Gandhar Oil Ref.

Gandhar Oil Refinery delivered robust financial results for Q2 and H1 FY26. Consolidated manufacturing volumes for H1 FY26 grew 9% YoY to 261,524 KL. Q2 FY26 revenue increased 17.37% sequentially to INR 10,599 million, while EBITDA surged 43.04% sequentially to INR 658 million. Profit after tax for Q2 FY26 more than doubled YoY, growing 115.76% to INR 397 million, reflecting strong operational performance and disciplined cost management.

The company's strategic focus on PHPO (personal care, health care, and performance oils) is yielding results, accounting for 49% of H1 FY26 revenues. Management highlighted PHPO as the fastest-growing segment with strong demand from pharmaceuticals and personal care. Initiatives to strengthen this segment include expanding into new geographies, offering additional products to existing customers, acquiring newer customers, and increasing wallet share, with an aim to achieve higher margins.

Gandhar Oil expects to achieve its historical volume growth rate of 10-12% for FY26. Current capacity utilization stands at 85-90% for Silvassa and 95% for Taloja, while Texol UAE is at 70-72% and is projected to reach full utilization in 1.5 to 2 years. The company does not foresee the need for additional capacity expansion for the next 2-3 years, prioritizing catching up with existing capacity utilization.

Margin improvement in Q2 FY26 was primarily driven by a reduction in finance costs, attributed to lower SOFR (sub-5%) and conversion of overseas suppliers to non-LC terms, reducing discounting interest. Additionally, disciplined cost management contributed to better margins. The manufacturing gross margin spread for Q2 FY26 was INR 8,662 per KL, and management expects this improvement to carry forward into the next two quarters.

The company maintains a healthy current ratio and a negligible debt-to-equity ratio, ensuring strong liquidity. Cash on hand, including fixed deposits, is in the range of INR 70-80 crores. While no immediate capacity expansion is planned, the Silvassa capex, primarily for automobile lubricants, is expected to significantly boost high-margin volumes by approximately 19,000 kL per annum once operational. The company remains open to inorganic growth opportunities and is currently evaluating options.

Management expressed optimism that major headwinds, including global consumption softness, geopolitical issues, and logistical challenges, are now behind them. They anticipate an upward trend in capacity utilization and profitability margins going forward^⏳. While freight costs remain high, the company has successfully passed these on to most customers, and Red Sea issues have largely stabilized. The focus remains on operational excellence and leveraging growth opportunities in high-purity product segments.