ELLEN

Ellenbarrie Industrial Gases reported Q2 FY26 revenues of ₹892 million, marking a 6.7% sequential increase. The company maintained a stable EBITDA margin of 38%, translating to ₹337 million. Profit After Tax (PAT) saw a significant 96% year-on-year surge, reaching ₹367 million, reflecting strong operational discipline and capital efficiency. The core gases business continues to be the primary growth driver, with management emphasizing its resilience and contribution to overall performance.

The company successfully ramped up operations at its Kurnool and Tata Steel Metaliks plants, with Kurnool's utilization now at 75-80% from 60-65% in Q1. A new merchant plant in East India and a 220 TPD plant are expected to commence production by the end of November 2025. The onsite plant in East India is slated for commissioning by March 2026, while another merchant plant has been pushed from Q2 FY27 to H2 FY27 due to minor execution delays. These expansions will increase total owned and operated capacity to 1910 TPD by end of FY26 and over 2100 TPD by end of FY27.

Argon, a high-margin value-added gas, now accounts for 13% of total revenues, up from 10% last quarter, with management expecting this contribution to 'inch up' long-term and its EBITDA margins to be 'higher than 40%.' The company is also actively targeting the solar cell and semiconductor sectors with ultra-high purity gases like nitrogen, oxygen, silane, ammonia, and nitrous oxide. For traded specialty products, margins are anticipated to be in the 15-20% range, and the company has already secured 3 contracts in this space with phenomenal inquiry levels.

The government's decision to reduce GST on medical oxygen from 12% to 5% was welcomed, making the critical product more affordable. Management clarified its revenue guidance of 20-25% CAGR applies specifically to the core gases business over the next four to five years, using the last full financial year as a base. This distinction is crucial as project engineering revenues are lumpy and can distort overall year-on-year comparisons, which showed a 10% growth in core gases after adjusting for last year's project engineering revenue of ₹150 million.

Ellenbarrie is actively pursuing geographical expansion to become a pan-India company, with a strong focus on Western, Central, and North India, where it historically had less presence. While a site for a new merchant plant in Western India has been largely finalized, an official announcement is pending. The strategy for penetrating new markets with existing vendors involves leveraging efficient cost of production, existing customer relationships with multi-location operations, and the overall expanding market size, ensuring growth capture across regions.

The company's hydrogen electrolyzer pilot is progressing, with plans to integrate this technology into future air separation plants. However, management emphasized that hydrogen is viewed as another gas in their portfolio, primarily for industrial customers like pharmaceutical and edible oil companies, rather than as a significant energy resource. It is not expected to be a meaningful contributor to overall revenue, which will continue to be driven by air separation gases.