Cosmo First: Revenue Surges 29%, But Margins Dip Amid Tariff Woes

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AuthorSimar Singh|Published at:
Cosmo First: Revenue Surges 29%, But Margins Dip Amid Tariff Woes
Overview

Cosmo First Limited reported a strong 29.0% year-on-year revenue growth to ₹899 crore for Q3 FY26, driven by higher sales volumes and its specialty chemical subsidiary. However, EBITDA margins compressed to 11.5% from 12.3% due to factors including US tariffs, inventory loss, and increased employee liabilities. PAT remained flat at ₹30 crore. The company is completing a significant capex cycle and plans to focus on cash generation, debt reduction, and expanding its high-margin specialty portfolio, including its Petcare business (Zigly), aiming for double-digit revenue growth ahead.

📉 The Financial Deep Dive

Cosmo First Limited has unveiled its investor presentation for the quarter ending December 31, 2025 (Q3 FY26), revealing robust top-line growth coupled with margin pressures.

The Numbers:

  • Revenue: ₹899 crore, a significant 29.0% increase year-on-year (YoY).
  • EBITDA: ₹103 crore, up 19.8% YoY.
  • EBITDA Margin: Compressed to 11.5% from 12.3% in Q3 FY25.
  • PAT: Remained flat at ₹30 crore.
  • 9M FY26 Performance: Revenue grew 21.8% YoY to ₹2618 crore, and EBITDA increased 25.6% YoY to ₹348 crore, with margins improving to 13.3% from 12.9% in the prior year period.

The Quality:

The Q3 FY26 margin contraction was attributed to several headwinds: declining core film margins (BOPP and BOPET), the impact of USA tariffs, a temporary shutdown of a BOPP line, an inventory loss of ₹8.4 crore, and a one-time ₹4 crore increase in employee benefit liability. The flat PAT was primarily due to increased depreciation and interest costs associated with new capacities coming online.

The Grill:

Management addressed the margin compression by detailing the specific factors impacting profitability in Q3, highlighting that some, like US tariffs, are expected to ease, potentially improving profitability from Q1 FY27. The focus is clearly shifting from aggressive capacity expansion to optimizing existing assets and driving profitable growth.

🚩 Risks & Outlook

Cosmo First is nearing the completion of its significant ₹1,140 crore capital expenditure cycle. The strategic focus now shifts decisively towards generating higher cash flows and improving Return on Capital Employed (ROCE). The company anticipates limited large-scale capex over the next three years, which is expected to enhance free cash flow visibility and facilitate a clear roadmap for net debt reduction within the next 24 months. A key strategic imperative is the structural shift towards a higher-margin specialty portfolio, increasing the contribution from specialty films, value-added applications, and scaling its consumer-facing businesses like Petcare (Zigly) and Window Films/Paint Protection Films (Cosmo Consumer). The company targets a substantial increase in non-film EBITDA contribution over the next three years, aiming to unlock value across its diversified business segments. Double-digit revenue growth is projected for the coming quarters. The Petcare vertical (Zigly) is scaling rapidly, posting over 50% topline growth YoY in Q3 FY26, and a demerger is planned by FY27. Cosmo Plastech (Rigid packaging) achieved positive EBITDA in December 2025. Net debt stood at ₹1,215 crore (2.8x Net Debt/EBITDA) as of December 2025. Future targets include mid-teens ROCE for the Film business, significant topline and profitability from Specialty Chemicals and Rigid Packaging, and strong CAGR growth for Cosmo Consumer and Zigly by FY30.

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