Neogen Chemicals Navigates Q2 FY26 with Resilience and Strategic Vision

Neogen Chemicals Limited, a prominent Indian manufacturer of bromine and lithium-based specialty chemicals, has demonstrated remarkable operational resilience in the second quarter of Fiscal Year 2026 (Q2 FY26). Despite facing significant challenges, including the temporary unavailability of its Dahej plant due to a fire incident, the company reported a consolidated revenue of INR 208.7 crore, marking an 8% year-on-year growth. This growth was primarily driven by sustained demand and higher volumes across its base business and organolithium portfolio, effectively mitigating the impact of the plant outage. However, profitability metrics such as EBITDA and Profit After Tax (PAT) were constrained by increased operating costs, higher insurance premiums, and elevated interest expenses, with consolidated PAT standing at INR 3.4 crore.

The company's performance highlights a strategic pivot, where production was swiftly relocated to alternate plants and supplemented by capacity from key outsource partners. This agile response ensured business continuity and maintained volume trajectory. The Neogen Ionics business, a key growth vertical focused on lithium-ion battery materials, is currently in its startup phase, which also contributed to the pressure on consolidated performance. Management has acknowledged these challenges transparently, providing detailed explanations for the impact on profitability and the delays experienced in the battery chemicals segment.

Strategic Initiatives and Future Outlook

Neogen Chemicals is actively pursuing several strategic initiatives to drive its long-term growth, particularly in the burgeoning battery materials sector. A significant development in Q2 FY26 was the enhancement of corporate governance practices. The Board approved the separation of the Chairman and Managing Director roles, appointing non-promoter family members to key leadership positions, effective October 1, 2025. Mr. Anurag Surana was designated as the Non-Executive Chairman of Neogen Chemicals Limited, and Mr. Sanjay Mehta as the Non-Executive Chairman of Neogen Ionics Limited, reinforcing the company's commitment to robust independent oversight.

In a crucial move to bolster its financial flexibility, Neogen successfully raised INR 200 crore through a private placement of non-convertible debentures (NCDs). These funds are earmarked for executing ongoing growth projects and expediting the rebuilding of the Dahej organic plant, pending the final insurance payout. This proactive fundraising demonstrates management's commitment to maintaining its growth trajectory despite unforeseen events.

The company's foray into the battery chemicals segment through Neogen Ionics is gaining momentum. The greenfield facility at Pakhajan, Dahej PCPIR, for electrolyte using MUIS technology and lithium electrolyte salt is progressing, with mechanical completion expected before the end of the current fiscal year. Commercial production of electrolyte is anticipated in H1 FY27, followed by lithium electrolyte salt in H2 FY27. A significant milestone was achieved with a leading Indian gigascale customer completing the Production Part Approval Process (PPAP) for electrolyte supply, positioning Neogen as a key domestic supplier. Furthermore, the company received provisional approval for lithium electrolyte salt from a key international customer, with final approval expected in Q4 FY26 or Q1 FY27.

Another pivotal development is the formation of Neogen Morita New Materials Limited (NML), a joint venture with Morita Investment (MIL). This Indo-Japan JV aims to produce, develop, and sell solid LiPF6 salt, a critical ingredient for lithium-ion batteries. This partnership is strategically aligned with global trends, particularly the US government's 45X tax credits, which necessitate non-Foreign Entity of Concern (FEOC) compliant suppliers by 2027. Neogen's ability to offer a non-FEOC compliant solution provides a significant competitive advantage in the international market. The Patancheru plant also saw an expansion, increasing its capacity from 120 MT active to 300 MT active in 2025.

Navigating Challenges and Future Growth

While the battery chemicals business shows immense promise, management has acknowledged delays in electrolyte demand and final approval for electrolyte salt, pushing expected revenue timelines. However, the company remains confident in its long-term outlook. Neogen Ionics is guided to achieve INR 400 crore to INR 500 crore in revenue in FY27, with full utilization of the battery chemicals facility expected by FY29, potentially generating INR 2,400 crore to INR 2,900 crore in revenue. For its standalone base business, the company targets INR 950 crore to INR 1,000 crore in FY27, with a projected double-digit growth in FY28 through plant optimization.

The company's commitment to sustainability and responsible business practices was recognized with the EcoVadis Silver Medal for 2025, placing it in the top 15% for sustainability ratings. This underscores Neogen's dedication to ESG excellence, with initiatives like the Dahej Greenfield project strategically focused on clean energy transition and robust oversight of ESG risks.

Conclusion

Neogen Chemicals Limited's Q2 FY26 performance reflects a company adept at navigating operational headwinds while steadfastly executing its long-term strategic vision. The focus on expanding its battery chemicals footprint, strengthening corporate governance, and maintaining financial prudence positions Neogen for sustained growth. Despite short-term profitability pressures, the company's strategic initiatives, particularly in the lithium-ion battery materials space, are set to unlock significant value and reinforce its leadership in the specialty chemicals sector.