Summary
Gem Aromatics Limited - Q3 FY26 Earnings Call Summary Tuesday, January 27, 2026 5:30 P.M. IST
Event Participants
Executives 4 Aadit Shah (CEO’s Office), Kaksha Parekh (Whole-Time Director, Chairperson and CFO), Suraj Shah (Deputy CFO), Yash Parekh (Managing Director and CEO)
Analysts 8 Akshada Deo (Niveshaay), Darshan Garg (Tiger Assets), Disha (IIFL Capital Services), Jatin (Svan Investments), Kamlesh Bagmar (Lotus Asset Managers), Nikhil Ostwal (Ostwal Investments), Nishita (Sapphire Capital), Rohan Mehta (Ficom Family Office)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue (Consolidated) | ₹78.9 crores | -19.4% QoQ; impacted by US tariff uncertainties and GST-related changes in domestic blending requirements. |
| Revenue (Standalone) | ₹83.9 crores | -5.7% QoQ; reflects impact of external headwinds on the core mint-centric business. |
| Gross Margin (Consol) | 23.0% | +900 bps QoQ; significant recovery driven by improving realization in mint and US subsidiary GEM LLC. |
| EBITDA (Consolidated) | ₹7.0 crores | +133% QoQ (from ₹3.0cr); margins improved to 8.9% backed by gradual mint price recovery. |
| EBITDA (Standalone) | ₹7.6 crores | 9.1% margin; up from 4.7% in Q2, indicating early signs of margin normalization. |
| PAT (Consolidated) | (₹5.0 crores) | Net loss reported due to higher depreciation (₹8.7 crores) following Dahej plant capitalization. |
| Net Profit (Standalone) | ₹4.2 crores | 5.0% PAT margin; largely steady compared to previous quarters. |
| Cash PAT (Consol) | ₹3.7 crores | Positive cash earnings despite reported net loss, adjusted for non-cash depreciation charges. |
Geographic & Segment Commentary
- US Market: Represents ~60% of total exports; currently facing headwinds due to 25% “Russian penalty” tariffs. Management noted that customers are exhausting existing inventory, leading to improved inquiry levels in Q3/Q4.
- Europe: Strategic focus area for expansion to reduce US dependency; management expects the India-EU trade deal to be a significant tailwind for the flavor and fragrance (F&F) portfolio.
- Mint & Derivatives: Performance recovering as mint prices stabilize; customers have adjusted blending requirements following domestic GST-related rate structure changes.
- Clove & Eugenol: Segment continues to grow as a key diversification pillar; production is being transitioned to the new Dahej facility where Eugenol is tariff-exempt for the US market.
Company-Specific & Strategic Commentary
- Dahej (Krystal) Facility Commissioning: The ₹270 crore Greenfield facility commenced production of Cooling Agents (WS23, WS3) and Clove verticals on December 11, 2025. This facility provides a 3x capacity expansion (total 16,000 MTPA) and is designed with Continuous Flow Technology for effluent-free processing.
- Product Diversification: Shifting from a mint-centric model to highly integrated specialty ingredients across Phenol, Citral, and Anisole chemistries. New products like cooling agents and certain phenol derivatives are specifically chosen for their tariff-exempt status in the US.
- Backward Integration: Management plans to manufacture Anisole in-house starting Q1 FY27 to provide cost advantages for downstream products like MEHQ, Guaiacol, and BHA.
- Technological Edge: Adoption of Continuous Flow Technologies for phenol chemistries is expected to improve product quality and operational efficiency compared to conventional batch routes.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue | ₹1,050 - ₹1,100 crores (FY28) | Driven by Dahej ramp-up (target ₹700cr) and GEM standalone (target ₹400cr). |
| EBITDA Margin | 16% - 18% (FY28) | Driven by high-margin specialty products at Dahej, automation efficiencies, and improved product mix. |
| Plant Utilization | 50% - 60% (FY27 end) | Expected utilization for the Dahej (Krystal) facility by the end of the next fiscal. |
| Breakeven | Cash Breakeven FY27 | Dahej facility expected to reach cash breakeven at ~45% capacity utilization. |
| Asset Turnover | 3.0x (Peak) | Management expects the Dahej facility to eventually generate ₹750-800 crores in revenue at peak. |
Risks & Constraints
| Risk | Context |
|---|---|
| Geopolitical/Tariffs | 25% tariffs on certain products in the US market remain a major hurdle, though mitigation via tariff-exempt product launches and “US Plus One” strategies is underway. |
| Regulatory (GST) | Domestic demand was disrupted by two-tier GST rate structures on menthol; management notes this primarily affects the unorganized market segment. |
| Commissioning/Ramp-up | The Dahej facility is in the stabilization phase; delays in product approvals from global majors could impact the projected FY27 ramp-up. |
| Competition | Entry into Phenol derivatives (MEHQ/Guaiacol) puts the company in competition with established legacy players, though management relies on its unique Anisole-based technology route. |
Q&A Highlights
Dahej Capacity & Revenue Split
- Question: What is the peak revenue potential and the split between the two main entities? (Jatin, Nikhil Ostwal, Darshan Garg)
- Answer: Dahej (Krystal) has a peak potential of ₹750-800 crores based on a 3x asset turn on ₹250 crores capex. For the FY28 target of ₹1,100 crores, the expected split is ~₹700 crores from Krystal and ~₹400 crores from GEM standalone, though this may shift as clove production moves to Krystal (Suraj Shah).
Phenol Derivatives Strategy
- Question: How will Gem compete in MEHQ/Guaiacol against legacy players like Clean Science and Vinati? (Disha)
- Answer: Gem utilizes a clean vapor-phase technology starting from in-house Anisole, which provides cost advantages. The company is focusing on unique downstream derivatives for the F&F industry that differ from competitors’ portfolios (Yash Parekh).
US Tariff Exposure & Mitigation
- Question: What is the status of US tariffs and the “US Plus One” strategy? (Akshada Deo, Vinay Shah)
- Answer: While 60% of exports are currently tariff-impacted, new products like cooling agents and eugenol are tariff-exempt. The company is undergoing a long due diligence process for third-party manufacturing in other countries to bypass tariffs (Yash Parekh).
Working Capital & Efficiency
- Question: Will the working capital cycle improve with the new facility? (Saiganesh)
- Answer: The company is implementing off-balance sheet factoring for receivables and expects inventory days to decrease for phenol and citral derivatives as raw materials are more easily available than mint (Suraj Shah).
Key Takeaway
Gem Aromatics reported a transitional Q3 FY26, marked by the commissioning of its strategic ₹270 crore Dahej (Krystal) facility. While consolidated revenues were pressured by US tariff uncertainties and domestic GST adjustments, gross margins saw a sharp recovery to 23% due to better realizations and a shifting mix toward non-mint products like clove derivatives. The company is executing a major pivot toward specialty chemicals, with a target to reach ₹1,050-1,100 crores in revenue and 16-18% EBITDA margins by FY28. This growth is anchored by a 3x capacity expansion and the introduction of high-value, tariff-exempt products such as cooling agents and phenol derivatives. Management remains focused on stabilizing Dahej operations and securing global customer approvals, expecting cash breakeven for the new unit in FY27 as utilization scales toward 50%.
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