Arrow Greentech Ltd Management Discussions

Global economy overview:

The global economy entered FY 2025-26 having absorbed a prolonged phase of trade-policy realignment and exited it confronting a fresh shock. According to the International Monetary Fund (IMF), global output expanded by approximately 3.2% in calendar 2025, moderating from 3.3% in 2024, as the world economy adjusted to higher trade barriers and elevated policy uncertainty.

The outbreak of conflict in the Middle East reset the outlook during the year. In its April 2026 World Economic Outlook, the IMF projected global growth of 3.1% in 2026 and 3.2% in 2027, assuming the conflict remains limited in duration and scope, while revising global headline inflation upward to 4.4% in 2026 before an expected easing to 3.7% in 2027. This marks a clear departure from the disinflationary trend of recent years.

Growth in advanced economies is projected at 1.7% in 2026 and 1.8% in 2027. Outcomes within the group remain uneven: the United States, cushioned by its position as a net energy exporter, is expected to expand 2.3% in 2026, while the European region remains subdued at 0.9%. Downside risks continue to dominate, including a longer or broader conflict, deeper geopolitical fragmentation and renewed trade tensions.

Indian economy overview:

India remained the fastest-growing major economy through FY 2025-26. As per the Provisional Estimates released by the Ministry of Statistics and Programme Implementation (MoSPI), the second advance estimate released on 27 February 2026, real GDP grew 7.6% in FY 2025-26, against 7.1% in FY 2024-25. Nominal GDP or GDP at current prices is estimated to attain a level of Rs. 345.47 lakh crores in FY 2025-26, as against Rs. 318.07 lakh crore in FY 2024-25, showing a growth rate of 8.6%. These estimates are computed on MoSPIs new national accounts series with base year 2022-23, which replaced the earlier 2011-12 series during the year.

Growth was broad-based, with manufacturing, trade, transport and communication services groups both contributing materially, while gross fixed capital formation pointed to a firmer investment cycle. Inflation remained unusually benign for most of the year before turning higher on energy and supply-side pressures.

The Reserve Bank of India (RBI) reduced the policy repo rate by a cumulative 125 basis points over calendar 2025, bringing it to 5.25% by December 2025 and has held it there since. At its April 2026 review, the Monetary Policy Committee kept the repo rate unchanged at 5.25% with a neutral stance, while lowering its FY 2026-27 real GDP growth projection to 6.9% and raising its CPI inflation projection to 4.6%, while noting continued volatility in energy prices and monsoon-related risks to food inflation.

Company Overview:

Arrow Greentech Limited (AGTL) reports its business in two segments. The High-tech Products segment comprises anti-counterfeit products, intellectual property and Avery Pharma. The Green Products segment comprises water-soluble films, bio-compostable products and other green products. The narrative that follows describes the underlying businesses within these segments:

A. Security Products

The structural case for this business remains intact in several respects and has strengthened. Global demand for brand protection features in packaging is estimated at approximately USD 4.0 billion in 2025 and is forecast to reach approximately USD 5.0 billion by 2030, a compound annual growth rate of about 4.7%. Within the broader anti-counterfeit packaging market, track-and-trace accounted for the largest technology share at close to half of revenue in 2025, with pharmaceuticals the single largest application with a 27.9% share.

AGTL operates a state-of-the-art facility for manufacturing high-security products used to control counterfeiting, including anticounterfeit threads, security fibres and security films. The plant has advanced capabilities in metalising, demetallising, holography, nano printing, and functional coatings, including the embedding of machine-readable features and lamination. These products are designed for integration into security papers, tax stamps and high-value brand protection across sectors including bank notes, passports, certificates, perfumes, cosmetics and pharmaceuticals, together with track-and-trace management.

The Company operates on fully integrated and 100% indigenous technologies. These products are primarily supplied to paper manufacturers and require specialised production capabilities.

i. High-Level Security Protection

Our company specialises in advanced security solutions for paper-based identification systems, designed to combat counterfeiting of security documents, including banknotes, passports and birth certificates, etc.

This industry is highly confidential. Due to the confidentiality requirements stipulated in our contracts, we are unable to provide detailed information about this business segment.

ii. Level 2 Security Elements - Medium Level Security Protection

The Company is equipped with technology, expertise and infrastructure to adapt its solutions for high-value brand protection and counterfeiting control across sectors including pharmaceuticals and branded consumer products. The tightening of on- pack traceability and serialisation requirements, both in India and in export markets, expands the addressable opportunity for this business well beyond its historical base.

During the year, the Company continued to expand its intellectual property position in this area, with patents granted for security laminates in Sri Lanka in January 2026 and Malaysia in February 2026, and an Indian patent for multicolour security fibres and planchettes for high-security paper. The Companys strategic focus remains on securing robust patent protection to safeguard innovations, mitigate litigation risk and strengthen long-term competitiveness and on the global commercialisation of patented products, including opportunities for out-licensing intellectual property to enhance revenue streams.

We remain committed to strengthening our presence in the Indian security market and to expanding into global markets, beginning with the EU and EEA regions. We continue to explore strategic partnerships with established market players to leverage our cost advantages and integrate their technologies. Inspired by the Prime Ministers Atma Nirbhar initiative, the Company remains energised to advance its goals and contribute to the vision of promoting high-quality, Indian-made products globally.

B. Water Soluble Films (Watersol®)

The global market for polyvinyl alcohol (PVA) films was valued at around $550 million in 2024 and is expected to grow at a compound annual growth rate (CAGR) of 5-6% through 2030. Polyvinyl alcohol dominates the material mix, on account of its water solubility, biodegradability and non-toxic properties. North America is estimated to be the largest single market, while the Asia- Pacific region leads growth, driven by rapid industrial expansion, rising demand for convenience products, and the expansion of packaging and agriculture end-uses. The market remains fragmented, with a large number of participants accounting for the majority of revenue - a structure that favours technically differentiated suppliers with protected process know-how.

Arrow Greentech Limited stands out as a global leader in the production of cast water-soluble films, with our flagship brand Watersol® setting the standard in the industry and is the largest manufacturer of water-soluble films in India. Our manufacturing facility is located at Ankleshwar, Gujarat, approximately 350 kilometres from Mumbai, on land held under a 99-year renewable lease from the Gujarat Industrial Development Corporation, with an on-site R&D centre equipped with modern instrumentation and common utilities available to support future expansion.

Watersol® films are manufactured from polyvinyl alcohol with proprietary additives, through a batching, casting, slitting, curing and packing process, with embossing and printing available as value-added steps. Our PVA films are characterised by their water solubility, biodegradability, and customisation capabilities, making them suitable for offering versatile applications across agrochemicals, construction chemicals, dyes, pigments, embroidery, health, hygiene, industrial engineering, water transfer printing and FMCG. The product range now spans AD film for detergent unit-dose packaging, dye packaging, pigment packaging, toilet block packaging film, water-soluble laundry bags, mould release film, construction chemical packaging, fibre packaging, seed bomb packaging, and seed tape packaging.

The agrochemical and home care sectors represent approximately 60-70% of the global market for water-soluble films, and AGTL is engaged with major prospects and clients within these niches. In addition, we are targeting the mass market for embroidery film, where we compete directly with lower-tech, Chinese-made products using our advanced, indigenous technology.

The Companys distribution reaches Europe, Asia, North America, South America and Africa, served principally through three supply points located in India, the United Kingdom and South America, supported by a wide distribution channel.

To capitalise on these opportunities, AGTL is expanding capacity and diversifying its product offering through capital expenditure. The Company holds an industrial plot admeasuring 3 acres in the Dahej-II Industrial Estate in Gujarat, which is intended to support future capacity expansion, particularly in green technologies. With a strong emphasis on research and innovation, AGTL remains committed to establishing itself as a leading global supplier of PVA films and related value-added products.

C. Sustainable Solutions

The regulatory environment for sustainable packaging in India moved decisively during the year and this is the single most important development for this part of the business. The ban on identified single-use plastic items, in force since July 2022, continues to apply. Building on this, the Plastic Waste Management (Amendment) Rules 2026 were notified on 31 March 2026 and the Extended Producer Responsibility framework for packaging took effect from 1 April 2026.

AGTL is dedicated to investing further in this growing sector. We believe that bio-based solutions in flexible films offer a sustainable, eco-friendly alternative to single-use plastics and other traditional options, addressing growing concerns about plastic pollution. Unlike petrochemical-based plastics that do not break down naturally, bio-compostable films are designed to decompose through natural processes. Our work in this area has the potential to transform packaging solutions by offering sustainable alternatives to conventional polyester and polypropylene materials. Our Bioplast bio-compostable film and Watersol® capsules - the most concentrated range of hygiene products, supplied in water-soluble capsules without generating plastic waste are the Companys principal offerings in this space.

Our New Products Development and R&D teams continue to integrate soluble and sustainable technologies to develop advanced packaging solutions. We adhere to a policy of invention, patenting and production based on end-user specifications, while prioritising environmental sustainability. Our team also remains actively involved in promoting the transition to sustainable practices within the industry and through trade associations.

D. Pharma Delivery Systems - Mouth Dissolving Strips (MDS)

MDS are fast-dissolving films that deliver active pharmaceutical ingredients more rapidly than conventional dosage forms such as tablets, capsules and liquids. The films dissolve on contact with saliva, eliminating the need for additional fluids, offering rapid absorption and high bioavailability. They are particularly advantageous for geriatric, paediatric, psychiatric and veterinary populations. For patients with swallowing difficulties, this provides ease of self-administration, water-free usability, quick onset of action, and non-invasive dosing. Transdermal patches, also developed by Avery Pharma, deliver actives through the skin directly into the bloodstream, ensuring sustained and controlled release over an extended period.

AGTLs wholly owned subsidiary, Avery Pharmaceuticals Private Limited (Avery Pharma), advances the production of Mouth Dissolving Strips and transdermal patches. Avery Pharma operates a WHO-GMP-approved manufacturing facility at Sanand, Gujarat, with state-of-the-art German-designed machinery and an in-house product development centre. The facility holds WHO- GMP, FSSAI, GLP, ISO 9001 and ISO 22000 certifications.

Avery Pharmas technology platform rests on a granted patent for Active Embedded Water-Soluble Film, commercialised under the MDS trade name. The platform allows one or more actives to be embedded or entrapped at controlled concentrations for targeted, precise delivery and supports lingual, sublingual and buccal routes of administration. The subsidiary now organizes its offering around three platforms: MDS Films - its novel drug delivery system for rapid oral delivery; the Novel Drug Delivery Device - which enables time-controlled release through embedded or coated actives in water-soluble or dispersible films; and RX Matrix - a system for the safe collection, storage and disposal of biological samples that eliminates cross-contamination and improves biosafety.

Avery Pharma currently has 40 products approved under FSSAI and 21 products under prescription (Rx) approval, with product approval from the Food and Drug Controller Administration and a Central FSSAI license. The nutraceutical range spans vitamins, minerals, botanicals, and functional combinations, including Vitamin D3, K2, B12 strips, folic acid, iron, zinc, melatonin, caffeine, ashwagandha, and curcumin formulations. The prescription range includes products approved under WHO-GMP certification, products licensed for domestic and export sale and a pipeline of products under test license spanning cardiovascular, neurological, respiratory and analgesic categories. Approved products are introduced directly into Rest-of-World markets without the need for additional regulatory approvals.

Commercially, Avery Pharma has signed a few supply contracts and is in discussion with several other domestic and international companies on long-term supply arrangements. The subsidiary is pursuing product registrations in Russia, Yemen and Vietnam and is engaged in Contract Development and Manufacturing Organisation (CDMO) projects, drawing on the parent companys expertise in casting film and embedding actives. These CDMO engagements contribute to the bottom line, deepen client relationships and position Avery Pharma for future commercial production opportunities.

E. IP Protection

At Arrow Greentech Limited, we prioritise the strategic protection of our markets through robust patent filings both domestically and internationally, including via the Patent Cooperation Treaty route. Dedicated Intellectual Property Cells have been established across AGTL India and our subsidiaries. Our focus is on high-technology products and technologies. We continue to direct new IP creation towards green products across Arrow and its subsidiaries.

Patents are a cornerstone of our IP strategy, providing protection against infringement and offering significant commercial value through monetisation and, where necessary, litigation. To strengthen our research and development capabilities, we maintain a specialised centre focused on proof-of-concept creation and pilot projects, with validated concepts either developed internally or licensed to external partners. The Company continues to play an active role in shaping IP policy through its participation in the Select Committee on IP organised by the Confederation of Indian Industry and the Department for Promotion of Industry and Internal Trade and remains committed to contributing to Indias ambition to rank among the top 25 nations in the Global Innovation Index.

The Company has obtained more than 50 patents globally over the years, of which 24 are presently in force, spanning India, the United Kingdom, the United States, Europe, Sri Lanka and Malaysia. By jurisdiction, 10 in-force patents are held in India, 6 in the United States, 6 across the United Kingdom and Europe, 1 each in Sri Lanka and Malaysia. In addition, more than 10 Indian patent applications and 3 foreign patent applications are currently under process covering various sectors, geographies, focused principally on water-soluble films and security solutions. The Company also maintains a strong brand protection framework with 40 in-force registered trademarks and 19 trademark applications currently under processing.

The portfolio is organised around five technology groups - paper industry; packaging industry; security products; health, hygiene and food; printing and pressure-sensitive adhesive materials. Applications extend from mouth-melting, gel and enzyme strips, clinical sample collection in health, through active ingredient retention in hygiene products, agro-nutrient and food packaging, security labels and security documents such as cheques, bank notes, passport papers, printing on fabrics, paper and vinyl and selfadhesive labelling.

Grants during FY 2025-26. The Company was granted a patent for security laminates in Sri Lanka in January 2026 and in Malaysia in February 2026. In February 2026, the Indian Patent Office granted Patent No. 580835 for Multicolour Security Fibres and Planchettes for High Security Paper, a technology that embeds tamper-resistant elements into paper and materially raises the difficulty of replication.

Our efforts in innovation and IP protection continue to be externally recognised. AGTL has received the National Intellectual Property Award from CII and DPIIT in 2019, 2021,2022, 2023, 2024, 2025 with 2020 an exception on account of the COVID-19 pandemic. At AGTL, intellectual property is a vital asset, we remain steadfast in our commitment to its creation, protection and strategic management.

F. Trading and Revenue Streams from Foreign Subsidiaries:

The Companys international operations are conducted through Arrow Green Technologies (UK) Limited, a wholly owned subsidiary, which in turn holds Advance IP Technologies Limited in the United Kingdom and Advance Secure Products B.V. in the Netherlands. These entities serve as strategic hubs providing access to markets across Europe, Asia, the Americas and Africa; they function not only as operational bases but as gateways for innovation, customer engagement and regulatory alignment.

The Board and team at Arrow UK are focused on the commercialisation of patents and technology. Leveraging the logistical advantages and favourable business environment of the Western world, we are committed to maximising the potential of this subsidiary. In addition to monetising our patents and trading in water-soluble films, Arrow UK is expanding its trade into high- technology products. The subsidiary, together with its European counterpart, generates substantial revenues and we remain optimistic about the future prospects for both entities.

Within India, the Companys group structure additionally comprises Arrow Secure Technology Private Limited and Avery Pharmaceuticals Private Limited, both wholly owned, together with LQ Arrow Security Products (India) Private Limited and sP Arrow Bio-polymer Products Private Limited.

2. Opportunities:

The Company is well positioned to leverage opportunities across both of its reported segments and the FY 2025-26 outcome sharpened rather than weakened that positioning.

In the Green Products segment, the tightening of Indias Extended Producer Responsibility framework from 1 April 2026, the recycled-content mandates now applying to plastic packaging and the preferential treatment of IS 17088 certified compostable materials together create a regulatory pull towards the Companys product set. The same direction of travel is evident in developed markets, where demand for eco-friendly packaging continues to drive water-soluble film consumption. The agrochemical, home care, pharmaceutical and healthcare industries are simultaneously seeking safe, hygienic and precise delivery mechanisms, creating new avenues for our speciality film solutions. The segments 52% growth during the year, from a small base, indicates that this pull is beginning to convert into revenue.

In the High-tech Products segment, counterfeiting and document fraud remain major global concerns; the spread of on-pack serialisation and traceability mandates is widening the customer base for security features. Our Security division has invested significantly in advanced manufacturing technologies and plans to extend its market reach globally, beginning with exports to the EU and eEa regions. Our wholly owned subsidiaries, Avery Pharmaceuticals Private Limited and the Watersol division, are targeting expansion into Europe, South America and Africa.

A growing in-force patent portfolio, extended during and after the year across security fibres, colour-shift films and graphene-based security threads, supports both the direct product business and the out-licensing opportunity. The Companys debt-free balance sheet and liquidity position provide the capacity to fund the Dahej expansion and further R&D investment without external leverage.

3. Threats:

Our business operations may experience fluctuations on account of several factors, including geopolitical developments, technological obsolescence, rising input costs, project execution delays, patent expirations and tender outcomes. Reducing the volatility in performance - through a broader customer base, a wider product mix and the scaling of the Green Products segment, remains a management priority.

Elevated energy prices and the inflation outlook raise the risk of higher PVA and other input costs, while currency volatility affects both export realisations and imported input costs. The importation of non-standard materials, including extruded films from China, continues to pressure competitive pricing in the mass-market segments we address. Working capital employed increased during the year, reflecting movement in receivables and inventory, and its normalisation continues to be a management focus. We have identified key risks across our business functions and will implement the measures needed to address and mitigate these risks effectively and consistently.

4. Internal control system and its adequacy:

The companys internal audit system is designed to ensure robust internal controls that align with the size, complexity and requirements of our business. This system aims to safeguard assets against misuse or loss and ensure that transactions are properly authorised, recorded and reported.

Operating parameters are clearly defined and monitored regularly. The Audit Committee continually assesses the adequacy and effectiveness of our internal controls. These controls are implemented to enhance operational efficiency, financial management and compliance with relevant regulations and laws.

In accordance with Section 138 of the Companies Act, 2013, the company has engaged a firm of Chartered Accountants to perform internal audits of our functions and activities. They provide quarterly reports on their findings, which are reviewed by both the Audit Committee and the Statutory Auditors.

5. Material developments in human resources/industrial relations front, including number of people employed:

Throughout the year, industrial relations have remained amicable and uninterrupted, with no disruptions to manufacturing activities. The company has conducted various programs focused on enhancing motivation and technical and soft skills. We have implemented comprehensive safety measures to protect our employees and have adopted a work-from-home policy for nonfactory staff, providing the necessary technological support and tools to ensure smooth operations.

Human capital is regarded as a vital asset and a key factor for the companys success, particularly given the niche nature of our products, patents and applications. We are committed to building a dedicated team to support the companys growth. As of March 31,2026, our workforce consisted of 120 employees.

6. Cautionary statement:

This report may contain forward-looking statements. AGTL may also include forward-looking statements in periodic reports to the Stock Exchanges, as well as in its annual reports to shareholders, proxy statements, offering circulars, prospectuses, press releases and other written communications. Additionally, forward-looking statements may be made orally by our officers, directors, or employees to third parties.

AGTL does not undertake any obligation to update or revise these forward-looking statements, whether in this report or elsewhere. Forward-looking statements, which reflect our beliefs and expectations, are inherently subject to risks and uncertainties. Various factors could cause actual outcomes to differ materially from those projected in forward-looking statements.

For and on behalf of the Board of Directors

	Shilpan P Patel
Place: Mumbai	Chairman & Managing Director
Date: 22nd May 2026	DIN:00341068