ARCL Organics Ltd Management Discussions

1. FINANCIAL STATEMENTS

The financial statements of ARCL Organics Limited ("ARCL" or "the Company") have been prepared in accordance with the Indian Accounting Standards ("Ind AS") notified under Section 133 of the

Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, as amended, and other accounting principles generally accepted in India. The Management Discussion and Analysis should be read together with the audited standalone and consolidated financial statements, the notes thereto, the Directors Report and the Corporate Governance Report. The discussion below explains the external environment, industry developments, operational and financial performance, opportunities, risks, internal controls and outlook of the Company. Unless otherwise stated, financial references are to the year ended 31 March 2026 and are in Indian Rupees.

Forward-looking information

This report contains forward-looking statements based on current expectations, assumptions and managements assessment of future business conditions. Such statements relate, among other matters, to demand, capacity utilisation, raw-material availability, product mix, capital expenditure, margins, working capital, exports and growth opportunities. Actual results may differ materially due to changes in economic conditions, feedstock and energy prices, foreign exchange rates, customer demand, competition, regulation, technology, environmental requirements, logistics and other factors beyond the Companys control. The Company does not undertake to update these statements except as required by law. Financial performance:

Particulars ( crore)	FY 2025 26	FY 2024 25	Change
Revenue from operations consolidated	272.31	250.59	8.7%
EBITDA consolidated (approx.)	28.58	26.16	9.2%
PBT before exceptional items consolidated	17.60	16.75	5.1%
Particulars ( crore)	FY 2025 26	FY 2024 25	Change
PBT after exceptional items consolidated	17.05	16.75	1.8%
PAT consolidated	5.19	12.33	(57.9%)
Revenue from operations standalone	272.31	250.59	8.7%
PBT standalone	16.39	16.03	2.2%
PAT standalone	4.68	11.75	(60.2%)
Total assets consolidated	220.33	168.89	30.5%
Net worth consolidated	82.20	77.45	6.1%
Total debt consolidated	70.89	34.02	108.4%
Capital expenditure consolidated	35.30	10.03	251.9%

GLOBAL ECONOMY

The global economy remained resilient through 2025, but the operating environment continued to be shaped by geopolitical conflicts, trade fragmentation, supply-chain disruptions and uneven inflation trends. The International Monetary Funds World Economic Outlook Update, July 2026, projected global growth of approximately 3.0% in 2026 and 3.4% in 2027, while highlighting downside risks from geopolitical escalation, further trade fragmentation, renewed commodity-price pressures and threats to supply chains. For the chemicals sector, the global backdrop has direct implications for energy costs, natural-gas linked feedstocks, ocean freight, insurance, currency movements and customer inventory cycles. Manufacturers with diversified sourcing, disciplined working capital, responsive pricing and a higher share of application-specific products are better placed to navigate such volatility.

INDIAN ECONOMY

India continued to be one of the fastest-growing major economies. As per the provisional estimates released by the Ministry of Statistics and Programme Implementation, real GDP grew by 7.7% in FY 2025 26, supported by robust manufacturing, services, consumption and capital formation. The secondary sector recorded strong momentum and manufacturing registered double-digit growth under the revised national accounts series. The medium-term environment remains favourable for organised manufacturing, housing, infrastructure, furniture and building-material value chains. At the same time, domestic producers remain exposed to global feedstock prices, import dependence for select inputs, currency volatility, logistics constraints and the need for continuous compliance with environmental and product-quality standards.

GEOPOLITICAL, ENERGY AND FEEDSTOCK ENVIRONMENT

Methanol and other petrochemical inputs are critical raw materials for formaldehyde and resin manufacturing. Their prices are influenced by natural-gas economics, global plant operating rates, trade flows, freight, exchange rates and geopolitical developments in major producing and transit regions. Any disruption to energy supply or shipping routes can therefore affect procurement cost, inventory requirements and the timing of price transmission to customers. ARCL seeks to manage this exposure through a combination of supplier diversification, procurement planning, inventory discipline, continuous market intelligence, customer engagement and calibrated price revisions. The ability to balance continuity of production with prudent working-capital deployment remains an important management priority.

INDUSTRY STRUCTURE AND DEVELOPMENTS

ARCL operates in the formaldehyde derivatives and thermosetting-resins value chain. Its product portfolio includes formaldehyde, phenolic resins, amino resins, melamine resins, hardeners, specialised one-shot resins and customer-specific chemical solutions. These products serve a wide range of industrial applications, including plywood and wood panels, laminates, furniture and adhesives, textiles, paper and other process industries. Demand in the Companys addressable markets is linked to housing and renovation activity, infrastructure development, furniture consumption, growth of organised panel and laminate producers, industrial output and customers preference for consistent quality and reliable technical support. The industry is characterised by a mix of organised and unorganised participants, price competition in standard products and a growing premium for customised formulations, process efficiency, low-emission performance and regulatory compliance. The transition towards lower-emission resins, safer handling, improved bonding performance, faster press cycles and resource-efficient manufacturing is creating opportunities for application-led innovation. At the same time, margin performance remains sensitive to methanol and other input costs, industry capacity utilisation, freight and the speed at which price movements can be passed through.

OPPORTUNITIES

Growth in housing, renovation, furniture, plywood, laminates, medium-density fibreboard, particle board and other engineered-wood applications can support long-term demand for formaldehyde derivatives and resins.

Rising preference for organised suppliers, consistent quality, traceability and dependable technical service creates scope for market-share gains.

Application-specific, faster-curing, lower-emission and performance-enhancing resin systems offer better differentiation than commodity grades.

An integrated formaldehyde and derivatives platform can improve supply reliability, product development, asset utilisation and customer responsiveness.

Import substitution and selective export expansion can diversify the customer base and improve the scale of value-added products.

Process optimisation, digital monitoring, energy efficiency, yield improvement and disciplined procurement can enhance productivity and margins.

THREATS, RISKS AND CONCERNS

The Company has a structured risk management framework to identify, assess and mitigate key business risks. The principal risks include volatility in raw material prices, market and financial risks, operational and safety risks, regulatory and environmental risks, project and quality risks, and human resource risks. These risks are managed through diversified sourcing, prudent financial controls, safety and compliance systems, technical and quality controls, and employee training and retention initiatives.

BUSINESS OUTLOOK

The Companys outlook remains cautiously positive. Indias manufacturing and building-material ecosystems provide a supportive demand base, while increasing formalisation and customer focus on quality create opportunities for organised producers. However, the pace of growth and margin improvement will depend on feedstock spreads, industry capacity utilisation, customer demand, logistics and the Companys ability to convert capital investment into sustainable cash generation. During FY 2026 27, managements priorities are expected to include:

Improving utilisation and operating stability across the manufacturing network.

Scaling value-added and customised resin systems with disciplined customer qualification.

Strengthening procurement resilience for methanol and other critical inputs.

Maintaining strict control over receivables, inventories and cash conversion.

Optimising the balance between growth investment, leverage and debt-service capacity.

Deepening quality, process safety, environmental compliance and preventive maintenance.

Expanding the customer base across domestic and selected export markets.

The Company will pursue growth with a focus on sustainable returns rather than volume alone. Pricing discipline, product mix, asset productivity, working-capital efficiency and risk-adjusted capital allocation will remain central to value creation.

GREEN INITIATIVE

Your company took measures to send all documents in electronic mode to the members who have registered their email IDs with the Company / Registrar & Share Transfer Agent, a step towards achieving paperless statutory compliances.

INTERNAL CONTROLS AND GOVERNANCE FRAMEWORK

Internal control system adopted aimed at promoting operational efficiencies and emphasizing adherence to the policies adopted by the Board of Directors. The Company also conducts regular internal audits to evaluate the effectiveness of its internal controls, identify areas for improvement, and ensure timely implementation of corrective actions. The management believes that the existing internal control framework is commensurate with the nature, size, and complexity of the Companys operations and provides reasonable assurance regarding the orderly and efficient conduct of business.

The 12th day of August 2026	For and on behalf of the Board of
Directors
	Suraj Ratan Mundhra
	Chairman and Managing Director
	(DIN No. 00681223)