Uflex said its cost of funds was 7% and falling. Now it's 9% and refinancing is off the table.
Q4 EBITDA hit a 14-quarter high, but the financing narrative just flipped. Blended cost of debt jumped 200 bps and management abandoned the refinancing plan it promised in February.
What's new
- Q4 EBITDA margin hit 15.3%, the highest in 14 quarters, but management flagged the March spread environment as abnormal.
- Blended cost of debt rose to 9% from the 6.9%-7% guided in February, and refinancing plans were shelved.
- Aseptic volumes missed the February guidance of 8.5 billion packs, landing at 7.97 billion for FY26.
Themes from the call
Financing
Blended cost of debt jumped to 9% from 6.9%-7% in one quarter, and the refinancing plan management hinted at in February has been abandoned.
Margins
Q4 EBITDA margin of 15.3% was a 14-quarter high, but management said spreads have moderated into Q1 FY27.
Capacity
Capex phase is near completion with Egypt aseptic, Mexico WPP and recycling facilities all targeting H1 FY27 commissioning.
Guidance watch
- Aseptic volumes guided to 10-10.5 billion packs in FY27, a 25-31% jump over the 7.97 billion in FY26.
- FY27 revenue and profitability expected to outperform FY26 from improved utilization of new capacities.
- No specific margin guidance provided; management acknowledged spreads have moderated into Q1 FY27.
Risk flags
- The 200 bps jump in blended cost of debt from 6.9%-7% to 9% was not explained. It materially worsens the interest burden and was not in any prior model.
- Aseptic missed FY26 guidance by 6% with no prior warning of demand disruptions. The new 10-10.5 billion pack target assumes smooth Egypt commissioning.
- India packaging films volumes declined 6.3% in FY26 on FMCG softness and customer pricing concerns.
Key quotes
-
"So current blended cost of funds will be about 7%, 6.9 to 7% blended cost of funds. ... we expect cost of funds to come down based on the plans that we are working on."
— Uflex management, Feb 2026 call -
"So overall our blended cost of funds is about nine percent... At this stage, talking about a refinancing option is something a little premature, though we remain open to that..."
— Uflex management, Jun 2026 call
The brief
Uflex's June earnings call reported a 14-quarter EBITDA high and a margin of 15.3%. The headline number hides a more consequential story: the cost of debt the company just reported is 200 basis points higher than what management told investors in February. Three months ago the blended cost of funds was stable at 6.9%-7% and heading lower, according to CEO Rajesh Bhatia. Now it is 9%, and the refinancing plan that was supposed to bring it down has been shelved as 'premature'. No one on the call explained the gap.
The financing reversal matters because Uflex is in the middle of a ₹1,900-2,000 crore capex cycle, with the Egypt aseptic facility, Mexico WPP unit and recycling plant all targeting H1 FY27 commissioning. Higher debt costs during a capital-intensive phase compress the return on that capex. Net debt to EBITDA improved from 4.51x to 4.35x between Q3 and Q4, but that was before the interest cost fully hit.
On the operational side, the aseptic business also fell short. Management guided 8.5 billion packs in February for FY26; actual volumes came in at 7.97 billion. The miss was blamed on weather, an unseasonably cool summer and prolonged winter. The new FY27 target of 10-10.5 billion packs assumes the 12 billion pack Egypt facility will commission in H1 and deliver two quarters of incremental volume.
Q4 spreads were described as abnormal by management itself, and margins have already started to moderate into Q1. The business recovery is real, international revenue is now 57% of the total and the Americas rebounded strongly post the US government shutdown. But the financing narrative has flipped without explanation, and that is the thing the market will price first.
Uflex's EBITDA recovery is real, but the 200 bps jump in the cost of debt it didn't warn about will shadow the capex cycle.