Gujarat Fluorochemicals Navigates Tariffs, Fuels EV Ambitions in Q2 FY26

Gujarat Fluorochemicals Limited (GFL) has demonstrated a resilient performance in the second quarter of Fiscal Year 2026, navigating a complex global economic landscape marked by tariff challenges and evolving market dynamics. The company reported a consolidated revenue from operations of Rs. 1,210 crore, reflecting a 2% year-on-year growth. This growth was underpinned by a robust improvement in profitability, with the chemical segment's EBITDA surging by 26% year-on-year to Rs. 381 crore. This propelled the EBITDA margin to an impressive 32%, an increase of 608 basis points year-on-year, driven primarily by a favorable product mix and ongoing cost optimization efforts. The consolidated Profit After Tax (PAT) also saw a significant jump of 49% year-on-year, reaching Rs. 179 crore.

The segment-wise performance presented a mixed picture, indicative of both market headwinds and strategic adjustments. The Fluoropolymer segment, a cornerstone of GFL's business, recorded an 8% year-on-year growth. However, it experienced a 4% quarter-on-quarter decline, primarily due to the imposition of higher US tariffs. Management has acknowledged this impact and is actively exploring alternate markets to mitigate the effects, expecting a significant pickup in sales during the second half of the fiscal year, particularly from Q4 onwards. In the Fluorochemicals business, revenue declined by 15% year-on-year, a consequence of R-22 quota reductions, inherent seasonality, and the impact of market conditions and US tariffs on R125 sales. Conversely, the Bulk Chemicals segment witnessed a revenue increase, driven by higher prices and volumes of Chloromethanes. The specialty chemical segment remained stable and is projected to improve steadily.

Strategic Thrust in Battery Materials

GFL's strategic foray into the Battery Materials segment remains a key highlight, positioning the company for substantial future growth. The company is uniquely placed as one of the only non-China fully integrated LiPF6 producers, a critical component in lithium-ion batteries. With LiPF6 prices significantly increasing from approximately USD 10/kg to USD 17/kg in recent weeks, GFL is expanding its capacities to capitalize on this favorable trend. The LFP Cathode Active Material (CAM) facility in India has been successfully commissioned, and samples are now being sent for customer approvals, with commercial sales anticipated to commence from Q4 FY26. Furthermore, qualification for fluoropolymer binders is progressing well, with sales expected to begin in the first half of Calendar Year 2026. The company is actively engaging with domestic and international cell manufacturers for electrolyte formulations, providing customized samples from its commercial plant.

Financial Summary (Q2 FY26)

Operational Excellence and Future Outlook

The company's focus on operational excellence is evident in its R32 refrigerant gas business. Despite an unfortunate incident, GFL remains on track to achieve its 20,000-ton R32 production target by the end of FY26 (March). The management plans to further maximize this capacity to 30,000 tons, a decision to be finalized in the coming quarter, which is expected to significantly boost both revenue and profitability. The supply of high-purity grades of fluoropolymers for critical sectors like semiconductors, aerospace, and automobiles commenced in Q2 FY26, signaling GFL's commitment to value-added products and advanced applications.

In terms of capital allocation, GFL's EV capex plans are progressing as scheduled. The company anticipates an EV capex of approximately Rs. 1,200 crore in FY26, followed by Rs. 1,500 crore or more in FY27. This significant investment is well-funded, with Rs. 1,000 crore equity already raised for the EV company and additional term loans available. Management expects the battery chemicals business to achieve EBIT break-even by FY27, with FY28 projected as a remarkable scale-up year for revenue generation. While working capital days have increased due to inventory stocking for new businesses and export models, management is focused on optimizing this as new segments reach full operational capacity.

Conclusion

Gujarat Fluorochemicals Limited's Q2 FY26 performance underscores its strategic clarity and disciplined execution amidst a challenging global environment. The company's robust EBITDA margin expansion, proactive navigation of tariff impacts, and aggressive yet well-funded expansion into the high-growth Battery Materials segment demonstrate its commitment to sustained value creation. With a strong pipeline of initiatives in fluoropolymers, fluorochemicals, and bulk chemicals, GFL is well-positioned to capitalize on emerging opportunities in green chemistry and advanced materials, reinforcing investor confidence in its long-term growth trajectory.