Astec Lifesciences Ltd Management Discussions

<dhhead>Management Discussion and Analysis</dhhead>

Economic and Industry Overview

Global Economy and Outlook

In 2024, the global economic landscape was shaped by resilient growth in emerging markets, persistent inflationary pressures, geopolitical tensions, and accelerated digital and green transitions, prompting central banks to cautiously navigate monetary policy normalization. The year 2024 witnessed significant electoral activities, with major elections in countries like India, the United States, and Indonesia, contributing to heightened political and economic uncertainty. The global trade environment is also evolving, with a noticeable rise in protectionist trade policies and shifting global supply chains. The recent announcement of tariffs by U.S. government, the impact of which is still evolving, has resulted in increase in economic uncertainty, market volatility and may result in reconfiguring of supply chains and retaliatory measures impacting global trade patterns. The IMF projects global growth to be 3.3 percent for both 2025 and 2026 (Source: World Economic Outlook by IMF). The global economic outlook remains clouded by medium-term risks, including policy-generated disruptions that could affect fiscal sustainability and financial stability.

Indian Economy and Outlook

Indias economy has demonstrated remarkable resilience amidst global headwinds, with real GDP growth estimated at 6.5 percent for FY25 as per second advance estimates released by National Statistical Office (NSO). This growth is primarily driven by robust performance in the agriculture and services sectors.

India’s growth remains stable, supported by strong domestic demand. High-frequency indicators such as PMI services, GST collections, air passenger traffic, and hotel occupancy rates indicate sustained momentum. Looking ahead, Indias GDP growth for FY26 is projected to be between 6.3 and 6.8 percent, supported by strong domestic demand, higher public capex, and improving business expectations. However, global uncertainties, including geopolitical tensions and trade policy shifts, pose potential risks to the growth outlook. The governments focus on structural reforms and deregulation will be crucial in enhancing Indias competitiveness and sustaining high growth rates in the medium term.

Agrochemical Industry and Implications for the Company

In 2024, the global agrochemical industry experienced a year of recalibration amid macroeconomic and operational headwinds. The industry has been navigating a prolonged and complex destocking cycle leading to price corrections and margin pressures. However, channel inventories have declined & the destocking phase is nearing an end. In the near term, volumes are expected to improve as residual destocking phase is nearing an end while pricing is expected to remain soft due to competitive intensity.

As per the latest reports from ICRA, while volume growth is expected to remain in the mid-single digits, increased competition from Chinese exports in non-US markets is likely to keep realizations low. The combination of moderate volume growth and intensified price competition, particularly in export markets, is expected to weigh on profitability.

India’s agrochemical sector has witnessed enormous growth in recent years, positioning itself as a major contender in the global market. Over the last couple of years, the sector faced headwinds due to global inventory de-stocking and oversupply. Domestic demand was also subdued due to erratic monsoon and lower pest infestations. The sector began stabilizing in the second half of FY 25. However, export sales declined by approximately 21% year-on-year, reflecting continued global volatility and pricing pressure.

Despite this, the sector remains optimistic for FY26 on the back of predictions of an above-normal monsoon, rising demand for food and crop protection, continued government support and policy tailwinds through focus on & increased allocation to the agriculture sector.

KEY DRIVERS

• Global presence: Indian agrochemicals are well-regarded for their quality and affordability, making them a preferred choice for farmers across nations.

• Affordability and high quality: Indian producers offer competitively priced generic agrochemicals, attracting interest globally and boosting export volumes. The affordability and high quality of agrochemical products make India an attractive destination for agrochemical manufacturing.

• Rising Global Population and Food Demand: With the global population projected to reach around 9.7 billion by 2050, there is an increasing need to produce more food. Agrochemicals like fertilizers and pesticides play a crucial role in enhancing crop yields to meet this growing demand.

• Decreasing Arable Land: As urbanization and industrialization reduce the amount of available farmland, the need to maximize productivity on existing agricultural land becomes more critical. Agrochemicals help optimize crop production on limited land.

• Need for Crop Protection: Up to 40% of global crop yields are lost annually to pests, diseases, and weeds. Agrochemicals such as herbicides, fungicides, and insecticides are essential for protecting crops and minimizing these losses.

• Technological Advancements: Innovations in agrochemical formulations and the adoption of precision farming techniques are enhancing the efficiency and effectiveness of these products, further driving market growth.

• Increasing Demand for High-Value Crops: The rising demand for fruits, vegetables, and other high-value crops is boosting the use of agrochemicals to ensure high-quality yields.

Your Company is one of the leading players in triazole fungicides and is well placed to capitalize on opportunities arising in the domestic as well as the international markets with well-established market credentials. The Company has 4 (four) manufacturing facilities in Mahad, Maharashtra and has a state-of-the-art Research and Development (R&D) Center which will further augment your Company’s R&D capabilities. Your Company has also commissioned another herbicide facility, in Q2 FY 2024-25, to cater to Contract Manufacturing business. The Company has already built a strong reputation for its ability to undertake complex chemical reactions with a focus on developing innovative products. Astec’s strong progress made in backward integration projects is also expected to aid in margin expansion.

In FY 2024-25, your Company recorded Total Income of I 38,693.22 Lakh as compared to I 46,382.46 Lakh in FY 2023-24 and Profit after Tax of I (13,471.17) Lakh in FY 2024-25 as compared I(4,689.10) Lakh in FY 2023-24.

Your Company faced significant challenges with subdued demand in the global agrochemical industry, particularly in triazole fungicides.

Your Company’s enterprise business faced price headwinds in both exports as well as domestic markets coupled with a drop in volumes, primarily in the first half of the year for key products. Further, the CDMO business also witnessed lower volumes due to continued destocking and cautious approach adopted by innovators. As a result, your Company reported a decline in revenues and significant reduction in margins in FY 2024-25.

Geographically, export sales declined by 21.1% year-on-year while domestic sales fell by 8.1% year-on-year due to lower volumes of key CDMO products. Share of CDMO sales decreased to 46% in FY 2024-25 from

60% in FY 2023-24. Proportion of exports in total sales declined to 68% FY 2024-25 from 72% in the previous year. Domestic share was at 32% of total sales in FY 2024-25.

Gross margin declined to 22.1% in FY 2024-25 as compared to 30.3% in FY 2023-24.

Despite the short-term challenges, your Company continued to focus on Contract Development and

Manufacturing Operations (CDMO) segment in line with the long-term strategic ambitions.

The state-of-the-art Research & Development Center, named "Adi Godrej Center for Chemical Research and Development" in Rabale, Maharashtra is, equipped with synthesis lab, formulation lab as well as sophisticated safety infrastructure, will enable your Company to expand offerings in CDMO space. This investment is ahead of time which will further aid your Company in improving product development, providing access to advanced equipment and facilities, fostering collaboration, and driving innovation.

With improved capability to reduce the time-to-market for innovative solutions and provide end- to-end solutions supported by advanced labs and analytical instruments, the R&D Center will also make your Company a partner of choice for innovator companies across the globe. Astec’s substantial investment in a future-ready R&D Center reflects its unwavering commitment towards long-term value creation despite challenges in the short run.

Godrej Agrovet Limited, the Holding Company has maintained its shareholding in your Company of

1,26,99,054 Equity Shares (64.75% as on 31st March, 2025 and 64.76% as on 31st March, 2024).

Key Financial Highlights

Particulars (in Lakh)	FY 2024-25	FY 2023-24
Total Income	38,693.22	46,382.46
Earnings Before Exceptional Items, Interest, Tax, Depreciation and	(6,057.80)	(26.87)
Amortization
Profit Before Tax	(14,098.92)	(6,174.79)
Profit After Tax	TOP> (13,471.17)	(4,689.10)
Total Comprehensive Income	(13,453.79)	(4,747.68)

Particulars (in Lakh)	FY 2024-25	FY 2023-24
Debtors Turnover Ratio	3.14	2.83
Inventory Turnover Ratio	2.14	1.30
Interest Coverage Ratio	NM	(1.45)
Current Ratio	0.93	1.00
Debt Equity Ratio	2.36	1.34
Operating Margin (%)	(28.8)%	(7.97)%
Net Profit Margin (%)	(35.33)%	(10.23)%
Return on Net worth (%)	(44.60)%	(11.89)%

NM:Non-measurable

The Debtors Turnover ratio has decreased in FY 2024-25 due to decline in sales owing to reduced off takes and sharp fall in selling prices.

The Return on Net Worth, Operating Margin and Net Profit ratio for FY 2024-25 and 2023-24 are negative due to sharp decline in profit for the year due to challenging market conditions as mentioned above.

The overall decline in margins resulted in substantial reduction in the net worth of the Company couple with some increase in debt resulting into fall in the debt equity ratio.

The formulae used for computation of key financial ratios are as follows:

Debtors Turnover Ratio	Net Sales / Average Trade Receivable
Inventory Turnover Ratio	Cost of Goods sold / Average Inventory
Interest Coverage Ratio	Profit Before Interest and Taxes / Finance Costs
Current Ratio	Current Assets / Current Liabilities
Debt Equity Ratio	Total Debt / Shareholders’ Equity
Operating Profit Margin (%)	Profit Before Interest and Taxes / Net Sales
Net Profit Margin (%)	Profit After Tax / Net Sales
Return on Net Worth (%)	Profit After Tax / Average of Total Equity

Opportunities, Strengths and Concerns

Opportunities:

Indian chemical companies are expected to rapidly gain market share on the back of multiple favourable factors listed below:

• Rising Domestic Demand: With Indias growing population and expanding middle class, the demand for chemicals in various sectors such as agriculture, pharmaceuticals, and consumer goods is increasing. This provides a substantial market for domestic chemical companies.

• Export Potential: India is already a significant player in the global chemical market, ranking high in the production and export of dyes, agrochemicals, and pharmaceuticals. There is potential to expand exports further, especially to markets in Europe and North America.

• Sustainability and Green Chemistry: The global shift towards sustainable and eco-friendly products presents an opportunity for Indian companies to innovate and produce green chemicals This can help them tap into new markets and meet the growing demand for environmentally friendly products.

• Technological Advancements: Embracing digital technologies and automation can enhance production efficiency and reduce costs. Companies that invest in research and development (R&D) to innovate and improve their processes will likely gain a competitive edge.

• Ingredients going off-patent: Globally, around 22 active ingredients are expected to go off-patent over the next 10 years. The estimated market size for these products will be around $4.1 billion by 2026. Indian chemical sector is well placed to capitalise on such opportunities and to build a strong manufacturing base.

• Geopolitical Shifts: Changes in global trade dynamics, such as stricter environmental regulations in China and trade conflicts, are creating opportunities for Indian chemical companies to fill the gaps in the global supply chain.

Strengths:

• Market Position: Your Company has established a strong presence in the agrochemical industry, holding a leadership position in triazole fungicides manufacturing coupled with reputed clientele that include in both Domestic and International Markets.

• Strong R&D Capabilities: Your Company’s cutting edge R&D Center will play a pivotal role in supporting the fast-growing CDMO business, while also expanding a significant number of global innovators.

• Manufacturing Expertise: The herbicide plants commissioned in 2021 and 2024 are enabling in diversification of product portfolio and augmenting your Company’s manufacturing capacity.

Concerns:

• International markets and trade policies: Global sentiments on trade recovery are not quite promising.

The recent trade tensions owing to reciprocal tariffs, geopolitical tensions and effects of the same are yet not cognized. Your Company has a big export base of customers. Any untoward actions by the policy makers can have a direct bearing on the revenues of your Company. The Company is in the process of expanding its CDMO space to hedge itself from the effects of market volatilities and vagaries.

• Raw material constraints: A large part of your Company’s operations is dependent on imports of raw materials which may not be available in the domestic market. Your Company is exposed to risks associated with the non-availability of these materials from overseas markets. Your Company is working towards de-risking strategies and developing alternate vendors.

• Unfavorable and erratic weather patterns and monsoon failure: Agrochemical sector is highly vulnerable to unfavourable local and global weather patterns since it directly impacts the application of crop protection products. Erratic and uneven South-West monsoon can have material adverse impact on the overall demand for the products of the agrochemical companies. Your Company’s presence into wider geographies through exports limits the risk, to a significant extent.

• Foreign currency volatility and interest rates: Your Company’s exports to the foreign markets leads to profits getting impacted by the volatility in the foreign currency and the interest rates. Company has foreign exchange policy in place to hedge the risk.

Segment-wise Performance or Product-wise performance:

Your Company has only 1 (One) reportable segment, i.e., Agrochemicals. The Total Income from agrochemicals was I 38,693.22 Lakh for the FY 2024-25.

Internal Control System:

Your Company has adequate internal controls in place designed and developed to:

a Safeguard its assets from unauthorised use or losses b) Conduct its business operations efficiently in line with the Company’s policies c) Maintain accuracy, completeness and reliability of the financial and accounting records d) Comply with the applicable laws, rules and regulations e) Detect and prevent any fraud the frauds in the accounting and reporting system

The Audit Committee of the Board of Directors oversees and evaluates the internal financial controls and risk managements system as well as spearheads the internal audit mechanism, on a regular basis.

Human Resources

Your Company has adopted progressive Human Resources (HR) policies to develop and empower its valuable employee force. We provide ample, equal and fair opportunities to groom our employees and put them on career progression paths, without any form of discrimination in terms of religion, gender, race, colour, caste, etc. We take several initiatives to inspire our workforce and to care for them. As a part of Godrej Group, we have Whistleblower Policy and Prevention of Sexual Harassment Act Policy to empower our employees to be able to identify and report any wrong doings in the system. The Company believes in being an employer that provides all tools and guidance to its employees so that they can discover their full potential and add value to the organization through their skills and behaviour.