Ester Industries Limited

Ester Industries reported a consolidated revenue of INR 357 crores for Q2 FY26, marking a 7% year-on-year growth. This growth was primarily driven by higher volumes in both the Polyester Films and Specialty Polymers segments. However, consolidated EBITDA saw a significant decline of 59.7% year-on-year, reaching INR 17.33 crores, with the EBITDA margin at 4.85%. This decline was largely attributed to adverse exchange rate fluctuations and mark-to-market losses on foreign currency loans/derivatives, which amounted to approximately INR 10 crores for both companies combined.

The Specialty Polymers segment demonstrated robust performance, recording a 51% year-on-year volume growth and a 39% year-on-year revenue growth, with total sales reaching 1,161 metric tons. EBIT for this segment increased by 45% year-on-year to INR 21.24 crores, and the EBIT margin improved by 146 basis points to 37.03%. Management indicated that this strong performance was due to IP protection, shielding it from U.S. trade tariffs, and that a sustainable EBIT margin range of 35-40% is expected going forward^⏳.

The Polyester Films segment experienced a marginal revenue growth of 2% and sales volume growth of 8.72% to 21,329 metric tons. Domestic margins were pressured by heavy imports at predatory pricing, with approximately 25,000 tonnes of material imported in Q2. Spreads in the September quarter were INR 19-20/kg, improving marginally to INR 22/kg in October and currently ranging INR 22-25/kg. Despite these challenges, the company commissioned a 20,000 metric tons per annum rPET capacity in September 2025 at its Hyderabad plant, and rPET sales volume surged by 219% year-on-year to 1,046 metric tons, reflecting growing traction in sustainable product categories.

Ester Filmtech Limited showed significant operational improvement, with capacity utilization increasing to 85% from 61% in Q2 FY25. Sales volume grew by 39.7% year-on-year to 10,374 metric tons, and total income increased by 20.5% to INR 119.73 crores. However, its reported EBITDA reduced to INR 3.96 crores from INR 6.14 crores in Q2 FY25, primarily due to the adverse impact of foreign exchange fluctuations and mark-to-market losses on its Euro-denominated loan. Excluding these impacts, adjusted EBITDA would have been INR 11.22 crores, with a 9.3% margin.

The 50-50 joint venture, Ester Loop Infinite Technologies Private Limited (ELITe), is progressing diligently towards its December 2027 completion target. The project, with a total capex of INR 1,600 crores, aims to reduce carbon emissions by 81% compared to virgin PET. ELITe has secured approximately 90 acres of land in Surat and has signed multi-year offtake agreements with international clients like Nike and Taro Plast S.p.A. The groundbreaking for the plant is expected by the end of Q1 next year (March/April 2026), with start-up by the end of 2027. Ester's equity contribution to the JV is estimated at INR 250-270 crores, with INR 175 crores already raised through warrants.

The company's gross debt stood at approximately INR 740 crores, with net debt (after adjusting for cash and cash equivalents of INR 104.6 crores) at around INR 650 crores. Management targets to reduce net debt to INR 600-610 crores by the end of the year. Repayments for the next six months are estimated at INR 40 crores. The ELITe project's debt component of INR 1,000-1,100 crores is currently in the process of being tied up, with management noting that the export-oriented nature of the JV's production will provide a natural hedge against foreign exchange fluctuations for its debt.