Aarti Industries

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.

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.

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.

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 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.

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.

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.