Detailed Narrative
Structural Shift in Global Trade Favors India
Management identified three major events positively impacting the sector: the India-EU FTA, China's 'anti-involution' strategy, and the US-India trade deal. The US-India deal is particularly significant, as it reduces tariffs from over 50% to approximately 18% for key products. This shift is expected to boost volumes and margins in the US market, where Aarti already resumed record volumes in Q3 FY26.
MMA Capacity Expansion and Market Leadership
The Energy business, led by MMA, remains the primary growth driver. The company is scaling capacity from 290+ KT to 360 KT by Q4 FY26 through efficient debottlenecking. While MMA currently constitutes a large portion of the portfolio, management expects it to settle at 30-40% in the medium term as other Zone 4 projects come online. They are also exploring backward and forward integration to stabilize volatile margins in this segment.
Zone 4: The Transformational Growth Platform
Zone 4 represents a total investment of ₹1,600 to ₹1,800 crore, with the majority to be deployed by the end of FY26. Key projects including MPP, Chloro toluene, and downstream process blocks are set to commission in a phased manner during CY26. These assets utilize in-house indigenous technology, which management claims allows them to be among the lowest-cost producers globally.
China's 'Anti-Involution' Strategy Impacts Pricing
Aarti is seeing immediate benefits from China's policy shift to curb hyper-competition. Specifically, the removal of the 13% VAT rebate on Chinese exports in the NCB chain led to a 7-10% price increase in global markets within days. Management anticipates this transition will serve as a structural catalyst for sustainable margin recovery across their broader portfolio as China prioritizes higher-quality growth.
CAPEX Discipline and Future Outlook
FY26 CAPEX is estimated at ₹1,100 crore, slightly above the previous guidance of ₹1,000 crore due to fast-tracked initiatives in MMA and DCB. However, management expects FY27 CAPEX to be significantly lower as the current heavy investment cycle for Zone 4 nears completion. Operating cash flow for the first nine months of FY26 stood between ₹500-600 crore, supporting the ongoing expansion.