💰 Financial Performance

Revenue Growth by Segment

Core gases revenue grew by nearly 10% YoY in Q2 FY26 on a like-for-like basis. Total revenue for FY25 reached INR 3,124.8 million, a 15.9% increase from INR 2,694.8 million in FY24. Project Engineering revenue is lumpy, contributing INR 200 million in FY25 compared to INR 433 million in FY24, a 53.8% decrease, which impacts overall growth volatility.

Geographic Revenue Split

The company has Pan-India ambitions with a strong presence in East India (Kolkata headquarters). While specific regional percentage splits are not disclosed, the company is expanding with a new North India capacity and an 'East on-site' project expected to commence by the end of FY26.

Profitability Margins

Gross margins stood at 69% in H1 FY26 compared to 64% in H1 FY25. Profit After Tax (PAT) margin improved significantly to 29% in FY25 from 26% in FY24. Q2 FY26 PAT was INR 367.2 million, representing a 96.3% YoY increase from INR 187.0 million, driven by operational discipline and higher-margin gas sales.

EBITDA Margin

EBITDA margin remained stable at 38% in Q2 FY26. For FY25, EBITDA was INR 655.2 million (38% margin), up 12.7% from INR 581.1 million (36% margin) in FY24. The company targets a long-term EBITDA margin of 40% by increasing the sales mix of high-margin gases like Argon.

Capital Expenditure

The company is investing in three new plants to drive growth. While the specific total INR Cr for the current cycle is not explicitly totaled, the focus is on merchant plants and on-site capacities, with one merchant plant pushed to the second half of the next financial year due to execution delays.

Credit Rating & Borrowing

The company maintains a comfortable financial risk profile with an interest coverage ratio of 6.5 times and a net cash accrual to adjusted debt ratio of 0.4 time for fiscal 2025. Finance costs increased to INR 171.4 million in FY25 from INR 80.3 million in FY24, reflecting increased borrowing for capacity expansion.

⚙️ Operational Drivers

Raw Materials

The primary 'raw material' for atmospheric gases is ambient air; however, chemical inputs and stock-in-trade purchases accounted for INR 333.0 million in FY25, representing 10.6% of total revenue. Power is the most critical operational input.

Import Sources

Not specifically disclosed in the documents, though the business operates primarily within the Indian domestic market for production and distribution.

Capacity Expansion

Current plants are running at near full capacity. Expansion includes an 'East on-site' plant (expected end of FY26) and a new merchant plant (rescheduled to H2 FY27). These delays of approximately one month to two quarters impact short-term revenue realization but support the 20-25% long-term CAGR.

Raw Material Costs

Purchase of stock-in-trade and materials consumed totaled INR 364.9 million in FY25, approximately 11.7% of revenue. This is a decrease from 21.2% in FY24, indicating better backward integration or a shift toward self-produced gases.

Manufacturing Efficiency

Most existing plants are operating at 'pretty much full capacity,' necessitating the current CAPEX cycle to sustain the 20-25% growth target.

Logistics & Distribution

The company utilizes a mix of bulk (62.5% of gas revenue), packaged (16.5%), and on-site (14.6%) distribution models. On-site models are the most efficient as they eliminate transport costs.

📈 Strategic Growth

Expected Growth Rate

20-25%

Growth Strategy

Growth will be achieved through a 20-25% CAGR in the core gases segment over the next 4-5 years. Key pillars include: 1) Expanding capacity with three new plants; 2) Increasing the mix of high-margin Argon from 13% toward higher levels; 3) Leveraging the 50-year legacy to secure long-term contracts; and 4) Capitalizing on increased manufacturing activity in India (Steel, Pharma, and Aerospace).

Products & Services

Industrial and medical gases including Oxygen (40% of FY25 revenue), Nitrogen (37%), Argon (10%), and other specialty gases. The company also provides Project Engineering/MGPS services (6.4% of FY25 revenue).

Brand Portfolio

Ellenbarrie Industrial Gases.

New Products/Services

Focus on increasing Argon mix (currently 13% of sales) which carries higher margins than Oxygen and Nitrogen. Expected to be a key driver for reaching the 40% EBITDA margin target.

Market Expansion

Expanding into North India and strengthening the East India footprint through new on-site and merchant plant capacities.

Market Share & Ranking

Not disclosed, but the company notes it competes with both large international players and unorganized local players in a consolidating industry.

🌍 External Factors

Industry Trends

The industrial gas industry is growing at a steady pace, driven by healthcare, aerospace, and electronics. The industry is consolidating, with large international players merging. Ellenbarrie is positioning itself as a Pan-India player with a 50-year legacy to capture this growth.

Competitive Landscape

Competes with organized international players and unorganized local entities. The industry is commoditized, leading to intense price competition in the bulk segment.

Competitive Moat

Moat is built on: 1) 50-year operational legacy; 2) High switching costs for on-site customers; 3) Capital-intensive nature of the business (entry barrier); and 4) Long-term contracts that provide cash flow visibility. These are sustainable due to the essential nature of gases in industrial processes.

Macro Economic Sensitivity

Highly sensitive to Indian manufacturing GDP. Management views the gases business as a 'direct proxy' for broader manufacturing activity expansion.

Consumer Behavior

Shift toward higher demand for high-purity gases in the electronics and pharmaceutical sectors (31% of revenue).

Geopolitical Risks

Exposure to global supply chains for cryogenic equipment and plant machinery which can cause project delays.

⚖️ Regulatory & Governance

Industry Regulations

Subject to the Companies Act, 2013 and Indian Accounting Standards (Ind AS). The company faced a minor compliance observation regarding the 'audit trail' feature in its accounting software, which was only enabled from June 21, 2024, rather than the full financial year.

Taxation Policy Impact

Effective tax rate for FY25 was approximately 18.2% (INR 123.6 million tax on INR 677.9 million PBT).

Legal Contingencies

The company has pending litigations disclosed in Note 39(A) of the financial statements. While the specific INR value is not in the summary, the auditors noted these impacts are disclosed in the financial position.

⚠️ Risk Analysis

Key Uncertainties

Project execution delays (current 1-month delay) could impact short-term revenue targets by 5-10%. Cyclicality in the steel sector (22% revenue) poses a risk to volume growth during economic slowdowns.

Geographic Concentration Risk

While expanding, the company remains heavily concentrated in its core markets in East India, though specific regional % revenue is not provided.

Third Party Dependencies

High dependency on state power utilities for electricity, which constitutes 24% of the cost structure.

Technology Obsolescence Risk

Low risk for core gas separation, but the company must invest in modern cryogenic technology to maintain the 38-40% EBITDA margin.

Credit & Counterparty Risk

Receivables quality is monitored; impairment loss on financial assets was INR 21.3 million in FY25, down from INR 46.4 million in FY24, showing improved collection efficiency.