Astral Ltd Management Discussions

Global Economy

The global economy grew by 3.3% in 2024, supported by improved stability across several regions. A moderation in inflation, improved supply chain efficiencies, and a decline in energy and food prices contributed to this outcome. The resilience of consumption and services activity, alongside calibrated policy actions helped maintain momentum through the year. Trade flows saw notable changes during the year as new tariys introduced by the United States prompted responses from key trading partners. While these adjustments brought shifts to the global trade environment, countries continued to adapt to the evolving landscape. Advanced economies recorded stable performance, with the United States growing at 2.8% during the year. Overall, advanced markets expanded by 1.8%, supported by the strength of their services sectors and determined eyorts by central banks to anchor inflation expectations. The euro area posted a more modest growth of 0.8%, reflecting the interplay of monetary policy normalisation, subdued industrial activity, and cautious consumer sentiment.

Growth in emerging markets and developing economies remained strong at 4.3%. India continued to stand out with strong domestic consumption, favourable demographics, and rising adoption of digital services. These trends are expected to support sustained growth in the coming years. Chinas growth moderated during the year, influenced by ongoing trade-related developments and shifting global dynamics.

In the near term, global growth is expected to moderate to 2.8% in 2025. This is mainly due to continued trade frictions, the lagged impact of tighter monetary policies, and ongoing geopolitical developments. Despite these headwinds, the global economic outlook remains constructive, with steady progress in technology, energy transition, and regional collaboration oyering new avenues for growth.

Indias economy is estimated to grow at 6.5% in FY25. While the pace of growth has moderated from 9.2% recorded last year, it remains robust in the context of evolving global trade dynamics and a cautious private investment environment. The overall sentiment remains positive, supported by sustained domestic consumption, improving rural demand, and a promising outlook for agriculture on the back of a normal monsoon forecast.

Inflationary trends continued to soften through the year, with the headline rate easing to 3.34% in March 2025. This marked the lowest level in five years, primarily due to a decline in food inflation, which stood at 2.69%. Price stability in housing and fuel also contributed to this favourable trend. In response to these developments, the Reserve Bank of India undertook two successive reductions in the repo rate, bringing it down to 6.0%. This policy shift has created greater headroom for supporting growth while maintaining inflation within target levels.

Across key sectors, the economy has shown encouraging signs of progress. Manufacturing activity picked up, aided by better capacity utilisation and a more stable policy environment. While some parts of the sector remain exposed to global uncertainties and input cost pressures, domestic demand has stayed firm. Measures such as improved logistics infrastructure, incentives for value-added production, and strong public investment in infrastructure have helped support momentum, particularly in consumer-facing and light manufacturing segments. The services sector continued to perform well, supported by resilient demand across financial, digital and retail-driven verticals.

One of the key indicators of economic resilience has been the continued strength in Goods and Services Tax collections. For FY25, gross GST revenues stood at _22.08 lakh crore, reflecting a 9.4% increase over the previous year. This growth highlights the underlying strength of the consumption base, especially in non-discretionary categories.

The Reserve Bank of India has maintained its growth forecast at 6.5% for FY26. Early estimates for FY27 suggest a possible improvement to 6.7%, supported by expectations of a global economic recovery, renewed private capital investment, and ongoing benefits from supply chain diversification. While global uncertainties remain, the underlying fundamentals including favorable demographics, growing formalisation and steady policy reforms are expected to keep India on a stable growth path.

The Indian plastic pipes industry has grown into a key enabler of the countrys infrastructure, agriculture, and housing ambitions. With applications spanning water supply, sanitation, drainage, and plumbing, plastic piping systems have become integral to both rural development and urban modernisation. As per CRISIL Ratings and ICRA, the industry is estimated to have crossed _50,000 crore in size by FY25, supported by sustained volume growth despite near-term pricing pressures.

Over the past several years, plastic pipes have steadily replaced traditional materials such as metal and concrete, driven by their durability, ease of installation, and lower lifecycle costs. Government-led initiatives such as the Jal Jeevan Mission, PM Awas Yojana, and PM Krishi Sinchai Yojana have played a pivotal role in expanding access to piped water and sanitation services across the country, directly supporting demand for plastic piping systems.

The financial performance across the industry in FY25 was impacted by a sharp decline in realisations due to volatility in raw material prices, particularly polyvinyl chloride (PVC) resin, which accounts for nearly three-fourths of the cost structure in PVC-based pipe segments. According to data from PolymerUpdate and CARE Ratings, PVC resin prices declined by nearly 24% over the past two financial years, from a peak of around USD 1,026 per metric tonne to approximately USD 782 in FY25. This fall was primarily triggered by global oversupply, including higher imports into India, particularly from low-cost producing regions. The direct consequence of this price correction was subdued revenue growth and a contraction in operating margins across the value chain, particularly in the first half of FY25. The impact was also ampli_ed by inventory losses, as pipe manufacturers carried higher-cost stock into a falling price environment. Demand from the infrastructure sector remained stable, although the timing of General Elections in early 2025 led to a temporary slowdown in government capital expenditure during the first half of the financial year. Private real estate activity, especially in urban and semi-urban areas, oyered some oysetting strength, supported by continued momentum in housing completions and renovation-led replacement demand. Against this challenging backdrop, we not only registered growth in sales volumes but also maintained our profitability, in contrast to the overall industry trend. While most competitors faced degrowth and margin pressure, we continued to gain market share, further strengthening our position within the industry.

The outlook for the Indian plastic pipes industry remains favourable over the medium to long term, supported by several enduring demand drivers. Rising urbanisation, growing water stress, and infrastructure creation under public schemes are expected to sustain the need for efficient piping solutions. Additionally, a gradual shift from unorganised to organised players, catalysed by improved quality standards and enforcement of BIS norms, is likely to strengthen industry fundamentals.

A key long-term development is the ongoing eyort to enhance Indias domestic PVC resin capacity. Currently, over 60% of the countrys PVC requirement is met through imports. According to CARE Ratings, projects under implementation could add around 2.5 million metric tonnes of annual resin capacity by FY27, which would help reduce import dependency and ease price volatility. Furthermore, the anticipated introduction of anti-dumping duties on select imports may support more stable domestic pricing conditions in the years ahead.

Looking forward, ICRA projects the industry to grow at a compound annual growth rate of 10-12% over the next two to three years, with momentum expected to pick up in FY26 once current election-related spending pauses are lifted. Demand is likely to be supported by both new infrastructure rollout and replacement demand from older pipeline networks in rural and semi-urban areas. While raw material cost fluctuations remain a structural risk, ongoing domestic capacity creation and better inventory planning are expected to reduce volatility over time. The industry remains well-placed to benefit from Indias broader growth cycle, with strong demand visibility across end-use segments.

Despite short-term pressures from input cost movements and softer realisations, the Indian plastic pipes industry continues to demonstrate long-term strength. Supported by policy momentum, growing consumption, and supply-side investment, the industry is poised for steady, formalised, and sustainable growth.

The Indian adhesives and sealants industry forms a vital component of the countrys manufacturing and construction value chain, with extensive applications across infrastructure, automotive, packaging, woodworking, electronics, and consumer segments. In FY25, the industry maintained steady growth despite evolving demand cycles and input cost dynamics. As per IMARC group report, the Indian adhesives and sealants market is estimated to be valued at approximately USD 2.56 billion. Industry assessments from IMARC Group indicate that the market is expected to expand at a compound annual growth rate of 5.95% over the next eight years, reaching USD 4.3 billion by 2033.

FY25 was characterised by stable volume growth supported by resilient demand from infrastructure, packaging, and automotive sectors. While input cost volatility and project execution cycles posed challenges in the early part of the financial year, adhesive volumes remained firm across high-consumption verticals. Packaging, which accounts for a significant share of adhesive usage in India, continued to benefit from growth in e-commerce, retail logistics, and flexible packaging. Similarly, infrastructure activity, including building materials, waterproo_ng, and tile adhesives, supported volume traction in the construction segment. The automotive and electronics industries also contributed meaningfully, particularly with the growing integration of adhesives in electric vehicles and component assembly.

Against this backdrop of healthy industry growth, Astral delivered a robust performance, continuing to gain market share over peers. During FY25, our Adhesive Business in India grew by 14.4% with an EBIDTA margin of 16.8%, further reinforcing our leadership and strengthening our competitive position in the industry.

The industry is benefiting from structural demand across several verticals:

• Construction and Infrastructure

Government initiatives under ayordable housing, smart cities, and transportation corridors continue to create consistent demand for sealants and construction adhesives.

• Packaging

Rapid expansion in consumer goods and e-commerce logistics has boosted demand for carton-sealing, labelling, and flexible packaging adhesives.

• Automotive and Electronics

The shift towards lighter vehicles and compact electronics is leading to increased use of epoxies, acrylics, and polyurethane-based adhesives in assembly and component bonding.

Looking ahead, the industrys growth prospects remain intact. Infrastructure rollout under government programmes, higher urb an housing penetration, ongoing investment in transport and industrial corridors, and the continued expansion of consumer goods will continue to drive adhesive and sealant usage. Moreover, the diversification of Indias manufacturing base and the push for localised supply chains are expected to create additional demand across upstream and downstream applications.

The Indian adhesives and sealants industry remains well-positioned for medium- to long-term growth. Backed by multi-sectoral demand and a shift towards sustainable and high-value formulations, the industry is expected to continue on a stable and expanding trajectory.

The Indian paints industry plays a key role in both the construction and industrial manufacturing value chains. It is broadly categorised into decorative paints, which form roughly three-fourths of the market, and industrial coatings, which serve automotive, infrastructure, and general industrial applications. According to estimates published by Fortune India, the total market stood at _70,000 crore in FY24, positioning it as one of the fastest-growing materials sectors in India. Over the last decade, the sector has grown at a compound annual rate of approximately 10-12%, supported by structural trends such as urbanisation, rising income levels, and growth in organised housing.

FY25 marked a period of moderation for the paint industry, with overall performance remaining subdued, particularly in the decorative segment. Demand during key seasons was tepid across both urban and rural markets, with a muted festive cycle and continued caution in discretionary spending impacting volumes. Despite broadly stable volume growth, overall revenues were constrained by declining realisations. Pricing pressures intensi_ed amid heightened promotional activity and increased competition, resulting in downtrading within product categories. This environment was most pronounced in the decorative segment, which remained subject to limited pricing power through the year. In contrast, industrial coatings demonstrated greater resilience, supported by steady demand from the automotive, capital goods, and infrastructure sectors, contributing to sustained growth within categories such as powder and protective coatings.

In this challenging industry context, the Companys paint business delivered a satisfactory performance, achieving a positive EBITDA for the year and reflecting the inherent strength of its strategic approach. While overall industry growth was muted, the Company progressed with steady expansion. The launch of paints in Gujarat during the first and second quarters was met with encouraging market acceptance across multiple cities. Subsequently, the phased rollout in Rajasthan recorded positive early results, further consolidating the Companys presence. The Company remains focused on expanding its geographic footprint, introducing Astral Paints in a systematic, state-wise manner, while continuing to service the southern region under the Gem Paints brand. As the paint business continues to scale, the Company is confident of further enhancements in profitability and the continued strengthening of the Companys position within the industry.

The year witnessed increased market fragmentation, with new entrants gaining presence in both decorative and industrial categories. This led to greater competition for shelf space and channel support, further compressing trade margins.

Despite stable input costs, particularly for crude-derived raw materials, pricing discipline remained under pressure. Distribution-led growth strategies by newer participants also reshaped trade structures, driving higher incentives and volume-linked schemes.

Forecasts suggest a potential recovery, supported by a normalised monsoon, stable commodity pricing, and rural consumption recovery. Government-led infrastructure and housing initiatives are also expected to stimulate downstream demand for both decorative and industrial coatings.

Over the medium term, the industry is projected to grow at a compound annual rate of 9-10% through to 2030. Key drivers will include broader urban expansion, rising construction activity in tier-2 and tier-3 cities, and a growing consumer shift towards premium and functional products. Sustainability trends are also expected to influence product development, with increased adoption of water-based and low-VOC formulations. While FY25 posed several challenges including muted demand and elevated competitive pressures, the Indian paints industry remains structurally sound. With strong fundamentals, supportive policy frameworks, and diversified sectoral exposure, the industry is well-placed to resume a steady growth trajectory in the years ahead.

The Indian sanitaryware and bathware industry is an integral part of the countrys building materials sector. It includes ceramic sanitaryware such as basins and water closets, along with bath fittings and accessories like faucets and showers. Growth in this segment is driven by rapid urbanisation, infrastructure development, evolving consumer lifestyles, and increased emphasis on hygiene and water efficiency. Government initiatives in housing, sanitation, and smart cities continue to provide a strong foundation for medium-term growth.

After a period of sustained growth, the industry recorded a subdued performance in FY25. According to Business Standard, revenue growth across the sector was constrained, with several players reporting either flat or declining sales. This was predominantly attributable to a slowdown in residential housing demand, especially within the mid-income and ayordable segments, compounded by persistent cost pressures and elevated financing rates. While the premium segment remained relatively stable, demand at the lower end of the spectrum was adversely impacted by subdued discretionary spending. The sanitaryware segment, in particular, experienced volume pressures.

In this challenging industry context, the Companys bathware segment delivered robust growth of 51.4% year-on-year, significantly outpacing overall industry dynamics. Although growth was achieved on a relatively low base, the strong uptake of the Companys oyerings reflects increasing market acceptance. The Company remains confident in the segments potential to sustain high growth rates and eyectively scale operations in the coming years. As customer acceptance deepens and the brand further establishes its position in the market, the Company is well positioned to expand its presence, gain incremental market share, and replicate the success achieved in other core business segments.

The market is gradually shifting towards premium and value-added oyerings, including touchless fixtures, water-saving technologies, and modernised bathroom solutions. Urban consumers are increasingly seeking aesthetically designed products that oyer functionality, convenience, and sustainability.

A gradual recovery is expected FY26, supported by improved macroeconomic conditions, easing interest rates, and ongoing policy support for real estate and infrastructure. Over the medium term, both the sanitaryware and bath fittings segments are expected to grow at a compound annual growth rate of 6-8%, as per forecasts from IMARC and Mordor Intelligence.

Expansion into tier-2 and tier-3 cities, rising demand for branded and organised products, and a stronger focus on sustainable manufacturing are expected to further drive sectoral momentum. The continued rise in nuclear families, homeownership, and renovation spending also position the industry for steady structural growth.

Established in 1996, Astral Limited has grown into one of Indias leading building materials companies, with a diversified presence across essential construction and infrastructure product categories. Starting with a focused oyering in pipes and fittings, the company has, over the years, systematically expanded its portfolio to include adhesives, sealants, water storage solutions, bathware, valves, paints, construction chemicals, and infrastructure products. This transition from a single-product manufacturer to a comprehensive building materials player reflects Astrals long-term strategic vision and responsiveness to market needs.

The company operates 19 manufacturing units across India, the United Kingdom, and the United States, supported by a total production capacity of approximately 5.49 lakh metric tonnes per annum. These facilities are designed to ensure efficient, high-quality output across product segments while maintaining consistent standards globally.

Astrals market reach is enabled by a robust distribution network comprising over 2.51 lakh dealers and more than 3,600 distributors, ensuring product availability across urban and rural markets alike. The company also maintains a growing presence in export markets, supplying to over 31 countries worldwide.

Innovation remains central to Astrals growth philosophy. With dedicated investments in research and development, the company continues to introduce value-added products and solutions that align with evolving industry requirements.

As of FY25, Astral is supported by a workforce of more than 8,900 employees across functions and geographies, each contributing to its culture of operational excellence and customer-centricity.

In the pipes and fittings segment, overall category momentum remained subdued compared to previous year, primarily due to soft demand in real estate and infrastructure. Additionally, a sharp correction in PVC prices placed pressure on pricing realisations, leading to inventory-related losses across the industry. Despite these headwinds, the Company maintained stable volumes and strengthened its manufacturing backbone. The Hyderabad plant became fully operational during the year, enabling faster service to southern and eastern markets, while the Kanpur facility neared commissioning. The decentralisation of fittings manufacturing, with facilities added in South India and Rajasthan and another underway in Odisha, significantly improved regional servicing capabilities and lowered logistical costs. On the product front, Astral scaled up its Silent Pipes range and introduced ISI-certified OPVC pipes and UL-approved fire safety piping systems, marking significant portfolio advancements.

The adhesives and sealants business in India delivered a robust performance, supported by improved capacity utilisation at the Dahej plant. Key product lines such as epoxy and PVA adhesives saw good traction, and the commissioning of new production lines during the year will enhance Astrals reach in specialised adhesives and tapes. Additionally, the Kanpur unit commenced production of electrical and teflon tapes, with approvals from international buyers setting the stage for export-led growth. In the UK, demand conditions remained soft, particularly in the silicone sub-segment.

The paints business completed its first full year of operations under the Astral Coatings identity. With a focus on operational stability and prudent cost management, the business registered early success in markets like Gujarat and Rajasthan. In the southern region, the Company continued to leverage the legacy of an acquired brand of Gem Paints to sustain market presence. The paints segment is at EBITDA-positive performance at a steady-state level, validating the long-term viability of the business.

In the bathware division, leveraging Astrals existing distribution network, the Company expanded its presence in faucets, sanitaryware and accessories. Backed by improved dealer confidence and an expanding product line, the business demonstrated steady volume growth. While the segment remains in its early stages, operational improvements and backend integration have begun to contribute positively towards long-term viability.

In the pipes segment, the environment is expected to improve moderately. Industry feedback points to a more stable pricing outlook, aided by potential anti-dumping measures on imported PVC. With manufacturing capacities now spread across key demand centres, Astral is well-positioned to service regional markets efficiently and respond to growth as it materialises. The adhesives business will continue to leverage recent capacity enhancements and product diversification to deepen its presence across consumer, construction and industrial segments. The commissioning of new lines at Dahej and Kanpur is expected to unlock further efficiencies and product coverage. The Company also anticipates stronger traction from export markets, particularly in the tapes category, supported by recent product approvals. In the UK business, a recovery is expected to be gradual, but the Company remains confident that realigned operations and sharper customer focus will aid stabilisation and margin recovery in the medium term.

In paints, the focus for FY26 will be to scale distribution, sharpen product-market fit, and optimise manufacturing efficiency. Initial market feedback has been encouraging, and further expansion is planned across western and central India. The Companys dual-brand strategy—operating under Astral Coatings and an existing regional label i.e. Gem Paints will allow for flexible positioning across geographies. The bathware segment is set to reach an important inflection point in FY26. The Company aims to achieve breakeven in the coming year by enhancing product design, increasing backend integration and strengthening the dealer ecosystem. A greater focus on margin-accretive SKUs and category-specific marketing is expected to support this transition. Across all business verticals, Astral will continue to prioritise financial prudence, market responsiveness and operational agility. Investments made in recent years in manufacturing, product development and network expansion are now entering the delivery phase. The Companys capital allocation strategy will remain disciplined, with growth initiatives focused on scalability, synergy, and long-term competitiveness. With macro indicators showing signs of gradual recovery and policy tailwinds supporting construction and infrastructure activity, the Company remains confident in its ability to deliver sustainable, profitable growth across its diversified portfolio.

Astral has established a comprehensive internal control framework designed to ensure the orderly conduct of its business, safeguard its assets, and maintain the integrity of its financial reporting. These controls extend across all functions of the Company and are structured to promote operational efficiency, ensure reliable accounting and financial information, and support compliance with applicable legal and regulatory requirements.

The internal control environment is continually reviewed and enhanced to reflect evolving business requirements and industry standards. Internal audit processes are conducted independently and regularly, with oversight from the Internal Auditor, and findings are reviewed by the Audit Committee of the Board. The Committee monitors the implementation of recommendations and ensures that corrective actions are taken in a timely manner.

Independent statutory auditors have, as part of their audit procedures, confirmed the adequacy of internal financial controls over reporting. This structured and evolving system of internal controls reflects Astrals continued commitment to transparency, good governance, and the long-term confidence of all stakeholders.

Astral recognises that its people are central to its success and continues to invest in building a strong, capable, and engaged workforce. The Companys human resource strategy is focused on creating a work environment that encourages performance, growth, and professional development across all levels of the organisation.

As on 31 March 2025, Astrals workforce stood at over 8,900 employees, including contract personnel, deployed across multiple locations and business verticals. This diverse and dedicated team continues to be a key driver of operational performance and innovation across the Companys businesses. Astral places strong emphasis on employee learning and development, leadership building, and workforce well-being. Structured training programmes, skill enhancement initiatives, and performance-linked development pathways are integral to the HR approach. The Company also maintains robust HR policies that align with its core values and are designed to promote fairness, inclusivity, and professional growth. Going forward, Astral remains committed to strengthening its talent base and fostering a culture of accountability, collaboration, and continuous learning—recognising that sustained organisational success is built on the strength and commitment of its people.

This Management Discussion and Analysis contains forward-looking statements that reflect the Companys current expectations regarding future events, business performance, and financial results. These statements are based on certain assumptions and are subject to a range of known and unknown risks and uncertainties.

Words such as "will", "should", "aim", "believe", "anticipate", "intend", "estimate" and other similar expressions are intended to identify such forward-looking statements. Actual results may diyer materially from those expressed or implied due to a variety of factors including changes in market conditions, regulatory developments, economic conditions, and business performance.

The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are advised not to place undue reliance on these statements and to refer to the Companys audited financial statements and disclosures for a more comprehensive understanding of the risks and opportunities that may ayect performance.

1. Excluding Revaluation Reserves and reducing miscellaneous expenditure.

2. Excluding Revaluation Reserves, Miscellaneous Expenditure and Capital Work in Progress.

3. Excluding Goodwill, Brand, Distribution Network and Capital Work in Progress.

4. Excluding Revaluation Reserves, Goodwill, Brand and Capital Work in Progress.

5. Cash profit considered for cash earning per share is Net Profit + Depreciation + Deferred tax + Exceptional item excluding foreign gain(loss).

6. Above data represents only continuing operations except details of non-controlling interest.