Ladies and gentlemen, good day and welcome to Garware Hi-Tech Films Limited Q2 FY 2027 earnings conference call hosted by Go India Advisors. As a reminder, all participants' line 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 over the conference to Ms. Garima Singla from Go India Advisors. Thank you, and over to you, ma'am.
Thank you. Good morning, everyone. I am Garima Singla, and it is my pleasure to welcome you on behalf of Garware Hi-Tech Films Limited. Thank you for joining us today for Q2 and H1 FY 2027 earnings conference call. This call is being hosted by Go India Advisors. Please note that today's discussion may include certain forward-looking statements, therefore, they must be viewed in conjunction with the risks that the company faces. Today on the call we are joined by Mr. Deepak Joshi, Director of Sales and Marketing. I now invite Deepak, sir, to present the company's business outlook and performance, after which we will open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Garima. Good morning, everyone, and thank you for joining us today. Before we begin, I would like to extend my warmest wishes to all of you and your families on the occasion of the festive season. I hope this period brings happiness, prosperity, and good health to everyone. I hope you have had an opportunity to review our financial results and investor presentation. Q2 FY 2027 was another important milestone for us. We delivered our highest ever quarterly revenue of INR 696 crore, up 22% year-on-year and 10% sequentially, which is nearing the INR 700 crore mark. EBITDA increased 42% year-on-year to INR 189 crore with a margin of 27.2%. Profit after tax also grew 42% to INR 129 crore. This performance was achieved despite geopolitical headwinds and a slowdown in the Middle East.
Demand, improved realization, and a favorable product mix and operating leverage supported growth and helped offset higher raw material and logistic cost. Our business follows a seasonal pattern, with Q1 typically benefiting from stronger summer demand for SunC ontrol films and a more favorable product mix. Q1's EBITDA margin of 30.3% was consistent with the strength typically seen in the quarter and should be assessed against prior year Q1 performance. As our product mix evolves, we believe margins of around 30% in Q1 represents a sustainable seasonal level. Against this seasonal backdrop, we delivered our best ever Q1, followed by our best ever Q2, with Q2 EBITDA margin at 27.2%, expanding 377 basis points year-on-year. For H1 FY 2027, revenue increased 25% to INR 1,329 crore. EBITDA grew 49% to INR 381 crore, and profit after tax rose 50% to INR 262 crore.
Profit before tax increased 51% to INR 350 crore, with PBT margin expanding by 464 basis points to 26.30%. Cash profit grew 46% to INR 293 crore. Our H1 revenue mix comprised 73% from CPD and 27% from IPD, while value-added product accounted for 86% of revenue, highlighting the growing contribution of the niche, differentiated, and higher value products to our business.
Sorry to interrupt you, sir. We can't hear you. Ladies and gentlemen, the line for the management got disconnected. Please stay on the line while I reconnect them.
Hello? Hello? Hello?
Yes, sir. You're audible. Please proceed.
No. Please connect on the main line.
Sure, sir.
Yeah. Battery is low here. Please connect on the main line.
Okay, perfect.
Yeah.
Ladies and gentlemen, please stay connected while I reconnect the management line. Ladies and gentlemen, thank you for patiently waiting. We have the management line reconnected. Over to you, sir.
Yeah. Thank you very much, and I am really sorry for this interruption. Our balance sheet remains strong with cash of INR 933 crore as of September 30, 2026. Working capital stood at 29 days compared with 28 days in FY 2026. This financial flexibility enables us to invest in growth while maintaining disciplined capital allocation. At Garware Hi-Tech Films Limited, our focus remains on building a premium technology-led material science business. We are moving up the value chain through specialized applications, product development, stronger brands, and deeper customer relationships, with an emphasis on revenue quality and profitable growth. During this quarter, we advanced our switchable privacy film capabilities through our PDLC facility. This technology allows glass to transition between transparent and opaque states, creating applications across automotive, commercial, and architectural environments. In our car care portfolio, we introduced Ultra Series window film kits.
We also enhanced customer accessibility through digital e-warranty services and no-cost EMI option in partnership with Pine Labs. We continue to invest in capabilities to support our next phase of growth. Our thermoplastic polyurethane or TPU film line remains on track for commissioning in Q3 FY 2027. The strategic MoU with Lubrizol supports our ambition to develop advanced TPU-based film solutions in India and expand into specialized applications. In parallel, our INR 191 crore solar control film capacity expansion is progressing with a focus on robotics and automation. Commercial production is expected in H1 FY 2028, adding approximately 1,200 lakh square feet of fungible capacity. Together, these products will strengthen our technology and manufacturing platform. Our international business remains an important growth pillar. We serve customers across more than 90 countries and continue to strengthen our presence through distribution and application-led support.
During Q2, we opened two additional global application studios in the U.S., taking our international network to 14 studios. We also added four global distributors during this quarter. The expanded network helps us to demonstrate our products, support channel partners, and develop new market opportunities. In our Garware Home Solutions business, we are expanding direct customer reach through a growing studio network. From nine studios in Q1, we increased the network to 14 and plan to add another 12 studios in Q3, including locations across Delhi, NCR, and Mumbai. Our longer-term target is to reach 50 studios by December 2027. In the architectural and graphic segment, we added three channel partners during the quarter and are pursuing opportunities with leading malls and hospitality chains. These initiatives are intended to extend our reach across new customer segments and applications.
Digital enhancement continues to support our brand-building efforts. During the period, our Instagram following increased by 25% year-on-year, and Facebook grew 10%. Our global LinkedIn following increased 400%, while website traffic reached as high as 1.1 lakh visitors in a month. Our annualized digital footprint crossed INR 18 crore, reflecting the growing reach of our digital platforms. Our H1 performance reflects the strength of our business, the growing contribution of premium products, and our ability to translate strategic investments into profitable growth. With strong execution across products, capacity, and markets, we entered the second half well positioned to sustain our growth momentum. Reflecting this confidence, we have upgraded our FY 2027 EBITDA margin guidance by 200 basis points to 27%, ± 2%, while reaffirming our revenue target of more than INR 2,500 crore. Our priority remains to deliver on these commitments through disciplined execution and prudent capital allocation.
Having started the year strongly with sustained momentum through Q2, we have delivered a robust first half. We remain focused on building on this performance in the second half while strengthening our trajectory towards a landmark year for Garware Hi-Tech Films. We thank you for our shareholders for their continued support, and we remain committed to creating sustainable long-term value. Thank you. We will now open the floor for question and answer.
Thank you very much. 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Hi, good morning, sir. Thank you so much for the opportunity. Sir, just wanted to know, what is the contribution from the export for this quarter? And what is the contribution from SunC ontrol film and paint protection film during the quarter?
Yeah. Thank you, Mahesh. Thanks for your kind words. This quarter, our export was 80% and domestic was 20%. In SunControl, it is 51%. Just one second. It is 51% from SunControl and 24% from PPF and balance around 25% from IP.
Sure. Sir, we have a strategic technology partnership with Lubrizol. Any details about the same, how this will help us?
Yeah. The strategic partnership with Lubrizol, because Lubrizol is a global company, and they are helping us with the product development. One is the product development for our normal TPU film for paint protection film, which is, there were special grades which make paint protection film a superior quality, with that TPU. At the same time, they are helping us with many other products. For example, one of them is, we have identified as air bladders, then LED applications, then front windshield. All those very special kind of resin they are providing us, then we can supply. Other than 75% of backward integration from TPU line, 25% these products will be sold as a merchant seller into the market. They are helping us with all those new developments. Lubrizol is helping us to achieve this.
Sure. Sir, last question from my end. In the presentation, we have mentioned that we are entering into a new growth vertical, that is PDLC films for a smart architecture. Currently, what proportion of our sales come from the architecture side?
Presently, like I said, it is a very good success story for us. We started with 10%. Today, roughly 30% of our sales is coming from architectural business, so from window films. This windows vertical is roughly INR 400 crore for us as of now, annualized basis.
What we had done in terms of paint protection films over last two, three years, can we assume similar story also panning out in the architectural?
I think we can do much more than that because, we believe as a company, we complement the glass really well. That means where there is a glass, there can be a film. It can be a safety film, it can be a SunC ontrol film, it can be a reflective, dual reflective or a decorative film. So all these are part of our architectural film business, which we believe is a very high potential, and we can do much more than any other business in this. Because we started with 10% of window film, now we are around 30%, but we hope that as the business grows, it will reach to 50% of our window film business.
Sure. Sir, last question. Given such a strong demand and the output from the factories, are there any further plans of adding capacity? Any manufacturing expansion we are looking? Thank you so much.
We have already done six CapEx in last six years. That is amounting to roughly INR 900 crore, and that all has been funded by ourselves. We will definitely aim in next three years, more investments, but as of now, I can't tell unless it is approved by the Board, and we'll come up with that. But definitely, company is working towards, because the growth momentum which we are seeing now in architectural film business than TPU film business, and we need to support these businesses with more CapExes. So as and when they will come, we will announce. But definitely, company is looking into that because as we guided, after this year of INR 2,500 crore plus growth, we definitely look forward for much more growth in coming years, and which will definitely come from new verticals, new products, and new CapExes.
Sure. Thank you so much, sir.
Thank you very much. Thank you.
Thank you. The next question is from the line of Viraj Parekh from Carnelian AMC. Please go ahead.
Good morning, sir. Congratulations on a great set of numbers. Just picking up on the previous participant's last question. You said that given the CapEx we have done for TPU and the SCF that will come on stream in H1 of next year, what is the peak revenue potential we can generate from the existing capacities?
With both these two CapEx coming in, we can reach up to INR 3,500 crore. This number actually varies a little bit based on the product mixes, but we can reach INR 3,500 crore with full potential of these two capacities.
If you keep the current product mix the same as 51%, 24% and 25% between SCF, PPF and IPD, it's a fair assumption how this would ramp up to INR 3,500 crore?
Yeah, because, of course, the percentages will change. IPD will go down.
Could you also give a number that architectural films currently contribute to approximately 30% of our sales right now.
30% of window films sales.
Okay, 30% of SCF sales.
Yes.
Right, sir. Just wanted to help me understand the journey, three years before, how architectural films have scaled up from, say, last three years to what it is today. What are the numbers like the last two or three years?
Honestly, the numbers which we have a run rate of around INR 400 crore, we expect this business to be as big as INR 1,000 crore. There is a big headroom available here, and then we have headroom available in PPF, and automotive, definitely we are growing. If the second new line, which is a new solar control film line, will be on stream in H1 next year, roughly by June 2027, which is H1 FY 2028. This capacity mostly we are targeting to go into architectural segment only. That is why I am saying with this capacity we are all set for INR 3,500 crore. Of course, the sales and other things are there. I am talking purely in terms of capacity full utilization, which we are aiming for, of course.
Then we have our targets to reach higher numbers, which we will come with the CapEx whenever they are approved. We will come to the market and update about that. But we are on course of that journey already.
Right, sir. One other thing is that I think, recently I read that there is customer concentration of 30%, one customer probably is looking at 30% of revenue. Just wanted to understand if that number is true and how do we plan to address this customer concentration risk for us as well?
See, the customer concentration is definitely there, and there are more customers of not that big size, but of course, half of that size, there are a couple of customers or 1/3 of that. But we have a long-term association with them and the agreements are there, and the product is already approved into various, for example, a best EV car seller in U.S. They have the agreement there, and when they approve the product, it goes with what kind of base film is there, which does not fail in long-lasting because of its dyeing properties. Then because of our own IR nanoparticles, which reduce the heat, and then the special kind of adhesive which lasts for minimum 15 years. With these kind of capabilities, the product is approved by them into some top companies in the world.
These agreements, we are not worried about they will go down or do that because they are definitely growing their business, which is good for us. Our focus is always, this is one business, but we have other business where the different teams are working. Irrespective, without compromising the growth in that customer or worried about that customer, we are definitely growing all across. Right? Our aim, and that customer does not do any of the architectural. We are focusing a lot on the architectural. Our structure is we have different team for SunControl, film automotive, PPF, and architectural, and then IPD. All people focus on their job. Nobody is growing or de-growing at the expense of others. Our focus is very clear. Our manufacturing is also working in this, like which line is working for which.
Irrespective of looking at others, they are growing on their pace. Same with the R&D. We have now new center of excellence, which used to be one fixed R&D for us, which has taken us to this level. We have identified, we have made a new center of excellence, which is taking us there. We have six new people, and the top one is having 60 + international patents under his name. These kind of top talent we have attracted, and we are working to take the company from this level to next growth of journey.
Last two questions from my end. First is, I think over the last few years, I've just seen our inventory days increasing, and that's a conscious call that the company has taken. Just wanted to understand in terms of inventory days, what level are we comfortable at going forward, given the current issues that we face? Second is the sensitivity of ours to crude, at what level it is approximately, 114 today.
Yeah. Two questions. I think number one is related to inventory. Inventory, we have increased intentionally on raw material part because of the way current geopolitical tension is going. We do not want to lose any sale or any customer because of non-availability of raw material. Because we make most of the things by ourselves, but we buy chemicals and similar particles from outside. Right? For that, we have raised their inventory levels intentionally so that we do not get affected. Even if there is two months no supply, three months no supply, we are well-poised to absorb that shock. Right? That's why we have increased our raw material. At the same time, inventory to our Europe, U.S.A. customers, which is our major market, their inventory has increased because number of days have gone by 15 to 25.
Roughly 20 days overall company export level inventories have increased. Right? This is a practical scenario, but we have done that intentionally to avoid any shock from tomorrow that one country is not able to supply some of the raw material. Absolute numbers, let me check. How many numbers inventory do we have?
58.
58.
60.
We have 58 days- 60 days inventory in absolute. I mean, that's the number which we have right now, and we are comfortable with that. Even, I think, if any situation comes, we add 10 more days, it doesn't make much of a difference for us because all the products are either already sold out with advances or raw material is kept for continuous business, so it doesn't affect us.
I think the last question was about the sensitivity to crude right now and the level that is?
Yeah. Okay. Sorry. Last question. I'll just give you a number, that our raw material cost increased in this quarter by around 4%, and logistic cost increased by INR 9 crore in absolute. Put together, there is a total INR 37 crore was like a headwind for us, or we were challenged by extra cost of that. Despite that, we have performed this. So we are very confident of our resilience that despite all those difficult times, we are able to perform with these kind of numbers. Right? Think of a situation when this situation goes, how much can we benefit out of logistics and this situation? Definitely, since we are working at numbers $110, crude as between $100-$ 110. So these are the numbers. If it goes up, definitely there is a challenge, but we will try to pass on this to our customers.
Normally, we pass on, in some cases, easily, in some cases with difficulty. So we'll have to pass on. But on a longer term, think of a situation where we do not think of our company performing only one quarter or one year. Think of a situation where the world is moving towards EVs and lot of alternative fuels are coming in the world. Where after, I think, one or two years or three years, where diesel, petrol, and everything demand is going to definitely go down, and the crude realistically may not be even $50-$ 60. That is as per the market estimations which I have heard about the long term, three to five years. Then you think of the company, which is now doing these great numbers at $100 and $110 crude, what it will do at those numbers.
We are thinking of these kind of things. And short term, we easily absorb. We have performed despite INR 35 crore + negative cost increase to us, we performed this. So definitely, if the situation changes, we are definitely taking advantage of such situation.
Got it, sir. Thank you so much for your time.
Thank you.
Thank you. The next question is from the line of Aachal Pal from Monarch Networth. Please go ahead.
Yeah. Thank you. Thank you for giving me the opportunity. My first question is, what is the current utilization level of PPF and SCF, and how do you see utilization trend evolving going forward?
Yeah. SunControl this quarter was 75%, and PPF was 73% in Q2. Since this PPF line is just not even a year old now, we expect in next six months this will almost go full, up to 90%, because 90%, 95% is the full capacity because of maintenance and everything. By next year, I think this will go full. SunControl will also go full by Q2 next year. At the same time, our new plant is coming, so we will continue this growth momentum with that. For PPF, we have a fungible this thing. If this capacity goes up, we will use some of the SunControl plant for the first pass or fungible capacity to continue the growth momentum on both SunControl and PPF.
Okay. Understood. Sir, how much money we have received from tariff reversals?
Yeah. Okay. Till date, we have received around INR 31 crore. Out of that, the refund to customer has been around INR 20 crore, and INR 11 crore has been in our book. We expect in Q3 another refund of around INR 30 crore. That is the last one. Out of that, roughly INR 16 crore will come to our books, and INR 14 crore will be refunded to the customers.
Okay. Sir, what kind of opportunity do we see in the Indian market, and how do you expect the domestic business to perform, and what are the initiatives you have taken in order to strengthen the company's presence in India?
Okay. For India business, I will start with PPF. When we started, there was no PPF in 2020. 0.1% of the penetration was in PPF. Today, the PPF penetration is roughly 3% of each car sold. That means three cars in 100 cars is done with PPF. If we talk of U.S.A. and China, they are closing towards 20% of the penetration. We feel there is a big headroom available for PPF to grow in India. We being the only manufacturer with such kind of backward integration, we will take advantage of this situation. That was number one. Second thing, as it is on record, we applied for anti-dumping duty because the imports from China were coming at very low prices. That was approved by Ministry of Commerce. However, Finance Ministry did not apply it. We are taking some necessary steps to make that happen.
We are working in that direction. That is step number one. First, there is a natural growth potential. From 3%, the country is definitely going towards 10%, right? There is a big headroom for PPF. Then we have our own advantage because of our scale and quality. We are the frontrunner having 60% of market size with us, rest goes to imports. We are trying to increase that also by taking actions against those products which are coming very cheap. That is about PPF. There is a big headroom available. Now we go to SunC ontrol films. We are already a market leader with 60%-65% market presence in that. That business is growing with the car sales in India.
The third and most exciting thing about the architectural business, where we have a full dedicated team working on this, which was not there three years back. They come from a top background, the top head, and he has got a full team. In the last three years, we did 3x on the top line on almost 4x, 5x on the bottom line in architectural sales in India. Now, the next phase, where we are now competing with the glass. We are trying to tell the market, film comes with a lot of benefits. It is 20%-30% less expensive. It gives you more UV protection, 99.9%, against the glass gives you only 70%. Then we talk of heat rejection, which can be 20%- 30% more than the glass. Finally, it gives an additional benefit of safety. The glass does not shatter.
I mean, it will not flow on somebody's face or something in case of any unforeseen situation. With these awareness campaigns in the market, we are quite excited about the third growth as well. I have explained you all three verticals for us in the domestic market.
Okay. So sir, in the next two to three years, how much we can expect India business to contribute from the current level?
See, the way we are growing right now, if we have said the company level, we have 80% export and 20% of the domestic. This, we are talking INR 2,500 crore+ revenue as well. As we grow, we are definitely going to have the run rate of INR 3,000-INR 3,500, where this ratio will be maintained or slightly up and down, but the growth has to be there by 25%-30% CAGR on both exports and domestic also.
Okay, understood. Sir, how are we placed in the global market in terms of pricing? At what discount or premium are our products as compared to global leaders, in terms of competition?
Yeah. Our products, we share a very interesting story here. When we started our architectural business, we understood that we were selling around 30% of the top world leader into this market. We were priced at only 30% of that. While studying the market, we understood our product is really good, but we were not marketing that well. We did all those efforts, and we added the full product line. We had three issues. Number one, in architectural, there are product baskets. We were missing two products in between. We added those two products. Then we found that our marketing, it was more towards automotive. We created a whole new set of marketing team in India, in Middle East, in U.S. They are continuously working only on the architectural segment.
And third and most important thing, we thought that we are only 30%, 40% of the top guy into the market. So interestingly, we raised our price to 80%-85% of that number one player. So in a way, we doubled our prices in certain cases. So right now we are 80%- 85% of the global player. I am not talking of the imports from China and Korea, I am talking of mostly American or sometimes European producer. So we are 85%- 90% in some cases, and there are certain products which are so good that we are even 10%, 15%, or 20% higher than the American players. So there is no question that we are at discount or at premium. It depends on the merit of the product and the way we market it.
So we have achieved in last three, four years from a level of 30%, 40%, we are now 85% to 120% of global peers.
Okay.
And we are not one product. We have 100 different products. I will just give you example. Do not think like there is one product we can simply say this is 85%. Like for architectural, I told you there is a safety film, safety and security film. There is a SunC ontrol film, there is a decorative film, there is dual reflective film, and there is a reflective film. So these are five vast categories I am talking. Similarly, in automotive, there are various kind of products. So each product has different dynamics, and we work scientifically on each product. What is the demand, supply, quality aspect. So based on that, we decide. But broad number is 85%- 120%.
Okay, helpful, sir. Also my last question, the tariff reversal that we have received, where are we reporting that?
We are reporting it because this is our subsidiary, so as per the laws there, we are reducing it from COGS, but we are not counting in the sales. We are reversing it the sales and adding it into COGS.
Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Rahul Jain from Credence Wealth. Please go ahead.
Yeah, thanks for the opportunity and congratulations to the entire team of Garware for a wonderful performance once more. My first question is with regards to TPU. 25% external sales at full utilization could amount to what kind of sales in the TPU division, given the kind of products which we are talking about? Sir, talking about the absolute number, the 25% external sales which we are planning to do, 75% we will be using for captive PPF, and the 25%, what kind of sales is possible in that TPU 25% part?
Yeah.
Also with the—
Yeah.
—also with the margins of TPU, we understand our highest margin product among the various products is architecture films, followed by SunControl and followed by PPF. So where will the margins for TPU, the sales which are being done externally lie?
Yeah. Okay. First of all, thank you for your kind words and appreciating us. The first question, about 25% will lead to, in next financial year, we expect INR 75 crore-INR 100 crore of sale. That is what we are targeting. This is the initial estimate with us. So we go with that. In terms of margin, as of now, I think we can rate them with, if I talk of EBITDA margin, I can say roughly around 35% as of now. Because nobody makes these products. One thing, we can always say that we always create our market. Like for SunControl, we created our market. For PPF, we created our market in India. Now in architectural, we are creating our market. So we have been successful on three occasions by creating, because we give solution to the market. We do not give product.
We just don't go to the market, somebody is supplying, I want to also supply, so I will take that share. No. We try first with creating a market with a value product. Right? For that, we have identified and we expect that somewhere around 35% should be the targeted number. As of now, I'm not sure because line is yet to start its commissioning, everything is going on. So rough number is 35%, and expected revenue FY 2028 can be INR 75 crore- INR 100 crore. That's what we are expecting.
Great, sir. My second question is with regards to the top line. Given the current rate, sir, I think we are headed towards somewhere around INR 2,600 crore of top line for the current year, which you have mentioned in your presentation as well as opening remarks of INR 2,500 crore+ .
Yeah.
Given the expansion of TPU, additional INR 100 crore coming in and also SCF expansion, and you also mentioned that there is a thrust on architecture film for higher growth. So next year, FY 2028, can this number of top line be around INR 3,100 crore- INR 3,200 crore sales?
See, exact number I can't quote, but yes, we are targeting INR 3,000 crore+ .
Okay. And sir, just to clarify the margin part. In your presentation, we have given that medium term 2028/2031, the margin guidance has been given as 27%+?
Yeah.
I think given the higher margins of TPU and also architecture films, higher proportion coming in FY 2028, are we talking about 27% margin roughly plus another 1.5%-2% coming from TPU backward integration? That 1.5%-2% is over and above 27%?
See, this guidance is for this year, so definitely we will talk this number. Like we said, we are expecting 1.5%-2% of expansion in FY 2028, right? So we talk definitely 28%+ in any case, right? See, again, these guidelines, because our sales depend on the product mix. Like when IPD sells more or slightly SunControl goes little down, so this market percent change, so exactly we can't comment, but definitely 28%+ we are targeting. So this 27%, ± 2%, this year's guidance was 25%, ± 2%. We enhanced it to 27%, ± 2%. So definitely next year guidance we will elevate from this level, for sure. So we are talking 28%, 28.5% for sure.
Great. Last one.
I like again, sir, that we have heard a lot of comments like margin sustainability on 30%. If you remember, when there was no tariff two years back, we hit first time 27% in Q1. The same question arose, this is too high. Is it one time? We said, no, because quarter one, typically, we will see these kind of things. We are a number one company in the world on SunControl, and this is a peak season for us, so we always expect these kind of margins in Q1. Having said that, we performed best ever Q1 for us, and even this Q2 is the best ever in our history in terms of margin, in terms of top line, in terms of bottom line. So we continue to perform like that because we can never perform like Q1. So that shows that we are continuously growing.
We can't grow on quarter-on-quarter basis because Q3 will be similarly low, but Q4 will be back again. So we should be valued. It's a two seasonal, where there is sun, there is a SunC ontrol; where there is no sun, there is no SunC ontrol, but it still will perform.
No, so I do understand, sir. My question regarding clarification was because in our presentation, released with the quarter two results, we had mentioned the medium-term guidance for margin size 27%+, and down below you have mentioned plus one. No, I'm talking about medium-term target, not for the current year.
Yeah.
You have given both the guidance for the current year, which is 27%, ± 2%, and for medium-term 28%-31%, you have mentioned 27%+, and down below that you have mentioned 150 basis points-200 basis points plus for TPU backward integration.
Yes.
This is why I was trying to clarify. We are saying 27% plus 1.5%-2% is the possibility. That is what I was trying to clarify.
It is very clear. We are clear in our mind that we will add once the TPU comes on the stream and it starts contributing to PPF, overall company revenue should go up by these numbers. So that is, you are right, ±27% plus 1.5%-2%, and then this number goes up and down.
Sure. Just one last request, sir. It was kind enough of the management to allude to a shareholder request when we had been at the AGM about two to three years back with regards to increasing the dividend. With the kind of cash which we have in the balance sheet, and also the cash expected to be generated over the next two years, given the kind of products which we are getting into, given the kind of growth, given the kind of goodwill which we have for our business. If we could increase some kind of dividend, that would really help, not just from the point of view of extra dividend, but I think more so looking at higher valuations for the company, sir.
Okay. Noted. We have a lot of CapEx we expect to come, but definitely I will put forward this within the management. Thank you for your suggestion.
Sure. Thank you.
Thank you. The next question is from the line of Bhavika Singhvi from Niveshaay. Please go ahead.
Hello, am I audible?
Yes, you are.
Yeah. Thank you so much for the opportunity. Sir, the first question I have is on the utilization. Basically, what are the current utilization going on in both the SunControl and the paint protection films? Also wanted to understand the timeline of the new capacity which is going to come for the SunControl film. If you can throw some light on that. Once that will be live, how much potential revenue we can expect from the SCF full capacity, and also from the PPF on the optimum utilization.
Okay. Our current utilization in Q2, 75% of SunControl and 73% of PPF. We expect, because the growth continues, and next year Q1, we will hit almost 100% of SunControl and similar for PPF, almost 100% for PPF. In that case, our new SunControl line is coming. We will try a little early as well. That is coming in June 2027. That is Q1 FY 2028. By that time, we are towards exhausting our all capacities. By that time, we will have a new SunControl line. This is the plan, and it is going perfectly. That is why we built it. This plant can make both. If we need more of PPF, we can make it, but this is primarily we are expecting architectural business to grow faster and we have provisioned all those items into that new line.
This is your question number one. Second thing is, this new line is able to contribute roughly INR 450 crore-INR 500 crore, depending on the product mix. PPF can add around INR 250 crore from the current level. We can say with all those things full utilization, we can reach roughly INR 3,500 crore with the current capacities which are upcoming with us.
Okay. Sir, also, I wanted to understand on the studio business, which I think in the last quarter you had mentioned that we will be able to do INR 300 crore revenue from the Garware Home Solutions and the new products by FY 2028. Are we in line to do that? Also wanted to understand our strategy on the home studio, because we are also, as we are diverting into the B2C segment, wanted to understand that how aggressively we are doing that and by what timeline we can expect it to be a major contributor in our revenue we can see going forward?
Yeah. We are very aggressive about B2C business because the company from B2B has gone to B2C. Now we are targeting D2C. The primary reason is we want to create a brand among each of our consumer. That is like we call top of the mind. With that reason, we opened 14 studios in H1 this year, and we are very careful in identifying those because they should have a good grip on Garware Home Solutions products or home furnishing and similar who are directly connected to that. We do not give it to someone who just want to spend money and all those things. We are very careful on that. That is why we added 14 studios, and we are targeting now 50 studios, like in next, I would say nine to 12 months, not in next six months. That is our target.
Plus revenue-wise, since it is a new business, less than a year old, and the target is to reach, of course, first INR 50 crore, then INR 100 crore, then INR 200 crore. That was not one-year target. That was actually three-year target. I think I was very clear on that. I did not give INR 200 crore for one year. The target are like INR 50 crore first year, I mean next year, then INR 100 crore, and then INR 200 crore. That was the target.
Okay, got it. Just one more.
Because it is a B2C, it is a small ticket size business and this is done directly. See, for us, volume raising is never a problem. We can sell any product in big quantities at lower prices. But what we want here, we want to create value with each home buyer or homeowner who wants to buy these products. That is why this is a very niche segment where we are putting products which are really, really good to showcase, like PDLC, you can do switch on/off with make it transparent, opaque and all those things. That is why we have set targets like this, INR 50 crore, INR 100 crore and INR 200 crore.
Got it. The reason I ask this because, and I think in last call you explained that the B2C holds a comparatively higher margin than our B2B. So if we can expect it also contributing on our margin side as well.
Yes.
Yeah. And also just want. Yeah—
Okay. Please go ahead.
—yeah, sir. So, the second question I have is on the, because we are into multiple products, I just wanted to understand that of which product comparatively hold higher margin, like the SunControl comparatively hold higher margin or the PPF? And also wanted to understand where we see the industry going fast comparative to the other. Basically, just wanted to understand where we want to focus ourself more, in terms of SunControl or the paint protection films.
No. Honestly, again, we have a team who focus on their business, and depending on the requirements, we add talent to that, and we make products accordingly. We feel the architectural SunC ontrol film, architectural segment is going to be something which we are targeting as number one. And then paint protection, of course, all our efforts, our team is already there. All has got different teams and they are focusing irrespective of others' growth. But what is more exciting or what is giving you more leverage is architectural business because it's natural. There is so much of glass around the world, so we are targeting that segment as a top segment for us.
Sir, can you share the margin percentage what we make in the SunControl and the paint protection?
See, margin, if I talk, is like SunControl, there are various products. When we talk of top of them, they go up to 40%-45%. I am talking EBITDA margin. And when we go to the medium kind of product, it is 30%-35%. PPF remains 20%-25%.
Okay, got it. Thank you so much, sir.
Thank you. The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi, good afternoon and congratulations for a fantastic show quarter after quarter. Sir, most of my questions have been answered. Just one clarification. You said that we are making this kind of a margin despite crude at $110. If crude goes down, there is some benefit. In terms of pricing strategy, how does it work that? Is it possible to retain the pricing despite RM falling, maybe not fully but partially? How does that entire thing works across different products?
Yeah. When you talk our 25% business, which is IPD as of now, there the cost goes up and down. They are usually passed on, right? If it is like all our peers in India, we don't compare on that, but that 25% business is similar. If crude is high, you will try to pass on. Sometimes you are not able to pass on because it's a commodity kind of business. But mostly you do. When it goes down customer ask you, it is go down, so do that. But for the rest of the business, the correlation goes as low as 10%-12% for SunControl and paint protection film, it is even lower, 5%-7%, right? Because they are not crude linked product. In SunControl, there is only a base film.
But there are so much of value addition in terms of adhesive, in terms of nanoparticles, in terms of coatings, in terms of the liner. All those things, if you really add, the correlation goes very low. I can say the maximum when it goes, maybe 15%, right? That's why, if it goes down, then it helps you a lot because your costs go down maybe by 5%, 7%, or 10%, right? But when it goes up, it adds the prices, but the correlation is lower. It is not easy, like every month you can't go to the customer and ask for a price rise or price decrease, right? Normally these things happen in a quarter or six-month period, and we already did that when crude went 100 plus in couple of months ago, right? We are struggling. Sorry, we are staying with that only.
But if it goes further down, we will have to go to market and ask for that. There are a lot of other components other than crude in our major business, 75%, which affects us, right? That is why the correlation is low, but in terms of IPD business, it is directly passed on to the consumer. Even if everything goes low, like when we talk of crude going to $55, $60, in that case, everything goes down. Your packaging cost also goes down. Because of transportation, everything is affected. Then your packing costs go down. Then your other costs, like dyes, chemicals, and everything go down. So you definitely take advantage of that situation.
Got it, sir. Very clear. Thank you.
My assessment was that if we are able to do at $100 and $110, these kind of numbers, definitely we are poised for much bigger and better growth for future.
Got it, sir. Very clear. Thank you.
Thank you.
Thank you. The next question is from the line of Vedant Sarda from Nirmal Bang Securities Private Limited. Please go ahead.
Am I audible?
Yes, you are.
Thank you for the opportunity. My first question is with respect to the INR 25 lakh MPCB penalty, which was for consent validation. Can you just give some more color on that? What exactly happened and why?
Yeah. There was one boiler which was very old because normally plants are pretty old. In that case, the situation, the MPCB said that it needs modification. We were doing the modification. While doing the modification, I think, we started and took trial on that, which was noticed, and we accepted that. That was the real issue. There was a boiler which was old, and it was asked by MPCB to modify it, which we have done already. But in between, while taking trials and everything, we had to run it, but because of some miscommunication and everything, they asked us that this was run despite told not to run. But we accepted this is okay. We abide by the rules, government rules and everything.
Okay. My second question is the extension of the previous participant's question. We did a revenue of INR 700 crore around in this quarter. If the prices of crude were $60, can you just give a rough calculation? What would be our revenue of the finished product?
See, you are talking of revenue, you are talking of your top line, right? If it is crude goes down.
Yeah.
I think it can—
INR 700 crore revenue, which will be like 25% of your business will be directly linked to crude and 75% will be 10%, 15%. What the revenue would have been?
—I think if I go roughly by that, maybe INR 650 crore, INR 660 crore. Only INR 40 crore, INR 50 crore would be affected because major business, 75%, is not linked to crude because it is made out of so many other components. Only 25% with that. That too, when it goes down, even I remember when the crude went $40 or $45, during COVID. But the cost of price or selling price do not go that down because there are certain Right now it looks like major component, around 50%, 45%- 50% component is the raw material. But rest 50% is also there. There is power, there is manpower, there are so many things. That is why I expect INR 650 crore- INR 660 crore should be the realistic number.
Understood. Thank you so much for the answer, sir.
Thank you.
Thank you. The next question is from the line of Nilesh Jain from Astute Investment Management. Please go ahead.
Hi, sir. Thank you for the opportunity. My question on the IPD division. I have got a good understanding, at least on the CPD side. This quarter, obviously, we have seen the commodity business grew quite well. It is almost like INR 100 crore revenue. How are you seeing the IPD overall division growth, for this financial year and also in medium term?
See, honestly, we are a company which focuses more on consumer product business. IPD, because there are a lot of component goes to us in consumer product, like some base film, liner, cap sheets, all those things we manufacture in IPD. That is why we keep it very relevant to us. Otherwise, honestly, whatever market says, because nobody can say in that commodity. Sometimes they can make double the profit, sometimes they will go in red. They have gone in red in, I think, prior to COVID and immediately after COVID. During COVID, it went really high. So, it is directly linked to the supply-demand in India, which is over-supplied market, and there, if you are making purely on packaging, you are at the mercy of how you are passing on the cost to your consumer.
We are focused only to a very limited. We are talking of revenue of 25%, but in terms of margin, it is only, I would say, 10%-12%. It doesn't affect much. Even if it goes to little lower, our margins won't be affected. Honestly, we are not a major player there, and we go by whatever is happening into the market. Our focus is to support our consumer business from industrial product.
Sure. The second question is on the D2C side, where you also mentioned you want to scale from INR 50 crore-INR 100 and 200 crore. Broadly, if you can give us what are the incremental margins here as compared to maybe the base architectural film margins we make to distributors on the B2B side?
See, base, we can say we add around 10%-15% on existing margins of, which I already said, roughly 40%.
Sorry, I lost your voice.
I am saying, the top products on architectural, they attract around 40%, and there we can add around 10% from D2C, because it is already a very high niche market. Since we are developing that, we add around 10%-15% on top of that.
Sure, sir. Thank you so much. All the best.
Thank you.
Thank you. The next question is from the line of Swechha Jain from ANS Wealth. Please go ahead.
Hi, sir. Thank you for giving this opportunity. Sir, I have couple of follow-up questions from the previous participants. One was, with the Lubrizol tie-up, I wanted to understand. You mentioned that we are taking some resins and all from them. I wanted to understand what exactly is this partnership. Are we just taking some raw materials from them, or we are doing some joint development with them? What exactly is this partnership? With this partnership, what kind of incremental top line are we expecting from this? Will this also do some kind of EBITDA expansion? What is the deal structure exactly? If you can just explain these contours of this tie-up, sir.
Yeah. This TPU is our business, which is very unique business, right?
Right.
For example, the plant which we are doing, it's an aliphatic TPU, which nobody has in India. We are the first to do this in India, right?
Right.
For that knowhow, is the kind of resin which runs into our line, because we are very advanced line, and you need a right quality of the raw material. Resin means we make the films, but we will buy these resins from Lubrizol, right? They make the best. They are the number one and the best into the world to supply those resins. Number one question, 75% of this TPU will go to our PPF business, where we expect a good margin expansion of 1.5%- 2%, is 150 basis points- 200 basis points for consolidated level for the company. Because it will reduce the cost of manufacturing for the TPU. That is number one, right? Second thing is, our ambition to grow the company. Our strategy, we had only two verticals in the past, where we had industrial product and SunC ontrol film for automotive.
Then we added a third vertical called PPF. Then we added a fourth vertical called SunControl for architectural. Now we want to add a fifth vertical, which is a thermoplastic polyurethane, TPU, based product lines. There are many products in the discussion. There are certain products which are used in the front windshield of cars and buses and big trucks where, if you see the luxury buses and all in U.S., if they get a small stone chip, the entire windshield gets cracked. So we produce those kind of front windshield with that. Then there are a lot of air bladders in high-end cars, which is the resin has been developed by them, because any resin won't work for all those things. So they have developed these things, and they are giving that technology to us.
The understanding between us, we have an understanding with them that we buy this much of resin from them. So this is their margin. Of course, we sell it to the market. It is our margin. Now they are also going to the market saying that we are the best TPU manufacturer in the world, but they don't manufacture the film. So Garware makes film from them. So they're going to OEMs and saying that our product is going there. We give you these kind of guarantees that this is our product and this goes to the market and this has got these properties. They are introducing us with that into the market. It's not only in India. We are doing the same thing in SEMA Show. We got a very good response from participants in U.S.
We have a partnership with Lubrizol, which will help us to grow our business in all this.
Okay. This is only for the 25% of the TPU which we are going to make the products for the external sale.
Sure.
Only for that?
No.
Okay.
The partners are both, right, for 75% also, 25% also.
Okay.
But when I talk 25%, it will only because it is internal sale.
Right.
It will add to the margin expansion. The 25% will add the top line also, which I just said, around INR 75 crore-INR 100 crore we are expecting in the coming year. Not this year, next year.
Right. Understood. The products that we will make with this, are the products going to be sold across the world or it is only for some specific market with the Lubrizol tie?
Across the world. We have our channel, 90 + countries, we will do this thing. This is just a beginning. If it all works, we will think of further expansions and all those things, because this is a first trial for us, and we are now planning to move ahead with that. As soon as these things come on paper, it will come to you. But definitely we will not stop only on this.
Okay. Sir, you did give the revenue breakup in terms of value for the SCF, PPF, and the IP. Can you give the volume breakup for these segments for the Q2 and also geographically-wise, how did we do in the U.S., Europe, India, and rest of the world?
Volume-wise means revenue-wise is the volume-wise only. Because we sell industrial products in kgs. We sell our consumer products in square feet. That is why we give revenue numbers, which I gave you. Right?
Okay.
And you want geography-wise? Yes. U.S. has been 51%, and E.U. has been 15%, India has been 20%, which we discussed, and rest 12% is basically Middle East and nearby countries.
Okay. How has the growth of SunControl been in the U.S.?
See, SunControl in U.S., it is growing. Definitely, we are targeting for each segment to grow minimum 20%, and special segments like architectural, we are targeting to grow by 35%-40%. And we saw this is in line with what we have targeted.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I would now like to hand the conference over to Mr. Deepak Joshi for closing comments. Over to you, sir.
Yeah. Thank you everyone for your continued interest, trust, and support in GHFL. We look forward to updating you on our progress in the coming quarters. Have a great day. Thank you.
Thank you. On behalf of Garware Hi-Tech Films Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.