Aarti Industries Limited Q3 FY26 Earnings Call Summary

Summary

Aarti Industries Limited - Q3 FY26 Earnings Call Summary Tuesday, February 03, 2026 12:00 PM IST

Event Participants

Executives 2 Chetan Gandhi (CFO), Suyog Kotecha (CEO)

Analysts 10 Abhijit Akella, Aditya Khetan, Arun Prasath, Darshita Shah, Kumar Saumya, Nitin Agarwal, Nitesh Dhoot, Ranjit Cirumalla, Rohit Nagraj, Tushar Raghatate, Vivek Rajamani

Financials & KPIs

Geographic & Segment Commentary

• Energy (MMA): Continued as the primary growth driver with robust volumes and favorable feedstock spreads. Capacity is being expanded from 290+ KT to 360 KT by Q4 FY26 to capture “swing demand” and market leadership.
• Polymers: Mixed performance as PDCB demand rose due to PPS growth in the EV segment, while PDA faced pressure from U.S. tariffs. Management expects volume recovery following the recent India-U.S. trade deal announcement.
• Agrochemicals & Pharma: Volumes remained stable, but pricing was subdued due to Chinese dumping. Management anticipates margin recovery as China implements “anti-involution” policies to curb excess capacity.
• United States: Constitutes a major export destination; MMA accounts for 50-60% of U.S. exports, followed by PDCB at 15-25%. The India-U.S. trade deal reduces effective tariffs from 50%+ to ~18%.

Company-Specific & Strategic Commentary

• China Anti-Involution Strategy: China’s removal of 13% VAT subsidies on products like the NCB chain has already led to 7-10% price increases.
• Zone 4 Transformation: A platform for high-value advanced materials with ₹1,600-1,800 crore total investment; commissioning of MPP and Chloro toluene blocks expected in CY26.
• Advanced Materials Pivot: Strategic shift from bulk products to high-value, application-led solutions using specialized capacities and indigenous technology.
• AI & Digital Transformation: Initiated deployment of AI for real-time process control and predictive maintenance to reduce energy consumption and improve plant uptime.
• Strategic Partnerships: Signed exclusive distribution agreement with Actylis for PCBTF (coatings); other global partnership conversations are accelerating following trade clarity.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Trade Agreements & Tariffs

• Question: What is the impact of the U.S. tariff reduction on MMA margins? (Arun Prasath)
• Answer: Existing contracts will be honored, but new negotiations will reflect the lower tariff (18% vs 50%+), improving net realizations and customer affordability (Suyog Kotecha).
• Question: Will the India-EU FTA lead to competitive dumping in India? (Arun Prasath)
• Answer: The risk is limited; the FTA primarily creates strategic partnership opportunities to serve Europe from India-based assets (Suyog Kotecha).

Capacity & Growth

• Question: Why debottleneck MMA to 360 KT if it’s already a large part of the portfolio? (Vivek Rajamani)
• Answer: The expansion is capital-efficient and allows AIL to capture “swing demand” while maintaining global leadership; it will eventually settle at 30-40% of the mix as Zone 4 ramps up (Suyog Kotecha).
• Question: What is the status of the Zone 4 ramp-up? (Nitin Agarwal)
• Answer: Bulk of Capex (₹1,600-1,800cr) will be deployed by year-end. MPP and Calcium Chloride blocks commission this quarter; specialty blocks follow in CY26 (Suyog Kotecha).

Market Dynamics

• Question: What is driving the 140 KTPA DCB expansion? (Aditya Khetan)
• Answer: Strong demand for PDCB as a monomer for PPS polymers used in Electric Vehicles (EVs) (Suyog Kotecha).
• Question: Has China’s stance on VAT removal had an immediate impact? (Suyog Kotecha)
• Answer: Yes, NCB chain pricing increased 7-10% within days of the VAT rebate removal (Suyog Kotecha).

Key Takeaway

Aarti Industries delivered a resilient Q3 FY26, with revenue growing 11% QoQ to ₹2,492 crores, supported by record export levels (65% of mix) and volume growth in the energy segment. Despite pricing headwinds in agrochemicals due to Chinese dumping, the company is benefiting from structural shifts including the India-U.S. trade deal (tariffs dropping to ~18%) and China’s “anti-involution” policies. Strategic focus remains on commissioning the ₹1,600-1,800 crore Zone 4 project in CY26 and expanding MMA capacity to 360 KT to solidify global leadership. Management has increased FY26 Capex guidance to ₹1,100 crores to fast-track high-return debottlenecking but expects FY27 spending to be significantly lower. The company is successfully pivoting toward high-value advanced materials and AI-driven operational excellence to sustain long-term margin improvement.