DOMS Industries Ltd (NSE:DOMS) (Q2 2027) Earnings Call Highlights: Revenue Jumps 17. ...

Q & A Highlights

Q: With raw material inflation running high, how much of the 18% growth came from volume versus price, and what is the plan on passing on further increases? A: CFO Rahul Shah said more than 80% of the ~18% growth came from volumes and about 20% from realization. Raw material prices cooled early in the quarter but rose sharply from early-to-mid August and have continued climbing into October, with increases now occurring once or twice a week. DOMS is taking calibrated, product-level price actions (including trimming schemes and discounts) with the first priority being no damage to volume-led growth, rather than reacting immediately to every cost move.

Q: Given the near-term margin pressure, what is the realistic EBITDA margin trajectory and when can DOMS return to its targeted range? A: The CFO acknowledged near-term margin pressure but said DOMS is consciously balancing it against long-term volume and market share gains and value-chain support. The targeted EBITDA margin range remains 16% to 17%; the company will stay patient for a couple of quarters, assess input costs and the results of ongoing pricing measures, and then decide whether more significant action is warranted. He cautioned this should not be read as a commitment to a specific quarter for recovery.

Q: What is the status of the Reynolds integration, and when will the brand start contributing revenue? A: The entire Reynolds sales and support team was integrated with DOMS effective July 1, and the field force and distribution network have now been largely rationalized where overlaps existed. The first building at the new 50-acre facility has been commissioned with dedicated capacity for Reynolds writing instruments; production has begun on fast-moving products like Bright and 045, with trial production of the iconic Jetter click pen also started. MRP pricing has been kept unchanged to avoid disrupting market dynamics, with revenue from DOMS-manufactured Reynolds goods expected from Q3 FY'27 and gaining momentum in Q4 FY'27.

Q: Why relocate Reynolds manufacturing to Umbergaon, and why prioritize pen capacity over pencils in the new plant? A: The CFO explained the deal was structured around identified assetsmainly molds and assembly machineswith molding to be done on machines DOMS had already ordered for its own pen expansion; continuing Chennai manufacturing was never part of the negotiated structure. Reynolds is therefore a replacement of existing capacity rather than fresh capacity, which is why the 18% to 20% guidance is unchanged, and the brand offers an opportunity to build a strong second brand in the mid-to-premium writing instrument space (roughly INR10 to under INR100). On pencils, machine and mold orders take six to eight months, and pen capacity was prioritized in the original plan given the larger market share opportunity; pencil capacity is now being added, with the timing difference not material.

Q: What drove the Q2 margin miss, including the one-off items, and how did the Gujarat floods impact the quarter? A: Q2 FY'27 revenue grew 17.6% to INR667.8 crores and EBITDA came in at INR82.8 crores with a 12.4% margin, flat sequentially despite raw material volatility. Unusually heavy rainfall and flooding in Gujarat caused inventory damage and workforce mobility issues, estimated at 300 to 350 basis points of impact on sales growth, and PAT included a one-time exceptional loss of INR10.4 crores, for which insurance claims have been lodged. Profitability was also weighed down by a temporary mismatch: Reynolds employee costs were incurred from July 1 while revenue from the relocated assets remained limited, an impact of roughly 0.5% to 1% of quarterly sales, expected to normalize as operations scale.

Q: How is the capex program progressing, and which segments will benefit over the next 12 to 18 months? A: DOMS invested over INR200 crores in H1 FY'27, mainly on the 50-acre greenfield project (construction, common infrastructure, machinery), adjacent land that expanded the site from 45 to 50 acres, and the Reynolds asset purchase, and expects a further INR100 crores to INR125 crores in the remainder of the year. One building is operational, machinery is being installed in the second and third, and three others are at the finishing stage. The first capacities are for writing instruments, followed by wooden pencils (spanning scholastic stationery and scholastic art) and further office supplies, so these segments should see revenue benefits over the next 12 to 18 months.

Q: What are the key growth drivers behind the 18% to 20% revenue guidance for FY'27? A: The CFO said growth has historically followed capacity additions, and the recent office supplies capacity expansion will be a key driver, alongside capacity added through last year. With the back-to-school season running from this quarter toward the end of the quarter, paper stationery is expected to drive significant growth in the second half. All categories are seeing positive momentumwooden color pencil capacity supported scholastic art material, and the new school box and compass box range is seeing positive tractionbut office supplies, diaries and paper stationery, where the largest capacity expansion happened, will predominate.

Q: How does DOMS view the writing instrument segment over the next three to five years, and what is its right to win in a highly penetrated category? A: The right to win, per the CFO, is well-engineered, well-designed products at price points that deliver a "wow" experience, backed by frequent new SKU and design launchesthe same playbook that drove rapid volume growth after entering ballpoint pens in June 2023. Manufacturing scale is a key advantage: DOMS now has one of the largest molding setups in the stationery space globally, and in-house manufacturing facilities being installed will aid backward integration. Except for baby hygiene (an 8% to 10% EBITDA margin category), all businesses have a similar margin profile, and backward integration benefits will be shared with the channel and consumers rather than retained, in line with the "nothing at the cost of market, nothing at the cost of margin" philosophy.

Q: How is the UniClen (baby hygiene) business performing, and what are its capacity and margin plans? A: UniClen reported 21.5% year-on-year revenue growth, a mix of volume and higher selling prices, as diapers are crude-sensitive and saw significant raw material inflation that was partly passed on; consumption was nonetheless impacted year-on-year, pulling EBITDA margin down to 6.4% from 8.1%. The company targets 8

For the complete transcript of the earnings call, please refer to the full earnings call transcript .