Aether Industries Q1 FY27 earnings call

Aether Industries reported robust financial performance for Q1 FY27, with consolidated revenue growing 27.2% year-over-year to INR 326.6 crores. EBITDA increased by 31% year-over-year to INR 102.8 crores, resulting in an EBITDA margin of 31%, up from 30% in Q1 FY26. Net Profit After Tax (PAT) also saw a significant rise of 33.4% year-over-year to INR 62.7 crores, with the PAT margin improving to 19%. The company successfully received the full insurance claim for the November 2023 fire accident during the quarter.

Aether announced a landmark exclusive research partnership with Dow Chemical to develop new manufacturing technologies for silicones in India. This multi-year program, with all R&D and pilot plant scale-up activities at Aether's Surat facilities, aims to address India's multi-billion dollar silicones market, which currently relies heavily on imports. Management highlighted this as a platform technology development, aligning with Aether's core competencies in complex chemistries and validating its scale-up capabilities. This initiative is expected to enhance Aether's process know-how in silicone chemistry, a new material class for the company.

The company is strategically entering the advanced electronic materials segment, specifically low dielectric materials for 5G and AI hardware applications, which are critical for high-speed circuit boards. This niche involves complex, low-volume, high-value specialty monomers that Aether is actively developing. Initial manufacturing of a pharmaceutical intermediate (related to LSM products) has begun in Site 3, with qualifications completed. For semiconductor materials, Site 5 (Magnum) is planned to have 45 tons/month capacity online by the end of September, with a target to grow this 400-ton capacity three-fold by 2030.

Aether's capacity expansion plans are progressing as per schedule, with Site 3++ (commissioned in February 2026) ramping up well and contributing at healthy utilization, supported by the Milliken supply agreement. Site 5, dedicated to Baker Hughes and other contract-led manufacturing, continues to scale. The total investment for Magnum (Site 5) is projected to be INR 2,200-2,300 crores, with Phase 1 becoming online and targeting an asset turn of 1.5 to 1.75. The new R&D facility, featuring 15 new labs and 160 fume hoods, is on track for commissioning in FY 2028.

The company is increasingly focusing on its Contract Exclusive Manufacturing (CEM) and Contract Research and Manufacturing Services (CRAMS) models, which currently contribute approximately 50% of revenue and are targeted to reach over 70% in the next couple of years. CEM operations yield higher EBITDA margins (28-30%) compared to large-scale manufacturing. A 22.5% decline in LSM (Large Scale Manufacturing) volumes was a deliberate reallocation of production lines to higher-margin CEM contracts, demonstrating a strategic shift towards profitability. The Oil & Gas segment currently accounts for about 20% of the business, largely driven by the Baker Hughes partnership, with Site 4 producing approximately INR 70 crores and clear demand visibility.

While overall working capital intensity has improved, inventory levels remain elevated due to strategic raw material positioning and semi-finished materials for the new Site 3++ and Site 5. Management expects a progressive decline in working capital days as revenues from these new sites materialize. The expansion of CRAMS capabilities is also anticipated to further ease working capital intensity and strengthen overall capital efficiency. The company spent INR 94.3 crores on capex in Q1 FY27, with a full-year FY27 capex plan of INR 300-350 crores, primarily for Site 5 and the new R&D site.