Ester Industries

Ester Industries reported Q4 FY26 as a meaningful inflection point, with the Polyester Films segment revenue growing 14.9% YoY to INR321 crores and EBIT surging 73% to INR42 crores, expanding margins by 440 bps to 13%. The rPET business demonstrated robust growth, with volumes up 126% YoY to 1,677 metric tons in Q4 FY26 and 258% YoY for the full year. Despite these gains, the stand-alone total income marginally declined by 1.6% YoY in Q4 FY26 due to lower BOPET film volumes, and the full year FY26 consolidated results showed a net loss of INR27.5 crores, primarily due to non-cash mark-to-market losses on foreign currency liabilities.

The BOPET Film segment is emerging from a challenging period, with antidumping duties expected to be notified, which management believes will lead to meaningful margin improvement in FY27 and beyond. The average spread in Q4 FY26 was INR32-33 per kg for 12-micron VA, with expectations of INR30-35 per kg for the current quarter. Management anticipates the sustenance of BOPET margins for at least 18-24 months due to favorable global and domestic supply-demand dynamics. The company's strategy includes increasing the share of value-added and specialty (VAS) films from 25% to over 60% in the next 2-3 years to enhance profitability and reduce business cyclicity.

The Specialty Polymers segment achieved FY26 revenue of INR179.3 crores, a 16% YoY increase, maintaining a healthy EBIT margin of 32.7%. However, Q4 FY26 experienced volume moderation and a decline in EBIT margin, attributed to seasonality and demand issues for a key product. To address this, the company is actively developing and scaling up new value-added Specialty Polymer products, leveraging its R&D pipeline. This diversification aims to reduce dependence on a few products and customers, potentially leading to a slightly lower but more stable EBIT percentage compared to historical highs.

The 50-50 joint venture, Ester Loop Infinite Technologies Limited (ELITe), focused on chemical recycling of polyester textile waste, is advancing. Land acquisition for the project is in progress, and Toyo Engineering has been appointed as the engineering consultant, marking the final engineering phase before construction. The project is expected to be operational by the end of calendar 2028 or Q1 2029. Upon completion of its first phase (70,000 tonnes capacity), ELITe is projected to generate approximately $150 million in revenue at 100% capacity utilization, with an EBITDA margin of 40-45%.

For FY27, the company plans a total capex of INR70 crores, with INR15 crores earmarked for new projects and the remainder for sustenance and maintenance. These new projects are expected to deliver an attractive IRR exceeding 20%. As of March 31, 2026, total consolidated debt stood at approximately INR730 crores, with annual repayments of INR85 crores. Management aims to limit new borrowings to below INR40 crores for FY27, targeting a significant reduction in overall debt by March 31, 2027, and expects a return on capital employed of over 20% in the next 8-10 quarters.

The company incurred significant non-cash mark-to-market losses on foreign currency liabilities in FY26, which contributed to the consolidated net loss. This was primarily due to the unprecedented^🌐 appreciation of the Euro against the INR, moving from INR84 to INR112 over 15 months. Management acknowledged this impact and outlined a two-pronged strategy: balancing the impact with exports and actively hedging to mitigate future losses from currency depreciation, ensuring financial stability.