PCBL Share: Will Expansion in Semiconductors, EVs, and Data Centre Chemicals Result in Growth?

Synopsis: PCBL Chemical Limited navigated one of its toughest years amid geopolitical disruptions, volatile raw material costs, and global supply chain challenges. Yet, with a 90,000-tonne capacity expansion, rising specialty chemical demand from semiconductors, EVs, and data centres, battery chemical initiatives, and ₹200–250 crore cost savings, management believes FY27 could mark a stronger growth phase. 

For years, PCBL Chemical Limited has built its business around carbon black and performance chemicals, serving tyre and industrial customers across global markets. However, as industries such as semiconductors, electric vehicles, data centres, and battery storage begin creating demand for advanced materials, PCBL appears to be positioning itself beyond its traditional portfolio. After navigating a difficult FY26 marked by geopolitical disruptions and margin pressures, the company is now entering FY27 with fresh capacities, specialty projects, and new technology-led growth initiatives. 

With a market cap of Rs 12,040 crore, the shares of PCBL Chemical Ltd are trading at Rs 306 and are trading at a PE of 56 compared to their industry’s PE of 48. The shares have given a return of more than 200% in the last 5 years.

Recovery After a Tough FY26 

This, however, could not be said about PCBL Chemical Limited. According to the management of the firm, it was probably the most challenging year within their memory due to lower spread levels, over-capacity in the domestic market, political uncertainties, and inventory reductions made by their overseas clients. 

These challenges continued through the majority of the year, but by the end of Q4, the management observed early signs of improvement. The levels of the spread were starting to bottom out; their customers’ order pipeline was becoming better, and the latest developments in the realm of international trade, such as tariffs being rationalised in the United States and the signing of the India-EU FTA, were expected to help boost their exports.

West Asia Disruptions and Margin Pressure

The most important operational issue faced during the quarter was the rise in tension due to the war in West Asia, which broke out in February. As about 75% of PCBL’s raw material requirements come from the U.S. Gulf Coast region and almost 40% of its revenues come from export activities, PCBL was impacted through its entire supply chain. 

The freight routes to Europe and the USA had been impacted such that shipping had to take a detour to reach their destinations via the Cape of Good Hope, leading to delays of about 14 days and additional logistical expenses. 

On the other hand, there were sharp increases in feedstock prices since the cost of Brent crude increased from about $60 per barrel at the start of the quarter to $100 towards the end of the quarter, moving up to about $120 during the earnings announcement. However, management expects the formula-based contracts with major tyre companies along with price increases in March to help recover these costs fully by Q2 FY27.

90,000-Ton Expansion Supports Demand

PCBL was able to make progress despite these challenges. Over the quarter, the firm expanded its carbon black production capacity by adding 90,000 tonnes worth of capacity in its plant located in Tamil Nadu. The firm’s carbon black production capacity now stands at 880,000 tonnes annually. 

The management believes that the addition of this capacity comes at an opportune moment since customers around the world are moving away from “just-in-time” to “just-in-case” inventories. This has been generating additional demand for carbon black across various regions. 

Over Q4 FY26, carbon black sales volumes saw an increase of 8% YoY to 161,865 metric tonnes, aided by a 21% increase in domestic sales volumes to 105,055 tonnes. The sales volumes in the international market dipped by 10% on account of logistical constraints; however, management is optimistic about future improvements in sales volumes.

Specialty Chemicals Gain Momentum

Whereas tyres continue being the key products for the company, the management has emphasised that specialty chemicals have become an increasingly critical factor in the next phase of expansion for PCBL. The sales volume in specialty sales increased by 26% to 19,386 tonnes during the period. 

The company noted positive progress in applications like industrial coating, among others, in spite of a less active infrastructure sector. More crucially, PCBL noted that there was a positive trend regarding growth opportunities in sectors such as electric vehicles, semiconductors, data centres, and AI-driven investments. The demand in these sectors is due to their need for specialty blacks with enhanced conductivity and properties. 

In order to capitalise on these developments, PCBL noted that it has completed construction of a superconductive specialty black line of 1,000 metric tonnes per annum capacity in Palej, while a specialty black line of 20,000 tonnes per annum capacity in Mundra is ready to be commissioned soon.

Nanovace Opens Battery Opportunity

Nanovace, the battery chemicals platform of PCBL, was one of the most strategically critical topics highlighted during the call. The company’s management stated that the pilot plant at Palej is now completely set up and prepared for commissioning in the coming weeks. PCBL has increased its strength in research and development, improved laboratory facilities, and intensified its business development initiatives in Europe and South Korea. Negotiations have already commenced with big battery companies to confirm the qualities of the products. According to management, it will take several months to qualify the battery chemicals. Nonetheless, the company expects the volumes to increase from FY28 onwards. However, management stated that battery chemicals can be considered a high-growth and high-margin sector with tremendous long-term diversification potential other than carbon black products.

Rs 200–250 Cr Cost Savings Ahead

Other than growth-related investments, management pointed out that there was a significant cost savings plan on the anvil, which would lead to cost savings of about ₹200 crore to ₹250 crore in the coming 4 to 6 quarters. This will be achieved through efficiency in yield, efficiency in throughput, and flexibility in use of feedstocks. 

In addition, PCBL has been using agentic AI-based approaches in its manufacturing processes. According to the management, some early indications have been positive, as quicker decision-making can already be seen on the shop floor. Management feels that such initiatives can help in improving uptime, quality of products, process efficiency, and time to market.

Feedstock Diversification Begins

In addition to this, another important strategic initiative that was outlined in the discussion was related to the backward integration of the coal tar distillation process. In its history, PCBL has always been known to rely mainly on the production of crude-based feedstock; however, as per discussions with management, studies pertaining to the viability of utilising coal-tar-based feedstock are ongoing with selected applications in mind. 

The management mentioned that while coal tar is going to be utilised, it would certainly not replace crude-based feedstock for all product lines but rather would be selected as per the application which requires such material. This strategy aims to improve cost resilience by minimising dependency on crude-based feedstocks.

A Stronger FY27 Platform Emerges

Despite having had a tough year, PCBL is heading into FY27 with a relatively better financial position. This can be observed from the fact that net borrowings have been cut down by ₹454 crore from ₹5,000 crore at the end of FY26 to ₹4,536 crore, despite the fact that it had incurred a capital expenditure of ₹750 crore. 

Working capital management has also seen marked improvement in this regard. Volume growth in the carbon black category is expected to be in the high single digits in FY27, while EBITDA growth is estimated to be well above double digits, backed by increased volumes, favorable product mix, price hikes, and cost savings. It must also be pointed out that management reconfirmed the EBITDA target of ₹4,000 crore by 2030. 

With increasing importance being given to specialty carbon blacks in semiconductors, EVs, data centres, and artificial intelligence-based systems, Nanovace is looking forward to a foray into batteries, and with various other improvements underway, PCBL seems to be on the cusp of entering a fundamentally new growth phase.

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