At a Glance
Aarti Industries’ Q1 FY26 results could double as a chemistry lab disaster—lots of smoke, not enough reaction. Revenue fell to ₹1,675 Cr (-9.5% YoY), and net profit nose-dived -68.6% YoY to ₹43 Cr. Operating margins stayed stuck at a meagre 13%, while the stock continues to parade a 64.8x P/E—a valuation only a desperate romantic (or FOMO trader) could love. The market responded with a 5.7% crash. Investors are asking: is this a specialty chemical or a specialty circus?
Introduction
Remember when Aarti Industries was the poster child for India’s specialty chemical boom? Fast forward to Q1 FY26, and the company looks like it accidentally inhaled its own fumes. The once-proud NCB (Nitro-Chloro-Benzene) kingpin is facing demand slowdown, pricing pressure, and margin erosion.
The stock is now down 44% YoY. Promoters have been quietly trimming stakes (now 42.24%), FIIs are heading for the exit (down to 6.44%), and DIIs are reluctantly holding the fort at 20.38%.
If this were a chemistry equation: High Debt + Falling Margins + Expensive P/E = Investor Heartburn.
Business Model (WTF Do They Even Do?)
Aarti Industries cooks up specialty chemicals for everything from dyes to pharma intermediates. Their products are the invisible ingredients in your medicines, clothes, and plastics. Sounds cool? Sure. Profitable lately? Not so much.
The company operates across Gujarat and Maharashtra, exporting to over 100 countries. They cater to agrochemicals, polymers, pigments, and energy-related chemicals. The catch? Global slowdown + higher raw material costs = weak realizations. Even their fancy capex projects haven’t yet translated into fat margins.
Financials Overview
Q1 FY26 numbers scream “ouch”:
- Revenue: ₹1,675 Cr (-9.5% YoY)
- EBITDA: ₹212 Cr (margin 13%)
- PAT: ₹43 Cr (-68.6% YoY)
- EPS: ₹1.19 (annualized ₹4.8)
Interest expense is eating away profits (₹60 Cr this quarter), depreciation continues its march (₹114 Cr), and tax rate keeps doing weird yoga (negative last year, near zero now).
Fresh P/E Calculation:
Current Price ₹420 / Annualized EPS ₹4.8 = P/E 87.5 (worse than reported 64.8—market is even crazier).
Valuation
Let’s apply the 3 magic tricks:
- P/E Method:
Sector average P/E ~30. Fair price = 30 × 4.8 = ₹144. - EV/EBITDA Method:
EBITDA TTM ₹906 Cr, EV/EBITDA ~12× → EV ≈ ₹10,872 Cr. Less debt ₹3,847 Cr → Equity value ≈ ₹7,025 Cr. Per share ≈ ₹195. - DCF (Quick & Dirty):
Growth 5%, WACC 10% → Value ~₹200–₹220.
Fair Value Range: ₹145 – ₹220. Current ₹420 is flying without fuel.
What’s Cooking – News, Triggers, Drama
- Ongoing capacity expansions—but output still low.
- Demand in Europe/US weak due to destocking.
- Strategic projects delayed—management keeps saying “next quarter”.
- Specialty chemical peers (Navin Fluorine, Deepak Nitrite) eating their lunch.
Balance Sheet
| (₹ Cr) | Mar 2025 |
|---|---|
| Assets | 11,114 |
| Liabilities | 11,114 |
| Net Worth | 5,605 |
| Borrowings | 3,847 |
Auditor’s Joke: Assets grew, but profits didn’t. Debt is slowly turning from sidekick to villain.
Cash Flow – Sab Number Game Hai
| (₹ Cr) | Mar 2023 | Mar 2024 | Mar 2025 |
|---|---|---|---|
| Operating | 1,319 | 1,204 | 1,242 |
| Investing | -1,330 | -1,310 | -1,398 |
| Financing | 38 | 35 | -73 |
Remark: Heavy investing outflows + shrinking ops cash flow = Capex hangover.
Ratios – Sexy or Stressy?
| Metric | Value |
|---|---|
| ROE | 6.04% |
| ROCE | 6.45% |
| P/E | 87.5 |
| PAT Margin | 2.6% |
| D/E | 0.7 |
Commentary: Sexy? No. Stressy? Oh yes.
P&L Breakdown – Show Me the Money
| (₹ Cr) | Mar 2023 | Mar 2024 | Mar 2025 |
|---|---|---|---|
| Revenue | 6,619 | 7,271 | 7,095 |
| EBITDA | 1,089 | 997 | 906 |
| PAT | 545 | 331 | 237 |
Remark: Revenue stagnant, PAT sinking. Margin compression is the story.
Peer Comparison
| Company | Revenue (₹ Cr) | PAT (₹ Cr) | P/E |
|---|---|---|---|
| Pidilite Inds. | 13,140 | 2,093 | 69.7 |
| Navin Fluorine | 2,551 | 355 | 72.9 |
| Deepak Nitrite | 8,282 | 680 | 36.9 |
| Aarti Industries | 7,095 | 237 | 87.5 |
Remark: Aarti has Pidilite-like P/E without Pidilite-like profits. Investors are clearly high on something.
Miscellaneous – Shareholding, Promoters
- Promoter holding: 42.24% (gradually falling)
- FIIs: 6.44% (exiting stage left)
- DIIs: 20.38% (pretending to be brave)
- Public: 30.9% (bag-holding).
Promoters’ body language says “we’ll expand”, but their selling says “good luck, investors”.
EduInvesting Verdict™
Aarti Industries is stuck in a bad equation: High Valuation + Falling Profits + Weak Demand. While it has strong capabilities in specialty chemicals, Q1 FY26 highlights structural challenges—low capacity utilization, high costs, and poor pricing power.
SWOT Snapshot
- Strengths: Diverse product portfolio, strong client relationships.
- Weaknesses: Margins under pressure, debt rising, profitability tanking.
- Opportunities: Global supply chain diversification, China+1 benefits.
- Threats: Competition, raw material volatility, prolonged demand slump.
Final Take: At ₹420, Aarti Industries is priced like a premium cocktail but tastes like tap water. Unless margins recover and new capacities start printing cash, the stock is running on fumes. For now, the market is paying for hope, not earnings.
Written by EduInvesting Team | 31 July 2025SEO Tags: Aarti Industries, Specialty Chemicals, Q1 FY26 Results
