Ester Industries Limited — Q3 FY26 earnings call

Call held 9 Feb 2026

Management summary

Ester Industries reported a challenging Q3 FY26, with a marginal decline in consolidated income and a significant drop in EBITDA, primarily due to aggressive price competition, US trade tariff disruptions, and one-time expenses. However, the Specialty Polymers segment demonstrated robust growth, and the Elite project is progressing well with a key off-take agreement. Management anticipates improved performance in coming quarters due to tariff resolutions and anti-dumping investigations.

Highlights

  • Specialty Polymers segment showed significant volume growth of 46.4% in Q3 FY26 and 31.8% for 9 months FY26, with EBIT increasing by 61.8% in Q3 FY26.

  • Ester Filmtech Limited achieved 37.2% YoY sales volume growth, reaching 9,186 tons, and improved capacity utilization to 76%.

  • The proportion of value-added and specialty (VAS) products was maintained at 25% despite market loss in North America, with 5% YoY growth (excluding North America) in Q3 FY26.

  • The Elite project is progressing diligently, with land acquisition in advanced stages and engineering consultants appointed, securing a 3-year take-or-pay off-take agreement with Nike.

  • Resolution of U.S. trade tariffs is expected to boost margins and performance in upcoming quarters, with the new 18% tariff making India advantageous compared to competitors.

Concerns

  • Consolidated income declined marginally by 2.1% YoY to INR 343.5 crores in Q3 FY26.

  • Consolidated EBITDA reduced significantly by 67.7% YoY to INR 21 crores, with a margin of 6.1%.

  • Operating performance was impacted by one-time gratuity and leave encashment liability of INR 2.68 crores and mark-to-market/reinstatement losses on foreign exchange term loans of INR 4.95 crores.

  • Standalone loss after tax was INR 4.9 crores in Q3 FY26, compared to a profit of INR 18.6 crores in Q3 FY25.

  • The company faced aggressive price competition due to dumping of BOPET films by China and U.S. trade tariff-related disruptions in the market.

Key financials

  1. Consolidated Income ₹343.5 Cr -2.1%YoY
  2. Consolidated EBITDA ₹21 Cr -67.7%YoY
  3. Consolidated EBITDA Margin 6.1%
  4. 9 Months FY26 Total Income ₹1,047.6 Cr +7.2%YoY
  5. Standalone Loss After Tax ₹-4.9 Cr

What they filed

Q1 FY27: revenue up 21.5%, net profit up 50.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue298 275 258 279 260 −13%250 −9%256 −1%339 +22%
EBITDA32 42 33 26 11 −66%10 −76%24 −27%32 +23%
Net profit12 19 12 10 -5 −142%-5 −126%4 −67%15 +50%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Polyester Films (Consolidated)
    ₹287.7 Cr Segmental Revenue8.9% YoY Decline
  • Specialty Polymers
    46.4% Q3 FY26 Volume Growth31.8% 9 Months FY26 Volume Growth72.9% Q3 FY26 Revenue Growth61.8% Q3 FY26 EBIT Increase
  • Ester Filmtech Limited
    37.2% Q3 FY26 Sales Volume Growth9,186 tons Q3 FY26 Sales Volume₹106 Cr Q3 FY26 Total Income₹7.1 Cr Q3 FY26 EBITDA

Capital allocation

high confidence
  • Capex Capex disclosed Planned to fund Elite project through debt and equity, with 70% debt.
    • Recycled polyester extruder at Hyderabad ₹40 Cr
    • Elite project (total capex) $193 Mn
    During Q3 FY '26 and 9 months ending December 2025, performance needs to be reviewed in the context of an exceptionally challenging external environment marked by aggressive price competition caused due to dumping of BOPET films by China. ... So in terms of capex, you may recall that in a previous call that we have mentioned about our investment in recycled polyester extruder at Hyderabad. So that capex was around INR40 crores. ... Elite is a key marquee project that we are starting and, as you are aware that the total capex for this project is USD 193 million, which we are planning to fund through our debt and equity.
  • Debt Gross ₹742 Cr · Net ₹660 Cr Cost 9% · Maturity: Average repayment amount stands at INR85 crores per year.
    So our gross debt as on 31st December is around INR742 crores and we have a liquidity of around INR80 crores with us. This loan is going to be repaid over a period of time and basically the next 5 years with a staggered repayment schedule depending on the different loans that we have. But on an average, the repayment amount stands at INR85 crores per year. ... So Saransh, as we have mentioned that this INR195 million, we are going to fund through a mix of debt and equity. Our target is that we are going to raise 70% of this amount as debt, which amounts to roughly INR1,100 crores. Since it's a 50-50 JV so even if we assume that INR550 crores is a part of Ester Industries so then my peak debt is going to go up from INR750 crores plus INR550 crores. So it's around INR1,200 crores, INR1,250 crores. ... See, our gross debt, as I mentioned earlier, was INR740 crores and when you adjust it for the cash and cash equivalents, it's around INR660 crores. ... So cost of debt is around in the range of 10% to 11% depending upon the entity in which the debt is there. As you know that we also have a euro loan from OLB Bank so where the rate of interest is very low at less than 3%. ... And if you talk of the cost of debt, weighted average cost of debt in Ester Industries is about 9%, 9.4% and Ester Filmtech is about less than 9%.
  • Liquidity Cash ₹80 Cr Sufficient to sustain budgeted enhanced operations.
    So our gross debt as on 31st December is around INR742 crores and we have a liquidity of around INR80 crores with us. ... On the working capital front, both companies have adequate limits to sustain budgeted enhanced operations.

Guidance & targets

Market Share

  • Specialty products revenue share Market Share · next 3-5 years · High confidence 70%+

    From 35-40% today

    So Ester wants to become a specialty company, right? So what it means is that right now almost 35% to 40% of our revenues are coming from specialty products. We want to take this share up to 70% plus in next 3 to 5 years.

    — Vaibhav Jha

  • Specialty film share Market Share · next 3-5 years · High confidence 50%

    From 25% today

    So now with the tariff going away, we are expecting a bump in sales in North America and also growth like we have shown in rest of the world. So what we want to do in specialty film share is take this number from 25% to somewhere in the range of 50% over next 3 to 5 years and maybe even more.

    — Vaibhav Jha

Cost

  • Cost efficiency Cost · High confidence Most cost-efficient producer globally
    The second strategic priority of course is the cost optimization where we want to be the most cost-efficient producer of the product in the world not only in India.

    — Vaibhav Jha

Project Completion

  • Elite project completion Project Completion · by end of 2027 · High confidence Completed by end of 2027
    And right now the third strategic priority for us is the successful execution of the Elite project wherein we are expecting to complete the project by end of 2027 and commission the or start selling out the product within the following quarter.

    — Vaibhav Jha

Growth

  • Specialty Polymer growth Growth · consistent basis for next 3-5 years · High confidence Double-digit growth
    On the Specialty Polymer side, we expect a double-digit growth on year-on-year basis for the whole financial year and we would like to keep growing in healthy double digits in Specialty Polymers on a consistent basis for next 3 to 5 years.

    — Vaibhav Jha

Capacity Utilization

  • Films business capacity utilization Capacity Utilization · next financial year · Medium confidence Improvement
    And as the -not in the immediate quarter, but in the following quarters, let's say, in the next financial year, there should be an improvement in the capacity utilization.

    — Pradeep Kumar Rustagil

Operating Rates

  • BOPET film operating rates Operating Rates · next 4-5 quarters · High confidence Consistent gradual increase
    There would be a slight upswing in this quarter, but I think it's going to be a consistent set of gradual increase in operating rates due to the consistent increase in BOPET demand, right? So it won't be a step change. But if you see quarter-on-quarter over next 4 to 5 quarters, you would be able to see a growth curve in our operating rates.

    — Vaibhav Jha

Market Growth

  • Indian BOPET market growth Market Growth · annually · High confidence 8-10%
    See right now, the Indian market is roughly 900,000 to 1 million tons, right, somewhere in there per year and we are expecting growth in the range of 8% to 10% on this. So which means that every year 90,000 to 100,000 tons of capacity increase happens.

    — Vaibhav Jha

Project Milestone

  • Elite project land acquisition Project Milestone · April-May 2026 · High confidence Completed by April-May 2026
    So the land acquisition, we are expecting to be completed by April, May '26.

    — Pradeep Kumar Rustagi

What to watch in Q4 FY26

Elite Project Land Acquisition Completion

April-May 2026
Current Advanced stages
Target Completed

Why it matters

Crucial milestone for the Elite project, impacting its overall timeline and future revenue generation.

Process for acquisition of land for the project is in advanced stages and is likely to be completed by April, May 2026.

Risks & concerns

  • Aggressive price competition from Chinese BOPET film dumping

    high

    Caused subdued performance and margin pressure; anti-dumping investigation initiated by DGTR.

    During Q3 FY '26 and 9 months ending December 2025, performance needs to be reviewed in the context of an exceptionally challenging external environment marked by aggressive price competition caused due to dumping of BOPET films by China.

    Management acknowledged

  • U.S. trade tariff-related disruptions

    medium

    Previously impacted market for BOPET film exports; new trade deal expected to reduce tariffs from 50% to 18%, improving outlook.

    U.S. trade tariff-related disruptions in market for BOPET films especially exports and depreciation of Indian rupee against U.S. dollar and euro. ... This agreement has reduced the tariff from, is likely to reduce the tariff from 50% to 18%.

    Management largely resolved

  • Volatility in foreign exchange rates

    medium

    Caused mark-to-market and reinstatement losses on foreign exchange term loans; rupee depreciation against USD and Euro.

    Operating performance in terms of EBITDA reduced during Q3 FY '26 and 9 months ending December 2025 mainly on account of drop in margin due to aggressive price competition caused by dumping of BOPET films by China, U.S. trade tariff-related disruptions in market for BOPET films and mark-to-market and reinstatement losses on foreign exchange term loans due to depreciation of Indian rupee against U.S. dollar and euro.

    Management managing through hedging and open exposure

  • One-time increase in employee benefit liability

    low

    INR 2.68 crores increase in gratuity and leave encashment liability due to new labor codes implementation.

    Operating performance was also affected due to onetime increase in gratuity and leave encashment liability by INR2.68 crores due to implementation of new labor codes with effect from 21st November 2025.

    Management acknowledged and accounted for

Q&A highlights

7 direct
Elite Project Peak Debt and Accounting Direct
So Saransh, as we have mentioned that this INR195 million, we are going to fund through a mix of debt and equity. Our target is that we are going to raise 70% of this amount as debt, which amounts to roughly INR1,100 crores. Since it's a 50-50 JV so even if we assume that INR550 crores is a part of Ester Industries so then my peak debt is going to go up from INR750 crores plus INR550 crores. So it's around INR1,200 crores, INR1,250 crores. ... But there's an accounting standard, which we need to be cognizant of. In a 50-50 JV, there would not be consolidation -- line-by-line consolidation of the debt assets, liabilities, income, et cetera. It is the bottom line of Elite to the extent of 50% will be consolidated with bottom line of Ester Industries. So when you see the balance sheet of Ester Industries, you will not see this debt increasing by INR550 crores.

Clarified the total capex for the Elite project, Ester's share of debt, and importantly, that this debt will not be consolidated on Ester's balance sheet due to JV accounting, impacting future debt ratios.

Asked by Saransh Gupta

Impact of US Tariffs on High Margin Segment Direct
So far, the other competitors mainly in Southeast Asia were in the range of 19% to 20% while we were in the range of 50% in terms of the tariff which was imposed so which put us in a tough spot in that market. But now with 18% tariff, we are going to be in the most advantageous position compared to our competitors in the manufacturing world, including China which is at which will be at a significantly higher duty. So it is a very big positive for us and we expect it to lead to good growth in our high margin products in the U.S.

Explained how the new US tariff structure (18%) makes Indian exports more competitive than before (previously 50% vs SE Asia's 19-20%), signaling a significant positive for high-margin product growth in the US market.

Asked by Rohan Mehta

Chinese Price Pressures and Anti-Dumping Investigation Direct
Chinese price pressure is indeed a pain point in the domestic market. We have seen that the prices of the products coming from China are at a level which has really prevented us from leveraging the demand scenario in India to the fullest extent. But at the same time to tackle the issue, we have filed an antidumping duty -- I mean the industry has filed an antidumping duty, Ester is a part of that petition. And we are expecting that very soon we should see conclusion to that antidumping duty investigation and we hope that government will support us and help us get some relief in the Indian market from these pricing pressures.

Addressed the ongoing challenge of Chinese dumping in the domestic market and highlighted the industry's anti-dumping petition, indicating potential relief and improved domestic pricing if successful.

Asked by Rohan Mehta

PCR Content Legislation and Impact on BOPET Demand Direct
So what has happened is the notification said that -- and it was a draft notification. It is not a final legislation. Which said that the companies can defer but not eliminate the PCR obligations that they are supposed to fulfill. So if the companies decide to not fulfill their 10% obligation, then it gets carried forward and added on to the subsequent year's obligation. ... So overall, all of these things -- solutions are a big positive for BOPET volumes and margins.

Clarified that the deferral of PCR content rules does not eliminate the obligation, leading many customers to either convert to BOPET or increase PCR content in BOPET, which is a positive for BOPET volumes and margins.

Asked by Saransh Gupta

Specialty Polymers Capacity, Utilization, and Revenue Potential Direct
See, right now the Specialty Polymers capacity is north of 30,000 tons per annum and what we are looking at is roughly 10,000 to 12,000 tons of production. So we are looking at 25% to 30% operating rate right now. The peak revenue potential if we thoroughly use this 30,000 tons odd of the production should be roughly, in my opinion, somewhere around INR400 crores to INR500 crores.

Provided specific figures for Specialty Polymers capacity, current utilization (25-30%), and significant peak revenue potential (INR 400-500 crores), highlighting the segment's growth runway.

Asked by Rohit Mehra

BOPET Film Spreads and Market Improvement Direct
So the spread, which is VA between 12 micron plain film which is the commodity film and the raw material, in January was roughly around INR30. And it is an improvement of around INR5 to INR6 from the previous quarter. ... We are seeing quite robust demand for PET films starting from November and right now also it is very good. So this trend is likely to sustain.

Quantified the improvement in BOPET film spreads (VA at INR 30/kg in January, up INR 5-6/kg QoQ) and confirmed robust, sustainable demand since November, indicating a positive market trend.

Asked by Saket Kapoor

Warrant Conversion Details Direct
Mid of May '26. ... INR158.

Provided specific date (Mid-May 2026) and exercise price (INR 158) for warrant conversion, which is relevant for potential equity dilution and shareholder value.

Asked by Saket Kapoor

3 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance and Headwinds

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.

Polyester Films Segment: Challenges and Emerging Opportunities

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.

Specialty Polymers: A Robust Profit Anchor

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.

Elite Project: Strategic Progress and Off-take Agreement

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.

Regulatory Tailwinds and Market Outlook

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.

Capital Structure and Debt Management

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%.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Capital Goods earnings calls