AARTIIND - Aarti Industries Ltd Share Price

Question 1: Can you comment on any specifics or any other category which has led to the increase in the margins? And how sustainable is it?

Answer 1: The margin improvement was predominantly driven by operating leverage. Despite the mix leaning towards MMA and energy products, our overall contribution margins remain consistent across our product portfolio. As business volumes increase, operating leverage strengthens, leading to an uptick in EBITDA percentage. This trend indicates that the margin sustainability is primarily tied to improving volume instead of shifts between end applications.

Question 2: Could you list the likely plants we are closer to starting in the next 12 to 18 months and their commissioning dates?

Answer 2: This quarter, we will commission a Calcium Chloride facility. In the next quarter, we will launch our multipurpose plant at Zone 4. By Q4 FY26, we plan an increased MMA capacity from debottlenecking and introduce a new PEDA project relevant to our products. Sequentially, five incremental blocks at Zone 4 will be commissioned throughout the next financial year. However, specialty products will take longer to ramp up due to qualification cycles with global customers.

Question 3: What would be the likely end-category exposure mix after these plants are commissioned?

Answer 3: Looking at our three-year plan, we anticipate that energy will maintain a 30% to 40% share, while Agro and polymers will increase, alongside some gains from Pharma. However, given the market volatility, these projections remain cautious and will evolve based on actual developments over the coming years.

Question 4: What are the levers you have to mitigate tariff-related impacts?

Answer 4: Our options are somewhat limited at the organizational level. Primarily, we engage proactively with customers to maintain strong relationships while ensuring mutual compromise. Additionally, we are working on strategically addressing products potentially re-exported from the U.S. to minimize tariff impacts, leveraging both customer relationships and portfolio adjustments.

Question 5: What would likely be the steady-state EBITDA number a couple of quarters down the line before Zone 4 and PEDA capacity are commissioned?

Answer 5: While I prefer not to comment on exact numbers, the current performance reflects our strategies and if we maintain our volumes, similar EBITDA figures can be assumed as steady-state numbers. Our objective, however, is not just to maintain but to improve through further volume ramp-up and cost optimization.

Question 6: Can you elaborate on the rationale behind the PEDA expansion and target market dynamics?

Answer 6: The market for PEDA is sizable since India imports value chains at multiple stages, including DEA, PEDA, and Pretilachlor. We're aiming to establish a comprehensive supply chain with competitive cost advantages. This initiative enhances our value chain integration and positions us globally, ensuring sustainable competitiveness while tapping into large markets.

Question 7: Could you provide insight into the upcoming projects, particularly the multipurpose plant (MPP)?

Answer 7: The MPP significantly reduces our time to market for new products while providing flexibility for various chemistries. Projects like PEDA serve as examples where we can quickly leverage existing capabilities. While we prioritize innovation, MPP allows us to adapt our production based on market demand and profitability considerations.

Question 8: What is the expected capex for FY27, and the anticipated tax rate for FY26 and FY27?

Answer 8: I anticipate FY27 capex will be substantially lower than the FY26 figure of INR 1,000 crore, although exact numbers are still being determined. As for tax rates, I expect a rate below 15% for FY26, gradually rising to between 15% and 20% for FY27 as we move forward.

Question 9: What explains the increase in debtor levels by 65%?

Answer 9: The increase in debtors is closely linked to our top-line growth; we've experienced a higher export percentage, which typically has longer credit durations compared to domestic sales. Nevertheless, our overall working capital cycle remains consistent, keeping receivables and inventory within similar levels.

Question 10: Can you speak to any changes in strategy regarding U.S. market presence due to the tariff situation?

Answer 10: Despite the tariffs altering our strategy temporarily, the U.S. remains a crucial market due to its size. We've been actively diversifying our customer base and market approach. With trade stabilization prospects, we believe U.S. volumes can still rebound significantly in the long term, and we'll continue to develop markets across various regions including Europe and the Middle East.