Ladies and gentlemen, good day and welcome to the Aarti Industries Q4 FY 2026 earnings conference call. As a reminder, all participant lines will be on listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you.
Thank you. Good afternoon, everyone, and thank you for joining us on Aarti Industries Q4 FY 2026 earnings conference call. Today, we are joined by senior members of the management team, including Mr. Suyog Kotecha, Executive Director and Chief Executive Officer, and Mr. Chetan Gandhi, Chief Financial Officer. We will commence the call with opening remarks from Mr. Kotecha, followed by a Q&A session where management will address participants' queries. Just to share our standard disclaimer, certain statements that may be made in today's conference call could be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared earlier and also uploaded on stock exchange websites. I would now like to invite Mr. Kotecha to share his perspectives. Thank you. Over to you, sir.
Thank you, Nishid. Good afternoon, everyone. Welcome to Aarti Industries Limited Q4 and a full year FY 2026 earnings call. It's a pleasure to connect with you all again. The quarter under review was defined by a complex and dynamic global landscape. The escalation of geopolitical tensions in the Middle East has led to disruptions across global supply chains, impacting trade flows, logistics timelines, and input cost structures. In particular, the prices of key raw materials such as benzene, sulfur, aniline, toluene, methanol, went up by over 60%. Elevated freight rates are also resulting in an increase in cost of global trade. Further, the curtailment of volumes from Middle East has created significant supply chain issues and have presented near-term headwinds for the chemicals industry. This has reinforced our need for operational efficiency, product diversification, and deeper customer engagement.
Against this backdrop, our FY 2026 performance and Q4 performance demonstrated the inherent resilience of our diversified and cost-competitive product portfolio and our ability to manage global volatility, leveraging our expansive geographic footprint and deep-rooted customer relationships. The overall demand environment for our basket of products remain largely stable. While we experience disruptions in the shipments to the Middle East, we were able to proactively redirect volumes to the other geographies, ensuring continuity in operations and minimizing the impact on overall volumes. Before we go into the financials, let us also highlight the two long-term contracts which we concluded in the last quarter.
First one being a backward integration initiative with a leading global chemical company, transitioning the relationship into a more integrated end-to-end manufacturing model with a CapEx of about INR 200 crores- INR 250 crores to cater to the requirement over the residual 15-year contract period. The second one is a $150 million multi-year supply agreement with a global agrochemical innovator for a critical agrochemical intermediate used in crop protection formulations, extending through March 31, 2030. This contract will be supplied without any instrumental CapEx. These developments mark a strategic shift towards a deeper integration, enhanced earnings visibility, and improved capital efficiency. Notably, during the year, Aarti Industries was also honored with the 2026 Gallup Exceptional Workplace Award by Gallup, becoming one of the first manufacturing companies in India to receive this recognition.
This distinction further reinforced AIL's position as a global manufacturing organization, combining operational scale with high performance and a people-centric culture. Let me now take you through the financial performance for the quarter and the full year. For the Q4 FY 2026, the company reported revenue of INR 2,422 crores, representing a growth of 9% YoY, driven by stable domestic demand and increase in export volumes. EBITDA stood at INR 342 crore, growing 29% YoY. Profit after tax was INR 137 crore, registering a growth of 43% YoY. The freight cost has significantly increased in the current quarter, driven by increase in export shipments and also due to increase in the fuel rates, accounting for the bulk of the increase in the other expenses.
Interest costs also include an amount of INR 39 crores, being the revaluation loss in respect of our long-term foreign currency loan. For the full year FY 2026, revenue stood at INR 9,018 crores, up 12% on a YoY basis. EBITDA grew by over 15% to close at INR 1,172 crores, while PAT recorded a growth of about 27% to close the year at INR 419 crores. In line with the guidance given, the CapEx for the year was at about INR 1,125 crores. Overall, the performance reflects steady execution supported by volume growth, improving capacity utilization, and benefits coming from operational efficiency despite continued margin pressure over a significant part of the portfolio.
Let us talk about specific business updates, starting with the energy application, which contributes roughly 40% of the revenue. We continue to maintain a very strong global presence, holding a market-leading position. The volumes for the quarter were down 4% quarter-on-quarter, primarily driven by lower exports to the Middle East, which were impacted due to geopolitical disruptions. The impact was lower as we were able to successfully reroute part of these volumes to other geographies. Despite the disruptions, the capacity utilization continued to remain high, preserving our wallet share with the global customer. The full impact of disruptions will be felt in the ongoing quarter. Our expansion to 360 KTPA is on track and is expected to be commissioned soon in line with the market requirements.
Ongoing volatility in the refining product margin does create uncertainty in terms of gasoline, naphtha cracks and the supply chain risk related to the key RMs is adding some near-term risks to this business. Against this backdrop, we maintain a very dynamic approach, balancing volume growth with spread management to optimize overall profitability to the best extent possible. In non-energy applications, agrochemical applications as a basket demonstrated a steady volume growth, albeit the margin pressure continued to prevail. The contract win supports the growth of select product and intermediates and is in line with our plans to ramp up capacities which are already created for this application. Dyes, pigments, paints were relatively stable for the quarter.
In the near term, as the impact of West Asia war is felt in the global market, there could be some impact on export, but that we expect to be compensated by increasing volumes in the domestic markets. Polymer as application continue to perform well and is currently in a strong growth phase, especially demand and volume driven due to applications in the EV markets. Within the polymer application, MPDA specifically continues to underperform due to heavy competition from China. Rest of the portfolio continues to do extremely well. Pharma application also continued to remain stable during the quarter. The last quarter announcement of China's anti-involution stance, and, you know, impact to products related to PNCB in the NCB chain, should start seeing benefits from the Q1 FY 2027 onwards.
Thus on a overall basis, even the non-energy and sort of the base business has performed better, driven by volume growth and supporting cost efficiencies as we continue to make rapid progress on our operational and strategic initiatives. On Zone IV projects, they're still expected to be commissioned in the phased manner during the current financial year. Our multipurpose plant and PDA plants are actually under commissioning trials and should come on stream soon, while others will commission gradually in the next couple of quarters. These projects were delayed by three to four months on account of labor constraints, primarily, driven by, you know, LPG, commercial LPG related issues and migration of labor due to election as well.
The company has taken multiple steps to support contract labor and to sustain them, and to minimize the delay in the CapEx integration. From a capital allocation perspective, as guided earlier, the CapEx for FY 2026 is at about INR 1,125 crores. You would have witnessed the decline in the CapEx spends in FY 2026 versus the spends in the past two to three years, which is in line with our plans to optimize the capital allocation. Our CapEx for FY 2027 is expected to be in the range of INR 700 crores- INR 800 crores as we continue our journey to optimize CapEx and maximize the returns. Going forward, we expect to invest in high-growth initiatives with investment largely focused on niche cum high-return projects. Our previously announced partnerships are also advancing well.
Ojiin, the superform joint venture, is on track for commissioning in first half FY 2027 with an initial focus on agrochemicals, paints and coatings end markets. Our circularity initiatives also continues to gain momentum with commissioning on track for the CY 2027. All these initiatives not only underscore our R&D progress, but also helps us secure a first-mover advantage as we tap into emerging opportunities in sustainable chemistries. Working capital requirements expanded during the quarter, driven primarily by significant elevation in raw material prices, causing an uptick in net debt as well as interest expenses. While we are working with our customers and suppliers to optimize the working capital cycle, the normalization of this might take some time. However, given the CapEx intensity is lower, we still anticipate the net debt to decline in the current year.
FY 2026, 2027 begins with sort of cautious optimism supported by improved capacity utilization, strong order visibility through long-term contracts and continued progress on the key growth and integration initiatives. The specific situation in West Asia continues to pose near-term risk to the availability of certain critical feedstock and placement of key products in the Middle East. While near-term risk persists, the company is actively working with suppliers and customers to explore alternate sourcing and placement avenues to ensure continuity of operations. The company has delivered strong growth in quarterly EBITDA and ROE and is on track to implement profitability improvement initiatives, including the higher operating-leverage-related initiatives, cost optimization initiatives and incremental contributions from recently commissioned and upcoming assets.
With a strong foundation of strategic investments, improving capacity utilization and long-term partnerships, Aarti Industries is well positioned to navigate near-term volatility while building a robust foundation for sustainable growth. With that, I would now request the moderator to open the floor for the Q&A session. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Archit Joshi from Nuvama Institutional Equities. Please go ahead.
Hi. Good afternoon, and thanks for the opportunity. Congrats on a great set of numbers this quarter. First question, sir, on the quarterly results. Just wanted to understand, you've had a healthy gross margin expansion. Would there be an element of an inventory gain that you might have booked, especially during the month of March? That would be my first one.
There is I think, on a overall quarter basis, there is a FX gain of roughly around INR 10 crores. On inventory, I think it's a bit of a mixed bag because though the pricing went up in the March, many of our raw material pricing also went up simultaneously. We did have some amount of contracts concluded from a pricing point of inset, which we continue to serve in March. Not a significant impact of inventory gain in the last quarter, but from a FX standpoint, there was a gain of roughly INR 10 crores in the last quarter.
Understood. Suyog Kotecha, second question on the exposure that we have in our energy portfolio, specifically in the Middle East, and also at the company level, if you can throw some number on that.
On average, yearly average basis, roughly 9%-10% of our revenue came from Middle East, which is dominantly in energy application. That's the extent of exposure that we have currently to the region. We are working actively to figure out a way to divert that product portfolio to the rest of the world. We also hope the situation in the Middle East should get settled at some point in time, and in that point in time, we actually might see an increase in demand in that particular region, given, you know, practically the material flow to the region has stopped now for almost six to eight weeks kind of time frame. Nonetheless, that's the extent of exposure.
Sure. One last final one before I hand back the queue again. You did mention about the MPP and the p-Phenylenediamine plans to come online at the earliest. What would be the balance CapEx that we plan to commission in this year? If you could just elaborate on the kind of timelines in terms of commissioning of these CapExes, and when can we expect revenue accruals or sales to happen from these plants? If you can split this in a elaborate, timely manner if possible, that would be helpful. That would be all from my side. Thank you.
Yeah. I think the entire Zone IV , which is a combination of multipurpose plant, calcium chloride plant, and there are five chemistry blocks. I think the entire CapEx will get commissioned during FY 2027. I think the first two which we'll get off the block is the calcium chloride and the multipurpose plant. The p-Phenylenediamine capacity, we consider it as an extension of the multipurpose plant. I think all of the calcium chloride is actually already sort of the commercial runs have happened. The plant is under operation. It will ramp up to full capacity over the course of next three to four weeks. I think the multipurpose plant and associated extension of p-Phenylenediamine is also under commissioning trials as we speak. Within this quarter, we should be able to declare it sort of commissioned and commercialized.
I think the remaining five different blocks will get commissioned throughout the current financial year. I think compared to our original expectation, there is a three to four months of delay in that commissioning cost, mostly due to contract labor issues. Nonetheless, even with that, we anticipate all of this get to commission within the current financial year. Accordingly, the revenue aggregation will start over a staggered manner, right? We don't anticipate all of it will go to a full capacity utilization in a very short timeframe. As I had mentioned earlier, it does take a little bit of a time bandwidth to go through a qualification cycle and improve capacity utilization over a period. The initial revenue from this asset should start as early as from Q2 of this financial year.
Thank you.
Right.
Next question is from the line of Arun Prasad from Avendus Spark. Please go ahead.
Good morning. Thanks for the opportunity. Sir, my first question is on, if I look at our utilization, most-
Arun, sorry, can you use your handset mode, please? Your audio is not very clear.
Hopefully this is better.
Yes.
So Sir, my first question is on the utilization. We are mostly at upwards of 80%, 85%. If I look at the Q4 volumes and annualize it's close to 100%. Is this an industry-wide phenomenon or is it just because we are at this kind of utilizations because we didn't add any supply with the last cycle?
I think it would be a bit unfair for me to comment whether this is an industry-wide phenomenon. I think at AIL, what I can comment on it is, I think improving utilization levels of all of our existing asset has been a deliberate strategy. I think we have pushed volumes sometimes, you know, even at the expense of a slight compromise on the margins. That is reflected in the utilization levels that you see. I think there are some value chains like p-Phenylenediamine, where we are structurally figuring out a long-term solution. I think apart from that, in rest of the value chain, we have been able to push up the utilization levels.
As we speak, we see further upside possible in select chains like DCB, where we are also working on capacity de-bottlenecking, as we mentioned in the last quarter. Even in sort of ethylation chain, where the new contract that we signed in the last quarter plus the downstream integration of p-Phenylenediamine will help us improve utilization levels in that particular chain. I think from our global customer diversification and relationship standpoint, I think in a significant part of our portfolio, we are reaching to utilization levels which are healthy.
Okay. Because these kind of utilization usually leads to a pricing recovery and a margin expansion because of the tight supply demand balance. Should we expect some kind of a pricing related upsides from our existing portfolio and existing volumes?
I think the utilization levels that you see are at a sort of the bulk product level, right? It is a MCB level, DCB level, or at a utilization level. I think if you look at our portfolio, our portfolio significantly also goes downstream of this bulk isomer level chemistries. That's where I think the story product by product will be very different. Of course, there are some value chains where there is a pricing recovery at a bulk level, as we talked about MCB last quarter as well, and we have seen that kind of happening now as the Chinese anti-involution plays out, where the margin profile has definitely improved, including pricing.
I think DCB continues to remain quite robust, and is driven by both, I think tighter capacity transition as well as demand growth coming from EV market. Versus some other chains, even though we might be operating at a relatively higher level, if the global industry hasn't moved to that utilization levels, then the margin uptick or the pricing correction will not happen.
Okay. Okay. In your assessment, that is a likely scenario? Maybe we are at higher levels, industry is not this kind of a level.
I think there are some products in which that situation does exist, and that's why I would hesitate to say that across the portfolio we are seeing margin recovery or pricing corrections. I think there are definitely pockets of the portfolio where it is happening. In general, I think given the global dynamic, I think if China continues to act what they are talking about, then this recovery should become much more broad-based going forward compared to-
Mm-hmm.
Current situation where it is sort of in select pockets.
Understood. Understood. My second question is on the MMA. So typically on a elevated crude prices, our understanding is that MMA scores over the, say, probably the traditional MTBE. Are you seeing this playing out at least? Secondly, if you are not facing a supply into the Middle East, where we are facing MMA volumes currently, and is it sustainable?
I think on the MMA economics, frankly, a lot of complicated answer without getting into technical details. I think, I mean, we've described this a few times in the past. There are multiple factors which play out when it comes to affordability of MMA with final customers. I think one of that is also a naphtha gasoline spread. I think in the current situation, naphtha being significantly stronger, that sometimes does have impact on naphtha gasoline spread available to our customers. At the same time, the absolute pricing level sort of remaining at a higher level also creates a counterbalancing sort of factor for the spread affordability. It also has an impact in terms of our raw material cost goes up, right? Both aniline and methanol are at a significantly elevated level.
In that context, our ability to offer certain pricing to customers, that also gets impacted by ultimately raw material cost prices have to be passed on. There are multiple factors playing over there. What I can say is that, we are able to optimize volumes and spreads to ensure that liquidation happens wherever there is a physical possibility of supplying the cargo. Our shipments to U.S. are relatively consistent and happening. Our shipments to Europe are starting, and we hope to expand that going forward. I think the domestic market also remains relatively consistent from a volume standpoint. I think Middle East is a place where physically it is impossible to ship the material as of now, as we speak, and that's where there's an impact.
I think we partially offset that in the last quarter, but the full impact of that, I think, will be visible in the coming quarter. It depends on how soon the West Asia situation settles, and we are able to restart our flows to Dubai and Oman market.
We should expect the contribution from energy in our revenue should slightly moderate?
Frankly, difficult to answer the question, right? Because we are, in the sort of four weeks into the quarter. You know, if the situation stabilizes, there is also possibility that the volume requirement in Middle East can dramatically go up given the region has been running dry of the product for last six, eight weeks. If the situation in West Asia doesn't settle down over the course of next two months, then of course, you know, we would expect certain impact on the volumes for this molecule going into Middle East market.
Understood. Understood. If I can squeeze in one more question on CapEx. You said that 2026 CapEx are reduced from INR 1,125 crores to the somewhere or INR 800 odd crores. Is it because of scope reduction or postponing of the cash flows to 2027?
No.
the breakup on the FY 2026-2027 CapEx.
We did not. FY 2026 CapEx was in line with what we had said. It was INR 1,125 crores. It was not reduced. FY 2027 CapEx is what we are saying will be in the range of INR 750 crores-INR 800 crores.
Oh, okay. Any breakup, approximate ballpark breakup of the, you know, project price?
INR 750 crore-INR 800 crore, significant part of it will still go in completion of Zone IV , and part of it will also go to the new long-term contract which we signed, right? Where we announced total CapEx of INR 200 crore-INR 250 crore. I think part of that will be spent in the current year. These two will kind of broadly account for a significant amount of CapEx, and then we have a sort of yearly run rate of INR 150 odd crore that goes into asset maintenance.
Oh, okay. Understood. Then finally, on the NTP and the calcium chloride, at current prices, what is the steady state revenue from these two products?
I would not like to comment. Again, we don't talk about revenue. I think we talk about margin profiles. Given there are lot of products which are interlinked, even within NTP and within the different Zone IV blocks, I think the total potential coming from that location in an integrated manner is what we have talked about, and I think we continue to maintain that range. We will hit that. You know, we will hit that over the course of two years is the current plan. I think it would not be correct to talk about revenue/margin potential based on today's pricing because it is definitely a bit, I would not call it a sort of regular pricing/margin level.
Understood. Understood. All right, sir. Thank you very much.
Thank you. Next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Thank you, sir, for the opportunity. sir, my question is on to the dye segment. sir, as you mentioned in your opening notes, the dye segment is recovering and we are expecting a steady state going ahead. sir, when we look at the numbers, on YoY basis and on quarter-on-quarter basis both there is a dip, and it seems like the dye segment is now slowing down after peaking out the last two quarters. Is there any change, sir, into the structure of the business or volumes in the global markets or Indian markets are slowing down? Any thoughts on that?
Overall, if you look at our share of business in dyes, pigments and printing inks, we classify these three end markets together, it remains in the range of 10%-11%. You know, it will remain broadly around that. I think there are multiple trends within the segment at a product level which differ. For example, you know, 3,3'-Dichlorobenzidine is one of the core product in that segment where we are facing pressure on the demand from the global markets, that is partially getting compensated by increase in demand in the local market as the global consolidation in the pigment industry happened, right? There are different trends at a individual product level. Overall, I think, our share of, you know, this application remains at around 10%, 11 % .
There is a part of the portfolio where, because of extremely high raw material pricing and corresponding price being passed on through our products, some of the low margin segments may not be able to afford, and we might see a slight amount of demand destruction. That could be a potential impact in a three to six months kind of timeframe. So far, I think the pressure in the global market has been compensated by the growth in the domestic market.
Got it. Sir, on to the agro side, sir, it has been two years, persistently we are mentioning on the margin pressure. It seems like there is no answer. Any sort of positive thing which you see going ahead for FY 2027, 2028, whether we could so higher uptake in the domestic could partially mitigate the RM price hike. Any sort of things that can change structurally into the business, which is?
I think the biggest driver to get back the margins in the agrochemical segment would be how sort of Chinese industry evolves on this particular application. I think they have been one of the most important driver of the margin compression in this segment over the last few years. I think their conduct and behavior over the coming years, coming quarters and years is what ultimately determine the ultimate sort of margin potential in this segment. As I said, the narrative that we are hearing, what we are seeing, I think if that persists and that becomes much more broad based, we might see a recovery in the margin. I think we wait to see a firmer trend to make a conclusive commentary on the same.
Got it. sir, onto the debt side, we have seen like debt reach around INR 49 billion in this fiscal, highest ever when we look at Aarti's history. Any particular reason, sir? We also see on the asset side there is some INR 600 crore of cash also sitting today.
Yeah.
What I see, sir, because, so we don't have also material CapEx also INR 700 crore-INR 800 crore or maybe INR 1,000 crore FY 2028 that we can easily do it from our, so cash flow only. What is the need for so much debt picking up?
Let me answer that. The cash which you see is more like a one-off kind of a situation. It just happened that one of the term loan got disbursed towards the last days of March and then couple of holidays, so the money were not effectively utilized to reduce the debt. On a net debt basis, we are still at around INR 4,300 crores. A good part of this may be around INR 250 crores-INR 300 crores is purely because of the working capital increase which has happened in the last part of the Q4. Plus, as you would have seen, the export profile has gone up, export revenues have gone up.
In exports, the receivable days are optically a bit higher than the domestic receivable days, which is where the working capital profile continues to remain a bit elevated. A INR 4,900 crore debt obviously will not be there. We'll have to look at a net debt number of around INR 4,300 crores. As we speak, bulk of that cash has already been used to liquidate the debt portfolio immediately in the first week of April. That's how it is. Yes, going forward, as the CapEx intensity is going down, the CapEx is coming down, the EBITDA and cash flows improving, the debt for this year will start tapering off.
Sir, just one last question. Can you provide the breakup of the CWIP of INR 2,000 crores you have done in FY 2026?
A bulk of that would be for Zone IV . As you understand, Zone IV had a CapEx of around INR 1,800 odd crores. A bulk of that would be with Zone IV . I don't have that exact breakup right now, but we'll send it separately later on. Yeah, a bulk of that would be for Zone IV . Zone IV from an overall perspective, a bulk of CapEx which has to happen has already happened by FY 2026.
Got it, sir. Thank you, sir.
Thank you. We'll take our next question from the line of Amar Maurya from Laxmi Investments. Please go ahead.
Yeah, hi sir. Thanks a lot for the opportunity. Sir, just want to understand, like, in terms of your pricing environment, primarily, let's say if we see your agri portfolio, are you seeing some improvement in the pricing and primarily, lot of supply which was China-based? There were a couple of plants which had fire incidents. Do you see any improvement in your pricing of the product?
I think on absolute pricing, of course, there is a huge positive trajectory compared to where we were in China. I think what we have to look at is the spread and margin, because even raw materials have also gone up significantly, right? In some cases 60%. In some cases they have also more than doubled. I think what we have to look at is spread and I guess not necessarily, absolute pricing, which definitely is significantly better compared to where it was, you know, at the start of the Q4. I think some of the incidences that you mentioned which happened in China, yes. I think there is a sort of increasing scrutiny, especially on sort of nitration chemistry related assets.
We see more and more regulatory constraints rightfully being put so on these chemistries to avoid sort of hazardous operations which are kind of non-safe, right. Go more towards continuous operation, put additional safeguards in place, and that will mean that some of the smaller volume, inefficient players will ultimately vacate the market at some point in time. That should lead to sort of industry consolidation and sort of better conduct going forward. It will happen over a period of time. In select products, we see impact of that in the near term. I think, as I said, a broad-based recovery, we will, I guess, get to see a firmer trend over the course of next few quarters.
Okay. Typically when you talk about spread, let's say, ideally, how much % of your portfolio in agro as well as in the energy space would have seen the improvement in the spread?
I think on agro side, frankly, currently we are able to hold on to spread, and that itself is from a company's point of view, is a good outcome because passing on such a rapid increase in raw material costs to agrochemicals, specialty chemical companies who have a much longer gestation period in terms of absorbing price rises, I think is a good outcome. I think over the course of next three to six months, we will be able to fully pass on the price rise, provided, you know, there is certain stability that comes on the raw material side, which itself is a bit of a question mark right now. Typically there is a huge amount of inventory in the agrochemical chain, right?
We are at intermediate level, but there will be inventory at an intermediate level, in-inventory at a technical level, inventory at a formulation level, and inventory at ultimately end consumer level. All of that needs to get adjusted before the full pricing is passed on. That's what typically takes time versus, you know, if you look at some of the energy applications or some of the polymer applications where you are directly closer to end customer, there the price pass-through happens relatively quickly.
Okay. Typically, sir, one last from my end. Typically, how much percentage of the supply would have gone out of the system, let's say, because of this fire incident in China and these small facilities which are now likely to be closed or on the verge of like, you know, closure because of the scrutiny increasing and all those things?
Difficult to comment. We don't have answer for that. The specific incidences that you are mentioning are not linked to our product portfolio, right? It doesn't impact AIL directly as such.
Okay.
I'm not in a position to answer that.
Okay. Fine, sir. Thanks a lot. Thank you, sir. Thank you.
Thank you. Next question is from the line of Nitesh Dhoot from Anand Rathi Institutional Equities. Please go ahead.
Hi. Good afternoon, team. Thank you for the opportunity. My first question is, you know, basically it looks like, you know, there is a higher inventory created, that's, you know, also visible from the disconnect between the increase in the production figures across the products and the, you know, the sequential revenue decline that you see. That's despite the increased prices. What explains this disconnect? I see a stock adjustment line of INR 409 crores that's increase in inventory. Could you give some color on this?
Yeah. If you're looking at that, there are certain materials being moved out from India were exported out and are on seas, reaching to our customers, and that is where they are being in-transit inventories which you're looking at.
That material given is not delivered to a customer. I think the revenue for that part of the portfolio is not recognized.
Okay. Is that what explains the increase in the working capital on the inventory side, you know, between Q2 and Q4?
Yeah.
Okay.
That some element of the raw material price impact which came in the later part of the month, the last month.
All right. Sequentially there's a 22% increase on the other expenses side on a 5% revenue decline. That's also partially related to the production levels versus the sale volumes?
That is primarily driven actually by freight. I think we saw, especially mid-February onwards, we saw sort of huge escalations in the freight rates. I think the jump that you see in other expenses, significant part of it is actually coming from freight. It's a combination of freight rates as well as the additional export volumes, right? I think on an overall basis, almost 57% of total revenue came from exports. That's what is also reflected in the incremental freight in the other expenses.
All right. All right. Of the targeted EBITDA, we expect about INR 350 crores-INR 400 crores coming in from the CapExes, right? With this, you know, the delay in the Zone IV CapEx by a few months, any slippages, you know, on the guided EBITDA numbers or probably you could stay closer to the lower end of the EBITDA range, ex of pricing gains, obviously. I mean, what's your thoughts?
I think, look, our target as a management team still remains on how to do catch up, even with that three to four months of delay. At the same time, we are transparent in communicating in terms of how are we progressing against our initiatives, right? I think we laid down a very clear path in terms of what actions we are taking to achieve the targeted growth. Cost and operating, you know, efficiencies, operating leverage, which is sort of relatively in our control, is going as per track. Most of the initiatives on the cost side are implemented. They will start accruing fully in the current year. Operating leverage, all initiatives are on track. There is no delay in any of these.
Of course, near-term volatility will create quarter-on-quarter different picture, but from a strategy implementation point of view, there is no lag effect there. I think on the CapEx side, yes, we are behind compared to our original plan, and that three to four months of delay will have a impact in terms of how much we were budgeting over the course of next two years. We are figuring out strategies to mitigate that impact.
This is probably on account of labor shortages or any other reasons also partially responsible because, I mean, three to four months delays on account of labor shortages suddenly. I mean, at least in last quarter this wasn't spoken about, not sure. Maybe if you can explain.
This is the phenomena of this quarter. There's a 35% reduction in the contract labor availability in the region where we are executing CapEx. Right now the project is in the kind of last mile connectivity leg, where a lot of pipeline work needs to happen, which is usually significantly labor-intensive. That's where I think the impact is hitting us right now. The combination of impact of LPG and I guess to some extent also the election-related migration. We are working quite proactively to address that issue. Today, yes, we do have a significant shortage of contract labor in our project execution.
Understood. Understood. Just one last, sir. This INR 39 crores of revaluation loss on FX, I mean, it looks slightly on the higher side for a, you know, for a particular quarter. If you can, you know, probably give some, you know, color on the total exposure and the hedging policies there.
We have roughly around $87 million of an FX loan which is unhedged and is open. Rupee depreciated by close to INR 5 from a level, I guess, December 31 was at INR 89.8 or something, and March 31 was at INR 94.8. There was a INR 5 depreciation on Indian rupee on a $87 million of exposure. Unfortunately, the accounting treatment requires us to take the impact of this on the day of the balance sheet. Whereas if you look at our overall dollar perspective, say, this is relatively an exposure which will be repaid over a period of next eight years. From a dollar balance sheet point of view, I've got a larger export portfolio which will absorb this as a natural hedge.
From an accounting point of view, that gains are accounted only once it is materialized, whereas this loss is accounted now.
Understood. Understood. Great. Thank you so much. Really helpful.
Thank you. Next question is from the line of Darshita from DSP Asset Managers. Please go ahead.
Hi. Thank you for taking my question. Firstly, the INR 1,800 crore-INR 2,000 crore of CapEx that we are doing on Zone IV , can you give a split for the calcium carbide, Calcium chloride and the MPP plant? I mean, how much would it be? Would it be anywhere, somewhere between INR 450-INR 500 odd crore, or how should we think about it?
Typically, we will not share asset block by asset block CapEx. I think at an overall zone level, the number is, what Chetan described earlier.
Oh, okay. Secondly, on the INR 1,800 crore of EBITDA, runway, INR 150 crore-INR 200 crore was from the cost initiatives. Any changes, you think from the MPP plus Zone IV plus UPL JV that we may see? I mean, any change in the incremental EBITDA from these three segments?
No, I think at this point in time, we are not changing the EBITDA potential from all of these initiatives. I think the only thing we are highlighting is on the CapEx-led growth.
Mm-hmm.
I think we see a slight delay in the project execution, that might have a impact on realization of that EBITDA potential in the given timeframe. Apart from that, there is no change on any of the EBITDA potential that we have already highlighted.
Right. INR 300 crore-INR 450 crore is something that can flow through, but maybe, not in FY 2028, but could get delayed by six, seven odd months or something like that.
Yeah.
Okay. On the working capital days, as I understand the freight-related issues and the war-related issues, I believe that our exports will continue to grow as it is. How should we think about the receivable and inventory days from here on?
I think it will remain pretty dynamic. I think one is export, the export to which region also matters quite a bit because different regions have different voyage times, and that ultimately decides your working capital exposure. For example, in last quarter, significant part of export was done to U.S., which typically on an average has two to three months of voyage time, your working capital requirements are much larger. Versus Middle East, where voyage times are as low as, you know, 7-10 days, your working capital exposure is significantly lower. Frankly, difficult to comment at this stage. I think it does remain quite dynamic, depending on which region you are sort of pushing your product to.
Transit times, customer terms, you know, the situation in the market, all of that determines ultimately what kind of a favorable position we end up landing into. What's more important at this point in time is, of course, to ensure very dynamic allocation of the product to the regions, because a global geopolitical situation remains quite volatile. I think that remains a priority, and our subsequent impact of that in working capital is managed through incremental debt. We don't like it. It does cost us in terms of our balance sheet as well as the interest cost. That's a necessity given the global situation at this stage.
No, no. I meant keeping the current situation aside, should we think about it as, I mean, total, like your net working capital days of anywhere between 60 to 70 odd days. We've also seen a 50 odd day kind of a cycle. That is where I was coming from, and more so from a perspective of when Zone IV is commercialized, then how would that incrementally affect our, working capital days? Keeping the current situation aside.
Ideally, as a target, we would like to remain within 55-60 days kind of average levels. As I mentioned, it does vary depending on the market situation. From an objective standpoint, I think we like to target 55-60 days kind of levels.
I guess Zone IV will not materially change the numbers. Continue to be in the same trajectory.
Okay, got it. Just lastly, on the tax rate, it's been a little volatile this year. I think you'd mentioned a 15% kind of tax rate for 2027, 2028, sorry, 2027. Should we assume it to be 15%, or is there any change there?
We should be in the range of, maybe around 10%-15%. This year, there are a lot of earlier tax litigations which have came in our favor, and that is why you're seeing a lot of prior adjustments and the deferred tax adjustments and everything. Hopefully, with that getting over, we will not see much of volatility. Given the fact that we have Zone IV, which is getting commercialized, and there's an IT depreciation, which is a significant part of deduction available, the tax rate will be in the range of around maybe 9%-14%, 15% kind of stuff.
Got it. Okay.
Yeah.
Great. That's all. Thank you.
Good.
Thank you. Ladies and gentlemen, in order to ensure that management is able to answer queries from all participants, kindly restrict your questions to two at a time. You may join back the queue for follow-up questions. We will take our next question from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Yeah. Good afternoon. Thanks for the opportunity. First, on the follow-up on MMA, you did explain, Suyog, some of the dynamic, but just to get a picture clear. My understanding is there is two big application for MMA. One is in the gasoline naphtha blended application where they boost octane. The other one is the refinery, which are not able to meet the guidance, guidelines on the octane boosting ARO. They add MMA to meet the regulation. Now, given gasoline and naphtha spread in between, in fact, went to negative, and even today it remains in a weaker zone, and considering the volatility, it doesn't seem that this dynamic is gonna change pretty much in next one or two quarter. How should we think? If you can help us with the two breakup.
One is more sustainable, the other one could remain volatile. That's number one. Probably an associate question is that considering that crude has gone up, one can anticipate ethanol blending to rise very sharply, which in itself acts as an octane booster. Then there is a gas shortage which can lead to some of these dynamics playing against us. I know we have a balance in terms of higher crude price, but I think there are a lot more headwinds. Can you help us explain this entire MMA situation? How is it gonna think about it for next two to three quarter? Yeah.
As you yourself explained, it is complex, right? There are multiple trends which play out simultaneously. Trying to aggregate all of these trends which have different directional impacts to come up with a concrete point of view on where we will land up at the end of, you know, three, six months, frankly, is not an easy exercise. Individual, I think you only talked about factors, but also these factors vary region by region, right? What gasoline naphtha spread we see today in the Middle East versus what we are seeing in Europe versus what we are seeing in U.S. is also very different number. It's not necessary that all three regions will see exactly the same number on a given day.
With all of these factors playing out, I think the only objective effort that we can do is to ensure that we are working very closely with our customers to understand their affordability. In that context, optimize the volumes and spreads to ensure our manufacturing asset sort of runs at a healthy utilization levels. Also it gives us guidance in terms of what is our affordability to buy our raw materials. That's what we are focused on right now. I think the gasoline naphtha cracks have been very volatile. Yes, there are days in which it has gone negative. There are days in which it has also gone up $20 per barrel, right? Given the sort of extremely volatile Middle East situation that we have seen over the last six weeks.
I don't think there is any conclusive trend at this point in time which we can draw. I don't think we will reach a stability until the situation in the Middle East is kind of directionally at least settled. Till that point in time, the only thing that we do is to ensure that we remain very, very closely connected with our customers to understand their affordability and try and do sort of our raw material sourcing and the production planning linked to their affordability and their requirement. That's what we are focusing on right now.
Can you just split between, or probably give a breakup on how much it is where the pricing is not linked to the crack and it is just the production or the refinery inability to produce the gasoline and, irrespective of pricing, they will need to add MMA to the gasoline.
I would frankly say that's a relatively small market. I think irrespective of pricing, the need to add MMA, I think that market will always remain a bit limited because MMA is not the only octane booster available in the market, right? I think there are multiple other products, albeit, you know, they operate at a significantly lower performance range. There are, of course, alternate options available in the market. At some point in time, the pricing economics has to come into the picture when it comes to customer decision-making. You know, we can have a detailed chat later. At this point in time, as I said, I think the objective remains at least the region where the trade flow is operating right now, there, how do we maximize sort of our share?
We hope that the region where currently the flows are closed, which is the Middle East, will hopefully open up, you know, as the thing stabilizes.
That's pretty clear. My second question is on the contracts, not the two we have announced now. I'm talking about the historical five contract. One was MMA. Can you help us in the business cycle, where are we in those four contract, utilization level? Some, have we reached the peak, contract level? Where are we in those four contracts? I know one got terminated, so, we were trying to do something out of it. Yeah, and utilization level will help.
No. I think, without getting into the specifics, broadly, out of three contract, one was for sort of advanced polymer intermediate that continues to operate as per the contractual terms. There is no volatility there. You know, it's a relatively secure and predictable earnings coming from that particular contract. The one linked to MMA, I think, there were certain aspirations in terms of target volumes and that we wanted to achieve. I think at least if you look at the last calendar year, I think that contract operated in that range, right? We were able to achieve the target volumes.
It doesn't mean that the monthly and the quarterly volumes necessarily are met, but at a yearly level, if you see, I think, that contract did meet kind of the targeted volumes. Our nitric acid contract, which was another long-term contract which we did for the purchase of the raw material, also continues to operate as per the contractual terms, and there is no deviation from that. There was another contract for agrochemical intermediate, where the volume conditions are being met. Yes, from a margin point of view, there has been a pressure compared to what was originally anticipated during the contract closures. That's the current status of the four large contracts.
That's great. One last on the balance sheet side. We ended this year with four odd times net debt to EBITDA. Next year there is a headwind of higher raw material translating into higher working capital requirement. We have a target of reaching the 2.5x net debt to EBITDA. Can you help us the path to the net debt to EBITDA of 2.5x in next two years?
I think Chetan Gandhi can add. I think we closed the year at roughly INR 1,172, and our net debt was INR 4,300.
We are roughly 3.6x.
We are roughly at a 3.6x level, just to get that perspective right. Going forward, of course, the anticipation is that the EBITDA will increase and the net debt will go down. I think this is the year potentially where hopefully the cash flow should be more than the CapEx that we are planning to do. From a working capital point of view, yes, there is a pressure, but I mean, currently, we are operating at a crude level of $100-$110 per barrel, right.
If it goes to a scenario where it goes to $140, $150 per barrel, of course you're looking at a scenario where the raw material and the working capital requirement will go even further up, and that will put a strain on the balance sheet. The likelihood of that scenario, we don't know. In general, the anticipation is that the pricing scenario should stabilize at the current level or should get corrected once the situation normalizes, and that should ideally lead to reduction in the working capital requirement going forward. As I talked about CapEx, you know, with the CapEx intensity going down and the operating cash flow going up.
At least the internal target is to reduce the net debt levels from the current levels in the current financial year, despite the current pricing scenario, and the CapEx intensity that is planned for the current year.
Super. Thanks for all those elaborate answers and best of luck for the coming quarters.
Thank you.
Thank you. We'll take our next question from the line of Dhruv Kuchhal from HDFC AMC. Please go ahead.
Yeah. Thank you so much. The nitration related incidents in China probably are linked to some specific product, one key product. But I'm just trying to understand based on some of the commentaries, it seems, the read-through is, I mean, the implication could be for broader nitration related chemistry, similar nitration related chemistries. I'm just trying to understand, how are you reading this development? Also, I mean, are nitration product related change very different than probably what these Chinese are doing? The implication would be for, I mean, the impacted products would be for them.
Yeah. Our product portfolio is significantly different compared to, you know, some of the products in which these accidents have happened in China. There is no direct linkage, first of all. Second, in general, I think it is good that the regulatory standards, the standards on safety, will go up, and that will help in general overall chemical industry, and that's good for the society. The corollary of that is, with increased governance, with increased standards, it is possible that some of the smaller scale inefficient operator will be forced out of the market. That is expected to happen over a period of time and not sort of, in a knee-jerk manner. That's what will help the overall sort of margin profile of these nitration chemistries.
As I said, there are multiple products which get manufactured, you know, using this chemistry, and one-to-one linkage is always difficult. Broadly speaking, as an industry, I think we are on the right track when we say that we want to improve the standards of safety and the standards of governance on some of these hazardous chemistries.
Sure, got it. Based on the reading, what I understand, probably if you can help me, it was that the problem was or the issue was primarily related to the nitration related whatever they were doing in that particular molecule. The nitrations that we do, is it very different? I'm just trying to understand. Say, for example, a chemical plant in China is doing nitration on a separate, on a different molecule than the incident related molecule. Will they also see a tightness or, this will not have any implication on them?
I think in general the standards go up, they get applied as a rule across the product portfolio, right? It doesn't remain restricted to a particular product. It is applied as a chemistry and a reaction level and not necessarily for a particular product. Yes, everyone will go through increased scrutiny. I think especially from an AIL standpoint, bulk of our operations now we have moved to continuous nitration, which is inherently much safer than the batch nitration. I think we have significantly enhanced our safety practices and safety measures when we are operating, you know, such chemistries over the course of last now couple of decades, right? Which is sort of visible also in our performance on the safety dimensions and our recognition by the global bodies when it comes to safety and sustainability parameters.
We feel very confident and comfortable, and we also feel that the actions currently getting taken in China are in the interest of the industry from a long term point of view.
Sure. Helps. Secondly is on the BASF contract, the long term contract, although we have seen some positive developments related to that final technical molecule in U.S. Any changes for us in terms of how we see, and also the duties in U.S. probably are now lower. Any changes that we see on this, I mean, I mean, utilization of this asset now?
I think as I mentioned in the last call, I think sort of 50% of that asset is used to manufacture one particular intermediate that goes into Dicamba. There we are seeing steady volumes right now. It should definitely lead to a better utilization of that asset in the coming financial year.
Sure. Got it. Lastly, if you can speak about RM availability, primarily methanol and, I think sulfur related, what's your, I mean, how is the availability for you? I understand price will be high, but in terms of physical availability, are you seeing challenges?
No, in terms of physical availability we are well covered, so far. As far as both of these commodities that you mentioned, it does come at a increasingly higher cost to ensure that sort of all of our plants are fed 100% of their requirement. From a physical availability point of view, we are well covered on both of these commodities.
Mm-hmm. Got it. When you say covered, it is for, I mean, duration? What duration?
You know, it depends on the commodity. Something like methanol, we will typically have a coverage of, you know, couple of months. Something like sulfur, given it's a domestic supply, you know, we will have a contract in place and we'll have a coverage of few weeks. Commodity by commodity, the coverage range will change.
Mm-hmm. Mm-hmm. Got it. Sure. Great. Thank you so much and all the best. Thanks.
Thank you. Ladies and gentlemen, we request you to restate your questions at a time, please. We'll take our next question from the line of Rohit Nagraj from Centrum Capital. Please go ahead.
Yeah. Thanks for the opportunity. Just one question on the demand side. You mentioned in one of the remarks that the demand contraction in exports market probably from the discretionary portfolio can be taken care by the domestic market. What gives us confidence that there may not be a material distortion even in the domestic market, given that the pricing for the same, you know, non-discretionary portfolio, sorry, discretionary portfolio will go up in domestic market too? Thank you.
That comment was specifically for dyes and pigments in the context of a particular product where there is a pressure in the global demand, but that is getting offset by the increase in the domestic demand. I think in general, your point is right. If, you know, globally, because of West Asia war, if the global interest rate cycle reverses and there's a global inflationary scenario which links to potential downward trend on the global GDP, then of course it will have impact on the discretionary spend, not only in the global market but also in the Indian market. That's a scenario which we continue to monitor and sort of mitigate. At this point in time, difficult to comment, but it is a potential risk in case, you know, we start seeing impacts to the global GDP levels, including India.
Right. Just one number related question. What would be the gross block by the end of FY 2027 when the entire Zone IV will be commissioned?
End of FY 2027, we should be in the range of around nine and a half thousand odd gross kind of stuff. 9,500-10,000 gross . We don't have the exact numbers, but around that range.
Sure. That's helpful. Thanks a lot, and all the best.
Thank you. Next question is from the line of Surya from PhillipCapital. Please go ahead.
Yeah, thanks for this opportunity. Just two clarifications of what you have commented already. When you said that raw material security, is it fair to believe that, for the June quarter at least there is a 100% kind of raw material supply security that has been ensured? Is that right understanding?
Surya, given the way the situation changes here on an every week basis, I think, affirming anything for next two months feels like. Anyways, let me not go there. Broadly, I think we are well covered based on our current planning today. Of course, we can't predict, you know, hypothetical scenarios two weeks down the line, three weeks down the line. As of now, based on our current contracts in place, we feel we are well covered.
Okay. Second clarification about the freight, sir. This is generally the spike in the other expenses quarter-on-quarter basis what we see. As you mentioned that is large portion of that is due to freight. Looking at freight share, kind of 7%, 8% of the total. Even if that getting double, so the number looks slightly higher. Second related aspect what I want to understand, whether this elevated freight is till June quarter-end or it is, or it can be very short-term phenomena also.
There are three elements to freight, Surya. There is rate, which is a unit rate. The second is the volume, third is the destination, right? All three were adverse in the last quarter. Rate because of West Asia war related issue that in the freight rates went up. Volume because we did substantially higher exports, right? 57% of it is exports. The third is the destination mix. Because we pushed out lot of material to U.S., which is the longest voyage time and a significantly higher freight compared to, let’s say, markets like Middle East, where, you know, the absolute quantity of freight also goes down significantly compared to U.S. It’s a combination of these three things, and that’s where you see significantly higher number.
Okay. Just last one point, sir. While you are kind of a bit cautious, given the short-term situation that is visible, but you are also very confident about the potential for FY 2027 in terms of growth and all that, looking at strong order book visibility or positioning and also the new project contributions. If you can elaborate a bit where from that you are seeing the strong order book visibility? If you also can give some sense about the upcoming project, whether it could be the JV with the Superform JV or the plastic recyclability, how meaningful those two projects which is coming with you will in terms of number contribution for AIL?
Yeah. The, I think the midterm to long-term confidence comes from the fact that what we have been able to deliver on volume growth in the last 18-month timeframe, right? Which has shown that, you know, if we operate with agility in the market, we are able to get the market share and we are able to push a utilization of our assets. And it is also kind of reaffirms our cost competitiveness when it comes to getting the required share of wallet from our customers. If we sort of disassociate ourselves from the near-term headwinds of West Asia war, I think in mid to long term, the ability to run the asset to their full potential and getting the required share of volumes from the global market, I think that confidence level is there.
That's what is reflected in sort of our mid to long-term guidance. As the cycle turns, as we have seen in some of the chains, if you're operating at a higher volume base, then the recovery in margin supports you in an incremental way because the margin gain that you get is at a significantly higher volume compared to your old baseline, right? That's the broad thesis for the mid to long term. From a JV point of view, we expect Augene to commission, you know, within hopefully June, July kind of timeframe, which is the JV with UPL. That should actually ramp up to a full utilization level within the current financial year. That will start contributing meaningfully. I think the recycling JV is expected to commission within this calendar year.
I think it may not contribute meaningfully in terms of numbers as of now, given it's a first of its kind plant and there will be a timeframe to establish that technology, as such. Nonetheless, I think the proof of that technology will be established within the current financial year.
Sure, sir. Yeah. Yeah, thank you for all the answers.
Thank you.
congrats.
Next question is from the line of Kumar Saumya from Ambit Capital. Please go ahead.
Hi, sir. Good afternoon. Just two questions from my side. On the backward integration CapEx that you have announced for one contract. If I remember right, that was a fixed margin contract. How will this backward integration help in that contract?
It's a additional fixed margin that we will get for the remaining period of 15 years.
Okay. Okay. Then the second contract, sir, that you said, this is the revenue potential over the next three years, that is 2027, 2028, 2029 and 2030, right?
Yeah, four years. Yeah.
Four years. Okay. Secondly, sir, on this Ojiin JV that you said. Given the profile that you are planning, what is the margin that we should expect in this business?
Kumar, sorry, your voice is muffled. Can you repeat the question, sir?
Hello. Yes, sir. In the Ojiin JV, what should the margin that we should work with in considering how the ramp-up will be and what is the contribution that we should expect?
I think, I will honestly, maybe ask the right question to be asked to the JV management team as such. In general, our philosophy is that JV should operate at a slightly better margin profile compared to where AIL is operating at this stage. Just to be sort of doubly clear, though we will start presenting, you know, EBITDA from that JV as and when the number starts becoming relevant. From a consolidation point of view, given it's a 50/50 JV, it will not consolidate into AIL. We will most likely report the numbers on a separate basis, from a accounting standard point of view, that number may, might not consolidate into AIL at a EBITDA level.
Got it. It will come as a separate line item, yeah. Okay. Thank you. Thank you, sir. That will be all from my side.
Thank you. Next question is from the line of Nitin Agarwal from DAM Capital Advisors. Please go ahead.
Hi, sir. Thank you for taking my question, sir. On the, you know, the two contracts that you announced this year, and in the last call also, you may have alluded to the point that you're looking to probably, you know, I think stepping up activities around partnerships and JVs. You know, those are conversations are going up. Yeah, I just want to check with all of that that's really going on in West Asia, has there been a loss of momentum in some of those conversations, or they are going on as they, you know, as they were even prior to the conflict?
No, I think there is no loss on momentum. I think it does continue. Of course, from a bandwidth point of view, management bandwidth point of view, sometimes, you know, the crisis management takes precedence over some of these activities. I think we have created good enough structures within the organizations to ensure that the momentum is not lost. I would say that on a overall level, we don't see momentum falling. In fact, we see momentum increasing because people are increasingly looking at more robust supply chains, more secure supply chains for their global requirements going forward. We expect, you know, many such conversations to proceed and conclude in the coming financial year as well.
What is the nature of, you know, qualitatively these kind of arrangements that we are exploring with people? I mean, what is the motivation for them to tie up with somebody like Aarti?
I think the, again, it's a long conversation, but I think, in one line, I think it's our ability to deliver, you know, extremely reliable and safe operations in complicated chemistries in a most competent manner, right? That's the value proposition that we offer. I think the heartening thing to see in the last quarter was the repeat long-term contract from the global major, right? I think it is one thing to get a long-term contract, but if the same major comes back to you with a repeat long-term contract, that also gives you a significant validation of the value proposition that you're putting up in this partnership, and that was very heartening to see. The nature of the contract will keep varying, right?
Some of these are fixed margin contracts, some of these are pure buy and sell linked to index prices kind of contracts. I think every partnership looks different from a commercial arrangement standpoint, but nonetheless, it improves the quality of the portfolio going forward and brings certain amount of earning visibility.
Just to push that point, you know, is it fair to assume that, you know, when you look through the next, say, couple of years or more, such kind of incremental partnerships or JVs that you will do will contribute, begin to contribute much more meaningfully to our business as we go forward and overall helping the earnings quality?
That's the intention as well.
Last thing, you know, you know, when you look at the, you know, the disruption with whatever is happening for now with the West Asian war, I mean, at what point does it become a challenge for us? I mean, till, you know, if there's a, is this a particular scenario or scenarios in by which it derails probably, you know, our trajectory and till what time? It's only a temporary hiccup for us. I mean, is there a way to go dimension it?
Well, I don't know. For us, it's a challenge today. I think it's not easy to handle, you know, more than 60% increase in raw material pricing in a two-weeks timeframe. It's not easy when, you know, 10% of your revenue, which is going to a market, suddenly shuts. I think it's a challenge even today. I think, as I said, the only way you can manage it is sort of be proactive, be agile in terms of all the action that you can take to minimize the impact of such disturbances. I would say the situation is serious enough where it is a challenge today.
At the same time, I think we're putting in lot of efforts and actions to mitigate the impact to the best extent possible.
Thank you so much. Best of luck.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments. Over to you.
Thank you. Thank you, all. We appreciate your ongoing support and participation in today's call. I think despite the prevailing near-term headwinds linked to West Asia war, our disciplined approach allows us to manage through this phase effectively. We remain committed to our growth trajectory and look forward to engaging with you again. Please feel free to connect with us for any follow-up queries. Thank you once again. Have a good day.
Thank you. On behalf of Aarti Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.