Yasho Industries Limited

Yasho Industries reported H1 FY26 revenue of INR 382.6 crores, marking an 11.8% year-on-year growth, significantly supported by a strong 30% volume growth. However, Q2 FY26 revenue was marginally lower sequentially at INR 183.6 crores, though still up 9.6% YoY, primarily due to pricing pressure and deferred export orders linked to tariffs. Despite these challenges, the company maintained profitability with an EBITDA margin of 18.2% and a PAT margin of 2.65% for Q2 FY26, attributed to operating discipline and improved product mix.

The company achieved two key strategic milestones: signing a 15-year long-term supply agreement with a global MNC for lubricant derivatives, expected to generate approximately INR 150 crores in annual revenue from FY27, with the associated plant becoming operational by Q4 FY27. Additionally, a new R&D laboratory was successfully commissioned on October 29, 2025, following an investment of INR 23 crores. This R&D focus aims to drive innovation-led growth, with R&D opex projected to increase from INR 1 crore previously to INR 5 crores in FY26 and INR 8-10 crores in FY27.

The external environment, particularly tariff pressures^🌐 and slow demand in key export markets like the US, significantly impacted operations. Approximately 40% of the 25% US business was affected by tariffs, leading to Pakhajan facility operating below optimal utilization (below 50%) in Q2. To mitigate this, Yasho is actively exploring alternate geographies and engaging with customers to regain business. Management expects exports to constitute almost 70% of total revenue within 6-18 months, indicating a strategic shift towards diversification.

Working capital and gross debt saw a temporary increase in Q2 due to inventory buildup from tariff-related export delays. However, management is focused on normalizing cash flows and optimizing inventory, aiming to reduce inventory days from 210 to 160-175 by March. The company has no intention to reduce absolute debt but targets a debt-to-EBITDA ratio of 3-3.5 by FY27, driven by EBITDA growth. Long-term debt repayments commenced in April 2025.

Due to the ongoing tariff issues, Yasho Industries revised its FY26 revenue guidance downwards from INR 900-1000 crores to INR 800-850 crores. While INR 23 crores were spent on the R&D lab and INR 20 crores on existing capacity expansion, INR 45 crores of planned capex for the current year remains unspent, awaiting clarity on the business climate. New capex for the MNC project is estimated at INR 50-75 crores, expected to generate INR 250 crores in revenue within 12-24 months of becoming operational.