A home has always been more than just a structure. It sits at the center of basic human needs. The idea of roti, kapda, makan still holds true. Demand for housing may slow down at times. It may accelerate in cycles. But the need for a home never disappears. It remains constant across generations.
Where there are homes, there is always a need to maintain them. Walls need colour. Spaces need finishing. Over time, repainting becomes as essential as construction itself. India’s paint industry has steadily grown on the back of this. Rising incomes, urbanisation, and a shift towards better living standards continue to support demand. Paint is no longer a one-time activity. It is a recurring part of the housing cycle.
But paints are only the final layer. Behind every coat lies a chain of chemicals.
Pigments give colour. Resins provide binding. Additives improve durability. These inputs come from chemical intermediates players. These companies operate one step behind the visible demand.
As housing activity expands, and repainting cycles shorten, demand for these inputs rises quietly in the background. This makes the space interesting. It offers indirect exposure to housing without being in the crowded front-end segment.
The selection here focuses only on companies that are closely linked to this value chain.
The idea is to avoid broad or diversified chemical names. Instead, the focus is on players that supply key intermediates used in paints and coatings. These businesses have a clearer connection to housing demand. They also operate in higher value segments of specialty chemicals. This ensures a more direct and cleaner way to participate in the housing theme through upstream players.
#1 Aarti Industries: Scaling High-Value Advanced Materials
Aarti Industries, is the flagship company of the Aarti group. The company manufactures organic and inorganic chemicals at its major facilities in Vapi, Jhagadia, Dahej and Kutch, in Gujarat and in Tarapur in Maharashtra.
Navigating Margin Pressures with Volume Growth
Aarti Industries reported a stable performance in Q3 FY26 despite a challenging global environment. Revenue for the quarter stood at Rs 2,318 crore, up 25.8% year-on-year (YoY). This was supported by volume growth across key products. For Q3 FY26 profit after tax came in at Rs 133 crore up 189% YoY. Higher operating leverage and cost control supported earnings.
The business continues to be driven by benzene and toluene-based chemistries. Key products include methyl methacrylate (MMA), used in coatings and acrylic applications, and dichlorobenzene (DCB), used in polymers and specialty materials.
MMA volumes improved with recovery in U.S. demand. DCB demand was supported by downstream applications such as PPS polymers, which are seeing traction in segments like electric vehicles. The company is expanding MMA capacity from around 290 kilo tons (KT) to 360 KT. This is expected to be commissioned by the end of FY26.
The company is moving towards higher value segments. The focus is shifting from bulk products to advanced materials and application-led solutions. Customer discussions are becoming more chemistry-led and R&D-driven. This includes deeper integration into end-use applications such as coatings and specialty materials. A recent example is the PCBTF molecule, which is targeted towards coatings applications in global markets.
Capacity expansion remains a key growth lever. Zone IV is expected to be commissioned in phases through CY26. The site has flexible process blocks. This allows faster commercialisation of new products. The company is also debottlenecking products such as DCB. This is aimed at capturing incremental demand. Capex for FY26 is expected to be around Rs 1,100 crore. The focus remains on projects with better return potential.
Exports contributed about 65% of revenue during the quarter. The company is expanding across markets such as the U.S., Europe, and the Middle East. Trade developments may support export opportunities over time. However, demand remains dependent on global conditions.
Aarti operates at the intermediate level of the chemical value chain. Some products such as MMA have linkage to coatings applications. However, the overall portfolio is diversified across industries. Exposure to housing remains indirect but not concentrated.
Going ahead, growth will depend on capacity ramp-up and product mix. Global demand conditions will remain important. The shift towards advanced materials may support margins over time. However, performance will continue to track global chemical cycles.
In the past year, share price of Aarti Industries is up 2.6%.
Aarti Industries 1 Year Share Price Chart
#2 Aether Industries: R&D-Led Growth in Material Sciences
Incorporated in 2013, Aether Industries is a manufacturer of specialty chemicals. The company is the sole Indian manufacturer for chemicals such as 4-(2-Methoxyethyl) Phenol (4MEP), and 3-Methoxy-2-Methylbenzoyl Chloride (MMBC), Thiophene-2-Ethanol (T2E), Ortho Tolyl Benzo Nitrile (OTBN), N-Octyl-D-Glucamine, Delta-Valerolactone, and Bifenthrin Alcohol.
Scaling High-Margin CRAMS & Specialty Models
Aether Industries reported a strong performance in Q3 FY26, supported by volume growth and a favourable product mix. Revenue for the quarter stood at Rs 317 crore, up 44% YoY. Profit after tax came in at Rs 64.5 crore, rising 49% YoY. The improvement was driven by higher volumes and better realisations across segments.
The business is built around advanced chemical intermediates and contract manufacturing. Aether operates across segments such as pharma, agrochemicals, oil and gas, and material science. During the quarter, pharma and agro together contributed about 45% of revenue. Material science contributed around 18%, while oil and gas accounted for about 22%. This reflects a gradual shift towards specialty and application-driven segments.
The company is expanding its manufacturing footprint. Construction at Site 3++ and the first blocks of Site 5 has been completed. Commercial production from these facilities is expected shortly. These sites will support both large-scale manufacturing and contract manufacturing. Capacity utilisation is expected to ramp up gradually over the next few quarters.
Aether is also investing in R&D to support future growth. The company is expanding its research infrastructure with new labs and advanced analytical equipment. The focus is on non-pharma and non-agro segments such as material science and oil and gas. These areas require higher chemical engineering capabilities and offer better long-term opportunities.
On the client side, the company continues to build long-term partnerships with global players. It has added new customers during the quarter and is in discussions for large contracts with multinational companies, especially in Europe. These partnerships are typically long-term in nature and offer visibility on future revenues.
Aether’s linkage to the housing theme comes through its material science segment, which contributed about 18% of revenue during the quarter. This includes products such as polyols and specialty intermediates used in coatings and industrial materials. However, this remains a smaller part of the overall portfolio, with pharma and agro still contributing a larger share. As a result, the connection to housing demand is present but not a primary growth driver.
Going ahead, growth will depend on ramp-up of new capacities and execution of long-term contracts. The shift towards high-value chemistries and specialty segments may support margins. However, performance will remain linked to demand across multiple industries and execution of ongoing projects.
In the past year, share price of Aether Industries has rallied 36.7%.
Aether Industries 1 Year Share Price Chart
#3 Sudarshan Chemical Industries: Navigating Global Integration Pains
Sudarshan Chemical Industries manufactures and sells a wide range of organic and inorganic pigments, effect pigments. The group also manufactures pollution control equipment, size reduction equipment and grinding equipments for industrial applications.
Integrating ‘One Sudarshan’ Amidst Global Headwinds
Sudarshan Chemical Industries reported a subdued performance in Q3 FY26, in line with broader weakness across the specialty chemicals and pigments industry. On a sequential basis the quarter was impacted by weak demand in key markets such as Europe and North America. Customer industries such as paints and automotive also saw slower offtake, which weighed on volumes.
While revenue surged 215.8% YoY to Rs 2,103 crore due to the Heubach acquisition, operational performance remained subdued due to global destocking, resulting in a net loss of Rs 116 crore.
Customers had built higher inventories earlier due to supply uncertainties and have been reducing these stocks over the past few months. This led to lower sales during the quarter despite underlying demand not falling to the same extent.
The company continues to position itself as a global pigment player following the acquisition of Heubach’s pigment business. The combined entity now has 19 manufacturing facilities across 11 countries. This provides a wide global footprint and access to a broader customer base. The integration process is underway, with a focus on improving customer service, rebuilding trust, and stabilising supply chains.
Cost optimisation remains a key focus area. The company has already achieved cost savings of around Rs 40 crore through initiatives across procurement, operations, and fixed costs. Further savings are in the pipeline as integration progresses. At the same time, efforts are underway to streamline systems, including the transition to a single SAP platform by December 2026. This is expected to improve efficiency and reduce operational complexity.
Sudarshan’s core business lies in pigments, which are a key input in paints and coatings. This creates a direct linkage to housing and construction activity. Management indicated that demand weakness during the quarter was temporary and partly driven by destocking. Early signs from January and February suggest that customer offtake has started to recover, as inventories normalise and buying resumes.
Looking ahead, the company expects gradual improvement in performance as demand stabilises and integration benefits start to reflect in earnings. Inventory reduction remains a near-term priority and may impact reported profit in the short term. However, it is expected to improve cash flows and balance sheet strength. Over the medium term, growth will depend on recovery in end-user industries such as paints and automotive, along with execution of integration and cost optimisation plans.
In the past year, share price of Sudarshan Chemical Industries tumbled 21.9%.
Sudarshan Chemical Industries 1 Year Share Price Chart
The Valuation Gap: Why the Housing Link is Not Equal
Let’s now turn to the valuations of the companies in focus, using the Enterprise Value to EBITDA multiple as a yardstick.
Valuations of Companies in focus
| Sr No | Company | EV/EBITDA Ratio | 3-Year Average EV/EBITDA | Industry Median | ROCE | ROE |
| 1 | Aarti Industries | 17.3 | 19.2 | 15.5 | 6.3% | 6.0% |
| 2 | Aether Industries | 43.7 | 53.1 | 10.2% | 7.8% | |
| 3 | Sudarshan Chemical | 12.7 | 19.2 | 8.9 | 6.0% | 3.0% |
Returns are still not very strong. Aether is slightly better, with return on capital employed (ROCE) at 10.2% and return on earnings (ROE) at 7.8%. Aarti’s ROCE is 6.3% and ROE is 6.0%. Sudarshan is lower, with ROCE at 6.0% and ROE at 3.0%. This shows profitability is still under pressure across the space.
Valuations are quite different. Aether is still expensive at 43.7x EV/EBITDA, though lower than its 3-year average of 53.1x. Aarti is at 17.3x, closer to its 3-year average of 19.2x and near the industry median of 15.5x. Sudarshan is at 12.7x, down from 19.2x earlier, but still above the industry median of 8.9x.
The housing link is not equal. Sudarshan is closest, as pigments go directly into paints. Aarti has some connection through products like MMA, but it remains diversified. Aether’s linkage is smaller, with only part of its business in material science.
So this is not a clean one-theme story. It is a chain. Sudarshan sits closer to demand. Aarti and Aether sit behind it. Watching all three together helps understand how demand is moving.
Inventory Rationalization: The Short-Term Pain for Long-Term Gain
Homes don’t stay untouched. After a few years, they need fixing. Walls fade. Paint wears out. People repaint. This keeps happening.
Paint is what we see. But it doesn’t work alone. Pigments give it colour. Chemicals sit behind that. That is where these companies come in.
Sudarshan is closest to this. Its pigments go straight into paints. Aarti has some link through a few products, but a lot of its business is elsewhere. Aether is even less connected. Only a small part of what it does ties back to this.
So it’s not one clean story. Each company is at a different point in the chain. If housing improves, it should reflect here too. But not equally. That’s why it helps to watch all three together.
You can track how these companies progress by adding these stocks to your watchlist.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Ekta Sonecha Desai has a passion for writing and a deep interest in the equity markets. Combined with an analytical approach, she likes to deep dive into the world of companies, studying their performance, and uncovering insights that bring value to her readers.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article.
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