BASF India Ltd Management Discussions

The global economic environment remains uncertain, shaped by geopolitical tensions, trade disruptions, and divergent growth and inflation outcomes across major economies. While global activity has shown resilience in the near term, underlying vulnerabilities persist, including elevated fiscal pressures, fragmented supply chains, and increased reliance on economic policy instruments for strategic purposes.

Even as the global economy navigates uncertainty, India continues to chart a strong growth path, with real GDP growth rate of 7.4 percent, reaffirming Indias status as the fastest growing major economy for the 4th consecutive year. Within this, the manufacturing sector has recorded double-digit growth in FY 2025-26, emerging as a key contributor to the economys resilient performance. This strength in consumption reflects a supportive macroeconomic environment, characterized by low inflation, gradual improvement in urban consumption, aided by the rationalization of direct and indirect taxes, stable employment conditions, and rising real purchasing power.

The agricultural sector recorded steady growth during FY 2025-26, aided by largely normal monsoon conditions, enhanced irrigation coverage, and continued policy initiatives aimed at income support and productivity improvement. However, challenges related to climate variability and technology adoption continued to warrant focused attention.

Manufacturing Gross Value Added (GVA) grew by 7.72 per cent and 9.13 per cent in 1st half of FY 25-26, primarily driven by ongoing structural shifts within the sector. The Chemicals sector contributed 8.1 per cent to the overall manufacturing sectors GVA and continues to play a significant role in the industrial development of the economy, having strong backward linkages to petroleum refining and natural gas processing, as well as forward linkages with numerous downstream industries.

The current global environment indicates unprecedented uncertainty with increased trade tensions, geopolitical instability, and slowing momentum. Conflicts in the Middle East, along with the lingering effects of the Russia-Ukraine war, have created a “new era” of volatility, threatening to push up commodity prices and disrupt supply chains.

Despite the challenging environment, the Indian chemical industry is going strong, driven by specialty chemicals, with strong domestic consumption and shifting global supply chains.

Your Companys Agricultural Solutions business innovates, manufactures, and sells products required for Crop Protection such as Insecticides, Herbicides, Fungicides, Seed Treatment solutions and Plant Growth Regulators.

Overall rainfall and its distribution pattern across India have significant influence on the Indian Agriculture as well as your Companys product sales. In 2025, India witnessed above-normal rainfall to the tune of 108% of the long-period average, with surplus of more than 20% in Northwest part of India. Continuous rains impacted the number of sprays, especially in the crops like soybean, cotton, grapes and vegetables coupled with lower commodity prices especially in chilly, cotton, soybean and vegetables.

During FY 2025-26, inordinate weather conditions and a decline in chilly and soybean prices led to a significant drop in farmer-level consumption of crop protection products. Consequently, the Agricultural Solutions business experienced a slight reduction in insecticide and herbicide volumes compared with the prior year. The Companys diversified portfolio, supported by the introduction of new products such as Mibelya? and Valexio? in the rice market, further strengthening our market position.

During the FY 2025-26, your Company launched two innovations for the Rice farmers. Valexio? Insecticide (powered by Prexio? Active), for comprehensive brown rice plant hopper control & Mibelya? Fungicide (the first Revysol? novel chemistry launched in India) protects rice plants from diseases. These launches demonstrate BASFs commitment to rice as part of its global strategy and offer rice growers a comprehensive portfolio of solutions.

Your Company also launched Clearfield? production system for Mustard crop in strategic partnership with Corteva AgroSciences India. This innovative, non-transgenic herbicide tolerant crop system aims to improve mustard cultivation through better weed control and higher yields. The Clearfield? Technology, including the Kifix? herbicide, is a proprietary innovation of BASF, known for delivering broad-spectrum and selective control against difficult weeds.

Your Company utilizes digital platforms like Facebook, WhatsApp & YouTube very effectively for product promotions and for creating awareness about safe farming practices. During the FY 2025-26, your Company achieved digital outreach of over 60 million farmers promoting the responsible use of crop protection products. Your Company also pioneered stewardship and sustainability practices among the farming community during the year. Various measures were also taken with the support of esteemed organizations on educating the principles of Diagnosis, Management and Treatment of Accidental Agrochemical Poisoning to over 800 participants including doctors, State Agriculture Department officials and officials from District Administration.

CHEMICALS

Your Companys Chemicals segment comprises of the Petrochemicals & Intermediates businesses. The Petrochemicals business of your Company comprises acrylic acid, acrylic monomers, superabsorbents, oxo-alcohols and specialty plasticizers. These products are used in a variety of end user industries including paints & coatings, adhesives, baby diapers, a wide variety of flexible PVC applications such as artificial leather for automotive upholstery, wires and cables, packaging and as solvents in the chemical industry.

During financial year 2025-26, prices and margins for petrochemicals remained under pressure due to global overcapacities. Despite these challenges, your Petrochemicals business delivered double digit volume growth during the year, led by the acrylics segment and increasing penetration in the hygiene market. Towards the end of the year, the conflict in the Middle East severely disrupted regional supply chains. Your Petrochemicals business continued to deliver products to customers despite these disruptions, supported by its expanded manufacturing footprint across Asia.

The Intermediates business of your Company caters to a wide range of end use industries, including pharmaceuticals, agrochemicals, coatings, food & feed, flavors & fragrances, surfactants, rubber chemicals, textiles, personal care, adhesives, and dyes.

During the first half of FY 2025-26, the performance of this division was under pressure primarily due to sharply increased US tariffs on chemicals and intermediates exports across key sectors. These tariff actions together with oversupplies in the market, driven by increased capacities and a weak demand in China resulted in significant Chinese imports to India & other global markets. This intensified competition led to substantial margin pressure on Indian exporters, particularly in agro, food, leather, and textile segments. However, in the second half of FY 2025-26, market conditions stabilized together with slight demand recovery across key sectors such as pharmaceuticals, agro, food & feed, with volumes recovery in amines and acids portfolio along with partial price recovery.

Your Companys Intermediates business continued with cost-optimization initiatives and operational efficiency improvements to mitigate the impact on earnings. Strengthening customer relationships, scouting new business opportunities especially for the specialties portfolio and offering sustainable solutions, aiming for a reduction in CO2 emissions compared to its existing products, remains the primary focus of this business.

MATERIALS

Your Companys Materials segment includes the Performance Materials and Monomers businesses.

The Performance Materials business of your Company, which houses the Polyurethanes, Engineering Plastics, Specialty Plastics product lines primarily cater to the requirements of the Consumer, Construction, and Transportation Industries.

The passenger vehicles production grew by 9.6% during FY 2025-26. Your Companys product lines that cater to the Interior, Exterior, Powertrain, Chassis and Vehicle Suspension related applications grew above market growth due to participation in new launches and winning new business including in electric vehicles segment. Continuous focus on localization will further boost future growth prospects.

The Consumer Industry business continues to have a strong presence in the appliance (refrigerator), footwear and furniture markets. The appliance business segment has been able to strengthen its supply reliability and thus gain higher trust and confidence from its customers. With warmer climate for more days in many parts of the country, sales in appliance segment grew significantly. The footwear market is moving towards lighter and comfortable products. Your Company is continuously working to provide solutions for this trend and are collaborating with customers specially for sports and casual shoes. Footprint in furniture & housing business also enhanced the volumes of the engineering plastics business.

Construction segment which predominantly supplies polyurethane insulation for cold chain, infra and residential markets, showed improved volumes. The Construction market is expected to grow at a faster pace due to government norms for energy efficiency in the industry.

Continued pricing pressure from competition showed no major respite for volume of the Specialty chemicals business which comprises of multi-application product Ultrason?, thermal and sound insulating melamine foam Basotect? and compostable plastic material Ecovio?.

Overall, the sales volume grew with better margins compared to previous year for the Performance Materials business. Capacity expansion at Thane and Panoli Engineering Plastics sites supports the year and way forward growth. Polyurethanes unit at Dahej and Thane and CELLASTO? unit at Dahej also had better utilization supporting the volume growth. All business segments faced strong headwinds due to subdued global chemical market indexes, local currency depreciation, logistics challenges and input cost volatility.

Your Companys Monomers business deals in basic raw materials for polyurethanes, inorganics & polyamides, and its precursors. The financial year 2025-2026 showed significant growth in volume in isocyanates and polyamides businesses over the last year.

Although the businesses in isocyanates and polyamides segments grew well, the business continued to face global challenges with respect to geo-political trends, margins impact due to increased spot freight rate bookings and prices volatile for some of the commodity segments. The domestic demand remained positive during the financial year 2025-26, however exports remained moderately slow due to uncertain global scenario. Intense competition driven by over-capacities in the Asian market for isocyanates continue to adversely impact the competitiveness. Additionally, precursors business remained challenged and did not grow as expected due to margin pressures led by volatility in raw materials & changes in product mix. Sustained margin pressure across the year required us to effectively capturing market opportunities to defend our profitability.

Despite the strong currency headwinds and lower prices, the business continued to have strong engagement with key customers and markets that helped securing their volumes by contracts & better services, to maintain its position as one of the key suppliers to the industry.

MDI (Methylene diphenyl diisocyanate) continued to show moderate to high growth in all application segments especially in the flexible packaging and coating adhesives, footwear resins and construction. Growing consumer demand in rigid PU foam applications helped to maintain the growth of sales volumes of TDI (Toluene diisocyanate), despite local availability. High future demand growth in appliances, infrastructure, construction, automotive sector and innovation in slab stock will continue to drive the usage of polyurethane.

In the Polyamide and precursors portfolio, the focus continues to remain on barrier films for packaging and mono- filament segment, in which the demand remained stable due to the market conditions and volatile price trends. Despite this, the business was able to show improved margins and volume growth during the financial year 2025-26.

Your Monomers business continues to remain well positioned to capture opportunities and meet the challenges led by dynamic market conditions.

INDUSTRIAL SOLUTIONS

Your Companys Industrial Solutions segment comprises of Dispersions, Resins, Additives and Performance Chemicals businesses, including Process Catalyst business.

The Dispersions business of your Company mainly caters to the needs of paints & coatings, construction and paper industries. The Resins & Additives business caters to the needs of adhesives, automobile, printing & packaging industries. Your Company grew volumes, mainly in the construction and paper segments. The sales were impacted due to lower monomer prices & product mix. The waterproofing and infrastructure segments grew with frugal product innovations & superior technical performance. The startup of new paper coating plants supported growth, and your Company could commercialize certain sustainable innovations in the paper segment. The paint industry witnessed challenges due to early & extended monsoon leading to muted demand.

To meet the growing demand of the Dispersions business, your Company expanded its dispersions production capacity at its Mangalore site. This new line will support customers across architectural paints, construction chemicals and paper applications and meet the growing demand for premium, sustainable dispersions.

The Performance Chemicals business comprises of Enhanced Oil Recovery (EOR), Fuel & Lubricant solution, Plastic Additives portfolio.

Your Companys Enhanced Oil Recovery (EOR) business offers customized surfactants to oil operators, aiding in the recovery of additional crude oil from mature oil fields. EOR technology and solutions under Trade name “Aspiro™”, improves oil recovery from existing wells, which in turn adds to the domestic production volume of crude oil, thereby reducing imports.

The Fuel and Lubricant Solutions business comprise of Formulations and Components divisions. In Formulations, the Company provides finished products such as engine coolants, brake fluids, and multi-functional fuel additives to automotive OEMs and fuel manufacturers/ marketers. For Components, the Company supplies Polyisobutylene (PIB) in various molecular weights, lube additives, and synthetic base fluids for a range of automotive and industrial lubricants. Volume growth was driven by increased supply of low molecular weight PIB. Higher automotive production and industrial demand ensured sales growth for the rest of the portfolio.

Your Companys Plastic Additives business is categorized into antioxidants and light stabilizers for the plastics industry. Customers are broadly classified into upstream industries such as polymer manufacturers and downstream industries such as master batchers, compounders & converters. The Plastic Additives business continues to focus on value- added products to customers to further enhance sales. Plastic Additives business also participated in Plast India held in February 2026 showcasing broad range of light stabilizers for Indian market particularly for agricultural films.

The Chemical and Refining Catalysts business of your Company continues to play a critical role in enabling efficiency, sustainability, and technological advancement across Indias chemical and refining industries. With a strong portfolio spanning environmental catalysts, process catalysts, and adsorbents, the business supports customers in optimizing performance while meeting increasingly stringent regulatory and decarbonization requirements.

In FY 2025-26, the Chemical and Refining Catalysts business witnessed steady demand driven by capacity expansions in key sectors such as Monomers, Intermediates, Agrochemicals and oleochemicals. The catalyst supplies from Mangalore plant to pharma and agrochem customers hit the highest sales in this year. Increasing focus on sustainability, particularly in sulfuric acid, nitric acid and biofuel value chains, created opportunities for advanced catalyst solutions that deliver both operational efficiency and environmental compliance. In particular for sulfuric acid producers, BASF launched its worlds first 3D printed catalyst X3D? that is positioned to not only deliver significant cheaper capex for new projects but also debottleneck existing assets with better productivity and energy efficiency.

Looking ahead, these businesses remains focused on driving profitable growth by capitalizing on Indias strong industrial expansion, increasing environmental regulations, and the global shift toward sustainable chemistry.

SURFACE TECHNOLOGIES

Your Companys Surface Technologies segment comprises of Coatings Solutions businesses.

The Automotive Coatings & Refinish business, housed under BASF India Coatings Pvt Ltd, Wholly Owned Subsidiary of the Company, caters to innovative solutions that improve the appearance and quality of cars. As part of the differentiated Steering, in October 2025, BASF and Carlyle reached a binding transaction agreement on coatings business to create a leading standalone global Company. As part of this transaction, your Company has decided to transfer its 100% shareholding in BASF India Coatings Private Limited to Carlyle companies. The said transaction is expected to conclude by Q2 2026, subject to approvals as necessary.

NUTRITION & CARE

Your Companys Nutrition & Care Segment comprises of Care Chemicals, Nutrition and Health Care businesses.

The Care Chemicals business provides solutions to customers in personal care, home care & institutional cleaning and industrial formulation segments (viz: textile, leather, agrochemicals, metal surface cleaning etc.).

Indian personal care industry in 2025-26 is characterized by strong growth, high innovation intensity, and increasing consolidation. While competitive pressures are intensifying with entry of E-commerce players, the long-term outlook remains highly positive, supported by favourable demographics, digital reach, and increasing consumer willingness to accept specialized, premium, and science-backed products.

The Beauty and Personal Care segment (BPC), recognized as the fastest growing industry, continues to attract significant attention. The skincare and sun care continue to be among the fastest-growing segments within the Indian BPC market, the sun care category is projected to deliver the highest CAGR in the coming years mandating improved testing norms.

In this evolving context, BASF UV filters, positioned as high-end, new-generation UV filters, are gaining strong relevance and traction in the Indian market, particularly among science-led and compliance-focused brands.

Premiumization and digital transformation in the skincare market is creating a significant opportunity for your Companys Beauty Care Solutions, which offer science-backed, high-performance ingredients that meet global safety, quality, and regulatory standards. By working collaboratively with leading brands, BASF is creating tangible value for brand partners, which in turn translates into enhanced benefits for end consumers.

The domestic demand for the Industrial Formulators industry outlook looks positive, while exports are still slow due to uncertain global scenario.

The Indian Home care industry is expanding steadily, driven by rapid urbanization, rising household incomes and deepening washing machine penetration across urban and semi-urban areas. Evolving consumer lifestyles are shifting demand toward premium liquid detergents, fabric conditioners, and antibacterial laundry sanitizers, while growing environmental consciousness is bringing more interest shown in adoption of biodegradable and plant-based formulations. The expansion of organized offline retail networks and increasing digital commerce penetration are further broadening product accessibility, sustaining the India fabric wash and care market share.

The Nutrition & Health Segment of your Company offers a comprehensive range of products across Nutrition (Human & Animal Nutrition), Pharma Solutions and Aroma Ingredients. This business continued to deliver impressive performance for another successful year driven by strong growth in Aroma ingredients and Nutrition Ingredients while steady business continued in Pharma Solutions in a market that witnessed muted volume growth and decline in prices.

The Nutrition Ingredients business aims to be the most credible food & health ingredient supplier with the portfolio of Vitamins & Carotenoids for both human and animal nutrition and high-quality feed enzymes business for animal feed. Demand for nutrition ingredients remained steady during the year under review with increasing awareness about preventive health, need for high quality protein thereby resulting in improved consumption of vitamins in food (including poultry), dietary supplements, as well as fortification of staples like Oil & Mill and other functional food. The enzyme business achieved growth, which was primarily driven by sustained poultry production, increased adoption of feed enzymes by customers and a gradual rebound in protein demand throughout the year.

The Aroma Ingredients portfolio has diverse product lines for our customers in Fragrance and Flavor (F&F) applications that eventually find their way into fast-moving consumer goods (FMCG). The business witnessed steady growth of the entire citral value chain portfolio across applications. Innovative product launches continued to generate distinct value for the F&F industry in the coming years. This business also saw the acceptance and demand for our 100% natural Isobionics? product portfolio from advanced bio-technology route, giving confidence for higher growth in coming years.

The Pharma solutions team specializes in functional excipients and select Active Pharma Ingredients (API) for the pharmaceutical industry. Your Companys pharma solutions division largely balanced itself by establishing as a pivotal player in Biopharma industry with key products - Kolliphor? Urea and Kolliphor? P 188.

TECHNICAL MANAGEMENT

Your Companys steadfast focus on safety, quality, productivity and sustainability continues to drive operational excellence and strengthen its long-term value creation capabilities. Safety remains the foremost priority, and through targeted initiatives implemented across manufacturing sites, your Company delivered industry-leading safety performance during FY 2025-26, backed by a robust operational foundation and a culture of safety. Your company is well positioned to enhance resilience, deliver sustainable growth, and create enduring value for stakeholders.

During the year, your Company continued to enhance capacities and capabilities across its manufacturing sites. To strengthen local production footprint in India, at Panoli site, the production capacity of its Ultramid? polyamide grades was increased to meet growing market demand. At Dahej site, dispersion plant debottlenecking project enhanced the capacity of plant by around 10%. Capacity enhancement project for Cellasto? plant at Dahej is well on track to meet the growing demand of the automotive industry. At Thane, production capacity of its Ultramid? polyamide grades was increased to meet the growing demand.

Your Company is deeply committed to digital transformation to enhance operational efficiency, support data-driven decision-making and maintain competitiveness in an increasingly digital landscape. The Dahej Site implemented digital energy monitoring system (EMS) to get real time data. Work permits have been digitalized to simplify permit process which enables end to end tracking & systematic capture of data for future analysis. Thane site implemented digitized checklist at shopfloor towards paperless journey. Panoli site implemented energy management dashboard for automated energy data recording, and real-time energy consumption monitoring to enable data-driven decision making for efficient energy management.

All manufacturing sites are actively pursuing sustainability initiatives aimed at reducing Scope 1 and Scope 2 emissions in alignment with BASFs global sustainability goals for 2030. Under Scope 1 emission reduction, Mangalore site has optimized HSD (High speed diesel) consumption in the off-gas burning system, which resulted in 35% reduction of HSD usage. Also, Dahej site initiated and implemented various projects to reduce steam consumption by reducing losses and improving productivity. Under Scope 2 emissions reduction, Dahej & Panoli sites have signed a captive power purchase agreement with Clean Max Enviro Energy Solutions Limited for procuring renewable energy from the hybrid solar and wind farm. With this initiative, your Companys renewable energy contribution would be around 57% in the next year.

All manufacturing sites continue to maintain and pursue certifications aligned with business requirements, including ISO 9001, ISO 14001, ISO 50001, IATF1 16949 and BIS2.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has established adequate internal financial control systems to ensure reliable financial reporting and compliance in accordance with the laws and regulations. All resources are put to optimal use and adequately protected against any loss. All transactions are authorized, recorded and reported correctly. Policies and guidelines of your Company are being adhered to and improvements in processes are being carried out on an ongoing basis. The principles of risk avoidance, such as segregation of duties and approval-based authorization matrix form the core of the internal control systems. The efficiency and effectiveness of the internal control systems over financial reporting have been performed by the management through evaluation, documentation, testing and reporting of the relevant processes and controls.

Our internal control systems are also supplemented by an extensive program of internal audit by an independent firm of Chartered Accountants. Internal audits are conducted regularly and their summary as well as recommendations are placed before the Audit Committee/ Board of Directors of the Company. The Audit Committee reviews the internal financial control systems on an ongoing basis. Some of the Key Financial Ratios for the financial year 2025-2026 are provided hereunder for your reference:

Key Financial Ratios:

Key Ratios		2025-26	2024-25	Change %
Trade Receivables Turnover (times)	(Revenue from Operations / Average Trade Receivables)	5.7	6.0	-5%
Inventory Turnover (times)	(Cost of goods sold / Average Inventory)	4.6	5.2	-12%
Interest Coverage Ratio	(Earnings Before Interest Tax & Depreciation before exceptional items / Finance cost)	37.1	53.2	-30%
Current Ratio	(Current assets / Current liabilities)	1.7	1.6	6%
Debt Equity Ratio	(Total Debt [Long term borrowings + Short term borrowings + Current maturities of long term debts] / Total Equity)	NA	NA	NA
Operating Profit Margin (%)	(Earnings Before Interest & Tax before exceptional items / Revenue from Operations)	3.9%	4.3%	-10%
Net Profit Margin (%)	(Profit after tax / Revenue from Operations)	2.8%	3.3%	-15%
Return on Net Worth (%)	(Profit After Tax (PAT) / Average Total Equity)	10.9%	14.5%	-25%

HUMAN RESOURCES AND EMPLOYEE RELATIONS

Your Company remains steadfast in its commitment to attracting, onboarding, developing, motivating, and retaining high-performing talent. Recognizing employees as their most valuable asset, the Company continues to strengthen its leadership pipeline through focused interventions aimed at building future-ready capabilities.

To foster a high performance-driven culture, the Company has further strengthened its reward and recognition framework. The incentive framework-including annual bonuses, impact bonuses, and non-cash recognition—effectively distinguishes and rewards top performers.

The Company has introduced its “Winning Ways” strategy, with a strong focus on building a high-performance culture. Extensive sensitization and awareness initiatives have been undertaken to help employees understand and adopt winning behaviors in their daily work and mindset.

Continuous learning and skill development remain imperative for employee growth. This is achieved through structured training programs, e-learning modules, and participation in external seminars. At the sites, employees are encouraged to enhance manufacturing excellence through Kaizen projects and targeted technical training.

Diversity, equity, and inclusion remain integral to the Companys people agenda as it advances toward building a resilient and inclusive organization. The Company continues to cultivate a safe, respectful, and welcoming work environment for all employees. Initiatives such as internships, women-focused capability-building interventions, and other diversity-led actions remain central to attracting emerging and diverse talent.

The Company remains committed to continuous employee education, wellness initiatives, and maintaining harmonious and constructive relations with the union. As of March 31, 2026, the total employee strength stood at 1,250.

CORPORATE COMMUNICATIONS

Your Companys Corporate Communications team collaborates with various business and service units, enabling them to communicate effectively with stakeholders across various platforms. Strong partnerships with Corporate Advocacy teams on several key business topics with the Government of India and various associations continued to create strong positioning and enhance brand visibility for your Companys products and solutions. Your Company shared insights and built awareness for its solutions that help create sustainable chemistry through strategic alliances with customers and industry bodies. During the year, your Companys leadership team engaged with customers, academia, and industry through various forums, such as the PlastIndia, PU Tech, Honda Tech Days, The Battery Show, India Energy Week, Mercedes Benz Tech Day, CPHI, Green Hydrogen Technology Conference, India Energy Storage Week, WeChemie among others. These engagements emphasized sustainability, innovative solutions, and fostering collaboration for continued success.

AWARDS AND RECOGNITION

Your Company was awarded the “PU Tech Award” by PU Tech for exceptional innovation in Polyurethane technology, contributing to the improved energy efficiency in cold storage applications, which supports energy conservation and reduces the carbon footprint.

	On behalf of the Board of Directors
	For BASF India Limited
	PRADIP P SHAH	ALEXANDER GERDING
	(Chairman)	(Managing Director)
Mumbai	(DIN: 00066242)	(DIN: 09797186)
Dated: May 19, 2026