Sudarshan Chemical Industries Limited — Important, 26-07-2025: Disclosure of material issue

**Sudarshan Chemicals Q4 & FY25 Review**

Sudarshan Chemicals reported strong top-line growth for FY25, with consolidated revenue jumping to ₹3,345.58 Cr from ₹2,538.78 Cr YoY. Quarterly revenue also surged to ₹1,349.44 Cr from ₹764.24 Cr. Profit before exceptional items and tax for FY25 rose to ₹202.80 Cr from ₹155.43 Cr YoY, while Q4 saw ₹72.21 Cr vs ₹78.02 Cr. EPS for FY25 stood at ₹16.0, and for Q4, it was ₹7.6. Note that net profit figures were significantly impacted by one-time items: a major gain from land sale in FY24 and acquisition-related costs in FY25.

**The Issue & Impact:**

The biggest development is the acquisition of Heubach Group's global pigment business in March 2025 for approximately €151.9 million (~₹1,389.90 Cr). This acquisition led to ₹103.63 Cr in "Exceptional Items" costs in FY25. However, the company also recognized a substantial "Bargain Purchase Gain" of ₹1,243.85 Cr in other comprehensive income, meaning they acquired assets for less than their fair value – a positive for equity. This acquisition has significantly altered the balance sheet, making direct comparisons with previous periods challenging.

A concerning issue identified in the newly acquired subsidiary, Heubach Colorants India Limited (HCIL), involves the transfer of certain assets worth ₹25.81 Cr to a related party in 2019 without due Board approval. The final resolution, including any financial impact, is still pending.

The company also incurred a higher foreign exchange loss of ₹17.27 Cr in FY25 compared to ₹10.21 Cr in FY24, impacting profitability.

**Company’s Response & Mitigation Plan:**

To finance the Heubach acquisition, Sudarshan Chemical Industries successfully raised ₹195 Cr through a preferential issue and an additional ₹800 Cr via a Qualified Institutional Placement (QIP). These funds were utilized for the acquisition and debt repayment. A monitoring agency has confirmed no deviation in fund utilization.

Regarding the HCIL asset transfer issue, the company is evaluating various legal options to determine the appropriate course of action.

The Board of Directors, at their meeting on July 25, 2025, also approved a corporate guarantee not exceeding €25 million for subsidiary foreign exchange hedging. The Board has also proposed a dividend of ₹4.5 per share (225%) for FY25. Mr. Rajesh Balkrishna Rathi was appointed Chairman in addition to his MD role, following Mr. Pradeep Ramwilas Rathi's resignation.