AksharChem (India) Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS REPORT</dhhead>

OVERVIEW

Aksharchem (India) Limited is one of the leading chemicals manufacturing company based in India with a focus on exports to over 30 countries. The Company has also redirected its focus on the domestic market as one of the future growth drivers. Our product offerings fall into two categories organic chemicals and inorganic chemicals, which further diversified into Vinyl Sulphone, H Acid, CPC Green in organic chemicals and Precipitated Silica in inorganic chemicals. Out of which organic chemicals have multiple applications in textile, inks, plastics and paints industries and inorganic chemicals have applications in tyre, rubber, agrochemical and animal feed industries. We are one of the key manufacturers in the chemical markets for these products and have been recognised as Three Star Export House by the Government of India. We believe that we have built strong reputation in various markets, over 30 years of experience that has translated to a customer base.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Our manufacturing facility is located in Gujarat, with installed manufacturing capacity of 23,400 MTPA, as of March31, 2025. Our facility is fully integrated and equipped to manage products from the stage of chemical treatment to dispatch, lending us competitive advantages such as cost effectiveness and maintenance of quality standards. Our facility includes automated and cost-efficient systems and quality control and quality assurance laboratories, among others. The plants of the Company are situated at Chhatral and Dahej Locations.

As far as concerned with the Industry, multiple basic and specialty chemical manufacturers are staring at weak prospects in the near term, led by weak global demand and destocking of inventory. Declining chemical prices and increased competition from China post opening of the Chinese economy are putting pressure on their margins. The only solace for now comes from some decline in raw material prices. Nevertheless, there are multiple factors that led to a cautious near-term outlook for many companies even as analysts maintain a structurally positive view on the sector looking at long-term prospects.

OPPORTUNITIES AND THREATS

The Company has successfully penetrated in catering precipitated silica needs of major tyre and rubber manufacturers of India. Company has committed for expansions for various types of precipitated silica. Product mixes available for consideration are conventional precipitated silica, micro pearl silica and highly dispersible silica. The Company has identified domestic market as one of the future growth driver. The Company is committed to increase its market share by increasing domestic sale of all the products.

The Company has witnessed major slowdown in the demand which has forced the partial stoppage of the plant operations, resulting into minimum operating margin and ultimately not able to cover all the fixed overheads which is necessary for the positive bottom line. However, the demand started improving after prolonged sluggishness of the chemical sector. We believe that there would be some challenges in the next financial year too but we hope for the positive uptrend also.

OUTLOOK AND STRATEGY

The Company has entered in the new geography namely Turkey, Vietnam, Srilanka, Russia etc. The Company is regularly conducting Sales & Operations Planning Meeting for identifying the issues and resolving them in an efficient and timely manner. During the year the Operating Cash flow of the Company has improved by effective utilization of working capital.

The Company is ensuring sustainable performance even though there remains high vulnerability in raw material prices. We believe that our performance will be back on track, once the situation of geopolitical instability and global economy start improving. Further, with increased capacity utilization, company is reaching out to all markets in tire and rubber industry with parallel efforts for increased capacity creation during the year. New products requirements as per various demands of customers are being studied to expand product portfolio in coming years.

RISKS AND CONCERNS

The major risk for the company is the China price mechanism, which is still worrisome for the Company. Dumping/selling at lower rate by China in the current scenario makes it difficult for the Company to improve margins. Company along with other players of the same industry contemplating on this issue and hopeful for resolution of the matter with concerned authorities.

Costs control measures, enhanced productivity, improved efficiency and expansion are key parameters to maintain competitiveness and these are being pursued by the Management of the company. Customer satisfaction is the key focus area for the Company. Frequent visits to customers, customer engagements, encouraging customers to visit our plant, creating local contact network to attend to daily needs of customers, customers rating of our product and service etc. help us to achieve set targets through creation of trust in product and service quality.

FINANCIAL AND OPERATIONAL PERFORMANCE

During the year 2024-25, the volume was 19,224 MTPA and our current capacity utilization blended basis stands at 82%. Revenue from operations for FY2024-25 is Rs. 34,626.52 Lakhs as compared to Rs. 30,204.70 Lakhs for FY2023-24, growth of 15%. In terms of earnings, the net profit of the Company for the financial year 2024-25 earned Rs. 477.04 lakhs.

Below are the Financial Figures for the financial year 2024-25.

IMPORTANT RATIOS (Changes with respect to the Previous Year)

* Interest Coverage Ratio has increase due to increase in EBIT.

@Current Ratio decreased due to increase in current liability.

$ Debt Equity Ratio increased due to higher borrowings.

# Net Profit Margin increase due to increase overall margin & Net Profit.

^ Return on Net Worth has increase due to Net Profit.

CERTIFICATIONS

The certification of ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 is a testimony to the Companys commitment towards quality, sustainable environment friendly approach and occupation, health & safety.

Further, The Company is having the certificate for registration of trademark from the Registrar of Trade Marks, Trade Marks Registry, Gujarat for its logo i.e. Aksharchem and its products Pigment Green 7 and Precipitated Silica i.e. Asaflow and Aksil respectively.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Board has adopted policies and procedures to ensure the orderly and efficient conduct of its business, including but not limited to the prevention and detection of frauds and errors, the safeguarding of its assets, the accuracy and completeness of the accounting records, adherence to the company’s policies, periodical review of financial performance of Company and review of the accounts every quarter by Statutory Auditors.

HUMAN RESOURCES DEVELOPMENT

Engaged employees are more motivated, productive, and committed to their work, leading to improved outcomes. Here are some common employee engagement initiatives undertaken by companies in the HE sector: Companies establish effective communication channels to ensure transparent and open lines of communication between management and employees, which includes motivational programs that are arranged on a quarterly basis. We offer opportunities for career advancement, skill-building, and cross-functional experiences. We value employee feedback and often conduct internal meetups to assess employee satisfaction, engagement, and overall organizational climate. We implement recognition and reward programs to acknowledge and appreciate the efforts and achievements of their employees.

The Management of the Company mainly focus on Learning and development by following and maintaining certain specifications such as encouraging professional development by involving employees on a daily interaction by team meetings in group as well as one to one so each employee can express and we as an organization can develop them by the conclusions we come up with in such interactions, and by maintaining training schedules as per marking their growth and work quality inputs which we register from the specific department. And the management strongly believes in maximum knowledge sharing through discussions, presentations, and weekly tasks.

The Board of Directors had admired the efforts put in by all employees to achieve good performance and looks forward to its continuation.

Cautionary Statement

Statements in this report on describing the Company’s objectives, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. These statements are based on certain assumptions and expectations of future events. Actual results could however differ materially from those expressed or implied.

The Company assumes no responsibility in respect of the forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.