1. At a Glance – Blink and You’ll Miss the Profits
Chemfab Alkalis Ltd is currently valued at ₹584 crore, trades around ₹406, and is behaving like a classic mid-cap chemical stock that forgot its own glory days. Once upon a time, this company flexed 30%+ operating margins, printed cash from caustic soda, and enjoyed a neat negative working capital cycle. Fast-forward to Q3 FY26 and we have sales down 18.5% YoY, PAT at –₹4.45 crore, OPM collapsed to 2.83%, and interest coverage gasping at 1.16x.
ROCE is chilling at 3.32%, ROE at 2.33%, and the stock is down ~60% YoY, which tells you the market has already delivered its judgement — without mercy, without anesthesia.
And yet… promoters still own 72.1%, debt is not nuclear (D/E 0.29), a new electrolyser is live, PVC-O pipes capacity is expanding, and a ₹563 crore greenfield subsidiary project is quietly loading future leverage like a slow-burn thriller.
So the real question:
Is Chemfab Alkalis temporarily sick… or structurally broken?
Let’s dissect this molecule by molecule.
2. Introduction – When Caustic Soda Turns Caustic to Shareholders
Chemfab Alkalis is not a newbie chemical play. Incorporated in 2009, it operates in one of the most boring, cyclical, brutally competitive chemical segments in India — chlor-alkali. This is a business where:
- Power cost decides margins
- Caustic soda prices decide mood
- Chlorine disposal decides survival
In FY23, Chemfab looked smart. Margins were high, capacity utilisation decent, and PVC-O pipes gave a “sunshine infra story” angle. But FY25 and FY26 decided to humble the management.
By Q3 FY26:
- Revenues slid to ₹68.1 crore
- EBITDA shrank to ₹1.93 crore
- Depreciation and interest said “hello darkness my old friend”
- PAT turned negative again
The stock P/E is blank because EPS is –₹9.12. You can’t divide by sadness.
But before we call this a fallen angel or a value trap, we need to understand what Chemfab actually does, where it makes money, and where it bleeds chlorine-scented cash.
3. Business Model – WTF
Do They Even Do?
Chemfab Alkalis runs three businesses under one corporate helmet:
A. Chlor-Alkali (The OG Cash Cow)
This is the core business.
- Caustic soda (lye + flakes)
- By-products: chlorine, hydrogen, hydrochloric acid, sodium hypochlorite
- Uses membrane cell technology (efficient, modern, less mercury drama)
Installed capacity:
- 185 TPD caustic soda at Pondicherry (post FY23 debottlenecking)
Customers:
- Textiles
- FMCG
- Petrochemicals
- Pharma
- Paper
Revenue contribution FY23:
- Caustic Soda Lye: 74%
- Caustic Soda Flakes: 6%
- Hydrogen + others: ~8%
This segment is cyclical and brutally price-sensitive. When realizations fall, margins don’t politely decline — they jump off a cliff.
B. Salt Division – The Unsexy but Necessary Evil
Industrial and edible salt, mostly captive and utility-oriented. Low margin, low drama, low excitement.
C. PVC-O Pipes – The “Infra Growth Story” Add-On
This is where management dreams big.
Current status:
- Plant at Sricity, Andhra Pradesh
- Capacity: 6,000 MTPA
- Two lines producing 400 mm diameter pipes
Expansion plan:
- Third line (630 mm diameter)
- Capacity: 5,000 MTPA
- Capex: ₹35 crore
- Debt funded: ₹31.5 crore
- Another 3,000 MTPA line planned in FY25
Customers:
- Earlier: farmers’ associations
- Now: EPC contractors for government water projects (70–80% of order book)
PVC-O is higher margin than caustic soda — but also capital hungry and slow to scale.
So Chemfab is juggling commodity chemicals + infra pipes + upcoming greenfield mega project. What could possibly go wrong?
4. Financials Overview – The
