Srivasavi Adhesive Tapes Ltd| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

⬤12th Jun 26

Summary : Srivasavi Adhesive Tapes is aggressively expanding capacity and diversifying into high-growth sectors like defense and EV, expecting future profitable growth despite current investment-led margin pressure.

Management Perspective positive : We are confident that the capacity capabilities we have built will translate into stronger and more profitable growth in the years ahead. Our long-term vision is very clear and ambitious.

Concall Report Analysis & Insights

Business Overview

Srivasavi Adhesive Tapes manufactures industrial specialty adhesive tapes, foams, films, fabrics, and die cuts.
The company operates five manufacturing units, spanning two lakh square feet, doubled post-IPO.
It offers over 300 SKUs across eight product lines under the 'Dollar' brand name.
Products are sold domestically in 21+ states and exported to 27+ countries.
The workforce increased from 280 to 357 during the year.

Future Growth Prospects

IPO proceeds are invested in significant asset additions and new unit startups (Units 2, 3, 4, 5).
Entered high-entry barrier sectors like defense PSUs and electronic manufacturing services (EMS).
Deepened certifications, approvals, and new product trials, including Indian Railways approval.
Polymer division in Dobbaspet is targeted to go live by FY27.
Aiming for 1,000 Cr revenue through backward integration, capacity expansion, sector diversification, and export scale-up.

Management Insights

FY26 revenue from operations grew 22% to 109.98 crores, crossing the 100 Cr benchmark.
Profit after tax was 6.01 crores, down from 6.80 crores in FY25 due to investments.
Balance sheet expanded to 85.86 crores, with net worth strengthening to 46.71 crores.
Tangible assets grew by 19.56 crores, with 10.58 crores in capital work in progress.
Management is confident that new capacity will translate into stronger, more profitable growth.

Signs of Skepticism

Management was vague about specific details of defense PSU orders, citing secrecy.
The exact margin difference for aerospace products was described broadly as 'more than double digits'.

Risk Factors

FY26 was a year of heavy investments, impacting current profitability.
Margin pressure due to the cost of new capacity built but not fully utilized.
Increased finance costs and depreciation from borrowings and new assets.
Raw material prices, especially crude, can compress operating margins for 2-3 months.
Competition from established players like 3M and other MNCs.

Good To Know

Exports grew 20% year-on-year in Q3 FY26.
US tariff reductions are expected to improve competitiveness in American and other industrial markets.
India's specialty tape market is over 65% import-dependent, mainly from Korea and Japan.
The company's backward integration helps compete in import substitution and protect margins.
Unit 6 is leased, installing solar energy, and expected to start production in four months.

Key Drivers

New capacity utilization will drive growth.
Entry into high-barrier defense sector.
Expansion into EMS and EV battery.
Backward integration improves margins.

Key Analyst Discussions

Competitive Environment

Competition exists from Chinese, Korean, and Japanese high-end products.
Anti-dumping duties are not applicable for their high-end, specification-driven products.
3M innovates and focuses on margins, not direct price competition.
The company's backward integration helps compete with international players.
No other listed Indian companies are directly comparable in their niche.

Financial Highlights

Working capital days are typically 80-90, with a minimum of 75 days.
Management aims for double-digit operating margins this year.
R&D spending is approximately 0.5% to 1% of revenue.
New plants (Units 3 and 4) are running at about 50% capacity.
Unit 1 and 2 are running at 60-70% capacity.

Product Composition

Aerospace division contributes roughly 4% of revenue.
Aerospace products have double-digit margins.
Commodity tapes account for 20-25% of revenue, with the rest being specialty products.
Specialty products have higher margins, ranging from two to three digits.
Specification-oriented products offer three-digit margins.

Strategic Considerations

Signed NDAs with EV battery pack manufacturers and upgrading Unit 2 for clean room facilities.
Supplying insulation, bonding films, and die cuts to defense factories (ammunition, parachute, BEL).
Foreign expansion plans are finalized, with an office to be published soon.
Unit 6 is not yet operational but is being set up to cater to future demand.
The polymer division (Unit 5) will manufacture fabrics for captive consumption and advertisement sector, with 6,000 tons/year capacity.