Tata Chemicals’ domestic business saves the day in Q1

Put together, Q1FY26 Ebitda margin expanded 240 basis points (bps) year-on-year to 17.5%. While the domestic business Ebitda growth was 24%, two of the three overseas regions of US, UK and Kenya, reported an Ebitda decline. The three regions contributed 46% of consolidated Q1 revenue of ₹3,700 crore, which is almost 2% down year-on-year due to muted volumes.

The market for soda ash, Tata Chemicals’ key product, remains under pressure with excess global capacity, although the Indian market continues to be steady. Domestic soda ash and sodium bicarbonate, an intermediate product for soda ash production, volumes grew 19% and 38%, respectively, thanks to fresh capacities commissioned in H2FY25.

Overseas businesses volume fell due to delayed shipments and the closure of the loss-making soda ash unit in the UK in Q4FY25. While the UK’s revenue declined 28% year-on-year, Ebitda margin jumped over 500 bps to 8.5%. The closure of the UK plant would help Tata Chemicals achieve an incremental Ebitda of ₹600 crore in FY26, as per the management, which translates into over 30% year-on-year growth. Higher volumes from domestic capacity expansion and cost-saving initiatives would be other drivers for Ebitda.

The UK business is expected to get another boost to its profitability and revenue with the commissioning of a 70 kilo tonne per annum (ktpa) plant for production of pharma grade salt in Q1 and in-house production of carbon dioxide gas. The plant is going through the process of qualification with customers and should get an approval in H2FY26. However, it has put a pause on its US expansion plans until the market recovers.

While the stock is about 13% down in the past one year, it has gained 26% from its 52-week low of ₹756 on 3 March after the closure of its UK plant. The stock trades at an EV/Ebitda of 13.5x for FY26 estimates, shows Bloomberg data.

Robust growth in consuming industries of solar cells and electric vehicles aids Tata Chemicals outlook, but sustained earnings growth is crucial for the stock. Investors will also keep a tab on plant closure announcements across the globe that can help the industry consolidate.