India Glycols Q2 FY26: Robust Revenue Growth Masks Rising Financial Costs

The quarter showcased India Glycols' ability to drive topline expansion whilst navigating a challenging environment characterised by elevated debt servicing costs. Net sales for Q2 FY26 reached a record ₹1,092.20 crores, representing the highest quarterly revenue in the company's recent history and reflecting strong demand across its diversified product portfolio serving textile, agrochemical, oil and gas, personal care, pharmaceutical, and industrial segments.

However, the profitability narrative reveals a more nuanced picture. Operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) stood at ₹157.64 crores, up 5.37% sequentially, with operating margins improving marginally to 14.43% from 14.38% in Q1 FY26. Yet, a sharp 10.30% quarter-on-quarter surge in interest costs to ₹49.28 crores—the highest quarterly interest burden on record—weighed heavily on bottom-line performance, underscoring the company's elevated leverage position.

Financial Performance: Strong Revenue Momentum Offset by Cost Pressures

India Glycols demonstrated impressive revenue growth in Q2 FY26, with net sales climbing 13.63% year-on-year to ₹1,092.20 crores from ₹961.20 crores in Q2 FY25. On a sequential basis, sales advanced 4.97% from ₹1,040.46 crores in Q1 FY26, reflecting sustained demand momentum and improved capacity utilisation across the company's manufacturing facilities. For the first half of FY26 (H1 FY26), cumulative sales reached ₹2,132.66 crores, representing a solid 13.02% increase over H1 FY25's ₹1,929.84 crores.

Operating margins showed resilience despite raw material volatility and competitive pressures. The operating margin (excluding other income) stood at 14.43% in Q2 FY26, marginally higher than Q1 FY26's 14.38% but lower than Q4 FY25's 16.91%. This sequential improvement in margins, albeit modest, demonstrates management's focus on operational efficiency and cost optimisation initiatives. However, the year-on-year comparison reveals margin expansion of 238 basis points from 12.05% in Q2 FY25, indicating structural improvements in the business mix and pricing power.

The profit after tax (PAT) margin for Q2 FY26 contracted to 5.96% from 7.04% in Q1 FY26, primarily attributable to the surge in interest costs. On a standalone basis, net profit stood at ₹53.50 crores, down marginally from ₹54.63 crores in the previous quarter but up significantly from ₹38.89 crores in Q2 FY25, representing a 37.56% year-on-year improvement. The tax rate for the quarter was 22.19%, slightly higher than the previous quarter's 19.09% but within the company's normalised tax range.

The Debt Burden: Rising Interest Costs Erode Profitability

The most significant concern emerging from India Glycols' Q2 FY26 results centres on the company's escalating debt servicing burden. Interest costs surged to ₹49.28 crores in Q2 FY26, up 10.30% sequentially from ₹44.68 crores in Q1 FY26 and a substantial 23.48% higher than ₹39.91 crores in Q2 FY25. This represents the highest quarterly interest expense in the company's recent history, reflecting both the quantum of debt and the prevailing interest rate environment.

The company's balance sheet as of March 2025 reveals long-term debt of ₹1,040.09 crores, representing a significant 43.44% increase from ₹725.08 crores in the previous year. This debt accumulation has been primarily directed towards capacity expansion and capital expenditure programmes, with fixed assets growing to ₹3,737.55 crores from ₹3,172.91 crores. The debt-to-equity ratio for H1 FY26 reached 0.84 times, the highest level in recent periods, whilst the debt-to-EBITDA ratio stood at an elevated 3.62 times on an average basis.

The interest coverage ratio, measured by EBIT to interest, averaged 2.39 times over recent periods—a level that indicates adequate but not comfortable debt servicing capability. For Q2 FY26, profit before interest and tax stood at ₹121.89 crores (excluding depreciation), translating to an interest coverage of approximately 2.47 times. Whilst this remains above critical thresholds, the declining trend warrants careful monitoring, particularly given the company's ongoing capital expenditure commitments.

Operational Efficiency: Margin Resilience Amidst Challenges

Despite the headwinds from elevated interest costs, India Glycols has demonstrated commendable operational efficiency. The company's return on capital employed (ROCE) for H1 FY26 reached 11.01%, marking the highest level in recent periods and reflecting improved asset productivity. On an average basis, ROCE stood at 8.28%, whilst the latest annual ROCE was 9.72%, indicating a positive trajectory in capital efficiency.

Return on equity (ROE) for H1 FY26 similarly showed improvement, though the average ROE of 8.95% and latest annual ROE of 10.24% remain modest by industry standards. The company's relatively low ROE reflects the capital-intensive nature of the chemical manufacturing business and the impact of leverage on shareholder returns. Nonetheless, the sequential improvement in both ROCE and ROE suggests that management's capital allocation decisions are beginning to yield results.

Working capital management exhibited mixed signals during the quarter. The debtors turnover ratio for H1 FY26 reached 24.77 times, the highest in recent periods, indicating efficient receivables collection and strong customer relationships. However, cash and cash equivalents declined to ₹77.44 crores in H1 FY26, the lowest level recorded, reflecting the company's substantial capital expenditure requirements and debt servicing obligations. The sales-to-capital-employed ratio averaged 0.97 times, suggesting room for improvement in asset turnover efficiency.

Industry Context: Navigating Commodity Chemical Volatility

India Glycols operates in the highly cyclical commodity chemicals sector, serving diverse end-use industries including textiles, agrochemicals, oil and gas, personal care, pharmaceuticals, and industrial applications. The sector has witnessed significant volatility in recent years, driven by fluctuating raw material prices, global supply chain disruptions, and varying demand patterns across end-user segments.

The company's diversified product portfolio and customer base provide a degree of insulation from sector-specific headwinds. India Glycols manufactures a range of green technology-based chemicals, positioning itself favourably as industries increasingly prioritise sustainability and environmental compliance. This strategic positioning has enabled the company to maintain pricing power and sustain margins despite competitive pressures.

The commodity chemicals sector in India has delivered modest returns over the past year, with the sector index advancing 7.63%. India Glycols has significantly outperformed this benchmark, delivering an 89.24% return over the same period, reflecting investor confidence in the company's growth trajectory and operational improvements. However, the sector remains vulnerable to global economic cycles, raw material price fluctuations, and regulatory changes, requiring constant vigilance and operational agility.

Peer Comparison: Valuation Premium Reflects Growth Expectations

India Glycols' valuation metrics reflect a premium positioning relative to select peers in the commodity chemicals space, justified by its superior growth profile and improving operational efficiency. The company trades at a price-to-earnings (P/E) ratio of 26.27 times trailing twelve-month earnings, below the industry average of 42 times but above several direct competitors.

India Glycols' ROE of 8.95% positions it in the middle of the peer group, ahead of Tata Chemicals (5.64%) but behind GHCL (21.55%) and Chemplast Sanmar (12.40%). The company's price-to-book value (P/BV) ratio of 3.02 times is higher than most peers, reflecting market expectations of sustained earnings growth and improved returns on equity. The debt-to-equity ratio of 0.80 times is higher than Tata Chemicals (0.28) but comparable to Chemplast Sanmar (0.54), indicating moderate leverage relative to the peer group.

The dividend yield of 0.45% remains modest, with the company prioritising capital allocation towards growth investments rather than shareholder distributions. The dividend payout ratio of 13.41% reflects this conservative approach, providing management with financial flexibility to fund expansion whilst maintaining a token dividend for shareholders. With a market capitalisation of ₹6,791 crores, India Glycols ranks as the second-largest company in its peer group, behind only Tata Chemicals.

Valuation Analysis: Trading at Premium Despite Concerns

India Glycols' current valuation reflects a premium positioning that appears stretched relative to its fundamental performance metrics. Trading at ₹1,099.50 as of November 17, 2025, the stock commands a P/E ratio of 26.27 times, significantly above its historical averages and implying high growth expectations. The company's PEG ratio of 0.78 suggests the valuation may be reasonable relative to expected earnings growth, though this metric should be interpreted cautiously given the company's modest five-year EBIT growth of 12.32%.

The price-to-book value ratio of 3.02 times represents a substantial premium to book value, particularly noteworthy given the company's modest ROE of 8.95%. Typically, companies commanding such valuation premiums demonstrate ROEs well in excess of their cost of capital, suggesting the market is pricing in significant operational improvements and return profile enhancement over the coming years.

Enterprise value multiples paint a similarly expensive picture. The EV/EBITDA ratio of 14.95 times and EV/EBIT ratio of 19.42 times are elevated by historical standards, particularly for a commodity chemical business characterised by cyclicality and moderate growth. The EV/Sales ratio of 2.17 times and EV/Capital Employed ratio of 2.12 times further underscore the premium valuation, suggesting limited margin of safety at current levels.

The stock's valuation grade has oscillated between "Expensive" and "Fair" over recent months, currently classified as "Expensive" as of August 2025. This assessment reflects the disconnect between valuation multiples and underlying fundamental metrics such as ROE, ROCE, and debt levels. The 52-week price range of ₹502.50 to ₹1,134.60 illustrates the stock's significant volatility, with the current price just 3.09% below the 52-week high but 118.81% above the 52-week low.

Shareholding Pattern: Stable Promoter Base, Modest Institutional Interest

India Glycols' shareholding structure reflects a stable promoter base with limited institutional participation, a pattern common amongst mid-sized Indian chemical companies. Promoter holding has remained steady at 61.01% across the past five quarters, indicating strong promoter commitment and alignment with minority shareholders. The promoter group, led by the Delhi-based Bhartia family through Kashipur Holdings Limited (50.35%), has maintained consistent shareholding without any pledging, a positive indicator of financial stability.

Foreign institutional investor (FII) holding stood at 2.62% in Q2 FY26, down from 3.44% in the previous quarter, representing a sequential decline of 82 basis points. This reduction suggests some profit-booking by foreign investors following the stock's strong rally. Mutual fund holdings remain minimal at 0.24%, down from 0.33% in Q1 FY26, indicating limited interest from domestic institutional investors. The total institutional holding of just 3.95% is notably low, suggesting the stock remains largely undiscovered by the broader institutional community.

The non-institutional shareholding category, comprising retail and high-net-worth investors, stood at 35.03% in Q2 FY26, up from 34.16% in the previous quarter. This increase of 87 basis points suggests growing retail investor interest, likely driven by the stock's strong price performance. The absence of insurance company holdings and minimal mutual fund participation indicate potential for future institutional accumulation should the company's fundamental performance continue to improve and valuation concerns moderate.

Stock Performance: Exceptional Returns Driven by Momentum

India Glycols has delivered exceptional returns across multiple timeframes, significantly outperforming both the benchmark Sensex and its sector peers. Over the past year, the stock has surged 89.24%, generating alpha of 79.74 percentage points relative to the Sensex's 9.50% gain. This outperformance extends across shorter timeframes as well, with the stock advancing 36.41% over three months (alpha of 31.01 points) and 12.13% over one month (alpha of 10.94 points).

The stock's year-to-date performance of 70.07% places it amongst the top performers in the small-cap universe, with alpha of 61.35 percentage points versus the Sensex. Longer-term returns are even more impressive, with two-year gains of 213.78% (alpha of 184.66 points) and three-year returns of 176.36% (alpha of 138.79 points). The five-year return of 671.85% and ten-year return of 2,292.82% underscore the wealth-creation potential for long-term shareholders, though past performance does not guarantee future results.

Technical indicators reflect the stock's strong bullish momentum. The stock trades above all key moving averages, including the 5-day (₹1,025.32), 20-day (₹992.71), 50-day (₹921.23), 100-day (₹920.98), and 200-day (₹812.77) moving averages. The overall technical trend is classified as "Bullish," supported by positive signals from MACD, Bollinger Bands, KST, Dow Theory, and OBV indicators across weekly and monthly timeframes.

However, the stock's high volatility of 44.42% over the past year and beta of 1.35 indicate significantly higher risk compared to the broader market. The risk-adjusted return of 2.01 suggests the stock has delivered superior returns relative to its volatility, but investors should be prepared for continued price fluctuations. The stock is classified as "High Risk High Return," appropriate only for investors with high risk tolerance and long investment horizons.

Investment Thesis: Growth Potential Constrained by Leverage

India Glycols presents a nuanced investment case characterised by robust revenue growth and improving operational efficiency, tempered by elevated leverage and expensive valuations. The company's proprietary Mojo score of 51 out of 100 reflects this mixed assessment, resulting in a "Hold" rating. The score components reveal the key tensions in the investment thesis: positive near-term drivers and improving financial trends are offset by below-average quality metrics and expensive valuations.

The company's near-term drivers remain positive, supported by a "Positive" quarterly financial trend and "Bullish" technical indicators. The financial trend assessment highlights record net sales, highest-ever operating profit, and strong debtors turnover as key positives. However, the quality grade of "Below Average" reflects concerns about the company's long-term fundamental strength, with an average ROCE of 8.28% and ROE of 8.95% falling short of benchmarks for quality compounders.

The valuation grade of "Expensive" represents perhaps the most significant constraint on the investment case. Trading at 26.27 times earnings and 3.02 times book value, the stock offers limited margin of safety at current levels. The valuation appears particularly stretched given the company's modest return ratios and elevated debt levels, suggesting significant downside risk should growth expectations fail to materialise or interest costs continue to escalate.

Key Strengths & Risk Factors

Outlook: What to Watch in Coming Quarters

The outlook for India Glycols over the coming quarters hinges critically on the company's ability to translate capacity expansion investments into improved profitability whilst managing its debt burden. The positive financial trend and strong revenue momentum provide a foundation for optimism, but the elevated leverage and expensive valuation create significant execution risk. Investors should monitor quarterly results closely for evidence of margin expansion, debt reduction, and improvement in return ratios.

Key metrics to watch include the trajectory of interest costs, operating margin trends, cash flow generation, and debt-to-equity ratio. Any signs of stress in these areas would warrant a reassessment of the investment case. Conversely, sustained margin improvement, debt reduction, and ROE expansion above 12% could justify the current valuation premium and support further upside.