Arabian Petroleum lands first ONGC contract, but margins halved in FY26
The lubricant maker grew revenue 32% to ₹375 cr, but EBITDA margins compressed from 6% to 4% due to commodity inflation and a strategic inventory build.
What's new
- FY26 standalone revenue grew 31.6% to ₹375 cr, with PAT up 23.4% to an EPS of ₹10.3.
- Won a ₹35 crore, three-year contract from ONGC and received DRDO technology transfers for defence-grade lubricants.
- Management guided for FY27 volume growth of 20-25% and EBITDA growth of 30-35%.
Why this matters
Arabian Petroleum is pivoting to higher-value products, and the ONGC win and DRDO deal validate the strategy. The catch is that margins were crushed to 4% in FY26. The guidance for a sharp EBITDA recovery hinges on working capital normalisation in H1 FY27 and successful execution of the new contracts.
What we're watching
- Whether the ONGC contract volume ramps as planned, given the company's market cap is just ₹70 cr.
- If EBITDA margins recover in H1 FY27 as management targets.
- Revenue contribution from the newly acquired Lavisa Technologies subsidiary.
The full read
Arabian Petroleum's FY26 results tell two stories. The first is growth: revenue jumped 31.6% to ₹375 crore, volumes climbed 21% to 24,200 MT, and it won a ₹35 crore contract from ONGC, its first government order. The second is a margin hit. EBITDA margins collapsed from 6% to 4%, squeezed by commodity inflation and a strategic inventory build. The company's market cap is just ₹70 crore, making the ONGC win worth nearly 9% of last year's revenue. Management is now guiding for a sharp recovery, forecasting 20-25% volume growth and 30-35% EBITDA growth in FY27. This hinges on working capital normalisation in H1 and the successful ramp of the new DRDO technology transfer for defence-grade lubricants. Lavisa Technologies, acquired in December 2025, should add ₹8-10 crore in revenue. The key test is whether margins can bounce back from a base of 4%.
Questions answered
- How significant is the ONGC contract for Arabian Petroleum?
- The ₹35 crore, three-year contract represents nearly 9% of the company's FY26 revenue of ₹375 crore. It's also its first private-sector order from a government entity, marking a new client segment.
- Why did margins compress so sharply in FY26?
- EBITDA margins fell from 6% to 4% due to commodity price inflation and a deliberate inventory build. Management expects working capital to normalise in the first half of FY27, which should support margin recovery.
- What is the guidance for FY27?
- Management guided for volume growth of 20-25% and EBITDA growth of 30-35%, driven by a better product mix and pricing realisation. The subsidiary Lavisa Technologies is expected to contribute ₹8-10 crore in revenue.
- How does the company's valuation look after these results?
- At a trailing P/E of 6.2 and a market cap of ₹70 crore, the stock prices in limited growth. The FY27 guidance, if met, would imply an EPS of roughly ₹12.6-₹13.7.