Gandhar Oil Refinery (India) Limited — Q4 FY25 earnings call

Call held 23 May 2025

Management summary

Gandhar Oil Refinery reported a stable operational throughput with ~3% volume growth in FY25, but revenue was impacted by a decline in average realization and a significant drop in export revenue due to geopolitical issues. Despite these headwinds, the company maintained cost discipline and is strategically focusing on expanding its high-margin PHPO segment and investing INR 1,000 crores in the Vadhavan Port Project for long-term logistics benefits. Management provided a positive outlook for FY26, projecting 10-12% volume growth and improved realizations.

Highlights

  • Full Year FY25 revenue stood at INR 3,896.9 crores, with volume growth of around 3% YoY.

  • Consolidated EBITDA for FY25 was INR 175.6 crores, and PAT was INR 83.5 crores.

  • Management projects 10-12% volume growth for FY26 and expects realizations to improve from INR 76,223 per KL.

  • Signed a non-binding MoU for a Rs. 1,000 crore Vadhavan Port Project to enhance logistics efficiency and supply chain capabilities.

  • Achieved USFDA approval in October last year, leading to increased orders and volumes in the PHPO segment.

Concerns

  • FY25 export revenue decreased significantly from INR 2,402.8 crores in FY24 to INR 1,565.6 crores in FY25 due to Red Sea disruptions and geopolitical conflicts.

  • Average realization declined from INR 82,824 per KL in FY24 to INR 76,223 per KL in FY25, impacting top-line.

  • EBITDA margins have significantly fallen post-IPO, from approximately INR 320 crores (implied from analyst question) to INR 175.6 crores for FY25.

  • Higher shipping freight rates, incurring an additional Rs. 13 crores this year, impacted other expenses, though expected to stabilize.

Key financials

3 periods

Q4 FY25

  • Revenue
    ₹961.7 Cr
  • EBITDA
    ₹33.6 Cr
  • PAT
    ₹12.3 Cr
  • Standalone Manufacturing Volume
    99,934 KL

FY24

  • Average Realization
    82,824 per KL
  • Export Revenue
    ₹2,402.8 Cr

FY25

  • Revenue
    ₹3,896.9 Cr
  • EBITDA
    ₹175.6 Cr
  • PAT
    ₹83.5 Cr
  • Volume Growth
    3%
  • Average Realization
    76,223 per KL
  • Export Revenue
    ₹1,565.6 Cr

What they filed

Q1 FY27: revenue up 91.8%, net profit up 692.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue935 1,005 962 903 1,060 +13%1,167 +16%1,093 +14%1,732 +92%
EBITDA40 42 34 46 66 +65%59 +40%64 +88%281 +511%
Net profit18 20 12 26 40 +122%34 +70%37 +208%206 +692%
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

  • Capex ₹1,000 Cr Combination of equity (major partner), term loan facilities, and potentially an SPV with other partners
    • Vadhavan Port Project: terminal for storage of base oils, chemicals, other liquids, blending plant ₹1,000 Cr
    The Envisat investment stands at around Rs. 1,000 crores, subject to necessary regulatory clearance and successful bidding outcomes. We believe this project has the potential to significantly enhance our logistics efficiency and strengthen our long-term supply chain capabilities.
  • Debt Gross ₹300 Cr
    Yes, so we currently have around Rs. 300 Cr of debt. So could you give some color on debt reduction plan or is this the peak debt? No, most of the debt that you see over here, there is no debt on this standalone level. The most of the debt that you see over here is on account of our subsidiary at Sharjah. It is expected to reduce as we go ahead because the utilizations, the churning will be quicker. So I don't see us having debt beyond this. It could be incremental slightly. Otherwise, this is the peak debt.

Guidance & targets

Volume

  • Volume Growth Volume · FY26 · High confidence 10-12%
    So Financial Year '26 on a volume basis, we are projecting increased increment of about 10%-12% and we anticipate that the realizations which are currently around at Rs. 76,000 per KL will also improve.

    — Indrajit Bhattacharyya

Realization

  • Average Realization Improvement Realization · FY26 · Medium confidence Improvement from Rs. 76,000 per KL
    we anticipate that the realizations which are currently around at Rs. 76,000 per KL will also improve.

    — Indrajit Bhattacharyya

Margin

  • Gross Margins / EBITDA Margins Margin · Going forward · Medium confidence High single digit or double digit
    obviously, the endeavor is to have high single digit or double digit of gross margins going forward, EBITDA margins going forward.

    — Aslesh Parekh

  • Gross Margin Improvement from Value-Added Products Margin · When value-added products happen · Medium confidence 4%-5%
    So these value-added products are mostly in PHPO and lubricants and if and when they do happen, this will generate additional gross margin. We expect the gross margin to go up significantly by 4%-5%.

    — Indrajit Bhattacharyya

Capex

  • Next Capacity Enhancement Capex · Next 2-3 years · High confidence Not needed for 2-3 years
    So we don't see any capacity enhancement required in the next 2-3 years. After that, we see the CAPEX.

    — Indrajit Bhattacharyya

Vadhavan Port Project

  • Completion Vadhavan Port Project · FY30 · High confidence FY30
    The port is expected to have its completion by FY '30

    — Aslesh Parekh

What to watch in Q1 FY26

Freight Cost Stabilization

Coming quarters / Next quarter
Current Still high due to Red Sea route diversions, incurred Rs. 13 crores additional cost this year.
Target Stabilization and reduction, no additional freight cost.

Why it matters

Direct impact on profitability (other expenses) and overall cost structure.

There has been a slight increase in other expenses, mainly due to the higher shipping freight rates arising from the global disruptions. However, these are expected to stabilize in the coming quarters.

Risks & concerns

  • Geopolitical Challenges & Red Sea Disruptions

    high

    Led to a significant decrease in export revenue from INR 2,402.8 crores to INR 1,565.6 crores and increased shipping freight costs by Rs. 13 crores.

    Management acknowledged

  • EBITDA Margin Compression

    high

    EBITDA fell from approximately INR 320 crores (post-IPO) to INR 175.6 crores for FY25, with management aiming for high single-digit or double-digit gross/EBITDA margins.

    Analyst acknowledged

  • Softening Prices & Reduced Demand

    medium

    Average realization declined from INR 82,824 per KL in FY24 to INR 76,223 per KL in FY25, primarily due to softening prices and reduced demand in FMCG and pharma segments.

    Management acknowledged

Q&A highlights

5 direct
Sustainability of Gross Margins and Post-IPO EBITDA Decline Partial
obviously, the endeavor is to have high single digit or double digit of gross margins going forward, EBITDA margins going forward.

Analyst challenged the significant drop in EBITDA margins post-IPO, and management acknowledged the issue, setting an aspirational target for improvement.

Asked by Viraj Mehta (Enigma)

FY26 Outlook on Volume Growth and Realizations Direct
So Financial Year '26 on a volume basis, we are projecting increased increment of about 10%-12% and we anticipate that the realizations which are currently around at Rs. 76,000 per KL will also improve.

Provides clear quantitative guidance for the next fiscal year, crucial for investor modeling.

Asked by Isha Murthy (IM Capital)

Capacity Utilization and Future Capex Plans Direct
no capacity constraints at all because we have enhanced capacity at our Taloja plant last year itself and we have not yet reached that peak capacity utilization of the Taloja plant. So capacity is not a problem.

Asked by Rajeev Roy (RR Investment), Moksh Ranka (Aurum Capital)

Impact of Red Sea Crisis on Freight Costs Direct
No, the vessels are still not going through the Red Sea. The vessels are still going down, all the way down to Cape of Good Hope to go across, so that is why the freight cost still remains the same. We had expected with the coming of the recent US President that this issue will probably even out, but it has still not happened and the Red Sea still remains an issue.

Explains why freight costs remained high in Q4 FY25, despite expectations, and quantifies the additional cost incurred (Rs. 13 crores), highlighting an ongoing external risk.

Asked by Aditya (Securities Investment Management)

Vadhavan Port Project Rationale and Funding Direct
The Envisat investment stands at around Rs. 1,000 crores... We intend to set up a terminal for the storage of our base oils, chemicals and other liquids, along with blending plant in the jetty.

Asked by Kevin Mehta (Star Investment), Bhavesh Patel (Patel Investments)

USFDA Approval and Diversification Strategy Direct
we got a USFDA approval in the month of October last year. The idea was to expand our PHPO portfolio, which we are focused on and which we are doing by adding new products. We have started getting orders from customers after this USFDA approval. The volumes have increased.

Confirms the positive impact of USFDA approval on the PHPO segment and clarifies the strategic rationale behind the Vadhavan project as a lateral integration for logistics efficiency rather than a pure diversification.

Asked by Bhavesh Patel (Patel Investments)

3 min read 7 chapters

Detailed narrative

Q4 & FY25 Financial Performance Overview

Gandhar Oil Refinery reported Q4 FY25 revenue of INR 961.7 crores and full-year FY25 revenue of INR 3,896.9 crores. Despite a healthy volume increase of around 3% from FY24 to FY25, revenues were impacted by a reduction in average realization from INR 82,824 per KL in FY24 to INR 76,223 per KL in FY25. Consolidated EBITDA for Q4 FY25 stood at INR 33.6 crores, and for the full year, it was INR 175.6 crores, with PAT at INR 12.3 crores and INR 83.5 crores respectively.

Impact of Geopolitical Challenges on Exports

The company's international business, contributing around 40.2% of total sales, faced significant headwinds. Export revenue decreased from INR 2,402.8 crores in FY24 to INR 1,565.6 crores in FY25, primarily due to shipping disruptions in the Red Sea and ongoing geopolitical conflicts. To mitigate this, the company strengthened its domestic market presence, leading to a compensatory rise in domestic sales.

Operational Efficiency and Cost Management

Despite pricing headwinds, Gandhar Oil maintained cost discipline, achieving reductions in both finance and employee costs in absolute and percentage terms. Standalone manufacturing volume grew to 99,934 KL in Q4 FY25. However, other expenses saw a slight increase, mainly due to higher shipping freight rates, which added approximately Rs. 13 crores this year, though these are expected to stabilize in coming quarters.

Strategic Focus on PHPO Segment and USFDA Approval

The company continues to expand its presence in the high-margin White Oil segment, particularly in Personal Care, Healthcare, and Performance Oil (PHPO). Following USFDA approval in October last year, the PHPO portfolio has seen increased orders and volumes. Management is actively working on adding new value-added products within this segment to further strengthen margins, with an expectation of a 4-5% increase in gross margin from these products.

Vadhavan Port Project Investment

Gandhar Oil has signed a non-binding agreement with JNPA for the proposed Vadhavan Port Project, a greenfield deep-draft major port expected to complete by FY30. The company intends to invest around INR 1,000 crores to set up a terminal for storage of base oils, chemicals, and other liquids, along with a blending plant. This strategic investment aims to significantly enhance logistics efficiency and strengthen long-term supply chain capabilities.

Outlook and Future Growth Projections

For FY26, management projects a volume growth of 10-12% and anticipates an improvement in average realizations from the current INR 76,223 per KL. The company aims to achieve high single-digit or double-digit gross and EBITDA margins going forward, leveraging inventory optimization and new product additions. No capacity enhancement is foreseen for the next 2-3 years, as current installed capacity is sufficient.

Debt Profile and Capital Allocation Strategy

The company currently reports around INR 300 crores of debt, primarily associated with its Sharjah subsidiary, and expects this to reduce with quicker utilizations. Management emphasized having no long-term debt on a standalone basis and a strong balance sheet to fund new projects. While the Vadhavan project will be funded through a combination of equity, term loans, and potentially an SPV, the company remains open to inorganic growth opportunities.

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