Ester Industries Navigates Headwinds with Strategic Focus on Specialty Polymers and Circular Economy

Ester Industries Limited, a prominent player in polyester chemistry, recently announced its financial results for the second quarter and half year ended September 30, 2025 (Q2 & H1 FY26). The company reported a consolidated revenue of INR 357.24 crores for Q2 FY26, marking a 7% year-on-year growth. However, profitability saw a significant decline, with EBITDA falling by 59.2% to INR 17.33 crores and the company reporting a net loss of INR 15.78 crores for the quarter. For the first half of FY26, revenue grew 12.5% to INR 704.09 crores, but EBITDA decreased by 22.64% to INR 46.29 crores, resulting in a net loss of INR 22.93 crores. These figures reflect a challenging macro environment, particularly impacting the Polyester Films segment, while the Specialty Polymers business demonstrated robust performance.

The Polyester Films segment, which constitutes the majority of Ester's revenue, faced considerable headwinds. Despite a 9.3% increase in sales volume, revenue for Polyester Films declined to INR 264 crores from INR 287 crores in Q2 FY25. This was primarily attributed to lower realizations and margins due to heavy imports at predatory pricing in the domestic market and the adverse impact of US trade tariffs on exports. The company has actively petitioned the Director General of Trade Remedies for the imposition of anti-dumping duties against imports from Bangladesh, China PR, Thailand, and USA, expressing optimism for a favorable outcome. In contrast, the Specialty Polymers segment delivered a stellar performance, with revenue growing 39% year-on-year to INR 57.36 crores and EBIT increasing by 45% to INR 21.24 crores. This growth was driven by a 51% increase in sales volumes, supported by sustained demand for its IP-protected marquee products, which remained unaffected by US trade tariffs. The segment's EBIT margin improved by 146 basis points to 37.03%.

Strategic Initiatives and Sustainability Focus

Ester Industries is making significant strides in its commitment to sustainability and the circular economy. A key highlight is the progress of Ester Loop Infinite Technologies Private Limited (ELITe), a 50:50 joint venture with Loop Industries. This JV aims to establish a chemical recycling manufacturing plant in Surat, Gujarat, with commercial operations expected to commence by the end of calendar year 2027. The facility will convert polyester textile waste into virgin-quality recycled dimethyl terephthalate (rDMT) and mono-ethylene glycol (rMEG), with a capacity of 70,000 MT per year. This initiative is projected to reduce carbon emissions by up to 81% compared to virgin PET production.

Crucially, ELITe has already secured multi-year off-take agreements with global brands like Nike, Taro Plast S.p.A., and formed a strategic alliance with Hyosung TNC. Nike will be the anchor customer for the Infinite Loop India facility, with ELITe supplying Twist™, Loop's branded virgin-quality polyester resin made exclusively from textile waste, featuring full traceability. This validates the technology and underscores the high demand for sustainable materials. The company's rPET extruder, commissioned in September 2025, further strengthens its sustainability portfolio, with rPET sales volume increasing significantly by 219% in Q2 FY26 and 492.78% in H1 FY26.

Operational Efficiency and Market Dynamics

Despite the challenging market for Polyester Films, Ester Industries maintained healthy capacity utilization, with 75% at Khatima and 85% at Hyderabad, resulting in a consolidated utilization of 79%. The company continues to focus on cost optimization, supply chain efficiencies, and strengthening its product mix to improve profitability. Management highlighted that the share of value-added products stood at 23% of segment volume, maintaining an upward trend. The target for value-added products on a consolidated basis has been adjusted to ~25% by Q4 FY26 to mitigate cyclicality, a strategic course correction in response to market realities like US Trade Tariffs.

The Indian flexible packaging sector continues to boom, driven by rapid growth in FMCG, food & beverages, and e-commerce. Government mandates, such as the Plastic Waste Management Rules requiring 10% PCR content in flexible packaging, are pushing brand owners to adopt PET Films with PCR content, creating a strong demand for sustainable solutions. The government's GST reforms, reducing tax rates on essential goods, are also expected to boost the flexible packaging industry. Ester Industries anticipates heavy demand for BOPET films, especially PCR content BOPET films, around the first or second quarter of the next calendar year due to Extended Producer Responsibility (EPR) obligations.

Outlook and Future Focus

Ester Industries is navigating the current market complexities with a clear strategic vision. The company remains focused on strengthening its Specialty Polymers portfolio, improving operational efficiency, and advancing its circular economy vision through the ELITe project. With growing demand for Polyester Film, IP protection for certain marquee products in the Specialty Polymers segment, and a strong focus on products promoting recycling and sustainability, Ester Industries is confident in its ability to create long-term value for its shareholders. The company's disciplined execution of its adopted strategy is expected to define its growth trajectory in the years ahead, positioning it for sustainable growth.