Ester Industries

Ester Industries reported a challenging Q3 FY26, with consolidated income marginally declining by 2.1% year-on-year to INR 343.5 crores. Consolidated EBITDA saw a significant reduction of 67.7% year-on-year, settling at INR 21 crores with a margin of 6.1%. This subdued performance was attributed to aggressive price competition from Chinese BOPET film dumping, U.S. trade tariff disruptions, and mark-to-market losses on foreign exchange term loans totaling INR 4.95 crores. Additionally, a one-time^📎 increase in gratuity and leave encashment liability of INR 2.68 crores due to new labor codes further impacted profitability.

The Polyester Films segment experienced an 8.9% year-on-year decline in segmental revenue to INR 287.7 crores in Q3 FY26, primarily due to reduced selling prices, margin compression, and lower sales volumes partly from one-time^📎 maintenance activities. Despite these challenges, the proportion of value-added and specialty (VAS) products was maintained at 25%. The recent U.S. trade agreement, expected to reduce tariffs from 50% to 18%, is anticipated to significantly boost margins and performance. Furthermore, the Directorate General of Trade Remedies (DGTR) has initiated an anti-dumping investigation into BOPET film imports from China, offering potential relief for the domestic industry.

The Specialty Polymers segment continued to be a strong performer, reinforcing its role as the company's profit anchor. It delivered significant volume growth of 46.4% in Q3 FY26 and 31.8% for the nine months ending December 2025. Revenue growth for the segment was 72.9% in Q3 FY26, and EBIT increased by 61.8% year-on-year. Management aims to sustain healthy double-digit growth for this segment over the next 3-5 years, leveraging its current EBIT margin of over 30% and a peak revenue potential of INR 400-500 crores from its 30,000 tons per annum capacity.

The Elite project, a 50-50 joint venture, is progressing diligently, with land acquisition in advanced stages and expected completion by April-May 2026. Toyo Engineering has been appointed as the EPC consultant, following the successful completion of the front-end engineering and design (FEED) study by Tata Consulting Engineers. A significant 3-year take-or-pay off-take agreement has been secured with Nike, initially for 5,000 tons of finished goods, escalating to 10,000 tons before commercial production. The project is expected to be completed by the end of 2027 and commence sales within the following quarter.

New regulations, particularly the Plastic Waste Management Rules (PWMR) mandating 10% constant usage in flexible packaging since April 2025, are creating a significant boost for BOPET film demand in India. While a draft notification allowed deferral of PCR obligations, companies are still preparing, leading to increased BOPET usage. Management believes the segment is near the bottom of its cycle, with the improving demand scenario, US trade tariff relief, and potential anti-dumping duties on Chinese imports poised to drive meaningful upside in operating rates and margins over the next 4-5 quarters.

As of December 31, 2025, consolidated gross debt stood at INR 742 crores, with net debt at INR 660 crores and liquidity of INR 80 crores. The average annual debt repayment is INR 85 crores. The Elite project's total capex of USD 193 million will be 70% debt-funded, with Ester's share of INR 550 crores. However, due to 50-50 JV accounting, this additional debt will not be consolidated on Ester's balance sheet. The weighted average cost of debt for Ester Industries is around 9-9.4%, with a Euro loan at less than 3%.