Industrial Gases: Building scale, driving profitability
Ellenbarrie Industrial Gases (ELLEN), with a legacy of over five decades, is among the oldest industrial gas companies in India. The company manufactures and supplies a broad portfolio of gases, including oxygen, nitrogen, argon, hydrogen, helium and carbon dioxide. These gases are integral to essential systems and applications across industries such as steel, pharmaceuticals, healthcare, engineering, defense, energy, and food & beverages, supporting recurring demand and fostering long-term customer relationships.
The company’s business model is underpinned by strong customer retention and high entry barriers, arising from the core nature of industrial gases and the structural rigidity of long-term pipeline contracts that limit supplier substitution.
Geographical expansion continues to be a core priority of ELLEN, as it is progressing toward a pan-India footprint by increasing its presence in the northern and western parts of India while strengthening its manufacturing capabilities in the eastern and southern regions.
India’s industrial gas demand is projected to reach ~USD1.75b by CY28 from USD1.3b in CY24 at a CAGR of 7.5%, providing a favorable backdrop for ELLEN’s expansion strategy. The company has scaled its capacity 4.5x over FY23-25 to 3,870 tons per day (tpd), led by 18x growth in onsite capacity from 176tpd in FY23 to 3,172tpd in FY25. ELLEN aims to increase its capacity to 4,630tpd by FY27.
Steel/Pharmaceutical & Chemicals sectors are key growth drivers of the company, with sales contributions of ~37%/26% in FY25. ELLEN’s sectorally diversified model drives stable and scalable growth, with onsite steel plants ensuring steady offtake and strategically located ASUs catering to rising pharma and chemical demand. ELLEN also sees future opportunities in electronics through high-purity gases. These factors, along with capacity expansion in key clusters, position the company for stable growth and margin expansion.
EBITDA posted an 81% CAGR over FY23-25, and margins improved from 16.4% in FY23 to 22.8% in FY24 and further to 35.1% in FY25. We expect ELLEN to maintain a strong EBITDA growth trajectory at 39%/42%/43% in FY26/FY27/FY28, driven by higher contributions from argon, green energy initiatives, capacity ramp-up (which leads to operating leverage), and lower power consumption in new plants.
We expect a CAGR of 39%/49%/52% in revenue/EBITDA/PAT over FY25-28. ELLEN is currently trading at 49.8x/30.6x/25x FY26E/FY27E/FY28E PE. We initiate coverage on ELLEN with a BUY rating and a TP of INR680, based on ~40x FY27E EPS.
Key downside risks: a) dependent on key customer relationships, b) prolonged disruption in facilities, c) slower demand in key sectors like steel.
Valuation and view – initiate with BUY
ELLEN operates through a diversified portfolio of gases, supported by long-term contracts that ensure stable demand and customer retention. Its balanced business model across bulk, packaged, and onsite supplies contributed 67%, 18%, and 15% of revenue in FY25, respectively.
Over FY23-25, ELLEN has expanded its capacity by 4.5x to 3,870tpd (led by 18x growth in onsite capacity from 176tpd in FY23 to 3172tpd in FY25). It aims to expand the capacity to 4,630tpd by FY27, with new plants in East and North India. Strong execution capabilities, an in-house project engineering team, and a multi-vendor procurement strategy are further strengthening its execution capabilities.
Looking ahead, ELLEN aims to improve margins through higher contributions from argon, green energy initiatives, capacity ramp-up leading to operating leverages, and lower power consumption in the new plants.
The Indian industrial gas market is projected to grow to USD1.75b by CY28 at a 7.5% CAGR, which provides a favorable backdrop. Financially, ELLEN delivered a CAGR of 23% in revenue, 81% in EBITDA, and 71% in PAT over FY23-25.
We estimate ELLEN to deliver a CAGR of ~39%/49%/52% in revenue/EBITDA/PAT over FY25-28, driven by capacity additions, a better product mix, and market share gains. The company is currently trading at49.8x/30.6x/25x FY26E/FY27E/FY28E PE, with RoE/RoCE of ~20.7%/19.6% in FY27E and ~20.6%/20.1% in FY28E. We initiate coverage with a BUY rating and a TP of INR680, based on ~40x FY27E EPS (51% discount to Linde).
