Gulshan Polyols Limited

Gulshan Polyols reported a strong Q3 FY26, with consolidated EBITDA margins reaching 13.7%, up 920 basis points year-on-year, and 9M FY26 margins at 9.4%. Revenue for the quarter stood at ₹626.7 crores, contributing to a profit after tax of ₹40.9 crores, a significant 504% increase year-on-year. This robust performance was primarily driven by the ethanol segment and softening raw material prices, aligning with the company's stated guidance.

The ethanol business delivered its strongest results to date, fueled by successful capacity ramp-up in Madhya Pradesh and Assam. The company holds orders worth approximately ₹1,200 crores, translating to 17 crore litres for ESY 25 and 26, against a total production capacity of 26 crore litres per annum. Government policies, including the mandate for ethanol producers to procure 40% of rice from FCI at a fixed price, have softened open market prices for key raw materials like maize and broken rice, leading to meaningful margin improvement. Sustainable EBITDA margins for ethanol are expected to be in the ₹9-10 per litre range, or 12-13% including PLI.

The grain processing segment continues to face headwinds due to industry-wide overcapacity in starch, which has kept starch prices under pressure and negatively impacted margins. While sorbitol and fructose remain EBITDA positive, the starch business is a drag. To address this, the company has rationalized loss-making starch volumes and is implementing operational efficiency improvements, including the introduction of an RDF boiler at its Muzaffarnagar plant, with expected positive impact on power and fuel costs within the next three months. The segment is expected to contribute ₹800 crores to revenue in the current year, with a mix of 60% from sorbitol/by-products, 30% starch, and 20% fructose.

The mineral chemical segment delivered steady performance, meeting expectations with consistent demand and operational execution. This segment provides margin resilience and predictable cash flows, contributing to the overall stability of the company's financial profile. It continues to be a reliable part of the revenue mix, balancing the more volatile grain processing segment.

The company is focused on improving cash flow and reducing working capital utilization through FY27, with no new capex planned for this period. A planning stage for future capex will occur in FY27, with fresh investments expected in FY28. These future investments will target the specialty chemical space, focusing on value-added products and import substitutes not currently manufactured in India, indicating a strategic shift towards higher-value offerings. The last capex of ₹500 crores in the ethanol segment generated ₹1,500 crores in revenue, setting a benchmark for future investments.

Softening raw material prices, particularly for maize and broken rice, were a key driver of margin expansion in Q3 FY26. The government's policy requiring 40% FCI rice usage for ethanol production has improved overall grain availability and liquidity. While ethanol produced from FCI rice has lower EBITDA margins, the overall availability has allowed for better margins in the remaining 60% of raw material procurement. The company views the import of maize DDGS as positive, as it helps improve price realization for domestic DDGS, which has superior protein and oil content.

Management views the 20% ethanol blending target as just the beginning, with expectations for further increases to 24-25% with current engines and eventually higher levels with flexi-fuel vehicles. The company aspires to achieve a top line of approximately ₹2,300 crores for FY26, with consolidated EBITDA margins of 9-10%. For FY27, revenue is targeted at ₹2,600-2,800 crores, assuming 80-90% capacity utilization, with a potential to reach ₹3,000 crores with existing infrastructure. Full utilization of distillery capacity is expected in FY26 and FY27, supported by improving industry demand.