Pharma Is No Longer the Only Story: This Chemical Company Is Betting on Semiconductors and Battery Materials
A chemical company supplying pharmaceutical intermediates can grow by adding customers and expanding its product range. But entering semiconductor chemicals and battery materials opens up a different set of opportunities. That is the direction this chemical stock is taking, while also scaling its contract development and manufacturing organisation (CDMO) business. Its latest results provide a strong starting point, but the bigger story is whether these newer businesses can become meaningful contributors to growth over the next few years.
Strong Q2 FY27 results and higher guidance
Acutaas Chemicals reported revenue from operations of ₹436.9 crore in Q2 FY27, up 42.7% year-on-year. EBITDA increased 84.6% to ₹176 crore, while profit after tax rose 71.4% to ₹123.1 crore.
EBITDA margin increased to 40.3% from 31.1% in the same quarter last year. Gross margin also improved, reaching 62.1% compared with 55.8% a year ago. In other words, the company was not just selling more; it also retained a higher share of revenue after direct costs and generated stronger operating earnings.
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The first-half performance was also strong. Revenue grew 49.3% to ₹766.6 crore in H1 FY27, while EBITDA nearly doubled to ₹289 crore. PAT increased 71% to ₹198.1 crore.
Following this performance, management raised its FY27 revenue growth guidance from around 25% to approximately 30%. It also guided for an EBITDA margin of 38-40% for the full financial year.
The quarterly margin of 40.3% is already above the top of the full-year guidance range. However, investors should not assume this level will continue every quarter, as margins can change with product mix, input costs and capacity utilisation. The revised guidance signals confidence in the business, but performance over the second half will determine whether the company delivers on it.
CDMO business targets ₹2,000 crore by FY30
The CDMO business is one of Acutaas's clearest growth opportunities. Management expects revenue from this business to reach ₹1,000 crore in FY27, a year earlier than previously planned. It has also set a target of ₹2,000 crore by FY30.
CDMO companies develop and manufacture products for other businesses. In pharmaceuticals, this can involve developing and producing specialised molecules or intermediates for customers rather than selling only standard products.
Acutaas's focus on originator companies could help it build longer-term customer relationships, provided it continues to meet their development, quality and manufacturing requirements. Management has indicated that its targets are supported by customer visibility and contracts.
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However, the FY30 target remains a goal rather than revenue already achieved. The pace of product commercialisation, customer demand and manufacturing ramp-up will determine how quickly the business grows.
There is also room to improve utilisation at the company's Ankleshwar Unit 2 CDMO facility, which management said was running at around 30% in Q2 FY27. Better use of existing capacity could support growth before a major new expansion becomes necessary. Further investment will depend partly on land acquisition and decisions about future capacity.
Battery electrolyte additives enter commercialisation
Acutaas is also building a presence in battery electrolyte additives used in lithium-ion batteries. These specialised chemicals help support battery performance and stability.
Acutaas has started commercial supplies of two named battery electrolyte additives, vinylene carbonate (VC) and fluoroethylene carbonate (FEC), along with a third product whose name management has not disclosed. A fourth additive is still undergoing customer validation, with pilot-scale batches already supplied. Management expects the business to ramp up over the next two to three quarters, but has not shared its current revenue contribution.
This is an important step, but initial commercial supplies should not be confused with a fully scaled business. Acutaas has not disclosed a detailed revenue target for battery additives, so the size of their contribution remains uncertain.
The company plans to invest ₹45 crore in the next phase of electrolyte additives capacity during H2 FY27. Investors will need to watch whether customer demand develops quickly enough to support higher production and justify the investment.
Semiconductor chemicals offer a longer-term opportunity
The semiconductor business could open another growth avenue, although it will take time to develop.
Acutaas inaugurated its South Korea manufacturing facility ahead of schedule in Q2 FY27. The facility is intended to produce high-purity chemicals used in applications such as photoresists, semiconductor packaging and etching. These products serve specialised requirements in semiconductor manufacturing.
The company does not manufacture chips. Instead, it aims to supply chemicals used in the production process. Success will depend on product quality, customer qualification and the ability to deliver consistently to demanding specifications.
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Separately, Acutaas plans to invest around ₹100 crore in electronic-grade chemicals during H2 FY27. Production from this project is expected to begin in H1 FY29. Management expects the semiconductor chemicals business to ramp up during FY28, but the newer electronic-grade chemicals project has a later timeline.
Investors should distinguish between the existing South Korea facility and the separate project planned for H1 FY29. Neither announcement means that the entire semiconductor opportunity will translate into substantial revenue immediately. Customer approvals and commercial orders will be the milestones to track.
Capex and the shift away from legacy products
Acutaas plans FY27 capital expenditure of around ₹300 crore. H1 capex was approximately ₹123.9 crore, with around ₹165 crore planned for H2. The second-half allocation includes ₹100 crore for electronic-grade chemicals and ₹45 crore for electrolyte additives, with the balance earmarked for maintenance. These figures exclude certain items, including R&D capex and land acquisition.
The investment is intended to build future growth, but new facilities take time to generate returns. The company must commission capacity, qualify products with customers and increase utilisation before the benefits become visible in earnings.
At the same time, management is gradually phasing out older product lines, including parabens and methyl salicylate, to make room for newer opportunities. The paraben phase-out is expected to take around 1.5 years, while methyl salicylate could take longer because existing customers need to be accommodated.
This transition is already affecting the specialty chemicals segment. Revenue from the segment was around ₹34.9 crore in Q2 FY27, down approximately 20% year-on-year. Management attributed the decline to the product phase-out and a temporary pause in shipments to a US customer following its acquisition. Shipments have since resumed.
The key question is whether new products can replace the revenue being phased out and eventually improve the business's growth profile. That outcome is possible, but it should not be treated as guaranteed.
Working capital and key risks
Despite strong profit growth, investors should keep an eye on working capital. Acutaas's working capital cycle increased to 115 days in Q2 FY27 from 99 days in Q1, mainly because of higher debtor days.
A longer working capital cycle means more money can remain tied up in the operating business. This is not necessarily alarming during a period of rapid growth, but persistent increases in receivables could put pressure on cash generation even when reported profits are strong.
The company had cash and cash equivalents of around ₹300.9 crore as of September 30, 2026. That provides financial flexibility, but its investment programme will still need to be assessed against cash flows and future funding requirements
Other risks include delays in customer qualification, slower-than-expected ramp-ups in battery and semiconductor chemicals, and the possibility that new capacity takes longer to reach productive utilisation. The CDMO target is promising, but it also depends on sustained customer demand and successful execution.
What investors should track next
The next few quarters should provide a clearer view of whether Acutaas can deliver its revised FY27 growth guidance and maintain margins within the guided range. Investors should also track progress towards the ₹1,000 crore CDMO target, commercial scaling of battery additives and customer approvals for semiconductor chemicals.
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Working capital deserves equal attention. Growth is more valuable when it translates into cash generation rather than a continuing rise in receivables and funding needs.
The bigger picture
Acutaas is building beyond its established pharmaceutical-intermediate business. CDMO offers a defined near-term growth target, battery additives have entered commercial supply, and semiconductor chemicals could provide a longer-term opportunity.
The latest results are encouraging, but the expansion story is still unfolding. The real test will be whether these investments translate into sustained revenue, higher capacity utilisation and healthy cash generation. For investors following the company, the focus should be on measurable progress in each business rather than treating every announced opportunity as an immediate growth driver.