the pace of growth may vary across quarters depending on the timing of customer orders. Moving to the balance sheet, net debt stood at Rs. 911 100 911 crore as of September 30th, 2026. During the first half, we consciously maintained high inventory levels to ensure supply continuity and meet customer commitments
Jagdish Agarwal (S H Kelkar and Company Ltd): at September end debt level to represent a peak for the year with the reduction anticipated by March 2027 as we optimize inventory levels. Beyond the current financial year, our objective is to progressively improve cash generation and reduce debt on a year-on-year basis, thereby strengthening our balance sheet and enhancing financial flexibility. Looking ahead, our focus will remain on sustaining operating performance, protecting profitability, and improving working capital efficiency. We believe these priorities will support continued business growth while strengthening our financial position over the long term. With that, I would request the moderator to open the forum for questions. Thank you.
Moderator: Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, you may press star and then one now. Your first question comes from the line of Abhijit Akella with KIE. Please go ahead.
Abhijit Akella (KIE): Hi, good afternoon. Thank you so much for taking my questions. First one was just if you could please share an update on the major capex projects, you know, the new projects underway both in India and abroad, what are the timelines for these, and yeah, how you see the ramp-up going?
Kedar Vaze (S H Kelkar and Company Ltd): So the capexes in Europe are almost all, all done. So the factory is put to use since May. We've seen second quarter that it's fully operational. The capex projects in India, particularly the fragrance factory renewal, is expected to complete by end of this year, kind of put to use in quarter four. And thereafter next year, we will transition the factories out from Mulund to the new factory. The second factory is also expected in financial year '27-'28. Incremental capex will be included. And the factory in the second factory in Mulund will then transition out to the the second factory in Vanivali, Vashivali. This is likely to happen, so first factory put to use in quarter four this year and the second one put to use in quarter four next year, which would conclude our large capex expansion as we complete our domestic requirements on fragrance and flavor growth for the next few decades.
Abhijit Akella (KIE): Thank you. And the other aspect was just on these overseas creation development centers that we have set up across 3 3 new markets. Any update there in terms of you know, progress in terms of customer discussions, any traction in project inflows, yeah?
Kedar Vaze (S H Kelkar and Company Ltd): So the first half, we've done budgeted sales in the US. So US market, we've already started generating revenues. The numbers are small. It will take a couple of years to ramp up, but there is active momentum. We also have our first sales in Germany and the first sales in the UK market. So we are on track to start to monetize our investments which we have concluded in the last 2 years.
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