Kiri Industries Limited (KIL), a leading player in the dyes and dye-intermediates industry, has reported a mixed set of financial results for the second quarter of fiscal year 2026 (Q2 FY26). The company demonstrated strong revenue growth but faced challenges in profitability, largely due to ongoing legal expenses and input cost pressures.

Revenue Growth Amid Industry Recovery

KIL reported consolidated revenue of Rs. 213.44 crore for Q2 FY26, marking a 6.00% sequential increase and a robust 23.00% year-on-year growth. This performance underscores the company's strong market positioning and the gradual recovery in the dyes and dye-intermediates sector. The standalone revenue stood at Rs. 194.62 crore, up 8.00% quarter-on-quarter and 34.00% year-on-year, driven by volume growth in dyes intermediates and basic chemicals segments.

Profitability Challenges

Despite the revenue growth, KIL faced significant profitability headwinds:

• Consolidated EBITDA for Q2 FY26 was negative at Rs. 13.05 crore, compared to a positive EBITDA of Rs. 18.56 crore in the previous quarter.
• On a standalone basis, the company reported an EBITDA loss of Rs. 9.92 crore, down from a profit of Rs. 17.35 crore in Q1 FY26.
• The EBITDA margin declined to -6.10% on a consolidated basis and -5.10% on a standalone basis.

Factors Impacting Profitability

1. Legal Expenses: The company's profitability was significantly impacted by non-recurring legal and professional costs associated with the ongoing DyStar matter.
2. Input Cost Pressures: Rising raw material costs continued to squeeze margins, with the material margin percentage declining year-on-year from 34.80% to 26.40%.
3. Currency Fluctuations: The company reported other comprehensive expenses of Rs. 47.19 crore, primarily due to currency translation adjustments from foreign subsidiaries.

Joint Venture and Associate Performance

• Lonsen Kiri Chemical Industries Limited, KIL's joint venture, maintained healthy operational performance, contributing Rs. 16.98 crore to the consolidated results.
• The share of profit from associates included a significant Rs. 82.13 crore contribution from DyStar, although this does not impact overall profitability due to the ongoing en bloc sale process.

DyStar Case Update

The company provided an update on the DyStar case:

• The purchaser failed to fulfill conditions precedent for the transaction by the extended deadline of November 3, 2025.
• The receiver has further extended the deadline to December 1, 2025, subject to an additional deposit of USD 5,112,156 into the escrow account.

Copper & Fertilizer Project Progress

KIL's diversification into the copper and fertilizer sector through its subsidiary, Indo Asia Copper Limited (IACL), is progressing:

• The project aims to establish a 5 Lakh TPA copper smelter and an integrated fertilizer plant in Gujarat.
• Key milestones achieved include partial land acquisition, environmental clearances, and initiation of the physical execution phase.
• The project is designed to meet India's growing demand for refined copper and fertilizers, with a focus on environmental sustainability.

Management Commentary

Manish Kiri, Managing Director of Kiri Industries Limited, stated, "Despite the challenging macroeconomic environment and temporary cost pressures, we are encouraged by our strong revenue growth and market positioning. Our focus remains on operational excellence, strategic diversification, and long-term value creation for all stakeholders."

Outlook

While Kiri Industries faces near-term profitability challenges, the company's revenue growth and strategic initiatives in the copper and fertilizer sectors position it for potential long-term growth. The resolution of the DyStar case and the successful execution of the IACL project will be key factors to watch in the coming quarters.

Investors and stakeholders will be closely monitoring the company's ability to improve margins, manage legal expenses, and capitalize on the recovering demand in the dyes and dye-intermediates industry.

Kiri Industries Limited has formally objected to an alternative transaction structure proposed by court-appointed receivers for the sale of its 37.57% stake in DyStar Global Holdings (Singapore) Pte. Ltd. The company has refused to consent to the new arrangement and has submitted its objections to the Singapore International Commercial Court (SICC).

Alternative Transaction Structure Details

The receivers have proposed a restructured deal involving both a share buyback and partial sale:

Company's Key Objections

Kiri Industries has raised several concerns with the SICC regarding the proposed structure:

Financial and Operational Concerns

• Cash Repatriation: Objects to partial repatriation of DyStar's cash from China, insisting all non-operational cash reserves be repatriated to Singapore
• Exit Certainty: Lacks certainty regarding complete exit from DyStar operations
• Automatic Termination: Demands the amended SPA should automatically terminate if not fully performed by January 31, 2026

Legal and Procedural Issues

• Receiver Powers: Questions whether share buyback falls outside receivers' powers under the appointment order
• Rights Protection: Concerns that participation may compromise existing court-ordered rights
• Extension Opposition: Objects to further extensions, advocating for alternative bidders

Court Extension Request

The receivers have applied to the SICC for extending the long-stop date from December 31, 2025, to March 31, 2026. This extension aims to provide runway for:

Transaction Timeline and Deposits

The deal has faced multiple delays since its initial announcement:

Zhejiang Longsheng Group has deposited an additional USD 5.00 million, bringing the total escrow amount to USD 13.59 million. This deposit may be forfeited at the receivers' discretion if transactions are not completed by the extended deadline.

Next Steps

Kiri Industries continues to take legal advice from its counsels and will pursue all necessary steps to protect its legal and commercial interests. The company has not consented to any extensions granted by the receivers and maintains its position against the alternative transaction structure. The SICC's decision on the receivers' extension application and the company's objections will determine the future course of this prolonged transaction.