Ester Industries sees specialty-polymer sales fall 41% in H1

Ester Industries reported specialty-polymer revenue of Rs 62 crore in H1 FY27, down 41% from Rs 105 crore a year earlier, after the largest customer for one product moved to a different chemistry. Ester is responding with value-added products, a wider customer base and projects progressing through customer approvals.

Why did Ester lose specialty-polymer sales?

Ester lost sales because the largest customer for a specialty-polymer product changed its process technology and adopted completely different chemistry. Management said the disruption was not due to another supplier replacing Ester. Other customers continue to use the product, but demand erosion at the largest outlet reduced specialty-polymer volumes.

Ester has developed an innovation around the affected product, but the customer treats it as a new product requiring a full approval cycle. Management said this cutting-edge application typically needs about one-and-a-half to two years of approval work, meaning any commercial recovery from the redesigned product would not be immediate.

How large was Ester’s specialty-polymer setback?

Ester’s specialty-polymer revenue fell by Rs 43 crore in H1 FY27, while segment earnings before interest and tax, or EBIT, declined by Rs 11 crore. The sales reduction was therefore larger than the EBIT reduction in absolute terms, which management attributed to sustaining the business’s EBIT percentage despite lower revenue.

The reported revenue comparison equals a 41% decline, rather than a 49% fall. Management said the specialty-polymer setback was the main factor behind lower profitability at Ester Industries Limited, or EIL, Khatima, while the film business was broadly stable between Q1 FY27 and Q2 FY27.

Ester agreed that reaching the earlier level of specialty-polymer sales and profitability would be difficult in the current financial year. Management expects H2 specialty-polymer performance to be slightly better than H1 as two to three products at advanced approval stages may mature in the January-to-March period.

How is Ester diversifying its specialty-polymer business?

Ester is reducing concentration by expanding from two to three products two years ago to about seven to eight products now, while its customer base has increased from six to seven customers to about 15 to 16. Management presented this wider product and customer base as its response to the risk of depending on a small number of products.

The two marquee products still provide about 50% to 55% of sales volume, according to management. Other launched products account for the remaining 40% to 45% of volume each quarter, although management said the marquee products retain a much larger share of the business’s margin contribution.

Ester is working with 27 customers on eight to nine products at different stages of the approval cycle. Management expects these value-added and high-specialty projects to mature in the next calendar year and over the next six to eight quarters, with high-specialty applications generally requiring longer customer qualification periods.

What new products can rebuild Ester’s volumes?

Ester expects a new class of value-added products to begin ramping from the next quarter after completing a production modification in the current quarter. Management described the opportunity as a couple of products within one product class, where a minor manufacturing change required capital expenditure before commercial supplies could expand.

One product could eventually contribute nearly 200 tonnes a month, although management expects it to take six to nine months to reach that volume. The product is not patented, but management said it is patentable and difficult for many producers to make; it is expected to generate mid-level margins rather than replace lost high-margin specialty volumes.

Ester also said it added one customer for LMC 03 and has MB 6 approvals at advanced stages with international customers. Management’s approach is to use available capacity for higher-volume value-added products, which have shorter gestation periods than high-specialty products, while continuing approvals for products with higher potential margins.

When could Ester’s specialty-polymer sales recover?

Ester does not expect the displaced high-margin product to recover soon because the redesigned version needs a new approval cycle lasting six to eight quarters. Management said commercial movement in the redesigned product, if achieved, would emerge over that period rather than in the next quarter.

The nearer-term plan depends on products scheduled to mature between January and March and the next-quarter ramp-up of the modified value-added product class. Management said these products should make H2 better than H1, but also distinguished them from the former high-margin business because they are intended to add volume at medium margins.

Ester has set a management target of 25% year-on-year growth in specialty polymers, using the current financial year as the base. That target depends on the 27-customer product pipeline converting into commercial supplies, rather than on an immediate restoration of demand from the customer that changed chemistry.

Conclusion

Ester’s H1 FY27 specialty-polymer decline was caused by a customer technology change, not a disclosed switch to a rival supplier. Revenue fell to Rs 62 crore from Rs 105 crore, while EBIT declined to Rs 25 crore from Rs 36 crore, showing that the loss reduced sales more sharply than reported EBIT in absolute terms.

The next developments to watch are completion of the current-quarter production modification, the expected next-quarter product ramp-up, and whether two to three products mature between January and March. Management’s longer-term 25% growth objective will also depend on customer approvals across its eight-to-nine-product pipeline over the next six to eight quarters.