Aarti Industries Limited — Q2 FY26 earnings call

The margin's improvement was predominantly driven by operating leverage. At a contribution level, if you see at the overall product portfolio level, we remain quite consistent on the contribution margin level. But as the overall business volume goes up, the operating leverage starts kicking in and that starts getting reflected in the EBITDA percentage increase.

Clarifies that margin improvement is due to operating leverage from higher volumes, not necessarily a shift to higher-margin products, indicating sustainability if volumes are maintained.

Asked by Arun Prasath

So what we can say at this point in time is, in this quarter, we will commission a calcium chloride facility. In the next quarter, we are commissioning our multipurpose plant, both of these are at Zone 4. In addition to that, in the next quarter, which is Q4 of FY '26, we are also planning to commission a slightly increased capacity of MMA based on the debottlenecking effort and in addition to that, one specific molecule PEDA, again, which will become a form of MPP. Post that, there are 5 blocks, incremental blocks in Zone 4. I think each of the blocks will get sort of sequentially commissioned throughout the next financial year.

Provides a clear roadmap for capacity additions and their timelines, crucial for future volume and revenue growth.

Asked by Arun Prasath

If you look at, at least from a strategic planning perspective, we feel energy will remain in kind of 30% to 40% range and the share of Agro, polymer specifically, these two end-applications, along with a little bit of pharma will inch up as we execute on our strategic plans. That is what is on the cards. How it evolves in reality, I think all of us will observe and see, but that is where we see kind of a resolved state at the end of 2-2.5 years. ... I do not think at this point in time, we are thinking about sort of the next level of large investment, which is sort of INR1,000 crore plus kind of a ticket size, which is what we did at Zone 4. I think for the next few years, the focus will remain on sort of relatively medium ticket size projects, which can be turned around quickly based on existing infrastructure, at the same time, significantly accrue to the bottom line.

Outlines the company's long-term product mix strategy and a shift towards medium-ticket, quick-turnaround capex projects for better financial returns, rather than large-scale investments.

Asked by Arun Prasath

I think the only couple of levers that have worked for us, and we continue to push that is sort of having the proactive conversations with customers to ensure that the relationship remains intact and the business remains intact where both sides have to compromise to some extent and the second aspect is, I think the product portfolio, which is potentially re-exported out of U.S. There, there are strategic levers which can be applied to minimize the overall tariff impact there.

Details the company's approach to managing the adverse effects of US tariffs, focusing on customer engagement and product portfolio adjustments.

Asked by Arun Prasath

I think we enter into a product where we feel we can have global competitiveness and we can have a global scale play. This is one value chain where we are developing end-to-end integration. So we will start from all the way basic petrochemical building blocks, and we will go all the way downstream. And we also feel that we will be able to do this with a distinctive competitive cost advantage.

Explains the strategic importance of the PEDA project as a move towards end-to-end value chain integration and building global competitiveness.

Asked by Archit Joshi

Yes, we have started our work in that dimension. I think we have good initial success. But currently, where we are in that sort of we are getting to know and build relationships with some of the global innovators. As we speak, we are doing sort of 3 or 4 projects, which are at R&D level. So I think the focus remains on building relationships with global innovators and trying to get involved in the very early part of a development cycle. That work converting into a concrete large-scale business in terms of manufacturing or supplying of a particular intermediate/chemical. That is kind of an 18 to 24-month journey in sort of our sense.

Provides an update on the nascent but promising CDMO business, highlighting R&D-level projects and the long-term nature of scaling up.

Asked by Archit Joshi

So if you look at the top line, the top line has also gone up. And in certain cases, in fact, just adding it to the previous question which was there, the export percentage is upwards of 60%, where the credit profile is a bit more as compared to the domestic numbers, so which is where you would see this receivable to be there. So if I combine on an overall working capital basis, the working capital cycle continues to remain at the level what it was. It continues to remain in the range of around 45, 50-odd days.

Explains the increase in debtor days as a consequence of a higher export percentage (over 60%), which typically involves longer credit periods compared to domestic sales.

Asked by Anil Chaurasia

So as I said that there is the mark-to-market impact on the loans, which has to be accounted based on the volatility of the currency and is not a cash flow item and that is where the cash flow will show the actual cash outgo versus the P&L will reflect the provisioning for those potential volatility impacts as well.

Clarifies that the difference is due to non-cash mark-to-market adjustments on loans, which impacts the P&L but not the cash flow statement.

Asked by Anil Chaurasia