Aether Industries Limited — Q2 FY26 earnings call

Call held 13 Nov 2025

Management summary

Aether Industries delivered robust Q2 FY26 results with strong year-on-year growth in revenue, EBITDA, and PAT, supported by an expanding business mix towards higher-margin CEM and CRAMS. The company made significant progress on its aggressive CAPEX plans and improved working capital efficiency. While margins expanded this quarter, management anticipates PAT margins to stabilize around 19-20% due to the impact of ongoing investments and associated costs.

Highlights

  • Consolidated revenue from operations grew 38% YoY to ₹2,751 million in Q2 FY26, driven by strong performance across all business verticals.

  • EBITDA increased by 70% YoY to ₹853 million in Q2 FY26, with EBITDA margin expanding to 31% from 25% in Q2 FY25.

  • Profit after tax (PAT) rose 55% YoY to ₹540 million, and PAT margin improved to 19% from 17% in Q2 FY25.

  • Working capital cycle significantly reduced to 149 days as of September 30, 2025, from 194 days as of March 31, 2025, reflecting improved operational efficiency.

  • The combined contribution of Contract and Exclusive Manufacturing (CEM) and Contract Research and Manufacturing Services (CRAMS) exceeded 50% of sales, aligning with the company's strategic vision.

Concerns

  • PAT margins are expected to remain around 19-20% going forward due to ongoing CAPEX, increased depreciation, and finance costs from debt funding.

  • Pricing for Large-Scale Manufacturing (LSM) products is anticipated to remain stable, with no significant uptrend expected in the near future unless extraordinary global events occur.

Key financials

2 periods

Q2

  • Revenue from Operations
    2,751 Mn
    YoY +38%
  • EBITDA
    853 Mn
    YoY +70%
  • EBITDA Margin
    31%
  • PAT
    540 Mn
    YoY +55%
  • PAT Margin
    19%

H1

  • Revenue from Operations
    5,312 Mn
    YoY +40%
  • EBITDA
    1,634 Mn
    YoY +81%
  • PAT
    1,010 Mn
    YoY +56%

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

  • Contract and Exclusive Manufacturing (CEM)
    47% Sales Mix
  • Large-Scale Manufacturing (LSM)
    41% Sales Mix
  • Contract Research and Manufacturing Services (CRAMS)
    9% Sales Mix
  • CEM and CRAMS Combined
    50% Sales Mix
  • Pharmaceutical and Agrochemicals (H1)
    48% Sales Mix
  • Oil and Gas (H1)
    19% Sales Mix
  • Materials Science (H1)
    18% Sales Mix
  • Aether Specialty Chemicals Limited
    ₹50 Cr Revenue (current quarter)₹41 Cr Revenue (last quarter)

Capital allocation

high confidence
  • Capex Capex disclosed QIP money used for past CAPEX, debt funds (banks or financial institutions) for future CAPEX.
    • Total CAPEX deployed in current financial year ₹245 Cr
    • Total CAPEX for Site-5 (Panoli) ₹2,200 Cr
    • CAPEX for first two production blocks of Site-5 ₹160 Cr
    On the CAPEX front, we have deployed Rs. 245 crores so far in the current financial year and all the sites are on schedule. Site-3+, which is dedicated to Milliken, is expected to commence production in Quarter 4 of Financial Year 2026. Site-5, which is based on Panoli, continues to progress smoothly and we target to commission the first two production blocks of Phase-1 by the start of Quarter 4 of Financial Year 2026. ... So, I would like to add that going forward now, see, we were using the QIP money for the CAPEX. Going forward, we will be using debt funds, whether from banks or financial institutions. ... No. The total CAPEX for Site-5 will be closer to Rs. 2,200 to Rs. 2,300 crores. This will go on till around FY'30.
  • Debt Debt disclosed
    Going forward, we will be using debt funds, whether from banks or financial institutions. So, that will also add to certain finance costs.
  • Liquidity Liquidity disclosed Working capital cycle reduced to 149 days as on September 30, 2025 (from 194 days on March 31, 2025). Inventory cycle reduced to 160 days (from 173 days). Data cycle reduced to 106 days (from 126 days).
    We have always been working towards working capital management since last few years and we are happy to inform that we have been able to reduce the overall working capital cycle to 149 days as on September 30, 2025 which was 194 days as on 31st March, 2025. This has been possible due to reduction in inventory cycle to 160 days as on September 30, 2025 from 173 days as on 31st March, 2025 and a reduction of data cycle to 106 days as on September 30, 2025 for 126 days as on 31st March, 2025.

Guidance & targets

Sales Mix

  • CEM and CRAMS contribution to sales Sales Mix · next two years · High confidence 60-70%
    This is in line with our vision where CEM and CRAMS together will contribute 60%-70% of the sales in the next two years period.

    — Rohan Desai

Profitability

  • PAT Margin Profitability · going forward · High confidence 19-20%
    So, we will be yet in the margin front on the net profit at around 19%-20% mark.

    — Kushal Doshi

  • EBITDA Margin Profitability · going forward · High confidence 29-30%
    We usually don't discuss CEM contracts on margin basis, but on the overall company level basis, we continue to maintain between 29% to 30% EBITDA margins.

    — Kushal Doshi

  • EBITDA Margin Profitability · going forward · High confidence 30%+
    Yes. Definitely, it is sustainable because we are entering to more and more contract manufacturing and CRAMS which is increasing. So, 30% margin is surely sustainable and we would be sustaining them.

    — Faiz Nagariya

Efficiency

  • Asset Turn Efficiency · going forward · High confidence 1.5x-1.75x
    So, we target between 1.5x to 1.75x asset turn. So, that is achievable. That is what we are going to be looking for.

    — Kushal Doshi

Capex

  • Total CAPEX for Site-5 Capex · till FY30 · High confidence ₹2,200-2,300 crores
    No. The total CAPEX for Site-5 will be closer to Rs. 2,200 to Rs. 2,300 crores. This will go on till around FY'30.

    — Kushal Doshi

Capacity Utilization

  • Site-5 First Two Blocks Capacity Utilization (First FY) Capacity Utilization · first financial year of operation · High confidence 40-50%
    In the first financial year, we expect these units to work at capacity utilizations of around 40% to 50% and then steadily ramp up.

    — Kushal Doshi

Revenue Growth

  • Overall Revenue Growth Revenue Growth · going forward · High confidence 25%+
    Yes, we should be growing at around 25% going forward.

    — Kushal Doshi

Working Capital

  • Working Capital Days Working Capital · going forward · Medium confidence 140 days
    Krishan, we are at around 150. We would be willing to go more down, but I think so 140 should be a good number to go down.

    — Faiz Nagariya

R&D

  • Number of R&D Projects R&D · next one and a half years · High confidence 120+
    And now with the expansion that is planned for the next two months, as I mentioned in my script, and especially with the new R&D extension next year, which will give us a 2x expansion, double expansion over the current capacity, we are looking at going over easily 120 projects by the next one and a half years ongoing in the R&D.

    — Dr. Aman Desai

What to watch in Q3 FY26

Site-3+ Milliken production commencement

Q4 FY26
Current Expected to commence production in Q4 FY26
Target Actual commencement of production

Why it matters

Commercialization of a dedicated site for a marquee client is crucial for revenue growth and strategic partnerships.

Site-3+, which is dedicated to Milliken, is expected to commence production in Quarter 4 of Financial Year 2026.

Risks & concerns

  • Impact of ongoing CAPEX on PAT margins

    medium

    PAT margins are expected to remain around 19-20% due to increased depreciation and finance costs from debt funding for new projects.

    Management acknowledged

  • Stable pricing for LSM products

    low

    No significant price uptrend is expected for LSM products unless extraordinary global events occur, limiting realization-driven growth.

    Management acknowledged

Q&A highlights

7 direct
PAT margin outlook given business mix shift and CAPEX Direct
Unlikely that margins will go to 24%-25%, I think what we will be looking at and what the vision is to have 70% CRAMS CEM, 30% with LSM, which will take some time. With also our ongoing CAPEX the depreciation is also expected to increase. So, we will be yet in the margin front on the net profit at around 19%-20% mark.

Clarifies that despite a favorable business mix shift, PAT margins are expected to stabilize around 19-20% due to the impact of ongoing CAPEX and associated costs.

Asked by Ravi Singh

Target asset turn on gross block after CAPEX ramp-up Direct
So, we target between 1.5x to 1.75x asset turn. So, that is achievable. That is what we are going to be looking for.

Provides a key efficiency metric target for the significant ongoing CAPEX, indicating expected capital productivity.

Asked by Ravi Singh

Clarification on Site-5 CAPEX and timeline Direct
No. The total CAPEX for Site-5 will be closer to Rs. 2,200 to Rs. 2,300 crores. This will go on till around FY'30. This is what we have been planned and we have said in the past. The asset turns for this entire side once it's fully operational and all the plants are stabilized will be targeted at around 1.5x to 1.75x.

Corrects and clarifies the scale and timeline of the major Site-5 expansion, providing a more accurate long-term CAPEX outlook.

Asked by Ravi Singh

Diversification within the material science business Partial
No. There are multiple products out there which we cannot disclose because of the confidentiality. But there are multiple products out there.

Indicates that growth in material science is not solely dependent on one client (Saudi Aramco), suggesting broader product diversification, though specific details are confidential.

Asked by Kumar Saumya

Reason for Q-o-Q increase in CEM segment Direct
So, we have multiple contracts which we cannot disclose, which are being ramped up because of the client's interest of moving faster since the last, if you have heard the transcript of the last two earnings calls, we have always mentioned that there are a lot of inquiries which are converting into opportunities at Aether and so we are ramping them up in the existing facilities and making use of it.

Highlights strong demand and successful conversion of the pipeline into active contracts, driving growth in the CEM segment.

Asked by Amay Sharda

Sustainability of 30%+ EBITDA margins Direct
Yes. Definitely, it is sustainable because we are entering to more and more contract manufacturing and CRAMS which is increasing. So, 30% margin is surely sustainable and we would be sustaining them.

Reassures investors about the stability of high EBITDA margins, attributing it to the strategic shift towards higher-margin CEM/CRAMS business.

Asked by Amay Sharda

Reason for decline in LSM revenue contribution Direct
Yes.

Confirms that the lower contribution from LSM is a result of strategic capacity reallocation towards CEM/CRAMS, rather than a demand issue for LSM products.

Asked by Abhijit Akella

Pricing outlook for LSM products in H2 FY26 and FY27 Direct
So Nilesh, the pricing is stable at the moment. We see certain fluctuations here and there on the price going and trying to go upwards. But then because of the demand supply situation where the supply is more, the prices come back again to the original bottom, which is there. So I think in a second half of this financial year, I don't see a price uptrend happening in at least in any of our products at this moment, unless something extraordinary happens in the world, which I am not aware of at the moment. I don't think anything will lead to a price increase on our products.

Provides a realistic and cautious outlook on LSM product pricing, indicating no significant tailwinds from realization in the near future.

Asked by Nilesh Ghuge

3 min read 7 chapters

Detailed narrative

Strong Q2 FY26 Financial Performance

Aether Industries delivered robust financial results in Q2 FY26, with consolidated revenue from operations growing 38% year-on-year to ₹2,751 million. EBITDA surged by 70% to ₹853 million, leading to a significant EBITDA margin expansion to 31% from 25% in the prior year. Profit after tax also saw a healthy increase of 55% to ₹540 million, with PAT margin improving to 19% from 17%.

Strategic Business Mix Shift Towards CEM/CRAMS

The company's strategic focus on higher-margin contract and exclusive manufacturing (CEM) and contract research and manufacturing services (CRAMS) is progressing well. For the first time, these segments collectively contributed over 50% of total sales in Q2 FY26, aligning with the long-term vision of achieving 60-70% contribution within the next two years. The sales mix for the quarter was approximately 47% from CEM, 41% from large-scale manufacturing (LSM), and 9% from CRAMS.

Aggressive CAPEX and Capacity Expansion Underway

Aether Industries deployed ₹245 crores in CAPEX during the current financial year, with all new sites on schedule. The dedicated Site-3+ for Milliken is expected to commence production in Q4 FY26. Furthermore, the first two production blocks of Site-5 (Panoli) are targeted for commissioning by the start of Q4 FY26. The total CAPEX for Site-5 is projected to be ₹2,200-2,300 crores until FY30, with future funding primarily from debt.

Enhanced R&D Capabilities and Pipeline Growth

The company is significantly expanding its R&D infrastructure, adding two new labs, including an engineering lab, which will increase fume hoods by 24 in the existing facility. A new R&D plant extension is also under construction, expected to add over 130 fume hoods. Currently, Aether has over 55 projects ongoing in R&D, with a target to reach over 120 projects within the next 1.5 years, primarily focusing on non-ag and non-pharma sectors.

Improved Working Capital Management

Aether successfully reduced its overall working capital cycle to 149 days as of September 30, 2025, a significant improvement from 194 days as of March 31, 2025. This was achieved through a reduction in the inventory cycle to 160 days from 173 days and a decrease in the data cycle to 106 days from 126 days, reflecting enhanced operational efficiency.

Outlook on Margins and Pricing Stability

Despite the favorable shift in business mix, management expects PAT margins to stabilize around 19-20% going forward, primarily due to increased depreciation and finance costs from ongoing aggressive CAPEX. EBITDA margins are projected to remain sustainable at 30%+. Pricing for large-scale manufacturing (LSM) products is anticipated to remain stable, with no significant uptrend expected in the near future unless extraordinary global events occur.

Insurance Claim Update

The company received ₹250 million from its insurance claim for fixed assets this quarter. Out of an approximate total claim of ₹100 crores, ₹60 crores has already been received, with an additional ₹3.5 crores earmarked for loss of profit. Management expects all remaining claims to be settled by the end of December. The impact of increased insurance premiums (exceptional items) is expected to reduce and cease by the end of FY27.

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