deepak nitrite ltd Management discussions

GLOBAL ECONOMIC SCENARIO

During FY 2022-23, the global economy was posed with formidable challenges, impeding its progress towards the 2030 Sustainable Development Goals (SDGs). The overhang of subsequent waves of COVID-19 remained a threat, while the war in Ukraine led to sanctions that disrupted global supply chains causing shortages for a variety of inputs and consumer products and driving a ripple eect throughout the globe. The resultant surge in inflation impacted businesses as well as consumer spending as a rise in food and energy prices significantly upended spending patterns. Central Banks responded to these inflationary pressures by raising interest rates which caused forex rate volatility, heightened balance of payment pressures and exacerbated sovereign debt sustainability risks in developing countries. Towards the end of the fiscal year, second order eects were witnessed in the global banking and technology sectors where bank failures and headcount reductions fanned fears of severe recessionary conditions. These shocks are expected to continue and have an impact on the world economy in FY 2023-24.

The current economic scenario has led to a decline in consumer confidence and investor sentiment, as rising interest rates and dwindling purchasing power weigh on the global economy. This has resulted in some compression in the global trade, with lower demand being witnessed for consumer goods and persistent supply chain challenges compounded by the prolonged war in Ukraine. As a result, the global growth rate is projected to reach its lowest point at 2.8% in 2023, followed by a modest increase to 3.0% in 2024. Global inflation is expected to decline, albeit at a slower pace than previously predicted, from 8.7% in 2022 to 7.0% in 2023 and further to 4.9% in 2024.

The world economys return to pre-2020 levels of economic growth seems increasingly diicult. Despite more than a year passing since Russias invasion of Ukraine and fading of pandemic concerns through less severe COVID-19 variants, many economies are still grappling with the aermath of events of the last 3 years. The continuous tightening of global financial market is further impeding the recovery process. Consequently, numerous economies are anticipated to face slower income growth in FY 2023-24, along with rising unemployment. Additionally, despite central banks eorts to combat inflation by raising interest rates, achieving price stability could be a lengthy endeavour. In the medium term, the outlook for growth appears less promising than in the previous years.

Asia: Emerging through global challenges

Asia and the Pacifics economic headwinds of the previous year are fading as global financial conditions improve, food and oil prices drop. These developments are fostering the regions prospects, with growth predicted to increase from 3.8% in 2022 to 4.6% in 2023 and 4.4% in 2024, making it the worlds most dynamic major region and a bright spot in the slowing global economy.

The dynamism is driven by the regions emerging and developing economies, which are set to expand by 5.3% this year, as supply-chain disruptions fade and the service sector thrives. China and India are expected to contribute to more than half of the global growth, with the rest of Asia contributing an additional quarter.

Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam are all back to their robust pre-pandemic growth levels. These economies are showing their true potential as the pandemic induced supply-chain disruptions fade and the service sector booms. Their economic growth is set to continue, driven by the regions dynamism, making Asia and the Pacific a region to watch for investors and businesses looking for growth opportunities.

The escalation of Asias inflation, which surpassed central bank objectives last year, has started decelerating. Although core inflation is yet to ease significantly, there are positive indications as the headline inflation reached its peak in the second half of last year. It is widely anticipated that inflation is set to return to central bank targets during the course of next year, as financial and commodity challenges ease.

The rise in inflation beyond the targeted levels has led to a hike in interest rates by central banks. As a result, Asian currencies have been recovering, reversing approximately half of last years losses, thereby reducing the strain on domestic prices.

This development has relieved some pressure on businesses and consumers, but it is worth noting that the economic outlook remains uncertain due to various geopolitical and environmental risks that may impact the regions inflation rate.

Global GDP Growth

Particulars	Actual	Projections
	2022	2023	2024
World Output	3.4	2.8	3.0
Advanced Economies	2.7	1.3	1.4
United States	2.1	1.6	1.1
Eurozone	3.5	0.8	1.4
Japan	1.8	1.8	1.8
United Kingdom	4.0	-0.3	1.0
Other Advanced Economies	2.6	1.8	2.2
Emerging Market and	4.0	3.9	4.2
Developing Economies
China	3.0	5.2	4.5
India	6.8	5.9	6.3

INDIAN ECONOMIC SCENARIO

The International Monetary Fund (IMF) has projected growth in India to increase from 5.9% in Calendar Year 2023 to 6.3% in Calendar Year 2024. India is expected to maintain its position as the fastest growing large economy in the world.

The IMF also projects Indias inflation to slow to 4.9% in the current year and further to 4.4% next fiscal year. Despite these challenges, private consumption in the first half of the fiscal year has been the highest since FY15, leading to a boost in production activity and enhanced capacity utilisation across sectors. The expansion of public digital platforms and measures to boost manufacturing output are expected to contribute to economic growth in India.

The Budget 2023 is characterised as growth-oriented, progressive and prudent, with a specific focus on stability and sustainable development. The Budget introduces various policy measures aimed at generating demand for a variety of chemicals, including construction chemicals, emission control catalysts, thermoplastic polyurethane materials TPUs, bio-pesticides and more. Additionally, changes in the Basic Customs Duty (BCD) rates for goods such as crude glycerin, denatured ethyl alcohol, acid grade fluorspar and specified chemicals for the manufacture of pre-calcined Ferrite Powder are expected to provide impetus to increase domestic manufacturing of these products, aligning with the Make in India initiative.

The total expenditure in the Budget Estimate (BE) for FY 2023-24 is estimated to be 45,03,097 Crores ( 45.03 Lakh Crores), with the total capital expenditure amounting to 10,00,961 Crores ( 10 Lakh Crores). This reflects the Union Governments continued strong commitment to boosting economic growth through investments in infrastructure development, leading to a significant increase of 37.4% in capital expenditure compared to the Revised Estimate (RE) for FY 2022-23. The Budget 2023 emphasises on the Governments focus of promoting economic growth and development through strategic investments and policy measures in the chemical sector and other key areas, while maintaining prudence and stability in fiscal management.

With a strong rebound from the challenges of the pandemic-induced contraction, the Russian-Ukraine conflict and inflation, the Indian economy is showcasing a robust recovery across diverse sectors, positioning itself for a return to the pre-pandemic growth levels in FY 2022-23. According to a report by Deutsche Bank, India is expected to emerge as a USD 7 trillion economy by 2030, fuelled by the triple engines of rapid financialisation, clean energy transition and the digital revolution. This ambitious projection signifies Indias potential to double its economy in just seven years from its current GDP of USD 3.5 trillion, driven by factors such as demographic dividend and domestic consumption that have been historically instrumental in driving Indias economic growth. Notably, Indias remarkable average growth rate of 7.5% per annum over the past two decades, second only to Chinas 9.6% growth, further reinforces its promising growth trajectory.

Sources:

(Ref – https://timesofindia.indiatimes.com/business/india-business/ world-bank-forecasts-indias-fy23-gdp-at-6-9-warns-of-global-recession/ articleshow/96890423.cms )

(Ref – https://www.adb.org/sites/default/files/publication/863591/asian- development-outlook-april-2023.pdf )

(Ref - https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world- economic-outlook-april-2023 )

(Ref – https://www.imf.org/en/Blogs/Articles/2023/02/20/asias-easing- economic-headwinds-make-way-for-stronger-recovery )

(Ref – https://www.worldbank.org/en/news/press-release/2023/04/04/ indian-economy-continues-to-show-resilience-amid-global-uncertainties )

(Ref – https://www.thehindu.com/business/Economy/india-set-to-grow- by-59-this-fiscal-imf/article66725696.ece

(Ref – https://www.livemint.com/economy/indian-economy-continues- to-perform-well-remains-one-of-the-fastest-growing-in-world- imf-11681227050100.html )

(Ref – https://www.businessinsider.in/finance/news/india-to-double-its- economy-to-7-trillion-by-2030/articleshow/99381185.cms )

(Ref – https://www.hindustantimes.com/india-news/imf-chief-praises- india-s-economy-says-bright-spot-101681262524530.html )

(Ref - https://www.hindustantimes.com/india-news/india-china- to-account-for-half-of-global-economic-growth-in-2023-imf- chief-101680805924881.html )

(Ref - https://www.ibef.org/economy/economic-survey-2022-23)

(Ref - https://www.ey.com/enin/alerts-hub/2023/02/budget-2023- chemical-sector )

INDUSTRY OUTLOOK AND TRENDS

Prior to the Russia-Ukraine conflict, the global chemicals market was projected to record a higher CAGR of 6.2% and an estimated value of USD 6.8 tn between 2020-2025, compared to 3.6% CAGR and USD 5.0 tn reported between 2015-2020. The conflict has disrupted supply chains for many chemical companies, particularly those that rely on imports or exports from Russia or Ukraine. This has led to shortages of certain chemicals and raw materials, as well as increased prices. Further, there is increased political and economic uncertainty, resulting delays or cancellation of investments. Due to the imposition of sanctions, Companies have had to shi production into alternate regions. Due to these challenges, as per the most recent projections, the global speciality chemicals market is expected to clock a CAGR of 5.2% over 2020-25E. The global chemicals industry has been fairly resilient to the upheavals across the global economy. The following mega-trends are likely to play a huge part in shaping the progress in the years ahead:

• Sustainable and Green Chemistry: The chemical industry is under increasing pressure to adopt sustainable and environmental friendly practices. Many companies are investing in green chemistry, which involves using renewable resources, reducing waste and emissions and creating safer products.

• Digitalisation: The chemical industry is also embracing digitalisation, which involves using advanced technologies such as artificial intelligence, machine learning and the Internet of Things (IoT) to optimise processes, increase eiciency and reduce costs.

• Consolidation and Mergers: The chemical industry has been undergoing consolidation and mergers, with companies seeking to achieve economies of scale, diversify their product portfolios and expand their geographic reach.

• Shi in Demand: There is a shi in demand for chemicals from developed countries to emerging markets, particularly in Asia, where there is a growing middle class and increasing demand for consumer goods.

• Increased Regulations: The chemical industry is facing increasing regulations around the world, particularly in areas such as environmental protection, worker safety and product quality. Companies are working to comply with these regulations while maintaining profitability.

DOMESTIC CHEMICAL INDUSTRY

In the last decade, Indias chemical industry has excelled in capitalising on demand growth and generating wealth for the shareholders on a global scale. Riding on this success, the industry is positioned to further expand its presence in both consumption and manufacturing worldwide. As many countries shi their attention to domestic self-suiciency and localised supply chains, Indias manufacturing competitiveness is proving to be strong compared to other major global chemical clusters. This positions India as a potential hub for chemical manufacturing in the near future.

Over the next two decades, India is projected to contribute over 20% to the incremental global consumption of chemicals. The domestic consumption and demand for chemicals are anticipated to increase from USD 170-180 billion in 2021 to USD 850-1,000 billion by 2040 (Source: McKinsey Report).

India is poised to become the fastest-growing global demand centre for chemicals, with domestic consumption projected to grow at a CAGR of 10% going ahead. This growth is driven by factors such as rising disposable incomes, a favourable demographic dividend, the global preference for environmentally friendly alternatives and the expanding diversification of global chemical supply chains.

The chemical sector in India is expected to experience significant growth driven by robust demand from various industries, both domestically and through exports. The speciality chemicals industry, in particular, is witnessing strong growth fuelled by increasing domestic consumption. To meet the rising demand, manufacturers are expanding their production capacity. Additionally, anti-pollution measures in China are creating opportunities for the Indian chemical industry in specific segments. The fast-paced growth of the Indian chemical industry is inevitable and it is transitioning towards speciality materials to cater to evolving user industry needs. The speciality chemicals sector is playing a crucial role in shaping Indias economic landscape and it is poised to benefit from future demands from local industry as India ramps up the share of manufacturing in economic growth.

FOCUS ON REDUCING CHEMICAL IMPORTS

Indias chemical market has traditionally relied on imports, but over the past decade, domestic manufacturers have made giant strides in new technologies, capabilities and processes. Additionally, the emphasis on backward integration and ‘Make in India initiative is likely to reduce Indias dependence on imports.

The Government aims to boost domestic production of chemicals, transforming India into a manufacturing hub by reducing imports. Indias appeal as a manufacturing destination has grown due to competitive labour costs, cost-eicient manufacturing units and recent changes in corporate tax rates. Indian speciality chemical players have developed unique capabilities and established global supply relationships, despite industry-specific challenges like inadequate infrastructure, high costs of raw materials, expensive capital and the need for facility modernisation. The government has introduced initiatives like Aatmanirbhar Bharat and Make in India to stabilise the industry. However, a major hurdle is shrinking profit margins due to rising raw material costs and higher operating expenses, especially during the COVID pandemic. It is crucial to prioritise the domestic production of essential chemical compounds in India. Chemical companies in India could benefit in the long term from rising domestic demand in various sectors like agriculture, consumer goods, infrastructure, automotive, electronics and healthcare, driving around 50% of incremental growth in the chemical industry as the economy expands. These factors are expected to generate lucrative opportunities in dierent chemical sub-segments. With policy support from the Central Government and subsequent spends by Indian chemicals majors across R&D, backward integration and technological initiatives, India is gradually reducing its import dependence, while a strong emphasis on exports is providing a much-needed fillip to narrow the trade gap.

STRUCTURAL GROWTH DRIVERS FOR INDIA

Shi in customers preferences – There is a noticeable change in customer preferences as they are now showing a greater inclination towards environmentally sustainable and socially responsible products and services. Additionally, customers are placing greater importance on health and hygiene and are insisting on greener and safer alternatives.

Increasing per capita consumption – The current per capita consumption of chemical products in India is about one-tenth of the global average and is expected to double by 2025.

Digitalisation and Industry 4.0 – Chemical companies are leveraging digitalisation to gain a competitive edge by enhancing their plant eiciency, integrating their processes and utilising innovative digital business tools. As part of this trend, they are implementing digitalisation initiatives and tools in their supply chains, demand forecast and pricing strategies.

Growing M&A and investment-related activity – The strong surge in M&A and investment activities is being propelled by several factors, including downstream value-added opportunities, robust demand for speciality chemicals and the need to realign portfolios. Major players in the global oil & gas and chemical industries are keen on exploring downstream prospects in emerging economies like India. This trend has already taken shape, with industry leaders like Saudi Aramco, Total and BASF expressing their interest in Indias thriving chemical sector.

Structural shi from China – Chinas chemical industry has experienced significant structural changes due to industry consolidation, environmental reforms and stricter financing regulations. This has resulted in uncertainty for global companies relying on China for their raw material supply chain. The COVID-19 pandemic has further prompted these companies to seek alternative locations, such as India, that provide stability and benefits in terms of low-cost labour and favourable investment policies.

Innovation and sustainability – The chemical industry is adopting a management principle that aims to add value by striking a balance between the economic and socio economic system that is panning out post impact of the pandemic and ongoing Ukraine war. In pursuit of sustainability and green chemistry, chemical companies are continuously innovating their products, technologies and processes and collaborating closely with customers and suppliers throughout the value chain.

Favourable Government Policy – In addition to ‘Make In India and ‘Atmanirbhar Bharat, the Govt. has implemented host of reforms and policy initiatives to support chemical manufacturing in India. The focus is to increase the share of the chemical sector to ~25% of the GDP in the manufacturing sector by 2025. In order to achieve this ambitious target, the Government in the Union Budget 2022-23 allocated 209 Crores (US$ 27.43 million) to the Department of Chemicals and Petrochemicals.

INDUSTRY OUTLOOK

The Indian chemical industry has favourable underlying prospects due to supply chain disruptions and anti-pollution measures undertaken in China. This, in addition to trade conflicts between the US, Europe and China presents ample opportunities for the Indian chemical industry across specific chemical value-chains.

Improved infrastructure through PCPIRs or SEZs, will further enhance competitiveness and development of the industry. Under the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy, dedicated integrated manufacturing hubs aim to attract an investment of 20 lakh Crores (US$ 276.46 billion) by 2035. To bring about structural changes in the domestic chemical industry, future investments should focus not only on transporting fuels like petrol and diesel but also on setting up crude-to-chemicals complexes or refineries that cater to chemical production.

The Government has promoted various policy initiatives such as mandating BIS-like certification for imported chemicals to prevent the dumping of cheap and substandard chemicals into the country. The Indian Government recognises the chemical industry as a key growth element and forecasts to increase the share of the chemical sector to ~25% of the GDP in the manufacturing sector by 2025. PLI schemes have been introduced to promote Bulk Drug Parks, with a budget of 1,629 Crores (US$ 213.81 million). The Government of India is also considering launching a production-linked incentive (PLI) scheme for the chemical sector to boost domestic manufacturing and exports.

Indias 2034 vision for the chemicals and petrochemicals sector has been set up by the Government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector. The Government plans to implement a production-link incentive system with 10-20% output incentives for the agrochemical sector; to create an end-to-end manufacturing ecosystem through the growth of clusters (Source: IBEF).

Sources: https://www.ibef.org/industry/chemical-industry-india.aspx McKinsey Report – March 2023 Centrum Institution Research Report – Nov 2022 Haitong Report – Jan 2023

PERFORMANCE OF YOUR COMPANY

Deepak Nitrite Limited (‘DNL) has demonstrated remarkable agility in capitalising on the pockets of opportunities available during the year. The sustained focus on driving operational eiciencies has ensured that the plants operate at consistently high utilisation levels. During the period under review, the Company set new production and sales benchmarks for several leading products steered by encouraging demand scenario. Despite volatility due to macroeconomic developments, DNL delivered a strong performance during the year with healthy revenue growth witnessed for key products, especially Phenolics. As a result, consolidated revenues were higher by 17% on a year-on-year basis in FY 2022-23.

During the year, the Company merged the strategic business units of Basic Chemicals, Fine & speciality Chemicals and Performance Products into a single unit called ‘Advanced Intermediates. This will not only allow DNL to evaluate the performance of the entire Group as two business segments, i.e., Advanced Intermediates and Phenolics, but also allocate the desired time and resources based on the value generated from these segments. As a process, the business segments are interconnected given the high integration levels that the Company has achieved, thereby higher margins in one segment may result in lower margins in another. Therefore, it is necessary to view the performance of the Company in a holistic manner to enable a fair assessment. This year, the Company has focussed on customer relationship enhancement and wallet share gains. Nonetheless, the Company has been able to either maintain or gain market share in almost all products by proactively assessing the market situation and ensuring adequate supplies, reinforcing its position as a dependable partner and has increased its wallet share in almost all products.

Operationally, the global landscape has been characterised by significant fluctuations in crude oil prices, plant shutdowns in Europe and China, rapid change in input prices, volatility in forex rates and logistical challenges. DNL has utilised its rich experience in manufacturing and has carefully countered the unforeseen challenges around logistics and supply chain management to ensure that it adheres to the supply commitments. As a result, the availability of critical intermediates has remained consistent even under the volatile operating conditions. In addition, the Company has remained nimble and responsive to the opportunities available due to change in the operating environment, leveraging them to further enhance operations.

One of the key strengths of DNL as a leading chemical intermediates Company is the wide range of products it oers. The diverse portfolio of chemical intermediates caters to various end-user industries, such as dyes and pigments, agrochemicals, pharmaceuticals, plastics, textiles, paper, home & personal care, laminates, ply, adhesive, paints, auto etc. The Companys manufacturing facilities are strategically located in Gujarat, Maharashtra and Hyderabad (Telangana), with its R&D facility located in Nandesari (Gujarat). All the products are certified by Responsible Care. Moreover, DNLs Dahej facility received an unprecedented score of 100 upon 100 in Together for Sustainability Audit.

The Company supplies its products across user segments in most continents such as Europe, North & South American countries, Asia and Africa. DNL exports to approximately 45+ nations worldwide and is known for its cost leadership across major products. It aims to grow its footprint in high-value intermediates and has initiated several growth plans to achieve this goal.

In FY 2022-23, the Company surpassed the 8,000 Crores mark of revenue, that stood at 8,020 Crores, which represents an increase of 17% compared to the previous year. By eiciently operating its plants, eectively sourcing raw materials and actively managing the logistical challenges, the Company has sustained high volumes for its products. However, profitability has not grown in line with topline growth due to a combination of factors including high inflationary pressures, particularly in commodities and pet-chem input and interruption of business due to fire at Nandesari plant. As a result, the Company reported an EBITDA of 1,337 Crores, lower than the EBITDA of 1,646 Crores achieved in the prior fiscal year. The EBITDA margin declined by 738 basis points (bps) year-on-year, reaching 16.67%. PBT for the year amounted to 1,146 Crores, reflecting a decline of 20% over the previous year, while PAT stood at 852 Crores, 20% lower than was reported in the previous fiscal year. Your Company proactively pursued opportunities in all product categories, with keen focus on ethics and transparent business practices further deepening the ‘Depend on Deepak initiative.

In terms of revenue contribution, the domestic market accounted for 80%, while exports accounted for 20%. Domestic revenues grew by 22%, while steady demand in key export geographies resulted in a 2% increase in export revenues. The Company was able to maximise the utilisation of its facilities and compete in both domestic and export markets, leading to improved profitability. DNL is methodically investing in expansion projects to diversify its expertise and widen the addressable market, with an objective of expanding the product portfolio where it has a clear competitive advantage. This will diversify the Companys oerings and strengthen its operational integration.

Overall, the demand outlook seems to be resilient, with most industries returning to normal production levels. There is an additional demand emerging from strategic shi in the global supply chain from China to other countries, particularly India.

Your Company enters into FY 2023-24 with a de-risked business model, a robust balance sheet and a pipeline of projects lined up for commissioning. This provides an attractive growth outlook and the Company will endeavour to sustain the performance momentum.

Post the incident of fire, the Company has obtained help of several eminent external experts to strengthen the system further, across all its units to ensure such incidents dont recur and towards this , the Company has already incurred a sizeable investment and have duly completed all the safety audits & checks.

1. Advanced Intermediates

Your Company delivered steady revenue growth on the back of sustained demand from key customers and end user industries. This performance was achieved despite non-availability of Nandesari plant for a period of about 40 days due to fire. Further, the aer-eects of pandemic and the global sanctions imposed on Russia led to rise in crude oil and related petrochemical-based intermediates. Combined with fluctuations in foreign currency rates and sharp shis in spot prices of commodities, there were myriad operational challenges.

The Company has actively pursued opportunities both domestically and internationally, demonstrating a commitment to fulfilling delivery obligations and catering to ongoing demand landscape despite external headwinds. Its competitive position and assured supply of key inputs suggest that it will maintain its strong performance momentum. While revenue growth has been strong, growth in EBITDA has been impacted by the sharp increase in input costs compared to the corresponding period last year. The Company has taken proactive measures to address this issue by creating in-house capacity for key inputs, development of relationship with alternate vendors, benchmark based pricing and creating storage facilities. The Advanced Intermediates segment has successfully expanded its international customer base and is expected to continue the performance momentum based on positive demand trajectory and shi of global supply chains to India. The Companys future performance will be driven by new multiyear contracts with pass-through clauses, strong demand and its ability to negate cost increases to customers.

In FY 2022-23, revenue increased by 21% to 3,034 Crores versus 2,511 Crores in FY 2021-22. The growth is owing to contribution from established products and ability to cater to the healthy demand and increase in market/wallet share. EBITDA was lower by 7% to 631 Crores during the period under review for reasons enumerated above. EBIT came in at 555 Crores, translating into a margin of 18% demonstrating a resilient performance despite the current operating environment faced with several challenges.

With the Nandesari plant fully restored and other plants running at high utilisation levels, the Company is well poised to deliver profitable growth moving ahead. Captive power supply and assured supply of critical raw materials further de-risks the operations. With multiple brownfield and greenfield projects set for commissioning in the coming quarters, the performance trajectory is set to elevate, further embellishing its value creation journey. However, presently market conditions are very volatile due to various factors like revocation of zero covid policy in China and elevated interest rate resulting in compressed demand.

2. Phenolics

Deepak Phenolics Limited (‘DPL), is a wholly owned material subsidiary of your Company. DPL is engaged in the business of manufacture of Phenol, Acetone and Iso Propyl Alcohol (‘IPA).

Phenol is a versatile industrial organic chemical and is used for manufacture of various chemical intermediates. Phenol is consumed in a broad spectrum of end-user segments, including ply, laminates, foundry, paints, rubber, surfactants, pharmaceuticals and agro-chemicals. Acetone and IPA are mainly used in pharmaceutical end use and also in paints, adhesives and thinners amongst many others.

DPL entered the FY 2022-23 amidst a robust business environment as global recovery took root aer the COVID- related concerns and restrictions were slowly withdrawn globally, including in India. At the same time, events in Europe and Ukraine caused a major spike in energy prices, including for household use, which resulted in a marked shi in consumer spends towards basic essentials like food and energy. An unusual pull from transport fuels caused Benzene prices to spike to unprecedented levels in the middle of the year. However, the market witnessed a steady decline thereaer as global consumption declined, new capacities of Phenol came on-stream in China and downstream BisPhenol-A and Polycarbonates lost their lustre. A continuous bear phase in Phenol caused chain margins to shed nearly 25% from the previous year.

DPL stabilised its operations of second Boiler as well as the captive power plant in the initial months of the year and consequently, improved the operational reliability significantly. DPL could avoid at least ten to twelve power disturbances related plant stoppages thanks to operating the power plant on an islanded mode. Despite the challenges and while the Asian producers were struggling to keep operating rates above 75%, DPL created new benchmark in terms of volumes of production and sales. DPL was awarded the prestigious Responsible Care certification by ICC during the year. DPLs IPA product was also certified to be meeting the quality requirement of Indian, British and American (US) Pharmacopeia, reflecting the commitment to produce world class quality products. DPL also commenced debottlenecking its Phenol production capacity by 10% over and above the current level of production, which is expected to be operational by the end of H1 of FY 2023-24.

DPL also started trials of using bio fuels in its boilers to reduce its usage of fossil fuels and it is planned to further scale it up during FY 2023-24.

During FY 2022-23, DPL achieved robust sales growth despite external headwinds, aided by the Phenol plant operating at high utilisation levels. Average capacity utilisation for the year stood at more than 120% which is meaningfully higher than the rated capacity. Revenues increased to 4,986 Crores in FY 2022-23 from 4,318 Crores in FY 2021-22. Revenue growth was linked to enhanced volumes of production and sales. Despite the improved top line performance, EBITDA margin compressed compared to the previous year. Profit Aer Tax reduced to 445 Crores in FY 2022-23 as against 624 Crores in FY 2021-22 which was largely due to drop in chain margins.

DPL continued to remain the largest producer of Phenol and Acetone in India with a market share of ~56%. Further with expanded capacity of IPA Plant, your Company is able to reduce import dependency of IPA. During the year under review, your Company successfully placed its volumes in the domestic market to reflect its commitment towards Aatmanirbhar Bharat.

3. Investment in Deepak Chem Tech Limited

The Group aims at growing through organic route, through its 100% subsidiary company, Deepak Chem Tech Limited (‘DCTL). With its Registered Oice at Vadodara in the State of Gujarat, DCTL is in the process of implementing various projects to produce intermediate chemicals for various applications leveraging existing competencies and product portfolio of the Group. DNL has invested 9.50 Crores as equity and 395.50 Crores as Compulsorily Convertible Debentures (CCD) into DCTL towards part funding the on-going projects.

As of now, DCTL is incorporating projects across two sites in Gujarat under both the business segments – Advanced Intermediates (AI) and Phenolics. To start with, DCTL is implementing several projects for an overall capital outlay of approx. 2,000-2,200 Crores across new products, upstream and downstream products. DCTL has acquired big-parcel of land at Dahej, Gujarat, where it is implementing most of the projects.

DCTL has already created a very strong project implementation team, which works closely with the R&D and Technical Services toward licenses and technical know-how and executing projects for the Group. DCTL has an existing employee strength of 135 which largely comprise of project team. It puts special emphasis on timelines and cost of projects while simultaneously looking deeply into various aspects such as health, safety, environment and compliances. In line with the Groups philosophy, it walks extra mile towards ensuring sustainable processes and easy scalability so that, in future, the Groups ability to expand is much more at less costs so to achieve better eiciency, green processes and reducing carbon footprints.

Alongside project implementation, DCTL is also creating a full capability operations team to ensure smooth take over and running the gamut of operations across all plants at various locations.

In a recent event, DCTL has signed an MoU with the Government of Gujarat, whereby it announced its intent of implementing another Phenol and Bisphenol A capacity. It is worth mentioning that, Phenol is a pre-cursor of Bisphenol A, while Bisphenol A is a pre-cursor of Polycarbonate. DCTL is already in the process of implementing a project of Polycarbonate compounding (i.e. downstream products of Polycarbonate).

During FY 2022-23, DCTL generated a total revenue of 1.41 Crores and a net loss of 0.56 Crores.

GEOGRAPHICAL PERFORMANCE

Domestic Revenues for FY 2022-23 stood at 6,410 Crores when compared to 5,272 Crores in FY 2021-22. Revenue contribution from Exports stood at 1,562 Crores, up by 2% when compared to 1,530 Crores in the previous financial year. On a Standalone basis, mix of Domestic versus Export Revenues has been 57:43 in FY 2022-23.

During the year, there was a significant increase in domestic revenues, by 22%, as demand in key end-user industries recovered. Further, with stringent COVID protocols in place in China in the early part of the fiscal year and increased shipping costs and logistics charges, domestic suppliers did become more competitive than imports.

The growth in demand was catered to despite capacity constraints during the first half of the year and DNL was able to maintain the wallet share for most of its products. The Company has maintained its position as a preferred supplier for key domestic customers, thanks to its competitiveness. This has been further complemented by eicient production and favourable product mix that resulted in positive volume growth for select products.

Exports grew by 2% during the period under review, driven by enhanced customer engagements in key geographical regions and the shi in the global supply chain resulting from the China+1 strategy. Your Company has been able to maintain this momentum by optimising plant utilisation levels and streamlining manufacturing processes. Europes contribution as a percentage of exports rose to 50% compared to 44% in the previous financial year, while Asias contribution stood at 26%. In addition, the US also contributed 20% of the overall share of exports.

The growth momentum of both domestic and export revenues has been strong, driven by DNLs focus on cost leadership, production eiciency and enhancement of product mix. The Company is well-positioned to continue its growth journey by leveraging opportunities in key end-user industries, optimising plant utilisation levels and increasing customer engagement in key geographical regions.

RISK MANAGEMENT

As a major player in the global chemical industry, your Company faces a wide range of risks. To mitigate these risks, the Company has implemented a comprehensive Enterprise Risk Management Framework and Policy that has been approved from the Board of Directors. This framework is aligned with the standards set forth by ISO 31000 and COSO, enabling the Company to identify risks at all levels, including the shop-floor level. By adhering to this robust risk management framework, DNL is equipped to proactively identify and address potential risks throughout the organisation. Risk management has been a key part of the operations and the Company continues to prioritise the development around integrated leadership and succession planning strategies to improve the performance trajectory.

Each Business and Functional Head is responsible for implementing Risk Management practices within their business units/functions, identifying short, medium and long-term risks, likelihood, impact and devising mitigation strategies against each identified risks. Risk registers are prepared to capture details about each identified risks. By aggregating and evaluating risks across these registers, DNL identifies its principal risks and formulate an appropriate response mechanism. Business and Functional Heads review risks specific to their operations / functions, assess changes in risk profiles and decide on necessary actions to manage and mitigate risks. These risks and mitigation plans are presented by respective Business and Functional Heads to the management for their review and inputs, every quarter. A comprehensive Risk Management report is then presented to a duly constituted Risk Management Committee of Directors.

The Risk Management Committee plays a crucial role in overseeing and guiding the organisations Risk Management eorts. The Risk Management Committee provides overall oversight of the Risk Management process within the Company. It ensures that a systematic and comprehensive approach is in place, aligning with the Companys strategic objectives. To further support the Risk Management process, the Risk Management Committee collaborates closely with the Board. Through the expertise and oversight of the Board, the Committee further strengthens the organisations ability to eectively address and mitigate risks.

Overall, your Company has implemented eective risk management and prevention frameworks that enable it to navigate the risks associated with its operations in the chemical sector on a global scale. By leveraging its best-in-class products and implementing appropriate risk mitigation strategies, the Company continues to strengthen its operational capabilities and improve institutional performance.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS (STANDALONE)

	FY 2022-23	FY 2021-22	Change (%)	Reason
Debtors Turnover Ratio	5.47	5.56	-2	Trade Receivables are higher on account of higher sales realisation
Inventory Turnover Ratio	4.86	5.21	(7)	Reduction in inventory turnover ratio on account of increased import supply in bulk quantities of key raw materials at a lower rate and ensure suicient supplies of inputs
Interest Coverage Ratio	1,827.31	1,533.74	19	Major improvement due to Nil borrowings.
Current Ratio	4.61	4.55	1	Improved current ratio on account of eicient working capital management.
Debt Equity Ratio	0.00	0.01	0	DNL is debt free on account of a healthy balance sheet
Return on Net Worth (%)	17.88	21.55	(17)	Lower ratios in current year on account of higher input and energy price which could not be fully passed on to
Operating Profit Margin (%) (EBIT)	19.50	24.93	(22)	customers and temporary disruption of manufacturing at
Net Profit Margin (%) (PBT)	19.45	24.87	(22)	Nandesari plant due to fire incidence.

INTERNAL CONTROL FRAMEWORK

Your Company has established a Corporate Governance structure to regulate its operations and its management team adheres to financial and accounting policies, processes and systems. The Companys Risk Management Framework and Planning & Review Processes provide a solid foundation for internal financial controls over its financial statements. The planning is based on essential accounting policies that are meticulously chosen by the management, endorsed by the Audit Committee and the Board and reviewed and updated regularly. Key management evaluates these processes, SOPs and controls, which are also audited by an internal audit and assurance team. The findings and recommendations of the Internal Audit Team are reviewed by the Audit Committee and implemented accordingly. The Company has eective internal financial controls in place for its financial statements. These controls are evaluated regularly throughout the year, focussing on the most significant aspects of internal controls. Following a thorough assessment by key management, no reportable material deficiency, or significant deficiencies in implementing internal financial controls were identified. The Company employs regular audit and review techniques to reinforce these programmes on a continuous basis.

Reputed firms were engaged to study the eicacy of various processes such as financial, business, information technology are in place. This is a continuous process and we shall remain vigil in order to strengthen the process with respect to changing business environment.

HUMAN RESOURCE DEVELOPMENT

Your Company currently has a total of 1,694 permanent employees as of March 31, 2023. The Companys approach to Human Resource Development is based on the fundamental principles of relevance, continuity and fairness. The Company continues its endeavour of investing in Human Talent and Talent Management process through its various interventions and programmes to improve and enhance competencies, capabilities, skills and potentials of its workforce. Maintaining "best-in-class" talent is critical to talent management and HR is committed to ensuring it.

As a result of various initiatives and engagement activities, there has been a significant improvement in attracting, developing, nurturing & retaining right talent and keeping them motivated. Virtual Town Halls were organised wherein Executive Director & CEO, Director (Finance) & Group CFO address all the employees thereby have established a strong sense of bonding between the Companys Management and Employees. During the year, recognising the significance of identifying high-potential employees to ensure a robust talent pipeline, the Company carried out competency assessment through a renowned agency to identify training needs of high-potential performing teams for career development.

Performance management links individual and team performance to the Companys overall strategic objectives. The HR department is committed to aligning its strategic interventions and procedures with a long-term vision to create and enhance value for DNL and its stakeholders. This remains one of the most important factors in boosting business performance.

SWOT ANALYSIS Strengths

Versatile Product Portfolio: DNL oers a diverse range of products that are divided into two main segments, namely, Advanced Intermediates and Phenolics. The Company provides a range of products for various industries such as dyes & pigments, agrochemical, pharmaceutical, plastics, textiles, paper, laminates, auto, plywood, home & personal care and petro derivatives. This helps DNL cater to the needs of dierent customers across multiple end-use sectors and mitigate risks associated with the obsolescence of any particular product or category. DNL has enhanced its product portfolio by utilising its production expertise and knowledge of complex chemistries.

Cost Leadership: Your Company enjoys a strong cost leadership position for several of its products thereby garnering a healthy market share. This is possible due to relentless focus of achieving economies of scale while oering value to the customers through regular process innovations.

Deep-rooted Partnerships & Wide Reach: DNL has a well-established distribution network that covers 45+ countries across six continents, including the United States, Europe, China and India. It is strategically positioned to enter new regions and capture market share. The Companys strong customer relationships and customer-centric approach have helped it maintain its position as a preferred supplier for key customers worldwide. DNLs is well-positioned to benefit from the growing demand for chemicals both domestically and internationally.

Sustainable Strategic Vision: Your Companys commitment to business sustainability has been acknowledged by its customers as one of the key priorities. As DNL progresses towards becoming a diversified chemical company, it plans to retain its leadership position in the existing value chain while also ensuring sustainable use of natural resources and contributing to environment, social and governance principles. Furthermore, DNL will maintain its emphasis on process intensification and operational excellence, while ensuring that sustainability and responsibility remain its guiding values.

Your Company is expanding its base by backward integrating into manufacturing of key raw materials incorporating new chemistries. We are also involved in forward integration of our products there by internally utilising higher proportion to manufacture derivatives.

Agile Supply Chain Operations: Over time, the Company has demonstrated significant agility to meet its delivery commitments, thereby delivering a strong performance. DNL has eectively and eiciently executed its operational plan and met its supply commitments, ensuring reliable and consistent deliveries to customers. The Companys expertise in chemical manufacturing has enabled it to eiciently manage large-scale logistics and supply chains. Using technology, DNLs nationwide supply chain team maintains close relationships with suppliers and customers, ensuring quality service and market performance.

Deepak Phenolics is a prime example of a global-scale plant that transports large quantities of raw materials and finished products in the most eicient and timely manner.

Valorisation in Innovation & Technological Advancements:

Your Companys R&D initiatives aim to innovate new chemical compounds and create value-added products from by-products while consistently assessing existing products and processes to increase eiciency and save costs. DNL will continue to utilise its proficiency in sustainable chemistry while taking advantage of the potential size. The Companys exceptional execution skills and established track record are crucial elements in its active transition to a research and innovation-led enterprise.

Strong Leadership & Competent Management: The key management team at DNL consists of well-respected stalwarts with extensive industry experience and a deep understanding of market trends. The management places a high value on the Code of Responsible Care and ethical principles. The current management team has made a significant contribution to the Companys success and has been with DNL for many years. They remain focussed on high-margin products and prioritise R&D and increasing business from existing customers.

Weaknesses

Volatile Input Costs: An operating environment can be considered challenging when input costs and supply limitations increase, particularly for utilities such as power and fuel. Factors such as demand and supply, political and economic conditions, shipping and employee wages, natural disasters, pandemics and competitive pressure can all aect the supply of raw materials and expenses. Despite the use of various methodologies and assumptions, there are still unknown variables in estimating these factors. To mitigate the negative impact of these factors, your Company has specific teams in place to access such scenarios on an ongoing basis and has ensured, wherever possible, pass-through clauses in its contracts.

Shortage of Sustainable Resources: As the scale and complexity of chemical reactions increase, manufacturing processes require a constant source of energy. In order to address this need, the Company commissioned a captive power plant at Dahej, with a capacity of 29 MW in May 2022. As a responsible company, DNL continues to explore and implement various methods to increase its environmental eorts. One way to reduce greenhouse gas emissions is by improving energy eiciency, which the Company recognises.

Fluctuating Forex Rates: The fluctuation of exchange rates is a well recognised risk for Companies engaged in exporting products and services and it is essential to manage this risk. In FY 2022-23, there was higher than normal volatility in global exchange rates and DNL has taken necessary actions to protect itself against unforeseen and adverse movements. This has led gain of 6.91 Crores to DNL during the year. DNL continues to have exposure to exchange rate risks due to its growing export business, however, the Company is suitably utilising the hedging techniques to mitigate such risks.

Opportunities

Large Potential for Import Substitution: DNL has historically concentrated on products where the domestic market relied heavily on imports, starting from its first product, ‘Sodium Nitrite, to its venture through Deepak Phenolics. Import replacement has been a crucial component of DNLs overall business strategy. The Company has eectively replaced critical products such as phenol and acetone, saving millions of dollars in foreign exchange and achieving self-suiciency. It has established a new benchmark for other chemical businesses to follow. DNL continues to prioritise the introduction of value-added downstream products to substitute imports, primarily taking advantage of the favourable demand situation.

Favourable Government Initiatives: Companies across sectors have been invited to manufacture their products in India as a part of the Governments ‘Make in India campaign. Additionally, the ‘Atmanirbhar Bharat initiative and several PLI schemes are expected to strengthen Indias position compared to global players. These initiatives will not only facilitate regulatory approvals but also provide numerous opportunities for foreign partnerships. DNL will leverage these opportunities to eectively achieve its growth objectives.

Buoyant outlook for Exports: Global chemical giants are constantly looking to reduce their reliance on China, creating opportunities for established Indian chemical intermediates firms to showcase their capabilities on a global scale. The favourable demand scenario has driven Indian chemical exporters to expand their capacities and operations, leading them to reinvest in R&D to enhance production eiciency.

Threats

Product and Process Viability Risk: The risk of products becoming obsolete is a constant concern as newer technologies and methods are introduced. The emergence of innovative products that oer more eicient ways to produce chemical compounds can challenge the viability of current product lines, leading to a decrease in demand for older products or replacement of existing processes. However, with its dominant position in several product categories, DNL is relatively insulated from such threats. Moreover, the Company continuously evaluates and improves its processes, as necessary, in response to advancements in technology.

Inadequate Skilled Manpower: The expertise required for chemical processes and mechanisms can make it diicult to find skilled workers with the necessary knowledge. At the same time, there may be a shortage of technically trained personnel in India. To address this challenge, your Company takes various initiatives such as providing extensive training for professional development, educating employees on the complexities of the industry and promoting adherence to international best practices to retain and expand the current talent pool.

External Challenges: Your Company caters to a wide range of industries, which reduces the risk of dependency on a single customer or sector. However, this also makes the Company vulnerable to demand-supply fluctuations in multiple industries. DNL relies on the Indian market, which contributes large portion of its total revenue. Any downturn in the domestic market could impact the Companys performance.

Geopolitical Developments: Global geopolitical developments like the Russia-Ukraine War results in disruption of established trade relations due to increased tari rates and sanctions, leading to higher prices and diminished availability of some products and commodities. While the Company proactively monitors the evolving situation, it can face negative outcomes due to these geopolitical tensions.

MANAGEMENT OUTLOOK

DNL is well-positioned to benefit from the significant opportunities arising in the sector due to the ‘Make in India for the World initiative and the increasing adoption of the China+1 strategy. In order to achieve its growth objectives, DNL has embarked 2,500 Crores of capital expenditure across the parent company and the two wholly owned subsidiaries.

The growth plans include a project for manufacturing Polycarbonate compounding, which aligns with the goal of entering the PC business. Through this project, the Company aims to gain insights into market trends, customer requirements and other important factors to progress towards a successful Polycarbonate project.

Furthermore, your Company has commissioned several brownfield projects that will contribute to its future performance, such as a new unit for producing a key agrochemical intermediate. Alongside these eorts, other plans include Brownfield expansion of select products, strengthening backward integration capabilities for key inputs to enhance margins, value-added downstream derivatives of Phenol and Acetone including solvents and adding new chemistry platforms such as photochlorination and fluorination. Plans include establishing a compounding asset to meet Indias significant and specialised demands for 5G, electronics, EVs, medical devices and other new products. DNL aims to accomplish this by utilising highly eicient chemistries that can serve various end-user industries.

Going ahead, your Company plans to elevate its growth trajectory by expanding the product categories and identifying/introducing various downstream and complex chemicals strategically. DNL will continue to be agile while seizing opportunities from fast-changing

Europes contribution as a percentage of exports rose to 50% compared to 44% in the previous financial year, while Asias contribution improved to 26%. In addition, the US also contributed 20% of the overall share of exports.

industry trends. Adding new solvents will diversify DNLs products, reach more customers and raise the share of complex, high-margin products in its mix, thereby improving its business proposition.

In order to fund these plans, DNL has been steadily strengthening its balance sheet to create adequate headroom for incremental growth capex.

Advanced Intermediates – Industry leaders with focus on achieving high integration levels; Thriving on immense growth opportunities

The Advanced Intermediates business achieved robust revenue trajectory amid strong demand. The Company aggressively pursued opportunities both domestically and with international customers, resulting in a significant increase in exports. Going forward, the Company expect this segment to continue to perform well, given the shi in global supply chains and continued positive demand trends. Despite the elevated prices of few products and raw materials, the Company has managed to improve the per kilo margins.

Your Company continues to capitalise on its cost leadership and large-scale production capabilities to drive higher volumes and better profitability. Thanks to the benefits of cost leadership, DNL has achieved a market share of around 55% and 70% in products such as sodium nitrate and sodium nitrite respectively. With Indias local demand base growing at a rapid pace, this segment will remain a significant revenue contributor. Over the past five decades, Deepak has honed its expertise in nitration, hydrogenation, oxidation and diazotization of organic and inorganic molecules. The Company is now leveraging this knowledge to create high-value products that enjoy better demand. The presence across the value chain allows the Company to oer competitive pricing while mitigating the impact of raw material margin volatility.

Despite a challenging macro environment, DNLs advanced intermediates revenues have shown strong growth. Recently, the Company completed a brownfield of one of its product that has significantly increased the production capacities. The Company anticipates that the segments performance will remain strong due to a shi in global supply chains to India and favourable demand trends. In FY 2022-23, the Company achieved a year-on-year revenue growth of 21%, driven by robust demand across all segments, particularly in the pharma industry, thanks to the addition of new products and increased exports resulting from the China +1 opportunity. From FY18 to FY23, the Company achieved an annual growth rate of 15%, supported by R&D investments and incremental expansions that led to a growing product portfolio. Export is the top market for the advanced intermediates products, with roughly 43% shipped in value terms. The backward and forward integration initiatives are generating desired results resulting in attractive margins and supporting the Companys standalone success.

Phenolics – Robust Revenue Growth Amidst External Challenges; Emphasis on Import Substitution to Cater to Global Industry Needs

Deepak Phenolics Limited (DPL) a wholly owned subsidiary of DNL, is a leading player in the domestic phenol and acetone markets. It entered the industry to capitalise on import substitution and successfully expanded its capacities, including a brownfield expansion of IPA. With a significant domestic market share of about 95% , DPL is poised to benefit from future opportunities by introducing downstream derivative products of phenol and acetone.

DPL has been a significant revenue contributor to DNL in the recent years, with its volumes have increased significantly due to high capacity utilisation and firm demand. In FY 2022-23, DPL contributed 62% revenue (~63% in FY 2021-22), with capacity utilisation increasing above 120% from 117% in FY 2021-22 and 111% in FY 2020-21 and 90% in FY 2019-20. Despite many Asian Phenol plants operating at only 60%-65% capacity, DPL has managed to produce and sell over 120% of its production capacity during the year.

Further, the Company plans to improve its backward integration capabilities by adding new capacities for key raw materials and expanding its capacity for captive waste treatment. This move is expected to ensure a stable supply of key inputs and oer a margin advantage. Additionally, various projects are being implemented at the new site in Dahej, including the introduction of various derivatives of Phenolics products.

ROADMAP AHEAD – CAPEX INITIATIVES

The Company has announced investment aggregating to 2,500 Crores for expanding its capacity, enabling assured availability of inputs, backward integration for improved eiciency, widening of product portfolio and assimilation of new chemistries within its operations –

• To enhance market share and maintain its leadership position, your Company has planned brownfield projects for certain key products. These projects aim to meet the growing demand and improve the overall business proposition.

• A Greenfield expansion in Polycarbonate compounding will help your Company venture into the Polycarbonate business. This expansion will provide valuable insights into the market, including niche and major players. It will also enable the catering of specialised demand in new-age applications such as 5G boxes, EV batteries, medical devices and more.

• Another project focussed on backward integration will incorporate new chemistry platforms like photochlorination and fluorination, your Company aims to reduce supply chain risks in the agro space and expand the range of products using these chemistries. It will strengthen the backward integration capabilities for key inputs.

• The MIBK-MIBC project involves forward integration. These products are derived from acetone and the objective is to introduce new chemistries thereby enabling utilisation of a higher proportion of acetone internally to manufacture MIBK and MIBC. This move enables the production of other downstream value-added products.

These projects will contribute to DNLs robust revenue growth, expand its market share, improve margins, mitigate business risks through a diversified product mix and strengthen customer and supplier relationships.

FINANCIAL HIGHLIGHTS FOR THE LAST TEN YEARS

						Ind-AS
		Consolidated						Standalone					Indian GAAP
Sr. No. Particulars	*UOM 2022-23**	2021-22	2020-21	2019-20	2018-19	2022-23	2021-22	2020-21	2019-20	2018-19	2017-18	2016-17	2015-16	2014-15	2013-14
1 Total Income	8,020	6,845	4,382	4,265	2,715	3,135	2,582	1,823	2,237	1,795	1,491	1,324	1,337	1,329	1,271
YoY Growth	17.16	56.22	2.73	57.08	60.80	21.43	41.63	-18.52	24.67	20.38	12.56	-0.96	0.61	4.55	23.42
2 EBITDA	1,337	1,646	1,269	1,061	429	688	716	550	804	308	214	152^#	168	140	114
3 Profit / ( Loss) Before Taxation	1,146	1,434	1,042	806	268	610	642	479	706	212	122	74^#	91	68	58
Percentage to Total Income	14.29	20.96	23.78	18.91	9.87	19.45	24.87	26.28	31.56	11.84	8.19	5.58	6.83	5.10	4.57
4 Profit / ( Loss) Aer Taxation	852	1,067	776	611	174	469	486	355	544	138	83	52^#	65	53	38
Percentage to Total Income	10.62	15.58	17.71	14.33	6.40	14.97	18.83	19.47	24.32	7.69	5.60	3.92	4.87	4.02	3.01
5 Equity	27	27	27	27	27	27	27	27	27	27	27	26	23	21	10
6 Net worth	4,090	3,338	2,347	1,572	1,072	2,625	2,256	1,845	1,491	1,058	944	732	476	347	308
7 Debt	54	301	578	1,099	1,187	0	14	-	208	328	462	574	495	545	505
8 Dividend on Equity Capital	102^##	95	75	61**	27	102^##	95	75	61**	27	18	16	14	10	10
Percentage	375^##	350	275	225**	100	375^##	350	275	225**	100	65	60	60	50	100
9 EPS	62.46	78.20	56.88	44.80	12.73	34.41	35.65	26.01	39.89	10.12	6.34	4.43	6.07	5.11	36.63
10 Book Value*^#	300	245	172	115	79	192	165	135	109	78	72	62	44	34	294
11 Net Debt/ Equity Ratio	0.00	0.00	0.15	0.68	1.08	0.00	0.00	0.00	0.14	0.30	0.43	0.64	0.89	1.56	1.62

Directors Report

Dear Shareholders,

Your Directors have pleasure in presenting the Fiy Second (52^nd) Annual Report and the third Integrated Report of Deepak Nitrite Limited (‘DNL or ‘your Company or ‘the Company) along with the Audited Financial Statements for the Financial Year (‘FY) ended March 31, 2023. The Directors Report has been prepared on a standalone basis and the consolidated performance of the Company and its subsidiaries has been referred to wherever required.

FINANCIAL RESULTS

Your Companys financial performance for the year ended March 31, 2023 is summarized below:

Particulars	Standalone Results		Consolidated Results
	2022-23	2021-22	2022-23	2021-22
Total Revenue (Gross)	3,135.13	2,581.85	8,019.64	6,844.80
Operating Profit Before Depreciation, Finance Cost,	687.57	716.15	1,336.96	1,646.19
Exceptional Item and Tax (EBITDA)
Less: Depreciation and Amortization expenses	76.16	72.54	166.30	177.70
Less: Finance Costs	1.57	1.60	24.78	34.04
Profit before Tax	609.84	642.01	1,145.88	1,434.45
Less: Tax expenses	140.45	155.80	293.88	367.81
Net Profit for the Year	469.39	486.21	852.00	1,066.64
Other Comprehensive Income	(4.85)	0.06	(5.00)	0.17
Total Comprehensive income for the Year	464.54	486.27	847.00	1,066.81
Surplus brought forward from previous year	1,694.52	1,288.07	2,776.96	1,789.97
Balance available for Appropriation	2,158.89	1,774.54	3,623.80	2,856.98

FY 2022-23 commenced in the backdrop of the Russia-Ukraine War. The resultant disruption in trade routes and the implementation of sanctions by the western countries caused a recalibration in global supply chains. The situation was exacerbated by stringent restrictions in China at the start of the fiscal year, which constrained the ability of Chinese chemical companies to respond to the global disruption. This has led to shortages of chemicals and raw materials; and resulted in a spike in prices of certain products as global customers scrambled to secure supply of critical inputs, largely commodities.

Against this backdrop, your Company focused on reliable and consistent supply to ensure that its customers could truly ‘Depend on Deepak. The emphasis was on maintaining elevated levels of production across all its manufacturing facilities while adhering to stringent regulatory mandates, rules and safety requirements.

Further, your Company continues to make progress in its initiatives to de-risk its business model. The Company has faced several operational and macro-economic challenges during the year that have tested its business model but it has emerged stronger and self-assured due to the all-round enhancement of its strategic positioning.

PERFORMANCE REVIEW Standalone

The performance during the FY 2022-23 should be viewed against the backdrop of the highly dynamic macro-economic environment. The sanctions on Russia combined with stringent COVID-19 protocols in China severely disrupted traditional global supply chains. This was accompanied by an increase in input and energy expenses, highly volatile foreign exchange rates, sharp rise in prices of crude oil and resultant petrochemical derivatives as well as inbound and outbound logistical challenges during the year.

Consequently, the supply and demand of key intermediates was impacted. However, your Companys manufacturing expertise, global-scale facilities and nimble operations supported by a strong financial position have ensured an eicient performance. Your Company has demonstrated notable agility in seizing opportunities arising from the upheavals across the chemical value chain. Strong customer relationships and global competitiveness have enabled it to be a preferred partner of choice for domestic and global customers alike, while a focus on operational eiciency has ensured that plants operate consistently at high utilization levels. As a result, your Company has achieved new production and sales benchmarks for several key products, showcasing the richness of years of experience and expertise in critical chemistries.

The business was also impacted due to the fire incident at the Nandesari plant in Gujarat in June 2022, which resulted in damage to some assets and inventory, as well as disruptions to business. Costs were incurred for about 40 days without corresponding revenue.

The Company, inspite of above challenges has demonstrated strong business performance with year-on-year growth reported across several product lines. In FY 2022-23, the total revenue, including other income, increased by 21% to 3,135.13 Crores from 2,581.85 Crores in FY 2021-22, sustaining the performance momentum.

EBITDA for FY 2022-23 was at 687.57 Crores, down 4% from 716.15 Crores in the previous year. Cost of Goods Sold increased by 37% to 1,669.68 Crores in FY 2022-23, as compared to 1,221.34 Crores in the preceding year. In FY 2022-23, profit before tax (PBT) was at 609.84 Crores, compared to 642.01 Crores in FY2021-22, registering a 5% decrease. Profit Aer Tax (PAT) was at 469.39 Crores in FY 2022-23, down by 3% from 486.21 Crores in the previous year.

Your Company emerged from the situation stronger than before. Following a month-long production shutdown, operations gradually resumed from early July and reached full production capacity by October 2022. The Company has estimated and recognised an initial loss of 47.20 Crores on account of damage to certain property, plant and equipment & inventory and has recognised insurance claim receivable to the extent of aforesaid losses. The Company has received an interim relief from the insurance companies towards assets and inventories aggregating of 25.00 Crores, out of which 11.23 Crores has been received in the month of March 2023 which has been adjusted against the claims receivable and balance 13.77 Crores received in the month of April 2023. As a measure to further elevate safety standards, a fire readiness audit was conducted and systems and safety measures were further upgraded during the fiscal year.

Your Company has shown significant progress across the business segments, which has contributed to strong revenue growth. It is important to note that the chemical industry also experienced substantial fluctuations in raw material and utility costs during the year, which had an impact on the pricing of the final products. Despite several challenges, your Company has been able to achieve a resilient performance by leveraging the diverse product portfolio to better meet its customers needs and maintain its market share. Your Company has also actively engaged customers to adjust prices in response to higher raw material costs and other utilities. Additionally, uninterrupted supply of critical raw materials was ensured to optimize high operational eiciency. Through these measures, your Company has been able to deliver a credible performance.

During the year, depreciation and finance costs amounted to 76.16 Crores and 1.57 Crores, respectively. Your Company is debt-free as of March 31, 2023 and its operational surplus of 368.87 Crores is invested in liquid mutual funds, which oer liquidity, stability and greater yields.

In the FY 2022-23, the domestic revenues of your Company increased by 18% to 1,718.90 Crores compared to 1,454.16 Crores recorded in the previous year. This decline was due to soer demand from key industries, which was countered by the targeted initiatives undertaken by your Company. On the other hand, export revenue increased to 1,314.58 Crores from the 1,056.89 Crores in the previous year. driven by focused approach in targeting countries experiencing faster recovery and positive demand. Your Companys wide range of intermediates also benefits from the strategic shi of international customers from ‘just in time to ‘just in case supply chain philosophy.

As a part of its growth strategy, your Company recently made an announcement regarding an investment in chemical manufacturing plant in the Sultanate of Oman. The investment is envisaged due to various advantages for setting up a chemical plant in Oman such as lower price of power, availability of natural gas for energy, availability of attractive priced ammonia through pipeline, Free Trade Agreement with USA, availability of caustic soda locally. Your Company is investing 51% in the equity of a the Company the Company.

Moreover, the teams have demonstrated remarkable adaptability and client focus even in the face of significant challenges leading to credible outcomes. Your Company is committed to becoming a diversified chemical company while maintaining leadership in crucial products and processes and generating new value through innovation. To achieve volume scalability, it plans to establish stronger relationships with key customers, while continuing to prioritize process improvement and operational excellence. DNL is well-positioned to take advantage of this opportunity with its unique product mix and manufacturing experience, making it a strong contender to lead Indias chemical manufacturing growth. DNLs existing expansions and greenfield projects will enhance its competitiveness and market share, creating value for all stakeholders.

Deepak Phenolics Limited

Deepak Phenolics Limited (‘DPL), is a wholly owned material subsidiary of your Company. DPL is engaged in the business of manufacture of Phenol, Acetone and Iso Propyl Alcohol (‘IPA).

DPL entered the FY 2022-23 amidst a robust business environment as global recovery took root aer the Covid-19 related concerns and restrictions were slowly withdrawn globally, including in India. At the same time, events in Europe and Ukraine caused a major spike in energy prices, including for household use, which resulted in a marked shi in consumer spends towards basic essentials like food and energy. An unusual pull from transport fuels caused Benzene prices to spike to unprecedented levels in the middle of the year. However, the market witnessed a steady decline thereaer as global consumption declined, new capacities of Phenol came on-stream in China and downstream BisPhenol-A and Polycarbonates lost their luster. A continuous bear phase in Phenol caused chain margins to shed nearly 25% from the previous year.

DPL also started trials of using bio fuels in its boilers to reduce its usage of fossil fuels and it is planned to further scale it up during the FY 2023-24.

During FY 2022-23, DPL achieved robust sales growth despite external headwinds, aided by the Phenol plant operating at high utilisation levels. Average capacity utilization for the year stood at more than 120% which is meaningfully higher than the rated capacity. Revenues increased to 4,986 Crores in FY 2022-23 from 4,318 Crores in FY 2021-22. Revenue growth was linked to enhanced volumes of production and sales. Despite the improved top line performance, EBITDA margin compressed compared to the previous year. Profit Aer Tax reduced to 445 Crores in FY 2022-23 as against 624 Crores in FY 2021-22 which was largely due to drop in chain margins.

DPL continued to remain the largest producer of Phenol and Acetone in India with a market share of ~56%. Further with expanded capacity of IPA Plant, your company is able to reduce import dependency of IPA. During the year under review, your

Company successfully placed its volumes in the domestic market to reflect its commitment towards Aatmanirbhar Bharat.

Deepak Chem Tech Limited

9.50 Crores as equity and 395.50 Crores as Compulsorily Convertible Debentures (CCD) into DCTL towards part funding the on-going projects.

As of now, DCTL is incorporating projects across two sites in Gujarat under both the business segments – Advanced Intermediates (AI) and Phenolics. To start with, DCTL is implementing several projects for an overall capital outlay of approximately 2,000-2,200 Crores across new products, upstream and downstream products. DCTL has acquired big-parcel of land at Dahej, Gujarat, where it is implementing most of the projects.

Alongside project implementation, DCTL is also creating a full capability operations team to ensure smooth take over and running the gamut of operations across all plants at various locations.

In a recent event, DCTL has signed an MOU with the Government of Gujarat, whereby it announced its intent of implementing another Phenol and Bisphenol A capacity. It is worth mentioning that, Phenol is a pre-cursor of Bisphenol A, while Bisphenol A is a pre-cursor of Polycarbonate. DCTL is already in the process of implementing a project of Polycarbonate compounding (i.e. down stream products of Polycarbonate).

During FY 2022-23, DCTL generated a total revenue of 1.41 Crores and a net loss of 0.56 Crores.

Consolidated

Your Companys total revenue, including other income stood at

8,019.64 Crores in FY 2022-23, growing by 17% from 6,844.80 Crores in the previous year. Higher volumes across key business segments, particularly Phenolics, led to strong and sustainable revenue growth. Utilization levels remained consistently high throughout the year, with ongoing improvements. Although prices for certain inputs have cooled o, they remain higher than the previous year. These elevated costs are being passed on to the customers, albeit with a slight delay.

EBITDA was at 1,336.96 Crores, down by 19% from 1,646.19 Crores in FY 2021-22. The normalisation of product realisations compared to the base year as well as non-availability of Nandesari plant for about 40 days due to fire impacted the EBITDA performance. EBITDA margin contracted by 700 bps on a Y-o-Y basis at 17% in FY 2022-23 due to challenging macro environment. Cost of Goods Sold were 5,347.51 Crores in FY 2022-23, up by 30% from 4,114.35 Crores in the previous year. The normalization of certain product margins this year has resulted in margin compression, aer being exceptionally high last year. To protect profitability, your Company is implementing measures to pass on the increased input costs, while also driving cost optimization eorts.

During the year, Depreciation amounted to 166.30 Crores, while Finance costs were at 24.78 Crores.

In the fiscal year under review, the Profit Before Tax (PBT) amounted to 1,145.88 Crores, in contrast to 1,434.45 Crores in FY 2021-22. Profit Aer Tax (PAT) was 852 Crores, lower by 20% in comparison to 1,066.64 Crores in FY 2021-22. The performance of PAT has been in line with the EBITDA. Despite the reduction in finance costs and depreciation, the overall rise in costs impacted the performance.

In terms of geographical break-up, Domestic Revenues for FY 2022-23 reached 6,410.31 Crores, a 22% increase from the 5,272.15 Crores in the previous year. Additionally, Revenue from Exports grew by 2% to reach 1561.75 Crores, up from 1,530.04 Crores in the previous year, demonstrating the Companys resilience and strong engagement with global customers. Despite global instability, Deepak has maintained a consistent customer base and your Company has been successfully able to sustain or grow its market share in various key products. This aligns with the "Depend on Deepak" initiative, which strives to develop a robust organization through eicient processes and systems, while emphasizing ethical and transparent practices. Deepak also boasts a highly skilled and motivated team capable of assuming leadership roles, along with extensive capabilities to fulfil customer requirements.

On the expansion initiatives, the SAC plants capacity installation is scheduled to be commissioned soon. The Company has embarked into further growth plans with an expected outlay of approximately

2,500 Crores over various facilities. These facilities are being commissioned in a phased manner across new products, upstream and downstream facilities including downstream of Polycarbonates which is called Polycarbonate Compounding. Your Company will manufacture compounding products to meet the growing demand in India for new-age applications such as 5G boxes, EV batteries, medical devices and others.

The future appears promising for the Indian chemicals sector, as most of the industries are returning to their pre-COVID levels of production and there is a growing demand due to a shi in the global supply chain from China to India. By leveraging the upcoming brownfield and greenfield expansions and integrating value-added forward and backward operations, your Company is enhancing competitiveness and positioning itself not only to compete on a global level but also to lead in respective business segments, thereby expanding market share.

DIVIDEND

Based on your Companys healthy performance, the Board of Directors of your Company is pleased to recommend a Dividend of 7.50 (Rupees Seven and Paise Fiy only) per Equity Share for the year ended March 31, 2023 as against 7.00 (Rupees Seven only) per Equity Share in the previous year. The total Dividend as above on 13,63,93,041 Equity Shares of face value of 2.00 (Rupees Two only) each, if approved by the Members at the ensuing Annual General Meeting, would involve a total outgo amount of 102.29 Crores, resulting in a Dividend Payout of 22% of the standalone Profit Aer Tax of the Company.

The Companys Register of Members and Share Transfer Books will be closed from Friday, July 28, 2023 to Friday, August 4, 2023 (both days inclusive) for the purpose of Dividend for the Financial Year ended March 31, 2023 and 52^nd Annual General Meeting of the Company. It is important to note that, as per the Finance Act of 2020, payment of Dividend is now subject to taxation and the Company is required to deduct tax at source from the Dividend paid to Members, as per the rates prescribed in the Income Tax Act of 1961.

Under Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the top 1,000 listed entities (by market capitalisation, calculated as of March, 31 of each Financial Year), are required to formulate a Dividend Distribution Policy and make it available on their website, with a link also provided in their Annual Reports. In accordance with this requirement, the Company has adopted the Dividend Distribution Policy and the same can be accessed using the following link: https://www.godeepak.com/wp-content/uploads/2021/05/1-DNL-Dividend-Distribution-Policy.pdf.

SHARE CAPITAL

The issued, subscribed and paid-up Equity Share Capital as on March 31, 2023, is 27.28 Crores, comprising of 13,63,93,041 Equity Shares of face value of 2.00 (Rupees Two only) each. The Company has not issued any Equity Shares during FY 2022-23. Accordingly, there is no change in the Equity Share Capital of the Company during FY 2022-23.

TRANSFER TO RESERVES

The Board of Directors has decided to retain entire amount of Profit during FY 2022-23 appearing in the Statement of Profit and Loss and no amount is proposed to be transferred to Reserves. The closing balance of the retained earnings of the Company for FY 2022-23 was 2,063.41 Crores.

FINANCE

Your Companys goal is to maintain a prudent capital structure at a consolidated level by managing its working capital requirements eiciently, while adhering to strict criteria and maintaining a balanced debt equity ratio. By implementing improved working capital management practices, your Company was able to report zero total debt during the year under review.

DNLs strong credit rating has proven advantageous in its financial activities, resulting in reduced charges. Additionally, the Companys depreciation increased aer acquiring certain Property, Plant and Equipment. With a team of specialized professionals monitoring Foreign Exchange exposure, the Company eectively mitigates associated risks. Owing to its dynamic and proactive management, the team has successfully managed the Companys cash flow position. As of March 31, 2023, the Companys standalone Net Debt: Equity remains at Nil, same as the previous year.

Overall, your Company is in a strong position in the industry, delivering high-quality products guided by a robust product mix. ICRA has reairmed the long-term credit rating at "ICRA AA/Positive" while the short-term rating of the Company remains at the highest level at A1+. This is primarily owing to the Companys sustainable business performance, ability to cater to varied end use segments, diversified product portfolio, constant improvement and eicient operations.

For the Companys wholly owned subsidiary, Deepak Phenolics Limited (‘DPL), ICRA has reairmed the long-term credit rating at "ICRA AA/Positive" and while the short term credit rating remains at "ICRA A1+" which is the highest rating in short term category.

During the year, DPL has pre-paid a substantial part of its borrowing apart from honouring committed repayments. Pursuant to this, the consolidated Net Debt / Equity ratio continues to remain Nil as of March 31, 2023.

DIRECTORS

In accordance with the provisions of Section 152 of the Companies Act, 2013 (‘the Act), Shri Maulik D. Mehta (DIN: 05227290) retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, has oered himself for re-appointment.

Shri Sandesh Kumar Anand (DIN:00001792) who is also retiring by rotation at the ensuing Annual General Meeting of the Company, has not oered himself for re-appointment. Accordingly, he shall cease to be Director of the Company with eect from August 4,

2023. The Board of Directors, at their meeting held on May 11, 2023, while placing on record their sincere appreciation for the valuable contribution of Shri Sandesh Kumar Anand during his tenure as the Director of the Company, have recommended the appointment of Shri Girish Satarkar (DIN: 00340116) as Director liable to retire by rotation w.e.f. August 4, 2023, in place of Shri Sandesh Kumar Anand, for approval by Members of the Company at the ensuing Annual General Meeting.

Upon recommendation of Nomination and Remuneration Committee, the Board of Directors, at the said meeting, have also recommended the appointment of Shri Girish Satarkar (DIN: 00340116) as Whole-time Director designated as Executive Director of the Company for a period of three (3) years w.e.f. August 4, 2023, for approval by the Members at the ensuing Annual General Meeting on the terms and conditions as provided in the Explanatory Statement to the Notice convening 52^nd Annual General Meeting.

Shri Sudhir Mankad (DIN:00086077), Dr. Richard H. Rupp (DIN:02205790) and Dr. Swaminathan Sivaram (DIN:00009900) ceased to be Independent Directors upon completion of their second term on August 7, 2022.

During the year, the Members of the Company, through Postal Ballot by way of e-voting on June 22, 2022, approved:

• Re-appointment of Shri Sanjay Upadhyay (DIN:01776546) as a Director (Finance) & CFO for a period from April 28, 2022 to July 31, 2026.

• Re-appointment of Shri Sanjay Asher (DIN:00008221) and Smt. Purvi Sheth (DIN:06449636) as Independent Directors of the Company for the second term of three (3) consecutive years with eect from June 28, 2022.

• Appointment of Shri Meghav D. Mehta (DIN:05229853) as a Non-Executive Director of the Company, liable to retire by rotation, with eect from May 4, 2022.

• Appointment of Shri Punit Lalbhai (DIN: 05125502), Shri Vipul Shah (DIN: 00174680) and Shri Prakash Samudra (DIN: 00062355) as Independent Directors of the Company for a term of three (3) consecutive years with eect from August 8, 2022.

Shri Dileep Choksi was appointed as an Independent Director at the 49^th Annual General Meeting of the Company held on August 7, 2020 for a term of three (3) consecutive years. Accordingly, the first term of Shri Dileep Choksi as an Independent Director is upto August 6, 2023. The Board of Directors at their meeting held on May 11, 2023, upon recommendation of Nomination and Remuneration Committee and based on evaluation of performance of Shri Dileep Choksi, which was completely satisfactory, have recommended the re-appointment of Shri Dileep Choksi for approval by the Members at the ensuing Annual General Meeting of the Company, for a second term of three (3) consecutive years with eect from August 7, 2023.

The Members at the 48^th Annual General Meeting of the Company held on June 28, 2019 approved the re-appointment of Shri Deepak C. Mehta as the Chairman & Managing Director of the Company for further period of five (5) years w.e.f. December 14, 2018. Accordingly, the present term of Shri Deepak C. Mehta as the Chairman & Managing Director of the Company is upto December 13, 2023.

The Board of Directors, at their meeting held on May 11, 2023 approved the re-appointment of Shri Deepak C. Mehta as the Chairman and Managing Director of the Company for further period of five (5) years w.e.f. December 14, 2023, subject to approval by the Members. Further, since Shri Deepak C. Mehta will attain the age of 70 years during the proposed term of his re-appointment, approval of Members is being sought for his re-appointment by way of Special Resolution at the ensuing Annual General Meeting.

INDEPENDENT DIRECTORS

All the Independent Directors of the Company have given their declarations to the Company under Section 149(7) of the Act that they meet the criteria of independence as provided under Section 149(6) of the Act read with Regulation 16(1) (b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations). There has been no change in the circumstances aecting their status as Independent Directors of the Company.

During the year under review, the Company did not have any pecuniary relationship or transactions with any of its Directors, other than payment of sitting fees and re-imbursement of expenses for attending meetings of Board and Committee thereof and also Commission on Net Profits of the Company as approved by the Members of the Company, in accordance with the provisions of Act and Listing Regulations.

As per requirements of the Act, a separate meeting of Independent Directors, without presence of members of management of the Company, was held on March 10, 2023 to evaluate the performance of the Chairman, Non-Independent Directors and the Board as a whole and also to assess the quality, quantity and timeliness of flow of information between the management of the Company and the Board.

All Independent Directors were present at the said meeting.

KEY MANAGERIAL PERSONNEL

As required under Section 2(51) and Section 203 of the Act read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, following persons are the Key Managerial Personnel of your Company:

1. Shri Deepak C. Mehta, Chairman & Managing Director

2. Shri Maulik D. Mehta, Executive Director & CEO

3. Shri Sanjay Upadhyay, Director (Finance) & Group CFO

4. Shri Somsekhar Nanda, Chief Financial Oicer

5. Shri Arvind Bajpai, Company Secretary

During the year under review, Shri Sanjay Upadhyay was elevated as Director (Finance) & Group CFO and Shri Somsekhar Nanda was appointed as the Chief Financial Oicer of the Company in place of Shri Sanjay Upadhyay with eect from August 3, 2022.

There were no other changes in Key Managerial Personal during the year.

NUMBEROFMEETINGSOFTHEBOARDANDCOMMITTEES OF THE BOARD

During FY 2022-23, five (5) meetings of the Board of Directors were held. The details of the meetings of the Board of Directors and Committees of the Board of Directors of the Company held and attended by the Directors are given in the Corporate Governance Report forming part of this Annual Report.

The maximum interval between any two meetings did not exceed 120 days, as prescribed under the Act and the Listing Regulations.

BOARD EVALUATION

Pursuant to the requirement of the Act and the Listing Regulations and upon recommendation of the Nomination and Remuneration Committee, the Board has adopted a Performance Evaluation Policy specifying the criteria for eective evaluation of Board, its Committees and individual Directors. The performance evaluation criteria for Independent Directors are also provided in the Performance Evaluation Policy as adopted by the Board.

The process of performance evaluation is in line with the provisions of the Act and the Listing Regulations and the Board has carried out an annual evaluation of its own performance, its Committees and individual Directors, based on the criteria as provided in the Performance Evaluation Policy.

The performance of the Independent Directors was evaluated by the entire Board without the presence of Independent Director being evaluated at their meeting held on May 11, 2023. Based on such evaluation, the Board is of the view that all Independent Directors are having thorough knowledge, expertise and experience in their respective areas. They also have very good understanding of the Companys business and the general economic environment it operates. They devote quality time and full attention to understand key issues relating to business of the Company and advising on the same. Their valuable contribution has certainly improved the governance standards within the Company.

The criteria for evaluation of performance of Independent Directors are:

• Relevant Knowledge, Expertise and Experience.

• Devotion of time and attention to the Companys long term strategic issues.

• Addressing the most relevant issues for the Company.

• Discussing and endorsing the Companys strategy.

• Professional Conduct, Ethics and Integrity.

• Understanding of Duties, Roles and Function as Independent Director.

The performance of the respective Committees was also evaluated by the Board aer seeking inputs from the Committee members. Based on such evaluation, the Board is of the view that various Committee of Directors are well constituted by way of having optimum number of Independent Directors with precise Terms of Reference / Charter. The respective Committees actively discussed various matters and eective suggestions were made concerning business, operations and governance of the Company.

Your Directors have expressed their satisfaction to the evaluation process.

Based on the declarations received from the Independent Directors, the Board of Directors of your Company confirms the integrity, expertise and experience (including the proficiency) of the Independent Directors of the Company appointed during the year.

AUDIT COMMITTEE

A duly constituted Audit Committee is in place having majority of Independent Directors with Shri Dileep Choksi, Independent Director, as the Chairman of the Committee. The other members of the Audit Committee are Shri Sanjay Asher, Independent Director and Shri Sandesh Kumar Anand, Non-Executive Non-Independent Director. The Committees purpose is to oversee the accounting and financial reporting process of the Company, the audits of the Companys Financial Statements, the appointment, independence and performance of the Statutory Auditors and the Internal Auditors. The terms of reference of the Audit Committee, details of meetings held during the year and attendance of members of the Audit Committee are set out in the Corporate Governance Report, which forms part of the Annual Report.

During the year under review, all the recommendations made by the Audit Committee were accepted by the Board.

STATUTORY AUDITORS

At the 51^st Annual General Meeting of the Company held on August 3, 2022, the Members approved re-appointment of Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm Registration No.: 117366W/ W-100018) as Statutory Auditors of the Company to hold oice as the Atatutory Auditors for a further period of five (5) years from the conclusion of the 51^st Annual General Meeting till the conclusion of the 56^th Annual General Meeting of the Company. During the year, the Statutory Auditors have confirmed that they satisfy the independence criteria required under the Act.

STATUTORY AUDITORS REPORT

The observations made in the Auditors Report of Deloitte Haskins & Sells LLP, Chartered Accountants, for the year ended March 31, 2023, read together with relevant notes thereon, are self-explanatory and hence do not call for any comments. There is no qualification, reservation, adverse remark, or disclaimer by the Statutory Auditors in their Report.

There were no instances of frauds identified by the Statutory Auditors during FY 2022-23.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit for the year ended March 31, 2023 was carried out by the Secretarial Auditors, KANJ & Co. LLP, Company Secretaries, Pune. The Board of Directors of your Company has re-appointed KANJ & Co. LLP, Company Secretaries, Pune to carry out Secretarial Audit of your Company for FY 2023-24.

SECRETARIAL AUDITORS REPORT

The Secretarial Audit Report of KANJ & Co. LLP, Company Secretaries, Pune, for the year ended March 31, 2023 in Form MR-3 is annexed as Annexure - A, which forms part of this Report.

The Secretarial Audit Report for FY 2022-23, does not contain any qualification, reservation, adverse remark or disclaimer by the Secretarial Auditor.

The secretarial Audit of Deepak Phenolics Limited (‘DPL), a material unlisted subsidiary, was undertaken by Samdani Shah & Kabra, Company Secretaries, Vadodara for FY 2022-23. The said Secretarial Audit Report confirms that DPL has complied with the provisions of the Act, Rules, Regulations and Guidelines and that there were no deviations or non-compliances. The Secretarial Audit Report of DPL is annexed to this Report as Annexure-B as per the requirement of Act and the Listing Regulations.

COST AUDITORS

The Company is required to maintain cost records under Companies (Cost Records and Audit) Rules, 2014. Accordingly, cost records have been maintained by your Company.

Pursuant to provisions of Section 148 of the Act, the Board of Directors, upon recommendation of the Audit Committee, re-appointed B. M. Sharma & Co., Cost Accountants, to conduct audit of the Companys cost records for FY 2023-24 at a remuneration of 8,00,000 (Rupees Eight Lakhs only) plus applicable taxes and out of pocket expenses. The Cost Auditors have confirmed that they are free from disqualification specified under Section 148(5) read with Section 141(3) of the Act and that the appointment meets the requirements of the Act. They have further confirmed their independent status and an arms length relationship with the Company.

As required under the provisions of the Act, the remuneration of Cost Auditors as approved by the Board of Directors is subject to ratification by the Members at the ensuing Annual General Meeting.

An Ordinary Resolution for the ratification of remuneration of Cost Auditors for FY 2023-24 is provided in the Notice convening 52^nd Annual General Meeting for approval by the Members. Your Directors recommend the same for approval by the Members.

The Cost Audit Report will be filed within the prescribed period of 180 days from the close of the Financial Year. The Cost Audit Report for FY 2022-23 does not contain any qualification, reservation or adverse remark.

INTERNAL AUDITORS

On the recommendation of the Audit Committee, the Board of Directors of the Company has re-appointed Sharp & Tannan Associates, Chartered Accountants, as Internal Auditors of your Company to conduct the Internal Audit for FY 2023-24.

The Internal Audit function reports its findings and status thereof to the Audit Committee on a quarterly basis.

REPORTING OF FRAUD BY AUDITORS

During the year under review, the Statutory Auditors, Cost Auditors and Secretarial Auditors have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under Section 143(12) of the Act and the Rules made thereunder, details of which needs to be mentioned in this Report.

RISK MANAGEMENT

The Company recognises that risk is an integral and inevitable part of business and that the Company is fully committed to manage the risks in a proactive and eicient manner.

Towards this, the Company has adopted a comprehensive Enterprise Risk Management Framework and Policy, duly approved by the Board of Directors, which is aligned with the requirements of ISO 31000 and COSO and articulates the approach to address the uncertainties in its endeavour to achieve stated and implicit objectives. The Enterprise Risk Management Framework ensures sustainable business growth with stability and encompasses establishment of structured and intelligent approach to Risk Management at the Company. The Company is having a disciplined process for continuously assessing risks, in the internal and external environment along with minimising the impact of risks. The Company incorporates the risk mitigation steps in all its strategy and operating plans.

The objective of Risk Management process in the Company is to enable value creation in an uncertain environment, promote good governance, address stakeholder expectations proactively and improve organisational resilience and sustainable growth.

In compliance with the requirement of Regulation 21 of the Listing Regulations, your Company is having a duly constituted

Risk Management Committee. The Risk Management Committee of the Company has been entrusted by the Board with the responsibility of reviewing the risk management process in the Company and to ensure that key strategic and business risks are identified and addressed by the management. The Committee evaluates the performance of the Company against perceived risks, develops methods to classify potential and evolving risk that may adversely impact overall risk exposure of the Company and determines the strategic plan and framework of Risk Management. Further, the Risk Management Committee has designated Chief Financial Oicer of the Company also as a Chief Risk Oicer who is responsible for identifying, measuring, monitoring, mitigating and reporting on risk exposures to the Risk Management Committee. The details about the Risk Management Committee have been provided in the Report on Corporate Governance which forms part of this Annual Report.

The Board of Directors regularly assess the processes for Risk Identification and Risk Mitigation to ensure that relevant risks are appropriately identified and eective mitigation mechanisms are in place by updating and assessing Risk Register regularly. This approach provides a constructive and value-added analysis mechanism that helps to maintain an appropriate level of risk profile in a rapidly evolving environment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company places great importance on Internal Controls including Internal Financial Controls, which plays a critical role in the smooth functioning of any organization. The Internal Control framework is suicient and implemented through written policies, rules and protocols to ensure compliance with laws, regulations, processes and guidelines. This framework ensures that all resources are protected against unlawful use or disposal and that transactions are appropriately permitted, registered and documented.

In FY 2022-23, the Internal Auditor conducted comprehensive assessments across all functional departments and locations. The Internal Audit provides independent and reasonable assurance about the adequacy and operating eectiveness of the Internal Controls to the Audit Committee. The Audit Committee regularly reviewed the Internal Audit findings and corrective measures are taken to ensure the eectiveness of the Internal Control systems and processes. The system of Internal Control is designed to verify the accuracy of financial and other documents for compiling financial reports and maintaining transparency for individuals.

The Statutory Auditors have confirmed the adequacy of the Internal Financial Control system over Financial Reporting and Statutory Auditors Report on Internal Financial Controls, as required under Clause (i) of Sub-section 3 of Section 143 of the Act, is attached to the Independent Auditors Report.

Some of the key initiatives during the year are:

Data Privacy, Protection & Retention of Critical Data/ Documents

With an aim of maintaining data secrecy & confidentiality of critical information/ documents across all Functions & Sites, an assessment of data life cycle was carried out through an external agency wherein assessment of current posture of the data security practices around critical information was identified and measures were recommended to strengthen the control posture to plug-in potential leakage points. In addition, it covered the areas relating to IT landscape for current data security practices and third-party risk management aspects.

Upgradation of CCTV cameras:

The Company upgraded its existing CCTV (close circuit television) system with edge-based analytics having security Artificial Intelligence (AI) features like line crossing, intrusion area, etc. the objective being enhancing safety within premises, reduced employee, or sta incidents, preventing & investigating a crime, etc. Old systems were replaced with upgraded technology as well as installation of new cameras at critical locations within site.

Turnstile Systems

Security is a rising concern in the world today i.e., hackers accessing valuable information to intruders threatening the safety of people and property. With an aim of controlling access to premises by contract workers, visitors, etc. turnstile systems were installed & implemented across all sites. Turnstiles provide superior access control by both detecting and deterring unauthorized entries & exits. In addition, contractors billing is done directly through the records generated from turnstile system.

VIGIL MECHANISM

Pursuant to provisions of Section 177(9) of the Act, read with Regulation 22(1) of the Listing Regulations, your Company has adopted a Whistle Blower Policy, to provide a formal vigil mechanism to the Directors and employees to report their concerns about unethical behaviour, including actual or suspected leak of unpublished price sensitive information, actual or suspected fraud or violation of the Companys Code of Conduct or ethics policy.

The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in certain cases. It is airmed that no personnel of the Company has been denied access to the Audit Committee.

The Whistle Blower Policy is available on the Companys website at https://www.godeepak.com/wp-content/uploads/2021/05/2-DNL-Whistle-Blower-Policy.pdf.

DEPOSITS FROM PUBLIC

During FY 2022-23, the Company has not accepted or renewed any deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. There has been no default in repayment of deposits or interest thereon during the year and there are no deposits outstanding as on March 31, 2023.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

The details on transfer of unclaimed/unpaid amount/shares to Investor Education and Protection Fund (IEPF) are provided in the Corporate Governance Report under para ‘Transfer of unclaimed / unpaid amounts / shares to the Investor Education and Protection Fund (IEPF).

RELATED PARTY TRANSACTIONS

There are no material related party transactions entered into by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons, which may have a potential conflict with the interest of the Company at large.

All transactions with related parties were on arms length basis and approved by the members of the Audit Committee who are Independent Directors. The transactions with related parties which are not in the ordinary course of business were also approved by the Board of Directors. During FY 2022-23, there were no transaction entered into with related party requiring approval of Members of the Company. Accordingly, the disclosure of related party transactions, as required under Section 134(3)(h) of the Act, in Form No. AOC-2 is not applicable to the Company.

Prior omnibus approval of the Audit Committee is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on arms length basis. While placing transactions with related parties, the necessary details required to be placed before the Audit Committee / Board of Directors under the provisions of the Act and Listing Regulations were circulated along with Agenda papers. Further, a statement containing details of all related party transactions is being placed before the Audit Committee and the Board of Directors on a quarterly basis.

All related party transactions are subjected to independent review by the Internal Auditors of the Company to establish compliance with the requirement of related party transactions under the Act and Listing Regulations.

Your Company has in place a Policy on related party transactions formulated in line with the provisions of the Act and Listing Regulations. The said Policy is duly approved by the Board of Directors and can be accessed on the website of the Company at www. godeepak.com.

None of the Directors has any material pecuniary relationships or transactions vis-a-vis the Company.

As required under the provisions of Listing Regulations, the Company submits details of all related party transactions in the prescribed format to the Stock Exchanges on a half-yearly basis.

SUBSIDIARY / ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

As required under Rule 8(1) of the Companies (Accounts) Rules, 2014, the Boards Report has been prepared on a Standalone basis.

Pursuant to requirement of Section 136 of the Act, which has exempted companies from attaching the financial statements of the subsidiary companies along with the Annual Report of the company, your Company will make available the Annual Financial Statements of subsidiary companies and the related detailed information to any Member of the Company on receipt of a written request from them at the Registered Oice of the Company. The Annual Financial Statements of subsidiary companies will also be kept open for inspection at the Registered Oice of the Company on any working day during business hours. These are also available on the website of your Company at www.godeepak.com.

The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Indian Accounting Standards notified under the Companies (Indian Accounting Standards) Rules, 2015 (‘Ind AS), forms part of the Annual Report and are reflected in the Consolidated Financial Statements of the Company.

The Consolidated Financial Statements include the operations of following subsidiaries:

• Deepak Phenolics Limited

• Deepak Chem Tech Limited (Formerly known as Deepak Clean Tech Limited)

• Deepak Nitrite Corporation Inc.

During FY 2022-23, there is no company which has become or ceased to be subsidiary or associate of the Company. Your Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 16(1)(c) of the Listing Regulations duly approved by the Board of Directors and can be accessed on the Companys website at www.godeepak.com.

PERFORMANCE OF SUBSIDIARIES (a) Deepak Phenolics Limited

Deepak Phenolics Limited (‘DPL), is a wholly owned material subsidiary of your Company. DPL is engaged in the business of manufacture of Phenol, Acetone and Iso Propyl Alcohol (‘IPA) at its state-of-the-art facility in Dahej, Gujarat. The detailed performance of DPL is provided under the section Performance Review of this Report.

(b) Deepak Chem Tech Limited (DCTL)

Deepak Chem Tech Limited (‘DCTL) (formerly known as Deepak Clean Tech Limited), a wholly owned subsidiary of the Company is implementing projects for manufacturing various intermediate chemical products. The detailed performance of DCTL is provided under the section Performance Review of this Report.

The Audited Consolidated Financial Statements of the Company for the year ended March 31, 2023 together with the Auditors Report, constitute part of this Annual Report in compliance with the provisions of the Act, Regulation 33 of the Listing Regulations and relevant Accounting Standards. Additionally, Form No. AOC-1, detailing the salient features of the Companys subsidiaries, associates and joint venture companies, is attached to the Financial Statements.

(c) Deepak Nitrite Corporation Inc. (USA)

Deepak Nitrite Corporation Inc. (‘DNC) is a wholly owned subsidiary based in the United States. This Company was established to support your Companys marketing needs in North and South America. During FY 2022-23, DNC generated total revenue of USD 17,966.90 and achieved a net income of USD 273.56.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION OF THE COMPANIES ACT,

The particulars of loans given, investments made, guarantees given and securities provided in accordance with the provisions of Section 186 of the Act are provided in the standalone Financial Statements.

MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments aecting the financial position of your Company since the close of Financial Year i.e. since March 31, 2023 and the date of this Report. Further, it is hereby confirmed that there has been no change in the nature of business of your Company.

COMPLIANCE MANAGEMENT

The Company has in place a comprehensive and robust legal compliance management online tool, which is devised to ensure compliance with all applicable laws which impact the Companys business. Automated alerts are sent to compliance owners to ensure compliances within stipulated timelines.

The compliance owners certify the compliance status which is reviewed by compliance approvers and a consolidated dashboard is presented to the respective functional heads and Compliance Oicer. A certificate of compliance of all applicable laws and regulations along with corrective and preventive action, if any, is placed before the Audit Committee and Board of Directors on a quarterly basis.

DIRECTORS RESPONSIBILITY STATEMENT

Based on the framework of Internal Financial Controls established and maintained by the Company, work performed by the Internal, Statutory, Secretarial and Cost Auditors and external agencies including audit of Internal Financial Controls over Financial Reporting by the Statutory Auditors and reviews performed by the management and relevant Board Committees, including Audit Committee, the Board is of the opinion that your Companys Internal Financial Controls were adequate and eective during FY 2022-23. Accordingly, pursuant to Section 134(5) of Act, the Board of Directors, to the best of their knowledge and ability confirm that: (a) In the preparation of the Annual Accounts for the Financial Year ended March 31, 2023, the applicable accounting standards have been followed and there are no material departures; (b) They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of aairs of the Company at the end of the Financial Year ended March 31, 2023 and of the profit of the Company for the year ended on that date; (c) They have taken proper and suicient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) They have prepared the Annual Accounts on a going concern basis; (e) They have laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and are operating eectively; and (f) They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating eectively.

CORPORATE GOVERNANCE

Your Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirement set out by Securities and Exchange Board of India (SEBI). The Report on Corporate Governance under Regulation 34 of the Listing Regulations read with Schedule V of the said Regulations forms an integral part of the Annual Report. The requisite Certificate from a Practising Company Secretary, KANJ & Co., LLP, Company Secretaries, Pune, confirming compliance with the conditions of the Corporate Governance is attached to the Corporate Governance Report.

BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT

Pursuant to Regulation 34(2)(f) of the Listing Regulations and SEBI circular no. SEBI/LAD-NRO/ GN/2021/2 dated May 5, 2021, your Company provides the prescribed disclosures in new reporting requirements on Environmental, Social and Governance ("ESG") parameters called the Business Responsibility and Sustainability Report ("BRSR") which includes performance against the nine principles of the National Guidelines on Responsible Business Conduct and the report under each principle which is divided into essential and leadership indicators. The BRSR is attached to Report as Annexure - C.

INTEGRATED REPORTING

Your Company believes that sustainable development calls for concerted eorts towards building an inclusive, sustainable and resilient future for people and planet through harmonising economic growth, social inclusion and environment protection. In furtherance to this commitment, the Company had taken paradigm shi from compliance-based reporting to governance based reporting and accordingly, in the interest of its stakeholders, the Company, on voluntary basis adopted the Integrated Reporting (IR) framework of the Value Reporting Foundation (Earlier known as International Integrated Reporting Council) International Integrated Reporting Council to report on all the six capitals that the Company uses to create long term stakeholder value and this is the third consecutive year in which your Company has published its Integrated Report. The Integrated Report is a part of this Annual Report, which provides a clear, concise and comprehensive vision of business model.

MANAGEMENT DISCUSSION AND ANALYSIS

In terms of Regulation 34(2)(e) of Listing Regulations, read with other applicable provisions, the detailed review of the operations, performance and future outlook of the Company and its business is given in the Management Discussion and Analysis Report which forms part of this Annual Report and is incorporated herein by reference and forms an integral part of this Report.

CORPORATE SOCIAL RESPONSIBILITY

Deepak Foundation, which is the Groups Corporate Social Responsibility (‘CSR) arm, carries out the Companys CSR initiatives focusing on social interventions in areas like education, health and livelihood. Through the years, the Company has worked closely with the communities surrounding their facilities and even beyond to improve their livelihood and society. The Company has a positive impact on society, particularly in capacity development, healthcare and womens empowerment. The Company has organized several campaigns, such as mobile health units that provide healthcare services at peoples homes. Additionally, the Companys CSR arm is working on improving the last-mile presence of Government programs in day-care centres, delivering books to children through mobile library services and other initiatives.

Your Company has undertaken a major CSR Project for construction of new building and renovation of existing buildings of Kashiben Gordhandas Patel Children Hospital situated at Vadodara, Gujarat, conceived by Medical Care Centre Trust as a service for the children with focus on the poor and the deprived section of the society. The Childrens Hospital is a tertiary care pediatric hospital serving the poor & needy people of Vadodara, Central Gujarat and neighboring states of Madhya Pradesh, Rajasthan & Maharashtra, focussing poor and sick child. More than 2.5 million children have been served by Kashiben Gordhandas Patel Children Hospital since its inception in 1984. The field of activities of the organization is to provide excellent medical care and treatment to nearly 30% of the cases free and to the remaining at very reasonable cost.

The CSR Project was undertaken through Medical Care Centre Trust (CSR Registration No.: CSR00003940).

During FY 2022-23, your Company has spent 11.94 Crores on CSR activities, against the requirement of 12.64 Crores, being 2% of average of the net profits for the preceding three years, as per the requirement of Section 135(5) of the Act. The shortfall in spending

0.70 Crores was towards renovation of existing buildings and construction of new building of Kashiben Gordhandas Patel Children Hospital which was due to delay in obtaining various government approvals for commencement of renovation and construction of hospital building. Since the said CSR project was classified as the ongoing project by the Board of Directors, the unspent amount of 0.70 Crores towards the said ongoing project is transferred to a separate Bank Account on April 25, 2023 as required under the provisions of the Act and the rules made thereunder which shall be spent in the subsequent Financial Year.

The Company is having a duly constituted CSR Committee, details of which such as composition, Terms of Reference, meetings held and attendance thereat are provided in the Corporate Governance Report. There have been no instances during the year when recommendations of the CSR Committee were not accepted by the Board.

The Company is also having a CSR policy duly approved by the Board of Directors that provides guidelines for conducting its CSR activities and can be accessed at Companys website at https:// www.godeepak.com/wp-content/uploads/2021/05/3-DNL-Corporate-Social-Responsibility-Policy.pdf.

Annexure - D, which is part of this Report, contains the Report on the Companys CSR activities, complying with the requirements of Companies (Corporate Social Responsibility Policy) Rules, 2014.

NOMINATION AND REMUNERATION POLICY

Your Company has adopted a Nomination and Remuneration Policy for the Directors, Key Managerial Personnel and other employees pursuant to the requirement of Section 178 of the Act and the Listing Regulations. The Nomination and Remuneration Policy of your Company is annexed as Annexure - E and is also available on the Companys website on www.godeepak.com.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197 of the Act, read with Rule 5(1) of the Companies

(Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this Report as Annexure - F.

Disclosures relating to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. However, in accordance with the provisions of the second proviso to Section 136(1) of the Act, the Annual Report is being sent to the Members of the Company excluding the aforesaid information. The aforesaid information is available for inspection by the members upto the date of the ensuing Annual General Meeting on all working days, except Saturdays, during working hours at the Registered Oice of the Company. Any Member interested in obtaining such information may write to the Company Secretary.

ANNUAL RETURN

Pursuant to Section 134(3)(a) and 92(3) of the Act, the Annual Return of the Company has been placed on the website of the Company at www.godeepak.com.

In terms of Rules 11 and 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return shall be filed with the Registrar of Companies, within the prescribed timelines.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information pertaining to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached as Annexure – G to this Report.

STATE OF COMPANYS AFFAIRS

The state of your Companys aairs is given under the heading ‘Performance Review and various other headings in this Report and in the Management Discussion and Analysis, which forms part of the Annual Report.

SIGNIFICANT OR MATERIAL ORDERS PASSED AGAINST THE COMPANY

There are no significant material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operations in future.

SECRETARIAL STANDARDS OF ICSI

During the year under review, your Company is in compliance with the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India, with respect to Meetings of Board and its Committees and General Meetings, respectively. The Company has devised necessary systems to ensure compliance with the applicable provisions of Secretarial Standards.

GENERAL DISCLOSURES

Your Directors state that no disclosure or reporting is required in respect of the following matters as there is no transaction on these items during the year under review: i. Issue of equity shares with dierential rights as to dividend, voting or otherwise. ii. Issue of shares (including sweat equity shares) to employees of the Company under any scheme. iii. The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees. iv. There is no Corporate Insolvency Resolution Process initiated under the Insolvency and Bankruptcy Code, 2016.

RESEARCH & DEVELOPMENT

Our innovation infrastructure consists of centralised research facility, Deepak Research and Development Centre (DRDC) at Nandesari, Gujarat. Recognised by the Department of Scientific & Industrial Research, Government of India, it is equipped with the modern instruments and equipment for developing cutting edge technology. Your Companys R&D team comprises of very highly qualified and experienced team members who bring in the best practises in the industry.

DRDC also houses a state-of-the-art process engineering Lab, Kilo lab and process intensification lab. Mentioned setups help in generating scale-up related data for all the products which are developed in R&D Centre. The speed of lab scale development is increased with the application of Design of Experiments methodology using a specialised soware for screening as well as optimisation mode.

To aid in new technology platform and continuous process development, your Company has invested in flow reactor, flow meters etc. under Process Engineering Research & Innovation (PERI).

Analytical Team plays a crucial role in supporting synthetic chemistry, hence the analytical capabilities for additional requirements are also enhanced by purchasing various new analytical tools such as Gas Chromatography (GC), Gas Chromatography/Mass Spectrometry (GCMS), High Performance Liquid Chromatography (HPLC), Liquid Chromatography/Mass Spectrometry (LCMS), Ultra Performance Liquid Chromatography (UPLC) and Ion Chromatography (IC). Analytical Lab has also been expanded to accommodate these additional instruments.

Our R&D remain focussed on:

• New product development

• New technology platform development to serve the niche requirements of our customers

• Improvement of productivity as well as yield in existing products

• Reduction of our resource consumption particularly water, energy and using green technology

Process Safety Activities

DRDC has a dedicated process safety team which analyses the chemical processes for their safe operations based on in-house ARC- Accelerated Reaction Calorimeter, DSC- Dierential Scanning Calorimeter, RC- Reaction Calorimeter (with gas evolution analysis). Also, the team takes help from third party labs for other safety data generation e.g. powder safety data.

Technology

Your Companys R&D team is working on various new technology platform developments such as fluorination as well as photo chlorination chemistry, high pressure oxidation reaction for adipic acid formation and gas solid reaction for salicylic acid formation. A pilot facility for Vapor phase process has also been installed.

Lab scale CSTR - Continuous Stir Tank Reactor set-ups are used for converting batch mode reactions into continuous mode to achieve better yield and quality with overall reduction in the cost of operations.

State-of-the-art pilot plants

Your Company is havinig two state-of-the-art pilot facilities, one each situated at Roha, in Maharashtra and Nandesari, in Gujarat. The Pilots act as catalysts between R&D and commercial production of intermediates for Agrochemicals, Dyes, Pharmaceuticals etc., thereby allowing your Company to deliver quality products seamlessly. The Pilot facility boasts of stainless steel and glass lined reactors along with distillation columns for gas and liquid raw materials fully-equipped with advanced instruments, DCS (Distributed Control system) and utilities like chilled brine, low pressure steam, cooling water, temper water and more.

Development of idea to plant process (ITP)

The Technical Organisation is responsible for generating ideas, developing sustainable processes and moving them to manufacturing plant. With this in mind, a team conducts a critical review of the process from idea generation to technical development to production plant (ITP process). The activities are mapped and relevant documents are formalised. The ITP project is targeted to define technical process, the infrastructure required and supporting the document system. This also include in-depth safety reports for the chemicals and processes.

The overall ITP concept includes:

1. Process flow:

• Idea collection and assessment (ICA)

• R & D process

• Technology transfer

2. Responsible team identification

3. Responsibility matrix

A highly secure web-based suite of tools have been deployed to manage all data from ideas to commercial trials.

The system stores data in a structured format making it searchable, preventing knowledge loss while controlling information flow.

Benefits of ideas to plant trials

• Documentation of the Lab Records are all digilized and in on-line mode.

- Formats designed to extract data/information.

- Reports and presentations are created by the system through aggregation.

- Ensures data integrity, data security and data traceability.

- Reduce the time spent by scientists in making management reports, significantly.

• Open and transparent R&D team availability.

• Using fortnightly reports and reduce the time of technical reviews.

• No orphan data points and complete audit trail and tracebacks.

Training of technical team

Two workshops on process safety and process scale up were organised. Participants were across functions of Deepak Group. These workshops introduced the salient feature of the Process Safety pertaining to Deepak Group competency.

The complete aspects of process safety and process scaleup were explained in detail during the workshop. This will help the teams in developing processes where the emphasis on scalability and safety starts from the lab itself.

SAFETY, HEALTH & ENVIRONMENT

Your Company is dedicated in ensuring Safety, Health and Environment (SHE) in relation to all its manufacturing processes, products and services. It consistently takes various measures to develop and adopt safer process technologies, unit operations and sustainable systems from conceptualization stage.

Investments are being made in various areas considering benefits of all stakeholders such as Process Automation to enhance safety and minimize human error, extensive training on process and behavior-based safety, implementation of safe and environment friendly production processes, upgrades to eluent treatment facilities, Reverse Osmosis plants, Multiple Eect Evaporators etc., to reduce eluent discharge. Waste Heat recovery systems are being commissioned to promote the reduction, recovery and reuse of eluents and other utilities.

A systematic and well-documented scale-up procedure is in place for the development of products, starting from Research

& Development to Pilot to Commercial scale. This includes risk assessment and process safety studies at each stage to ensure inherently safe processes.

Your Company has established policies and systems to adhere internationally recognized guidelines, such as the principles of the United Nations Global Compact, the International Labour Organization (ILO) conventions and the Responsible Care Initiative. Measures are taken to ensure social compliance regarding human rights, labour and social standards, anti-discrimination, conflict of interest and anti-corruption. Health and safety remain a significant focus for your Company, aiming to achieve an accident-free workplace. Your Company firmly believes that all injuries, occupational illnesses, as well as safety and environmental incidents, can be prevented. This mindset encourages all employees to strive for personal safety excellence and the safety of others, including employees, contractors, customers and the surrounding communities.

Your Company follows a systematic incident reporting system, where all incidents, including near misses, are logged into the safety Management Information System (MIS). Corrective and preventive actions are tracked through internally developed soware based on these reports. Each incident is investigated by a cross functional team to determine its root causes and necessary precautions are taken to prevent their recurrence. Before implementation, all technological changes and projects undergo various safety study such as Facility Siting, HAZOP Assessment and Quantitative Risk Assessment. Additionally, all changes in plant settings are approved through the Management of Change procedure and undergo pre-startup safety reviews. Your Company continuously strengthen workplace safety and Process Safety Management through employee engagement initiatives.

The Group has embarked on the safety and sustainability journey with a vision of "Zero Incident". Towards safety transformation and with the aim of driving safety upgradation with respect to systems, processes and continuous culture improvement across all the sites, safety diagnostic assessment was carried out through an external agency and their findings enable the leadership to take decisions on the transformation roadmap. Safety assessment report included observations highlighting strengths and opportunities on the defined areas of focus and prioritized recommendation. All manufacturing units, including the Corporate Oice, are certified with the latest standards of ISO 9001, ISO 14001 and ISO 45001. Scheduled safety awareness programs are carried out across plants to achieve continuous improvement in terms of process safety, workplace safety and behavioural transformation.

Logistic Safety Management System

Together with its peers, your Company has established Nicer Globe, an independent platform that enables real-time monitoring of the movement of hazardous materials throughout India. This platform helps monitor any deviations in speed, route, or driving time restrictions, thereby minimizing transport-related incidents. Transportation of raw materials and products are ensured within its supply chain framework, utilizing GPS for real-time monitoring to ensure the safety of its customers, carriers, suppliers, distributors and contractors.

Environment

Our commitment to environmental protection goes beyond fulfilling legal requirements. Your Company has implemented the chemical industrys Responsible Care system and has established fundamental principles fully aligned with the UN Sustainable Development Goals.

Various initiatives have been undertaken to conserve resources, reduce energy consumption, promote recycling and reuse and minimize pollution. Constant eorts are being made to reduce the environmental footprint and find innovative solutions that benefit the environment.

KEY INITIATIVES DURING FY Emission management

DNL is strategically increasing its energy eiciencies by equipping its plants with modern and energy eicient equipment and technology. These measures are enabling to minimize emissions and energy consumption while improving the plants eiciency. DNLs R&D team is continuously working to improve product yield. DNL is also working on carbon osetting for the carbon generated, by planting trees and by installing various new-age equipments while working towards carbon neutrality to make them more eicient.

Water management

DNL is taking a holistic approach to water management by adopting water conservation philosophy based on the principles of reduce, reuse and recycle. This approach assists in achieving future goal of water positivity. DNLs intent is to make its operations water eicient and reduce its reliance on fresh water at the same time aiming to reach zero-liquid discharge for its facilities. A Zero Liquid Discharge system (ZLD) was implemented at the Hyderabad unit.

In Roha and Dahej units, approximately 60% of treated water was recovered from total wastewater generated by the installation of Reverse Osmosis system.

Waste management

Natural resource management and decreasing environmental impact of production is crucial to DNL. DNL utilizes resources eiciently and reduce waste generation. The waste generated during manufacturing processes is disposed of responsibly and in accordance with regulatory requirements under Hazardous and Other Waste (Management and Transboundary Movement) Rules, 2016. DNL adheres to the Pollution Control Boards air emission standards and do not use any ozone-depleting substances

(ODS) in its operations. All plastic wastes are recycled through CPCB-registered plastic waste processor (PWP) and post-consumer waste are addressed through EPR management. 100% Fly ash is handed over to the brick and tiles manufacturer as per fly ash notification.

DNL is committed to embedding sustainability in its processes and this commitment has been acknowledged by EcoVadis through its comprehensive Together for Sustainability (TfS) audit. In this audit, DNLs Dahej plant achieved a perfect score of 100 out of 100 on the first attempt. This accomplishment showcases DNLs unwavering eorts towards promoting sustainable development.

HUMAN RESOURCES

During the FY 2022-23, the HR & IR Department has been actively engaged in various activities to ensure the smooth functioning of the Companys Human Resource Management system. This has an objective of ensuring a strong, skilful & trained workforce availability for the Company all the time. The Company continues its endeavour of investing in Human Talent and Talent Management process through its various interventions and Programmes to improve and enhance competencies, capabilities, skills and potentials of its workforce. During the year, recognising the significance of identifying high-potential employees to ensure a robust talent pipeline, the Company carried out competency assessment through a renowned agency to identify training needs of high potential performing teams for career development. The Companys Human Resources initiatives and engagement activities have enabled the Company not only to sail through the challenging times, witnessed recently, but has helped Company in attracting, developing, nurturing & retaining right talent and keeping them motivated. Virtual Town Halls were organised wherein Executive Director & CEO, Director (Finance) & Group CFO address all the employees thereby have established a strong sense of bonding between the Companys Management and employees.

INSURANCE

All the insurable interests of your Company including inventories, buildings, plant and machinery are adequately insured against risk of fire and other risks.

The Company has in place Directors, Oicers, Liability Insurance (D&O) for all its Directors (including Independent Directors) and members of the Senior Management Team for such quantum and risks as determined by the Board in line with the requirement of Regulation 25(10) of the Listing Regulations.

DISCLOSURE AS REQUIRED UNDER SECTION OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT,

Your Company is committed to creating and maintaining a secure work environment where its employees, agents, vendors and partners can work and pursue business together in an atmosphere free of harassment, exploitation and intimidation.

To empower women and protect women against sexual harassment and as per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and Rules made thereunder, a policy for prevention of sexual harassment is already in place and Internal Complaints Committee had been set up at all major locations of the Company. This policy allows employees to report sexual harassment at the workplace. The Internal Committee is empowered to look into all complaints of sexual harassment and facilitate free and fair enquiry process with clear timelines. To build awareness in this regard, the Company has been conducting various programme on a continuous basis.

No complaints were pending at the beginning of the year and no complaints were received during FY 2022-23 from any employee and accordingly, no complaint were pending as on March 31, 2023, for redressal.

GREEN INITIATIVES

Climate change has become an established fact and is intertwined with human activities and industrial operations. Taking well-informed, decisive actions to help address climate change is a priority for the Company. DNL has set bold targets for reducing greenhouse gas (GHG) emissions and building resilience in its business, value chain and local communities.

DNL is continuously working towards reducing GHG emission through acquiring power from renewal energy sources, engaging new-age equipments to augment energy eicient systems and engaging AI powered solutions for sustainable reduced energy consumption in its operations.

Other notable environment protection activities include installation of online continuous monitoring system (OCEMS) for air emission monitoring and control. DNL also successfully converted canteen waste to biofertiliser and the same is used for green belt development. ETP sludge and agro waste will be used as fuel in the boiler along with coal which is under trial. This will help in utilizing the waste generated and reducing coal consumption.

DNL has undertaken a massive tree plantation drive with the help of the Forest Department in Village Shelavali, Taluka: Shahapur Dist.: Thane, State: Maharashtra. Around 55,000 trees of local species are planted on 50 hectares of land which has helped in bringing positive impact to the environment such as carbon oset, biodiversity conservation, improved air quality, soil erosion prevention and water management. It also provides employment opportunities to the local persons and results in aorestation.

In compliance with the provisions of Section 20 of the Act and as a continuing endeavour towards the ‘Go Green initiative, electronic copy of the Notice of 52^nd Annual General Meeting of the Company including the Annual Report for FY 2022-23 are being sent to all Members whose address are registered with the Company/ Depository Participant(s).

AWARDS AND RECOGNITION

In a bid to keep ensuring its relentless quest for growth and excellence, the Company continues to be committed towards maintaining the highest standards of corporate governance and sustainable practices. As a recognition for our unconventional innovations and focussed drive to achieve best-in-class operations, the Company has been winning a multitude of accolades at various forums while acquiring plaudits as the recipient of numerous prestigious awards for demonstrating its business ethos.

These embellishments to Deepaks cognizant candidature deliver a testament to the progress made by the Company and honor its diligent eorts towards delivering value for the welfare of all stakeholders and the society as a whole.

The details of the key recognitions secured by the Company have been highlighted in a separate section in the Annual Report.

ACKNOWLEDGEMENT

The Board of Directors highly regards the commitment, dedication and engagement exhibited by all employees at every level and hierarchical. Additionally, the Board extends its appreciation to investors, bankers, financial corporations, consumers, corporate partners, regulatory and Government agencies and other stakeholders for their unwavering cooperation and support throughout the year.

Lastly, we express our gratitude to the Central and State Governments, statutory authorities and other Government agencies for their consistent backing and anticipate their continued encouragement in the future.

	For and on behalf of the Board
	Deepak C. Mehta
Place: Vadodara	Chairman & Managing Director
Date: May 11, 2023	(DIN: 00028377)

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