Epigral Limited Navigates Q2 FY26 with Strategic Focus Amidst Market Headwinds

Epigral Limited, a prominent integrated chemical manufacturer in India, recently announced its financial results for the second quarter of Fiscal Year 2026 (Q2 FY26). The company reported a revenue of 589 crore, marking a 7% decline year-on-year and a 4% sequential drop from the previous quarter. Profit After Tax (PAT) for Q2 FY26 stood at 51 crore, a significant 36% decrease compared to the same period last year. The EBITDA margin also saw a contraction, settling at 23% in Q2 FY26, down from 27% in Q1 FY26 and 29% in Q2 FY25. These figures reflect a challenging quarter influenced by reduced realizations in certain product categories, lower plant utilization, and the lingering effects of an extended monsoon season.

Management attributed the subdued performance primarily to an extended monsoon, which is typically an off-season for some products, leading to a volume drop. Subdued demand and ongoing plant maintenance work also contributed to the lower utilization levels. Despite these headwinds, Epigral's management expressed optimism for the second half of FY26, anticipating a recovery in sales volume and overall performance as the monsoon concludes and maintenance activities are completed. The company's strategic focus remains on its high-growth derivative and specialty chemical segments, which contributed 50% to the revenue in Q2 FY26, a balanced split with its Chlor-Alkali business.

Financial Snapshot: Q2 FY26 Performance

*Note: PAT for Q1 FY26 and H1 FY26 includes a reduction of deferred tax liability by 81 crore due to a shift to a new tax rate of 25.17%. Excluding this, PAT would be 79 crore for Q1 FY26 and 131 crore for H1 FY26.

Strategic Growth and Capacity Expansion

Epigral's long-term growth strategy is underpinned by significant capacity expansions and a continued shift towards high-value derivative and specialty chemicals. The company's CAPEX projects for doubling the capacity of CPVC and Epichlorohydrin are progressing as per schedule, with commissioning expected in H1 FY27. These expansions are set to make Epigral's CPVC plant the world's largest with a capacity of 1,50,000 TPA, and its Epichlorohydrin plant India's largest at 1,00,000 TPA. These initiatives are crucial for meeting the robust demand growth in these segments, with CPVC expected to grow at a 12-13% CAGR and ECH at a high double-digit percentage.

Furthermore, the Chlorotoluenes value chain, which was commissioned in March 2025, is poised to drive growth from FY2027 onwards. While it incurred initial expenses without revenue contribution in H1 FY26, it is expected to generate sizable revenue from Q4 FY26 or Q1 FY27. This new value chain will serve as a key intermediate for pharmaceutical and agrochemical active ingredients, consuming Chlorine and strengthening Epigral's integrated complex. The company is also exploring new projects, including one at its current complex and another sizable project on new land, targeting import substitution products with strong growth potential beyond FY2028.

Financial Strength and Future Outlook

Despite the short-term challenges, Epigral maintains a strong financial position, with a Net Debt/EBITDA ratio of 0.8x as of September 30, 2025. This comfortable leverage position, coupled with strong cash flow from operations, provides ample flexibility for funding its ongoing CAPEX plans. The company's commitment to ESG is also evident through its investment in a 19.8 MW additional Wind Solar Hybrid Power Plant, expected to be commissioned in H1 FY27, contributing to internal power consumption and sustainability goals.

Epigral's management is confident in its strategy of scalable, profitable growth, strengthening integration, and driving value for all stakeholders. The company's diversified product portfolio, catering to over 16 industries, along with its focus on import substitution and high-growth markets, positions it well for long-term success. The addressable market for Epigral is projected to grow by 10-13% in the next five years, reinforcing the company's strategic direction. With an experienced and qualified board, including 50% independent directors, Epigral aims to continue its path of disciplined execution and sustainable value creation.