Excel Industries Navigates Monsoon Headwinds with Strategic Diversification and Capacity Expansion

Excel Industries Ltd., a venerable name in the Indian chemical industry, recently announced its financial results for Q2 and H1 FY26, revealing a mixed bag of performance influenced by external market dynamics and proactive strategic shifts. While the company experienced some sequential headwinds in Q2, its long-term vision, underscored by significant investments in contract manufacturing, capacity expansion, and R&D, signals a determined push towards diversification and sustained growth.

For the second quarter of fiscal year 2026, Excel Industries reported consolidated revenue from operations of 270.2 crores. This marks a sequential decline from 309.5 crores in Q1 FY26. For the first half of FY26, the consolidated revenue stood at 579.7 crores, reflecting an 8.60% year-on-year growth compared to H1 FY25. However, profitability metrics saw a contraction in Q2. Consolidated EBITDA for Q2 FY26 was 29.9 crores, a 29.1% drop from the previous quarter, with EBITDA margins at 11.1%. Profit After Tax (PAT) for Q2 FY26 was 21.2 crores, a 37.2% sequential decrease, resulting in a PAT margin of 7.8%. For H1 FY26, consolidated EBITDA was 72.1 crores (12.4% margin) and PAT was 54.9 crores (9.5% margin), both showing a year-on-year decline of approximately 18% compared to H1 FY25.

Management attributed the Q2 revenue decline primarily to the subdued demand in the agrochemical segment, which was severely impacted by a prolonged monsoon season. This led to weak offtake in key products and a notable accumulation of channel inventory. Despite these challenges, the company's H1 performance demonstrated resilience, with overall revenue growth.

Strategic Initiatives and Future Growth Drivers

Excel Industries is actively pursuing a strategy of diversification to reduce its reliance on the agrochemical sector, which currently accounts for 50-60% of its revenues. A significant step in this direction is the signing of a binding term sheet for a long-term contract manufacturing agreement with a leading Indian specialty chemicals company. This five-year arrangement involves an investment of 40 crores for a new dedicated production line, expected to be commissioned by June 2026. This initiative is projected to generate an annual revenue of 35-40 crores (excluding raw material costs) and is expected to be EBITDA accretive, leveraging Excel's core strengths and the customer's market access.

In line with its growth trajectory, the company successfully commissioned a capacity expansion for one of its key biocide products in October 2025. This expansion, which involved an investment of 10.33 crores, is anticipated to contribute 15 crores in full-year revenue and is also EBITDA accretive. Furthermore, initial supplies under a previously announced long-term supply arrangement with a multinational company have commenced, indicating successful execution of prior commitments.

Innovation remains a cornerstone of Excel's strategy, with its new R&D center, launched last year, on track to become operational in Q3 FY26. This center is poised to become a core pillar of growth, enhancing capabilities in new technologies and process development. The company has also introduced new product capacities for Sodium Trichloro Pyridinol (NaTCP), polymer additives, and HEDP 4Na, further diversifying its offerings.

Capital Allocation and Outlook

Excel Industries has outlined a robust capital expenditure plan for the next three years, committing to invest 200-300 crores in plant upgrades, product innovation, capacity expansion, and technology. A consistent allocation of 40-50 crores per year is earmarked for ongoing maintenance and improvements. This disciplined capital allocation strategy, coupled with the company's status as a long-term debt-free and cash-rich entity, provides a strong foundation for future growth.

Management has maintained its full-year FY26 EBITDA margin guidance in the range of 13-15%. While acknowledging that Q3 FY26 is typically a lean quarter for the agrochemical sector and is expected to remain subdued, they anticipate some normalization in demand by Q4 FY26, contingent on the clearance of accumulated inventory. The company's focus on performance solutions is expected to drive faster growth compared to other segments, and it continues to explore all opportunities on a case-to-case basis.

Conclusion

Excel Industries Ltd. is navigating a challenging market landscape with a clear strategic roadmap. Despite the short-term pressures from monsoon-affected agrochemical demand, the company's aggressive pursuit of contract manufacturing, timely capacity expansions, and sustained investment in R&D underscore its commitment to building a diversified, resilient, and future-ready organization. The emphasis on reducing agrochemical dependence and leveraging its deep technical expertise positions Excel Industries for sustained value creation in the evolving specialty chemicals market.