Summary
Arabian Petroleum Limited - Q3 FY26 Earnings Call Summary Thursday, January 22, 2026, 12:00 PM
Event Participants
Executives 3 Kishan Sata (COO and Vice President), Manan Mehta (Whole Time Director), Tejas Furia (GM - Accounts & Finance)
Analysts
(Valueportal Event Participants; individuals named in Q&A: Siddharth Oberoi)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue Growth (H1 FY26) | +24% YoY | Growth driven by expansion in automotive and industrial segments across 22+ Indian states. |
| EBITDA Growth (H1 FY26) | +16% YoY | Growth slightly lagged revenue due to ongoing investments in infrastructure and manpower. |
| PAT (H1 FY26) | +33% YoY | Outpaced revenue growth, reflecting improved operational efficiencies and earnings strength. |
| PAT Margin | +8% YoY | Management targeting further expansion through high-value specialty product launches. |
| EPS | +30% YoY | Significant increase attributed to higher net profitability during the half-year period. |
| Debtor Days | 48 Days | Reduced from 62 days (Oct 2025) through implementation of credit control dashboards. |
| Installed Capacity | 48,000 KL per annum | Currently operating at ~70% utilization; expansion at Ambarnath Unit 3 aims to de-bottleneck small pack SKUs. |
| R&D Investment | ₹1 crore | Allocated in H1 FY26 for high-temperature fluids and backward integration projects. |
Geographic & Segment Commentary
- Automotive: Focused on lubricants for 2W, 4W, and heavy commercial vehicles under the “Arzol” brand. Distribution expanded into Kanpur, Rajkot, Karnataka, and Madurai, with a new mother warehouse established in Bhiwandi to improve supply chain turnaround from 7-10 days to 3-5 days.
- Industrial: Core strength in gear, hydraulic, and metalworking fluids for sectors like steel, pharma, and mining. Growth is being driven by the newly incorporated Lavisa Technologies, targeting high-margin (50% gross margin) specialty products for OEMs like Tata Motors and Kirloskar.
- Exports & International: Present in 30+ countries with a new wholly owned subsidiary in UAE (Arzol Petroleum Trading FZE). Added 4 new countries in the Middle East and Central America in H1 FY26; the UAE business is expected to break even in FY26.
- Government & Defense: Secured a rate contract from BHEL and a ₹90 lakh order from the Indian Army. Technology transfers (TOT) from DRDO for Universal Recoil Fluids (URFs) and low-temperature coolants provide a competitive moat in the defense sector.
Company-Specific & Strategic Commentary
- Backward Integration: Started production of fatty acid amides and esters in December 2025 to reduce raw material costs and enter the high-end refrigeration chemical market.
- Lavisa Technologies Acquisition: Majority-owned subsidiary formed to acquire the business of Emulsichem Lubricants. This move adds 25 years of technical expertise and grants entry into major automotive OEMs that were previously inaccessible.
- Nanotechnology Partnership: Exclusive licensing with Ukrainian firm Xado for nanotechnology-based additives. These high-performance products are benchmarked against global majors like Castrol and offer superior fuel savings.
- Product Approvals: Received US FDA (NSF) approval for food-grade lubricants, enabling entry into the pharmaceutical and food processing maintenance sectors.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | 20-25% CAGR | Sustained growth expected through penetration in South and East India and expansion of export markets. |
| Margin Profile | 5-6% Net Margin Target | Long-term target supported by shifting mix toward specialty products (50% gross margin) and backward integration. |
| UAE Subsidiary | Break-even by Q4 FY26 | Expected to turn profitable in FY27 as raw material sourcing and finished goods distribution scale. |
| Capacity Utilization | ~60% post-expansion | New capacity in Ambarnath Unit 3 will lower utilization from 70% to 60%, providing headroom for FY27 growth. |
Risks & Constraints
| Risk | Context |
|---|---|
| Currency Volatility | Exposure to INR/USD depreciation as 30% of raw materials are imported. Mitigation includes 60-70% natural hedging via exports and monthly price rollouts to distributors. |
| Market Sensitivity | Indian market remains highly cost-sensitive, potentially slowing the adoption of premium biodegradable/eco-friendly lubricants. |
| Working Capital | Expansion requires significant liquidity; while debtor days improved to 48, large-scale capex (₹20-25 crores) may require external funding beyond internal accruals. |
Q&A Highlights
Lavisa Technologies Rationale
- Question: What is the impact of the new subsidiary on the top and bottom line? (Valueportal Participant)
- Answer: Emulsichem previously did ₹30 crores revenue at 40% gross margins. Management expects to double this size in a few years by leveraging APL’s base oil inventory and global distribution network. (Manan Mehta)
Defense Sector Opportunity
- Question: Does the Universal Recoil Fluid (URF) technology open a monopoly market? (Valueportal Participant)
- Answer: TOT from DRDO is held by only 1-2 other players. This allows participation in high-quantum tenders (July/August) for heavy artillery with very low competition. (Manan Mehta)
Geographic Expansion
- Question: Are there plans for further warehouse expansion? (Valueportal Participant)
- Answer: Recently opened a Bangalore warehouse. The next move is consolidating North India operations (Ludhiana, Bhiwadi, Gurgaon) into one roof to improve cost-effectiveness. (Kishan Sata)
Competitive Positioning
- Question: How does APL compete with PSUs and global majors? (Valueportal Participant)
- Answer: APL operates a three-tier strategy—competing with Castrol via Nano-tech products, PSUs on hydraulic oils, and regional players on price. Speciality products under Lavisa will now target the OEM space. (Manan Mehta)
Key Takeaway
Arabian Petroleum Limited demonstrated strong H1 FY26 performance with 24% revenue growth and a 33% increase in PAT, underpinned by expansion into 22 Indian states and 30 global markets. Strategically, the company is pivoting toward backward integration through in-house ester and amide production and high-margin specialty segments via the acquisition of the Emulsichem business (now Lavisa Technologies), which targets gross margins of ~50%. Management has successfully reduced debtor days to 48 and is de-bottlenecking its Ambarnath facility to support a guided 20-25% CAGR. While currency risks are mitigated by a 60-70% natural hedge, the focus remains on scaling the UAE subsidiary and securing large-scale defense contracts through DRDO technology transfers. The company is well-positioned to capitalize on the projected 6 million metric ton Indian lubricant market by 2030 through specialized niche applications and OEM entries.
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