Ratios	UoM*	2020-21	2019-20	Increase : (Decrease)	Remark
Return on Net Worth (RoNW) #	%	18.61	22.38	(20%)	higher capitalisation during last quarter

#RoNW for operating activities are 23% and 25% for financial year 2020-21 and 2019-20, respectively (excluding treasury investment and income) *Unit of measurement Atul Ltd has identified two reporting segments, namely, Life Science Chemicals and Performance and Other Chemicals.

Life Science Chemicals segment

CROP PROTECTION

Product groups: Herbicides, Insecticides, Fungicides, Others

The products falling under these product groups are used by customers belonging to the Agriculture and Crop Protection Chemicals industries. The product groups comprise 20 products and 70 formulations. 2,4-D, Indoxacarb and Isoprothiolane are some of the key products.

During 2020-21, sales decreased by 12% from Rs 703 cr to Rs 618 cr. Sales in India decreased by 12% from 335 cr to Rs 295 cr; bulk sales in India decreased by 38% from Rs 229 cr to 142 cr, whereas retail sales, which are currently only in India, increased by 44% from Rs 106 cr to Rs 153 cr. Sales outside India decreased by 12% from 368 cr to Rs 323 cr and formed 52% of the total. The Company completed three projects and undertook two projects for implementation.

The size of the world Crop Protection Chemicals industry is estimated at US$ 58 bn and is growing at about 2.4%. The world Food and Agribusiness is estimated at around US$ 5 tn. If the current trend continues, caloric demand will increase by about 70% and crop demand for human consumption and animal feed will nearly double by 2050. One of the significant is biologicals. World biological market is estimated to reach at US$ 11 bn by 2025 from US$ 7.2 bn in 2019.

This necessitates increased use of crop protection chemicals. The Company will participate in this growth by - i) improving internal efficiencies and working capital management, ii) promoting retail sales, iii) expanding the product portfolio and securing more registrations and iv) evaluating investment opportunities in vertical integration.

Floods or famines may adversely affect the demand. Fluctuations in foreign exchange may impact sales realisations. Given that some of these chemicals can be hazardous, it is essential to take due care in their manufacture and use. Registration costs are high in certain countries.

PHARMACEUTICALS AND AROMATICS – I

Product groups: API intermediates, Active Pharmaceutical Ingredients, Others

The products falling under these product groups are used by customers belonging to the Pharmaceutical industry for various therapeutic categories such as antidepressant, antidiabetic, anti-infective, antifungal, antiretroviral and cardiovascular. The product groups comprise 76 products. Dapsone, fluconazole and metoprolol salts are some of the active pharmaceutical ingredients (API) and carbonates, chloroformates and amino acid derivatives are some of the key intermediates.

During 2020-21, sales increased by 8% from Rs 462 cr to Rs 498 cr. Sales in India increased by 6% from 283 cr to Rs 300 cr. Sales outside India increased by 11% from Rs 179 cr to 198 cr and formed 40% of the total. Growth on account of volume was 14%. Sales of Atul Bioscience Ltd (ABL), a 100% subsidiary company, increased from Rs 105 cr to Rs 142 cr. The Company completed one major project at the acquired facility in Ambernath, while two projects are under implementation at the Atul site.

The size of the world Pharmaceutical industry is estimated at US$ 1.75 tn, of which the conventional pharmaceutical segment is estimated to be US$ 1.3 tn.

Of this, the size of the world API industry is estimated to be US$ 160 bn. Biologics is estimated to contribute about 52% of sales of top 100 products by 2022, while oncology will remain the largest therapy area with sales growing at about 12.7% CAGR. Worldwide pharmaceutical R&D spend is estimated to grow by 2.4% CAGR to about US$ 181 bn in 2022. There are 20 major companies that dominate the world marketplace. The main user industry, namely, Pharmaceutical, is doing well and meeting the expectations of mankind. The Company along with the ABL will participate in this growth by - i) increasing manufacturing efficiencies, ii) debottlenecking and adding capacities, iii) introducing new products and iv) forming long-term strategic alliances with other companies.

The price and demand of products have seen consistency during the year, but is likely to vary widely over the short-term. Fluctuations in foreign exchange may impact sales.

Performance and Other Chemicals segment

Performance and Other Chemicals segment consists of four sub-segments, namely, Aromatics - II, Bulk Chemicals and Intermediates, Colors, and Polymers.

AROMATICS – II

Product groups: Intermediates, Perfumery, Others

The products falling under these product groups are mainly used by customers belonging to the Fragrance and Personal Care industries. The product groups comprise 31 products. para-Cresol, para-Anisicaldehyde and para-Cresidine are some of the key products.

During 2020-21, sales decreased by 19% from Rs 694 cr to Rs 562 cr. Sales in India decreased by 7% from Rs 228 cr to 211 cr. Sales outside India decreased by 25% from Rs 466 cr to Rs 351 cr and formed 62% of the total. Degrowth on account of volume was 10%. The Company completed one project during the year.

The world market for para-Cresol (a key product) is estimated at 67,600 MT and is growing at about 2%. Though earlier the product used to be manufactured in the UK and the USA, China and India are now major suppliers of the product. The size of the world Fragrance industry is estimated at US$ 14 bn and is growing at about 5%. The size of the world Personal Care industry is estimated at US$ 445 bn, of which personal care ingredients segment is US$ 26 bn and is growing at about 5%.

The main user industries, namely, Fragrance and Personal Care are growing well due to an improved standard of living. The Company will participate in this growth by - i) increasing manufacturing efficiencies, ii) debottlenecking and adding capacities, iii) broadening market reach and iv) introducing new products.

The price of some products may come down in the short-term. Fluctuations in foreign exchange may impact sales realisations.

BULK CHEMICALS AND INTERMEDIATES

Product groups: Bulk chemicals, Adhesion promoters, Others

The products falling under the bulk chemicals product groups are mainly used for internal consumption, while the products in the intermediate product groups are used by customers belonging to the Cosmetic, Dyestuff, Pharmaceutical and Tyre industries. The product groups comprise 23 products. Resorcinol, Resorcinol–formaldehyde resin and 1, 3–Cyclohexanedione are some of the key products.

During 2020-21, sales remained at 286 cr, despite the lockdown and disruption in production in the initial two months. Sales in India increased by 3% from Rs 153 cr to Rs 157 cr. Sales outside India decreased by 3% from 133 cr to Rs 129 cr and formed 45% of the total. The Company undertook two projects for implementation.

The world market for Resorcinol (a key product) is estimated at US$ 564 mn and is growing at about 2.5%. The size of the world Tyre industry is estimated at US$ 237 bn and is growing at about 3.7%.

The Tyre industry is projected to grow supported by resurgence in the Asia Pacific market region. The size of the world Chlor-alkali industry is estimated at US$ 46 bn and is growing at about 3.2%. The captive consumption of bulk chemicals is expected to grow as the Company expands manufacturing capacities of various products. The Company will participate in this growth by - i) increasing manufacturing efficiencies, ii) debottlenecking and adding capacities, iii) introducing downstream products and iv) widening market reach.

The demand and price of bulk chemicals are cyclical in nature. Fluctuations in foreign exchange may impact sales realisations.

COLORS

Product groups: Dyestuffs, Pigments, Dye-intermediates, Textile chemicals, Others

The product groups comprise 587 products. The products are used by customers belonging to the Textile, Paint and Coatings and Paper industries. Vat Green 1, Sulphur Black 1 and Pigment Red 168 are some of the key products. During 2020-21, sales decreased by 6% (of which volume decrease was 7%) from Rs 626 cr to Rs 591 cr. Sales in India decreased by 5% from Rs 332 cr to 315 cr. Sales outside India decreased by 6% from Rs 294 cr to Rs 276 cr and formed 47% of the total sales. The reduced demand in the denim and apparel industries affected sales of Sulphur Black and reactive dyes, whereas sales of vat dyes has reached to pre-Covid levels due to improved demand for workwear. Rudolf Atul Chemicals Ltd (RACL), a joint venture company formed in 2011-12, provides a complete range of textile chemicals in Indian market; its sales increased by 9% from Rs 82 cr to 89 cr, primarily because of volume.

The size of the world Textile Dyestuff industry is estimated at US$ 6.5 bn and is growing at about 3%. China continues to be the largest manufacturer of dyes followed by India. The world market for high performance pigments is estimated at US$ 5.5 bn (constitutes both organic and inorganic pigments) and is expected to grow at about 4% in the coming years. The main user industries, namely, Textile, Paper, Paint and Coatings will continue to grow because of increasing demands from the middle-class population and increase in discretionary spending. The Company along with RACL will participate in this growth by - i) increasing manufacturing and working capital efficiencies, ii) introducing new dyes, pigments, textile chemicals and products for non-textile applications, iii) broadening market reach in new geographies and iv) investing in newer capacities of existing and new products.

Fluctuations in foreign exchange and availability of raw materials may impact sales realisations. Treatment costs are expected to remain high because of stricter regulatory norms and increasing demand for cleaner and greener products from user industries.

POLYMERS

Product groups: Epoxy resins, Curing agents, Reactive diluents, Sulfones, Protective paints and Adhesives based on Epoxy, Synthetic rubber, Polyurethane, Cyanoacrylate, PVC and PVA

The products falling under these product groups are used by customers belonging to the Aerospace, Automobile, Composites, Construction, Defence, Electrical and Electronics, Footwear, Paint and Coatings, Paper, Sport and Leisure, and Wind Energy industries. The product groups comprise 96 synthetic products and 300 formulations. B11, P62 and P101 are some of the key products. Synthetic and formulated products are versatile and have significant applications in Aerospace, Automobile, FRP Composites, Wind Energy, Electrical and Electronics, Paint and Coatings, Construction, Defence, Sports and Leisure, and Paper industries.

During 2020-21, sales decreased by 16% from Rs 1,041 cr to Rs 878 cr. Sales in India decreased by 7% from 642 cr to Rs 596 cr; bulk sales in India decreased by 11% from Rs 517 cr to 460 cr, whereas retail sales increased by 9% from Rs 125 cr to Rs 136 cr. Sales outside India decreased by 29% from 399 cr to Rs 282 cr and formed 32% of the total. Degrowth on account of volume was 22%.

The world market for epoxy resins and curing agents is estimated at US$ 7.6 bn and is growing at about 3%, while the Indian market is estimated at US$ 285 mn and is growing at about 8%. There are seven major companies that dominate the world marketplace. The world market for sulfones (curing agents) is estimated at US$ 393 mn and is growing at about 6%.

The user industries, Construction, Defence, Electrical and Electronics, Paint and Coatings are growing well, particularly in India. The Company will participate in this growth by - i)improvingmanufacturingandworking capital efficiencies, ii) debottlenecking and adding capacities, iii) introducing new products and iv) widening market reach in new geographies.

Cheaper imports and new entrants in the market will keep the market competitive and may keep margins under pressure. Since the two main raw materials, namely Bisphenol-A and Epichlorohydrin, are imported, fluctuations in foreign exchange may impact margins.

INTERNAL CONTROL SYSTEMS

The Company has comprehensive internal observations noted control systems commensurate with the nature of its business and size and complexity of its operations. They provide reasonable assurance on effectiveness and efficiency of its operations, reliability of financial reporting and compliance with the applicable laws and regulations. The internal control systems that deploy an amalgam of modern and traditional processes are routinely tested and upgraded for both design and operational effectiveness by the Management and the same is audited by the Statutory Auditors. Significant audit observations and follow-up actions and recommendations thereon are also reported to the Senior Management and the Audit Committee for their review.

Internal Audit

The Company has an in-house Internal Audit department which includes professionals from finance, data analytics and engineering disciplines and is also working with reputed audit firms specialising in internal audits and assurance domain. Together, they have the responsibility to bring in excellence in the function, continuously identify areas of operations requiring strengthening and introduce best processes and practices to manage a growing business which comprises subsidiary, associate and joint venture entities (including Atul Foundation and entities overseen by it).

The annual internal audit plan is reviewed and approved by the Audit Committee in beginning of the financial year to ensure adequate coverage. Progress of internal audit plan, significant during internal audits and status of identified actions are reviewed by the Management periodically and by the Audit Committee on quarterly basis. The Company is planning to further strengthen its Internal Audit department for improved focus on retail processes, data analytics and technical audit.

Enterprise Risk Management

The Company has separated enterprise risk management (ERM) function which was so far a part of Internal Audit department and staffed it with one senior team member with the responsibility to work with the businesses so as to enhance risk management processes. The Company believes that risks are inevitable in any business and its approach is to identify, track and mitigate instead of avoiding them. ERM is an integral part of a business and its framework includes identification, classification, assessment, prioritisation, mitigation, monitoring and reporting of key risks. The Company has adopted a bottom-up and top-down approach to drive ERM. The bottom-up approach includes identification and regular assessment of risks by respective businesses and cross-functional teams and plan for mitigating such risks in a structured manner. This is complemented by a top-down approach where the senior management identifies and assesses long-term and macro risks. Risks are consolidated under major risk themes to create focus areas and prioritise mitigation plans.

ERM is driven by the Board of Directors through the Risk Management Committee of the Board.

HUMAN RESOURCES

2020-21 commenced with lockdown because of the COVID-19 pandemic that remained the single biggest threat throughout the year. HR function remained actively engaged with the entire workforce to ensure safety and smooth resumption of operations post lockdown including making appropriate arrangements and changes to facilitate ‘work from home for the concerned team members. People and culture are the cornerstones for building a company and for it to face the test of time. The Company took further initiatives to enhance i) its HR processes (particularly using technology) related to recruitment, performance management, learning and development, manpower planning and employee care and ii) work environment related to culture and code of conduct to manage a growing business (which comprises subsidiary, associate and joint venture entities). The Company is gradually broadening its online learning programs not only to enable its people to upskill and reskill for their roles, but also help them prepare for the changing landscape of work. The mandate is to be future-fit.

The Company concluded a unique wage settlement with the workmen of Atul site (signed on April 22, 2021). A similar wage settlement with the workmen of Ankleshwar site was signed on November 20, 2018. Employee relations at all locations remained cordial.

HR managers comprise those in the central team and those partnering with the different businesses : functions (including subsidiary, associate and joint venture entities). In addition, the Company regularly works with external experts for specific initiatives. During the fiscal, the number of team members increased by 82 from 2,907 to 2,991.