Newsletter July, 2025

India’s chemical sector has been under pressure to maintain margins over FY24-25, driven by a global slowdown and pricing pressure amid rising fixed costs and volatility in raw material prices. Post the golden era of FY20-22, street extrapolated optimism to FY22-25 with 23% earning CAGR and median EBITDA margin of 25%; however this never came through as revenue CAGR decelerated to -3% and median EBITDA margin crashed to 13% in FY24 but improved to 18% due to business stabilization in H2FY25. Fast forward to FY26 on the back of dismal FY22-25, the street is expecting only a modest recovery of 18% revenue CAGR over FY25-27 with an average EBITDA margin of 18% in FY27 vs 16% in FY25. We believe there is significant scope of upgrades to these assumptions given global channel inventory is at 5-year low, which suggests restocking led demand; recent pricing up-move indicates strong improvement in margins as well, and resultantly, we believe there is scope for upgrades.