Merino Industries Limited

What the business actually is Merino Industries is a 61-year-old, unlisted, Lohia-family-controlled manufacturer based out of Hapur, with six plants (Hapur, Halol, Dahej, Rohad, Hosur, and one more) and no subsidiaries. FY26 revenue was ₹2,520 crore. It runs four businesses: Decorative laminates (HPL, compacts, restroom cubicles) — the original business, ~70% of revenue, exported to 80+ countries (₹735 crore, or 29% of sales, is overseas). Panel products and furniture — particle board / FABWood chipboard, prelam panels, plywood, MDF, modular furniture, and the newly launched Marine Board. This is the Halol project. Potato flakes — an agri-processing diversification; they're India's largest producer. Others — Hanex trading, agri income. The strategic logic is reasonable on paper: they already sell the decorative surface (laminate), so why not sell the substrate underneath it (board), and then the finished furniture? Move from being a component supplier to owning the whole panel. Where the money is made and lost This one table explains almost everything: Merino FY26: one segment earns, three burn Laminates earned ₹219 crore of segment EBIT on ₹1,859 crore of revenue, a perfectly healthy ~12%. Everything else lost ₹163 crore before interest and ₹217 crore after it. The consolidated result was ₹0.33 crore of net profit. Why they've struggled

1The Halol panel project is the whole story. The panel and furniture segment now carries ₹1,046 crore of assets, more than the laminates business (₹892 crore), while producing a third of the revenue and losing money. It threw off ₹62 crore of depreciation on its own in FY26. The Board's report confirms the particle board plant was only commissioned during the year. This is the textbook shape of a large greenfield capex: the balance sheet loads up first, depreciation and interest start immediately, and volumes arrive years later.

2They entered a commodity from a specialty position. Laminates are branded, design-led, and priced on trust. Particle board and MDF are tonnage products where the buyer compares price per sheet, and Indian panel capacity has been expanding hard. Merino is trying to differentiate out of it (Marine Board, GreenPro, low-formaldehyde, Harmony coordinated surfaces), but until utilisation climbs, the plant is a fixed-cost machine running below breakeven.

3The arithmetic no longer works. EBITDA was ₹184 crore in FY26. Depreciation was ₹127 crore and finance costs ₹55 crore. Together those two consume ₹182 crore. The entire operating cash generation of a ₹2,520-crore company is being absorbed by the cost of the assets it has already built.

4Margins compressed before the losses showed up. Revenue grew 45% from FY22 to FY26, but EBITDA margin fell from 14.0% to 7.3% and EBITDA in absolute terms is lower than FY22. Profit before tax went ₹174 cr → ₹174 cr → ₹163 cr → −₹27 cr → ₹1.7 cr. EPS went from ₹117.52 to ₹0.29. So growth was bought, not earned.

5Capital is being destroyed, not compounded. ROCE fell from 12.85% to 2.90%. The company borrows at roughly 8–9% and earns under 3% on capital employed. Debt service coverage is 0.69, meaning operating earnings don't cover debt repayment plus interest. Of ₹583 crore of borrowings, ₹408 crore sits in current liabilities, which is short-term money funding a long-gestation asset. Inventory sits at 181 days.

6The potato flakes business flipped. It made ₹3.8 crore in FY25 and lost ₹13.6 crore in FY26 on ₹83 crore of sales. Small in absolute terms, but it's a sub-scale, non-core diversification that is now also consuming cash. One thing to be careful about The report frames FY26 as "a turnaround" and "significant improvement." Read the fine print in the ratio note: the company itself discloses that the marginal profit came from a government interest subsidy grant tied to Halol commercialisation. Current tax was nil. A ₹0.33 crore profit on ₹2,520 crore of revenue is a rounding error, not a recovery. They still declared a ₹1/share dividend. The honest summary is that Merino is a very good laminates company that has spent five years building a large panel business, and is currently carrying the full cost of that decision without yet seeing the returns. Whether it was a mistake or just early depends entirely on where Halol's utilisation goes over the next two or three years.