AVI Polymers Ltd Management Discussions

INDUSTRY STRUCTURE AND DVELOPMENTS: GLOBAL DEVELOPMENTS AND THEIR EFFECT

In the evolving global economic environment characterized by uncertainties as well as emerging opportunities growth projections indicate a balanced yet cautious outlook. The global economy is projected to grow by 3.2% in CY 2024, with the same pace expected to continue into CY 2025. In 2023, inflation eased significantly across most major economies, supply chain disruptions reduced substantially, and labour markets remained resilient, though historically tight. Looking ahead, global inflation is expected to moderate further, declining from an estimated 5.7% in 2023 to 3.9% in 2024. Nevertheless, inflationary pressures remain elevated in several regions, with geopolitical tensions posing a risk of renewed price escalation. The anticipated decline is largely supported by lower core inflation, the impact of sustained tight monetary policies, gradual cooling in labour markets, and the continued pass-through of earlier declines in energy prices.

INDIAN ECONOMY

The Indian economy is poised to remain the worlds fastest-growing major economy in 2024-25, supported by its resilient democratic framework and strong domestic demand. Over the past two years, India has consistently achieved growth rates above 7%, and the momentum is expected to continue in FY 2024-25. With robust consumption, steady investment flows, and the Governments sustained emphasis on capital expenditure, GDP growth is anticipated to remain strong and may even surpass the Reserve Bank of Indias 7% projection, barring unforeseen global disruptions.

In its vision to transform India into a ‘developed nation by 2047, the Government has reinforced fiscal prudence in the Interim Budget, setting the fiscal deficit target for FY 2024-25 at 5.1% of GDP an improvement from 5.8% in FY 2023-24. This demonstrates a clear commitment to growth with stability, while maintaining fiscal discipline.

The Indian chemicals industry continues to play a pivotal role in this growth story. Ranked 6th globally in production and 14th in exports, the industry is currently valued at around US$ 220 billion and is projected to expand at a CAGR of ~9% during 2020-25, reaching US$ 300 billion by 2025. Furthermore, it is expected to touch the US$ 1 trillion mark by 2040. Within this, the specialty chemicals segment has emerged as a key growth driver, catering to rising demand for value-added, niche products such as dyes and pigments, polymers, surfactants, textile chemicals, water treatment chemicals, and personal care chemicals. With significant

investments in R&D and a strong focus on continuous innovation, the

sector is set to enhance Indias position in global value chains while reshaping its domestic industrial landscape. SPECIALTY CHEMICALS MARKET OUTLOOK

Specialty chemicals are advanced molecules or formulations engineered to deliver specific performance or functionality across diverse industries such as automotive, construction, electronics, consumer goods, pharmaceuticals, food and beverages, flavours and fragrances, specialty polymers, paper and pulp, mining, and other industrial applications.

The outlook for the global chemical industry in 2024-25 appears positive, following the challenges witnessed in 2022 and 2023. The sector is expected to rebound with moderate but steady growth, supported by rising demand, favorable policy frameworks, and a strong focus on sustainability, decarbonization, digitalization, and innovation. A structural transformation is underway, with increasing emphasis on sustainable practices, energy transition, technological advancements, and adaptation to shifting geopolitical dynamics.

To remain competitive in this evolving environment, companies will need to adopt resilient business models by embracing supply chain localization, enhancing risk management frameworks, ensuring business continuity, and optimizing plant footprints and delivery networks. These strategies, coupled with innovation-driven growth, are expected to position the industry for long-term success in 2024-25 and beyond.

Opportunities and Threats

Opportunities

- Low cost skilled labour

- Presence across the value chain

- Growing domestic market

- Recent government efforts to promote the industry. Threats

- Effect of historical government policies

- Tech obsolescence. Quality is not consistent

- Delay in delivering the goods at the right time.

2) Segment -wise or product-wise performance :

The Company operates in a single segment of activity viz. trading and hence the segment reporting is not applicable to the Company.

3) Outlook

The outlook for the coming year 2024-25 looks promising for the Chemicals business at this point in time. Demand is showing signs of improvement and with a price advantage due to our best negotiation abilities we are likely to perform well. However, global recession and market condition may have an impact on our business to suffer which in turn can have bearing on profitability.

4) Risks and Concerns

Your Company had put a risk management framework in place post a comprehensive review of its risk management process. Your Company takes a fresh look at the risk management framework through our Audit Committee at least once in a year. The review involved understanding the existing risk management initiatives and assessment of risks in the businesses as the relative control measures and arriving at the desired counter measures keeping in mind the risk appetite of the organization. The audit Committee has periodically reviewed the risks in the business and recommended appropriate risk mitigating actions.

The business of the Company is likely to be affected by various internal and external risks enumerated as under:

- Our operations are significantly located in the Ahmedabad Region and failure to expand our operations may restrict our growth and adversely affect our business

- Oursuccess depends largely upon the services of our Promoter,

Directors and other key managerial personnel and our ability to attract and retain them.

- Company has credit risk on Trade Receivables and advanced unsecured loans to various parties. Company manages credit risk through continues monitoring of credit limits.

- The prices we are able to obtain for the products that we trade depend largely on prevailing market prices.

- We face intense competition in our businesses, which may limit our growth and prospects.

- Global economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.

- Global recession and market conditions could cause our business to suffer.

- Tax rates applicable to Our Company may increase and may have an adverse impact on our business.

- Political instability or changes in the Government could adversely affect economic conditions in India generally and our business in particular.

As a responsible employer, to ensure occupational safety and employment standards, your Company maintains strict safety and quality control programs to monitor and control these operational risks.

5) Internal Control System and their adequacy

The Company maintains adequate internal control systems, which provides, among other things, reasonable assurance of recording the transactions of its operations in all material respects and of providing protection against significant misuse or loss of companys assets.

Internal Controls are adequately supported by internal audit and periodical review of by the management. The audit committee meets periodically to review with the management and statutory auditors, financial statements. The Audit Committee also meets with the internal auditors to review adequacy /scope of internal audit function, significant findings and follow up thereon and finding of abnormal nature.

6) Discussion on financial performance with respect to operational performance.

During the financial year company has reported total revenue of Rs. 138.25 lakhs as against the total revenue of Rs. 87.73 lakhs in the previous year. Net profit of the company during the current financial year stands at Rs.81.68 lakhs as against profit of Rs. 2.36 lakhs in the previous year.

7) Material developments in human resources/ Industrial Relations front, including number of people employed.

Relations with the employees of the Company at various levels remained harmonial during the year under the review. The Company is making its best efforts to retain and attract talented employees. During the year under the review, the Company has complied with all legislative provisions of labour laws. The number of employees of the company as of 31st March, 2025 was

8) Other Disclosures:

a. Basis of related party transaction:

During the year under the review, there were no related party transactions.

b. Disclosure of Accounting treatments:

The Company has followed all relevant Indian Accounting Standards while preparing the financial Statements.

c. Board Disclosures - Risk Management:

The Company has developed comprehensive risk management policy and same is reviewed by the Audit Committee, which in turn, informs the Board about the risk assessment and minimization procedures. Major risks identified for the Company by the management are Currency fluctuation, Compliance, Regulatory changes, Manufacturing & Supply, Litigation, Information Technology and new capital investments return. The management is however, of the view that none of the above risks may threaten the existence of the Company as robust Risk mitigation mechanism is putin place to ensure that there is nil or minimum impact on the Company in case any of these risks materialize. Since the risk control frame work is new to Indian Corporate Culture, it is being strengthened on continuous basis using the outside professional help.

d. Proceeds from public issues, right issues, preferential issues etc: Not applicable, as no capital has been raised by the Company in last 5 Years.

Besides above, there was no instance of non-compliance of any matter related to the capital markets during the last three years.