ELLEN

Ellenbarrie Industrial Gases reported a Q4 FY26 where its core gases business demonstrated robust sequential growth of 9% quarter-on-quarter. The adjusted EBITDA margin for the gases segment reached 40% in Q4, contributing to a full-year adjusted margin of 38.4% for FY26, a 500 basis point improvement over FY25. However, the reported Q4 EBITDA of 260 million and 30% margin were affected by 46 million in one-off^📎 items, including an 11 million employee leave provision, a 20 million impairment on a legacy non-core investment, and a 15 million commercial settlement with an on-site customer.

The company is aggressively expanding its capacity to drive future growth, targeting a 20% revenue CAGR over the next 2-3 years. In Q4 FY26, the 220 tons/day Ulluberia 2 merchant plant was commissioned and is now ramping up. Looking ahead, another 220 tons merchant plant and a 320 tons/day on-site plant are expected to come online in FY27, with a further 250 tons merchant plant planned for early FY28. These additions will increase merchant capacity from 900 to 1,130 tons/day and on-site capacity from 700 to 1,000 tons/day within the next 12 months, with existing capacities already fully utilized.

Argon, a key contributor to higher margins, saw its prices recover in Q4 FY26 from the lows experienced in Q3, which were attributed to a softer steel environment and oversupply. Management anticipates further normalization of argon prices in FY27, supported by robust demand from the steel sector. While short-term volatility is acknowledged, the long-term demand-supply dynamics for argon remain favorable, as its production is a byproduct of oxygen, and demand is broadening across industrial and emerging applications. The company aims to increase argon's revenue contribution to approximately 15% in the longer term from the current 8-10%.

Power cost, identified as the largest input cost, is a critical focus for margin improvement. Ellenbarrie is implementing a two-pronged strategy: deploying more power-efficient new capacities and increasing its reliance on renewable energy. A long-term PPA for a wind-solar hybrid plant has been secured, covering 55-60% of the power demand for one 170-ton unit, with grid pricing being 50-60% higher than PPA rates. The company plans to sign similar PPAs for its other southern region plants to further reduce overall power costs and enhance cost visibility.

The company is strategically broadening its product portfolio to include specialty gases, targeting high-growth, new-age industrial sectors such as solar cell manufacturing, semiconductors, and electronics. These industries require high-purity and specialized gases, which are often imported and then debulked. Ellenbarrie plans to establish a dedicated facility within its West-Central India plant for debulking and distributing these specialty gases, leveraging existing customer relationships to expand its market reach and product capabilities in these lucrative segments.

FY27 is designated as an important year of execution, with key priorities including the efficient and profitable ramp-up of the Ulluberia 2 plant, commissioning and stabilizing the East India on-site plant, and continued execution of planned merchant projects. The company maintains a medium-term aspiration of achieving a 40% EBITDA margin and a 20% revenue CAGR. Management expressed optimism about India's industrial growth trajectory while remaining realistic about short-term market volatility^🌐, emphasizing disciplined capital allocation and cost management.