NGL Fine-Chem Limited: Navigating Recovery and Strategic Expansion in Q2 FY26

NGL Fine-Chem Limited, a prominent player in the animal health API segment, has reported a quarter of significant demand recovery and strategic advancements for Q2 and H1 FY26. The company's latest investor presentation and concall transcript highlight a period of renewed momentum, albeit with some bottom-line pressures. For Q2 FY26, NGL Fine-Chem recorded revenue from operations of INR120.26 crores, marking a robust 28.64% year-on-year growth. This top-line expansion was complemented by a strong operational performance, with EBITDA increasing by 48.43% year-on-year to INR17.16 crores. The EBITDA margin also saw a healthy expansion, reaching 14.27% in Q2 FY26. However, profit after tax (PAT) for the quarter stood at INR9.63 crores, a marginal dip compared to INR9.81 crores in the corresponding period of the previous year, primarily influenced by increased operating costs and finance expenses.

The demand recovery observed by NGL Fine-Chem was broad-based, spanning across its diverse product portfolio and key geographic markets. Management commentary indicated renewed momentum in regions such as Latin America, West Asia, Europe, and the domestic Indian market. This positive trend underscores the company's strong market positioning and the effectiveness of its product offerings. The segmental revenue mix for Q2 FY26 continued to be dominated by Animal API, contributing 90% of the revenue, followed by Intermediates at 5%, Human API at 4%, and Formulations at 1%. Geographically, Asia accounted for 40% of revenue, India for 29%, ROW for 21%, and Europe for 10%, with the USA currently at 0% as the company focuses on regulatory approvals.

Strategic Initiatives and Future Outlook

NGL Fine-Chem is actively pursuing a dual-pronged expansion strategy to capitalize on the improving demand environment and unlock future growth potential. The company has completed a brownfield expansion in its subsidiary Macrotech, which has already commenced commercial production, adding crucial capacities for intermediates. Simultaneously, a significant greenfield expansion project is underway at Tarapur, with an estimated capital outlay of ₹160 crores. As of Q2 FY26, ₹133.29 crores have been invested in this project, which is expected to be completed by Q4 FY26 and commissioned in Q1 FY27. This expansion is strategically aimed at meeting the demand for new products in the pipeline and catering to higher-value regulated markets.

A key focus area for NGL Fine-Chem is its foray into regulated markets, particularly the U.S. and Europe. The company successfully submitted its first API registration to the U.S. FDA in September 2025. The first clean room under Phase I is being utilized for manufacturing validation batches, a critical step towards regulatory approvals. Management anticipates regulatory audits to begin in the second quarter of the next financial year (FY27), with commercial production expected to commence in the second half of FY27. This move is projected to significantly contribute to future sales growth and accelerate profitability due to the higher margins typically associated with regulated markets. The company already holds 3 CEPs and 5 ASMFs in Europe, with more filings in process.

Operational Efficiency and Market Dynamics

Despite the positive demand trends, NGL Fine-Chem faced challenges from subdued product realizations and increased operating costs. The company resumed outsourcing operations to ensure timely fulfillment of customer requirements, which led to a 30% increase in outsourcing costs. Additionally, salaries increased by 15% due to the onboarding of a new team for the upcoming plant. These factors, combined with higher finance costs from ongoing capex, impacted the PAT. However, management remains cautiously optimistic, noting that the recovery trends are encouraging but require sustained observation to confirm their long-term viability. The company aims to achieve an EBITDA rate of 15% to 18% with increased scale of activities, and expects gross margins of 55% to 60% from its U.S. and EU business.

NGL Fine-Chem's robust manufacturing capabilities, including 95% in-house production, backward integration, and state-of-the-art facilities with various international accreditations (WHO-GMP, ISO, cGMP), underscore its commitment to quality and cost competitiveness. The company's production facilities also adhere to Zero Liquid Discharge principles, highlighting its environmental responsibility. With a market share ranging from 15% to over 50% in key products and supplying to 5 of the top 10 global animal healthcare companies, NGL Fine-Chem is well-positioned to leverage its new capacities and drive the next phase of growth.

Conclusion

NGL Fine-Chem Limited is navigating a dynamic market with a clear strategic vision. The company's focus on expanding capacity, entering regulated markets, and maintaining operational excellence positions it for long-term growth. While short-term profitability has been affected by cost pressures and subdued realizations, the underlying demand recovery and strategic investments lay a strong foundation for future value creation. The management's disciplined approach to capital allocation and proactive steps towards regulatory approvals demonstrate a commitment to sustained growth and enhanced shareholder returns.