GEMAROMA - Gem Aromatics

📊 NSE: GEMAROMA 🏢 Specialty Chemicals 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

Total revenue for Q2 FY26 was INR 89.5 Cr, a decline of 20.2% YoY from INR 112.2 Cr. H1 FY26 revenue stood at INR 177.2 Cr, down 13.5% YoY. The Mint portfolio, which accounted for 70% of FY25 revenue, saw significant volume contraction due to external headwinds, while Phenol derivatives and other natural/synthetic products remained healthy but lacked the scale to offset the Mint decline.

Geographic Revenue Split

The USA is a critical market, contributing 30% of total revenue in FY25. The company serves a global base of 269+ customers across 18 countries, including major flavor and fragrance houses and FMCG companies.

Profitability Margins

Gross Profit Margin for Q2 FY26 was 14.0%, a sharp decline of 805 bps YoY from 22.1%. PAT Margin for Q2 FY26 turned negative at -2.9% (INR 2.6 Cr loss) compared to 8.7% (INR 9.7 Cr profit) in Q2 FY25. H1 FY26 PAT margin was 3.1% (INR 5.4 Cr) versus 8.9% (INR 18.3 Cr) YoY.

EBITDA Margin

EBITDA Margin for Q2 FY26 crashed to 3.4% (INR 3.0 Cr) from 13.7% (INR 15.3 Cr) in Q2 FY25, a drop of 1,027 bps. H1 FY26 EBITDA margin was 10.1% (INR 17.9 Cr) compared to 14.4% (INR 29.6 Cr) YoY, impacted by high raw material costs and lower realizations in the Mint segment.

Capital Expenditure

The company completed capitalization of major assets at its subsidiary, Krystal Ingredients, in H1 FY26. The Net Block increased to INR 206.2 Cr as of September 30, 2025, from INR 43.4 Cr in March 2025. Capital Work-in-Progress (CWIP) stood at INR 25.1 Cr.

Credit Rating & Borrowing

The company utilized IPO proceeds to repay INR 140 Cr of debt, including INR 97.4 Cr of long-term debt for Krystal Ingredients and INR 42.6 Cr of working capital debt. This improved the Net Debt to Equity ratio from 0.8x to 0.3x. Finance costs for H1 FY26 were INR 7.0 Cr, up from INR 2.4 Cr YoY.

⚙️ Operational Drivers

Raw Materials

Key raw materials include Natural Mint Oil, Synthetic Mint Oil, Clove Oil, and Phenol. Mint-based materials represent the largest cost component, historically supporting 70% of revenue.

Import Sources

Not explicitly disclosed, though the company operates facilities in Silvassa, Badaun (U.P.), and a new Greenfield project in Dahej (Gujarat).

Capacity Expansion

The company has established a new Greenfield multi-purpose plant at Dahej under Krystal Ingredients with a capacity of 10,829 units. This facility is designed to manufacture Phenol derivatives like MEHQ and other specialty aroma chemicals.

Raw Material Costs

Cost of Goods Sold (COGS) for H1 FY26 was INR 138.7 Cr, representing 78.3% of revenue. Profitability was pressured by high raw material costs in the Mint segment and inventory adjustments during Q2 FY26.

Manufacturing Efficiency

Depreciation increased to INR 4.9 Cr in H1 FY26 from INR 3.5 Cr YoY following the capitalization of the Dahej facility, impacting short-term net profitability.

Logistics & Distribution

Other expenses, including logistics and distribution, rose to INR 14.6 Cr in H1 FY26 from INR 11.6 Cr YoY.

📈 Strategic Growth

Expected Growth Rate

30%

Growth Strategy

The company aims to reach INR 1,050-1,100 Cr in revenue by FY28 with 16-18% EBITDA margins. This will be achieved by ramping up the Dahej multi-purpose facility, shifting the product mix from Mint (70% of revenue) toward higher-margin Phenol derivatives (MEHQ) and specialty Aroma chemicals, and expanding the global customer base beyond the current 269 clients.

Products & Services

Menthol, Mint derivatives, Clove Oil, Clove Oil derivatives, Phenol derivatives (MEHQ), and various Natural and Synthetic Aroma molecules.

Brand Portfolio

GEM Aromatics, Krystal Ingredients (Subsidiary).

New Products/Services

New value-added specialty Aroma products and Phenol derivatives (MEHQ) are being fast-tracked for launch to offset the 20.2% decline in Q2 revenue.

Market Expansion

Targeting new global customers for Menthol and Aroma chemicals as the Dahej production ramps up; currently serving 18 countries.

Strategic Alliances

doTERRA Enterprises, Sàrl is a strategic investor (shareholder) and a key customer, providing value-add to the business through long-standing partnership.

🌍 External Factors

Industry Trends

The industry is shifting toward natural and wellness-focused ingredients. GEM Aromatics is positioning itself as a specialty ingredient company by moving away from commodity mint into integrated chemistry and next-generation aroma molecules.

Competitive Landscape

Faces competition in the Phenol derivative business from existing Indian manufacturers, though the company's multi-purpose plant at Dahej is designed for margin-accretive specialty products.

Competitive Moat

Durable advantages include a 27-year operating history, integrated manufacturing capabilities, a diversified portfolio of 269+ global customers, and a strategic partnership with doTERRA. These are sustainable due to high entry barriers in specialty chemical manufacturing and long-term customer trust.

Macro Economic Sensitivity

Highly sensitive to international trade policies and domestic tax structures, as evidenced by the immediate impact of US tariffs and Indian GST changes.

Consumer Behavior

Shift toward natural ingredients and wellness products is driving demand for the company's natural aroma and essential oil portfolio.

Geopolitical Risks

Significant exposure to US-India trade relations; a 50% tariff on Indian imports imposed in August 2025 led to a 20.2% YoY revenue drop in Q2 FY26.

⚖️ Regulatory & Governance

Industry Regulations

Impacted by GST revisions effective September 2, 2025, which set Natural Mint Oil at 5% and Synthetic Mint Oil at 18% (previously a uniform 12%), disrupting domestic procurement and blending models.

Taxation Policy Impact

Effective tax rate for H1 FY26 was approximately 35% (INR 2.9 Cr tax on INR 8.3 Cr PBT).

⚠️ Risk Analysis

Key Uncertainties

Uncertainty regarding future US trade policies and the duration of the 50% tariff impact could continue to suppress 30% of the company's revenue stream.