Galaxy Surfactants Limited — Q2 FY26 earnings call

Call held 13 Nov 2025

Management summary

Galaxy Surfactants faced a challenging Q2 FY26 with flat consolidated volumes and a 5% YoY decline in H1 EBITDA, primarily due to adverse US tariffs, elevated fatty alcohol prices, and temporary GST-related inventory adjustments in India. While Mass Specialties and certain international regions showed growth, Performance Surfactants declined. The company is adapting by developing alternate surfactants and exploring shifting production to Egypt to mitigate tariff impacts, expecting India recovery from Q4 FY26.

Highlights

  • H1 FY26 consolidated revenues grew 2% year-on-year.

  • Mass Specialties (non-US geographies) clocked double-digit volume growth in Q2.

  • Latin America and Asia Pacific maintained strong growth with double-digit YoY gains.

  • Super Specialty prestige segment (TRI-K) continued to perform well.

  • Market share gains registered in India with non-Tier 1 accounts.

Concerns

  • H1 FY26 EBITDA declined by 5% year-on-year.

  • Q2 Performance Surfactants registered a high-single-digit decline.

  • US tariffs (additional 50%) adversely impacted existing business and pipeline projects, with a full-year impact of 3% to 5% of FY25 EBITDA.

  • Elevated fatty alcohol prices adversely impacted volumes in India and led to reformulation shifts.

  • Temporary headwinds in India due to GST rationalization causing inventory adjustments.

  • AMET region recorded a modest single-digit volume decline QoQ and high-single-digit YoY due to intensified competition in Egypt.

Key financials

3 periods

Headline

  • Consolidated Revenue
    —
    YoY +2%
  • Consolidated EBITDA
    ₹251 Cr
    YoY -5%

Q2 FY26

  • EBITDA per metric ton
    ₹17,300
  • Consolidated Volumes
    —
    YoY 0% QoQ 0%

H1 FY26

  • EBITDA per metric ton
    ₹18,700

What they filed

Q1 FY27: revenue up 39.4%, net profit up 110.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,063 1,042 1,145 1,278 1,326 +25%1,329 +28%1,315 +15%1,782 +39%
EBITDA128 106 127 124 110 −14%119 +12%122 −4%249 +101%
Net profit85 65 76 79 66 −22%59 −9%62 −18%166 +110%
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.

Capital allocation

medium confidence
  • Capex Capex disclosed
    • Projects initiated 1.5 years back, mostly in India, some in Egypt, coming to fruition
    Yes. Most of them will be in India, some of it in Egypt, but most of it will be in India in terms of what projects we initiated 1.5 years back, okay. Are they coming to fruition? So those are all what was there in the capex, capital work in progress.

Guidance & targets

Volume

  • India Numbers Improvement Volume · from Q4 FY26 · High confidence steady improvement
    With both these steps, we believe we should see steady improvement in India numbers starting from Q4', '26.

    — K. Natarajan

Product Commercialization

  • Reformulation Approvals & Commercialization Product Commercialization · from Q4 FY26 · High confidence approvals to come in this quarter and business to commercialize
    We expect the requisite approvals to come in this quarter and business to commercialize from Q4 FY '26.

    — K. Natarajan

Profitability

  • Q3 Performance Profitability · Q3 FY26 · High confidence similar to Q2
    I think I'd be happy if I end Q3 on the same lines as Q2,

    — K. Natarajan

Financial Impact

  • US Tariff Impact on EBITDA Financial Impact · full year · High confidence 3% to 5% of FY '25 EBITDA
    Cumulatively, the impact for the whole year was in the range of 3% to 5% of our FY '25 EBITDA.

    — K. Natarajan

What to watch in Q3 FY26

India Volume Recovery

from Q4 FY26
Current Flat volumes due to GST adjustments and reformulation
Target Gradual but steady recovery

Why it matters

India is a key domestic growth engine, and its recovery is crucial for overall volume and revenue growth.

While the short-term disruption came as a surprise given that nobody was anticipating rationalization of GST rates, we remain confident of a gradual but steady recovery once the adjustments get done with. We're seeing the first signs of the same in November and basis the discussions with our large customers, we do expect the same to continue.

Risks & concerns

  • US Tariffs on Indian Exports

    high

    Additional 50% tariffs adversely impacting existing business and pipeline projects, with a full-year impact of 3-5% of FY25 EBITDA.

    Management acknowledged

  • Elevated Fatty Alcohol Prices

    high

    Persistently high prices hurting business, leading to reformulation shifts in India and AMET regions.

    Management acknowledged

  • GST Rationalization Impact in India

    medium

    Temporary headwinds due to inventory adjustments by large FMCG players, impacting Q2 and festive season volumes.

    Management acknowledged

  • Intensified Competition in Egypt

    medium

    Competition from backward-integrated local players leading to market share erosion in the AMET region.

    Management acknowledged

  • Inflationary Impact on Consumer Demand (US)

    medium

    Murmurs of inflation causing customers to delay commercializing projects in the pipeline.

    Management acknowledged

  • Supply Chain Disruptions

    low

    Shipment delays due to ongoing port congestion and blank sailings.

    Management acknowledged

Q&A highlights

7 direct
Reformulation impact on India volumes and its structural nature Direct
So this is more in terms of the demand environment for all our customers not being so healthy in India, coupled with the inflationary impact, they're all trying to see how they are able to manage the short-term. And that's why we're very clear that this is not structural. ... And probably, I think we see that in India, we could have done in the quarter, about 3,000 to 4,000 tons higher volume if this reformulation had not happened.

Clarifies that reformulation is a short-term response to inflation, not a structural shift, and quantifies its immediate volume impact in India.

Asked by Sanjesh Jain

India growth outlook for Q3 and Q4 FY26 Partial
See, with regard to Q3, the way I see it is that I'm looking at in a positive side, it being almost similar to what Q3 would be because all our customers, in fact, even if I see their commentary, all of them are saying that even into October and the festive season got impacted because of the GST. ... So I'd be very happy if we are able to end our numbers on similar lines as Q2,

Indicates continued near-term challenges in India (Q3 similar to Q2) due to GST impact and external winter, with recovery expected later.

Asked by Sanjesh Jain

Continued decline in AMET region and Egypt competition Direct
See, what is happening is that if you look at all these markets, essentially, Africa and Middle East, Turkey is majorly led a home care market in terms of end-use applications that we cater to, personal care does we cater to. But if you see in AMET market, there's a significant part that we are participating. Now these high prices of feedstock, mainly fatty alcohol is also prompting some of them to be looking at whether they reduce the active ingredient in the formulation, whether they can add a little bit more of a petrochemical ingredient into the formulation.

Explains the AMET decline is due to intensified competition from backward-integrated local players in Egypt and reformulation driven by high fatty alcohol prices.

Asked by Sanjesh Jain

Gross margin per kg drop despite RoW volume growth Direct
So what is also important is that it's a question of the composition, okay? So if you look at, say, in the rest of the world, we also have a combination of Performance Surfactants and Specialty. Okay. So that's what if you see when I told in my speech that the Tier 1 impact due to reformulation that has happened majorly in India, we have recouped our Tier 2, Tier 3 customers by being aggressive with them in terms of our getting higher share of their business.

Clarifies that while RoW volumes grew, the product mix and market share gains in India (Tier 2/3) influenced the overall margin, indicating a shift in sales composition.

Asked by Arun

Typical duration for reformulation reversal Direct
Yes. So, the reversal typically, what I've seen is that those reversals happen probably in about 12 to 15 months. That's what we have seen earlier after the reformulation has happened. But obviously, the reformulations start happening after the oleochemical prices start correcting and the customers do see that it is going to sustain. And based on the last five experience that I've had, it's been anywhere from 12 to 15 months.

Provides a historical timeline for recovery from reformulation impacts, suggesting a prolonged period for the current situation.

Asked by Arun

Risk of permanently losing US business due to tariffs Direct
In fact the first question is when we talk to our customers they are not happy with this tariff coming in because you know that every customer would want to have a diversified vendor base and also more dependable vendors. So they are not in a good situation where they are looking at the earliest opportunity where they can get back to business with us, okay? This tariff of 50% is only making it very difficult. ... So we are working with customers on approvals. We have already started some of it being shifted there.

Management acknowledges customer dissatisfaction with tariffs and their desire to return, indicating the potential for business recovery if tariffs are resolved, and outlines mitigation efforts.

Asked by Arun

Market share gains in India and their impact Direct
What I said was we gained a larger share of our business with Tier 2 and Tier 3 customers. Because in Tier 1, we did get impacted by the reformulation. So that's what I said, but that, to a large extent, mitigates but not fully the sort of volume impact. So it is not an overall market share.

Clarifies that market share gains were specific to Tier 2 and Tier 3 customers, partially offsetting Tier 1 volume loss due to reformulation, rather than an overall market share increase.

Asked by Aditya Khetan

Reasons for steep raw material prices Direct
So there is essentially, it's because I think the lower yield that has happened in Malaysia and Indonesia is what is impacting. But then there is also a situation in terms of certain positions the market takes. So we now need to wait because the underlying demand, really world over, the way we see it is not really keeping pace, whether you look at Europe or you look at US.

Explains that raw material price steepness is due to lower yields in key producing regions (Malaysia, Indonesia) and a disconnect between market positions and underlying global demand.

Asked by Aditya Khetan

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview

Galaxy Surfactants reported flat consolidated volumes year-on-year and quarter-on-quarter for Q2 FY26. H1 FY26 consolidated revenues grew 2% YoY, but EBITDA declined by 5% YoY to INR251 crores. The EBITDA per metric ton stood at INR18,700 for H1 FY26 and INR17,300 for Q2 FY26. Performance Surfactants registered a high-single-digit decline, while Mass Specialties (driven by non-US geographies) achieved double-digit volume growth.

Impact of US Tariffs and Mitigation Strategies

The US government's imposition of an additional 50% tariff on Indian exports significantly impacted Galaxy's business, affecting both existing operations and pipeline projects. The cumulative impact for the full year is estimated to be 3% to 5% of FY25 EBITDA. To mitigate this, the company is actively working on shifting production of certain products to its Egypt plant, with some material already shifted and customer approvals in progress. Additionally, resources are being diverted to build pipelines in Latin America, APAC, and Europe.

Challenges in India Market and GST Impact

The India market faced distinct challenges in Q2 FY26. While the rationalization of GST rates is structurally positive, it led to temporary inventory adjustments by large FMCG players, causing softer uptake and subdued volumes. This recalibration adversely impacted volumes, with effects continuing into the festive season. Management expects a gradual but steady recovery once these adjustments are complete, with initial signs observed in November.

Reformulation Due to Elevated Fatty Alcohol Prices

Persistently high fatty alcohol prices have significantly impacted the business, accelerating reformulation shifts towards petrochemical-based ingredients, particularly in the performance segment. This led to an estimated 3,000-4,000 tons lower volume in India for the quarter. Management views this as a temporary, not structural, issue, noting that such reformulations typically reverse within 12-15 months once oleochemical prices correct and stabilize.

Regional Performance Variances

The AMET region recorded a modest single-digit volume decline QoQ and a high-single-digit decline YoY, primarily due to intensified competition in Egypt from backward-integrated local players and reformulation. In contrast, Latin America and Asia Pacific maintained strong growth, delivering double-digit YoY gains across both Performance and Specialty Products segments, partially offsetting declines in other regions. North America saw a decline due to reciprocal tariffs impacting demand and margins in the Specialty Care segment.

New Product Development and Capacity Expansion

Galaxy is actively developing alternate surfactants to address reformulation trends, with requisite approvals and commercialization expected from Q4 FY26. The company also launched five new products in the Sun Care range (second-generation sunscreen molecules) in November 2025, receiving positive customer feedback. Capital Work-in-Progress (CWIP) stood at INR260 crores as of FY25, primarily for projects initiated 1.5 years ago in India and Egypt, which are now nearing fruition.

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