Ellenbarrie Industrial Gases Limited

Ellenbarrie Industrial Gases reported a challenging Q3 FY26, with Revenue from Operations at ₹81.3 crores, marking a 9% sequential decline. EBITDA also saw a significant 25% QoQ drop to ₹25.3 crores, leading to a margin compression from 38% in Q2 to 31% in Q3. The primary factors for this underperformance were low Argon realizations, which declined over 25% due to a softer steel environment and market oversupply, coupled with elevated one-off^📎 costs compared to the previous year.

The company remains focused on long-term growth through strategic capacity additions. The Uluberia 2 merchant plant, with a capacity of 220 tons per day of liquid products, was recently commissioned and is now in the ramp-up phase, expected to achieve 85% utilization over 18 months. Further expansions include an East India on-site plant (320 TPD) targeted for Q1 FY27, a North India bulk plant (220 TPD) for H2 FY27, and a Western plant with specialty gases by FY28. The total capex for these three projects is estimated at approximately ₹450 crores over the next couple of years.

Despite the Q3 margin compression to 31%, management reiterated its long-term EBITDA margin aspiration of 40%, noting that the 9-month YTD margin stood at 36%. This improvement is expected from the higher efficiency of new capacities, increased on-site capacity, and anticipated normalization of Argon prices. A key focus for cost optimization is power, the single largest cost item, with plans to sign a renewable energy contract to enhance sustainability and reduce operational expenses.

The total addressable market for the gas industry is estimated at ₹15,000 crores, growing at about 10% annually, with Ellenbarrie holding a mid-single-digit market share. The company is actively pursuing growth in the solar and semiconductor sectors, having signed contracts with a couple of solar players and engaging in discussions for more. The Western region facility will integrate a high purity oxygen/nitrogen plant with a warehouse and bottling station for specialty gases, which are primarily traded products with expected margins in the teens, distinct from core manufacturing margins.

Ellenbarrie maintains a strong balance sheet with a net cash position of ₹355 crores. The company has provided capex guidance of ₹250 crores for FY26 and ₹200 crores for FY27, demonstrating disciplined capital allocation towards its expansion projects. Management emphasized that the business is long-term in nature, with growth occurring in step changes as new capacities become operational, and expects an overall improvement in revenue for FY27 driven by these new capacities.