Gem Aromatics Limited, a leading manufacturer of essential oils and aromatic chemicals, reported a net loss of Rs. 2.60 crore for the second quarter of fiscal year 2026, as the company grappled with challenges stemming from US tariffs and changes in India's GST structure. The company's revenue for the quarter stood at Rs. 89.50 crore, reflecting the impact of these external factors on its operations.

Financial Performance

The company's Q2 FY26 results paint a picture of a challenging business environment:

For the first half of FY26, Gem Aromatics reported:

Challenges and Impact

The company's performance was significantly affected by two major external factors:

1. US Tariffs: A 50% tariff imposed by the United States led many customers to defer orders and utilize existing inventories, impacting export volumes.

2. GST Changes: Recent changes in India's GST structure, with Natural Menthol now taxed at 5% and Synthetic Menthol at 18% (compared to the earlier uniform rate of 12%), prompted buyers to reassess their blending requirements, resulting in a temporary pause in purchases.

These factors led to softer demand in Mint, Mint derivatives, Clove, and Clove oil derivatives, which are among Gem Aromatics' largest product categories.

Strategic Initiatives

Despite the challenging quarter, Gem Aromatics is taking proactive steps to mitigate the impact and position itself for future growth:

1. New Facility: The company plans to commission its Phase-II facility at Dahej by November 30, 2025. This expansion is expected to add 10,829 metric tons of additional capacity for phenol derivatives and cooling agents.

2. Product Diversification: Gem Aromatics plans to fast-track the introduction of new value-added specialty products, originally planned for FY27 and FY28, to offset the impact on its Mint portfolio.

3. Cooling Agents Focus: The new facility is expected to house India's largest Cooling Agent's unit capacity of over 500 metric tons per annum, along with dedicated lines for Phenol derivatives and Citral derivatives.

4. Financial Strengthening: The company has repaid Rs. 140.00 crores of debt, improving its leverage profile with the net debt to equity ratio reduced to 0.3x from 0.8x.

Future Outlook

Yash Parekh, Managing Director and CEO of Gem Aromatics, expressed confidence in the company's long-term prospects, stating, "With our diversified portfolio, integrated chemistry capabilities, scale, efficient manufacturing, global customer base, and innovation-driven mindset, we believe Gem Aromatics will deliver sustainable and profitable growth in the years ahead."

The company has set a target to achieve revenue in the range of Rs. 1,050-1,100 crore by FY28, with an EBITDA margin of 16-18%.

As Gem Aromatics navigates through these challenging times, its focus on expanding capacity, diversifying its product portfolio, and strengthening its financial position may help the company overcome current headwinds and capitalize on future growth opportunities in the specialty ingredients market.

Gem Aromatics Limited, a leading manufacturer of specialty ingredients, essential oils, and aroma chemicals, has announced its financial results for the second quarter and first half of fiscal year 2026, revealing a mixed performance amidst challenging market conditions.

Q2 FY26 Performance

For the quarter ended September 30, 2025, Gem Aromatics reported:

• Revenue from operations of ₹895.25 crore, down 20.2% year-over-year
• EBITDA of ₹30.00 crore, a significant decrease of 80.2% compared to Q2 FY25
• Net loss of ₹26.00 crore, compared to a profit of ₹97.00 crore in the same quarter last year

H1 FY26 Overview

For the first half of FY26, the company's results were as follows:

• Revenue from operations stood at ₹1,771.58 crore, a 13.5% decline year-over-year
• EBITDA reached ₹179.00 crore, down 39.4% from H1 FY25
• Net profit decreased by 70.5% to ₹54.00 crore

Factors Affecting Performance

The company's performance was impacted by several external factors:

1. U.S. Tariffs: A 50% tariff imposed by the United States led customers to defer orders and consume existing inventories.
2. GST Rate Changes: Revisions in GST rates for natural (5%) and synthetic (18%) products, compared to the previous uniform rate of 12%, caused domestic buyers to reassess their blend requirements and temporarily hold demand.
3. Softer Demand: The company experienced lower demand for Mint and Mint Derivatives, as well as Clove and Clove Derivatives.
4. Raw Material Costs: Higher raw material consumption and lower realizations in the Mint & Mint Derivatives segment affected gross margins.

Positive Developments

Despite the challenges, Gem Aromatics reported some positive developments:

• Strong demand in Phenol derivatives and other natural and synthetic ingredients
• Successful completion of its Initial Public Offering (IPO) on August 26, 2025
• Repayment of ₹97.40 crore of long-term debt and ₹42.60 crore of working capital borrowings, improving the Net Debt to Equity ratio to 0.3x from 0.8x

Dahej Facility Update

The company announced that its wholly-owned subsidiary, Krystal Ingredients Private Limited, has received all necessary approvals to commence operations at its Dahej facility. The plant is expected to be commissioned in November 2025, adding a capacity of 10,829 MTPA across four segments.

Management Commentary

Yash Vipul Parekh, MD & CEO of Gem Aromatics, commented on the results: "The first half of the year was impacted by multiple external headwinds. However, we are optimistic about the second half of FY26 as we prepare to commission our new greenfield facility at Dahej. The introduction of high-value products such as Citral, Phenol derivatives, and Cooling Agents is expected to drive growth, strengthen profitability, and reduce seasonality in our operations."

Outlook

Looking ahead, Gem Aromatics remains focused on innovation, sustainability, and next-generation aroma molecules. The company believes it is well-positioned to deliver its next phase of value creation and build a stronger, scalable, and sustainable business for the future.

Investors and analysts will be closely watching how Gem Aromatics navigates the current market challenges and capitalizes on its new production capabilities in the coming quarters.