Gulshan Polyols Limited: Ethanol Fuels Strong Q2 FY26 Growth Amidst Strategic Shifts

Gulshan Polyols Limited, a diversified Indian manufacturer, has reported a robust financial performance for the second quarter of Fiscal Year 2026 (Q2 FY26), signaling a significant turnaround driven primarily by its thriving ethanol segment. The company recorded an impressive 23% year-on-year growth in revenue, reaching Rs. 541.7 crore. This top-line expansion translated into an exceptional bottom-line surge, with Profit After Tax (PAT) witnessing a remarkable 1092% year-on-year increase to Rs. 15.5 crore. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) also saw a substantial jump of 139% year-on-year, reaching Rs. 41.9 crore, with EBITDA margin improving to 7.7% from 4.0% in the corresponding quarter last year. This strong performance underscores the company's strategic capacity ramp-ups and operational efficiencies, particularly within its bio-fuel division.

The company's business portfolio spans three main segments: ethanol & distillery, grain processing, and mineral processing. The ethanol segment emerged as the primary growth driver, delivering its strongest performance to date. This growth was underpinned by successful capacity ramp-ups across all plants and favorable market conditions, including the government's ethanol blending program. In contrast, the grain processing division faced significant headwinds, leading to underperformance. Management transparently acknowledged that the starch business within this division was incurring losses due to industry-wide overcapacity and intense competition, including from China. As a strategic response, the company temporarily halted starch production, which contributed to bringing the overall grain processing division back into positive territory. The mineral processing division, Gulshan Polyols' oldest business, continued to deliver a stable performance, maintaining consistent margins and contributing steadily to the company's overall profitability.

Segmental Performance and Strategic Adjustments

The ethanol segment's robust performance is a testament to Gulshan Polyols' successful execution of its expansion plans. The company's 810 KLPD distillery is anticipated to achieve full capacity utilization in FY26, targeting a production of 25 crore litres. This growth is further supported by Production Linked Incentives (PLI) from state governments; the 500 KLPD Madhya Pradesh plant receives ₹1.5 per litre from July 2023, and the 250 KLPD Assam plant will receive ₹2 per litre from May 2025. These incentives, coupled with the availability of FCI rice for ethanol production, have significantly improved the segment's cost structure and operational efficiency.

In contrast, the grain processing division, which includes products like starch and starch derivatives, faced severe challenges. The industry experienced overcapacity, intensified competition, and geopolitical disruptions, leading to unviable operating conditions for certain products. Management's decision to temporarily halt starch production, a loss-making activity, demonstrates a pragmatic approach to resource allocation and profitability protection. Despite this, other products like Sorbitol and Fructose remain in production. The company expects a recovery in the grain segment in the second half of the current calendar year, driven by corrections in raw material prices. The mineral processing division, producing products like calcium carbonate, continues to be a pillar of stability, consistently delivering strong margins and steady demand.

Outlook and Future Initiatives

Looking ahead, Gulshan Polyols is optimistic about sustaining its growth momentum. The company has set an ambitious target of achieving an overall revenue of approximately Rs. 2,800 crore by FY27, aiming for 80-90% capacity utilization across all its divisions. For FY26, the management projects a 20% revenue growth over FY25. The focus remains on maximizing the potential of the ethanol segment, leveraging government support, and improving operational efficiencies. The company is also exploring new growth avenues, with a feasibility study underway to assess the viability of bio-diesel production, indicating a commitment to diversification and sustainable practices.

Management's candid discussion on working capital requirements, driven by revenue growth and the shift to advance payments for certain raw materials, reflects a transparent approach to financial management. While borrowings have increased to support this growth, the company emphasizes its conservative stance and reliance on collections. Gulshan Polyols' ability to adapt to market challenges, optimize its product portfolio, and capitalize on strategic opportunities positions it for continued growth and improved profitability in the coming fiscal years. The company's journey through Q2 FY26 highlights strategic clarity and disciplined execution, reinforcing investor confidence in its long-term trajectory.