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.