Aarti Industries energy revenue reaches 50% of sales in Q2 FY27

Aarti Industries reported Rs 1,928 crore of energy revenue in Q2 FY27, equivalent to 50% of consolidated revenue of Rs 3,887 crore. AIL said strong global demand for octane-booster fuel additives, supported by high refining margins and gasoline-naphtha cracks, lifted volumes, while higher raw-material costs also increased realised prices.

What drove AIL's energy revenue in Q2 FY27?

AIL's energy revenue reached Rs 1,928 crore in Q2 FY27, up from Rs 961 crore in Q2 FY26 and Rs 998 crore in Q1 FY27. The company attributed demand to high refining margins and robust gasoline-naphtha cracks, which supported the octane-booster fuel-additives market across its operating geographies.

Energy volumes increased 57% year on year and 51% quarter on quarter in Q2 FY27, compared with 19% and 7%, respectively, for non-energy volumes. AIL said the energy increase occurred across the United States, European Union, Middle East and North Africa, and India; it also said higher raw-material costs contributed to the segment's increased revenue share.

AIL's consolidated revenue rose 73% year on year to Rs 3,887 crore in Q2 FY27, while earnings before interest, tax, depreciation and amortisation, or EBITDA, increased 44% to Rs 418 crore. Revenue was Rs 2,250 crore in Q2 FY26 and Rs 2,627 crore in Q1 FY27, with AIL attributing the overall increase to volume growth and the pass-through of elevated input prices.

How did energy compare with AIL's other end-use markets?

Energy was AIL's largest reported end-use category in Q2 FY27, generating Rs 1,928 crore and representing 50% of revenue. Pharmaceuticals was the next-largest category at Rs 505 crore, followed by agrochemicals and fertilizers at Rs 466 crore, making energy revenue more than four times the agrochemicals and fertilizers total.

Pharmaceuticals rose from Rs 368 crore in Q1 FY27 to Rs 505 crore in Q2 FY27, driven mainly by price and volume growth in para-nitrochlorobenzene, or PNCB. Polymer and additives increased to Rs 389 crore from Rs 289 crore but remained affected by softness in the phenylenediamine, or PDA, chain; AIL expected improvement in Q3 FY27 from dichlorobenzene, or DCB, demand.

Agrochemicals and fertilizers declined quarter on quarter to Rs 466 crore from Rs 473 crore, although they remained above Rs 428 crore in Q2 FY26. AIL described demand as steady but said a weak monsoon could affect the second half of FY27, contrasting with energy's Rs 930 crore sequential revenue increase.

What capacity supported AIL's fuel-additive volumes?

AIL completed an expansion of fuel-additives capacity from 290 kilotonnes per annum, or KTPA, to 360 KTPA. Its methylation capacity for fuel additives was listed at 360 KTPA from July 2026, and capacity utilisation rose from the 65% to 85% range in Q1 FY27 to above 85% in Q2 FY27.

Methylation had operated above 85% in FY26 after operating at 65% to 85% in FY25. The energy and additives portfolio lists methyl methacrylate, or MMA, and calcium chloride, or CaCl2, as key products, while AIL identified feedstock availability as an emerging constraint on serving elevated demand.

AIL also reported above-85% utilisation in Q2 FY27 for nitrochlorobenzene, or NCB, DCB and hydrogenation. DCB has 120 KTPA of capacity, and debottlenecking to 140 KTPA is under way, supported by para-dichlorobenzene and downstream demand; ethylation also moved above 85% utilisation from the 65% to 85% band in the previous three reported periods.

How export-led is AIL's energy and additives business?

AIL's energy and additives revenue was 84% exports and 16% domestic, making it more export-oriented than the other listed end-use businesses. By comparison, agrochemicals and fertilizers were 40% exports, polymer and additives were 37%, dyes, pigments and printing inks were 18%, and pharmaceuticals were 12%.

West Asia volumes normalised in Q2 FY27 as supply-chain solutions emerged to meet market requirements, according to AIL. This followed the company's reported volume growth across the United States, European Union, Middle East and North Africa, and India, with overseas markets accounting for the majority of energy and additives revenue.

AIL said it is developing newer markets and products for the fuel-additive segment to support long-term stability. It also said strategic initiatives to strengthen and build an integrated value chain in the energy-products portfolio are under implementation, without disclosing capital expenditure, timing or revenue targets for those initiatives.

What could constrain AIL's energy growth?

Adequate feedstock availability is the principal constraint AIL disclosed for its fuel-additive business. The company said demand for octane boosters remains strong but noted emerging challenges in sourcing sufficient feedstock, without quantifying any supply deficit or the effect on Q2 FY27 production.

Higher input prices also increased working capital and debt, resulting in higher finance costs in Q2 FY27. AIL said elevated input prices were passed through to customers overall, while noting a lag in agrochemicals and fertilizers; in energy, it specifically linked higher raw-material costs to the increased revenue share.

AIL reported consolidated EBITDA of Rs 418 crore in Q2 FY27, compared with standalone EBITDA of Rs 459 crore. The Rs 41 crore difference reflected an incremental stock-reserve provision at the consolidated level for in-transit inventories that had not yet been delivered to end customers.

Conclusion

AIL's Q2 FY27 revenue mix changed materially as energy contributed Rs 1,928 crore, or half of consolidated revenue, compared with Rs 961 crore a year earlier. Higher fuel-additive volumes across multiple markets, methylation utilisation above 85%, and price increases linked to raw-material costs coincided with refining conditions that supported octane-booster demand.

The next issue to watch is whether AIL can secure adequate feedstock while pursuing its disclosed plans for newer markets, new products and an integrated energy value chain. The company has expanded fuel-additives capacity to 360 KTPA and reported these strategic initiatives as under implementation, but has not disclosed a timetable or revenue target for them.