From Commodity Chemicals to Something Much Bigger.

Most chemical companies are easy to understand.

They make chemicals, sell them, and their margins move with the cycle.

Ather Industries is trying to become something different.

The interesting part of the story is not just that revenue is growing. It is that the mix of revenue is changing, from lower-margin, large-scale manufacturing towards businesses where the

company gets paid for chemistry, R&D, and customer relationships.

And that can change the economics of the business quite meaningfully.

The journey so far:

Ather was spun off from Anupam Rasayan in 2013. Interestingly, the company spent its first five years almost entirely on R&D before making its first commercial launch.

It eventually listed in 2022 and has since grown revenue nearly 10x in eight years.

FY26 was particularly strong, with revenue growing 34% YoY.

But the bigger story is what is happening underneath that growth.

From LSM to CRAMS + CM:

Historically, around 80–90% of Ather’s revenue came from Large Scale Manufacturing (LSM).

This is essentially the more traditional side of the chemical business — producing chemicals at scale, including reverse-engineering products that India currently imports. Customers include

companies such as UPL and Sun Pharma.

The problem with this business is fairly straightforward: it is lower-margin and more cyclical.

Today, LSM accounts for only around 40% of revenue, down sharply from historical levels.

So where is the revenue moving?

Towards CRAMS and Contract Manufacturing (CM).

CRAMS is the company’s contract research and manufacturing business. Around 70% of this business is non-pharma, with 65 live projects currently. It grew 20% in Q1 FY27.

Then there is CM, the most interesting part of the portfolio.

CM grew 75% YoY in Q1 FY27 and contributed around 46% of FY26 revenue.

Some of these projects can generate EBITDA margins of up to 70%.

This is where the story starts becoming interesting.

The Baker Hughes connection:

One relationship stands out: Baker Hughes.

Baker Hughes contributed around 42% of CM revenue in Q1 FY27 and operates under a five-year, extendable exclusive-supply agreement with Ather.

Today, eight molecules have a potential revenue opportunity of around ₹400 crore, with management targeting this to scale towards ₹1,100 crore. Another 10 molecules are already in the pipeline.

Why does this matter?

Because Ather is not simply selling a commodity chemical to Baker Hughes.

It is developing and manufacturing specialised products that become part of the customer’s operations.

That creates stickier relationships, better visibility, and much better pricing power.

It also gives Ather indirect exposure to the oilfield-services ecosystem.

The same is true with Saudi Aramco on the CRAMS side.

So, while Ather is a chemical company, part of its growth is effectively linked to the global energy ecosystem.

And there is another optionality:

Ather is also moving into electronics and semiconductor chemicals.

Through its partnership with Dow Chemicals, it is working on products related to heat dissipation and polishing for PCBs and potentially AI data-centre applications.

This is still an emerging opportunity, so we wouldn’t build the entire investment case around it.

But it is worth watching.

The company’s R&D intensity is already unusual for the sector. R&D headcount is up 25% YoY, while R&D spending is around 7.3% of revenue.

The leadership team also has significant Dow Chemical experience, along with 29 granted patents.

That tells us something about where management wants the company to go.

The margin story is perhaps the biggest takeaway:

This shift in business mix is already visible in margins.

Ather has managed to sustain EBITDA margins around 30–31%.

Compare that with more commodity-oriented chemical businesses where margins can swing dramatically with the cycle.

Companies like Tata Chemicals and Deepak Nitrite, for instance, have historically seen much wider margin movements.

The goal here is not necessarily to become the largest chemical manufacturer. It is to become a higher-value chemical manufacturer.

And that distinction matters.

If CRAMS + CM eventually account for around 70% of revenue, the market could start valuing Ather more like a specialised/CDMO business rather than a traditional commodity chemical company.

This is similar to the re-rating argument we have seen in parts of the pharma CDMO space.

But the next phase will require capital:

There is no free lunch.

Ather plans to spend around ₹350 crore in FY27, eventually scaling this towards ₹2,300 crore by FY30.

That’s a significant amount, roughly 10% of the current market capitalisation.

Debt is already increasing, although much of the longer-term borrowing will come as the new capex starts getting commissioned.

So the next few years will be about proving that the company can convert this investment into profitable capacity.

The risks are real:

The biggest one is customer concentration.

Baker Hughes alone contributes roughly 20% of overall revenue. That makes the relationship a major strength, but also a risk if something changes.

There is also exposure to oil & gas and pharma cycles.

Then comes R&D.

Spending 7%+ of revenue on R&D can create a powerful competitive advantage — but only if those projects eventually become commercial products.

R&D is a double-edged sword.

And, of course, chemical manufacturing comes with the usual fire, plant, regulatory and environmental risks.

Ather has already dealt with a fire-related disruption in FY24, which has since been resolved and the insurance claim received.

Our Key Takeaway:

For us, the most interesting part of Ather is not the 34% revenue growth in FY26.

It is the possibility that the company is changing what it is.

From an LSM-heavy chemical manufacturer with a relatively lower-margin business, it is gradually moving towards CRAMS + exclusive manufacturing + specialised chemistry.

If this transition works, revenue growth is only one part of the story.

The bigger opportunity could come from better margins, better revenue visibility, and a different valuation multiple.

Of course, the market already knows some of this. At a roughly ₹20,000–22,000 crore market cap, expectations are not low.

So the key question from here is simple:

Can Ather execute the next ₹2,300 crore of capex, scale the Baker Hughes opportunity, commercialise its R&D pipeline, and maintain its margins?

That is what we will be watching closely.

Because if the answer is yes, Ather could increasingly look less like a traditional chemical company and more like a specialised chemistry platform.