Aarti Industries

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 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 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.

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.

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.

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.

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.