Aarti Industries Ltd (AARTIIND) Q2 FY27 Results Analysis: Revenue Surges 72.8%, Margin Compresses 393 bps

Aarti Industries Ltd's Q2 FY27 numbers came in soft, with revenue of Rs. 3,887.00 Cr (+72.80% YoY) and PAT growth of +58.50% YoY. Here's a quick read of what worked, what to watch, and what management said.

Quarter Snapshot

Revenue grew 72.8% YoY to Rs.3,887 Cr and PAT grew 58.5% YoY, but the growth was pass-through-led with EBITDA margin compressing ~393 bps QoQ to 10.73% as material costs hit 70.0% of net revenue. Working capital build lifted net debt Rs.340 Cr against management's stated FY27 deleveraging expectation, and the H1 tax rate of 15.4% ran above the guided sub-15% level. FY28 EBITDA target of Rs.1,800–2,200 Cr remains on track at the lower end, with the Rs.1,000 Cr fundraising and Zone IV milestones pending on the November 2 call.

Key Investment Insights

Key Positives

• Consolidated gross revenue of Rs.3,887 Cr grew 72.8% YoY and 48.0% QoQ
• PAT to owners grew 58.5% YoY to Rs.168 Cr; PBT grew 119.4% YoY to Rs.204 Cr
• H1 EBITDA of Rs.803 Cr grew 58.4% YoY; TTM EBITDA Rs.1,468 Cr keeps the FY28 Rs.1,800–2,200 Cr target on track at the lower end
• Net debt/TTM EBITDA improved to 3.17x from 3.68x at FY26 close
• CFO/PAT at 1.22x; consolidated debtors turnover improved to 9.57x (7.72x YoY) and inventory turnover to 5.04x (4.95x YoY)
• Other expenses fell to 13.4% of net revenue from 16.7% in Q1
• Standalone PAT of Rs.186 Cr grew 84.2% YoY; normalized Rs.189.9 Cr after a Rs.5 Cr exceptional charge

Risk Factors

• EBITDA margin compressed ~393 bps QoQ and ~225 bps YoY to 10.73% as cost of materials rose to 70.0% of net revenue
• Net debt rose Rs.340 Cr to Rs.4,652 Cr vs March, against management's stated expectation of net debt declining in FY27
• H1 ETR of 15.4% (Q2 16.7%) is above management's guided FY27 tax rate of below 15%
• Trade FX swung from a Rs.46 Cr gain in Q1 to a Rs.13 Cr loss, a Rs.59 Cr sequential headwind
• H1 FCF was negative Rs.114 Cr with CFO/EBITDA at 0.50x; consolidated PAT to owners (Rs.168 Cr) is Rs.18 Cr below standalone (Rs.186 Cr) on subsidiary/JV drag