Ester Industries: Rs 66.7 crore working-capital hit delays debt cut

Ester Industries Limited said a Rs 66.7 crore increase in net working capital in H1 FY27 delayed debt reduction, despite Rs 53.5 crore of term-loan repayments, leaving total borrowings at Rs 748.8 crore on September 30, 2026, versus Rs 729 crore in March 2026. Higher petrochemical prices, freight costs and transit times raised receivables and inventory funding needs.

Why did Ester's borrowings rise in H1 FY27?

Ester's borrowings rose because receivables and inventory absorbed more cash during H1 FY27 than its term-loan repayments released. Management attributed the increase to higher crude-linked petrochemical prices, freight costs and longer transit times, which increased the funds needed to sustain enhanced operations.

Trade receivables increased by Rs 79.4 crore to Rs 264.3 crore in September 2026 from Rs 184.9 crore in March 2026. Inventories rose by Rs 36.5 crore to Rs 245.2 crore from Rs 208.7 crore. Higher trade payables partly offset these increases, resulting in a Rs 66.7 crore rise in net working capital during the first half.

Ester partly funded the additional working-capital requirement through Rs 51.7 crore of short-term bank borrowings. Management said debt would have declined in H1 FY27 without the increase in working capital, distinguishing this balance-sheet movement from a major new capital-spending programme.

How much debt did Ester repay and raise?

Ester repaid Rs 53.5 crore of consolidated term loans in H1 FY27 against its full-year repayment target of about Rs 100 crore, while raising Rs 18.9 crore of fresh term loans. Total borrowings therefore increased by Rs 19.8 crore over the six months, as working-capital funding offset the scheduled debt repayment.

Management described interest-bearing debt at about Rs 750 crore, including about Rs 480 crore of term debt and Rs 270 crore of working-capital debt. That indication broadly corresponds with the reported Rs 748.8 crore of total borrowings at September 2026 and shows that short-term operating funding accounted for a material part of the debt base.

Ester had cash and bank balances of Rs 180.4 crore plus Rs 47.9 crore of liquid investments at September 2026, giving combined liquidity of about Rs 228.3 crore. Part of these funds was earmarked for its equity contribution to Elite, its 50-50 joint venture with Loop Industries; Ester invested Rs 7.1 crore in the venture during H1 FY27.

Shareholders' equity rose to Rs 887.6 crore in September 2026 from Rs 782.7 crore in March 2026. Ester spent Rs 15.1 crore on capital expenditure and paid Rs 2.5 crore in dividends in H1 FY27, while management said it did not plan major capital expenditure beyond maintenance, sustenance spending and marginal expenditure for a specialty-polymers product.

Did Ester's earnings improve despite the higher debt?

Ester's earnings improved materially in H1 FY27, but the resulting cash generation was initially absorbed by the higher value of receivables and inventories. Consolidated earnings before interest, tax, depreciation and amortisation, or EBITDA, rose 124.6% year on year to Rs 104 crore, while profit after tax turned to Rs 26.5 crore from a loss of Rs 22.9 crore in H1 FY26.

The polyester film segment was the principal contributor to the improvement. Its earnings before interest and tax, or EBIT, rose to Rs 73.6 crore in H1 FY27 from Rs 80 lakh in H1 FY26, with the EBIT margin reaching 9%. Film revenue increased 38.7% to Rs 813.9 crore while volume grew 8.3% to 46,412 metric tons, reflecting higher realizations, feedstock-cost pass-through and a better product mix.

Ester Filmtech, the wholly owned subsidiary, reported EBITDA of Rs 36.4 crore in H1 FY27 and profit after tax of Rs 6.9 crore, compared with a loss of Rs 26.8 crore a year earlier. Its capacity utilisation increased to 85.3% from 78.4%, supported by higher exports, improved production efficiency and an increased contribution from value-added and specialty films.

Specialty Polymers moved in the other direction, with H1 FY27 revenue declining 41% year on year to Rs 62 crore after demand erosion in a marquee high-margin product. Segment EBIT nevertheless stood at Rs 24.7 crore, a 39.9% margin; management said the largest customer for the affected product had changed its technology and process chemistry.

What debt target and cash plan has Ester set?

Ester is targeting net debt to EBITDA of between 2 times and 2.25 times, versus management's estimate of about 3 times to 3.25 times when H1 FY27 EBITDA is annualised. Management did not give a timeline for meeting the target, saying it was difficult to fix one, but identified it as the objective guiding its debt-reduction efforts.

Management's plan depends on working-capital efficiency, continued scheduled term-loan repayments and limited new capital expenditure within Ester. It expects working-capital needs to ease if raw-material prices and freight conditions stabilise, and said raw-material and finished-goods values had risen by about 50%, increasing pressure on operating funding.

The product-mix plan is also relevant to operating cash generation. Value-added and specialty film sales reached 12,568 metric tons in H1 FY27, or about 27% of film volume, compared with 10,107 metric tons in H1 FY26. Management is targeting about 35% by Q4 FY27 and 50% to 60% over the following two to three years.

Elite is not intended to add debt to Ester's consolidated borrowings, according to management. The Gujarat recycling joint venture is targeting commercial operations in the last quarter of calendar 2028, with a stated project outlay of Rs 1,200 crore to Rs 1,400 crore; management said additional Elite debt would remain at the joint-venture level.

Conclusion

Ester's H1 FY27 debt movement reflected a Rs 66.7 crore increase in net working capital rather than a halt in debt repayment or a large internal expansion. The company repaid Rs 53.5 crore of term loans and increased consolidated EBITDA to Rs 104 crore, but higher receivables, inventory and short-term funding kept total borrowings Rs 19.8 crore above the March 2026 level.

The next measures to watch are whether stabilising feedstock and freight costs release cash from receivables and inventory, and whether Ester progresses toward its approximately Rs 100 crore FY27 term-loan repayment target. Management also plans to raise value-added and specialty films to about 35% of film volume by Q4 FY27, while Elite is targeted to begin commercial operations in the last quarter of calendar 2028.