Accent Microcell Ltd Management Discussions

MANAGEMENTS DISCUSSION AND ANALYSIS REPORT

06. GLOBAL ECONOMY

Stabilisation and Strategic Recalibration

In 2024, the global economy exhibited signs of stabilisation as inflationary pressures eased and monetary policies turned more accommodative across key markets.

Amid shifting trade dynamics and evolving geopolitical trends, major economies are recalibrating strategies to foster resilience and promote inclusive, regionally balanced growth.

Commodity Trends: Divergence and Opportunity

Commodity prices reflected a mixed trajectory in 2024. Ample supply and tempered demand contributed to overall price stability, particularly in the latter half of the year. Crude oil remained under pressure due to subdued global demand forecasts and sufficient inventory levels. Conversely, nonfuel commodities showed resilience, with select sectors poised for growth.

Trade Performance: Modest Expansion Amid Headwinds

Global trade is projected to grow by 3.3% in 2024, underscoring its continued role as a key engine of economic activity. Advanced economies registered a 2.1% increase, while emerging markets and developing economies (EMDEs) expanded by a robust 5.0%. However, growth remains tempered by rising protectionism, trade distortions and lingering disruptions from the Ukraine-Russia conflict.

Growth Trajectory

Global output is expected to grow steadily, 2.8% in 2025 and 3.0% in 2026. The United States is projected to maintain strong momentum, while emerging economies are expected to demonstrate substantial upside potential. Advanced economies, particularly in Europe, are likely to experience moderate but sustained growth.

Inflation and Price Dynamics

Headline inflation is forecast to ease to 4.3% in 2025 and 3.6% in 2026. Advanced economies are on track to achieve target inflation levels of 2.1% by 2025, reinforcing monetary stability. Crude oil prices are expected to decline, while nonfuel commodity prices are projected to rise by 2.5%, supporting growth in resource-intensive sectors.

INDIAN ECONOMY

Sustained Growth Amid High Base Effect

India, the worlds fastest-growing major economy, maintained its growth trajectory in FY25, registering a GDP expansion of 6.5%. While the pace moderated due to a high base effect, growth was underpinned by resilient consumer spending, improving rural demand, robust services expansion and rising high-value manufacturing exports.

Inflation and Monetary Policy

Annual inflation eased to 4.6% in FY25, down from 5.4% in the previous fiscal, driven by softening commodity prices. In response, the Monetary Policy Committee (MPC) reduced the repo rate by 50 basis points, from 6.5% to 6.0%, marking the first dual-rate cut in five years- signalling a shift toward supportive monetary policy.

Agricultural, Manufacturing and Industrial Activity

In FY25, Indias sectoral performance reflected broad- based resilience and momentum. The agriculture sector grew by 3.8%, supported by favourable monsoon conditions and improved rural demand. Industrial activity expanded by 6.2%, while the services sector recorded a robust 7.2% growth, driven by strong domestic consumption and digital-led transformation. The core sector maintained steady progress, with a 4.6% increase, underscoring the stability of infrastructure.

Manufacturing showed notable strength, with the India Manufacturing PMI rising to 58.1 in March 2025-surpassing both the flash estimate of 57.6 and Februarys 56.3-marking the highest level since July 2024. Labour market conditions remained stable, with the urban unemployment rate holding firm until the third quarter of FY25. Annual GST collections rose by 9.98% to C 16.75 lakh crore, reflecting sustained economic activity and enhanced tax compliance.

External Sector Activity

India is on track to achieve its fiscal deficit target of 4.8% of GDP in FY25, supported by robust economic growth and disciplined fiscal management. Service exports increased by a robust 11.6%, reflecting Indias growing global competitiveness in IT and professional services. Foreign direct investment (FDI) inflows surged 17.9% to Rs.4.81 lakh crore (US$55.6 billion), signalling sustained investor confidence. Foreign exchange reserves reached an alltime high of US$688.13 billion by the end of April 2025, reinforcing macroeconomic stability and external sector strength.

Moderation with Momentum

Indias economy is projected to grow at a moderate pace of 6.3-6.8% in FY26, reflecting the impact of a high base in the previous year. Nonetheless, India is expected to retain its position as one of the fastest- growing major economies, continuing to play a pivotal role in driving global growth. However, several external and domestic challenges could weigh on the outlook. Global headwinds, including a potential slowdown, rising geopolitical tensions, new U.S. tariffs and trade disruptions, pose risks to momentum. Domestically, subdued urban consumption, elevated food inflation and sluggish investment activity may further constrain growth prospects.

Microcrystalline Cellulose: A Versatile Driver of Multi-Industry Growth

Microcrystalline cellulose (MCC), derived from high- quality, purified wood cellulose, is produced through a hydrolysis process that removes amorphous regions, yielding a strong, stable and free-flowing white powder.

Its versatility stems from various production methods, such as acid hydrolysis, reactive extrusion and steam explosion, which are tailored to specific applications. In 2025, the MCC market reached US$1.33 billion, growing at a CAGR of 7.1%, driven primarily by rising demand in pharmaceuticals and processed foods.

Pharmaceutical application: The global pharmaceutical market is valued at US$1,700.13 billion in 2024 and projected to reach US$2,970.44 billion by 2034, growing at a CAGR of 5.74%, fuelled by rising healthcare demand, chronic disease prevalence and advances in drug research. Within this growth, microcrystalline cellulose (MCC) remains a key excipient, prized for its compressibility in tablet manufacturing and binding efficiency in both wet and dry granulation. In liquid formulations, MCC enhances stability through its thickening and viscosity properties. Advanced grades, featuring larger particle sizes and higher crystallinity, pair effectively with colloidal silicon dioxide for silicide and second-generation applications.

Its strong bio adhesive nature also supports innovative drug delivery systems, reinforcing MCCs expanding role in pharmaceutical development.

Food Industry Growth: The food segment is rapidly becoming the fastest-growing market for microcrystalline cellulose (MCC), driven by rising demand for clean-label and natural products. MCCs multifunctionality-as a bulking agent, texturizer and stabiliser, makes it ideal for applications in bakery, dairy and sauces. As healthconscious consumers seek low-calorie, low-fat options, MCC is increasingly used as a fat replacer that preserves taste and texture. Industry-wide reformulation efforts to meet evolving dietary preferences are further accelerating their adoption. With the global food market projected to reach US$9.45 trillion in 2025, growing at a CAGR of 6.34%, MCC is well-positioned to capture a larger share of this dynamic space.

Cosmetics & Personal Care: Microcrystalline cellulose (MCC) is gaining traction in the cosmetics industry for its multifunctional role as a thickening agent, stabiliser and bulking agent in creams, lotions and powders. Its ability to improve texture and enhance sensory appeal makes it a top choice for formulators, especially amid the shift toward natural and sustainable ingredients. Rising demand for anti-ageing and skincare products is further boosting

MCC adoption, as it improves stability, extends shelf life and aligns with clean beauty principles. With the global cosmetics market projected to reach US$335.95 billion in 2024 and growing at a CAGR of 6.34%, MCC is well-positioned to capitalise on expanding opportunities across both the cosmetics and food sectors.

Textiles & Paints: Microcrystalline cellulose (MCC) is gaining momentum in textiles and paints for its performance and sustainability advantages. In textiles, it enhances softness, dye uptake and wrinkle resistance while allowing for eco-friendly finishes. In paints, MCC serves as a natural thickener and stabiliser, enhancing viscosity control, adhesion and surface finish-delivering a non-toxic solution that meets both quality and environmental standards.

Outlook: Driven by rising demand for natural, clean-label and plant-based ingredients, microcrystalline cellulose (MCC) is set for strong growth. As a plant-derived, nondigestible fibre, MCC aligns perfectly with evolving consumer preferences, boosting its use in processed, low- calorie and functional foods. Its versatility also supports expanding applications across pharmaceuticals, cosmetics and personal care. With these trends accelerating, the MCC market is projected to reach US$1.88 billion by 2030, underscoring its growing influence across multiple industries.

INDIAN MCC INDUSTRY

The Indian MCC market is valued at US$43.77 million in 2024, growing at a CAGR of 4.34% from 2025 to 2033. Growth is underpinned by rising awareness of eco-friendly packaging, stringent environmental regulations and increased R&D investments aimed at developing advanced MCC grades with superior water absorption, stability and performance. Due to its renewable, non-toxic and biodegradable nature, MCC is widely used in paper manufacturing to enhance strength, texture and durability, thereby supporting the shift towards sustainable materials. Its moisture-absorbing properties also make it valuable in food and pharmaceutical applications.

Applications of MCC: It is gaining momentum across multiple sectors in India, driven by strong demand from the pharmaceutical sector. This aligns with the rapid growth of Indias pharmaceutical industry, projected to double from US$65 billion in 2024 to US$130 billion by 2030.

In cosmetics, MCC functions as a stabiliser, bulking agent and texturizer. Indias cosmetics market, valued at US$14.78 billion in 2024, is expected to reach US$21.21 billion by 2030, growing at a CAGR of 6.13%, driven by rising incomes, urbanisation and increasing personal care awareness. Digital platforms and eco-friendly product innovations are further driving demand for sustainable ingredients, such as MCC.

The packaging sector also reflects this shift towards sustainability, with an increasing demand for recycled paper, biodegradable plastics and plant-based materials. MCCs biodegradable nature and versatility position it well in this evolving landscape. This trend extends to other industries, including paints, textiles and food, where MCCs functional benefits and eco-friendly profile continue to support growth.

Outlook: Indias dynamic growth-driven by a booming pharmaceutical industry, sustainability initiatives, rising skincare awareness and real estate expansion-is fuelling demand for microcrystalline cellulose (MCC), which is projected to reach US$64.15 million by 2033.

DEMAND CATALYST

Growth in Plant-Based and Clean-Label Products

Indian consumers are increasingly favouring natural, minimally processed products across food, pharma and cosmetics. As a plant-derived, chemically inert ingredient, MCC is gaining popularity for its safety, functionality and clean-label appeal.

Rise of Functional and Nutraceutical Foods

MCC is widely used in meal replacements, energy bars and high-fibre snacks as a bulking agent and stabiliser. Its ability to improve texture and reduce fat without sacrificing taste aligns with growing health and wellness trends.

Demand from Oral Solid Dosage Forms in Pharma

With the expansion of healthcare access and local pharmaceutical manufacturing, MCC is increasingly used in tablets and capsules.

Emergence of MCC in 3D Printing of Pharmaceuticals

India is exploring advanced drug manufacturing techniques, such as 3D printing, where MCC is emerging as a promising base material for producing tablets with tailored release profiles, highlighting its potential in pharmaceutical innovation.

Rising Disposable Income

Rising disposable income among Indias middle and upper-middle class is a key driver of the cosmetics market. Economic growth over the past decade has led to an increase in per capita income, allowing for higher spending on personal care and beauty products.

COMPANY OVERVIEW

Accent Microcell is Indias leading manufacturer of microcrystalline cellulose (MCC), offering a wide range of high-quality grades tailored to diverse industry needs. With the commissioning of its third facility, the company is set to reach an annual installed capacity of 12,000 MT. Operating in over 75 countries, Accent Microcell is known for its advanced technology, consistent product quality and adherence to global safety standards. Its in-house lab and microbial testing unit ensure rigorous quality control and ongoing innovation. Committed to sustainability, the company employs eco-friendly manufacturing practices that minimise environmental impact, reinforcing its role as a responsible industry leader.

SWOT ANALYSIS

STRENGTHS II-II .

• Global Presence: A leading global manufacturer of microcrystalline cellulose (MCC) and related excipients, with operations and exports extending to over 75 countries.

• Advanced Manufacturing Technology: Employs sophisticated technology to produce a diverse range of high-quality excipient products.

• Efficient Resource Utilisation: Ensures optimum use of resources to maximise productivity and sustainability.

• R&D and Technology-Driven Processes: Strong focus on research, innovation and technology-led manufacturing excellence.

• Proven Technical Expertise: Backed by in-house technical capabilities and over 20 years of experience from the promoters.

WEAKNESSES

• Intense Market Competition:

Operates in a highly competitive market environment.

• Raw Material Dependency and Geopolitical Risks: High reliance on imported key raw materials, with supply stability affected by ongoing global geopolitical issues.

• Limited Domestic Wood Pulp Production: Availability is constrained by the small number of wood pulp manufacturers in India.

OPPORTUNITIES

• Capacity Expansion with a Green Focus: Setting up Unit-III to increase manufacturing capacity for premium excipient products, with a commitment to "Going Green."

• Rising Multi-Sector Demand: Growing need for excipient products across pharmaceuticals, nutraceuticals, food and cosmetics industries.

• Government Export Incentives: Benefit from export promotion schemes and incentives provided by the government.

• Wide Product Acceptance: Offering user-friendly products with broad acceptance across diverse industries for varied applications.

THREATS

• Global Economic and Commodity Price Volatility: Exposure to fluctuations in global economic conditions and commodity prices.

• Regulatory Changes: Potential impact from evolving domestic and international regulatory frameworks.

• Geopolitical Tensions and Trade Restrictions: Risks arising from geopolitical conflicts and restrictions on global trade.

OPERATIONAL PERFORMANCE

Over the past year, Accent Microcell has reinforced its position as a trusted pharmaceutical partner through strategic expansion, operational excellence and unwavering quality. Our diversified product portfolio now serves a broad range of industry needs, supported by an expanded presence across India and key global markets.

Operational efficiency has been enhanced through process optimisation and the adoption of advanced technologies, increasing installed capacity from 9,200 MTPA to 12,000 MTPA to meet rising demand. Our commitment to regulatory compliance and international quality standards ensures the integrity of our products and strengthens customer trust. These efforts have driven sales growth and cemented our reputation for delivering high-quality excipients to the global pharmaceutical industry.

FINANCIAL PERFORMANCE

In FY 2024-25, the Company delivered a resilient financial performance, underpinned by its robust global presence and operational strength. Revenue from Operations increased by 8% to Rs.26,457.69 lakh, compared to Rs.24,549.78 lakh in FY 2023-24, driven by strong demand across pharmaceutical excipients and supported by the Companys growing footprint. EBITDA grew by 12% to Rs.4,831.76 lakh, up from Rs.4,310.15 lakh in the previous year, reflecting efficiency gains from modern manufacturing facilities and process innovation. Profit After Tax (PAT) rose by 10% to Rs.3,306.29 lakh, against Rs.3,016.80 lakh in FY 2023-24,

The Companys Net Worth increased to C 19,479.27 lakh in FY 2024-25, from C 16,383.41 lakh in FY 2023-24, a growth of ~19%, highlighting strong reserve accretion and financial stability. Simultaneously, the Debt-to-Equity Ratio improved sharply to 0.01 times from 0.08 times, following the repayment of the Cash Credit Facility. ROCE also improved to 22.40% from 21.20%, underscoring efficient capital utilisation and sustained profitability, supported by favourable industry tailwinds and the Companys continued investments in R&D-led innovation.

Particulars	2024-25	2023-24	Quantum of Change Change (%)	Reasons for Change
Current Ratio (Times)	5.08	4.32	17.64%	N/A
Debt-to-equity Ratio (Times)	0.01	0.08	90.06%	Repayment of Cash Credit Facility
Debt Service Coverage Ratio (Times)	3.26	10.25	-68.22%	Repayment of Cash Credit Facility
Return on Equity Ratio (%)	18.44%	28.16%	-34.52%	Issue of Shares in Previous Year
Net profit ratio (%)	12.50%	12.29%	1.69%	N/A
Return on Capital employed Ratio (%)	22.40%	21.20%	5.38%	N/A
Inventory Turnover Ratio (Times)	4.84	3.89	24.44%	Reduction of Inventory
Receivables Turnover Ratio (Times)	4.46	5.83	-23.58%	Increase in Topline as well as Margins
Payables Turnover Ratio (Times)	11.38	6.99	62.95%	Decrease in Payables
Net capital turnover Ratio (Times)	2.12	3.28	-35.42%	Proceeds from IPO invested in Fixed Deposit during later part of PY

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Accent maintains robust internal control systems tailored to its operational scale and business nature. Our well-documented policies and procedures ensure effective monitoring of business performance, supported by integrated IT systems for daily operations.

An independent audit firm periodically reviews these controls, ensuring their adequacy and adherence to company policies and regulatory compliance. The firm focuses on accounting and operational efficiency, with internal auditors reporting their observations and recommendations to the Audit Committee.

The Audit Committee regularly reviews these reports and evaluates the effectiveness of our internal control systems, providing necessary recommendations to enhance them. This comprehensive framework ensures the security of our assets, operational efficiency and alignment with our strategic goals objectives.

HUMAN RESOURCE

At Accent Microcell, our people are fundamental to our success. We foster a culture of innovation, collaboration and ongoing growth, supported by a human resources strategy focused on attracting, developing and retaining top talent. We invest in regular training, skills development workshops and leadership programmes to empower employees and promote operational excellence. Our commitment to well-being includes comprehensive health and wellness initiatives, encouraging work-life balance and long-term engagement. A transparent, merit-based performance framework guarantees fair recognition, while our focus on diversity and inclusion creates an equitable, respectful workplace. As of 31st March 2025, we employ 195 professionals across our corporate office and two manufacturing facilities.

RISK MANAGEMENT

We recognise that effective risk mitigation is crucial to long-term business sustainability in a dynamic and evolving ecosystem. Our integrated risk management framework is designed to strengthen our business model and ensure that profitable growth remains resilient and sustainable. We have implemented a comprehensive, multi-layered approach that spans strategy and operations, proactively identifying, assessing and addressing both existing and emerging risks. Key managers across the organisation are actively engaged, fostering a culture of accountability and agility. By embedding risk intelligence into decision-making, we aim to safeguard performance and strengthen our capacity to navigate uncertainty with confidence.

Price Volatility Risk

Volatility in raw material and energy prices, coupled with fluctuations in currency exchange rates, can impact profit margins, particularly for export-driven businesses.

Mitigation measures: We secure cost stability through long-term procurement contracts, hedge currency exposure using financial instruments and enhance energy efficiency to lower production expenses.

Supply Chain Risk

Limited raw material supply could hinder production.

Mitigation measures: We have multi-year business relationships with our key suppliers, which provide supply chain stability. Furthermore, we continue to broaden our vendor base to enhance our sourcing power even as we expand capacities. Furthermore, we maintain strategic inventory reserves, ensuring an uninterrupted supply of materials.

Concentration Risk

Dependence on a few industries or geographies could impact the Companys progress in the event of a downturn.

Mitigation measures: We serve a diverse range of high- growth sectors, including pharmaceuticals, cosmetics and food & beverages, with a strong presence both domestically and internationally. This diversified portfolio helps safeguard our performance against sector-specific or geographic slowdowns.

Regulatory Risk

Evolving industry regulations and standards may result in higher compliance costs and increased operational complexity.

Mitigation measures: Our specialised compliance team maintains a hawk eye on the evolving regulatory landscape in India and the international geographies of its presence. It ensures that the Company complies with all regulatory requirements on time. Growing business volumes in the domestic and international markets are a testament to its regulatory compliance.

Quality Risk

Inconsistent product standards could undermine trust and damage our brand image.

Mitigation measures: The Companys manufacturing processes and business operations are aligned with stringent SOPs to ensure that every product batch meets the required quality standards. This perseverance to maintain rigorous quality standards enables the Company to grow its presence in demanding sectors (pharma, food, cosmetics) and scale business volumes with demanding customers.

Outlook

Accent Microcell is poised for strong growth, driven by rising global demand for microcrystalline cellulose (MCC) across pharmaceuticals, processed foods and cosmetics. To capitalise on this momentum, the company is expanding its production capacity with a new state-of-the-art facility at Nayka Kheda, which will boost the output of high- demand, value-added products such as Cross Carmellose Sodium (CCS), Sodium Starch Glycolate (SSG) and Carboxymethylcellulose (CMC). This expansion enhances Accent Microcells product portfolio and strengthens its competitive edge, particularly in American and European markets. With a strategic location in India and a focus on innovation and quality, the company is well-positioned as a key global player in the MCC industry.