Aarti Industries Navigates Headwinds with Strategic Growth in Q2 FY26

Aarti Industries Limited, a prominent player in the Indian specialty chemicals sector, has demonstrated commendable resilience and strategic agility in its Q2 FY26 performance. Despite a complex geopolitical backdrop and the persistent challenge of US tariffs on select Indian chemical exports, the company delivered a robust sequential growth. For the second quarter of the fiscal year 2026, Aarti Industries reported a consolidated revenue of INR 2,250 crore, marking a significant 21% increase quarter-on-quarter. This growth translated into a substantial surge in EBITDA, which rose by 36% QoQ to INR 292 crore, primarily driven by improved capacity utilization and ongoing cost optimization initiatives. Consequently, the Profit After Tax (PAT) also saw a remarkable increase of approximately 150% QoQ, reaching INR 106 crore.

The company's performance was predominantly driven by proactive market diversification, smart investments in innovation, and disciplined project execution. Aarti Industries is actively leveraging its integrated manufacturing and product portfolio strengths to solidify its position as a global partner of choice in specialty chemicals. While near-term challenges persist, the long-term volume visibility remains healthy across most businesses, indicating a resilient performance in a volatile yet gradually improving demand environment.

Segmental Performance and Strategic Shifts

The revenue breakdown for Q2 FY26 highlights the diverse contributions from various end-use applications. The Energy segment emerged as the largest contributor, accounting for 43% of the total revenue, followed by Agrochemicals & Fertilizers at 19%, Polymer and Additives at 12%, Dyes, Pigments and Printing Inks at 11%, Pharma at 10%, and Others at 5%. This mix reflects the company's broad market presence and strategic focus areas.

Within the energy-linked portfolio, MMA (Methyl Methacrylate) delivered an exceptionally strong performance, achieving its highest-ever quarterly volumes. This was largely due to spill-over demand from Q1 and successful diversification efforts into various geographies, including Europe, the Middle East, and Africa. The favorable naphtha-to-gasoline spreads further supported robust MMA consumption. The company is actively pursuing debottlenecking initiatives to scale up MMA volumes further from Q4 FY26, with an additional 300 KT capacity planned.

In Agrochemicals, select products showed promising volume recovery, although overall margins remained under pressure. The Dyes & Pigments segment experienced muted demand growth, while the Polymer business faced significant headwinds due to US tariffs impacting Q2 volumes. The domestic pharma market, however, remained stable, providing a consistent base. Overall, margins for high-value fluoro products faced challenges from aggressive competitive pricing from China.

Driving Growth Through Capex and Innovation

Aarti Industries is committed to a disciplined capital allocation strategy to fuel future growth. The Zone 4 expansion project continues to progress as planned, with newer capacities expected to come online over the next few quarters. A new multipurpose plant (MPP) within Zone 4 is slated for commissioning in Q4 FY26, enhancing flexibility in product development. The Calcium Chloride facility is also expected to be commissioned in the ongoing quarter. A new 4,000 TPA PEDA (2-Phenyl Ethyl Diethyl Aniline) project in Zone 4, utilizing raw materials from the company's Ethylation capacity in Dahej, is also on track for Q4 FY26 commissioning, positioning Aarti Industries as a key domestic supplier to India's agrochemical industry.

In a strategic move to ensure supply security and cost efficiency, Aarti Industries entered into a long-term partnership with DCM Shriram for chlorine supply to its upcoming Zone-IV facility. This agreement will significantly enhance chlorine availability from 150 TPD to 350 TPD, supporting future downstream growth. The company's R&D efforts are also intensified in advanced materials, polymer chemistry, and other sunrise applications, aligning capabilities with emerging opportunities.

Outlook and Commitment to Stakeholders

Looking ahead, Aarti Industries anticipates a broader recovery, contingent on external trade developments. The successful negotiation of a potential India-U.S. trade deal could serve as a major catalyst for a wide range of products. The chemical sector is expected to see a gradual recovery over the next couple of years as global trade flows stabilize and pricing dynamics improve. The company's focus remains on de-risking its portfolio, broadening its product base, and strengthening its competitive position through cost optimization and disciplined execution.

Management has provided clear guidance, estimating CAPEX for FY26 at around INR 1,000 crore, with a substantially lower figure expected for FY27. The target EBITDA range for FY28 is set between INR 1,800-2,200 crore, with a Debt/EBITDA ratio of less than 2.5x and ROCE greater than 15%. Aarti Industries' commitment to innovation-led growth, strategic partnerships, and operational excellence underscores its dedication to delivering long-term value for all stakeholders.