Summary
Aether Industries Limited - Q3 FY 2026 Earnings Call Summary Tuesday, February 03, 2026, 4:00 PM IST
Event Participants
Executives 4 Dr. Aman Desai (Promoter & Whole Time Director), Mr. Rohan Desai (Promoter & Whole Time Director), Mr. Faiz Nagariya (CFO), Mr. Kushal Doshi (Lead Investment Relations)
Analysts 12 Amay Sharda, Ankur, Atishray Malhan, Bhavika Jain, Chintan Shah, Darshan Garg, Deep Sanghavi, Kumar Saumya, Lakshay Agarwal, Maneesh Bhadane, Naushad Chaudhary, Nitin Agarwal, Parikshit Gujarati, Sajal Kapoor
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹317.1 crores | +44% YoY; Driven by volume growth in LSM and scale-up in Site 4 (Baker Hughes). |
| EBITDA | ₹108.3 crores | +75% YoY; Significant margin expansion due to better product mix and ₹15 Cr insurance claim. |
| EBITDA Margin | 34% | +600 bps YoY; Management normalizes this to ~29-30% excluding one-time items. |
| Profit After Tax (PAT) | ₹64.5 crores | +49% YoY; Reflects stronger operating performance and improved margins. |
| PAT Margin | 20% | +200 bps YoY; Improved from 18% in Q3 FY25. |
| Net Working Capital | 160 days | Increased from 149 days in Q2; Driven by inventory buildup for Site 3++ and Site 5. |
| Site 4 Revenue | ₹60 crores | +20% QoQ growth; Reflects increased wallet share with Baker Hughes. |
| Capacity Utilization | Site 2: 76%, Site 3: 70%, Site 4: 49% | Utilization at Site 4 is progressing as per strategic ramp-up with CEM partners. |
Geographic & Segment Commentary
- Exports & Domestic: Export revenue stood at 36% while domestic sales were 64%. Management notes increased urgency from European customers looking to shift manufacturing to India due to plant shutdowns in the West.
- Contract Manufacturing (CEM/CRAMS): Contributed 51% (43% CEM + 8% CRAMS) of total sales. Strategic shift continues toward these segments due to higher margins (60%+ for CRAMS) and better working capital cycles.
- Large Scale Manufacturing (LSM): Contributed 41% of revenue. Saw 25% YoY volume growth despite stable pricing; management noted pharma and agro demand has bottomed out and is recovering.
- Sectoral Mix: Strategic diversification achieved with Pharma/Agro at 45%, Oil & Gas at 22%, and Material Science at 18%. Semiconductor and Electronic Chemicals are emerging as the next growth vectors.
Company-Specific & Strategic Commentary
- Site 5 & 3++ Launch: Construction and installation for Site 3++ and the first two production blocks of Site 5 are complete. Commercial production is scheduled to commence in March 2026.
- R&D Expansion: Implementing both short-term (20 new fume hoods) and long-term (15 labs, 150 fume hoods) expansions. Added advanced analytical tools like NMR to support complex engineering for non-pharma sectors.
- Electronic Chemicals: Forayed into the semiconductor industry with Japanese, South Korean, and Taiwanese clients. Dispatched validation batches for low dielectric resins and silane coupling agents.
- European Energy/Cost Crisis: Noted a “clear urgency” from major European chemical firms to finalize contracts as high costs force Western plant closures. One Site 3 line is being repurposed for a new European Material Science contract.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Mix | 70% CRAMS/CEM | Target to shift away from LSM (to 30%) to improve margins and working capital. |
| EBITDA Margin | 29% - 30% | Long-term sustainable target; recent 34% included a one-time insurance claim. |
| Site 3++ Utilization | 45% - 50% | Target for the first full year of operations (FY 2027). |
| Site 5 Utilization | 35% - 40% | Target for the first two blocks starting in FY 2027. |
| Capex | ₹450 - ₹500 crores | Total estimated cash outflow for the full financial year 2026. |
Risks & Constraints
| Risk | Context |
|---|---|
| Chinese Competition | LSM segment faces aggressive pricing from China, particularly in Li-ion battery additives, forcing Aether to pause certain projects. |
| Working Capital Intensity | Current cycle is high (160 days) to compete with Chinese credit terms (180-250 days); mitigation strategy is to pivot to CEM/CRAMS. |
| Attrition/Talent | High demand for niche chemistry skills in India; management uses ESOPs and a flat hierarchy to retain R&D talent (avg age 30). |
Q&A Highlights
Business Segments & Margins
- Question: What are the margin profiles across the three business models? (Bhavika Jain)
- Answer: CRAMS ranges between 60-65%, CEM between 27-30%, and LSM between 21-23% at the EBITDA level. (Kushal Doshi)
Strategic Partnerships
- Question: Why do major clients like Baker Hughes use Aether as a sole supplier? (Naushad Chaudhary)
- Answer: It is due to IP protection and confidentiality. Aether mitigates the client’s risk by providing “redundant geographically separate” manufacturing across its multiple sites (Sites 2, 3, 4, and 5). (Aman Desai)
Operational Progress
- Question: What is the status of the Baker Hughes revenue and pipeline? (Kumar Saumya/Lakshay Agarwal)
- Answer: Revenue grew 20% QoQ to ₹60 Cr. There are currently 8 products being manufactured, with another 7-8 products in the R&D/scale-up pipeline. (Rohan Desai/Faiz Nagariya)
Financial Items
- Question: Why did “Other Revenue” spike this quarter? (Kumar Saumya)
- Answer: It contains a ₹15 crore Loss of Profit (FLOP) insurance claim settlement. (Faiz Nagariya)
Key Takeaway
Aether Industries delivered a robust Q3 FY26, characterized by 44% revenue growth and significant EBITDA margin expansion to 34%. The company is successfully executing its strategy to diversify away from Pharma and Agro, with Oil & Gas and Material Science now contributing 40% of the mix. High-margin CEM and CRAMS segments now represent 51% of sales, led by a 20% QoQ growth in the Baker Hughes partnership (₹60 Cr). Strategic investments in Site 3++ and Site 5 are nearing completion, with commercial production expected in March 2026. While the company faces high working capital intensity (160 days) and Chinese pricing pressure in commodity-lite chemicals, its move into semiconductor chemicals and specialized European contracts provides a high-entry-barrier moat. Management remains focused on transitioning to a 70% CRAMS/CEM revenue mix to sustain long-term EBITDA margins in the 29-30% range.
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