Balaji Amines Ltd Management Discussions

GLOBAL ECONOMY

‘A Critical Juncture amid Policy Shifts

The year 2024 represented not merely a phase of economic activity but a testament to global resilience amid a convergence of unprecedented forces. Rather than following a straight forward path to recovery, the global economy navigated a complex landscape shaped by persistent inflationary pressures, cautious policy responses from central banks, rising geopolitical tensions, and the early yet transformative emergence of artificial intelligence. This period also witnessed sharply diverging macroeconomic narratives across regions, with adaptability emerging as the paramount currency.

In 2024, global economic growth settled into a more moderate yet resilient pattern. Although initial forecasts suggested a sharper slowdown, the global economy largely exceeded expectations, demonstrating a surprising capacity to absorb and withstand external shocks. The International Monetary Fund (IMF) has projected a global GDP growth rate of approximately 3.3%, marginally ahead of the 2023 growth rate.

The battle against inflation – central to the economic narrative of 2022 and 2023–continued along a complex path in 2024. While global headline inflation generally trended downward, decreasing to an estimated 5.9% from 6.8% in 2023, the underlying (core) inflation decline proved to be more gradual and persistent. This persistence was particularly evident in the services sector, where tight labour markets sustained price pressures. In response, Central banks – having undergone an aggressive tightening cycle, began cautiously shifting towards monetary easing in the latter half of 2024.

Global trade in 2024 painted a nuanced picture, shaped by the enduring momentum of globalisation and the rising pressures of geoeconomic fragmentation. While merchandise trade growth remained subdued compared to pre-pandemic levels, it exhibited signs of stabilisation following a challenging 2023. Services trade, particularly in digitally delivered services, continued to exhibit robust growth, underscoring the evolving character of global commerce.

Outlook: The global economy, already navigating heightened challenges, has encountered a fresh wave of uncertainty. The International Monetary Fund (IMF) had initially projected stable, albeit modest, global growth through 2024 and extending into 2025. However, this outlook has been substantially disturbed by recent policy adjustments, most notably a series of new tari_ measures instituted by the United States and corresponding retaliatory actions from its trading partners.

Revisions to the projections for 2025 indicate a downward adjustment to 2.8% and for 2026, to 3%. This represents a notable decline from the previously forecasted 3.3% for both years as of January 2025. Such adjustments underscore the significant influence that trade friction and policy uncertainty exert on global economic activity.

As we reflect on the fiscal year 2025, India stands at a pivotal juncture, not merely as an emerging economy but as a dynamic force confidently charting its course amidst a complex global landscape. India has surpassed Japan to become the worlds fourth-largest economy, with its GDP reaching US$4 trillion. This ascent underscores Indias robust economic momentum and its increasing influence on the global stage.

This year has been a testament to Indias inherent resilience and strategic pursuit of transformative growth, driven by a powerful confluence of demographic advantage, digital innovation, and a strong commitment to foundational development.

Recognised as the fastest-growing major economy globally, India continued its expansion in FY25. The projected GDP growth for the year stands at 6.5%, a decline from the 9.2% recorded in the previous year. Government expenditure on infrastructure principally supported this performance, while robust domestic demand, particularly from private consumption, played a significant role in achieving this outcome. The financial sector remained stable, with healthy credit growth bolstering economic activity across various segments.

Indias key differentiator lies in its unparalleled demographic dividend and its rapid adoption of digital technologies. With the worlds largest young workforce, India possesses an inherent innovation, entrepreneurship, and consumption advantage.

The IIP (Index of Industrial Production) registered a sluggish expansion of 3.9% on a year-on-year basis, hindered by the weaker performance of the manufacturing sector. On the fiscal front, Goods and Services Tax (GST) collections exceeded C22.08 lakh crore, reflecting a 9.4% year-on-year increase–a sign of growing formalisation and improved compliance. Simultaneously, net direct tax collections rose by 13.57%, further strengthening the fiscal position. India appeared poised to achieve its fiscal deficit target of 4.8% of GDP in FY25, driven by strong economic growth. Indias forex reserves increased to an all-time high of US$638.69 billion at the end of February 2025.

Foreign Direct Investment (FDI) inflows revived strongly, reaching US$55.6 billion in FY25, signalling renewed investor confidence. The inclusion of India in the JP Morgan EM Bond Index is anticipated to attract additional capital flows, further strengthening the investment landscape. Infiationary pressures eased, particularly driven by a decline in food prices, supported by favourable agricultural output. The Reserve Bank of India (RBI) forecasts Consumer Price Index (CPI) inflation for FY 2025-26 to be around 4.0%, with quarterly estimates indicating a stable trajectory.

Indias external trade performance remains a pillar of strength. Net services and remittance receipts are expected to continue showing a significant surplus, effectively offsetting the merchandise trade deficit. This strong performance and careful management have resulted in healthy foreign exchange reserves, standing at approximately USD 676.3 billion as of 4 April 2025, providing nearly 11 months of import cover and enhancing the nations external sector resilience.

Outlook: Entering FY26, the Indian economy is projected to sustain its growth trajectory, with the IMF forecasting a 6.3% expansion. This continued momentum is expected to be driven by sustained domestic demand and ongoing government reforms. The focus on capital expenditure is anticipated to continue, further boosting infrastructure development and creating a conducive environment for private investment. While global economic conditions and trade tensions will remain key factors to monitor, Indias strong fundamentals and proactive policy measures are expected to ensure a stable and progressive economic landscape.

With the global economy navigating policy shifts and India poised for steady growth, sectors rooted in innovation and essential applications–like speciality chemicals–are expected to see sustained momentum. Rising domestic demand, global supply chain realignment, and government support offer a favourable backdrop for this segment.

These chemicals are also referred to as speciality or effect chemicals and are extensively utilised as components in finished products to enhance the manufacturing process. These chemicals may consist of single-chemical entities or formulations that yield high-value chemicals essential for consumer products. In contrast to commodity chemicals, specialty chemicals are produced in comparatively smaller volumes. As a result, they have applications across a diverse array of industry sectors, including chemicals, agriculture, automotive, aerospace, pharmaceuticals, and food and beverage (F&B). Speciality chemicals, also known as performance chemicals, are sold based on their performance or function, rather than their composition.

Speciality chemicals are utilised across nearly every industrial sector. Among the end-use industries, more than half of the globally produced specialty chemicals are allocated to four primary sectors: food and beverages, personal care (soap, cleaning, and cosmetics), construction, and electrical and electronics. The market is projected to demonstrate considerable growth potential in emerging markets in the forthcoming years, driven by industrialisation and the emergence of consumer-oriented economies.

In terms of category-specific growth, various segments of specialty chemicals, such as specialty coatings, electronic chemicals, nutraceuticals, _avours and fragrances, and the organic personal care market, are anticipated to witness rapid expansion due to an optimistic outlook for their respective end-use markets.

The global speciality chemicals market was valued at USD 641.5 billion in 2023 and is anticipated to witness a compounded annual growth rate (CAGR) of 5.2% from 2024 to 2030. This is attributed to the growing demand for construction, water treatment, and electronics chemicals, along with technological advancements and trade liberalisation advancements.

Additional growth drivers include rising demand for pharmaceutical ingredients, food and feed additives, and _avours and fragrances.

The demand for _avouring agents has increased as processed food and beverages have become more popular in developed nations. Further, rising customer preference for novel _avours and fragrances in food products is estimated to contribute to the market growth.

The Indian speciality chemicals industry is entering a transformative phase, and is well-positioned for considerable growth as it strives to satisfy the increasing domestic and international demand.

Backed by a strong foundation, the sector is poised to become a critical pillar of Indias economic growth. Historically regarded as a relatively modest segment within the broader chemicals industry, specialty chemicals have swiftly evolved to represent approximately 20% of the total chemicals market in India. This segment has emerged as a crucial driver of industrial growth, functioning as a foundational pillar for various sectors, including pharmaceuticals, agrochemicals, textiles, and consumer products.

India is emerging as a global hub for speciality chemical manufacturing, reflecting its expanding capabilities and strategic importance.

As Chinas competitive advantage in the global speciality chemicals industry diminishes due to escalating labour costs and more stringent environmental regulations, India stands to benefit from this transition. Indias cost efficiency and supportive government policies present a substantial opportunity for participants in the speciality chemicals sector to seize a larger market share. As multinational corporations progressively endeavour to diversify their supply chains beyond China, India emerges as a persuasive alternative. This worldwide realignment is propelled not only by geopolitical transformations but also by an increasing focus on risk mitigation, supply chain resilience, and cost efficiency.

Additionally, Indias demographic advantage, characterised by a youthful and expanding labour force and low manufacturing labour costs, positions the country favourably for deeper integration into Global Value Chains (GVC).

Furthermore, favourable policy reforms pertaining to labour and land acquisition, along with initiatives such as the Production Linked Incentive (PLI) scheme and the Remission of Duties or Taxes on Export Products (RoDTEP), further enhance Indias attractiveness for manufacturing investments.

In response to these trends, Indian speciality chemical companies are ramping up capacity expansion and innovation investments. The sector is witnessing unprecedented levels of capital expenditure, robust revenue growth, and a surge in market valuations, which indicate confidence in its long-term potential.

With a reputation for strong technical expertise and the ability to deliver high-quality, customised solutions at scale, Indian manufacturers are fast becoming preferred partners for global players across a wide range of industries.

The specialty chemicals sector is anticipated to contribute significantly to the growth of exports. This sector has demonstrated a consistent growth rate of approximately 5% over the preceding four years. India is likely to maintain its status as a net exporter within this sector, driven by agrochemicals, dyes and pigments, cosmetics and personal care products, as well as food ingredient chemicals, which collectively comprise roughly 80% of Indias total speciality chemical exports.

The speciality chemicals market in India was valued at US$33.5 billion in 2023 and is expected to reach US$61.5 billion by 2029, growing at a CAGR of 10.7% during the forecast period. Growth trajectories are expected to differ across segments, with electronic sector chemicals, including semiconductors and IC process chemicals, poised for robust expansion due to surging demand for electronic devices such as smartphones and wearables.

Conversely, sectors such as emission-control catalysts and lubricating oil additives are projected to experience stagnant or declining growth as the energy sector transitions away from fossil fuels. The diminishing significance of internal combustion engines, coupled with the rise of electric vehicles (EVs) and renewable energy sources, will lead to a decline in demand for these products. Sustainability and digitalisation serve as pivotal forces in reshaping the industry landscape. Organisations are directing investments towards environmentally friendly speciality chemicals in alignment with regulatory mandates and consumer preferences for sustainable products. The digital transformation associated with Industry 4.0 enhances operational efficiency and stimulates demand for electronic chemicals and advanced polymers.

Despite these opportunities, the industry must navigate raw material supply challenges and price volatility, necessitating agile sourcing and robust supplier networks.

Amines are nitrogen-based organic compounds utilised as intermediates in various end-user industries. They are derived from ammonia by substituting one or more hydrogen atoms with alkyl or aryl groups. They play a critical role as intermediaries in numerous industrial applications, including pharmaceuticals, agrochemicals, water treatment, personal care products, and gas treatment solutions. India is among the leading producers of several key amines, such as ethylamines, methylamines, and ethanolamines. Aliphatic amines are highly versatile chemicals used extensively in various industries like agrochemicals, pharmaceuticals, rubber, plastics, dyes, textiles, cosmetics, and metals. They act as intermediates, solvents, rubber accelerators, catalysts, emulsi_ers, synthetic cutting _uids, corrosion inhibitors, and _otation agents. Key end-user sectors for aliphatic amines include pharmaceuticals, Active Pharmaceutical Ingredients (API), agrochemicals, explosives, and water treatment. The pharmaceutical industry is the largest consumer of alkyl amines. Outlook: The Amines Market is projected to grow at a CAGR of 7.8% from 2024 to 2030 and is expected to reach US$23.5 billion by 2030.

• Pharmaceutical Industry: Amines are crucial raw materials and intermediates in the synthesis and manufacturing of drugs. The robust growth of Indias pharmaceutical sector, including its strong export performance and expanding Contract Development and Manufacturing Organisation (CDMO) segment, directly drives demand for amines.

• Agrochemicals: Amines are essential for producing a wide range of agrochemicals like pesticides, herbicides, and fertilisers, which are crucial for crop protection and maintaining yields. The modernisation of Indias agriculture sector continues to boost demand.

• Personal Care and Cosmetics: Increasing disposable incomes and growing awareness about personal care products in India drive the demand for amines used as surfactants, emulsi_ers, and other ingredients in cosmetics, toiletries, soaps, and detergents.

• Construction and Infrastructure: Amines are utilised in the construction industry for epoxy resins, coatings, adhesives, and flooring materials. Indias rapid urbanisation and infrastructure development projects generate demand for these compounds.

• Water Treatment: Amines are vital in water treatment processes, including industrial boiler systems. Growing concerns about water quality and the need for efficient treatment solutions contribute to market expansion.

• Automotive and Electronics: Amines find applications in automotive fuel additives, lubricants, coatings, and in the production of electronic components like semiconductors and printed circuit boards. The expansion of these sectors further supports demand.

https://www.industryarc.com/Research/amines-market-research-503242

Rising Domestic Demand and Consumption: Indias large, growing population, increasing disposable income, and urbanisation drive robust demand for chemicals across sectors like agriculture, textiles, automotive, pharma, and consumer goods. Speciality chemicals, particularly, are seeing significant growth driven by global and domestic demand in various end-use industries.

Global Supply Chain Shifts and "China+1" Strategy: Geopolitical factors and rising costs in China are prompting a "China+1" strategy, making India an attractive alternative for global chemical manufacturing. Government initiatives like PLI schemes and PCPIRs further enhance Indias appeal as a manufacturing hub.

Government Support and Policy Initiatives: The Indian government actively supports the chemical sector through policies like the PLI scheme, development of PCPIRs, "Make in India," and reduced import duties, aiming to boost domestic production, attract FDI, and improve global competitiveness.

Dependence on Imported Raw Materials and Price Volatility: India heavily relies on imported raw materials like petrochemicals, exposing the industry to global price fluctuations, supply chain disruptions, and geopolitical risks. This reliance impacts profitability and highlights the need for backward integration.

Stringent Environmental Regulations and Sustainability Concerns: The chemical industry faces strict environmental regulations globally and domestically. Compliance, especially for SMEs, is costly and challenging, requiring significant investment in pollution control and sustainable practices. Non-compliance can lead to penalties and trade barriers.

Global Competition and Technological Gap: Indian chemical companies face intense competition from global players, particularly lower-cost producers. Theres also a technological gap in adopting advanced manufacturing processes compared to international leaders, hindering efficiency, innovation, and overall competitiveness.

Founded in 1988, Balaji Amines is a leading Indian manufacturer of Aliphatic Amines, their derivatives, speciality chemicals, and pharma excipients.

The Company produces a wide range of derivatives and downstream products, serving the pharmaceutical and pesticide industries without being constrained by user-specific requirements.

Balaji Amines offers a diversified portfolio of over 40 products, catering primarily to the pharmaceutical and pesticide industries, without being limited to user-specific customisation.

Balaji Amines operates four world-class, fully automated manufacturing facilities in Maharashtra and Telangana. Its commitment to innovation is backed by state-of-the-art R&D labs, driving continual product development. With a strong track record of enduring relationships, the Company serves a distinguished clientele, including many of Indias top-tier companies. It also has a robust international presence, exporting to over 50 countries worldwide. Key export destinations include the U.S., UK, Argentina, Latin America, Canada, Israel, Australia, Bangladesh, Germany, Italy, Egypt, and South Africa.

(COMMENTARY BASED ON CONSOLIDATED FINANCIALS)

Balaji Amines Limited experienced a challenging financial year in FY251. On a consolidated basis, revenue from operations decreased by 14% to C 1,430 crore from C 1,671 crore in FY24. EBITDA saw a 25% decline to C 265 crore, with PAT falling by 31% to C 159 crore. Consolidated EBITDA margin was 19% (down from 21%), and PAT margin was 11% (down from 14%). This drop was primarily due to an increase in input costs, pricing pressure, and global uncertainty. The Cash Flow from Operations also decreased to C255 crore in FY25 from C 334 crore in FY24.

Networth stood at C 2,018 crore as on March 31, 2025, against C 1,893 crore as on March 31, 2024. Total debt stood at C11 crore as on March 31, 2025, resulting in a debt-equity ratio of practically zero as on the same day.

With an improving business environment, steady realisation and new projects expected to commence operations in FY26, the Company expects to improve its financial performance going forward.

Growth % is in Qty (MT)

The Board of Directors is confident in the companys internal control system. A dedicated team supports all operational areas, and business processes are continuously reviewed for risks, efficiency, and compliance with all relevant laws and regulations.

ERP and business process MIS systems are closely monitored to ensure the integrity of financial reporting. Internal Auditor and Cost Auditor regularly review these systems to meet internal control standards. Their findings are then reported to the Audit Committee and Board of Directors, ensuring all compliance requirements are current.

Methylamines: The new plant at Unit IV was commissioned on 10 November 2024.

Solar Power Plant: The First phase of the 8 MW DC (6 MW AC) Solar Power Plant was commissioned on April 2, 2025. This will substantially reduce the power bills of all plants, in line with our commitment to Carbon emission reduction under our ESG declarations.

Electronic Grade Di Methyl Carbonate (DMC): The existing DMC plant has been upgraded with new equipment, and the plant has been commissioned. Trial runs have been conducted, and the Electronic Grade DMC has been produced and accepted by prospective customers. The Plant was declared commissioned successfully on 28th May, 2025.

Di Methyl Ether: The plant is currently under construction and is expected to be commissioned in FY26.

N-Methyl Morpholine(NMM): The NMM plant with a capacity of 15 MT/Day is currently being constructed at Unit IV. Most equipment has been ordered, and civil works are underway. The plant is expected to be commissioned during the Financial Year 2025-26.

Iso Propyl Amine: The company has modified the existing Ethyl Amines plant at Unit-I to make it suitable for producing Iso Propyl Amines (MIPA/DIPA). The plants capacity will be around 20 to 21 tonnes per day. Most of the existing equipment from the Ethyl Amines plant is being kept. The plant is expected to be commissioned after obtaining the Consent for Operations from MPCB.

The company has undertaken a project to upgrade technology and increase the capacity of the existing ACN plant to 60 MT per day at Unit-III MIDC, Chincholi. The detailed engineering and procurement of critical, long-lead-time equipment are underway, and the plant is expected to be commissioned during FY 2026-27.

Balaji Amines has diversified into the hospitality sector by launching a 129-key hotel in Solapur, operated under the Sarovar Group. Solapur serves as a prominent tourist destination due to its proximity to renowned pilgrimage and heritage sites such as Pandharpur, Tuljapur, Siddheshwar Temple, Ganagapur, Bijapur, and Akkalkot, attracting visitors year-round.

Spread over approximately three acres, the Balaji Sarovar Premier Hotel provides a blend of luxury, comfort, and exceptional service. Designed to meet the needs of pilgrims, tourists, and business travellers, the hotel serves as an ideal venue for large-scale meetings, prestigious corporate gatherings, and social events.

Hotel: With an average occupancy rate of 80%, the property consistently yields a strong and stable revenue stream. To address the growing demand for room accommodation, the Company plans to expand its capacity. Based on findings from the structural stability assessment, the existing structure on the South side of the building can safely accommodate an additional 40 rooms. The estimated cost for this phase of expansion is approximately C 30–35 crore. The project will be taken up after necessary approvals are obtained.

Balaji Speciality Chemicals Ltd (BSCL) is a significant subsidiary of Balaji Amines Limited, which holds a 55% stake. Incorporated in 2010, BSCL was established to produce niche specialty chemicals that primarily function as import substitutes for the Indian market. The company commenced its commercial operations in June 2019 from its state-of-the-art manufacturing facility in Solapur, Maharashtra, boasting an installed capacity of 30,000 MTPA.

BSCL is recognised as the sole domestic manufacturer of several critical chemicals in India, including Ethylenediamine (EDA), Piperazine Anhydrous (PIP), Amino Ethyl Piperazine (AEP), Amino Ethyl Ethanol Amines (AEEA), and Diethylene Triamine (DETA). These products are vital for various end-user industries, particularly pharmaceuticals, agrochemicals, and other speciality chemical applications. The companys EDA and DETA products are REACH certified, facilitating their export to the European Union and other international markets. BSCL has established a global customer base of over 250 clients.

BSCL has ambitious expansion plans, including a new greenfield project to manufacture products such as Hydrogen Cyanide (HCN) and Sodium Cyanide (NaCN), which will involve a substantial investment of approximately C 750 crore. This expansion aims to strengthen its position further as a key player in import substitution and meet the growing demands of various sectors, including the pharmaceutical, agricultural, polymer, and coatings industries. BSCLs commitment to producing high-margin, import-substitute products, along with its strong financial profile backed by its parent company, Balaji Amines, positions it for continued growth and market leadership in the Indian speciality chemicals sector.

(MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS) Balaji Amines strongly emphasises training, rewarding, and retaining employees, who are regarded as the organisations most valuable asset. Their consistent contributions have been integral to the companys sustained growth and success. Each team is encouraged and empowered to nurture leadership, foster a culture of inclusion and belonging, and leverage available talent to create meaningful opportunities. This approach enhances communication, promotes collaboration, and drives overall productivity.

Employee well-being remains a top priority for the Company. The Human Resources team is dedicated to ensuring every employees safety, health, and holistic development. Balaji Amines supports its workforce in achieving operational excellence by aligning its efforts with the Companys strategic objectives. Employees are appropriately recognised and rewarded for their performance and contributions towards advancing business goals. As of 31st March 2025, the Company had a total workforce of 1169 members.

Business risks are becoming increasingly complex and dynamic due to the rapid evolution of global and domestic macroeconomic and microeconomic environments. Recognising these shifts, Balaji has established a robust and adaptable risk management framework to identify, analyse, and effectively mitigate business risks. The Companys Enterprise Risk Management (ERM) strategy forms a key foundation for enhancing its preparedness against external uncertainties and challenges.

This strategy entails a thorough evaluation of the Enterprise Risk Matrix, organised by functional areas, which clearly defines all risk factors. The Risk Management Committee and senior leadership continuously monitor emerging risks and changing scenarios. Based on their assessments, detailed mitigation plans are developed and subsequently implemented by the respective functional heads.

These functional leaders are well-trained to recognise risks relevant to their domains and to implement appropriate mitigation measures, ensuring that organisational objectives remain intact and business goals are consistently met.