Archean Chemical Industries Ltd Management Discussions

Global Economy

The global economy is projected to experience moderate growth, influenced by technological advancements, geopolitical uncertainties, and shifting economic policies. According to estimates from the International Monetary Fund (IMF) and the World Bank, the global GDP growth rate is expected to be between 2.5% and 3.2%, depending on economic stability, trade relations, and monetary policies worldwide. While major economies aim for recovery, inflationary concerns, supply chain disruptions, and policy decisions will play a crucial role in shaping global economic performance.

India remains the fastest-growing major economy, with GDP expected to exceed 6%, driven by manufacturing, IT services, and domestic consumption. Latin America will benefit from commodity exports, but economic instability and fiscal deficits remain concerns. Africas growth will be led by infrastructure projects, digitalization, and foreign direct investments (FDI).

The Indian economy is poised for strong growth in 2025, with GDP expected to expand at a rate of 6-7%, making it one of the fastest-growing major economies in the world. Indias economic trajectory will be driven by robust domestic demand, industrial expansion, digital transformation, and infrastructure development. The governments focus on self-reliance (Atmanirbhar Bharat), increased foreign direct investment (FDI), and policy reforms will further support growth across key sectors.

Indias Make in India and Production-Linked Incentive (PLI) schemes will drive manufacturing expansion. The semiconductor, automobile, and electronics sectors are expected to grow significantly due to global supply chain diversification. Demand for steel, cement, and construction materials will rise due to infrastructure development. Indias IT and software services industry will continue to be a major contributor to GDP, driven by AI, cloud computing, and cybersecurity while fintech, e-commerce, and digital banking will strengthen Indias digital economy. Government initiatives like Digital India and 5G expansion will enhance connectivity and economic participation. Large-scale investments in roads, railways, airports, and smart cities will boost employment and economic output. Increased agri-tech adoption, farm mechanization, and irrigation improvements will enhance productivity. Government support through minimum support prices (MSP), rural credit programs, and farm subsidies will ensure stability.

Indias economy in 2025 will be defined by strong domestic consumption, industrial expansion, and digital transformation. Despite global uncertainties, policy support, infrastructure development, and innovation will ensure that India remains a key driver of global economic growth.

The Indian chemical industry is set to witness substantial growth in 2025, driven by strong domestic demand, increasing exports, and the countrys emergence as a global manufacturing hub. The sector, valued at around USD 220 billion in 2022, is expected to reach USD 300 billion by 2025, growing at a CAGR of 10-12%. Government policies, technological advancements, and a shift in global supply chains away from China have positioned India as a key player in the global chemical market.

The Indian chemical industry is the sixth-largest in the world and the third largest in Asia. It contributes about 7% to the countrys GDP and accounts for over 14% of total exports. The industry is highly diverse, spanning bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, and pharmaceuticals.

For a decade, Indias chemical industry has consistently surpassed global averages in demand growth and wealth creation for shareholders. With its rapid economic expansion, growing middle class, and competitive capital and operational costs, India has the potential to emerge as a key consumer and producer in the global chemical sector. Nonetheless, challenges such as limited access to domestic raw materials, regulatory delays, and a shortage of skilled R&D professionals continue to be obstacles for the Indian chemical industry.

• Specialty Chemicals: Rising demand for high-performance materials in sectors like automotive, electronics, and personal care presents a significant growth opportunity. India can become a global hub for several chemical products driven by increasing domestic & export demands.

• China+1 Strategy: Global companies are reducing dependency on China for chemical supplies, creating opportunities for Indian manufacturers. India can attract foreign direct investment (FDI) and expand exports to Europe and North America.

• Green and Sustainable Chemicals: The shift towards eco-friendly and biodegradable chemicals offers new growth areas, including bio-based polymers and green surfactants. Government incentives for carbon-neutral production can boost investments in sustainable solutions.

Digitalization & Industry 4.0 : AI, automation, and IoT-driven smart factories can improve efficiency and reduce operational costs. Companies investing in predictive analytics and smart supply chains will gain a competitive edge.

Government Support & Policy Reforms: PLI schemes, infrastructure development, and R&D incentives will create a favorable business environment. Expanding domestic petrochemical production will reduce reliance on imports.

• Raw Material Price Volatility: Fluctuations in crude oil prices impact the cost of petrochemicals and other raw materials. Supply chain disruptions can lead to price instability, affecting margins.

• Environmental Regulations and Sustainability:

Strict environmental norms require companies to adopt greener production methods. India is pushing for greater sustainability with green chemistry solutions and bio-based alternatives.

• Competition from China and Other Asian Markets: While the China+1 strategy is benefiting India, competition from Southeast Asian countries like Vietnam and Indonesia remains a challenge. Indian companies need to improve productivity, efficiency and technology adoption to stay competitive.

• Global Competition: Cheaper chemical imports from low-cost manufacturing centers like China have intensified competition in India. Since joining the World Trade Organization, India has reduced import tariffs on various products, further increasing competitive pressures.

• Plant Underutilization: Due to oversupply in the global petrochemical market, the cost of petrochemicals has decreased, causing domestic manufacturers to underutilize their production facilities.

• R&D Limitations: The high cost associated with research and development discourages domestic manufacturers from introducing new products to the market, hindering their ability to innovate and adapt.

• Skilled Labor Shortage:

The chemical industry in India grapples with a significant shortage of skilled workers, impacting productivity. A study by FICCI-NASSCOM & EY highlighted that out of Indias 600 Mln - strong workforce, 9% will be in jobs that currently dont exist, and 37% will require entirely new skill sets. Over the next decade, the manufacturing sector alone is projected to face a shortfall of 7.9 Mln workers.

The Indian specialty chemical industry is set for significant growth, driven by rising domestic demand, global supply chain diversification, and government incentives. With an expected CAGR of 12-14%, the sector will benefit from increased investments in agrochemicals, pharmaceuticals, and performance chemicals. Indias push for self-reliance (Atmanirbhar Bharat) and a shift in global supply chains away from China provide strong tailwinds. Key players are expanding capacity and adopting green chemistry solutions to meet evolving sustainability norms. The sectors expansion will contribute significantly to exports, making India a global hub for specialty chemicals.

The global Bromine market is expected to witness steady growth, driven by increasing demand from pharmaceuticals, flame retardants, oil and gas drilling, and water treatment industries. Market valued at USD 3.80 billion in 2025 projected to grow with CAGR of around 5-6%, the market is fueled by rising consumption in Asia-Pacific, particularly in China and India, due to expanding industrial applications. The shift toward energy storage solutions, especially in zinc-bromine flow batteries, further boosts bromine demand.

Key global players in market are focusing on capacity expansion and sustainable extraction techniques to ensure steady supply and regulatory compliance. North America and Europe will also see moderate growth due to stringent safety standards in electronics and fire safety applications. Overall, technological advancements and growing end-use industries will drive bromine market expansion.

Industrial salt is a crucial commodity used across various industries, including chemical manufacturing, water treatment, de-icing, agriculture, and food processing. The market is expected to witness steady growth, driven by increasing demand in these sectors. The expanding chemical industry, especially in emerging economies, and the growing need for water purification solutions are key factors propelling the market forward.

Asia-Pacific region dominates the global industrial salt market, with China and India being the largest producers and consumers. Rapid industrialization & consumption and an expanding chemical sector, drive demand.

The global industrial salt market is estimated to be valued at USD 15-16 billion in 2024, with a compound annual growth rate (CAGR) of around 3-5%. This growth is fueled by the rising demand for industrial salts in chemical processing, particularly in chlorine-alkali production, which is essential for manufacturing chemicals like caustic soda, chlorine, and soda ash. The increasing use of salt in de-icing operations in colder regions also contributes to market expansion.

The global Sulphate of Potash (SOP) market is expected to experience steady growth, driven by increasing demand in agriculture, especially for chloride-sensitive crops like fruits, vegetables, and nuts. SOP is a premium potassium fertilizer that enhances crop yield and quality while improving plant resistance to stress. Its market is projected to grow at a CAGR of 4-6% over the next few years, with an estimated market value exceeding USD 6 billion by 2025.

Key growth drivers include rising global food demand, soil degradation concerns, and the shift towards sustainable farming practices. Additionally, water-soluble SOP is gaining traction in modern irrigation techniques, such as drip irrigation.

Regional trends show that Asia-Pacific leads in demand due to high agricultural activity, particularly in China and India. Europe and North America also contribute significantly, with increasing organic farming adoption.

Archean Chemical Industries Limited (ACIL) is an India-based specialty chemicals manufacturing company that produces and supplies marine chemicals. The Company is engaged in the production and supply of industrial salt, liquid bromine, sulphate of potash (SOP). ACIL serves a range of industries, including agriculture, pharmaceutical, water treatment, aluminium, glass, and textiles.

Archean Chemicals expanded its bromine production capacity from 28,500 MTPA to 42,500 MTPA in January 2023. Bromine is a naturally occurring element extracted from seawater, salt lakes, and brine wells, with higher recoverable concentrations in inland seas and brine wells. The increased capacity will primarily be used for captive consumption in the bromine derivatives plant, supporting an expanded product portfolio.

Bromine is used as a reactant and catalyst in the production of agrochemicals, biocides, water disinfectants, pharmaceutical intermediates, dyes, completion fluids, flame retardants, photographic chemicals, and zinc-bromide batteries. These applications span multiple industries, including chemicals, rubber, plastics, agrochemicals, oil and gas, pharmaceuticals, electronics, and textiles.

The companys subsidiary, Acume Chemicals Private Ltd (ACPL), has established a bromine derivatives production facility with a capacity of 28,000 MTPA, with Phase I commissioned in 2024. Acume is currently focusing on the production of clear brine fluids, PTA synthesis catalysts, and other bromine-based compounds. The company is also working towards setting up the facility to produce brominated flame retardants to further expand its bromine derivatives portfolio.

Archean also acquired Oren Hydrocarbons Private Ltd, gaining access to manufacturing facilities across Andhra Pradesh, Tamil Nadu, and Gujarat. These facilities are undergoing revival to restart production of chemicals used in oilfield and drilling applications, further expanding the companys offerings in this segment.

Archean Chemicals, through its step-down subsidiary SiCSem Private Limited, has initiated a upto Rs. 3,000 crore investment to establish a compound semiconductor fabrication and ATMP (Assembly, Testing, Marking & Packaging) facility in Odisha. This facility will manufacture silicon carbide (SiC) power semiconductor devices for applications in electric vehicles, renewable energy, data centers, fast-charging systems, and industrial power electronics.

The initiative is part of Archeans entry into Indias semiconductor manufacturing

sector and aligns with the goals of the India Semiconductor Mission.

In parallel, SiCSem has established the Silicon Carbide Research and Innovation Centre (SiCRIC) in collaboration with IIT Bhubaneswar. SiCRIC is focused on research and indigenization of silicon carbide (SiC) crystal growth technologies, enabling knowledge development and fostering industry-academia collaboration to support Indias semiconductor ecosystem.

Archean Chemicals acquired a strategic stake in Clas-SiC Wafer Fab Limited, UK, a dedicated silicon carbide foundry engaged in the design and manufacture of SiC MOSFET devices. This investment provides Archean with access to advanced silicon carbide process technologies critical for electric vehicles, renewable energy systems, and industrial applications.

The investment also provides SiCSem Private Limited with exclusive access to Clas-SiCs silicon carbide technology for the Indian market, strengthening its technology base and supporting domestic semiconductor manufacturing efforts.

Through its investment in Offgrid Energy Labs Inc., USA, Archean Chemicals is supporting the development of zinc-bromide battery technology. This patented technology is targeted at applications in renewable energy storage and industrial energy management.

Archean is participating in scale-up efforts through a pilot facility in the UK and a proposed giga-factory in India, leveraging synergies with its bromine production business.

Industrial salt is another main product. ACIL is Indias largest producer of industrial salt, with a capacity of 4 Mln MT in FY25. Industrial salt has 14,000 commercial uses of salt, a source of sodium and chlorine, which are essential components of an array of materials, glass, synthetic rubber, cleansers, pesticides, paints, adhesives, fertilizers, explosives and metal coatings. The Company exported 100% of its industrial salt production and benefits from its nearness to the captive Jakhau Jetty and Mundra Port, where it transports industrial salt to its customers globally.

With respect to Sulphate of potash (SOP), ACIL is Indias only large-scale producer of fertilizer grade water soluble SOP. It is produced through sea brine, which has a low cost of production and is green (no chemical process involved). Globally, only 15% of SOP is produced through this brine route, and the majority are by the Mannheim process, which consists of converting MOP (muriate of potash) into SOP by using sulphuric acid. The cost of production of SOP is lowest for brine-based production.

The Company recognises, assesses, and manages risks by placing suitable mitigation measures against each identified risk. The Company is engaged in formulating and recommending an appropriate Risk Management Policy to the Board on a continuous basis. The Risk Management Committee ensures (a) that appropriate methodology, processes and systems are in place to monitor and evaluate risks associated with the business of the Company (b) monitoring and oversee implementation of the risk management policy, including evaluating the adequacy of risk management systems. (c) periodically review the risk management policy (d) to keep the board of directors informed about the nature and content of its discussions, recommendations and actions to be taken.

The Company has established an internal control system commensurate with the size and nature of its operations. These controls are designed to provide reasonable assurance regarding the accurate recording of transactions, the reliability of financial and operational information, compliance with applicable laws and regulations, and the safeguarding of the Companys assets.

The responsibility for establishing and maintaining adequate internal controls for financial reporting rests with the Management. The statutory auditors have evaluated the Companys internal control systems, including those related to financial reporting. Based on their review, they have confirmed that the systems are adequate and appropriate, considering the size and nature of the Companys business. Further, the statutory auditors have issued a report on internal financial controls over financial reporting, as required under Section 143 of the Companies Act, 2013.

The Company has aligned its internal financial control framework with the requirements of the Companies Act, 2013 (“Act”), In compliance with Regulation 17(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR), the Company assessed the effectiveness of its internal financial controls as of March 31, 2025. Based on this evaluation and in accordance with Section 177 of the Act and Regulation 18 of SEBI LODR, the Audit Committee concluded that the internal financial controls were adequate and operating effectively as of March 31,2025.

Archean Chemical Industries Limiteds total revenue on a standalone basis is Rs. 1,01,379.02 lakhs. In FY 2024-25, the EBITDA stands at Rs. 37,212.14 lakhs, compared to Rs. 51,103 lakhs in FY 2023-24. In FY 2024-25, the PAT is Rs. 18,492.34 lakhs, compared to Rs. 32,234.56 lakhs in FY 2023-24. EPS in FY 2024-25 is Rs. 14.98.

On a consolidated basis, the total revenue is Rs. 1,04,101.79 lakhs. EBITDA stands at Rs. 35,143.74 lakhs in FY 2024-25, compared to

Rs. 50,598.27 lakhs in FY 2023-24. PAT stands at Rs. 16,214.49 lakhs in FY 2024-25, compared to Rs. 31,897.07 lakhs in FY 2023-24. EPS stands at Rs. 13.13 in FY 2024-25.

The Company continues to uphold its commitment to being a people-centric organization, recognizing its employees as its most valuable asset.

Building on this philosophy, the Company has strengthened its Human Resource function through the adoption of Digital HR solutions to streamline processes, enhance data-driven decision-making, and deliver a seamless employee experience. A focused approach to leadership development has been implemented, leveraging well-established assessment tools to identify and nurture high- potential talent across the organization.

Our talent management strategy now integrates structured career paths aligned with organizational goals, ensuring every employee has a clear growth trajectory. Efficient onboarding practices and continuous capability-building programs foster learning agility, supported by a culture that promotes adaptability and innovation. Robust HR communication strategies have been instituted to ensure transparency, alignment, and engagement at all levels.

Recognition and reward initiatives are in place to celebrate individual and team achievements, with a clear linkage between pay and performance outcomes. Diversity, Equity, and Inclusion (DEI) principles are now embedded into the Companys culture, policies, and practices, reinforcing our commitment to a fair and empowering workplace. Furthermore, the Company has adopted holistic wellbeing initiatives, supporting employees physical, emotional, and financial wellness.

All HR activities·from hiring and training to performance management·are clearly aligned with business objectives, driving improvements in productivity, profitability, and employee engagement. As of March 31, 2025, the Company employed 262 individuals across its plant and Registered Office.