Aarti Industries reported a resilient Q3 FY26 performance, posting revenues of Rs. 2,492 crore (up 11% Q-o-Q), driven by volume growth in key products like MMA and NT. EBITDA rose to Rs. 323 crore (up 11% Q-o-Q). Management highlighted structural tailwinds from US-India and EU trade deals, and China’s ‘anti-involution’ policy, which are expected to aid margin recovery. The company confirmed an estimated FY26 CAPEX of Rs. 1,100 crore.
Q3 FY26 Financial Highlights Show Resilience
Aarti Industries Limited announced its financial results for Q3 FY26, noting that performance was largely in line with the previous quarter, with incremental upside on the topline. Revenue for the quarter stood at Rs. 2,492 crore, marking an 11% Q-o-Q increase, primarily driven by robust volume growth across products such as MMA, NT, and DCB. The company reported witnessing the resumption of U.S. volumes, leading to better operating leverages despite absorbing some U.S. tariffs.
Consequently, EBITDA surged to Rs. 323 crore, an 11% Q-o-Q increase. Profit After Tax (PAT) for the quarter reached Rs. 133 crore, a significant 25% Q-o-Q jump, attributed to higher operational performance and economies of scale. Management noted a one-time exceptional expense of Rs 15 crore related to the implementation of the New Labour Code.
Exports constituted the highest share, accounting for about 65% of total revenues.
Positive Global Macro Tailwinds
Management detailed several structural shifts favoring the Indian chemical sector. Key factors include the recently concluded India – EU Free Trade Agreement (FTA), expected to drive long-term growth opportunities. The company is also monitoring China’s ‘anti-involution’ strategy, which aims to curb hyper-competition and excess capacity, potentially leading to a more rational global pricing environment. Furthermore, the recently announced US-India Trade deal is expected to boost business in the U.S.
Segment Performance Review
Energy Business (MMA)
The energy business, led by MMA, remains a key growth driver with robust volumes. Management is scaling up capacity from about 290+KT to about 360 KT, expected to be ready by the end of the current fiscal year (Q4FY26). The long-term strategic view is for MMA to eventually constitute 30% to 40% of the total portfolio.
Polymers and Benzene Chemistries
The Polymers segment saw mixed results. PDCB demand saw an uptick due to PPS growth in the EV segment. The company is undertaking debottlenecking efforts to increase DCB capacity from 120 to 140 KTPA. For Benzene and Toluene-based chemistries, customer discussions have shifted to be more R&D-focused and value-driven, pivoting the future strategy towards Advanced Materials.
Agrochemicals and Pharmaceuticals
These segments maintained stable volumes, but pricing remained subdued due to persistent Chinese dumping. Management anticipates margin improvement in the medium term due to the evolving Chinese tariff stance.
Operational Excellence and Capex Outlook
Cost-efficiency programs are nearing completion, with deployment of AI and digital transformation tools now initiated across plants for process control and optimization.
Zone 4 and Capital Expenditure
Zone 4 is anticipated to commission its major blocks (MPP, Chloro toluene) during the current calendar year using indigenous technology. The total CAPEX for Zone 4 is estimated in the range of INR1,600 crore to INR1,800 crore, with the bulk deployed this year.
Driven by fast-track expansions for MMA, DCB, and PEDA, the estimated FY26 CAPEX is raised to about Rs. 1,100 crore (from the earlier guidance of Rs. 1,000 crore). Management expects FY27 CAPEX to be significantly lower as the major Zone 4 deployment concludes.
Q&A Insights on Tariffs and Strategy
- US Tariff Impact: The reduction in U.S. tariffs (from over 50% to now 18% plus) is expected to accrue margin benefits to all players, with new contract negotiations factoring in this reduction.
- PDCB Contribution: PDCB accounts for 15% to 20% of total U.S. exports, while MMA contributes 50% to 60%.
- China Anti-Involution: The removal of the VAT subsidy on chemical exports from China led to an immediate impact, with NCB chain pricing rising by almost 7%-10% within days.
- JVs Progress: The Superform JV commissioning is expected in Q1FY27, focusing on agrochemicals, paints, and coatings. The RESL JV commissioning is anticipated in H1FY27.
Source: BSE
