Aarti Industries Limited — Q4 FY25 earnings call

Call held 8 May 2025

Management summary

Aarti Industries concluded FY25 with a positive note, reporting a 15% YoY revenue growth and 3% YoY EBITDA growth, despite a challenging environment. Q4 FY25 showed sequential improvement with revenues up 9% QoQ and EBITDA up 13% QoQ, driven by volume recovery across end applications, particularly in energy and base chemicals. The company remains focused on volume-led growth, cost optimization, and strategic CAPEX deployment, with FY26 CAPEX projected at Rs 950-1,000 crores, primarily for Zone IV projects.

Highlights

  • FY25 total revenue: Rs 8,046 crores, up ~15% YoY.

  • FY25 EBITDA: Rs 1,016 crores, up ~3% YoY.

  • FY25 PAT: Rs 331 crores.

  • Q4 FY25 revenue: Rs 2,214 crores, up 9% QoQ.

  • Q4 FY25 EBITDA: Rs 266 crores, up 13% QoQ.

  • Q4 FY25 PAT: Rs 96 crores.

  • Final dividend recommended: Rs 1 per share for FY25.

  • Q4 Energy application volumes grew 21% QoQ, and base business volumes grew 14% QoQ.

  • FY25 CAPEX: Rs 1,372 crores, with FY26 CAPEX guidance of Rs 950-1,000 crores.

Concerns

  • Volatile external environment & geopolitical events

  • US Tariff Actions

Key financials

3 periods

Headline

  • Revenue
    ₹8,046 Cr
    YoY +15%
  • EBITDA
    ₹1,016 Cr
    YoY +3%
  • PAT
    ₹331 Cr
  • Dividend per Share
    ₹1

Q4

  • Revenue
    ₹2,214 Cr
    QoQ +9%
  • EBITDA
    ₹266 Cr
    QoQ +13%
  • PAT
    ₹96 Cr
  • Export Revenue
    ₹1,240 Cr

FY25

  • Overall Volume Growth
    17%

What they filed

Q1 FY27: revenue up 37.0%, net profit up 227.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,717 1,749 1,992 1,636 2,084 +21%2,276 +30%2,439 +22%2,241 +37%
EBITDA199 230 265 212 284 +43%318 +38%349 +32%366 +73%
Net profit55 47 99 44 102 +85%131 +179%147 +48%144 +227%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Energy Applications
    21% Volume Growth
  • Base Business (Nitro Toluene, NCB, Ethylation-based)
    14% Volume Growth

Capital allocation

high confidence
  • Capex ₹950 Cr
    • Zone IV projects (bulk of FY26 capex)
    • New product development, fostering innovation, diversification
    • Maintenance capex ₹150 Cr
    Our CAPEX for FY25 stood at about Rs. 1,372 crore, in line with expectations. Our large project initiatives at Zone IV are being executed in a phased manner, with commissioning scheduled to progress through FY'26. Our newly operational pilot plant at Zone IV has already commenced commercial operations. It will play a vital role in driving new product development, fostering innovation, and supporting the diversification of our offerings moving forward. Based on our current plan, we expect the capex in FY26 to be about 950-1000 crs. (Suyog Kotecha) and I guess the maintenance CAPEX and CAPEX related to some of the initiatives which are there on the existing product should be in the range of Rs. 150 crore to Rs. 200 crore or so. Beyond that, everything will be for the new initiatives at Zone-4 is going to be a bulk of that. (Chetan Gandhi)
  • Debt Net ₹3,500 Cr
    Okay, just the last question from my end is with respect to net debt. You closed the year somewhere around Rs. 3,500 crore, for FY '26 how will this number look like, figuratively or directional? So directionally, I guess, we would have peaked out. We expect the number to be lower. We are expecting some unlocking of cash flow from working capital as well. So, plus the CAPEX intensity is also going down. So directionally, I expect the number to be lower by maybe Rs. 200-300 crore kind of range. (Harsh Shah and Chetan Gandhi)
  • Dividend ₹1/share (final)
    Considering the annual performance, the Board has recommended a final dividend of Rs. 1 per share (20% of face value of Rs. 5/- each) for FY25.

Guidance & targets

Capex

  • FY26 Capex Capex · FY26 · High confidence 950-1000 crs
    Based on our current plan, we expect the capex in FY26 to be about 950-1000 crs.

    — Suyog Kotecha

Volume Growth

  • FY26 Volume Growth Volume Growth · FY26 · Medium confidence volume-led growth
    we continue to remain optimistic about volume-led growth for the coming financial year.

    — Suyog Kotecha

Working Capital

  • Gross Working Capital Days Working Capital · FY26 · High confidence 70 to 80 days
    So it should be somewhere between 70 to 80 days on a gross basis.

    — Chetan Gandhi

Debt

  • Net Debt Reduction Debt · FY26 · Medium confidence lower by maybe Rs. 200-300 crore kind of range
    So directionally, I expect the number to be lower by maybe Rs. 200-300 crore kind of range.

    — Chetan Gandhi

Tax Rate

  • Effective Tax Rate Tax Rate · FY26 · High confidence mid-single digit
    I expect it to be somewhere close to mid-single digit next year.

    — Chetan Gandhi

Trade Payables

  • Increase in Trade Payables Trade Payables · FY26 · High confidence around Rs. 100 crore to Rs.200 crore
    I believe there will be a potential uptake of maybe around Rs. 100 crore to Rs.200 crore in next year, assuming the volumes continue to grow in the trajectory they are.

    — Chetan Gandhi

Depreciation

  • Depreciation Depreciation · FY28 · High confidence between Rs. 580 crore to Rs. 620 kind of crore
    If I look at FY '28, my depreciation, which is currently at around Rs. 430-odd crore, should be somewhere between Rs. 580 crore to Rs. 620 kind of crore.

    — Chetan Gandhi

PBT

  • PBT (EBITDA Rs 1800cr scenario) PBT · FY28 · High confidence between Rs. 900 crore to Rs. 1,000 crore
    So, I would assume at Rs. 1,800 crore we would be somewhere between Rs. 900 crore to Rs. 1,000 crore at the PBT level

    — Chetan Gandhi

  • PBT (EBITDA Rs 2200cr scenario) PBT · FY28 · High confidence between close to Rs. 1,200 crore, Rs. 1,300 crore
    and at Rs. 2,200 crore we will be somewhere between close to Rs. 1,200 crore, Rs. 1,300 crore.

    — Chetan Gandhi

What to watch in Q1 FY26

Volume Growth Trajectory

Next quarter (Q1 FY26)
Current Q4 FY25 non-energy 14% QoQ, energy 21% QoQ. FY25 overall ~17% YoY.
Target Continued volume-led growth as per management's optimism.

Why it matters

Volume growth is a key driver for revenue and capacity utilization, especially given current pricing pressures.

we continue to remain optimistic about volume-led growth for the coming financial year.

Risks & concerns

  • Volatile external environment & geopolitical events

    high

    Operating in a volatile external environment marked by increased global uncertainty stemming from geopolitical events and evolving trade dynamics.

    Management acknowledged

  • US Tariff Actions

    high

    New uncertainties such as US tariff actions, with a mixed impact on AIL's product portfolio, expected to settle in 2-4 months.

    Management acknowledged

  • Agrochemical demand-supply imbalance & China overcapacity

    medium

    Genuine demand-supply imbalance and overcapacity in China for agrochemical intermediates, leading to marginal pricing despite volume recovery.

    Management acknowledged

  • Raw material (crude-linked) price volatility

    medium

    Difficulty in forecasting gasoline-naphtha spreads in different crude price environments.

    Management acknowledged

  • Competition in MMA

    low

    Potential competition from new capacities, including from China, but management is confident in market development and competitive advantages.

    Analyst acknowledged

Q&A highlights

6 direct, 1 evasive
Agrochemical business pricing weakness despite destocking Direct
I think there's a genuine demand supply imbalance issue for the agrochemical intermediates and downstream technicals. We are seeing volume recovery for sure, but given the amount of over capacity that exists in China, that incremental volume growth is also served by marginal pricing, and that's where we are not seeing uptick on pricing/margins at this stage.

Explains the persistent pricing pressure in agrochemicals despite destocking, attributing it to demand-supply imbalance and Chinese overcapacity.

Asked by Aditya Khetan

Impact of US tariffs on Aarti Industries' products Partial
So I think if you want one line summary, then I can say that the overall US tariff impact in terms of AIL is a bit mixed, right. Because it is complex, we have a wide variety of product portfolio, and different products have different implications because some products are part of Annexure-2, and some products are not part of Annexure 2.

Management acknowledges a mixed impact, with some products benefiting (e.g., MPD) and others facing challenges (e.g., MMA due to added cost), highlighting the complexity and evolving nature of the situation.

Asked by Aditya Khetan, Abhijit Akella

Weakness in Dichlorobenzene (DCB) volumes in H2 FY25 Direct
So dichlorobenzene, the end application is actually polymer, right? PDCB specifically goes into the polymer segment mostly into PPS which is used into automotive kind of applications and that segment has been under pressure from a demand point of view.

Clarifies that the weakness in DCB volumes is linked to the polymer end application (PPS for automotive), which faced demand pressure.

Asked by Aditya Khetan

FY26 revenue/EBITDA targets and three-year guidance Evasive
No, Abhijit, we are not talking about specific yearly guidance, we mentioned that last time, right. We have set out a strategy for the three years and I think the only thing I can confirm is we remain on track to deliver that three-year numbers.

Management reiterates commitment to the three-year targets but declines to provide specific FY26 revenue or EBITDA guidance, indicating continued caution.

Asked by Abhijit Akella

CAPEX outlook for FY26 and growth drivers Direct
So I think the bulk of the CAPEX spend that we have committed right now is going to Zone-4. I think we will complete the Zone-4 CAPEX by and large within this financial year... And the volume growth from all of these assets will actually start to get reflected from the next financial year. So yes, this year we are pushing for volume growth from the existing assets which are already stabilized and ramped up.

Confirms that the bulk of FY26 CAPEX is for Zone IV, with significant volume growth expected from existing assets this year, and new assets contributing from FY27.

Asked by Abhijit Akella

Higher expense growth than sales growth in Q4 Direct
So there's this increase in the global transaction or shipment, so the export numbers have been significantly higher. If I have to put the number out, 55% of revenue for the quarter is from exports as compared to the previous period where it was close to 48%, 50%. So that has resulted in an increase in the freight cost.

Explains that higher export volumes (55% of Q4 revenue) led to increased freight costs, impacting expense growth.

Asked by Deekshant Gupta

Net debt outlook for FY26 Direct
So directionally, I guess, we would have peaked out. We expect the number to be lower. We are expecting some unlocking of cash flow from working capital as well. So, plus the CAPEX intensity is also going down. So directionally, I expect the number to be lower by maybe Rs. 200-300 crore kind of range.

Management expects net debt to decrease in FY26 due to lower CAPEX intensity and working capital unlocking.

Asked by Harsh Shah

Competition in MMA business from China Direct
No, I think competition will come, right. I think people do track us closely, and in that context it is expected that competition will come up as and when we scale up certain products. But that's perfectly fine, if more people are trying to develop the market, it also works in the industry's favor.

Management acknowledges potential competition in MMA, including from new Chinese capacities, but expresses confidence in Aarti's market development and competitive advantages.

Asked by Archit Joshi

3 min read 7 chapters

Detailed narrative

Q4 & FY25 Performance Overview

Aarti Industries concluded FY25 with a total revenue of Rs 8,046 crores, marking a 15% YoY growth, while EBITDA grew by 3% to Rs 1,016 crores. PAT for the year stood at Rs 331 crores. Q4 FY25 demonstrated sequential improvement, with revenues reaching Rs 2,214 crores (9% QoQ growth) and EBITDA at Rs 266 crores (13% sequential improvement), leading to a PAT of Rs 96 crores. The Board recommended a final dividend of Rs 1 per share for FY25.

Volume Growth and End-Use Applications

Volume recovery was a key driver for Q4 performance. Energy application volumes grew 21% QoQ, supported by diversification of customer base and geographical spread. The base business, including Nitro Toluene, NCB, and Ethylation-based products, saw a 14% QoQ volume growth due to new capacity additions and improving demand. Overall, the company's portfolio achieved approximately 17% YoY volume growth in FY25. Demand for dyes, pigments, and polymer additives remains positive, while agrochemical inventory levels appear to have stabilized.

Sustainability and ESG Initiatives

Sustainability remains a core focus, with Aarti Industries achieving CDP Leadership Band status and an improved S&P Global DJSI score of 62, placing it in the top decile of global chemical companies. The company maintained its Gold Medal in the EcoVadis CSR Assessment for the fourth consecutive year. Two renewable energy power purchase agreements for solar and hybrid power were signed, with one expected to deliver within the current calendar year, aiming to lower operational costs and enhance sustainability.

Cost Optimization and CAPEX Plans

Several cost optimization initiatives were completed in FY25, including the Back-Pressure Turbine Project and Hybrid Power Phase-1, contributing to steam efficiency and cost savings. FY25 CAPEX stood at Rs 1,372 crores, primarily for Zone IV projects. For FY26, CAPEX is projected to be Rs 950-1,000 crores, with the bulk allocated to Zone IV for phased commissioning. Maintenance CAPEX is estimated at Rs 150-200 crores.

Impact of US Tariffs and Trade Dynamics

The company acknowledges a mixed impact from recent US tariff actions, noting that some products (e.g., MPD) may benefit due to competition from China, while others like MMA could face negative impacts from added costs. Management expects the tariff issues to settle within the next two to four months, bringing more clarity. The agrochemical sector continues to face demand-supply imbalances and overcapacity from China, leading to marginal pricing despite volume recovery.

Working Capital and Debt Outlook

The company's net debt at the end of FY25 was around Rs 3,500 crores. Management anticipates a reduction in net debt by Rs 200-300 crores in FY26, driven by lower CAPEX intensity and unlocking of cash flow from working capital. Gross working capital days are expected to be maintained between 70-80 days. Trade payables are projected to increase by Rs 100-200 crores in FY26, linked to higher imports of raw materials like aniline.

MMA Business and Competition

Aarti Industries is actively diversifying its MMA customer base and geographical spread, with increasing supplies to the US, Europe, and India. While acknowledging potential competition, including new Chinese capacities, management expressed confidence in its market development efforts and competitive advantages, focusing on developing the market for higher volumes and optimizing costs to offer better value propositions.

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