Ester Industries Limited Q3 FY26 Earnings Call Summary

Summary

Ester Industries Limited - Q3 FY26 Earnings Call Summary Monday, February 09, 2026 4:00 PM

Event Participants

Executives 3 Pradeep Rustagi (Executive Director, Corporate Affairs), Sourabh Agarwal (CFO), Vaibhav Jha (Deputy CEO)

Analysts 8 Juzer (Individual Investor), Muskan Malhotra (Individual Investor), Rohan Mehta (Individual Investor), Rohit Mehra (SK Securities), Saket Kapoor (Kapoor & Company), Sana (Individual Investor), Saransh Gupta (SVAN Investment), Vikrant Sahu (RK Advisory)

Financials & KPIs

Geographic & Segment Commentary

• Polyester Films: Segment revenue declined 8.9% YoY to ₹287.7 crores due to Chinese dumping and U.S. trade tariffs. Despite North American volume losses (30-40%), Value-Added Sales (VAS) remained at 25% of the mix, growing 18% YoY in non-U.S. markets. Management expects a sharp recovery as U.S. tariffs drop from 50% to 18% in March 2026.
• Specialty Polymers: Revenue surged 72.9% YoY in Q3 with volumes up 46.4%, acting as the company’s profit anchor. EBIT margins remained robust at 30%+ due to IP protection on marquee products. The segment currently operates at 25-30% utilization with a peak revenue potential of ₹400-500 crores.
• Ester Filmtech Ltd (Wholly Owned Subsidiary): Reported income of ₹106 crores (+13.5% YoY) with sales volumes up 37.2% to 9,186 tons. Performance was weighed down by ₹4.2 cr in MTM FX losses and ₹2.7 cr in labor code provisions. Utilization improved significantly to 76% vs 55% in the prior year.

Company-Specific & Strategic Commentary

• U.S. Trade Deal: Anticipated signing in mid-March 2026 to reduce tariffs from 50% to 18%, positioning Ester as more competitive than Chinese and SE Asian peers.
• Project Elite (JV): A $193 million chemical recycling project with Loop Industries; land acquisition to be completed by May 2026. Toyo Engineering has been appointed as the EPC consultant for a late 2027 commissioning.
• Sustainability & PWMR: New Plastic Waste Management Rules requiring 10% recycled content in flexible packaging is driving domestic demand for recycled PET (rPET). Ester recently installed a new rPET extruder in Hyderabad (October 2025) to capitalize on this.
• Specialty Transition: Strategy to move VAS from current 25-40% to 70%+ of total revenue over the next 3-5 years to decouple from commodity cycles.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Domestic Pricing & Spreads

• Question: What is the current situation of imports and pricing post-December? (Saransh Gupta)
• Answer: Value addition (VA) has improved from ₹23-24/kg in December to ₹30/kg in January. Chinese imports have stabilized at 6-7 kt per month, down from peaks of 11-12 kt (Vaibhav Jha).

Nike Offtake Agreement

• Question: Can you provide details on the Nike contract for the Elite project? (Rohan Mehta)
• Answer: It is a 3-year take-or-pay contract for 5,000 tons initially, expected to increase to 10,000 tons before commercial production. Nike pays 40% of the price if they don’t buy the material (Pradeep Rustagi).

U.S. Market Recovery

• Question: When will the North American specialty film volumes recover? (Saket Kapoor)
• Answer: We lost 30-40% of volume due to the 50% tariff. With the tariff dropping to 18%, we expect to recover these volumes in a few months and restart the business development pipeline (Vaibhav Jha).

Labor Code Impact

• Question: What were the one-off items hitting EBITDA? (Vikrant Sahu/Sourabh Agarwal)
• Answer: A one-time charge of ₹2.67 crores for retiral benefits due to new labor codes and ₹4.95 crores in MTM FX losses on foreign currency loans (Sourabh Agarwal).

Key Takeaway

Ester Industries reported a subdued Q3 FY26, with consolidated income declining 2.1% to ₹343.5 crores and EBITDA falling 67.7% to ₹21 crores, heavily impacted by predatory Chinese pricing and U.S. tariff barriers. Strategically, the company is pivoting toward a high-margin specialty mix, with Specialty Polymers volume growing 46.4% and the “Elite” recycling JV progressing through engineering phases with a secured Nike offtake. Management indicates the commodity BOPET cycle has bottomed, evidenced by domestic spreads recovering to ₹30/kg in January and the upcoming reduction of U.S. tariffs from 50% to 18% in March 2026. While FX volatility and Chinese dumping remain near-term pressures, the shift toward 70% specialty revenue and the enforcement of domestic recycled-content mandates provide a clear trajectory for margin expansion and volume growth into FY27.