Aarti Industries Limited — Q4 FY26 earnings call

Call held 5 May 2026

Management summary

Aarti Industries delivered strong Q4 FY26 results with significant YoY growth in revenue, EBITDA, and PAT, supported by new long-term contracts. However, the company navigated complex geopolitical tensions in the Middle East, leading to raw material price volatility, elevated freight costs, and delays in capex projects. Despite these headwinds, management is focused on operational efficiency, product diversification, and strategic growth initiatives, aiming for net debt reduction in the coming year.

Highlights

  • Q4 FY26 Revenue of ₹2,422 crore, up 9% YoY.

  • Q4 FY26 EBITDA of ₹342 crore, up 29% YoY.

  • Q4 FY26 PAT of ₹137 crore, up 43% YoY.

  • Secured a 15-year backward integration contract with ₹200-250 crore capex and a $150 million multiyear supply agreement.

  • Honored with the 2026 Gallup Exceptional Workplace Award.

Concerns

  • Geopolitical tensions in the Middle East led to disruptions, impacting 9-10% of revenue from the region.

  • Raw material prices (benzene, sulfur, aniline, toluene, methanol) increased by over 60%.

  • Elevated freight rates significantly increased other expenses.

  • Zone IV projects delayed by 3-4 months due to labor constraints and elections.

  • Net debt increased to ₹4,300 crore (net) due to expanded working capital requirements and a ₹39 crore forex revaluation loss.

Key financials

2 periods

Q4 FY26

  • Revenue
    ₹2,422 Cr
    YoY +9%
  • EBITDA
    ₹342 Cr
    YoY +29%
  • PAT
    ₹137 Cr
    YoY +43%
  • Forex Revaluation Loss
    ₹39 Cr

FY26

  • Revenue
    ₹9,018 Cr
    YoY +12%
  • EBITDA
    ₹1,172 Cr
    YoY +15%
  • PAT
    ₹419 Cr
    YoY +27%
  • Capex
    ₹1,125 Cr

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 Application
    40% Revenue Share-4% QoQ Volume Growth
  • Agrochemicals
    — Volume Growth— Margin Pressure
  • Dyes, Pigments, Paints
    — Stability
  • Polymers
    — Performance
  • Pharma
    — Stability

Capital allocation

high confidence
  • Capex ₹700 Cr New plan — Optimization of capital allocation
    • Completion of Zone IV projects
    • New long-term contract (backward integration) ₹200 Cr
    • Asset maintenance (yearly run rate) ₹150 Cr

    Previously planned ₹1,125 Cr

    For the full year FY26, revenue stood at INR9,018 crore, up 12% on a Y-o-Y basis. EBITDA grew by over 15% to close at INR1,172 crore, while PAT recorded a growth of about 27% to close the year at INR419 crore. In line with the guidance given, the capex for the year was at about INR1,125 crore. ... Our capex for FY27 is expected to be in the range of INR700 crore to INR800 crore as we continue our journey to optimize capex and maximize the returns. ... INR750 crore to INR800 crore, a significant part of it will still go in completion of Zone IV and part of it will also go to the new long-term contract, which we signed, right, where we announced total capex of INR200 crore to INR250 crore. I think part of that will be spent in the current year. So these 2 will kind of broadly account for a significant amount of capex. And then we have a sort of yearly run rate of INR150-odd crore that goes into asset maintenance.
  • Debt Gross ₹4,900 Cr · Net ₹4,300 Cr · 3.6× EBITDA
    Working capital requirements expanded during the quarter, driven primarily by significant elevation in raw material prices, causing an uptick in net debt as well as interest expenses. ... So, on a net debt basis, we are still at around INR4,300 crore. ... So, we have roughly around $87 million of an FX loan, which is unhedged and is open. Rupee depreciated by close to INR5 from a level, I guess 31st December was at INR89.8 or something and 31st March was at INR94.8. So, there was a INR5 depreciation on Indian rupee on $87 million of exposure.
  • Liquidity Liquidity disclosed Working capital requirements expanded due to significant elevation in raw material prices, leading to an uptick in net debt. Management anticipates net debt to decline in the current year due to lower capex intensity.
    Working capital requirements expanded during the quarter, driven primarily by significant elevation in raw material prices, causing an uptick in net debt as well as interest expenses. ... However, given the capex intensity is lower, we still anticipate the net debt to decline in the current year.

Guidance & targets

Capex

  • FY27 Capex Capex · FY27 · High confidence ₹700-800 crore
    Our capex for FY27 is expected to be in the range of INR700 crore to INR800 crore as we continue our journey to optimize capex and maximize the returns.

    — Suyog Kotecha

Capacity

  • Zone IV Commissioning Capacity · FY27 · High confidence Phased commissioning
    On Zone IV projects, they are expected to be commissioned in a phased manner during the current financial year. Multipurpose plant and PEDA plants are actually under commissioning trials and should come on stream soon, while others will commission gradually in the next couple of quarters.

    — Suyog Kotecha

Revenue

  • Zone IV Initial Revenue Accruals Revenue · Q2 FY27 · High confidence Start from Q2 FY27
    But the initial revenue from these assets should start as early as from Q2 of this financial year.

    — Suyog Kotecha

Joint Venture

  • Augene JV Commissioning Joint Venture · H1 FY27 · High confidence H1 FY27
    Augene, the Superform joint venture is on track for commissioning in H1FY27 with an initial focus on agrochemicals and coating end markets.

    — Suyog Kotecha

Initiatives

  • Circularity Initiatives Commissioning Initiatives · CY26 · High confidence CY26
    Our circularity initiatives also continue to gain momentum with commissioning on track for the CY26.

    — Suyog Kotecha

Debt

  • Net Debt to EBITDA Debt · Next 2 years · Medium confidence 2.5x

    From 3.6x today

    Sanjesh Jain: And next year, there is a headwind of higher raw material translating into higher working capital requirement, and we have a target of reaching the 2.5x net debt to EBITDA. Can you help us the path to the net debt to EBITDA of 2.5x in next 2 years? Suyog Kotecha: I think we, Chetan can add, but I think we closed the year at roughly INR 1,172 and our net debt was around INR4,300 crore. Roughly 3.6x. We are roughly at a 3.6x level, just to get that perspective right. Going forward, of course, the anticipation is that the EBITDA will increase and the net debt will go down.

    — Sanjesh Jain (analyst) / Suyog Kotecha (management)

Tax Rate

  • Effective Tax Rate Tax Rate · Later on · Medium confidence 9-14%
    But given the fact that we have Zone IV, which is getting commercialized and there is an IT depreciation, which is a significant part of deduction available, the tax rate will be in the range of around maybe 9% to 14%, 15% kind of stuff lateron.

    — Chetan Gandhi

Gross Block

  • Gross Block Value Gross Block · End of FY27 · High confidence ₹9,500-10,000 crore
    End of FY27, we should be in the range of around INR9,500 crore to INR10,000 crore. We do not have the exact number, but around that range.

    — Chetan Gandhi

What to watch in Q1 FY27

Zone IV Project Commissioning & Revenue

Next quarter (Q2 FY27)
Current First two blocks (calcium chloride, multipurpose plant) under commissioning trials, remaining 5 blocks throughout FY27.
Target Commercialization of first two blocks, initial revenue accruals from Q2 FY27.

Why it matters

Crucial for realizing returns on significant capex and driving future revenue growth.

So within this quarter, we should be able to declare it sort of commissioned and commercialized. I think the remaining 5 different blocks will get commissioned throughout the current financial year. ... But the initial revenue from these assets should start as early as from Q2 of this financial year.

Risks & concerns

  • Geopolitical Tensions in Middle East

    high

    Escalation of geopolitical tensions led to disruptions across global supply chains, impacting trade flows, logistics, and export volumes from the Middle East (9-10% of revenue).

    The escalation of geopolitical tensions in the Middle East has led to disruptions across global supply chains, impacting trade flows, logistics timelines and input cost structures. ... The volumes for the quarter were down 4% quarter-on-quarter, primarily driven by lower exports to the Middle East, which were impacted due to geopolitical disruptions.

    Management acknowledged

  • Raw Material Price Volatility

    high

    Prices of key raw materials such as benzene, sulfur, aniline, toluene, methanol went up by over 60%.

    In particular, the prices of key raw materials such as benzene, sulfur, aniline, toluene, methanol went up by over 60%.

    Management acknowledged

  • Elevated Freight Rates

    high

    Elevated freight rates are resulting in an increase in cost of global trade and significantly increased other expenses.

    Elevated freight rates are also resulting in an increase in cost of global trade. ... The freight cost has significantly increased in the current quarter, driven by increase in export shipments and also due to increase in the fuel rates accounting for the bulk of the increase in the other expenses.

    Management acknowledged

  • Capex Delays for Zone IV Projects

    medium

    Zone IV projects delayed by 3-4 months due to labor constraints, LPG issues, and election-related migration.

    These projects were delayed by 3 to 4 months on account of labour constraints, primarily driven by LPG, commercial LPG-related issues and migration of labour due to election as well.

    Management acknowledged

  • Expanded Working Capital Requirements

    medium

    Working capital requirements expanded due to significant elevation in raw material prices, leading to an uptick in net debt.

    Working capital requirements expanded during the quarter, driven primarily by significant elevation in raw material prices, causing an uptick in net debt as well as interest expenses.

    Management acknowledged

  • Volatility in Refining Product Margin

    medium

    Ongoing volatility in refining product margin creates uncertainty in terms of gasoline naphtha cracks and supply chain risk related to key RMs.

    Ongoing volatility in the refining product margin does create uncertainty in terms of gasoline naphtha cracks and the supply chain risk related to the key RMs is adding some near-term risk to this business.

    Management acknowledged

Q&A highlights

6 direct
Gross Margin Expansion and Inventory Gain Direct
So, on an overall quarter basis, there is an FX gain of roughly around INR10 crore. On inventory, I think it is a bit of a mixed bag because though the pricing went up in March, many of our raw material pricing also went up simultaneously. And we did have some amount of contracts concluded from a pricing point of view in Feb, which we continued to serve in March. So not a significant impact of inventory gain in the last quarter. But from an FX standpoint, there was a gain of roughly INR10 crore in the last quarter.

Clarifies the drivers of Q4 margin performance, attributing it partly to FX gain rather than significant inventory gains.

Asked by Archit Joshi

Middle East Exposure in Energy Portfolio Direct
So, on an yearly average basis, roughly 9% to 10% of our revenue came from Middle East, which is dominantly in energy application. So that is the extent of exposure that we have currently in the region. We are working actively to figure out a way to divert that product portfolio to the rest of the world.

Quantifies the direct revenue exposure to the Middle East and highlights the company's strategy to mitigate geopolitical risks by rerouting volumes.

Asked by Archit Joshi

Zone IV Capex Commissioning Timelines and Revenue Accruals Direct
So within this quarter, we should be able to declare it sort of commissioned and commercialized. I think a multipurpose plant and associated extension of PEDA is also under commissioning trials as we speak. ... But the initial revenue from these assets should start as early as from Q2 of this financial year.

Provides specific timelines for new capacity coming online and its expected revenue contribution, crucial for future growth projections.

Asked by Archit Joshi

Capacity Utilization and Pricing Recovery Partial
I think improving utilization levels of all of our existing assets has been a deliberate strategy. And I think we have pushed volumes sometimes even at the expense of a slight compromise on the margins. ... I think there are some value chains like PDA where we are structurally figuring out a long-term solution. But I think apart from that in rest of the value chain, we have been able to push up the utilization levels.

Explains the company's strategy of prioritizing volume and utilization, and indicates that margin recovery is selective rather than broad-based.

Asked by Arun Prasath

Net Debt and Cash Balance Direct
So, on a net debt basis, we are still at around INR4,300 crore. A good part of this, maybe around INR250 crore to INR300 crore is purely because of the working capital increase, which has happened in the last part of the Q4. ... But yes, going forward, as the capex intensity is going down, the capex is coming down, the EBITDA and cash flow is improving, the debt for this year will start tapering off.

Clarifies the actual net debt position and provides context for the temporary cash balance, reassuring investors about the capital structure.

Asked by Aditya Khetan

FX Revaluation Loss and Hedging Policy Direct
So, we have roughly around $87 million of an FX loan, which is unhedged and is open. Rupee depreciated by close to INR5 from a level, I guess 31st December was at INR89.8 or something and 31st March was at INR94.8. So, there was a INR5 depreciation on Indian rupee on $87 million of exposure. Unfortunately, the accounting treatment requires us to take the impact of this on the day of the balance sheet, whereas if you look at our overall dollar perspective, say, this is relatively an exposure, which will be repaid over a period of next 8 years. Whereas I have got a larger export portfolio, which will absorb this as a natural hedge.

Explains the reason for the significant one-time forex revaluation loss and the company's long-term strategy for managing currency exposure.

Asked by Nitesh Dhoot

Working Capital Days Partial
Ideally, we would like to remain within 55 to 60 days kind of average levels. But as I mentioned, it does vary depending on the market situation. ... So, your working capital requirements are much larger versus Middle East where voyage times are as low as 7 to 10 days, your working capital exposure is significantly lower. So frankly, difficult to comment at this stage.

Highlights the dynamic nature of working capital requirements, influenced by export destinations and voyage times, making it a key area to monitor.

Asked by Darshita

Momentum on Partnerships/JVs despite West Asia Conflict Direct
No, I think there is no loss on momentum. I think it does continue. Of course, from a bandwidth point of view, management bandwidth point of view, sometimes the crisis management takes decisions over some of these activities. But I think we have created good enough structures within the organizations to ensure that the momentum is not lost. So, I would say that on an overall level, we do not see momentum falling. In fact, we see momentum increasing because people are increasingly looking at more robust supply chains, more secure supply chain for their global requirements going forward.

Addresses a potential strategic risk, indicating that geopolitical tensions are not hindering strategic collaborations but rather accelerating the need for robust supply chains, benefiting Aarti Industries.

Asked by Nitin Agarwal

3 min read 7 chapters

Detailed narrative

Q4 FY26 Performance Overview

Aarti Industries reported a robust Q4 FY26 with revenue growing 9% YoY to ₹2,422 crore, driven by stable domestic demand and increased export volumes. EBITDA saw a significant 29% YoY increase to ₹342 crore, and PAT surged 43% YoY to ₹137 crore. For the full year FY26, revenue reached ₹9,018 crore (up 12% YoY), EBITDA ₹1,172 crore (up 15% YoY), and PAT ₹419 crore (up 27% YoY). This performance reflects steady execution and volume growth despite margin pressures.

Strategic Contracts & Recognition

The company secured two significant long-term contracts in Q4. One is a 15-year backward integration initiative with a global chemical company, requiring ₹200-250 crore capex. The second is a $150 million multiyear supply agreement for an agrochemical intermediate, extending through March 2030, with no incremental capex. These developments enhance earnings visibility and capital efficiency. Aarti Industries was also recognized with the 2026 Gallup Exceptional Workplace Award, reinforcing its position as a global manufacturing organization.

Geopolitical & Supply Chain Headwinds

The quarter was marked by complex global dynamics, including escalating geopolitical tensions in the Middle East. This led to disruptions in global supply chains, impacting trade flows and logistics. Raw material prices for key inputs like benzene, sulfur, aniline, toluene, and methanol increased by over 60%, and elevated freight rates contributed to higher operating costs. The company's Middle East exposure, primarily in the energy application, accounts for 9-10% of its yearly revenue, with efforts underway to reroute affected volumes.

Capital Expenditure & Project Delays

FY26 capex was ₹1,125 crore, in line with guidance. The planned capex for FY27 is ₹700-800 crore, primarily for completing Zone IV projects and the new long-term contract. Zone IV projects, including calcium chloride and a multipurpose plant, are under commissioning trials and expected to be commercialized within the current financial year, with initial revenues from Q2 FY27. However, these projects faced 3-4 month delays due to labor constraints, LPG-related issues, and election-related migration.

Working Capital & Debt Management

Working capital requirements expanded during the quarter due to the significant rise in raw material prices, contributing to an uptick in net debt. The net debt stood at ₹4,300 crore, resulting in a net debt to EBITDA ratio of approximately 3.6x for FY26. The company incurred a ₹39 crore revaluation loss in Q4 due to Rupee depreciation on an unhedged $87 million foreign currency loan. Management aims to reduce net debt in the current year, leveraging lower capex intensity and improved cash flow.

Business Segment Performance

The energy application segment, contributing 40% of revenue, saw a 4% QoQ volume decline due to Middle East disruptions, though rerouting mitigated the impact. Agrochem experienced continued margin pressure, largely influenced by Chinese industry dynamics. Polymers performed well, driven by EV market demand, while Pharma remained stable. The company is focusing on operational efficiency, product diversification, and deeper customer engagement to navigate volatility and optimize profitability.

Outlook & Growth Initiatives

Aarti Industries maintains cautious optimism for FY27, supported by improved capacity utilization, strong order visibility from long-term contracts, and ongoing growth initiatives. The company expects to invest in high-growth, niche, high-return projects. The Augene JV is on track for commissioning in H1 FY27, and circularity initiatives are expected to commission in CY26, underscoring R&D progress and first-mover advantage in sustainable chemistries. The company targets a net debt to EBITDA ratio of 2.5x in the next two years and an effective tax rate of 9-14% later on.

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