gulshan polyols ltd Management discussions

1. INDUSTRY STRUCTURE & DEVELOPMENT

1.1 Overview on Economic and Business Environment: Global Economy and Outlook

Prospects for a robust recovery of global economic situation remain dim amid stubborn inflation, rising interest rates, financial sector turmoil, high inflation, and heightened uncertainties. The world economy faces the risk of a prolonged period of low growth as the lingering effects of the COVID-19 pandemic, the ever-worsening impact of climate change and macroeconomic structural challenges remain unaddressed. The major forces that shaped the world economy in 2022, seem set to continue into this year, however with lower intensities. Debt levels remain high, limiting the ability of fiscal policymakers to respond to new challenges. Commodity prices that rose sharply following Russias invasion of Ukraine have moderated, but the war continues, and geopolitical tensions are high. Infectious COVID-19 strains caused widespread outbreaks last year, but economies that were hit hard-most notably China-appear to be recovering, easing supply-chain disruptions. In light of this, IMF in its latest report has forecasted that global growth will fall from 3.4 percent in 2022 to 2.8 percent in 2023, before settling at 3.0 in 2024 which will be below the historical average of 3.8 percent.Despite desperate measures taken by Federal Reserve, the European Central Bank and Central Banks in other developed countries, the major economies like United States, European Union, China etc. are facing challenging period with their growth reported to be on the lower side then projected coupled with high inflation. The global growth rate is well below the average growth rate reported in the past two decades before the pandemic which was 3.1 per cent. Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. In a plausible alternative scenario with further financial sector stress, global growth declines to about 2.5 percent in 2023 resluting in the weakest growth since the global downturn of 2001, barring the initial COVID-19 crisis in 2020 and during the global financial crisis in 2009 when advanced economy growth fell below 1 percent. For many developing countries, growth prospects have further deteriorated amid tightening credit conditions and rising costs of external financing. Rs.The under developed / least developed Countries are forecast to grow by 4.1 per cent in 2023 and 5.2 per cent in 2024, which is far below the 7 per cent growth target set in the 2030 Agenda for Sustainable Development.

According to IMF, the global economy appears poised for a gradual recovery from the powerful blows of the pandemic, Russia – Ukraine crisis, slowdown in China and other geopolitical disorders. China is rebounding strongly following the reopening of its economy. Supply-chain disruptions are unwinding, while the dislocations to energy and food markets caused by the war are receding. Simultaneously, the massive and synchronous tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back toward its targets.

Global GDP Growth and Forecasts

Particulars	2021	2022	2023	2024
				Projections
World Output	6.1	3.4	2.8	3.0
Advanced Economies	5.2	2.7	1.3	1.4
United States	5.7	2.1	1.6	1.1
Euro Area	5.4	3.5	0.8	1.4
Emerging Market and Developing Economies	6.8	4.0	3.9	4.2
China	8.1	3.0	5.2	4.5
India	8.7	6.8	5.9	6.3
Japan	1.7	1.1	1.3	1.0
United Kingdom	7.4	4.0	-0.3	1.0
Brazil	4.6	2.9	0.9	1.5

Amidst the geo-political tensions, weakening global demand and tighter monetary and fiscal policies, the Global trade has remained under pressure. The volume of global trade in goods and services is forecast to grow by 2.3 per cent in 2023, which is also well below the trends during pre-pandemic times. According to UNCTADs Global Trade Update published in March, 2023 the Global trade reached a record US$ 32 trillion in 2022. Trade in goods was about US$ 25 trillion (an increase of about 10 per cent from 2021) and trade in services totalled about US$ 7 trillion (an increase of about 15 per cent from 2021). The UNCTAD nowcast for Q1 2023 indicates global trade in goods to increase by about 1 per cent, while trade in services is expected to increase by about 3 per cent on the same basis.

Spurred by pent-up demand, lingering supply disruptions, and commodity price spikes, inflation reached multidecade highs last year in many economies, leading central banks to tighten aggressively to bring it back toward their targets and keep inflation expectations anchored. The unexpected failures of two specialized regional banks in the United States in mid-March 2023 and the collapse of confidence in Credit Suisse—a globally significant bank—have roiled financial markets, with bank depositors and investors reevaluating the safety of their holdings and shifting away from institutions and investments perceived as vulnerable.

Global headline inflation is set to fall from 8.7 percent in 2022 to 7.0 percent in 2023 on the back of lower commodity prices, but underlying (core) inflation is likely to decline more slowly. Infiations return to target is unlikely before 2025 in most cases. Once inflation rates are back to targets, deeper structural drivers will likely reduce interest rates toward their pre-pandemic levels. According to UNCTAD, the Global

rd inflation will recede, although slowly than initially anticipated, from 8.7 percent in 2022 to 7.0 percent this year and 4.9 percent in 2024. The US Federal Reserve has been raising interest rates to restore price stability and to bring balance to the labor market. The demand for new hires is exceeding the supply of available workers in the US, as the unemployment rate has fallen toRs.its lowest level in over 50 years, and this has contributed to higher inflation. Although these higher rates will temporarily increase unemployment, they will pave the way for stable inflation and sustainable economic growth, which will ultimately help create more jobs in the future.

Source: IMF World Economic Outlook April 2023, IMF Country Focus dated February 03, 2023 & February 16, 2023

Indian Economy

As India marked its 75th years of its Independence, it became the fifth largest economy of the world, despite confronting considerable challenges such as financial sector turmoil, inflationary pressures, effects of the Russia-Ukraine war, and the persistent impact of the Covid-19 pandemic over the past three years. The agencies worldwide continue to project India as the fastest-growing major economy. Staging a broad based recovery across sectors post pandemic, the Indian economy is poised to grow at 5.9 percent for the year 2023 which is followed by growth rate of 6.8 percent in the previous year. GDP growth is expected to remain robust in the year 2024 with forecast for FY24 in the range of 6-6.8 %. According to IBEF, Strong economic growth in the first quarter of FY 2022-23 helped India overcome the UK to become the fifth-largest economy. . Real GDP in the first quarter of 2022–23 is currently about 4% higher than its corresponding 2019-20, indicating a strong start for Indias recovery from the pandemic. Growth is inclusive when it creates employment. Rising employment and substantially increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the near future. Both offcial and unoRs.cial sources confirm that employment levels have risen in the current financial year. As an indicator to economic growth, the Core sectors like real estate and infrastructure is also showing positive signs with increase in the demand of cement and steel. Power and fuel are critical inputs for the industry and commercial establishments is also back to pre-pandemic demand. Aviation, one of the worst-hit sectors due to the pandemic and lockdown, is also seeing a strong uptick with month on month increase in weekly average daily Rs.iers. The automobile industry is also back on track with the every segment reporting upward movement. Buoyant tax collection during 2023 is also a key indicator to the growth. Complemented by The worlds second-largest vaccination drive involving over 2 billion doses, the economic activity and growth has been tremendous and is poised to ascend to the pre-pandemic growth path in FY23.

India is shifting toward greater renewable energy generation while striving to improve energy access, aRs.ordability, and security. Its also poised to be one of theRs.fastest growing economiesRs.in coming years, which will in turn sharply boost energy demand. Whether it meets those needs with fossil fuels or green alternatives has the potential to shift the trajectory of its greenhouse gas emissions for many more years to come. India has made significant progress towards meeting its emissions reductions targets under the Paris Agreement, but with current policies total GHG emissions would nonetheless increase by more than 40 percent by 2030. While a modest increase in short-term emissions may be necessary to meet poverty reduction and energy security goals, a more rapid scaling up of current policies could help lower emissions considerably over the medium-term and bring India closer to a path to net zero by 2070. The rise in consumer prices has slowed considerably. The retail inflation which peeked up during FY22 is now below RBIs upper tolerance limit of 6 percent. In India, Consumer Price Index (‘CPI) inflation is projected to moderate to 5.2 per cent for 2023-24; with Q1 at 5.1 per cent; Q2 at 5.4 per cent; Q3 at 5.4 per cent; and Q4 at 5.2 per cent. Since the September 2022, CPI inflation path has been impacted by domestic food supply shocks amidst weather vagaries and the passthrough of pent-up input costs. A transitory but more than anticipated seasonal correction in vegetable prices during November-December 2022 brought some relief but this reversed in January-February 2023 due to sustained price pressures from cereals and spices and a pick-up in protein-based food inflation. With improving domestic demand conditions, input costs were steadily passed on to retail prices of goods and services, imparting considerable stickiness to the already elevated core (CPI excluding food and fuel) inflation. Indias overall exports projected to scale new heights, growing at 13.84 percent during FY 2022-23 over FY 2021-22 to achieve USD 770.18 billion worth of exports. Merchandise exports have registered highest ever annual exports of USD 447.46 billion with 6.03% growth during FY 2022-23 surpassing the previous year (FY 2021-22) record exports of USD 422.00 billion. Services export lead the overall exports growth and projected to set a new record annual value of USD 322.72 billion with growth rate at 26.79 percent during FY 2022-23 over FY 2021-22. The Capital Expenditure (Capex) of the central government, which increased by 63.4 per cent in the first eight months of FY23, was another growth driver of the Indian economy. A sustained increase in private Capex is also imminent with the strengthening of the balance sheets of private sector. Emergency Credit Linked Guarantee Scheme (ECLGS) of the Union government contributed remarkably for the growth and support of MSME sector.

Propelled by favourable monetary and fiscal policy, various structural reforms across the industry, government and regulatory interventions coupled with good monsoon, the fundamentals of the Indian economy seems sound in the near future. With the current encouraging economic recovery and positive signs of revival it may be construed that there is light at the end of the tunnel.

Source: IMF World Economic Outlook April 2023, RBI Bulletin April 2023, Press Release- Ministry of Commerce & Industry April 2023; IBEF.org

Industry Overview

1.1 Global Chemical Industry

Global chemical production (excluding pharmaceuticals) is expected to grow by 2.0% in 2023, slower than in the previous year (2022:Rs.+2.2%). A decline in the production is anticipated in the advanced economies with growth in minus from –2.90% in 2022 to –3.00% in 2023. Growth in the emerging markets is expected to slow slightly from +4.8% in 2022 to 4.4% in 2023.

China, the worlds largest chemical market is forcasted a, the worlds largest chemical market, we are forecasting slightly weaker growth in chemical production of 5.9% in 2023 as compared to 6.6% in 2022. The opening of the Chinese economy is expected to bring with it higher growth in Chinese domestic demand, especially in the consumer goods industries and the health and nutrition sector, as well as positive contributions to growth from the automotive and electronics industries.

Chemical production in theRs.E.U.Rs.should again decrease by 5.2% (2022:Rs.–5.8%), well below the overall industrial development forecast for Europe. Due to the high energy costs, no major catch-up effects are expected in energy-intensive basic chemicals following the already strongly negative prior year. Growth should mainly be driven by demand from the automotive industry. By contrast, consumption of durable and non-durable consumer goods is not likely to increase. It is expected that the chemical production in theRs.United Kingdomfito continue to decline from -5% in 2022 to -5.5% in 2023.

In theRs.United States, the positive base effects that supported growth in 2022 will come to an end. Domestic demand will largely stagnate, with the exception of the automotive industry, the energy sector and the electronics industry. Demand from the construction industry is expected to decline on the back of high interest rates. Export demand for chemicals from Europe should provide positive momentum given the lower raw materials and energy prices. Overall, A slight decline is expected in chemical production from +2.3% in 2022 to -2.0% in 2023. Japan, is also forecasted for weaker weak recovery after the decline in the previous year (2023:Rs.+1.0%, 2022:Rs.–3.0%). Growth stimulus in Japan is expected to come primarily from the automotive sector.

South AmericaRs.will presumably see much lower growth in chemical production (2023:Rs.+0.9%, 2022:Rs.+2.6%). Demand from the consumer goods industries is expected to grow at a similarly weak rate to GDP. By contrast, we expect demand from the agricultural sector to increase more strongly and demand from the automotive industry to remain solid but with weaker growth than in the previous year. Source: Chemical Industry - BASF Report 2022

Key Global Trends

Feedstock supply is healthy, but low demand will put margins under pressure

As the world recovers from the economic downturn of 2020 following the pandemic, the industry seeks to resume the growth trend. The current polyoleRs.n feedstock supply is healthy, but oversupply issues are expected in the first half of 2023. Feedstock production has outstripped demand, which means that overstocked capacity will negatively affect profitability.

High supply and low demand will mean prices remain unpredictable for the first part of 2023. This will mean tight margins across the value chain unless downstream demand rises in the latter half of the year.

Infiation and the cost-of-living crisis will continue to suppress consumer confidence

High inflation, energy prices, and the cost-of-living crisis will continue to dampen consumer spending on goods in end-use sectors. In addition, inventory reduction measures through the second half of 2022 have led to weak demand, with retailers and brands looking to reduce their inventories and cut costs in response to consumers reducing their outgoings.

According to afireport by Wood Mackenzie, this dampened consumer spending is likely to continue through the first half of 2023, with living costs anticipated to rise further. If inflation falls in the US and Europe as their governments aim, then theres optimism that demand will increase in the second half of 2023.

Chinas recovery from lockdowns hampered by supply and global inflation

Following the long lockdown and special measures across Shanghai, the region is attempting to manage a second wave of COVID infections. This will affect Chinas production capacity as much of the countrys chemical production is concentrated in the regions around Shanghai. This slowdown will likely slow the industrys growth through the first half of 2023. Weak downstream demand will also cause capacity issues for chemical producers, with overcapacity being an ongoing issue for polymer markets through 2023.

And as previously mentioned, China is a significant global exporter of specialist chemicals. Demand for these products across Europe and the US will likely remain diminished due to inflation, further affecting growth.

Recycled materials will be in short supply as public demand grows

Demand for recycled materials is expected to grow, in line with public expectations of companies and governments looking to meet plastic reduction targets. In 2023, brands will continue to invest in their circularity targets, bringing plastics back into feedstock. The challenge through 2023 will be a limited supply of recycled materials, particularly for food-grade packaging producers under pressure to move to more sustainable products, which could affect pricing this year.

The main focus through 2023 will be the improvement of the recycling collection and sorting, as well as improvements to infrastructure, to increase the viability and efficiency of waste recycling and returning materials to feedstock.

Sustainability will be a priority and drive ESG agendas

Recycling is just one part of the sustainability ecosystem. Chemical companies will continue developing their environmental, social, and governance (ESG) standards to drive their decarbonisation strategies.

There are three areas, orRs. Scopes, to consider for measuring emissions. Scope 1 involves direct emissions from company-own assets, including facilities and vehicles. Scope 2 looks at indirect emissions associated with the generation of electricity. And Scope 3 emissions are indirect emissions resulting from transportation and waste. Chemical producers will work towards these targets across all three scopes in 2023, but progress will likely be slow.

For example, DSMRs.increased its renewable energy purchasing targetsfito 100% by 2030.Rs.BASFRs.signed contracts in 2022 to purchase up to 660,000MWh of wind and solar electricity each year, with an output of 250 MW. As a result, more than 25% of BASF›s North American power will be sourced from renewable electricity.Rs.CovestroRs.plans to construct a ?27 million polycarbonate recycling plant in Shanghai, China. This facility will be capable of producing 25,000 tonnes of polycarbonate products with recycled content by 2023.

The growth of the EV industry is an exciting opportunity

Despite the challenges mentioned above, the industry does have some positive outlooks, and the growth of the Electric Vehicle (EV) industry is just one area of good news.

Industry insights specialists McKinsey and Company predict that by 2030, battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) will make up more than 55% of new vehicles produced by 2030Rs.in China, Europe and the US. Driven by public perception, government policy and incentives, and lower vehicle purchase costs, the EV market globally is set toRs. rise 3-5% across the major car marketsRs.of China, the US and Europe.

There is a continuing shift towards lighter EVs, including polypropylene, which accounts for over a third of the plastic demand in the transport sector. EV production also uses 3-5% more plastic than internal combustion engine (ICE) vehicles, and this increased demand will drive growth.

Source: NES FIBCROFT report

1.2 Indian Chemical Industry

Covering more than 80,000 commercial products, Indias chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers.

Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. India accounts for 16-18% of the world production of dyestuRs.s and dye intermediates. Indian colorants industry has emerged as a key player with a global market share of ~15%. The countrys chemicals industry is de-licensed, except for few hazardous chemicals. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals).

The domestic chemicals sectors small and medium enterprises are expected to showcase 18-23% revenue growth in FY22, owing to an improvement in domestic demand and higher realisation due to high prices of chemicals.

Indias proximity to the Middle East, the worlds source of petrochemicals feedstock, enables it to benefit on economies of scale.

The Indian chemicals industry stood at US$ 178 billion in 2019 and is expected to reach US$ 304 billion by 2025 registering a CAGR of 9.3%. The demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute US$ 383 billion to Indias GDP by 2030.

An investment of Rs. 8 lakh crore (US$ 107.38 billion) is estimated in the Indian chemicals and petrochemicals sector by 2025. The specialty chemicals constitute 22% of the total chemicals and petrochemicals market in India. The demand for specialty chemicals is expected to rise at a 12% CAGR in 2019-22.

Indian manufacturers have recorded a CAGR of 11% in revenue between FY15 and FY21, increasing Indias share in the global specialty chemicals market to 4% from 3%, according to the Crisil report. A revival in domestic demand and robust exports will spur a 50% YoY increase in the CAPEX of specialty chemicals manufacturers in FY22 to Rs. 6,000-6,200 crore (US$ 815-842 million). Revenue growth is likely to be 19-20% YoY in FY22, up from 9-10% in FY21, driven by recovery in domestic demand and higher realisations owing to rising crude oil prices and better exports.

Moreover, according to the CRISIL report, the specialty chemicals market in India would grow faster than China, increasing its market share to 6% by 2026 from 3-4% in fiscal 2021. A shift in the global supply chain brought on by the China+1 strategy and a resurgence in domestic end-user demand will fuel significant revenue growth of 18–20% in 2022 and 14–15% in 2023.

Despite the current pandemic situation, the Indian chemical industry has numerous opportunities considering the supply chain disruption in China and trade conflict among the US, Europe and China. Anti-pollution measures in China will also create opportunities for the Indian chemical industry in specific segments.

Additional support, in terms of fiscal incentives, such as tax breaks and special incentives through PCPIRs or SEZs to encourage downstream units will enhance production and development of the industry. The dedicated integrated manufacturing hubs under Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy to attract an investment of Rs. 20 lakh crore (US$ 276.46 billion) by 2035.

To bring about structural changes in the working of domestic chemical industry, future investments should not only focus on transportation of fuels such as petrol and diesel, but also on crude-to-chemicals complexes or refineries set up to cater to the production of chemicals.

Source: Indian Brand Equity Foundation- Chemicals Industry Report, RBSA Advisors, Department of Chemicals and Petrochemicals, India Chem report 2020, DyestuRs.s Manufacturers Association of India, Union Budget 2023-24

1.3. Company overview and recent developments:

Gulshan Polyols Limited (GPL or Gulshan or the Company) is a multi-location, multi product manufacturing company and is a leading manufacturer of grain and mineral based specialty chemical in India with global presence in 42+ countries, across 3 continents. Gulshan is an industrial house, older, more than four decades, engaged in manufacturing of specialty chemicals from grain and minerals, from multiple facilities set up across India.

The roots of the Company was incorporated by Promoters in the year 1981 as Gulshan Sugars & Chemicals Limited (GSCL) with primary business of manufacturing Calcium Carbonate at MuzaRs.arnagar, with an initial capacity of 2100 MTPA. Over the years, in 2000, GSCL was demerged into three companies and GPL is one of them, incorporated as a public limited company and registered in October 2000. Since inception, GPL is a dividend paying company and listed on Stock Exchanges. In March 26, 2002 and January 28, 2015, your Company was listed on Bombay Stock Exchange (BSE) and National Stock Exchange of India Ltd. (NSE) respectively.

Its business portfolio covers Ethanol, Sorbitol, Fructose & Sweetener, Starch, Calcium Carbonate, Ethyl Neutral Alcohol, Agro based Animal Feed and its By Products. On- Site PCC plants on multiple production facilities/locations at MuzaRs.arnagar in Uttar Pradesh, Bharuch in Gujarat, Chhindwara in Madhya Pradesh, Dhaula Kuan in Himachal Pradesh, Abu Road in Rajasthan, Patiala in Punjab, Tribeni in West Bengal, Amlai in Madhya Pradesh, Golpara, Assam.

From toothpaste to alcohol, from sweeteners to paints, from paper to medicines, from plastics to personal care items,GPL is touching and an integral part of everyones everyday life, across the world.

Gulshan provides the know-how to set up an On-site PCC plant and maintains the supply of the raw materials for the same. After success of its first partnership in this field, it is tying knot with other paper mills for On-site PCC technology.

GPL is one of the largest players in the mineral processing & grain processing segments in India. It is a market leader with a substantial market share in the respective segments. More than four decades of experience, large capacity, strong clientele and consistent performance place GPL in the pole position.

The Company caters to wide range of industry & niche markets in core sector encompassing pharmaceuticals, personal care products, footwear, tyres, rubber & plastics, paints, alcohol, value added paper, agrochemicals, food and agro products, ethanol etc. Gulshan has an impressive clientele comprising of the nations top FMCGs, leading paint manufactures and many reputed brands. Gulshan was recognized by Government of India as Star Export House in year 2016, for consistent export of products to various parts of the world. Gulshan caters the top 1000 Indian Companies.

The COVID-19 pandemic has posed significant unforeseen challenges for all businesses, including GULSHAN POLYOLS LIMITED. However, we driven by the dedication of our employees and the trust of our customers, we have grown and growing ahead at the fastest pace ever in a decade, constantly.

2. COMPANYS PRODUCT CATEGORIES/SEGMENT PERFORMANCE:

The Company has three manufacturing segments viz Mineral Processing, Grain Processing & Ethanol (Bio-Fuel)/Distillery. The products processed under these segments, are having end use in multiple industries.

2.1 GRAIN PROCESSING:

Starch Sugars Business: It includes Sorbitol-70% solution, Liquid Glucose, Native Starch, Fructose Syrup, and Rice Syrup Solids. Having facilities with a combined capacity of 1,81,800 MTPA for producing starch sugars and for Sorbitol with capacity of 72,000 MTPA with leading market share.

The Rice-based Grain Processing Plant at MuzaRs.arnagar, has achieved optimum level of capacity utilization and will remain the same in the future also.

Native Starch/ Maize Starch: It is the main carbohydrate nutrient from different sources of vegetation. Maize or corn starch powder is white, odorless and tasteless, which is extracted from kernel of maize/ corn. It is widely used as a thickener and a stiRs.ening agent with numerous industrial applications. Maize starch is the second major product after sorbitol, is used by the semi kraft paper industry for making corrugated boxes (demand supported by e-commerce boom). The companys plant is situated in and around the paper belt in MuzaRs.arnagar which gives us strategic locational advantage.

Fructose Syrup which is naturally found in fruits, corn syrup and molasses. Commercially, Fructose Syrup is used as a sweetener in Rs.avored and unRs.avored syrups, energy drinks, processed food, bakery products. It is serving the food and beverage industry is showing a very high growth rate.

Rice Syrup Solids which is also known as dried glucose syrup or Glucose Powder. It is usually used as sweetener and stabilizers for moisture & texture in baked goods, confectionary (hard candy), dairy products, processed meats, seafood and also used by breweries to lighten beer color, add body, rice Rs.avor and fermentable sugars. It is easily dispersed into water for ease of use in quick dissolving beverage mixes. Agro based Animal Feed business is Indias feed industry is growing with poultry, cattle and aqua feed sectors emerging as major growth drivers. The demand for animal protein and dairy products in India will increase the compound feed consumption volumes. Consequently, cattle need to be developed, more requirement of nutritious food for them, which implies higher demand of grain by-products.

Company has grain processing units in Bharuch, Gujarat and MuzaRs.arnagar, Uttar Pradesh. Currently grain processing is the main revenue generator for the company with the contribution of 75% (approx.) to the total revenue among segments.

Company is focusing on Green Energy

2.2 MINERAL PROCESSING

Calcium Carbonate business: Your Company also produces over 19 grades of Calcium Carbonate (Precipitated, Activated, Wet and Ground Natural Calcite Powder) used in various industries. The Company has four integrated facilities to manufacture Calcium Carbonate spread across the country.

In the Companys endeavor to add new products delivering value addition, the company is gradually shifting its focus from producing lower grade products to higher grade products which will increase the overall profitability of the Company in medium to long term perspective.

Company has mineral processing units in MuzaRs.arnagar, Uttar Pradesh, Dhaula Kuan in Himachal Pradesh and Abu Road in Rajasthan. Onsite PCC/WGCC Plants: The Company is ‘FIRST in the country to introduce the concept of On-site PCC manufacturing plant for Value Added Paper (VAP) industries. Companys achievement has been recorded in the Limca Book of Records in 2010. The Company has successfully installed Seven Onsite PCC plants for Paper Industry Companies.

Company provides the raw materials and expertise to set up and maintain an on-site PCC plant. This reduces energy consumption and drying time for users. Company has Onsite PCC plants in West Bengal, Uttar Pradesh, Punjab and Madhya Pradesh.

The Management hopes for the exponential growth in this segment in the country, in line with the developed nations, where on-site PCC has become an integral part of Value-Added Paper such as printing, photo copier, tissue paper and writing paper.

Your company is the only Indian company which is offering such technology & providing plants to Indian and overseas companies engaged in manufacturing Value Added Paper.

2.3 ETHANOL (BIO-FUEL)/DISTILLERY

Ethanol (Bio-Fuel): Company is successfully supplying Ethanol to IOCL, BPCL, HPCL and other Oil Marketing Companies (OMCs), Reliance and Nyara Energy forEthanol Blending Petroleum Program and Company is working at more than 100% capacity utilization. Company has entered into 10 years long ofitake agreement with OMCs for more than 50% of capacity for its 500 KLPD Grain Ethanol Manufacturing Plant. The Company is planning to expand its footprints in Ethanol production segment and has embarked on a significant capex plan for manufacturing ethanol using damaged food grains.

Company has Ethanol Production Units in Chhindwara, Borgaon, Madhya Pradesh and Golpara, Assam (in the process of setting up). Country Liquor: The Company has awarded a tender for manufacturing and selling of Country Liquor in the state of Madhya Pradesh.

Segment wise Revenue & Profits for the year ended March 31, 2023

(Rs. in Lakhs)

Segments	Revenue for the year ended 31st March		Profits before Interest and Tax for the year ended 31st March
	2023	2022	2023	2022
Mineral Processing	11,581.20	9,409.63	2,940.26	1,278.56
Grain Processing	87,481.73	80,915.33	3,327.90	8,140.83
Ethanol (Bio-Fuel)/Distillery	18,910.04	19,729.30	(29.40)	2,453.27
Unallocated	-	18.38	412.07	102.96
Total	1,17,972.97	1,10,072.64	6,650.83	11,975.62

3. OPPORTUNITIES & THREATS

The government has started various initiatives such as mandating BIS-like certification for imported chemicals to prevent dumping of cheap and substandard chemicals into the country. The Indian government recognises chemical industry as a key growth element and forecast to increase share of the chemical sector to ~25% of the GDP in the manufacturing sector by 2025. Under the Union Budget 2023-24, the government allocated Rs. 173.45 crore (US$ 20.93 million) to the Department of Chemicals and Petrochemicals. PLI schemes have been introduced to promote Bulk Drug Parks, with a budget of Rs. 1,629 crore (US$ 213.81 million). The Government of India is considering launching a production linked incentive (PLI) scheme in the chemical sector to boost domestic manufacturing and exports. A 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 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. 100% FDI is allowed under the automatic route in the chemicals sector with few exceptions that include hazardous chemicals. The government has proposed several incentives for setting up a sourcing or manufacturing platform within an Indian SEZ:

• Effective April 1, 2020, 100% Income Tax exemption on export income for SEZ units for the first five years, 50% for the next five years thereafter and 50% of the ploughed back export profit for next five years.

• Single window clearance for central and state-level approvals.

• Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units.

In this current scenario, Higher energy costs is the most significant risk to our business performance. The Company continues to remain focused towards keeping fixed costs low and controlling variable costs including grain, fuel, coal, lime stone and other raw materials costs and continuous improvement programs to help mitigate the adverse impact of these risks including working on changing fuel mix and different contracting strategies.

Adherence to more stringent environmental norms, packaging and improving safety performance in a sustainable manner are other key areas that the Company continues to focus on during FY 2023-24.

Our strengths revolve around our penchant for innovation and consistent product development with the aim of creating a clear differentiation from competition, our strong passion for sustainability and the circular economy, our thought leadership in creating intellectual property and our ability to collaborate with multiple agencies to realize our four-pillar strategy.

4. FUTURE OUTLOOK

The outlook for the Company for the coming years continues to be positive. Most of the customers have indicated robust growth plans which augurs well for the growth of the Company. Your Companys focus has always been on expanding its business horizons in the bioeconomy by leveraging its technology led innovative solutions.

Further, a consistent value creator, Indias chemical sector remains an attractive hub of opportunities. The sector has created enormous wealth for investors in the past with stocks of many specialty companies rising manifold. Robust demand across end-user industries led by rising domestic consumption, strong export growth, and rising import substitutions are expected to be primary growth drivers for the chemical sector.

Growing strong domestic demand and increased exports will continue to fuel the growth of the Indian specialty chemicals industry. The robust performance of the sector is prompting specialty chemical manufacturers to ramp up their production capacity to meet the growing demand for its products. Furthermore, anti-pollution measures in China will also create opportunities for the Indian chemical industry in specific segments.

Additional support, in terms of fiscal incentives, such as tax breaks and special incentives through PCPIRs or SEZs is set to encourage downstream units that will enhance the production and development of the industry. The dedicated integrated manufacturing hubs under the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy would also attract an estimated investment of Rs. 20 lakh crore (US$ 276.46 billion) by 2035.

To sum it all up, the fast paced growth of the Indian Chemical industry is inevitable and its growth trajectory will witness a transition to specialty materials as user industries constantly evolve. The specialty chemicals sector is reshaping the future of Indias economic landscape with a renewed approach towards its products and solutions, and if Indias demands and megatrends come to fruition, the specialty chemicals industry will need to further gear up, and maybe faster than we would imagine. Your Company is well positioned with its strong management team, technology interventions and robust processes to address any changes that may emerge due to COVID-19 and during this global tensions and fast inflation. Indeed, your Company has marked eRs.ervescent growth and achieved many milestones throughout the year in FY 2022-23. Though, Company is impacted by the constant fluctuations in commodity and fuel prices. But, it is your Companys endeavor to source the right material, that is of high quality and constantly keep track of emerging costs to take corrective action at the right time.

The Company has also signed and executed a Long Term Ofitake Agreement for setting up of upcoming Standalone dedicated ethanol plants of 500 KLPD and 250 KLPD at Chhindwara, Borgaon, Madhya Pradesh and Goalpara, Assam respectively in ethanol deficit states for supply of Indigenous Denatured Anhydrous Ethanol to Oil Marketing Companies (OMCs) under ‘Ethanol Blending Petroleum Program to meet ethanol requirements for 20 % blending by year 2023 by using corn/maize and rice combination, for supply of quantity of 12.87 Crores Liter per annum for 10 years.

Company is on track of Setting up of largest single stream grain based plant in ASIA

By FY25, the Company plans to expand its ethanol capacity to 810 KLPD from current 60 KLPD. In view of the above, Company has acquired land and ordered for major Plant and Machineries. The Company is looking at a total capex of Rs.45,000 Lakhs, out of which, our capex of Rs.30,000 Lakhs on 500 KLPD manufacturing unit at Borgoan, Madhya Pradesh has almost reached its final lap and the unit is expected to commence operations very soon allowing Gulshan to become the largest single stream grain based ethanol producer in Asia and Rs.15,000 Lakhs will be required for expanding the aggregate capacities across the grain processing division. The planned Capex for this project is ~Rs.15,000 Lakhs, out of which the Company has deployed ~ Rs.6,000 Lakhs already towards upgradation of the power plant and existing capabilities. The Company expects ~ 20% increase in total combined capacities of the plants. The upgraded capacities will be utilized towards the production of Sorbitol 70% Solution and Starch Derivatives like Dextrose Monohydrate & Maltodextrin Powder. Further, an estimated capex of Rs.18,500 Lakhs is to be deployed for ethanol plant in Assam, out of which the Company has completed approx. 30 % capex for its total requirement for its 250 KLPD in Assam. Currently fabrication and Installation of Plant & Machinery is in progress. The Capex is financing through a loan of Rs.17,000 Lakhs from HSBC Bank for the Ethanol facility in Madhya Pradesh, a loan of Rs.17,000 Lakhs from State Bank of India for setting up of an Ethanol Project of 250 KLPD Capacity in Assam, proceeds of the Qualified Institutions Placement and internal accruals.

The decision of advancing 20% blending target by 2030 has created huge opportunities in the ethanol sector. Ethanol plants based on Starchy feedstock are going to drive the new capacities. As we go forward some further favorable developments are likely in form of flex fuel policy, ethanol blending in diesel, expansion of biofuels basket and feedstock differentiated pricing for ethanol.

Notwithstanding the external challenging environment, your Company remains cautiously optimistic about the outlook based on the preparedness to deliver future ready offerings across the value chain, strong momentum for climate actions solution and diversified market portfolio in addition to resilient home market.

Your Company for the purpose of expanding the current business of the Company and exploring the business opportunities globally has incorporated a wholly owned subsidiary of the Company in International Free Zone Authority (IFZA), Dubai Silicon Oasis, Dubai, United Arab Emirates. There were no significant transactions and arrangements, entered and executed during the quarter ended March 31, 2023 by the Subsidiary Company. Your Company has always strived towards nation building, through its business endeavors which focuses on creating excellent environment. We aim at emerging stronger, once situations normalize. The emphasis will be on continued incubation of future businesses and create value for our stakeholders in the long term.

5. RISK AND CONCERNS

In any business, risks and prospects are inseparable. The Company is exposed to various risks which may be internal as well as external. The Company has a comprehensive risk management system in place and is tailored to the specific requirements of its diversified businesses, taking into consideration various factors, such as the size and nature of the inherent risks and the regulatory environment of the individual business segment of operating company. The risk management system enables it to recognize and analyze risks early and to take timely appropriate action. The Senior Management of the Company regularly reviews the risk management processes of the Company.

Therefore, the Companys diversified product profile, quality approach, value-added segments, manufacturing flexibility, modern technology & strong marketing network has saddled the company to successfully counter the effect of such adversities.

Company has formed Risk Management Committee and policy thereon to cater and mitigate various risks after necessary identification and evaluation.

We believe that our multi-location operations also allow us to leverage the competitive advantages of each location to enhance our competitiveness and reduce geographic and political risks in our businesses.

The Management, being well acquainted with business risks, is saddled to take care of the risks and concerns and takes appropriate and timely measures as and when the need arises.

Also, taking into cognizance of the current major risk is to control fixed and variable costs related to raw materials, crude oil, energy, coal, fuel, lime stone, etc. and mitigation measures, required to be taken thereon. The performance, future prospects and cash flow generation could be materially impacted by any of these risks or opportunities. As a responsible management, the Companys principal endeavor is to maximize returns. The Company continues to take all steps necessary to minimize its expenses through detailed studies and interaction with experts. Further, there are constant review meeting at management level to discuss and analyze various near term and long-term risk and formulate plans to mitigate the same.

Cost Risks

Risk: The key raw material consumed by the Company has been very volatile and sudden change can have an adverse impact on the Companys operating margins.

Concern: The Company has many long-term contracts with its major customer where the raw material cost could not be passed through entirely.

Financial risks

Risk: Financial risks relates to the Companys ability to meet its financial obligations and lessen the impact of various factors like interest rates, foreign currency exchange rates, credit rating etc. It also includes any risk to servicing pension obligations and to financial ratios due to impairment.

Concern: Company is well positioned to service financial risk and facilitates its growth objectives. The Company has adequate measures to deal with all types of financial risks.

Legal and Compliance risks

Risk: Legal and compliance risks relate to risks arising from outcome of legal proceedings, government action, regulatory action, which could result in additional costs.

Concern: Company has ensured compliance of all laws applicable to the Company and effectively monitors through efficient compliance management system.

Strategic Risks

Risk: It includes the range of external events and trends (like Government policy) that can adversely impact the Companys strategic growth trajectory and destroy stakeholder value. It also includes the risks arising out of the choices the Company has made in defining its strategy. Concern: Company has ensured mitigation and took prevention measures to the extent and wherever possible.

6. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Companys internal financial control framework is commensurate with the size and operations of the business and is in line with requirements of the regulations. Internal control systems have been a core focus for the Company. The Company has laid down procedures and policies to guide the operations of the business.

The Company has a strong internal control system comprising various levels of authorization, supervision, checks and balances and procedures through documented policy guidelines and manuals. Effective/ adequate internal control systems are in place to ensure that all assets are safeguarded and protected against unauthorized use and the transactions are authorized, recorded and reported correctly. Such controls which are subjected to periodical review also ensure efficiency of operations, accuracy and promptness of financial reporting and compliance with all applicable laws and regulation. The Companys internal control systems are routinely tested by the Management, Statutory Auditors and Internal Auditors.

The Internal Audit Team regularly monitors the efficacy of internal controls/and compliances with Standard Operating Procedures and Manuals with an objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance that all transactions are authorized, recorded and reported correctly and follow policies and statutes.

The management exercises their control over business processes through operational systems. These processes are reviewed and updated on regular basis to improve their efficacy and meet the business needs.

7. INTERNAL AUDIT

A regular Internal Audit System is also in place. The Company has an independent Internal Audit function with an established risk management framework. Outside expertise is availed to supplement internal resources. The internal audit approach is based on random sample selection and takes into consideration the generally accepted business practices. The internal audit reports are discussed by the Audit Committee of the Board of Directors along with the directions/ action plan. The directions are implemented by the respective departments.

The Internal Audit Team also assesses opportunities for improvement in business processes, systems and controls, gives recommendations and reviews the implementation of directions issued by the management, Board of Directors or its Committees.

8. OPERATIONAL AND FINANCIAL PERFORMANCE

Following are the financials highlights of the Company for the year ended March 31, 2023 on a comparable consolidated basis.

(Rs. in Lakhs)

Particulars	2022-23	2021-22
Revenue from operations	1,17,972.97	1,10,072.64
Profit before Interest, Tax & Depreciation (EBITDA)	9,506.32	15,216.52
Profit/(Loss) before tax for the year	6,020.10	11,479.65
Profit/(Loss) after tax for the year	4,518.18	8,524.89

9. CHANGES (Change of 25% or more) IN SIGNIFICANT KEY FINANCIAL RATIOS AND RETURN ON NET WORTH

As per the latest amendment as introduced by SEBI in SEBI (Listing Obligations & Disclosure Requirement) (Amendment) Regulations, 2018 on May 09, 2018 effective from April 01, 2019, new sub-clause (i) has been inserted in Clause I in Part B of Schedule V of SEBI (Listing Obligations & Disclosure Requirement), Regulations, 2015 according to which the listed entity shall provide the details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with the detailed explanations thereof, including:

Particulars	2022-23	2021-22	%	Comments
Current Ratio	1.43	2.17	-33.81%	Current Ratio is lower in this year due to increase in current liability as compared to last year.
Debt Equity Ratio	0.33	0.16	109.60%	Debt Equity Ratio is higher as compared to last year due to increased borrowings.
Debt Service Coverage Ratio	13.11	24.71	-46.94%	Debt Service Coverage Ratio is lower as compared to last year due to increase in cost of operation resulting into lower EBITDA. Return on Equity Ratio is lower due to increase in cost
Return on Equity Ratio	0.08	0.19	-56.30%	resulting lower profits after tax.
Inventory Turnover Ratio	7.90	9.16	-13.76%
Trade Receivables Turnover Ratio	9.03	10.10	-10.57%
Trade Payables Turnover Ratio	16.01	16.31	-1.85%
Operating Profit Margin	5.64	10.82	-47.89%	Operating Profit Margin Ratio is lower due to increase in cost resulting lower earning before interest and tax.
Net Capital Turnover Ratio	10.26	5.45	88.13%	Net Capital Turnover Ratio is higher as compared to last year as the Company has taken the loan in this year resulting decrease in working capital of Company.
Net Profit Ratio	0.04	0.08	-50.35%	Net Profit Ratio is lower due to increase in cost resulting lower profits after tax.
Return on Capital Employed	0.07	0.14	-54.19%	Return on Capital Employed is lower due to increase in cost resulting lower earning before interest and tax.
Return on Investment	0.11	0.08	40.20%	Return on Investment is increased due to increase in profit arise from the sale of investment.

Note: Previous year ratios has been revised due to figures for the previous year have been regrouped/ rearranged wherever necessary to make them comparable with current figures.

10. MATERIAL DEVELOPMENTS IN HUMAN RESOURCE AND INDUSTRIAL RELATIONS

Caring for its people has always been the way of life in the Company as its people are always treated as most valuable assets. Your Company has been continuously working to improve human resources skills, competencies and capabilities in the Company, which is critical to achieve results as per our strategic business ambitions. The Company has been successful in fostering a people-centric cohesive culture within the organization that has been instrumental in creating its diverse pool of intellectual capital. The Company is focused and committed towards empowering its employees and continues to embark upon several initiatives on this front.

The Company has a team of experienced and qualified personnel to support its plant and other allied operations. The team is having technical expertise and experience, which is critical for successful or timely implementation of operational decisions.

The recruitment of well qualified personnel and retention of experienced workforce is critical for maintaining the talent pool in the Company. The Company continuously works towards ensuring that appropriate recruitment and retention plans are in place to avoid any gaps in talent pool.

Employees are also empowered to take full ownership and accountability of their responsibilities. Besides human resource development, Company provides various welfare measures for its employees and their families. Cordial industrial relations in factory have also helped Company to build a strong team of employees at various levels having good experience and skills.

The underlying rule of Companys policy towards human resource development is that competent and motivated manpower is the most important factor in achieving business goals. The policies in this regard are evolved and pursued to achieve this objective. Industrial relations remained cordial at all locations during the year. No working hours was lost due to any labour dispute.

Simultaneously, we continue to strengthen employees value proposition including health and wellness measures, re-skilling programs, appropriate compensation interventions, ESOPs and enhanced career growth opportunities. Our recent priority has been to vaccinate our employees with agility and we have been holding various booster vaccination drives at our plants across the country, towards this endeavor.

As at the financial year ended March 31, 2023, there were total 484 numbers of employees and workers on roll of the Company.

11. CAUTIONARY STATEMENT

Certain Statements in the Management Discussion and analysis Report section concerning future prospects may be forward looking statements which involve a number of identified/non identified risks, uncertainties and assumptions that could cause actual results to differ materially. In addition to the foregoing changes in the macro-environment, geopolitical tensions as a result of war, global inflation, global pandemic COVID-19 may pose an unforeseen, unprecedented, unascertainable and constantly evolving risk, inter alia to the Company and the environment to which it operates. The result of these identified/ non identified risks, uncertainties and assumptions are made on available internal and external information and are the basis for determining certain facts and figures stated in the report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based are also subject to change accordingly. These forward looking statements represent only companys current intentions, beliefs, expectations, and any forward looking statements speaks only as of the date on which it was made.

These risks and uncertainties include the effect of economic and political risks within and outside India, volatility in interest rates, change in Government or regulatory policies that may impact the Companys business as well as its ability to implement the strategy. The Company does not undertake to update these statements.

12. DISCLOSURE OF ACCOUNTING TREATMENT IN PREPARATION OF FINANCIAL STATEMENTS

The Company has followed the guidelines of accounting standards as mandated by the Central Government in preparation of its financial statements.