Good morning, friends. This is Ankur Periwal from Axis Capital, and we are pleased to host Sudarshan Chemical Industries Q4 as well as 12-month ending financial year 2026 post-result earnings call. The call, as usual, will start with a brief management discussion on the quarterly and the full-year performance, followed by an interactive Q&A session. The management team here is represented by Mr. Rajesh Rathi, Chairman and Managing Director, Mr. Nilkanth Natu, Chief Financial Officer, and Mr. Amey Athalye, General Manager, Finance. Over to you, Mr. Rathi, for the initial comments, post which we will open the floor for Q&A. Over to you, Rathi ji.
Thank you, Ankur ji, for hosting us and Axis Capital for hosting our call. You are able to hear me clearly?
Yes, sir. Loud and clear.
Excellent. Thank you. Just kind of introducing Sudarshan again. I think more than a year ago, March 25, Sudarshan acquired the Heubach business. With this, we got businesses of Clariant, which is second largest pigment player globally, and Heubach's business. To give you a background, Clariant had invented most of the pigments in the world and is deep-rooted in innovation. Sudarshan, one of the fastest-growing pigment company, the most profitable globally, with customer centricity and agility at its heart. Combining these two entities, we are creating the most value-adding pigment player globally, rooted in customer centricity, agility, and innovation. Very excited about our One Sudarshan journey and what we can bring to this industry. To remind again everyone, we have 19 manufacturing sites globally in 11 countries, five continents.
More importantly, more than 50% of our manufacturing assets are based in Asia, a large competitive advantage to us just compared to this globally. Our competitor asset base in Asia would be less than 1%. We serve all major industries, more than 4,000 customers in 100 countries, 1,600 products, one of the widest product range in the industry, and more than 200 people working in technology. Amey, why don't you move this thing faster into here. Giving you all a little bit flavor on the integration. Integrating the companies was very important. When we started the integration process, we didn't realize that we are integrating two companies, but actually three companies as integration between Heubach and Clariant was not completed. From day one, we had challenges on profitability. We were challenged.
In addition to this, we had to remove or roll back the insolvency surcharge, which was to a large amount in the industry. We had to roll this back because customers felt very vindictive because of these charges. That again, put a lot of pressure on profitability. We had very high working capitals, high inventories, but at the same time, customer service was very poor because of broken supply chain processes. In order to bring back trust, we said on the first six months, nine months, we will not focus on the inventory. In fact, we increased some of the inventory. As we are kind of streamlining the supply chain processes, we are kind of aligning ourselves to this now. There was a legacy mindset, as I said, there was no integration.
In addition to that, no integration during the insolvency, each entity was asked, kind of working on their own. Survival was on their own. Hence, a big silo mentality had developed, as everyone had to survive on their own. That was the other challenge for us. No one thought of the one company together and what's good for it. Critical leadership talent was missing and lack of harmonized reporting systems. This was a big challenge, and we took on ourselves first to lay this strong foundation. We want to lay a strong foundation so that we are on a good foundation for the growth to come in in the future. To elaborate a little bit, what we've done in the past one year is really built back trust with customers.
Very glad to tell you that we received the Best Supplier of the Year awards from several of our customers with customer centricity at our heart. The second main point was value capture. We really focused on a lot of value capture initiatives across the organization. Almost every part of the organization is touched on this, and that's really helped us to deliver a positive EBITDA on the acquired group. We wanted to ensure that our processes are efficient, and hence quite a few of the transaction processes we want to bring back to India so that we are more efficient, and we set up a GCC now. In the next six months or eight months, they should get fully operational. One culture alignment that everyone works in one direction, right? With one mission, one purpose. That's been a big initiative for the organization.
More than 95% people have gone through rigorous workshops in aligning the mindset towards the One Sudarshan. As we say, one culture is important. The integration on process and systems were as important as this is strategic in nature. Hence we have decided to launch the One SAP Drive project in [inaudible] to integrate four systems into one integrated system. It is a big challenging task because it is not just SAP, but also 180 different applications outside of SAP are getting integrated, and we hope to complete this by this year-end.
Talking about the Q4 performance, very glad to tell you that we had a very robust performance in Q4. For the acquired group, we had projected EUR 9 million -EUR 10 million of EBITDA. But the business EBITDA we surpassed that, and we delivered at EUR 11 million of EBITDA. We had planned to reduce inventory by EUR 20 million. We have reduced inventory by EUR 29 million. I think the team has done a great job in delivering the robust performance, as we say.
More importantly, what has happened is that the net debt, which was at INR 934 crore in December 2025, has reduced to INR 755 crore on March 2026. Talking a little bit on the performance of Q4, again, as One Sudarshan. To explain this, the first Q4 columns talk about the legacy Sudarshan business, then is the acquired business, and then the total pigment global business. As you can see, compared to Q3, we have done a tremendous job in delivering good growth. This was really triggered because the whole destocking impact which customers had, that got over and during the insolvency, as I had mentioned, a lot of customers had stocked up because of the insecurity of supply.
Now that was completely over, and customers have started buying it. Also, our value capture initiatives delivered a very good performance from a perspective of EBITDA. All in all, I think a very good Q4 numbers as we can see. Sorry, one more point behind. We had introduced a concept of business EBITDA last time, which was different than the reported EBITDA. This was mainly because we were going through a large correction in inventories. As I mentioned, we have reduced our inventories by EUR 29 million last year, and that causes a big fluctuation in the EBITDA as you start reducing EBITDA. Natuji would explain a little bit of the bridge between EBITDA and reported EBITDA and business EBITDA, and more clarification on that. Thank you.
Thank you, Mr. Rathi. As Mr. Rathi has mentioned, we have started reported business EBITDA last quarter and this quarter due to the significant reduction in the inventory. Business EBITDA is the profit which is on the actual sales to the customer without any impact of the finished goods and semi-finished goods inventory changes. As finished goods inventory increases due to the higher production, overhead gets inventorized into the balance sheet. The absorption of the overhead moves to the balance sheet. This reverses in the period when we start selling from the inventory, and then this inventorized overhead gets charged to the P&L. On a yearly basis, this gets normalized when we see the sales volume and production volume converges. The reporting of the business EBITDA in this quarter was due to significant reduction, which we have done in the inventories during the quarter.
Coming back to the numbers, the reported EBITDA for the quarter is INR 73 crore, which is adjusted with one-time purchase price allocation credit due to the business combination accounting of INR 37 crore. This is one-time gain, and this is a non-cash gain. This is further adjusted with INR 82 crore of the release of the inventorized overhead during the quarter due to the reduction of the inventory which we have mentioned earlier. With this, our business EBITDA for the quarter under reporting is INR 118 crore. Thank you.
Speaking on the full financial year performance of the pigment business, the revenue from, if you see Sudarshan legacy, the revenue was flattish. This was mainly because we had some rationalization in the go-to-market strategy in our distributors, and in our distributors, especially in Europe and LATAM, which caused a temporary blip. In addition to this, on the EBITDA part, there were some integration costs setting in, and this has caused the EBITDA to slightly dip. In terms of the acquired group for the full year, as we saw on the revenue basis, we saw some de-stocking impact, which we should be able to normalize. Great efforts were made, as I said, in the value capture, and that's where you're seeing a good positive EBITDA turnaround for the year. This is just including RIECO in the performance, so I'll just came through these slides and speak a little bit more on RIECO.
Thank you, Mr. Rathi. Deep diving into the RIECO performance for the quarter and for the year, I will more concentrate on the full year performance. For the financial year 2026, RIECO has reported the revenue from operation of INR 268 crore compared to INR 228 crore last year, the growth of 17.5%, and this increase is due to the execution of high-value projects during this year. On the EBITDA side, we have seen the sharp rebound and the recovery from the INR -17 crore in regard to INR +10 crore. This has been driven majorly by the revenue increase and our initiatives on the transformation side, which are organization restructuring, fixed cost reduction, and absolutely robust control on the project cost monitoring, which has helped in the EBITDA improvement of the RIECO. Thank you.
Coming to the financial ratios, the positive sign is our net debt for this group is at INR 755 crore, and this is also after considering the acquisition finance. Just to recap our debt number for legacy Sudarshan in FY 2023, we're also in the similar range of around INR 800 crore. So we see as a group, this is a positive sign that we are keeping our balance sheet healthy and net debt to equity ratio is at also 0.3 x. On the outlook, I think first we'll be talking about the Middle East crisis, as we say.
The Gulf War situation has definitely impacted our cost base. Several raw materials used by One Sudarshan are petroleum-derived, and we are facing both price increasing and supply constraints. Our first endeavor is to ensure that we have enough raw materials, even if it's at high cost. Our energy costs have significantly increased. We have some logistic cost increases, but more importantly, logistics lead times have increased.
But what we have been working is we are using our global footprint as a competitive advantage to ensure that supply availability to our customers is good. We further accelerated our value capture efforts, and we selected ensuring that we are able to pass on the cost increases to our customers. We are playing a delicate balance. We are watching each region, each industry, how the industry is reacting, ensuring that we do not lose volumes, but at the same time, we are able to pass on the increases. We have also created a cross-functional team to closely monitor the situation and react as fast as possible. We are dealing this more on a tactical basis on the Middle East crisis. We are, in a way, not projecting this for the coming year. Let me talk now on the full year, how we see the year.
As you have seen, a very robust performance in the Q4. We have built back customer trust. As you can see, and the de-stocking situation on legacy high-value products is easing and almost over, I would say, at least the insolvency stocking. We also saw good buying from global key accounts. We are cautiously navigating the challenging working environment created by the current geopolitical situation. Uncertainty resulting in logistic challenges, rising raw materials, so we are ensuring that we are navigating this situation very cautiously. Integration, as I mentioned, is progressing well. The SAP, GCC, One culture, One ESG movement is moving very well to solidify our Sudarshan. Our value capture initiatives will yield improved profits and working capital improvements. We remain fairly confident in our strategic rationale of the acquisition.
We expect to achieve EUR 90 million -EUR 100 million over the next three to four years, as guided at the time of acquisition, and all this is driven by synergies, value capture initiatives, and sales growth. We expect to deliver an EBITDA of EUR 35 million for the next financial year. All in all, as I mentioned, the integration is going well. To remind everyone, I think we have one of the largest global pigment platforms with scale, reach, and great, deep industry legacies. Sudarshan itself legacy has 75 years of inheritance. Clariant, Heubach, more than 200 years, and that is what kind of helps us with the deep inherent knowledge.
We have the broadest product portfolio and a technology depth. We have rebuilt our technical teams, and we would be able to serve every customer needs, and that is what we are focusing on. I already mentioned about our global footprint structural advantage enabling a resilient supply chain for us. Integration and value capture engine is where a lot of synergies have been identified, and we are ensuring that we are able to capture on those initiatives. A very positive EBITDA trajectory supported by volume recovery, margin discipline, and cost optimization. All in all, I think we are emerging out stronger with a clear execution agenda and an improved path to sustainability. Thank you very much. Thank you.
Thank you very much. We now begin the question and answer session. Anyone who wishes to ask the question may click on Raise Hand icon to ask their question. Also note, participants are requested to announce their company name before proceeding with their question. Participants are requested to limit themselves to two questions per participant and rejoin for a follow-up question. Ladies and gentlemen, we will wait for a moment while the questions assemble. First question is from the line of Thomas. Kindly announce your company name and proceed with your question.
Sorry, I did not have any question.
Thank you. Next question is from the line of Anil Nahata. Kindly announce your company name and proceed with your question.
Can you hear me?
Yes, sir, we can hear you.
Okay. Good morning. This is Anil Nahata from Parami Financial . I have a couple of questions for the management. The first question is, in the last quarter, we had sort of indicated that we want to liquidate the inventories over the next two or three quarters. That was around EUR 35 million-EUR 40 million, if I remember right. So how we have progressed on that, and with the war and everything and the prices rising, now is that inventory still going to have a loss, or we can even look at break even or even the profit on the inventory sale?
As I indicated in my presentation, Mr. Nahata, that we have been able to reduce EUR 29 million of inventory, and as we navigate this situation, we will see what are the other additional opportunities in the coming year to reduce further inventories. Yeah.
What will be the extent of inventories left for which you had stocked up for meeting the customer requirement? Just a ballpark figure.
These were kind of existing from the very beginning, and as we built up the stock, and I think we hope that we are able to further optimize our inventories to the tune of EUR 15 million -EUR 20 million.
Okay. My second question is, while you have indicated that the net debt at a group level is now around INR 760 crore, which is very good news, and the balance sheet is healthy. However, I also note that most of the cash is in the Sudarshan, basically the Indian entity, and most of the debt is in the external entities. How do you look at reducing the debt over a period of time?
Yeah.
[inaudible]
So, thanks, Anil. Very good observation that we have also the cash in the Indian entity, but there is also the cash in the acquired group. As we move ahead in this particular deck, which is in the acquired group, we will get served from the cash flow generation from the acquired operations.
I understand that, but when you look at the current year kind of guidance of around 5% EBITDA, I mean, that will not be sufficient, right? So when you move to EUR 90 million-EUR 100 million, yes, I can understand you will have some operating cash flow. So, if you can give some kind of a trajectory of how are you looking to reduce the INR 1,600 crore in the next four or five years, to what level? That will be highly appreciable. Thank you.
Thank you. Thank you, Anil. As we had taken this acquisition finance, the repayment schedule is a ladder schedule. So the first repayment will start in the current financial year, and will get step-up. So we are fairly confident, as we move along with the EBITDA trajectory. This will be covering the debt repayment as we move. Thank you.
Thank you, Anil. I will request you to come back for a follow-up question. Next question is from the line of Rohit Nagraj. Kindly announce your company name and proceed with your question. Rohit Nagraj, may I request you to unmute your line, announce your company name, and proceed with your question.
Hi. Am I audible?
Yes.
Yeah. This is Rohit Nagraj from 360 ONE. Sorry, I joined a bit late, so I am not too sure whether you add this in your commentary. From the supply chain side, on both the aspects, in terms of raw material sourcing and the product placements, have we faced any challenges over the last three months? What are the steps that we are taking to smoothen this particular challenge, given that now we are looking at sourcing across geographies and our customers are located across different continents. Any view on this would be helpful. Thank you.
Thank you, Rohit. I think, as I mentioned, that our raw materials are petrochemicals derived, and we are facing both price increases, supply constraints. We have ensured that we are able to cover enough inventory that we do not look at that. Energy costs have also increased. What we have done is we are leveraging our global manufacturing footprint to ensure that the supply ability to our customers is on. We further accelerated our value capture initiatives, and we are passing on our cost increases to customers on region-specific, how the regions are reacting based on that.
Sure. We have not faced any material challenges as of yet in terms of-
No.
Yeah. Okay, fair. Thank you so much. The second question is in terms of the integration benefits. Have we got the entire integration benefits or will there be something left which can be accessed during, say, FY 2028? FY 2027, sorry. Thank you.
The entire integration impact would come in the next two financial years. As I have mentioned, our value capture is a very important stream, and we see a lot of opportunities. That's one area. The second is, as we implement our One SAP and set up our GCC, we will see good addition. That's where we are projecting a very healthy turnaround on the EBITDA of the acquired group.
Sure. Thanks a lot, and all the best, sir.
Thank you.
Thank you. Next question is from the line of Gagan Dixit. Kindly unmute your line, announce your company name, and proceed with your question.
Yeah. Hi. Thanks for taking my question, sir. My few questions is about the Heubach Group.
Gagan, sorry to interrupt you. May I request you to proceed with your company name first, and then go ahead with your question?
Yeah. This is Gagan Dixit from Elara Securities. I have a few questions about this Heubach Group. So your EBITDA run rate has improved to EUR 11 million in Q4 versus EUR 7 million-EUR 8 million in the Q3. So how much is the true demand versus the restocking impact, if you can just give the breakup. And what is the typical April and May run rate that are currently going on? That is my first question, sir.
The EBITDA on the acquired group, as we reported is, if you look at the business EBITDA without the restocking impact, it is about INR 118 crore . Right? And this has mainly come, as I mentioned, that it is not about restocking, but this is like people have started buying. Earlier quarters, there was a destocking impact, right? So from that perspective, Q4 is always the strongest quarter. But customers have started buying, right? And there is a seasonal trend where you find Q3 will be a very weak quarter as we gone more global, right? And as December is a fairly muted month for the group.
Yeah. And sir, the second question is about the demand, sir. So you mentioned in the presentation that this Q4 recovery was driven by the global key accounts, India-Europe demand recovery, and also tariffs in the North America. So, is this a broad-based recovery that you see across, for the coatings business or is it concentrated in certain accounts or regions? That is what, just if you give some color about it, sir.
We have seen an overall good recovery in Q4. I think, during the mid-March we did see the crisis, but I think from that perspective, we have seen a full good global recovery in all segments of the industry. Primarily in coatings, which is our acquired group's main sales, which are very strong in coatings. But every segment, I would say, have shown a good recovery.
Okay. My final question is about some guidance or some idea about the legacy Sudarshan margins. Your margins are very healthy, around 14%, business EBITDA margins. For FY 2027, is this sustainable given this rising input means oil volatility, raw material cost, productivity, all these things. Or you expect some normalization or that's what, if you can give some color about it.
We are hoping to maintain a healthy margin on legacy Sudarshan business group. We are making every effort to pass on any cost increases on through the value chain for our customers so that our margins are protected.
Yeah. That's all my questions. Yeah. Thanks.
Thank you. Next question is from the line of Nilesh Ghuge. Kindly unmute your line. Announce your company name and proceed with your question. Nilesh Ghuge?
Yeah. Hello.
Nilesh Ghuge.
Yeah.
Yes.
Yeah. Hi, I am Nilesh Ghuge from HDFC Securities. Sir, one first question is on the depreciation. If I look at the quarterly depreciation for your console, in earlier three quarters, the run rate was in the range of INR 99 crore - INR 100 crore in that range. But for this quarter, it was about INR 50 crore. So any adjustment here in the depreciation?
Thank you, Nilesh. The depreciation for the quarter is at INR 50 crore. As we mentioned, earlier, the business combination accounting under Ind AS 103 provides during the measurement period, which is a one year from the date of closing of the transaction, which was last year, March 25, gives us the window to fair value the assets and liabilities before finalization of the purchase price allocation. As we mentioned last year, the purchase price allocation was a preliminary or provisional purchase price allocation.
During the measurement period, we have fair valued all the assets and liabilities and that too on the fixed asset side. That impact of the remeasurement of the fair value has been considered in the final purchase price allocation. This has given one time reduction in the depreciation cost, which has been reflected in the quarter four, which is a reporting quarter. On an annualized basis, the run rate what we have seen of INR 196 crore for the entire year should be factored in for the purpose of this work.
So on annual basis, how much you are saying?
I am sorry, not INR 196 crore, INR 347 crore.
Okay, INR 347 crore.
INR 347 crore for the-
Yeah. Thanks. Sir, second question on the tax. Sir, can you guide us on the tax rate on an annualized basis? That will be helpful, sir. Thank you.
Thank you, Nilesh . On the tax rate, the ETR is currently slightly on the higher side for the acquired group as on a conservative or prudent accounting basis. We have not considered deferred tax associated few entities. But maybe you can consider the similar range for the year also. Thank you.
Okay. Thanks. Thanks a lot, sir. That's all from my side.
Thank you. Next question is from the line of Ranjit Cirumalla. Kindly announce your company name and proceed with your question.
Yeah, sir, I am Ranjit from IIFL Capital Services. My first question is to Rathi ji. While doing the Heubach acquisitions, we were also talking about making our Frankfurt site more of a speciality center while we intend to kind of move the commodity production more towards the Indian operations. How far have we been in this particular journey? If you can elaborate a bit on this, that would be helpful.
We have already moved some of the commodity products into the Indian Heubach site in Roha, and now Frankfurt primarily remains a very Is towards a speciality product range.
Also, if you can share some bit or more color onto the volume and price led growth during the fourth quarter and FY 2026 for the Heubach and consolidated group.
Ranjit, can you please repeat the question?
Yeah. So a bit more granularity with regards to volume-led growth and the price-led growth for the fourth quarter, more so for the Heubach Group.
Majorly volume growth, volume-related growth has come in. We have not gone for any price increases, et c, in Q4. This is all volume recovery.
Okay. On this EUR 35 million EBITDA that we are guiding for FY 2027, if you can provide us a ballpark figure about how much are we building in from the integration benefits and the recovery in the business.
It is a mixed bag, right? As we can see, this year also, the EBITDA has remained positive only because of value capture initiatives. These are all both baked in. There is a very moderate growth taken into account for the year, given the current geopolitical issues.
My final question is to Mr. Natuji. While we understand the year-over-year comparison may not be correct given that we had only one month consolidation last year, if you see on a sequential, while we understand fourth quarter and the first quarter is key or seasonally good quarters for the pigments, we have seen a sharp 33% growth in sales on a sequential basis from the third quarter to the fourth quarter. When I look at the other operating expenditure, there is only an uptick of 13 -odd percent. How should we see this? That is what has clearly benefited us on the EBITDA front. The other expenditure growth has been lower than the sales growth.
Thanks, Ranjit, and correct observation. While there has been a sales growth in the quarter four compared to the quarter three, quarter-on-quarter there is a growth, which has also resulted in the better operating leverage. As Mr. Rathi has also mentioned, the value capture initiatives which we have started are also building up the reason. Thank you.
Thank you, sir. I will come back in the queue.
Thank you. A reminder to all the participants, you may click on Raise Hand icon to ask a question. Next question is from the line of Nitesh Dhoot. Kindly announce your company name and proceed with your question. Nitesh, may I request you unmute your line and proceed. Getting no response. We move to the next participant. Next question is from Ankur Periwal. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity there. Okay. So, two, three questions there. So one, in the last quarter, we did highlight about a slightly elevated cost inventory, which was sitting at Heubach's books and possibility of we incurring some bit of lower margins or maybe losses there. But given the RM inflation now, what's the thought on that number and what that number will be now, given that they would have sold some as well?
Ankurji, I think just to clarify, we were not on high-cost inventory, but our inventory numbers were high, right?
Okay.
As Mr. Natu had explained, as we reduce inventory, the overhead charges flow from the balance sheet into the P&L, which causes the EBITDA depression, right?
Yeah.
We have reduced EUR 29 million of inventory in Q4. During this year, we are targeting to reduce EUR 15 million-EUR 20 more million gradually.
Sure, Rathi ji. You also alluded towards a little lack of confidence among customers given the way things were getting handled earlier. Are we behind that curve largely?
Yeah.
Incrementally, let's say by the end of next financial year, which is FY 2027, will we be looking more at a normalized inventory and what that number could be? We are right now at give and take 90 days inventory on a console basis. What can this number reduce to?
Yeah. So Ankurji, I think firstly the customer trust has been built back. Customers have started buying from us, which is great news. We want to further reduce EUR 15 million-EUR 20 million , and I think that will be the normal state of the business going forward. That's where I think the reported and business EBITDAs would merge going forward. This is exceptional situation where we have reduced substantial inventory.
Sure, sir. Second, your thoughts on RIECO. Some time back, we had thoughts of probably hiving off the business, turning around the business and hiving it off. How do you look at that asset now? Is there further uptake in profitability margins or a business ramp-up that you would like to achieve? Or your thoughts essentially on that business there.
Absolutely, sir. I think the transformation is not over and the numbers have not substantially improved, which our expectation is. I think the business requires more time to kind of deliver robust numbers. And we are confident that in the coming years, the numbers should keep improving as the transformation gets completed.
Sure, Rathiji. Thanks for all the answers. I'll get back into the queue.
Thank you.
Thank you. Next question is from the line of Rajesh Kothari. Kindly unmute your line, announce your company name, and proceed with your question.
Good morning, sir. Rajesh Kothari here from AlfAccurate Advisors . Sir, I have just two, three questions. The first is, and pardon for my ignorance, I joined little late, about 10, 15 minutes late. My first question is on standalone business. By when do you think we can come back to that good double-digit growth? Because still, the overall industry is also a little bit struggling, but now the paint industry is talking about a reasonably good growth. Last year, overall industry was doing very well but not getting reflected in our numbers. How do you see the growth for standalone, and what will be the key drivers for that growth? That's my first question.
As I mentioned, Rajeshji, I think the legacy business was impacted a little bit with rationalization of distributors, etc , abroad. That kind of business got a muted growth. Given the geopolitical crisis, not given that does not have a major impact. We should deliver 8%-10% of growth this year.
Okay. Sir, my second question is, in particularly our acquired group business, what do you think will be the impact of the higher energy cost? Does it making disturbance in terms of our production target as well?
The energy cost increase is impacting all of us, and especially Europe it is impacted a lot. Our endeavor is to ensure that our margins do not get impacted, we are able to pass on these increases, right? However, region-wise, and the country of origin of our competitors, there is certain lag in passing on, but we are ensuring that whatever is necessary, we pass on the increasing by at the same time maintaining the volume. It is a little bit of a balance act we need to perform.
I see. Energy cost will be how much percent of the revenue for the global business?
Interesting. Rajesh, this is in the range of 6%-7%.
This is the post-increase, right? Not the pre-increase.
Yes.
Okay. My last question is, we have seen significant increase in, generally speaking, all chemical prices, and does it also positively impact us in terms of since we are holding the old inventory, the earlier pricing and current pricing probably would have changed significantly. So does it help us to reduce those write-downs and probably it can have a positive impact on our overall inventory?
No, we don't see that, Rajeshji. What we are doing is, we don't want to profit from this situation and we want to maintain our volumes. So we are ensuring that whatever cost increases we see, only that's what we are passing on to the customers. Our customers also recognize that in the value chain, there is inventory and in this phase of building trust, we are very transparent with our customers.
Thank you. Rajesh Kothari, I'll request to come back.
Thank you, sir.
Next question is from the line of Nitesh Dhoot. Kindly unmute your line, announce your company name, and proceed with your question.
Yeah. I hope I'm audible now.
Yes, sir. Go ahead.
Yeah. Thank you. Sir, you mentioned. Sorry.
Yes.
Nitesh Dhoot from Anand Rathi Institutional Equities. I will go ahead with my question now. Sir, you mentioned about 8%-10% volume growth on the legacy business. Just where would we be in terms of capacity utilization for our legacy, the Indian plants, and how much capacity headroom do we have in the legacy pigments business? Also a connected one that, looking at the acquired group, where would we be in terms of the overall capacity utilizations there? If possible to have that kind of a number, sir, any ballpark there.
Niteshji, I think we have enough capacity headroom in both the legacies to grow, and our projection of what EBITDA we have shown in the three to four years does not require any investment for volumes. We should be able to achieve this from that perspective. We have enough capacities between both the entities for our growth coming forward.
Sure. Why I ask this question is because when we completed our expansions in the Indian plant, we had indicated about three to four years of reaching full capacity utilization and probably we are already in the last year of that period of FY 2027. That is the reason behind asking, have we reached closer to optimal capacity utilizations or not?
No, I think we have enough debottleneck further, et c, so it does provide a headroom for growth. Then I think given that when the integration is fully completed, I think we would have enough capacities as one unit together for our growth. Yeah.
Okay. Just one more on the gross margins of the Heubach Group. That is after adjusting the insolvency premium, after normalizing the insolvency premium, what would be a steady gross margin number to work with? Or maybe you can just give the difference between the legacy gross margins and the acquired pigment gross margins. That would also help.
I think between the legacy and the acquired group, on the gross margin part, there is at least 4 to 5 percentage points of higher this. But the fixed cost is higher on the acquired group. That is how it kind of balances out from that perspective.
Yes, sure. This difference is purely due to the superior product portfolio there or the backward integration bit? Or what would exactly be the reasons attributed to this difference in the gross margin between both the businesses?
I think product portfolio and the industries which we serve too.
All right. Great. Thank you. Those were my questions. Thank you and all the best.
Thank you.
Next question is on the line of Avinash Nahata . Kindly unmute your line and announce your company name and proceed with your question.
Am I audible, gentlemen?
Yes, sir.
Thank you. I represent Parami Financial . So two questions. The first question is, Rajeshji, while the time of acquisition and during the course of last five, six quarters, we would have identified certain assets, units, plants, which is more relevant to somebody else than us from strategic point of view, from geographical, and basically while we are realigning our supply chain. So there would be certain assets which you think might require disposal. Any thought on this?
We are exploring on the non-core assets we could explore. The first year was very busy in integrating the business for turnaround. Right now, the thought process is very initial, and I think we will come back to you at the right time when we could look at this. But there could definitely be an opportunity in looking at that.
Okay, thanks. My second question is regarding the demand in the industry. I mean, if you can talk about collectively both in Europe and maybe to our entire representative geography, what is the kind of demand growth we are looking at, A, from the industry demand perspective, and second is winning back our customer, winning market share. So both put together, what growth can we see? Leave aside pricing, if you can talk about volumes, what growth can we see over the next two, three years? Thank you.
I think Q4 represented a strong comeback in volumes and we were hoping that this trend would continue. Given the current geopolitical situation, quite a few of our customers are seeing a little bit of a muted demand or some of their complementary products not being available, and that is where some of their production levels are low. Second, people are taking a very cautionary advice on building up inventory. I mean, like everyone is guessing, when this gets over, people don't want to be stuck with high-cost inventories.
So in the near term, the demand looks muted. But it is very hard to predict when this crisis would get over, how the demand would come back, et c. But I would say barring the geopolitical crisis, the demand looks fairly good going forward from that perspective. The U.S. market, the housing market, the paint market is a little bit in trouble. As that economy recovers, we would see that demand coming.
Okay, just a follow-up on this. If I were to ask this differently, over the last three years, what has been the demand in the industry? My question still remains unanswered, Rajeshji, is with our realignment of supply chain, winning back our customers. Okay, war is one. I understand people don't want to get stuck with higher inventory, so maybe one things normalize, the restocking, etc , will happen at a normalized level. So A, what is the growth in the industry over the last two, three years, and at a normalized level, what growth can we achieve in our entire portfolio? Because for us, it is also winning back our customers, not the industry growth only.
Yeah, absolutely. That is where I think when you saw the Q4 growth, this was not an industry growth. This was our growth of winning back the business and the de-stocking of customers getting over, right? The general industry growth of two to three years is generally the pigment industry grows with the GDP of that area, right? The overall growth of the industry varies between 3%-4% globally, right? That is the industry growth of the pigment on that. What I described to you is when our growth from a growth Q4 perspective, our entire growth came back. There is no one-offs, right? It was like customers starting to buy back, looking at de-stocking over and having that. At the same time, I must say, like I said, there is a temporary blip I see, given that customers are very cautious.
Okay, thanks a lot. If I can squeeze one more, it is on the shareholding perspective. There are certain family members which are on the non-promoter there. What is the, if any, message for the shareholders? Is there any thought process there?
On the shareholding, I think as we have professionalized the management, the family had stepped down from the board and the management, and that's the reason the family had taken a view to de-promotise as they were not playing that role perspective. However, they still remain committed to the growth of Sudarshan.
Thanks, Rathiji. All the very best to the Sudarshan team. Thank you.
Thank you.
Thank you very much. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
Thank you, Neerav. Thank you, Axis Capital and Mr. Ankur Periwal, and thank you all the participants for your time and interest in Sudarshan Chemical and putting forth business questions. We are entering FY 2027 with stronger platform, clearer execution agenda and improved path to sustainable profitability. We remain confident in our growth journey and the strategy, and continue towards our commitment to deliver value to our stakeholders. We look forward engaging with you again in future. Thank you.
Thank you very much. On behalf of Axis Capital Limited, that concludes this meeting. Thank you for joining us, and you may now leave the meeting. Thank you