Aether Industries Limited — Q1 FY26 earnings call

Call held 24 Jul 2025

Management summary

Aether Industries reported a strong Q1 FY26 with significant revenue and profit growth, driven by robust demand in large-scale manufacturing and new contract wins, notably a 10-year agreement with Milliken. Margins expanded considerably, and the company made progress in reducing its working capital cycle. Strategic capex plans for R&D and new sites are on track, positioning for future growth, despite some headwinds in the electrolyte additives segment.

Highlights

  • Total consolidated revenue grew 35% YoY to ₹2,587 million in Q1 FY26 from ₹1,920 million in Q1 FY25.

  • EBITDA increased 94% YoY to ₹781 million in Q1 FY26 from ₹402 million in Q1 FY25, with EBITDA margin expanding to 30% from 22%.

  • PAT grew 57% YoY to ₹470 million in Q1 FY26 from ₹299 million in Q1 FY25, with PAT margin at 18% (vs 16% in Q1 FY25).

  • Demand for large-scale manufacturing (LSM) products grew 9% YoY and 8% QoQ, with 6 new clients added.

  • Executed a 10-year contract manufacturing agreement with Milliken Chemical & Textile India, dedicating new Site 3+ for this strategic product.

  • Working capital cycle reduced to 190 days (from 195 days) and inventory days to 165 (from 175 days).

  • R&D facilities expansion planned with ₹30-40 crores capex, increasing labs from 15 to 18 and fume hoods from 65 to 130.

Concerns

  • Electrolyte additives segment is not expected to generate major revenues this year, with a maximum of ₹10-15 crores, due to current market conditions making commercial production uneconomical.

  • Pharma and agro combined contribution decreased to 46% (from previous higher levels), though management attributes this to timing shifts rather than degrowth.

Key financials

  1. Revenue 2,587 Mn +35%YoY
  2. EBITDA 781 Mn +94%YoY
  3. EBITDA Margin 30%
  4. PAT 470 Mn +57%YoY
  5. PAT Margin 18%

What they filed

Q1 FY27: revenue up 27.2%, net profit up 34.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue199 220 240 257 280 +41%319 +45%305 +27%327 +27%
EBITDA54 65 80 81 88 +63%112 +72%83 +4%103 +27%
Net profit35 43 50 47 54 +54%64 +49%54 +8%63 +34%
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

  • Business Model Contribution
    0.51 % of sales Large-Scale Manufacturing (LSM)0.37 % of sales Contract/Exclusive Manufacturing (CEM)0.1 % of sales Contract Research & Manufacturing Services (CRAMS)
  • Sectoral Split
    0.46 % combined Pharma & Agro19% Oil & Gas17% Material Science
  • Geographical Split
    0.66 % of total revenue Domestic Sales0.33 % of total revenue Export Sales0.10-0.11 % of exports Europe0.04-0.05 % of exports China0.03-0.04 % of exports Japan0.05-0.06 % of exports US

Capital allocation

high confidence
  • Capex ₹350 Cr
    • R&D facilities expansion ₹30 Cr
    • Site 3++ (Milliken contract) ₹200 Cr
    • Site 5 (Panoli) ₹100 Cr
    We are planning to do capex of INR350 crores in financial year '26, which will be broken down into R&D, Site 3++ and Panoli, that is the Site 5. The remaining claim for the fixed assets for the loss has been put up to the insurance surveyor along with the loss of profit claim, and we are confident to get the same settled by the insurance company by or before Q2 of financial '26. In fact, the FLOP claim is submitted by the surveyor to the insurance company, and we are hoping to get the same within July '25 or August '25. (Faiz Nagariya) Around the INR350 crores, we will be approximately putting up approximately INR100 crores – INR150 crores in Site 5. The asset turn on maturity will be approximately 1.5x to 1.75x. (Faiz Nagariya)
  • Debt Debt disclosed
    Krishan, all this is working capital and working capital debt will continue because we do not have any long-term debt. These are all short-term debt. For the working which we are using. We would continue this. I think so it will continue for the next couple of years unless we have good internal accruals to pay this off because we are not doing any kind of other fundraise going forward currently. (Faiz Nagariya)

Guidance & targets

Capacity

  • Site 3+ (Milliken) Production Commencement Capacity · Q4 FY26 · High confidence Q4 FY26
    Site 3+, which we have dedicated to Milliken is expected to commence production by quarter 4 of financial year 2026.

    — Rohan Desai

  • Site 5 (Panoli) Production Blocks Commissioning Capacity · Q3 FY26 · High confidence End of Q3 FY26
    Site 5, which is based out of Panoli continues to progress smoothly and the target to commission the first two production blocks in Phase 1 continues to be -- by the end of quarter 3 of financial year 2026.

    — Rohan Desai

Asset Turn

  • Site 5 Asset Turn at Maturity Asset Turn · at maturity · High confidence 1.75x
    The capex cost per plant at Site 5 is approximately INR160 crores to INR180 crores, and we plan to achieve an asset turn of 1.75x at maturity.

    — Rohan Desai

R&D Capacity

  • Number of R&D Labs R&D Capacity · this year · High confidence 18

    Previously 15 → 18

    The plan is to incur a capex of INR30 crores to INR40 crores to increase the number of labs from the current 15 to current 18 labs

    — Aman Desai

  • Number of Fume Hoods R&D Capacity · this year · High confidence 130

    Previously 65 → 130

    and the current 65 fume hoods to an additional 130 fume hoods, including 4 engineering labs.

    — Aman Desai

Working Capital

  • Working Capital Cycle Working Capital · end of FY26 · High confidence 165-170 days

    From 190 days today

    Our target is to reach around 165 to 165 days or 170 days by end of this financial year.

    — Faiz Nagariya

  • Working Capital Cycle Working Capital · next 2-3 years · Medium confidence 150 days

    From 165-170 days today

    The target in next 2 to 3 years is around 150 days of working capital.

    — Faiz Nagariya

Revenue

  • Otsuka Chemicals Contract Revenue Revenue · FY26 · Medium confidence ₹35-40 crores
    26, no, 27. 26 would be approximately INR35 crores to INR40 crores.

    — Rohan Desai

  • Electrolyte Additives Revenue Revenue · current year · High confidence ₹10-15 crores max
    On the revenue-wise, we are not seeing any major revenues coming out of electrolyte additives for this current year. We would be seeing close to INR10 crores to INR15 crores of revenues at max coming out from electronic additives

    — Rohan Desai

Contract Duration

  • Milliken Contract Duration Contract Duration · High confidence 10 years
    The initial duration of this contract is 10 years, for which we will be fully dedicating our new Site 3+.

    — Aman Desai

Commercialization Timeline

  • CRAMS to CEM Conversion Commercialization Timeline · High confidence within 1 year

    Previously 1-1.5 years → within 1 year

    I think the timelines now is less than 4 to 6 months for finalization of the contracts, which was earlier 1, 1.5 years, which you usually take from the completion of the CRAMS activities and moving it into CEM business model. It has been shortened, and it is very fast now. It's moving in a very, very rapid pace.

    — Rohan Desai

Site 5 Revenue

  • LSM/CEM Revenue from Site 5 Site 5 Revenue · Q1 FY27 · Medium confidence good inflow
    but from quarter 1 of the next financial year, I think we will be seeing a good inflow of revenues coming out of this LSM model and the CEM model also.

    — Rohan Desai

Market Size

  • Addressable Market for Site 5 LSM Products Market Size · High confidence ₹1,500 crores
    In terms of the value, I think we are looking at INR1,500 crores of market size of the -- all 3 products combined in LSM model.

    — Rohan Desai

Margin

  • Milliken Contract Margin Profile Margin · High confidence similar or better than company average
    The margins will be similar or better than what we have at the company side.

    — Faiz Nagariya

What to watch in Q2 FY26

Site 3+ (Milliken) Production Commencement

next quarter
Current Under construction, expected Q4 FY26
Target Progress towards Q4 FY26 commencement

Why it matters

Crucial for realizing revenue from the new 10-year Milliken contract and validating capex execution.

Site 3+, which we have dedicated to Milliken is expected to commence production by quarter 4 of financial year 2026.

Risks & concerns

  • Geopolitical tensions and tariff uncertainties

    medium

    Last quarter was marked by heightened geopolitical tensions and tariff uncertainties, impacting the macro environment.

    Management acknowledged

  • Soft economic environment

    medium

    Despite macro volatility or soft economic environment in recent months, client visits and project discussions have increased.

    Management acknowledged

  • China dumping impacting LSM prices

    medium

    Prices in the LSM segment are still subdued because of Chinese dumping, though volume growth is observed.

    Management acknowledged

  • Uneconomical commercial production of electrolyte additives

    medium

    Current electrolyte prices make commercial production uneconomical, leading to low revenue expectations (₹10-15 crores max) for the current year.

    Management acknowledged

Q&A highlights

4 direct, 2 evasive
CEM revenue growth and Baker Hughes contribution Direct
Actually, the growth factor for contract manufacturing is the Baker, which has kicked in, which started from the last quarter slowly and then we have capitalized in that, and we have taken we have got a revenue of around INR410 million from them, and that is the driving force.

Clarifies the significant contribution of a key client (Baker Hughes) to CEM revenue growth this quarter.

Asked by Abhijit Akella

Outlook for major growth projects (Baker Hughes, Milliken, Site 5) Evasive
Yes, Abhijit, we would not like to give a forward-looking statement for the revenue potential, but of course, with the names which you have spoken will all be the driving forces for us, and we look forward to a good growth trajectory. I'm sorry for the same.

Management declined to provide specific revenue guidance for key projects, indicating a cautious stance on forward-looking numbers despite positive commentary.

Asked by Abhijit Akella

Insurance claim amount for fixed assets loss Direct
Approximately, we expect that we will still receive approximately INR50 crores to INR60 crores more.

Provides a specific financial figure for an upcoming inflow, which impacts liquidity and P&L.

Asked by Abhijit Akella

Minimum utilization level for plant profitability Partial
When we select the products, we initially select the products which are giving us an EBITDA margin of at least 25%-plus. Then only we take up and it's not that the margins start coming after the capacity or the capacity reached to some extent. We start getting the profits from the day we start the sales.

Explains the company's product selection strategy based on inherent profitability, rather than a fixed utilization threshold, which is crucial for new plant economics.

Asked by Amay Sharda

Electrolyte additives segment ramp-up and FY25 revenues Direct
On the revenue-wise, we are not seeing any major revenues coming out of electrolyte additives for this current year. We would be seeing close to INR10 crores to INR15 crores of revenues at max coming out from electronic additives, but we are currently involved in a few CRAMS, Contract Research and Manufacturing Services activities with regards to additives, which will announce at the proper part of time.

Highlights a segment facing challenges due to market conditions, with low revenue expectations for the current year, shifting focus to CRAMS activities for future growth.

Asked by Amay Sharda

Degrowth in agro and pharma business Partial
Yes. Quarter 1, we renewed the contract basically. It has been deferred by 2 months, but it's well in control. I think it's just phasing from one quarter to another. We do not see any pricing pressure on pharma and agro as of today. All the prices are stable, bottomed out and the demand is there. On the volume side, we are seeing increase in the demand, in fact.

Addresses analyst concern about sequential decline in pharma/agro, attributing it to contract timing and phasing, while asserting stable pricing and increasing demand.

Asked by Krishan Parwani

CEM plant design and flexibility for product changes Direct
The plants are designed in a multipurpose manner, and they are fitted with the specific requirements of the particular products, but what we usually say is that our plants are true multipurpose plants, which can be shifted from one chemistry to another if required with some rechecks in the equipment and the pipings.

Emphasizes the flexibility and multipurpose nature of their plants, allowing for product diversification with minimal capex (less than ₹50 lakh for chemistry change), which is a key competitive advantage.

Asked by Uttam Purohit

Milliken product application, newness, and geographies Evasive
This is used in material science polymer industry specifically. That's the best I can tell you about this product. We are we cannot tell you more than this at this moment. In the due time, we'll let you know the applications and the product name if the client gives us permission. (Rohan Desai) This is a new product for Milliken. We will be the only manufacturer and the first manufacturer of this product and to commercialize this product in the world. (Rohan Desai)

Management confirmed the Milliken product is new and Aether is the sole global manufacturer, but declined to provide further details on application or geography due to confidentiality, indicating a high-value, proprietary product.

Asked by Atishray Malhan

2 min read 6 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Aether Industries delivered a robust Q1 FY26, with total consolidated revenue growing 35% year-on-year to ₹2,587 million. EBITDA saw a significant increase of 94% YoY, reaching ₹781 million, leading to an expanded EBITDA margin of 30% compared to 22% in Q1 FY25. Profit After Tax (PAT) also surged by 57% YoY to ₹470 million, with the PAT margin improving to 18% from 16% in the prior year.

Large-Scale Manufacturing (LSM) and Contract Manufacturing (CEM) Growth

The large-scale manufacturing (LSM) vertical demonstrated strong demand, growing 9% YoY and 8% QoQ, with the addition of six new clients. The company's business model mix saw 51% contribution from LSM, 37% from Contract/Exclusive Manufacturing (CEM), and 10% from Contract Research and Manufacturing Services (CRAMS). A significant portion of CEM growth was driven by Baker Hughes, contributing approximately ₹410 million in revenue this quarter, with supplies made to their Indian entity.

Strategic Expansions and Capacity Building

Aether is on track with its capex plans, targeting ₹350 crores for FY26, allocated across R&D, Site 3++, and Site 5. The new Site 3+, dedicated to the Milliken contract, is expected to commence production by Q4 FY26. Site 5 in Panoli is progressing smoothly, with the first two production blocks targeted for commissioning by the end of Q3 FY26. The company also plans to expand its R&D facilities with a ₹30-40 crore investment, increasing labs from 15 to 18 and fume hoods from 65 to 130.

New Client Engagements and Contract Wins

A significant milestone was the execution of a 10-year contract manufacturing agreement with Milliken Chemical & Textile India Company Private Limited, a wholly-owned subsidiary of USA-headquartered Milliken & Company. Aether will be the sole contract manufacturing partner for a key strategic product, dedicating its new Site 3+ for this purpose. Management noted that this new product for Milliken will be manufactured for the first time globally by Aether.

Sectoral Mix Evolution and Export Strategy

The sectoral split for Q1 FY26 showed pharma and agro combined contributing 46%, while oil and gas contributed 19% and material science 17%. This shift aligns with the company's expectation for increased contributions from oil & gas and material science. Exports accounted for 33% of total revenues, with domestic sales at 66%, largely influenced by supplies to Baker Hughes' Indian entity. Key export geographies include Europe (10-11%), China (4-5%), Japan (3-4%), and the US (5-6%).

Working Capital Management and Debt Profile

Aether successfully reduced its working capital cycle to 190 days from 195 days as of March 31, 2025, with inventory days decreasing to 165 from 175. The company aims to further reduce the working capital cycle to 165-170 days by the end of FY26 and to 150 days in the next 2-3 years. Management clarified that the company primarily utilizes short-term working capital debt and has no long-term debt, with internal accruals expected to fund future needs.

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