True Colors Ltd (TRUECOLORS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (TIL Advisors): Ladies and gentlemen, good day, and welcome to the H1 FY '27 earnings conference call of True Colors Limited, hosted by TIL Advisors. 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 after the opening remarks conclude. Should you need assistance during the 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. Abhishek Mehra from TIL Advisors. Thank you, and over to you, Mr. Mehra.
Abhishek Mehra (TIL Advisors): Good morning, and welcome, everyone, and thanks for joining this H1 FY '27 earnings conference call of True Colors Limited. The investor updates have already been uploaded on the stock exchange and on the company website. In case you do not have a copy of the same, please feel to reach out to us. To take us through the discussion, we have with us from the management team, Mr. Satish Panjwani, Executive Director and Chief Executive Officer; Mr. Sagar Mulani, Executive Director and Chief Financial Officer; and Dhwani Kadandale, Company Secretary and Compliance Officer. We'll be starting the call with a brief overview of the business and financial performance, which will be followed by the Q&A session. I'd like to remind you all that everything said in this call, reflecting any outlook for the future, which can be construed as a forward-looking statement, must be viewed in conjunction with the risk and uncertainty that the company faces. With that said, I'll now hand over the call to Mr. Satish Panjwani for his opening comments. Over to you, sir.
Satish Panjwani (True Colors Ltd): Thank you so much, Abhishek, and good morning, everyone, and thank you for joining the True Colors Limited earnings call for the first half of FY '27. Our results and investor presentations are available on the BSE website, and I hope you have had the chance to go through them.
Satish Panjwani (True Colors Ltd): clearest evidence so far of how our business model works. The consumable we supply to our installed base are now driving both growth and profitability, and you can see that in our results. Second, we have announced the next major step in our journey, 50-50 joint venture that will make coated paper starting from pulp, taking us right back to the beginning of the paper value chain. I will take you through our performance, the compounding model behind it, our capex and growth lever, the joint venture and the thinking behind it, and finally, how all of this comes together over the next few years. So, let me begin with the numbers. At the start of the year, we guided for the revenue growth of more than 20%. I'm pleased to report that we have delivered on that. Revenue from operation for H1 FY '27 stood at INR183.01 crore, up 21.1% from INR151.11 crore in the same period last year. On a sequential basis, revenue grew 21.7% over the second half of FY '26. More importantly, profit grew much faster than revenue. Gross margin expanded by 405 basis points to 30.2%. EBITDA rose 40.1% to INR32.34 crore, and the EBITDA margin improved by 240 basis points to 17.7%. Profit after tax grew 43.3% to INR21.09 crore, with the PAT margin rising by 178 basis points to 11.5%. When profit grow at twice the rate of revenue, it tells you something about the quality of that revenue. The driver here is the richer business mix, with the high-margin consumable forming a larger share of our sales. I will come back to this when I talk about our compounding model because it is the single most important feature of True Colors. Our growth this half year has been driven by volume. In sublimation paper, volume more than doubled to 9.97 crore meter, up from 4.92 crore meter in H1 FY '26. Paper revenue grew 79% to INR51.81 crore, and paper is now our largest revenue line at 28% of the total. Our expanded coating capacity of 2 crore meter a month is already running at optimum utilization. 3 years ago, we had 30 lakh meter a month of capacity only. In ink, inks, volume grew 22% to 689 tonnes, and we are now supplying more than 150 tonnes a month to our customers. To put that in context, our average was about 58 tonnes a month in FY '24. This growth comes directly from our expanding installed base. In digital printing fabrics, volume rose 7% to 99.71 lakh meters, while revenue grew 25% to INR49.12 crore on the better product mix. In machines, we installed 56 unit in this half, against 68 a year ago. As we have said before, machine sales are lumpy by nature and should be judged over a longer cycle. Our active installed base has grown 11% over the year to 956 machines, and that is the number that drives our recurring revenue. I want to spend a moment on how our business works because it explains these results and why we are confident about the future. True Colors is India's only fully integrated digital textile printing ecosystem company. We sell and install machine from 5 to 6 global OEM partners. We supply the ink and sublimation paper those machine consumes every day, and we run our own large-scale printing operations. The machine is just the starting point. Once a machine is installed, the warranty on the printhead, spare part, and electronics is tied to the use of the ink that is supplied by True Colors. Beyond the warranty, digital printing is a make-to-order business. Customer designs are approved on specific color profile, and changing the ink that change the colors. So customers stay with us, and they place orders with us every day or every week. Our 60-plus service engineer across India, India's main textile cluster, deepen that relation over the life of the machine. So this is why every installation add to a growing base of recurring revenue. In H1 FY '27, ink and paper contributed 56.2% of our revenue, which is up from 48.7% a year ago. Recurring revenue is now the largest part of our business, and it carries better margin
Satish Panjwani (True Colors Ltd): machine sell. As the install base grow, this share will continue to rise and so will our profitability. That is the compounding at work. Last year I spoke openly about the pressure on our operating cash flow, it came from two things. We moved from our purchasing to domestic MSME suppliers who must be paid within 45 days, and the larger share of ink and machine business came with the advance payment terms. I am glad to report that this has turned around. We generated operating cash flow of INR 27.16 crore in H1 FY '27, against an outflow of INR 10.90 crore in the same period last year. Trade receivable were broadly stable at INR 116.03 crore, even at revenue grew by more than 20%. Cash and bank balance stood at INR 21.64 crore at the end of the September, up from INR 1.27 crore in March. We have a clear way of growing this business. First, we build a strong base of customer by distributing a product, then, once we have the scale, we integrate backward and make that product ourselves. This is how we keep more of the value and the product of our margins, and protect our margin, sorry. We have done exactly this in the sublimation paper. We started coating paper in 2018 at 50 lakh meter a month. Today, we have 2 crore meter a month, it is fully utilized. We are now doing the same in ink. For years we have imported and distributed inks, and India still source almost of all its digital printing ink from China and Japan and Europe. Having built a base of more than 150 ton a month, we are setting up our own ink manufacturing under the Inkea brand. Phase 1, with capacity of 150 ton a month is planned by the end of FY '27, at the CapEx of around 40 to 45 crore. The project qualifies for the 35% subsidy under the Viksit Gujarat Industrial Policy 2026. Phase takes capacity to 500 tons a month in FY '28, and over the longer term, we plan to reach 1,000 ton a month across sublimation, reactive, disperse, pigment, and adjacent applications. Our partnership with ITACA of Spain and added premium pigment inks and commercial supplies began this half. Ink is among the highest-margin products we sell, so this move is central to improving our profitability. Alongside this, we are going in new direction. We have started exporting ink and printed fabric to the UAE market as well. Alongside this, we are selectively extending our digital printing platform into commercial label and packaging applications while textile remain our core and priority. The entry is asset-light through machine distribution with the same underlying technology and ink capability, that is creating the potential for a larger installed base and recurring consumable opportunity. This bring me to one of the most important strategic announcements of this half. We have entered into 50-50 joint venture with Swastik Strategic Ventures LLP to establish an integrated manufacturing platform for specialized lower-GSM coated media that is used into digital printing. The new company will be called True Colors Advanced Materials Private Limited. Let me explain why this strategy is important. Over the years, our sublimation paper business has taken us progressively deeper into science of digital printing media. Today, we procure base paper and convert it through our coating technology into application-ready sublimation media, in a layman word, a sublimation paper. However, much of the specialized lower-GSM requirements being import-dependent, as the market has moved from higher GSM toward increasingly lighter substrate, we believe the next opportunity is not simply to add more coating capacity, but to gain greater control over the substrate itself. India currently remains significant dependent on import of this lower-GSM sublimation media because manufacturing constrained, high-performance substrate at very low GSM requires specialized process capability and scale. So our joint venture is designed to address this gap through backward integration, from pulp to base paper substrate to functional coating at a single integrated capacity. The objective is to manufacture application-ready digital printing media with greater control over GSM, consistency, coating performance and the product development. The proposed facility at Bardoli, Gujarat, is being planned for approximately 8 to 10 crore meter of coated media per month. It will make GSM grade around 29 GSM and progressively addressing the lower-GSM category where India remains import-dependent. The estimated project cost is approximately INR 320 to 340 crore. The
Satish Panjwani (True Colors Ltd): structure approximately 25% equity and 75% project debt with debt raised at the joint venture level. Commercial production is currently targeted for the second half of FY '29. The project will also come under the Viksit Gujarat Industrial Policy 2026. So the next thing is, why a partner? A question that a lot of you might have, let me address it upfront. True Colors brings the technology and process know-how of sublimation paper business along with our market understanding and customer relationship. Swastik brings a proven record of project execution and the financial strength a project of this scale need. An equal partnership share the capital and the risk and protect our core balance sheet during the build. We are moving first, there is very little of this capacity in India today and we already have the customer who will use it. So that gives us a real head start in capturing this import substitute opportunity. Let me now bring all this together for you. When these projects are complete, True Colors will own every link in the digital textile printing value chain. We will sell and service the machine, we will make the ink, we will coat sublimation paper in our own plant, through the joint venture, we will make the coated paper starting from pulp and we will continue to print fabric at scale ourselves. No other company in India offer this. So each link strategically strengthens the other. Every machine that we install create a customer for our ink and paper, making those products ourselves improves our margin and secure supply. Secure supply let us serve more customers, which bring more machine sales. The installed base grow, recurring revenue grows with it, and profit grows faster still. So the market gives us the plenty of room to run. The global digital textile printing market is expected to nearly double from USD 3.89 billion in 2025 to USD 7.63 billion by 2030. Yet digital printing makes up only 8 to 9% of textile printing in India against 80 to 95 in Europe. Fast fashion, sustainability demands from global brands, government support, and the economy of small runs are also pushing Indian manufacturers toward digital printing. Digital printing use about 70% less water, 55% less energy than the conventional method. We estimate that we already account for 16 to 18% of digital, India's digital fabric printing volume, and we are built to grow with this shift. So to sum up, H1 FY '27 has been a very strong half. We delivered on our growth guidance, our profit grew twice as fast as our revenue, and our cash flow have turned positive. Our recurring business is now the largest part of the company and continue to grow. At the same time, we are laying the foundations for the next phase. In-house ink manufacturing begin this year, and the paper joint venture will complete our ecosystem. With the compounding installed base, a rising share of consumable, and two backward integration project underway, we are confident that this strong performance will continue in the period ahead. With that, I will hand it over to the moderator for questions.
Moderator (TIL Advisors): Thank you very much, sir. We will 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 handsets while asking a question. Each participant is requested to limit himself or herself to a maximum of two questions. Time permitting, we shall revert for any further questions that you may have that remain unanswered. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead.
Keshav Garg (Counter Cyclical PMS): Sir, I wanted to understand are there any plans to raise equity?
Satish Panjwani (True Colors Ltd): Okay. So, if you, if you see historically, we, we have almost funded our individual projects individually through combination of internal accrual and project debts, right? So, currently what we are looking is it's as opportunity that is in front of us as, as a pool of the, at the company levels. So, eventually the mix could include internal accrual, project-level debt, strategic JV capital that what we did, and it create a long-term, if it creates a long-term shareholder value, then equity yes. So, we have not restricted ourselves to one funding route right now.
Keshav Garg (Counter Cyclical PMS): Understood. And this new paper JV that we are doing, how much capex will it entail? And what will be our share? And how much debt will be taken on in on that JV?
Satish Panjwani (True Colors Ltd): So, as as I as mentioned in my opening remarks, it is the capex is approximately 320 to 340 crore. The JV is 50-50, 25% is the equity, and 75% is the project debt. So, if we see for the fund from our end, it will be the 25 50% of that 25% that will come as a equity.
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