SUDARSCHEM - Sudarshan Chem.

📊 NSE: SUDARSCHEM 🏢 Dyes And Pigments 📅 Last Updated: 12/14/2025 13:46

💰 Financial Performance

Revenue Growth by Segment

Pigment segment revenue grew 7% YoY to INR 2,223 Cr in FY24 and accelerated to 17% YoY growth in 9M FY25. The Engineering division (RIECO) grew 42% YoY to INR 316 Cr in FY24 but faced a sharp 25.5% decline to INR 146 Cr in 9M FY25 due to macroeconomic headwinds impacting capital expenditure cycles.

Geographic Revenue Split

Domestic operations grew 10% YoY in FY24, while overseas operations recorded a modest 4% increase due to European challenges. However, the overseas revenue mix improved to 53% of total revenue in H1 FY25 compared to 49% in H1 FY24, driven by strong performance in North America, Northern Latin America, and the Middle East.

Profitability Margins

Operating margins improved by 290 bps to 12.9% in FY24. Gross margins reached 52.8% in 9M FY25, up from 48.5% in 9M FY24, driven by a favorable product mix favoring specialty pigments and stable raw material costs. Net operating profitability increased 42% YoY to INR 329 Cr in FY24.

EBITDA Margin

EBITDA margin stood at 14% for H1 FY26 with an absolute EBITDA of INR 172 Cr. Core profitability is expected to temporarily contract to mid-single digits post-consolidation of the Heubach Group due to its current weak profitability and initial turnaround expenses.

Capital Expenditure

The company committed INR 1,180 Cr (EUR 127.5 million) for the debt-free acquisition of Heubach Group's global pigment operations, plus an additional infusion of INR 925 Cr (EUR 100 million) for working capital and restructuring, totaling a planned spend of over INR 2,105 Cr.

Credit Rating & Borrowing

CRISIL A1+/Watch Developing. Interest coverage ratio improved to 11.53 times as of September 30, 2024, from 8.60 times in FY24. However, interest cover is expected to moderate to approximately 3 times over the medium term due to increased debt for the Heubach acquisition.

⚙️ Operational Drivers

Raw Materials

Pigment intermediates and commodity chemicals (specific names not listed, but identified as 'commodity prices') represent a significant portion of the 47.2% raw material cost base. Stable pricing in these materials was a primary driver for the 290 bps margin expansion in FY24.

Import Sources

Not specifically disclosed, though the company operates in 11 countries including Germany, USA, China, Mexico, and Japan, suggesting a global sourcing network.

Capacity Expansion

Current capacity includes Sudarshan's legacy plants plus Heubach's 17 manufacturing facilities across 11 countries. Planned expansion focuses on volume ramp-up from recently concluded growth capex to capture industry consolidation tailwinds.

Raw Material Costs

Raw material costs were approximately 47.2% of revenue in 9M FY25 (inverse of 52.8% gross margin). Procurement strategies focus on 'Cleansheet based negotiations' and 'Recipe harmonization' to reduce input costs across the unified entity.

Manufacturing Efficiency

Capacity utilization was impacted in Q2 FY26 by 'underutilised capacities' as the company intentionally lowered production to reduce inventory levels by INR 100 Cr in the standalone business.

Logistics & Distribution

Not disclosed as a specific percentage of revenue.

📈 Strategic Growth

Expected Growth Rate

12-15%

Growth Strategy

Growth will be achieved through the acquisition of Heubach Group (making Sudarshan the 2nd largest global player), realizing cost synergies through 'One Sudarshan' integration, and a 'Value Capture Funnel' targeting EUR 90-100 million EBITDA from the acquired group by FY28/29. The strategy includes recipe harmonization and renegotiating volume rebates.

Products & Services

Organic and inorganic pigments sold to the coatings, plastics, inks, and automotive industries; engineering equipment and solutions through RIECO Industries.

Brand Portfolio

Sudarshan, Heubach, RIECO.

New Products/Services

Focus on 'Specialty Pigments' which are expected to improve margins to 13-14% for the legacy business over the medium term.

Market Expansion

Targeting global market leadership by integrating Heubach's 17 facilities; specifically seeing strong growth in North America and Middle Eastern regions.

Market Share & Ranking

Post-acquisition, the group is the 2nd largest player in the global pigment sector.

Strategic Alliances

Acquisition of Heubach Group (share deal and asset deal) via Sudarshan Europe B.V.

🌍 External Factors

Industry Trends

The industry is undergoing global consolidation. Sudarshan is positioning itself as a cost-efficient global leader by acquiring distressed but high-scale assets (Heubach) to gain immediate market share and a global manufacturing footprint.

Competitive Landscape

The landscape is consolidating; major competitors include global pigment manufacturers. Sudarshan noted that during Heubach's insolvency, customers shifted to competitors, creating a challenge to win back market share.

Competitive Moat

The moat is built on extensive promoter experience, a global distribution network, and a diversified product range. Post-acquisition, the scale (2nd largest globally) creates a cost leadership moat through 'One Sudarshan' synergies.

Macro Economic Sensitivity

Highly sensitive to global interest rates and inflation; high rates have led to lower demand in the automotive and paint industries, which are primary end-markets for pigments.

Consumer Behavior

Shift toward specialty and high-performance pigments in coatings and plastics is driving the company's product mix strategy.

Geopolitical Risks

The Ukraine-Russia conflict significantly impacted the Heubach Group by raising energy prices in Europe, leading to its eventual bankruptcy filing before the Sudarshan acquisition.

⚖️ Regulatory & Governance

Industry Regulations

The Heubach transaction is subject to various regulatory approvals and mandatory open offer requirements under SEBI SAST Regulations, 2011 for a 26% stake in certain entities.

Environmental Compliance

Specific water intensity was reduced by 40% to 32.54 KL per crore of revenue. The company views ESG commitment as vital for maintaining access to overseas borrowings.

Taxation Policy Impact

Not specifically disclosed, but land monetization proceeds of INR 287 Cr were reported 'net of tax'.

Legal Contingencies

Heubach Group filed for bankruptcy/insolvency prior to the acquisition; Sudarshan is acquiring assets and shares to restructure these operations.

⚠️ Risk Analysis

Key Uncertainties

The primary risk is the 'turnaround phase' of the Heubach Group, which is three times larger than Sudarshan's current operations. Failure to realize cost synergies could keep net debt-to-EBITDA above 3.0x beyond FY27.