dcw ltd Management discussions

Economic Overview and Outlook

Global Economic Overview

The global economic recovery began taking shape in 2021 and is continuing into 2022, even as the pandemic persists in various parts of the World.

The robust comeback in 2021 marked the highest growth rate in more than four decades and was driven by solid consumer spending and some uptake in investment, with trade surpassing pre-pandemic levels. This was despite multiple supply disruptions for many goods and products, worsening pandemic dynamics for low-income developing countries, and the highly transmissible Omicron variant of COVID-19 unleashing new waves of infections. However, the recovery during 2021 was uneven within economies. The labour market became imbalanced, with many people struggling to find jobs, while many businesses in several sectors have difficulty recruiting workers. A shortage of workers in some sectors also reflects a decline in most OECD countries labour force participation rates. Imbalances also remain across industries, with sectors dependent on interpersonal contact such as travel, tourism and leisure continuing to suffer. At the same time, demand for consumer goods has been strong, especially in the United States and Europe.

The robust comeback in 2021 marked the highest growth rate in more than four decades with trade surpassing pre-pandemic levels.

According to the International Monetary Fund, the global economy grew by an estimated 5.9% in 2021.

Yet the momentum for growth - especially in China, the United States and Europe - slowed considerably by the end of 2021, as the effects of monetary and fiscal stimuli began to recede and major supply-chain disruptions emerged. Rising inflationary pressures in many economies are now posing additional risks to recovery.

Going forward, the International Monetary Fund expects the global economy to moderate to 4.4% in 2022. A revised assumption removing the Build Back Better US fiscal policy package from the baseline, earlier withdrawal of monetary accommodation in multiple countries, and continued supply shortages and logistical bottlenecks are some reasons for a more conservative estimate for 2022. Furthermore, in China, pandemic-induced disruptions related to the zero-tolerance COVID-19 policy and prolonged financial stress among property developers are other key reasons for downgrading 2022 growth. Looking further ahead, INTERNATIONAL MONETARY FUND expects global growth to slow to ~3.8 percent in 2023.

In the meantime, the rebound continues to lose momentum in 2022 as inflation pressures have emerged in most economies; disruptions in energy, food and commodity markets have pushed up prices; high energy prices and fuel shortages are limiting the manufacturing of critical materials and intermediate goods; and bottlenecks in production chains are spreading to more generalised scarcity of goods.

The recent conflict between Russia and Ukraine has added more fuel to the fire, attaching significant economic risk to the global economic recovery. The United States and European powers have stepped up unprecedented economic sanctions against Russia, which economists warn could also bite the global economy. Among multiple levels of sanctions,

Washington and Brussels have targeted major Russian banks, cutting them off from SWIFT, the global messaging system used for moving money around the World. These sanctions and a prolonged conflict are expected to disrupt the supply of many commodities that Russia and Ukraine are dominant suppliers of, causing further stress to global supply chains.

Global oil demand is set to surpass pre-pandemic levels in 2022 as fears over the latest coronavirus wave subside, creating the potential for another "volatile" year of oil prices. Oil prices are currently soaring high at levels not seen recently, caused by the economic revival driving demand for oil and oil-based products. Geopolitical tensions between Russia and Ukraine and increased instability in the Middle East add to oil market nervousness. An increase in oil price will not only be seen at gas stations, but it will be felt in virtually all the goods and services consumers use. Now amplified by energy price shocks, inflation has become a global public concern.

Indian Economic Overview

The much welcome recovery in real GDP growth that had resumed with the receding second pandemic wave lost some momentum in the second half of FY2022, with the emergence of the Omicron variant. Consequently, as per the Reserve Bank of India and State Bank of India data, GDP growth plunged from 20.3% in Q1 FY2022 to merely 5.4% in Q3 FY2022. However, according to IMF and the RBI, GDP growth is supposed to expand by ~8.0 to 9.0% in FY2022.

Agriculture and allied activities expanded by 3.3% in FY2022, supported by adequate and well-spread southwest and northeast monsoon rains, good reservoir levels and improved soil moisture, which helped rabi acreage increase by 1.5% over the previous year. Food grains production touched a new record in FY2022, with both Kharif and rabi output exceeding the final estimates and targets for FY2021.

Industrial activity lost momentum in the second half of FY2022, as manufacturing was affected by supply-side shortages and input cost pressures. Mining activity was supported by coal and natural gas, offsetting the contraction in crude oil production. Hence industrial GVA decelerated sharply from 23.1% in H1 to 0.9% in H2. The Services sector activity grew by 7.1% in H2 and crossed its pre-pandemic level. The contactintensive services, such as trade, hotels, transport, and communication, inched towards normalisation, though their rebound was held back by the Omicron variant.

Merchandise exports and imports remained buoyant in FY2022. Exports at $42.2 billion touched a new record in March 2022 and remained above $30 billion for the thirteenth consecutive month. During FY2022, merchandise exports at $419.6 billion crossed the target of $400 billion. The $300 billion mark was achieved in FY12 ($306 billion), and hence India took almost a decade to add an incremental $100 billion in exports. Merchandise imports reached an all-time high of $60.7 billion in March 2022 and remained above $50 billion for the seventh consecutive month in March 2022. Overall, Indias merchandise exports (YoY) increased by 43.8% in FY2022 vis-a-vis a decline of 6.9% in FY2021, while imports grew by a whopping 55.1% in FY2022 compared to a 16.9% contraction in FY2021. India recorded a current account deficit of 1.2% of GDP in April-December 2021 against a surplus of 1.7% in April-December 2020 on a sharp increase in the trade deficit. (Source Reserve Bank of India, State Bank of India)

Though CPI inflation is projected to average below 6.0% FY2023 (FY2022 average: 5.7%) by RBI, there remain several upside and downside risks to this inflation forecast. The upside risks emanate from a further hardening of global crude and other commodity prices due to geopolitical tensions, longer-than-expected supply chain disruptions, a more significant pass-through of input cost pressures to output prices in the event of stronger demand conditions and global financial market volatility induced by a quicker than expected normalisation of monetary policy by the advanced economies. The downside risks arise from an early mending of supply chain disruptions, a muted pass-through to output prices, a correction in global commodity prices due to more than expected global demand weakening, and an easing of geopolitical tensions.

As per the RBI, real GDP growth is expected at 7.2% in FY2023. Upside risks to growth could emanate from more potent and sustained expansion in domestic demand, including for contact-intensive services, a boost to private investment activity from the confluence of the Governments thrust on capital expenditure, the prospect of normal monsoon and healthier corporate balance sheets. On the contrary, the heightened geopolitical tensions - resulting in the significant hardening of international crude oil and other commodity prices to multi-year highs on a sustainable basis, the upsurge in global financial market turmoil and the loss of momentum in global trade and demand - pose sizeable downside risks to GDP growth.

As per the RBI, real GDP growth is expected at 7.2% in FY2023.

Industry Overview

Global Chemical Industry

According to data published by Cefic, (the European Chemical Industry Council), global chemicals sales increased from EUR 1,172 billion in 2009 to EUR 3,669 billion in 2019. Although the headwinds caused by the pandemic recession in 2020 inevitably affected the industry, causing a slight contraction in chemical production, growth in demand and production of chemicals is expected to pick up. The global outlook for chemical production is positive, with growth projected by most analysts, especially for China, India and emerging economies. According to BASF, global chemical production (excluding pharmaceuticals) is expected to grow by 4.4% in 2021. This is above average for the years prior to the coronavirus pandemic and stands for a strong rebound following the pandemic recession, where overall global chemical production contracted by 0.4% in 2020.

The global outlook for chemical production is positive, with growth projected by most analysts, especially for China, India and emerging economies.

Although the chemicals industry contracted slightly during the pandemic recession, new opportunities are opening, driven by shifts in customer demand and recent technologies. According to a special report by Deloitte , the outlook for the US & Global chemical industry is poised for a strong recovery in 2022 as economies reopen and restrictions are lifted, which should drive up plant utilisation rates that were hit hard by the pandemic. But one of the risks for this strong recovery is inflation. For example, Brent crude oil spot prices rebounded strongly and remained at an average of $74 per barrel in September 2021. Those inflation figures provide further evidence that the supply of raw materials and labour is struggling to keep up with resurgent demand. Central banks in the United States and Europe expect supply bottlenecks and inflation to ease in 2022 once the global recovery finds firmer footing and government support programmes are unwound.

Chemical companies are entering 2022 after overcoming challenging market conditions in 2020 and 2021, with COVID-19 adding volatility to an already volatile decade. The pandemic led to divergent demand for plastics and speciality materials, testing the resilience of companies asset portfolios. The shifts in chemical spending partially reflect commodity price volatility. Still, they are more driven by longer- term trends, including petrochemical expansion in the US Gulf Coast. 2022 will likely see similar price and demand volatility. The chemical sector will need to adapt, particularly as the energy transition accelerates. Chemical companies are likely to focus on repositioning their asset portfolios and balancing trade-offs between different strategic options with critical considerations, such as scale, the scope of products, and growth opportunities.

Global Speciality Chemical Industry

According to Grand View Research , the global speciality chemicals market was valued at US$ 630 billion in 2019 and is expected to grow at a CAGR of 3.7% from 2020 to 2027, when it is expected to reach US$ 842.5 billion. This growth is being driven by increasing demand for high-performance and function-specific chemicals. The industrial and institutional cleaners segment accounted for the largest market revenue share of 8.6% in 2019 and is projected to see a growth rate of 4.0% over the forecast period. Asia-Pacific is the dominant market for speciality chemicals, accounting for a revenue share of 46.8% in 2019. 44% of the global demand is attributed to the Asia-Pacific region, most notably in China, India, and Japan.

According to Grand View Research, the global speciality chemicals market was valued at US$ 630 billion in 2019 and is expected to grow at a CAGR of 3.7% from 2020 to 2027.

With rapid industrialisation, noticeable demand from Asian countries such as India and China has arisen.

There has been a rise in investments in construction and infrastructure development projects in Asia-Pacific.

Therefore, Asia-Pacific is considered a favourable destination for speciality chemical manufacturers, boosting market growth. Whereas variations in raw material cost and stringent regulations by the Government are estimated to hamper the growth of the global specialty chemicals market.

Indian Chemical Industry

As per Frost & Sullivan, the Indian chemicals market is valued at USD 186 Bn (~4% share in the global chemical industry), with the commodity chemicals accounting for almost 46%. It is expected to reach ~USD 330 Bn in the next five years, with an anticipated growth of ~12.2% CAGR. The specialty chemical industry forms ~47% of the domestic chemical market, which is expected to grow at a CAGR of around 11% over the same period. Agrochemicals and Fertilisers account for 18-20% of the domestic chemicals market and about 38% of the speciality chemicals domain, which constitute various differentiated chemicals used in the agro space, including pesticides, herbicides etc. Pharmaceutical API make up the second-largest share of around 20% of the specialty chemical market with an anticipated growth of over 11% by 2025F.

The pandemic shook the chemical industry just as it did other sectors, and in H1FY22, most companies witnessed a slump in their operating margins. Gross margins contracted, and operating costs jumped significantly. Gross margins were impacted as raw material prices soared because producers in China had to cut production due to energy crises (power shutdowns due to a shortage of coal) and unavailability of primary raw materials due to supply chain constraints. Operating costs were affected by higher freight costs due to a lack of containers and higher power and fuel costs due to a significant jump in coal and gas prices.

Pharmaceutical API make up the second-largest share of around 20% of the specialty chemical market with an anticipated growth of over 11% by 2025F.

However, chemical producers are optimistic about the future as demand stays robust.

Most players have implemented price hikes to cushion their margins. Prices of most basic chemicals have reached record highs, which are unlikely to sustain.

Some correction is beginning to be seen in the prices of some of the chemicals, which augurs well for the industry. Caustic soda prices have started to decline and have come down to about USD 600/MT this month from over USD 800/MT in October. In October 2021, Soda Ash prices from China declined to just over USD 400/MT from USD 600/MT. Similar declines have also been seen in prices of other critical raw materials such as acetic acid, benzene, phenol, and vinyl acetate, among others. The supply chain situation is also beginning to improve gradually with better container availability, resulting in lower freight costs.

Furthermore, a concerted effort by western economies to diversify away from China sourcing is likely to help Indian speciality chemicals players, especially players such as DCW. With greater emphasis on capacity addition, process improvement and development, Indian companies are investing in capacity addition for backward integration and research & development to develop high-margin products and reduce dependence on imports.

These measures should put the Indian players in an advantageous position to give their Chinese counterparts stiff competition.

Indian Speciality Chemical Industry

As per the Frost & Sullivan Report, Indias speciality chemical companies are gaining favour with global MNCs because of the geopolitical shift after the outbreak of Covid-19 as the World looks to reduce its dependence on China. Currently, China accounts for —15-17% of the Worlds exportable speciality chemicals, while India accounts for merely 1-2%, indicating that the country has immense scope for improvement and widespread opportunity. It is anticipated that Specialty chemicals will be Indias next excellent export pillar.

The growth of the domestic market is in conjunction with the overall development of the Indian economy. The "Make in India" campaign is also expected to add impetus to the emergence of India as a manufacturing hub for the chemicals industry in the medium term. Through incentives, subsidies and grants under this campaign, Indian companies could gain further ground as companies would want to reduce dependence on China after the COVID-19 pandemic and shift their supply chains. With over 1.3 billion population, India is one of the Worlds largest markets. The fact that the Per capita consumption of chemicals in India is lower compared to western countries offers immense scope for new investments.

	Commodity Chemicals	Specialty Chemicals
2015-20	8.7%	10.4%
2020-25F	10.3%	11.2%

Source: Frost & Sullivan

While speciality chemicals constitute 18% of Indias total chemicals and petrochemicals market, the total market size is around $32 bn [FY2019]. The demand for speciality chemicals is expected to grow at 12% CAGR from FY19-22. This is expected to reach 5.5 percent by 2025.

Company Overview

Introduction

DCW Limited is a leading manufacturer of niche speciality chemicals in India. The Company offers a diverse range of products focusing on commodity, speciality, and intermediate products. The Company serves customers in both the domestic and international markets. Depending on the demand- supply scenario, the intermediate products are either used to produce value-added speciality chemicals in-house or sold in the open markets.

The range of products in the Companys portfolio includes:

• Commodity Chemicals - Soda Ash, Caustic Soda, Poly Vinyl Chloride (PVC)

• Intermediate Chemicals - Liquid Chlorine, Hydrochloric Acid, Trichloroethylene, Utox, and Sodium Bicarbonate, among others

• Speciality Chemicals - Synthetic Rutile (SR),

Synthetic Iron Oxide Pigments (SIOP) and Chlorinated Poly Vinyl Chloride (C-PVC)

The revenue mix between commodity and speciality chemicals for FY2022 stood at 87:13 (from 86:14 in FY2021 ). Further, the EBITDA mix between commodity and speciality chemicals for FY2022 stood at 72:28. Going forward, DCW plans to focus on the speciality segment and steadily build on its capability thereby focusing on the stability in the bottom line along with expansion in profit margin.

Manufacturing

DCW operates one plant at Dhragandhra, Gujarat and another multi-purpose, self-sufficient plant at Sahupuram, Tamil Nadu. The Company has made significant investments in state-of-the-art technology at its manufacturing facility at Sahupuram, which is spread over a 2,500-acre land, ensuring the highest level of safety, product quality, productivity, efficiency, and consistency in the end product. The plant can scale from small pilot runs with fast turnaround times and scale up to production volumes to match the commercial-scale required by clients.

The Sahupuram plant is located in close proximity to the Tuticorin port and provides the edge over its peers for exports to the international markets. The plant is also equipped with a captive power plant with an installed power generation capacity of 70 MW (12 MW oil-based CPP and 58 MW coal-based co-gen) to cater power consumption demand of the plant.

The Companys manufacturing facilities are also equipped with amenities that help recover, recycle, preserve, and reduce water consumption, giving great importance to our environmental initiatives. DCWs captive power plant (CPP) provides continuous and reliable power to the facility. The Companys coal-fired captive power plant has a total power generation capacity of 70 MW.

Commodity Chemicals Soda Ash

Soda Ash (sodium carbonate) is used to manufacture glass, pulp and paper, detergents, and chemicals such as sodium silicates and sodium phosphates. It is also used as an alkaline agent in many chemical industries. Also known as sodium carbonate, Soda Ash is a white crystalline solid belonging to the Chlor-alkali family. The Indian soda ash market is primarily driven by the increasing product demand from the soap and detergent industry. It is extensively used as an additive in various home detergents and cleaning products due to its ability to remove alcohol and grease stains from clothing. Apart from this, a considerable increase in glass production due to the rising demand from the construction and renovation industries is also providing a boost to the market. This trend can be attributed to sustained economic growth, expanding commercial real estate and the rising urban population.

According to Astute Analytica data, the global soda ash market was valued at ~US$13.9 Billion in 2020 and expected to grow to more than US$26 Billion by 2025, expanding at a CAGR of 13.9% in terms of revenue. In terms of volume, the market was valued at 58.4 Million tons in 2020, which is anticipated to cross 82.6 Million tons by the end of 2025. The Indian soda ash market is expected to exhibit a CAGR of 1.82% from 2022 to 2027. However, the outbreak of the COVID-19 virus has resulted in the reduced sale of soda ash, mainly owing to supply chain disruptions.

DCWs Soda Ash plant is situated at Dhragandhra, Gujarat, with an installed capacity of 108,000 MTPA as of 31^st March 2022. The plant is currently operating at 84% capacity utilisation. The Soda Ash business contributed 8.2% to the total revenue during FY2022.

Caustic Soda

Caustic soda is used in several applications, such as aluminas manufacturing process, soap & detergents, pulp & paper, petroleum products, and chemical production. Its increasing use in these applications is expected to fuel the growth of the global caustic soda market. However, the high corrosive and reactive nature of caustic soda restrains the growth of the worldwide market.

According to Fortune Business Insights, the global caustic soda market was US$44.9 Billion in 2019 and is projected to reach US$ 55.6 Billion by 2027, exhibiting a CAGR of 3.1% during the forecast period.

DCWs Caustic Soda plant is situated at Sahupuram, Tamil Nadu, with an installed capacity of 96 Thousand MTPA as of 31^st March 2022. The plant is currently operating at 75% capacity utilisation. Caustic Soda business contributed 27% to the total revenue during FY2022.

Poly Vinyl Chloride (PVC)

Polyvinyl chloride (PVC) is a high-strength thermoplastic material widely used in various applications, such as pipes and fittings, films and sheets, wires and cables, bottles, profiles, hoses, and tubing. PVC is the third most widely used plastic globally after Polyethylene and Polypropylene.

According to Polaris Market Research, the global polyvinyl chloride (PVC) market size was estimated to be US$ 62.6 billion in 2018 and is expected to grow at a CAGR of 7.2% during the forecast period.

DCWs PVC plant is situated at Sahupuram, Tamil Nadu, with an installed capacity of 90 Thousand MTPA as of 31^st March 2022. The plant is currently operating at 105% capacity utilisation. PVC business contributed 51% to the total revenue during FY2022.

According to Grand View Research, the global iron oxide pigments market size was valued at US$ 2.2 billion in 2020 and is expected to expand at a CAGR of 4.7% from 2021 to 2028.

Speciality Chemicals

Synthetic Iron Oxide Pigments (SIOP)

Iron oxide pigments provide colours to varieties of end-user applications and are employed in numerous industries around the globe to provide permanent and stable colouring effects to the substrates. Iron oxide pigments can be subdivided into synthetic and natural iron oxide pigments. Synthetic iron oxide pigments are more cost-effective than organic pigments due to the low cost of raw material.

Synthetic iron oxide pigments have good dispersibility, high tinting strength, UV stability, excellent colour intensity and non-toxic properties.

According to Grand View Research, the global iron oxide pigments market size was valued at US$ 2.2 billion in 2020 and is expected to expand at a CAGR of 4.7% from 2021 to 2028. The rapidly growing construction activities, recovering economy in developed countries, and expanding infrastructure programs in combination with increasing urbanisation in developing economies, are the prime factors responsible for the growing consumption of iron oxide pigments around the globe. Moreover, the increasing utilisation of iron oxide pigments in the coating industry, owing to their excellent dispersibility and high strength, making them suitable for use in different types of paints and coatings under extreme atmospheric and weather conditions, is expected to propel the market growth. Iron oxide pigments are widely used in plastic products, including auto parts, fenders, soda bottles, food packaging, toys, and vinyl sidings. Iron oxide pigments are used as colourants in the products mentioned above.

DCW is one of the few large-scale synthetic iron oxide manufacturers for red and yellow pigments. The Companys SIOP plant is situated at Sahupuram, Tamil Nadu, with an installed capacity of 27 Thousand MTPA and 50 Thousand MTPA Calcium Chloride as of 31^st March 2022. The plant is currently operating at 54% capacity utilisation. SIOP business contributed4.4% to the total revenue during FY2022.

Chlorinated Poly Vinyl Chloride (C-PVC)

Chlorinated polyvinyl chloride is a thermoplastic produced by the chlorination of polyvinyl chloride resin, which is significantly more flexible and can withstand higher temperatures than standard PVC. CPVC is used in various industries, including construction, chemical, electrical & electronics, healthcare and material handling equipment. It also can be incorporated into a variety of products by controlling the percentage of chlorine during the production process.

According to BCC Research, the global market for chlorinated polyvinyl chloride is expected to increase from $2.1 billion in 2018 to $3.4 billion in 2023 at a CAGR of 10.3% for 2018-2023. The rising construction industry in India and China, along with growing applications of CPVC in the chemical industry, will drive product demand in the coming years.

DCW is the only domestic manufacturer of C-PVC, a versatile thermoplastic used mainly for manufacturing hot and cold-water pipes, industrial liquid handling, and a wide range of products serving a variety of applications. The Company C-PVC plant is situated at Sahupuram, Tamil Nadu, with an installed capacity of 10,800 MTPA as of 31^st March 2022. The plant is currently operating at 106% capacity utilisation. C-PVC business contributed 8.8% to the total revenue during FY2022.

Outlook

Although the global economy is growing again after a 3.3% contraction in 2020, the pandemic has caused a heavy toll, depressing economic activity and incomes for a prolonged period. Top near-term policy priorities are controlling the spread of COVID-19 and ensuring rapid and widespread vaccine deployment. To support economic recovery, the Government of India also needs to facilitate a re-investment cycle aimed at sustainable growth that is less dependent on government debt. The near-term outlook is optimistically uncertain. With successful pandemic control and a faster vaccination process, Indias growth could accelerate beyond 7%. Policymakers will need to continue to sustain the recovery, gradually shifting from income support to growth-enhancing policies.

In the longer run, policies to improve health and education services, digital infrastructure, climate resilience, and business and governance practices will help India mitigate the economic damage caused by the pandemic, reduce poverty and advance shared prosperity.

Several sectors have witnessed commendable growth during the pandemic and have successfully weathered the storm over this duration. Sectors such as ITeS, E-Commerce, pharmaceuticals, chemicals, diagnostics, consumer goods and durables, agrochemicals and fertilisers have benefited owing to the pandemic.

Given the series of steps taken by governments and industries across the globe, the medium and longterm global economy is expected to remain robust. The USs GDP is expected to rise sharply to ~5.1% by 2021 and gradually display a stable growth of ~3% over the next few years. Europe is likely to see a V-shaped recovery with the liquidity normalising and a substantial increase in loans to corporations, driving a solid credit impulse. In the Asia Pacific, China is expected to rebound to 3.1% in 2021 and ~5% by 2022, driven by its robust domestic demand growth.

In contrast, India is expected to experience the fastest recovery among major countries, with a massive turnaround from 2020s decline of ~10%. The countrys GST collection is growing gradually, showing that economic recovery is in sight. India is strengthening the entire ecosystem to achieve Prime Minister Narendra Modis dream of becoming a USD 5 trillion economy by 2025 through rapid structural reforms.

Given the improving global and Indian economic scenarios, the DCWs strengthening balance sheet and favourable demand conditions for its entire portfolio of products - the management is cautiously optimistic about the Companys medium to long-term future prospects.

Financial Review

Revenue from operation achieved during FY2022 was 24,547 Mn, as against 14,643 Mn in the previous year, registering 67.6% year-on-year growth. Commodity chemical revenue for FY2022 stood at 21,319 Million, up 70% on a YoY basis. Specialty chemical revenue stood at 3,228 Million, up 55% on a YoY basis. Profit before tax was recorded at 1,432.5 million as against 137 million during the previous year. Profit after tax for the year stood at 1,075 million as against 38 million in the previous year. For FY2022, EBITDA grew by 49.9% YoY to 3,309 Mn, compared to 2,207 Mn in FY2021. PVC and CPVC dominated the higher share in overall EBITDA. EBITDA margin for FY2022 stood at 13.5 %, soften by 160 bps on a YoY basis. Various cost control measures coupled with better market dynamics led to higher growth in EBITDA.

For FY2022, EBITDA grew by 49.9% YoY to 3,309 Mn, compared to 2,207 Mn in FY2021.

The major items of the financial statement on a consolidated basis are:

(in Million)

Particulars	FY2022	FY2021
Revenue from Operations	24,547.4	14,642.6
COGS	20,825.5	12,220.4
Gross Profit	3,721.9	2,422.2
Gross Margin %	15.2%	16.5%
Other Expenses	473.5	328.3
Other Income	61.0	113.3
EBITDA	3,309.4	2,207.2
EBITDA Margin %	13.5%	15.1%
Depreciation	885.3	873.7
Financial Cost	1,130.7	1,196.7
Profit Before Tax before exceptional item	1293.4	136.8
Exceptional item	139.1	-
Profit Before Tax (PBT)	1,432.5	136.8
Tax	357.4	98.8
Profit After Tax (PAT)	1,075.1	38.0
PAT Margin %	4.4%	0.3%
Earnings Per Share (in ) - Basic	4.12	0.15

Segment-wise Revenue:

(in Million)

Business Segment	FY2022	FY2021	% Change
Soda Ash	2,024	1,787	13.3%
Caustic Soda	6,702	3,557	88.4%
PVC	12,434	7,082	75.6%
SIOP	1,075	598	79.9%
C-PVC	2,153	1,486	44.9%

Details of changes in Key Financial Ratios and Return on Net Worth

The details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, as may be applicable and details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof are mentioned in the Notes to Accounts, which forms part of the Annual Report.

Risks and Concerns

Risk	Definition	Mitigation
Regulatory Risk	Our operations in multiple global markets expose us to risks of changes in regulations.	We are aware and fully compliant with the Safety, Health, and Environment (SH&E) norms. We duly follow multiple waste reduction and recycling norms. We are fully compliant with all the pollution and emission norms.
Raw Material Risk	The unavailability of raw materials and fluctuation in raw material prices is a major threat to our business.	We have long term contracts with our suppliers to ensure an uninterrupted supply of raw materials at competitive prices. We have also invested heavily in backward integration to reduce external dependency on raw materials.
Forex Risk	We deal with multiple currencies and therefore face the risk of unfavourable movement in any currency leading to financial losses.	The majority of our export revenue and imports are linked to US $ , reducing the risk of multiple currency exposures.
		The company is a net importer in dollar terms and the risk of currency fluctuation is naturally mitigated by domestic sales of products under imports substitution.
		Further, we also keep on watch on currency markets and enter the currency hedge contracts for multiple maturities whenever required.
Innovation Risk	Our growth and profitability is a derivative of our ability to innovate and improvise in our specialty chemical business.	We are an R&D driven organisation. We have a team of technically competent persons in chemical industry. We have 2 patents and 1 trademark in our name.
Customer Retention Risk	We may not be able to retain our clients due to the rising complexity in demand.	DCW has a long-term contract with its clients to supply a diversified set of clients. Our strong focus on R&D, innovation, and value for money provide a strong and valid value proposition to our clients, keeping them interested in our products.
Quality Risk	Any divergence in the quality standards may lead to loss of customers, revenue, and reputation	The quality of the products is monitored rigorously by the dedicated quality control team. DCW holds ISO certifications like ISO 9001, 14001,24000

Information Technology

Your Company understands that an adequately equipped IT infrastructure, both technologically and quantitatively, is the foundation for stable IT systems and best IT support. It has the best-in-class IT systems and the entire IT backbone to manage administration and delivery of its services. The Companys IT system facilitates DCW Limited in setting up various business intelligence reports for production management, electronic procurement, paperless transaction processing, budgeting, forecasting and cash flow modelling. The Company has adopted global standards in information automation, performance metrics, work from home capabilities and management excellence. The technical staff is responsible not only for programming the systems, but also supporting the users in technical development.

Human Resource Management

The domain knowledge and experience of the Companys Promoters and management team propels the Company with a significant competitive advantage as it continues to expand in existing markets and enter new geographies. DCW limited continues to invest in its Human Capital.

The Company on-boards qualified professional management and key personnel, which empowers DCW Limited to run independently.

DCW continues to promote meritocracy, integrity, and governance in matters of legality and compliance. To encourage employees to raise complaints without the fear of retribution or discrimination, the Company has rolled out many governance policies. The Companys Code of Conduct comprises relevant statutes about to the prevention of sexual harassment and a whistleblower policy to escalate and redress issues with speed.

Health & Safety

Sustainability is a core of all the activities at DCW limited. On the safety risk management front, the Company targets the "Zero Harm" policy regarding the human capital and plant assets. We have demonstrated a long, meticulous safety record with zero human capital loss for the last decade. Going forward, the Company will continue to focus on behavioural safety and related training programs along with a review of Process Safety Risk Management implementation to ensure continued safety performance. On the sustainability front, the Company is targeting to go beyond the minimum compliance requirements and set the best example regarding human capital development, solid and liquid wastage, and engagement with the local community.

Internal Controls

DCW has instituted adequate internal control systems commensurate with the nature of its business and size of operations. These systems ascertain that transactions are authorised, recorded and reported correctly. The Company ensures adherence with all internal control policies and procedures as well as compliance with all regulatory guidelines in respect of the business, risk, branches and support functions. The Audit Committee of the Board of Directors reviews the adequacy of these systems. All significant audit observations of the Internal Auditors and follow-up actions were duly reported upon and discussed at the Audit Committee. During the year under review, the Internal Control Framework was evaluated on the design and effectiveness of controls by an Independent Risk Advisory Consultant and was found to be in accordance with the Internal Financial controls requirement of Companies Act, 2013.

Cautionary Statement

Statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be "forwardlooking statements" within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand-supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the government regulations, tax laws and other statutes and other incidental factors.