Ambey Laboratories Ltd Management Discussions

1. Economic Overview

Indias economy grew by approximately 6.5% in FY 2024-25, maintaining its position as the fastest-growing major economy. While this marks a moderation from previous years, the Q4 growth surge to 7.4% helped lift overall sentiment. Growth was led by the services sector (7.2%) and a rebound in agriculture (4.6%), while manufacturing faced sluggish global demand.

Inflation moderated to 4.9%, but persistent food inflation at 8.4% remained a challenge. The external sector remained stable, with the current account deficit under control (~1.2% of GDP) and foreign exchange reserves around USD 640 billion, ensuring macroeconomic stability.

2. Industry Overview & Key Trends

The Indian agrochemical industry, valued at approximately INR 63,000 crore (USD ~7.5 billion) in FY 2024-25, continues to play a pivotal role in enhancing agricultural productivity, ensuring food security, and enabling the shift towards sustainable farming. India remains the 4th largest producer and 2nd largest exporter of agrochemicals globally, with over 50% of production being exported.

Despite global demand headwinds and supply chain disruptions, the Indian agrochemical sector showed moderate growth in FY 2024-25, driven by:

• A strong rabi harvest and stable monsoon patterns supporting crop output.

• Higher demand for pest and disease management solutions amid changing climate conditions.

• Increasing preference for low-dose, high-efficacy molecules, including bio-stimulants and environment- friendly pesticides.

Global Export Focus

• India continues to gain share in global agrochemical exports as multinationals diversify away from China.

• High global inventory levels and pricing pressures in early FY25 moderated export growth, but Q4 witnessed recovery in demand from Latin America, the US, and parts of Asia.

3. Company Overview - Ambey Laboratories Limited

Ambey Laboratories Limited as the third-largest manufacturer of 2,4-D in India, our company has established itself as a cornerstone in the agrochemicals and FMCG sectors over the past 40 years. Anchored by strong traditional values that have transcended three generations, we have consistently prioritized innovation, sustainability, and long-term stability. Our operations are backward integrated up to base chemicals for most of our product lines, enabling greater quality control and cost efficiency. We are operating from a 5-acre (20,000 sq.

m) production facility, we proudly hold over 200 product and combination registrations, reflecting our commitment to regulatory compliance and market reach. With a robust base of more than 250 customers, a low- debt capital structure, and a steady focus on operational excellence, we continue to grow at a rate that exceeds industry standards.

4. Company Performance Overview Operational Highlights:

• Revenue growth of 9% YoY, primarily driven by improved capacity utilization

• PBT margin improved to 4.60% Y OY, was primarily driven by enhanced operational efficiency, better capacity utilization, and prudent cost management across key inputs and processes.

• PAT stood at INR 478.27 Lacs, reflecting 38.42% YoY de-growth, primarily attributable to the absence of a deferred tax credit in the current year, which had positively impacted earnings in the previous financial year.

5. Financial Performance

(in Lacs)

Particulars	2024-25	2023-24	% Change
Revenue from operation	13126.99	12047.14	9%
Other Income	191.61	158.53	20.86%
Profit before Tax	603.83	547.65	10.25%
Net Profit after Tax	478.27	776.67	-38.42%
Payment of Dividend	_	_	_
EPS	2.06	4.27	-51.27%
Debtors Turnover Ratio	4.44	10.83	-59%
Inventory Turnover Ratio	5.20	6.39	-19 %
Interest Coverage Ratio	3.3	3.89	15.17%
Current Ratio	2.19	1.56	40%
Debt Equity Ratio	0.53	0.94	-43%
Operating Profit Margin %	6.60%	6.40%	-3.06%
Net Profit Margin %	4.00%	6.00%	33.33%
Return on Net Worth	9.00%	30.0%	70.0%

6. Opportunities

• Expansion into Exports & Intermediates

The company is actively exploring growth avenues in exports and the sale of intermediates, which could diversify revenue streams and reduce over-reliance on domestic markets.

• Strong Manufacturing Credentials

With nearly four decades of industry experience, Ambey Laboratories Ltd. has built a strong foundation of technical expertise, process reliability, and regulatory compliance. The companys long-standing presence in the agrochemical space positions it as a trusted partner for environmentally conscious clients seeking quality-assured and sustainable solutions. This credibility not only enhances its appeal to both domestic and international customers but also provides a solid platform to scale operations efficiently while meeting evolving regulatory and market demands

• Rising Domestic Demand

The broader growth of Indias agrochemical sector?driven by rising exports, crop diversification, and the “China+1” sourcing trend?presents a supportive market backdrop for Ambeys expansion.

7. Threat:

• Monsoon Dependency and Demand Fluctuations

Our Company remains heavily dependent on monsoon patterns, as rainfall directly influences crop sowing and input consumption. An inadequate or delayed monsoon can significantly reduce farmers demand for crop protection products, leading to sharp fluctuations in sales volume and excess inventory in the supply chain. This seasonal and weather-related unpredictability poses a key risk to revenue consistency.

• Working Capital Strain Due to Delayed Payments

Delayed payments from customers, particularly in the domestic market, continue to pose a challenge to the companys working capital cycle. Extended credit periods or payment defaults can constrain liquidity, affect operational efficiency, and increase dependence on short-term borrowings. This can impact the companys ability to invest in growth initiatives or manage day-to-day expenses smoothly.

• Inability to Meet Market Demand in Peak Cycles

At times, the company may face challenges in scaling up production or fulfilling large-volume orders during peak agricultural seasons, resulting in an inability to fully capitalize on market demand. This could lead to lost sales opportunities, customer dissatisfaction, or loss of market share to more agile competitors?especially in a fast- moving, season-sensitive industry like agrochemicals.

8. Risk:

The Company operates in a dynamic environment and is exposed to a range of internal and external risks that may impact its operational and financial performance. Key risk factors include:

• Monsoon Dependency and Seasonal Demand Volatility

Agriculture in India remains heavily dependent on monsoon rainfall. Any deviation from normal monsoon patterns, such as droughts or floods, can result in reduced demand for agrochemicals, affecting sales and profitability.

• Working Capital and Liquidity Risk

Delayed payments from customers or extended credit cycles can strain working capital and impact day-to-day liquidity. This may necessitate increased reliance on external borrowings, potentially affecting the Companys financial stability.

• Raw Material Supply and Pricing Risk

The Company depends on specific raw materials, some of which are imported. Volatility in raw material prices or supply chain disruptions?particularly from global suppliers like China?can impact production costs and timelines.

9. Concern

While the Company continues to show resilience and pursue growth opportunities, certain concerns persist that may affect short- to medium-term performance:

• Macroeconomic Uncertainty

Volatility in global and domestic economic conditions, such as inflation, currency fluctuations, and changes in trade policies, can impact input costs and overall demand patterns, especially in export markets.

• Delayed Customer Payments

A persistent concern is the delay in receiving payments from customers, particularly in the domestic market. This affects the Companys working capital cycle and may limit its ability to reinvest in expansion or R&D.

• Climate Dependency

As demand for agrochemicals is closely tied to crop cycles and rainfall, any abnormal climatic events such as droughts, floods, or unseasonal rainfall can adversely affect sales volumes and seasonal performance.

10. Internal control systems and their adequacy.

Ambey Laboratories Ltd. has established a robust internal control framework that is commensurate with the size and scale of its operations. It serves as critical mechanism for management to function effectively while ensuring rigorous oversight and accountability.

The Company has developed a robust and comprehensive internal control system to mitigate risks and support achieving its strategic objectives.

The system is designed to ensure the accuracy and reliability of financial reporting, safeguard assets, maintain operational efficiency, and ensure compliance with applicable laws and regulations. Based on ongoing evaluations, the management believes that the existing internal control systems are adequate and operating effectively, with no material weaknesses observed during the year under review.