Arabian Petroleum Ltd — Q2 FY26 earnings call

Call held 29 Jan 2026

Management summary

Arabian Petroleum reported robust H1 FY26 performance with revenue up 24% and PAT up 33%, driven by strategic initiatives including the acquisition of Lavisa Technologies and expansion into new geographies and product lines. The company is focusing on backward integration and high-margin specialty products to improve profitability, while navigating a nascent Indian market for eco-friendly lubricants and managing current capacity utilization.

Highlights

  • Revenue grew by 24% in H1 FY26, demonstrating strong top-line performance.

  • PAT grew by 33% in H1 FY26, indicating improved profitability.

  • EBITDA grew by 16% and EPS by 30% in H1 FY26.

  • Strategic acquisition of Lavisa Technologies Private Limited expands product portfolio and access to top-tier OEMs.

  • Secured an order from Border Road Organization in Bhutan and an award from the Indian Army for lubricant supplies worth ~₹90 lakhs.

Concerns

  • Net profit margin remains low despite significant revenue growth in H1 FY26.

  • The Indian market for eco-friendly/biodegradable lubricants is still nascent, limiting immediate growth in this segment.

  • Current capacity utilization is around 70%, with expansion aiming to bring it down to ~60% to allow for future growth, indicating near-term capacity constraints.

Key financials

2 periods

Headline

  • Gross Margin (Specialties)
    50%
  • Gross Margin (Industrial Average)
    20%

H1 FY26

  • Revenue Growth
    24%
    YoY +24%
  • EBITDA Growth
    16%
    YoY +16%
  • PAT Growth
    33%
    YoY +33%
  • EPS Growth
    30%
    YoY +30%

What they filed

Q4 FY26: revenue up 61.1%, net profit up 66.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY23Q4 FY23Q2 FY24Q4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue110 133 118 144 139 +26%146 +10%182 +54%232 +61%
EBITDA3 6 7 7 8 +167%8 +33%9 +29%9 +29%
Net profit1 4 3 3 5 +400%4 +0%6 +100%5 +67%
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.

Capital allocation

high confidence
  • Capex ₹1 Cr A certain part of the Capex will be taken care of by internal approvals, but large-scale infrastructure projects may require external funding from banks.
    • R&D investment ₹1 Cr
    we invested about 1 crore in R&D in this half year, and this is to drive innovation and product development in the coming years to come. [...] A certain part of the, you know, Capex will be taken care of by the internal approvals. When it comes to large-scape access, of a nature of setting up a whole new dedicated infrastructure, which may be to the tune of maybe 20, 25 odd accruals, definitely internal accruals will not be, you know, sufficient enough for us to finance that kind of transaction. So we may be looking at alternative options which are available to us. Having said that, currently, our debt position is also not that highly leveraged. So, we are having that comfort from bank in case if we require additional funding to be made available. They are quite supportive, and they have assured us that they will be available, you know, for any kind of new Capex or term loan to be granted to us.
  • Debt Debt disclosed
    our debt position is also not that highly leveraged. So, we are having that comfort from bank in case if we require additional funding to be made available. They are quite supportive, and they have assured us that they will be available, you know, for any kind of new Capex or term loan to be granted to us. [...] we are about 50-60% naturally hedged, and in terms of, you know, our positions, in terms of dollars, I think Mr. Tejas will be better able to answer, that question. So, normally, we have a policy to hedge certain portion of our, outward, you know, remittances and, at the same time, as I told you that since we are 60-70% naturally hedge, it does not really, you know, matter in terms of the profitability when it comes to increase in the dollar prices. [...] So in, case of an, this hedging part, as sir has already informed, or, stated, we have around in, 30-40%, natural hedging for, terms of our export remittance, and balance we do as in hedging, as in when it's required from our bankers. Like, in forwards and so...So, yeah, the cost-effectiveness or, cost of this are getting hedged. That's 100%, with a natural light of 50%.
  • M&A Lavisa Technologies Private Limited Acquisition · Integrated

    Expand product portfolio in metalworking lubricants, gain access to top-tier OEMs, and support backward integration goals.

    Historical peak revenue of ₹30 crores with 40% gross margins; expected to bring significant synergies and break-even by Q4 FY26.

    And in the first of HY26, we also incorporated Lavisa Technologies Private Limited, which I'll talk about in a bit detail in the coming... at the last part of the presentation. [...] Lavisa Technologies is a firm where we have started operations. This is, again, majority shareholding of Arabian Petroleum Limited, and here we are focusing on only value-added products and specialty products in the metalworking side. So, here we have, partnered with Mr. Abhijit Bhosale, who has about rich 25 year experience. He was, earlier part of the team at Emulsichem Lubricants Private Limited, and we have taken the business transfer agreement from Emulsichem Lubricants to Lavisa Technologies, which is our new entity, and all the key customers' business has been transferred from this company to Lavisa Technologies. [...] when this company, with its own technology, was operating at its peak, it was doing somewhere about 30 crores of revenue, and they saw a good, you know, gross margin levels of about 40%. [...] this coming, financial year, not even coming financial year, in the next first, last quarter of this financial year also, we would definitely break even.
  • Liquidity Liquidity disclosed Internal accruals may not be sufficient for large-scale new infrastructure capex, but banks are supportive for additional funding.
    internal accruals will not be, you know, sufficient enough for us to finance that kind of transaction. So we may be looking at alternative options which are available to us. Having said that, currently, our debt position is also not that highly leveraged. So, we are having that comfort from bank in case if we require additional funding to be made available. They are quite supportive, and they have assured us that they will be available, you know, for any kind of new Capex or term loan to be granted to us.

Guidance & targets

Top-line Growth

  • CAGR Top-line Growth · Long-term · High confidence 20-25%
    as a company, we are slated to grow at about 20-25% CAGR. That's how we've been planning to grow in terms of top line.

    — Mr. Manan Mehta

Profitability

  • Margins Profitability · Coming future · Medium confidence Improvement
    we also intend to also, focus on develop... focus on improving on our margins also in the coming future.

    — Mr. Manan Mehta

Profitability (UAE Business)

  • Break-even Profitability (UAE Business) · This financial year · High confidence Break-even
    we are definitely, going to break even in this financial year, that's what I would put it as. And, profitability will definitely come in the coming... in the next year

    — Mr. Manan Mehta

Profitability (Lavisa Technologies)

  • Break-even Profitability (Lavisa Technologies) · Next first, last quarter of this financial year · High confidence Break-even
    this coming, financial year, not even coming financial year, in the next first, last quarter of this financial year also, we would definitely break even.

    — Mr. Manan Mehta

Utilization

  • Capacity Utilization Utilization · Post expansion · High confidence ~60%
    with the additional expansion, I think we'll be able to de-bottleneck it, and we will be coming to about 60% odd levels, and that will give us enough room for us to further grow.

    — Mr. Manan Mehta

IP Transfer

  • Arigol brand IP transfer IP Transfer · Coming financial year · High confidence Transfer to company
    this will definitely be transferred to the company, maybe in the coming financial year.

    — Mr. Manan Mehta

What to watch in Q3 FY26

Lavisa Technologies profitability

Next first, last quarter of this financial year
Current Started operations, working towards break-even.
Target Break-even

Why it matters

This new subsidiary is a key strategic acquisition expected to boost product portfolio and margins.

this coming, financial year, not even coming financial year, in the next first, last quarter of this financial year also, we would definitely break even.

Risks & concerns

  • Nascent market for eco-friendly lubricants in India

    medium

    India is a cost-sensitive country, and the market for biodegradable lubricants is still nascent, unlike European/Western regions.

    Management acknowledged

  • Currency depreciation impact on pricing/margins

    medium

    Company is 50-60% naturally hedged, and price changes are generally passed on to distributors monthly or through quarterly price variation mechanisms for large customers.

    Analyst acknowledged

  • Fragmented competition in industrial lubricants

    low

    The industrial lubricant market, especially metalworking, is highly fragmented with regional players dominating.

    Management acknowledged

Q&A highlights

7 direct
Strategy for eco-friendly/biodegradable lubricants in India Direct
in India, they are still at a very nascent stage. So, I would like to answer this in such a way that, yes, we are ready whenever there is a, you know, strong pull from the market which are required for this kind of, biodegradable lubricants.

Highlights the company's preparedness for a future product segment but acknowledges the current market immaturity in India.

Asked by Finportal

Long-term growth goals for Arzol and APL brands Direct
as a company, we are slated to grow at about 20-25% CAGR. That's how we've been planning to grow in terms of top line. At the same time, we also intend to also, focus on develop... focus on improving on our margins also in the coming future.

Provides clear quantitative and qualitative long-term growth targets and strategic focus areas for the company.

Asked by Finportal

Execution plans to expand margins to 5-6% range in H1 FY26 Direct
The addition of these kind of new value-added products, and, would definitely see... just to give you an example, where we operate somewhere about 20-25% gross margins in the industrial space, 20% on an average. The products in the specialties operate at about 50% gross margin levels. So these kind of specialties will definitely drive the margins in the coming future

Explains the strategy for margin improvement through a shift towards higher-value, higher-margin specialty products.

Asked by Finportal

Impact of new subsidiary (Lavisa Technologies) on top line and bottom line Direct
when this company, with its own technology, was operating at its peak, it was doing somewhere about 30 crores of revenue, and they saw a good, you know, gross margin levels of about 40%... I think we definitely will be able to bring in a lot of synergies in terms of, you know, products which are required for them to produce.

Quantifies the historical potential of the acquired business and outlines synergy benefits for future growth and margins.

Asked by Finportal

Timeline for UAE business to turn profitable Direct
we are definitely, going to break even in this financial year, that's what I would put it as. And, profitability will definitely come in the coming... in the next year

Provides a clear timeline for the UAE business to achieve profitability, indicating a near-term positive impact on overall performance.

Asked by Finportal

Amount of raw materials imported and from which countries Direct
percentage typically is about 30% of our home meters are imported. This includes imports from Middle East, imports from US, imports from, you know, Turkmenistan, Turkey, Southeast Asia, South Korea.

Gives insight into the company's supply chain diversification and potential exposure to geopolitical risks or currency fluctuations.

Asked by Finportal

Cash flow situation and ability of internal accruals to fund expansion plans Partial
internal accruals will not be, you know, sufficient enough for us to finance that kind of transaction. So we may be looking at alternative options which are available to us. Having said that, currently, our debt position is also not that highly leveraged. So, we are having that comfort from bank in case if we require additional funding to be made available.

Clarifies that while internal accruals may not cover all large capex, the company has strong bank support for additional funding, mitigating liquidity concerns.

Asked by Finportal

Monopoly market potential of Universal Recoil Fluid technology Direct
these TOTs are being held only by one or two other players. So, the competition in general is very low in terms of, you know, having, you know, these kind of technology being made available to us.

Highlights a niche, high-barrier-to-entry market segment with low competition, suggesting strong potential for specialized defense applications.

Asked by Finportal

2 min read 6 chapters

Detailed narrative

H1 FY26 Performance Overview

Arabian Petroleum reported robust growth in H1 FY26, with revenue increasing by 24%, EBITDA by 16%, PAT by 33%, and EPS by 30%. The company also noted an 8% growth in 'part margin' (likely gross or operating margin). Debtor days improved significantly from 62 to 48 as of October 2025, reflecting better credit control. The total balance sheet stood at approximately ₹121 crores.

Strategic Initiatives & Expansion

The company invested ₹1 crore in R&D in H1 FY26 to drive innovation and product development. They expanded their distribution network by appointing new distributors in key regions like Kanpur, Rajkot, Karnataka, and Madurai for automotive, and in the South and East for industrial. Geographically, Arabian added 4 new countries across the Middle East and Central America, and opened a new warehouse in Bangalore to improve service in the South.

Product Development & Backward Integration

Arabian is actively developing new products, including water-based chemistries, peelable rust preventives, and low moisture refrigeration compressor oils. A key focus is backward integration, with the production of fatty acid amides starting in December, used for self-consumption and external sales. They also develop additives for cutting oils and other lubricants, and are working with academia to develop specialized products for extreme temperature applications.

Market Landscape & Competitive Positioning

Arabian operates in a diverse lubricant market, with products for automotive (two-wheelers, four-wheelers, heavy commercial vehicles) and industrial applications. The Indian lubricant market is estimated at 3.3 million metric tons, projected to grow to 6 million metric tons by 2030, with Arabian currently contributing 24-25 KT. The company faces competition from major players like Castrol, Mobil, and Shell in automotive, and a fragmented market with regional players in industrial segments.

Lavisa Technologies Acquisition & Synergy

Arabian Petroleum acquired a majority stake in Lavisa Technologies Private Limited, which specializes in metalworking lubricants. This strategic tie-up aims to expand Arabian's product portfolio, particularly in high-margin specialty products, and gain access to top-tier OEMs. Lavisa, at its peak, generated ₹30 crores in revenue with 40% gross margins, and Arabian expects significant synergies and a break-even for Lavisa by Q4 FY26.

Government Business & Defense Focus

The company has a strong foothold in government business, serving clients like the Army, Navy, Air Force, ISRO, Railways, and ONGC. They recently secured an order from the Border Road Organization in Bhutan and an award from the Indian Army worth ₹90 lakhs for lubricant supplies. Arabian is focusing on developing specialized products for the defense segment, including Universal Recoil Fluids and low-temperature coolants, leveraging technology transfers from DRDO.

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