Kiri Industries Ltd (BOM:532967) (Q1 2027) Earnings Call Highlights: Record PAT of INR270 Crore ...

Negative Points

• The company did not declare a dividend, disappointing shareholders who have waited for returns for over a decade, and management indicated no immediate plans to do so.

• The copper project's total capital requirement is estimated at INR12,000 crore, and financial closure has not been fully achieved, with only over 50% of debt commitments received.

• The earlier guidance of INR20,000-25,000 crore revenue for FY28 was retracted, with management stating that projections are dynamic and dependent on vendor timelines and commissioning schedules.

• The MCB Copper Gold Project, which is expected to provide 70% offtake, is facing shareholder disputes and litigation, particularly from Celsius, which could delay or jeopardize the offtake agreement.

• Input cost pressures persist, with major raw material prices increasing during the quarter, which could impact margins if the company is unable to pass through cost increases.

• The company's existing dyes business has significant unutilized capacity (around 40%), and management is cautious about ramping up volumes without compromising margins.

• The profitability of the standalone dyes business is lower compared to the JV (Longsheng Kiri), as value-added margins are captured at the JV level, and replicating those products in Kiri is not strategically pursued.

• Debt repayment for the copper project is not expected to start until 2029, and the company will rely on cash flows from phased operations, which may create liquidity pressure.

• The company's other income, which drove the PAT surge, is primarily from treasury activities and intercorporate loans, which may not be sustainable as a core source of profit.

• The project's timeline for full operational revenue is pushed to FY30, which is later than earlier expectations, and there is uncertainty around the exact commissioning dates.

Q & A Highlights

Q: What is the current status of the integrated copper and fertilizer project, and what are the key commissioning timelines? A: Manishkumar Kiri (Executive Chairman & MD) stated the project has moved from design into a structured construction phase. Orders for long-lead packages have been placed, and enabling infrastructure like the captive desalination plant and power infrastructure is advancing. The commissioning is phased: the copper tube plant is targeted for Q1 FY28, the copper rod plant for FY28, and the copper refinery for Q3 FY29. Ranjit Singh Chugh (CEO, Indo Asia Copper) added that the 35 kt tube plant will be operational by June '27, the 2.25 lakh ton rod plant by Aug-Sep '27, and the part refinery (1.75 lakh tons) by January '28, with the full complex, including fertilizers, operational by Q1 FY29.

Q: What is the total capital requirement for the project, and how is it being funded? A: Manishkumar Kiri (Executive Chairman & MD) stated the total capital requirement is estimated at close to INR12,000 crores for the project itself, with additional costs for supporting infrastructure. Currently, INR1,400 crore has been deployed, all in equity. Regarding financial closure, more than 50% of debt commitments have been received, and the company hopes to achieve complete financial closure in the next few months. Debt repayment is expected to start around 2029, considering the moratorium period.

Q: When will the company record its first revenue from the copper business, and when will it reach full operational revenue? A: Manishkumar Kiri (Executive Chairman & MD) clarified that the first commercial revenue from the copper business is expected in Q2 of FY28 (financial year 2027-28), following the commissioning of the tube and rod plants. The company expects to capture the majority of its operational revenues from the copper business in the financial year 2029-30.

Q: What is the status of raw material sourcing for the copper project? A: Ranjit Singh Chugh (CEO, Indo Asia Copper) explained that long-term contracts for copper concentrate are typically 2-3 years. The company has participated in global conferences (LME Week and SusCo) and currently holds MOUs for approximately 1 million tons of copper concentrate, which is about two-thirds of its requirement. These MOUs are expected to be converted into firm contracts around October '28. He expressed confidence in increasing visibility to 1.2-1.4 million tons this year as the project progresses physically.

Q: What is the update on the MCB Copper Gold Project, and will Kiri get access to the offtake? A: Manishkumar Kiri (Executive Chairman & MD) stated that Kiri is a part of the project and has structured 70% of the offtake to come to the company. However, there are ongoing shareholder disputes and litigation, with Celsius objecting to Kiri's offtake. The matter is sub judice, and Kiri is awaiting a court decision. Kiri continues to support the project as a lender and is hopeful for a positive resolution before the end of the year.

Q: Why is the profitability of the standalone business lower than that of the subsidiary Longsheng Kiri? A: Manishkumar Kiri (Executive Chairman & MD) explained that Kiri supplies raw materials to the JV (Longsheng Kiri), which captures the value-added margin on finished products. He noted that more than 50% of the products are different, with the JV producing advanced chemistries like Indigo. He emphasized that to see the entire value chain margin, one must look at the combined operations of Kiri and the JV. He also stated there is no plan to replicate the JV's products in Kiri to avoid inter-company competition and margin destruction.

Q: What is the potential revenue target for the existing dyes and chemicals business? A: Manishkumar Kiri (Executive Chairman & MD) stated that with current improved prices (H-acid is at INR800-900 vs. INR350-400 earlier) and if capacity utilization can be increased from the current 60% to 75-80%, the revenue could potentially double from the average to close to INR2,000 crore. He noted that the company is taking a cautious approach, ramping up capacity only where it can sustain profitability.

Q: Why is the company not declaring a dividend despite strong profits? A: Manishkumar Kiri (Executive Chairman & MD) responded that the company has reported one of its strongest quarters and is currently executing one of the largest greenfield projects in its history. The Board decided to retain capital to fuel this growth and meet future capital requirements. He acknowledged the shareholder's point and stated the company takes the feedback positively, but the decision is made in the best interest of the larger pool of shareholders, balancing growth and returns.

Q: What is the role of the marine jetty, and is it necessary for the project? A: Manishkumar Kiri (Executive Chairman & MD) explained that a dedicated jetty is crucial for the project due to the bulk imports of copper concentrate, phosphate, and ammonia. The nearby port is primarily a container port, making bulk handling a challenge. The dedicated jetty will provide operational cost optimization and dedicated unloading of bulk vessels, making it a necessary piece of infrastructure for long-term operational efficiency.

Q: Is there an option to fund the project through equity dilution instead of debt? A: Manishkumar Kiri (Executive Chairman & MD) acknowledged that equity dilution is a valid option and that the company has "tested the waters" with a recent equity infusion in Indo Asia. However, he explained the trade-off: by executing the project successfully without diluting today and generating profits, the company can create a much higher delta upside for shareholders through deferred dilution. He stated that while debt is the current plan, equity funding remains a viable "Plan B" if needed.

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