Apcotex Industries Ltd Management Discussions

ECONOMIC OVERVIEW GLOBAL ECONOMY

Global economic momentum remained resilient into early 2026, in spite of the tariffs imposed by the United States on most other countries. The resilience was supported by strong technology-led investment, accommodative financial conditions, a weaker US dollar, and continued policy support. The International Monetary Fund (IMF) had initially projected global growth of around 3.4% for 2026.

However, the escalation of conflict in West Asia has materially altered this outlook. In its latest World Economic Outlook, the IMF has revised global growth down to 3.1%, cautioning that the conflict could derail an already fragile recovery and potentially trigger one of the most severe energy crises in recent history. This revised projection falls below the recent growth trend of 3.4% seen during 2024-25 and remains well under the long-term average of 3.7% recorded between 2000 and 2019, with developing economies expected to bear a disproportionate impact.

The disruption of energy supply chains, including risks around the Strait of Hormuz and damage to regional infrastructure, has led to a sharp increase in energy prices. The IMF now estimates oil prices to rise by 21.4% in 2026 to an average of approximately USD82 per barrel, contributing to a higher global inflation outlook of 4.4%, compared to the earlier expectation of 3.8%.

Looking ahead, downside risks remain elevated. Intensifying geopolitical tensions, fiscal constraints, trade frictions, and volatility linked to evolving artificial intelligence investment cycles could further weigh on global growth and financial stability.

INDIAN ECONOMY

As per the Monthly Economic Review of the Department of Economic Affairs (DEA), Indias economy remained resilient through February 2026, supported by strong domestic demand and broad-based industrial activity across both supply and demand indicators.

However, the outlook has become more uncertain amid escalating geopolitical tensions in West Asia, which have disrupted global energy and logistics channels. The DEA highlights four key transmission risks for India: disruptions in oil, gas, and fertiliser supplies; potential impact on exports; higher import prices; and increased freight and insurance

costs. These factors are expected to exert pressure on growth, inflation, and the balance of payments.

Despite these external headwinds, domestic fundamentals remain strong. Continued public capital expenditure, infrastructure investment, stable consumption, and sustained expansion in manufacturing and services have supported industrial resilience, while services exports continue to anchor trade performance.

Reflecting this underlying strength, the International Monetary Fund has projected Indias GDP growth at 6.5% for FY 2026-27, with momentum expected to sustain into 2027, positioning India as the fastest-growing major economy despite global uncertainties.

Going forward, maintaining policy agility and vigilance will be critical to navigating evolving external risks.

INDUSTRY OVERVIEW

EMULSION POLYMERS INDUSTRY

Your Companys products are an essential class of synthetic polymers produced through water-based emulsion polymerization processes and are widely used across industries such as construction materials, paper and paperboard, textiles, carpets, gloves, paints and coatings, adhesives, footwear and automotive components. Their versatility, performance characteristics and environmental advantages have positioned them as critical inputs across a wide spectrum of industrial and consumer applications.

GLOBAL INDUSTRY LANDSCAPE

The global emulsion polymers market continues to expand steadily, supported by increasing demand for water-based systems and environmentally compliant coatings. The market is estimated at USD 38-39 billion in 2026 and is projected to reach approximately USD 68 billion by 2036, reflecting a CAGR of around 6.5% over the next decade. Growth is being driven by rising construction activity, expanding manufacturing sectors, demand for water- based products and increasing adoption of low-VOC formulations across industrial applications. Alongside this, automotive remains an important adjacent demand driver for specialty polymer materials. The global automotive industry continues to operate at significant scale, with OICA reporting global vehicle sales of 74.6 million units in 2024. The ongoing evolution in vehicle design, lightweighting and efficiency is supporting demand for polymer-based materials used in tyres, sealing systems, hoses, vibration- control parts and other technical applications.

INDIAN INDUSTRY LANDSCAPE

India is emerging as one of the fastest growing markets for emulsion polymers, both synthetic latex and synthetic rubber, supported by expanding downstream industries such as construction and coatings, paper and packaging, healthcare applications and industrial rubber products. Rising urbanisation, infrastructure development and manufacturing growth are driving increasing consumption of performance materials, including polymer emulsions and specialty latexes. The Indian emulsion polymers market is estimated to grow at over 8% CAGR over the next decade, outpacing growth in developed markets and positioning the country as a key growth hub within the global industry. The expansion is being supported by increasing adoption of water-based and environmentally compliant Source: Future Market Insights materials, greater investments in construction and infrastructure, and rising demand for value-added coatings and adhesives.

Key drivers include large investments in infrastructure/ construction, rising demand for low-VOC, eco-friendly water-based coatings, and accelerating industrialization across the automotive and packaging sectors. The continued expansion of housing construction, renovation activity and decorative coatings is expected to sustain demand for polymer emulsions used as binders and film-forming agents. Government initiatives such as Make in India, Production Linked Incentive (PLI) schemes, infrastructure spending and increased localisation of manufacturing are further strengthening domestic demand for specialty chemicals and polymer-based materials.

MARKET OPPORTUNITIES

1. Expanding Demand for Water-Based and Sustainable Polymer Systems

The transition toward environmentally compliant materials is accelerating the adoption of water-based polymer emulsions across industries. Regulatory pressure to reduce VOC emissions and increasing sustainability commitments are driving the shift from solvent-based to water-borne formulations. Emulsion polymers play a critical role in enabling low-VOC coatings, adhesives and construction materials while delivering performance attributes such as durability, flexibility and chemical resistance.

2. Infrastructure Growth and Construction Chemicals

Urbanisation, housing development and infrastructure investments are driving demand for construction chemicals and performance materials. Polymer emulsions are widely used in waterproofing systems, repair mortars, sealants and elastomeric coatings, where they enhance adhesion, flexibility and durability. Indias continued infrastructure expansion is expected to support sustained demand growth in these applications.

3. Expanding Industrial and Automotive Applications

Polymer emulsions and related specialty polymers are used across paper and packaging, textiles, carpets, tyre cord, gloves and technical rubber products. In parallel, growth in automotive production, exports and vehicle technology is supporting demand for polymer materials used in tyres, seals, hoses and other rubber- based components, particularly as lightweighting and performance efficiency become more important across mobility applications.

MARKET OUTLOOK

Given these structural drivers, India is expected to remain one of the most attractive growth markets for emulsion polymers in the coming years. Companies with diversified product portfolios, strong technical capabilities and domestic manufacturing capacity are well positioned to benefit from the countrys expanding industrial ecosystem.

APCOTEX STRATEGIC POSITIONING

Apcotex Industries Limited operates at the intersection of specialized polymer chemistry, deep process know-how and extensive application expertise, serving a diverse set of end-use industries including paper and paperboard, carpets, construction chemicals, textiles, tyre cord, gloves, various rubber applications and specialised industrial applications. Its strategic positioning is anchored in strong technological capabilities, particularly in gaseous emulsion polymerisation, and technically demanding processes that enable cleaner, more efficient production. These capabilities have supported the development of a diversified, performance-driven portfolio spanning both synthetic latex and rubber, allowing the Company to address evolving material requirements across sectors.

The Companys application-led innovation approach further strengthens its market position, with research teams working closely with customers to develop customised solutions backed by specialised laboratories. Apcotex is also the only domestic manufacturer of certain specialty grades such as NBR latex, NBR Rubber and High-Styrene Rubber, positioning it as a key player in import substitution while competing with global manufacturers and also expanding its international footprint. Supported by strong domestic demand, rising preference for specialty materials and localisation trends, Apcotex is well placed to strengthen its presence in high- value polymer segments.

BUSINESS OVERVIEW

Apcotex Industries Limited is a leading Indian specialty chemicals company engaged in the manufacture of specialty emulsion polymers, both synthetic latex and synthetic rubber, serving a wide range of industrial applications across domestic and international markets. The Company has built strong capabilities in polymer chemistry based on styrene-butadiene and butadiene- acrylonitrile technologies (amongst others), enabling it to develop specialised materials used in diverse end-use industries.

With over four decades of industry presence, Apcotex has developed a diversified product portfolio designed to address the evolving performance requirements of sectors such as paper and paperboard, tyre cord, carpets, construction chemicals, technical textiles, textiles, medical gloves, automotive components and specialty rubber products. The Companys products function as critical performance materials that enhance adhesion, durability, flexibility, resistance and processing efficiency across a range of industrial applications.

PRODUCT PORTFOLIO

The Company offers one of the broadest product ranges within emulsion polymers.. Its portfolio is broadly organised across two key product categories:

Synthetic Rubber

Apcotex manufactures several grades of

specialty synthetic rubber designed for

specialised industrial uses, including:

- NBR (Nitrile Butadiene Rubber) used in automotive components, hoses, rice dehusking rollers, LPG hoses, textile rollers and friction sheets.

- NBR-PVC Polyblends , commonly used in industrial rollers, automotive parts and fuel management systems.

- HSR (High Styrene Rubber) used in footwear, microcellular sheets and hard rubber goods.

- PNBR (Powdered Nitrile Butadiene Rubber) used in PVC modification, adhesives, coatings and gasketing applications.

Synthetic Latex

Apcotex also produces a wide range of latexes that serve

as binders and performance materials across several

industrial applications. These include:

- Styrene-Butadiene Latex used in waterproofing, bonding agents, elastomeric paints, paper coating, carpet backing, textile finishing and geotextiles.

- Nitrile Latex , used in examination gloves, industrial gloves and supported gloves.

- Vinyl Pyridine Latex , used for tyre cord dipping and fibre-to-rubber adhesion in tyre and belting applications.

- Pure Acrylic and Styrene Acrylic Latex , used in paper and paperboard coatings, construction chemicals, tufted carpet backing and automotive carpets.

- Specialty NBR Latex , used as binders for cork sheets, jointing sheets and friction lining materials

RISKS AND MITIGATION

Apcotex operates in a dynamic business environment where structured risk identification, assessment, and mitigation are integral to decision-making. The Company follows a comprehensive risk management framework with defined ownership, periodic review, and continuous monitoring at senior management and Board levels.

Key risks and mitigation strategies are outlined below:

Risk Area	Key Risk Description	Potential Impact	Mitigation Strategy
Market & Pricing Risk	Global oversupply in nitrile latex and certain polymer segments leading to pricing pressure	Margin compression and lower realisations	Focus on specialty grades, expand presence in relatively stable markets, enhance product approvals, and improve capacity utilisation with higher contribution products
Raw Material Risk	Dependence on butadiene, a critical input with limited domestic suppliers	Production disruption, increased input costs, potential shutdowns	Diversified sourcing, longterm contracts with multiple suppliers, strategic imports, and maintenance of buffer inventory levels
Geopolitical Risk	Ongoing West Asia conflict impacting supply chains, energy prices, and export markets	Volatility in raw material costs, logistics disruptions, loss of export orders	Alternate sourcing (including imports), price renegotiations, market diversification, and focus on domestic demand to offset external shocks

INTERNAL CONTROLS AND GOVERNANCE

Apcotex has established a robust internal control framework that supports operational flexibility while ensuring strong governance, financial discipline, and regulatory compliance. The framework is aligned with the scale and complexity of the Companys operations and provides reasonable assurance regarding the safeguarding of assets, accuracy of financial reporting, compliance with applicable laws, and prevention of frauds and errors.

The Companys internal controls are supported by well- defined policies, standard operating procedures, and a strong Internal Financial Controls over Financial Reporting (IFCoFR) framework, integrated with advanced IT systems and process automation to enhance operational efficiency and financial integrity.

The control environment is designed to ensure orderly conduct of business, adherence to management policies, reliability of financial information, and timely statutory compliance.

To independently evaluate the effectiveness of internal controls, the Company has appointed RSM Astute

Consulting as Internal Auditors. The internal audit plan is reviewed by the Audit Committee to ensure adequate coverage of key risk areas. Audit findings, corrective actions, and control improvements are periodically reviewed by the Audit Committee, which is satisfied with the adequacy and effectiveness of the Companys internal financial controls as at 31 st March 2026.

The Statutory Auditors and Internal Auditors regularly participate in Audit Committee meetings and provide independent recommendations for continuously strengthening the control environment.

HUMAN RESOURCE

The Human Resources (HR) function continues with the relevant strategic agenda of building organizational core capability through a high-performance and forward-looking workforce. The Company continues to remain committed to building organizational effectiveness through sound human resource processes, forward-thinking people strategies, and holistic learning and development programs, aided by ongoing digital transformation programs.

The HR function during the year successfully created and implemented a well-designed Leadership Development Program (LDP) for the leadership team. This involved a range of leadership development interventions, including leadership assessments, capability-building workshops, and coaching interventions. These interventions were aimed at building organizational leadership capability, strategic thinking, and crossfunctional collaboration.

Employee relations remain cordial and peaceful at both manufacturing locations. This is a result of a proactive and collaborative approach by the HR & Production team. At the Taloja manufacturing location, long-term settlements have been completed with 70% of the workmen, with the remaining settlements in progress as planned and expected to be completed during FY 2026-27.

The Company has implemented a Long-Term Incentive Plan to reward and retain select Key Managerial Personnel (KMPs) and senior employees who have a direct impact on the

Companys multi-year strategic goals. The plan is designed to align employee interests with long-term shareholder value creation through performance-based milestones.

CAUTIONARY STATEMENT

The statements made in the Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, and expectations may be forwardlooking statements within the meaning of applicable securities laws & regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand, supply, and price conditions in the domestic & overseas markets in which the Company operates, changes in Government regulations, tax laws & other statutes, and other incidental factors. The Company assumes no responsibility in respect of forwardlooking statements, which may be amended or modified in the future.