Bhansali Engineering Polymers Ltd Management Discussions

ANNEXURE1

A. ECONOMIC OVERVIEW

Global Economy

The global economy remained resilient during FY 2025-26 despite elevated geopolitical tensions, trade policy uncertainties and persistent supply chain realignments. According to the World Banks Global Economic Prospects Report and IMFs World Economic Outlook, global growth is expected to remain moderate, supported by easing inflation, improving financial conditions and continued investments in technology and artificial intelligence. However, higher trade barriers, regional conflicts and fiscal pressures across several economies continue to pose downside risks to growth. Global growth is projected to remain in the range of 2.6% - 3.3% during 2026, reflecting a stable but slower expansion compared to historical averages.

Advanced economies continue to experience relatively subdued growth, while emerging markets remain key contributors to global economic activity. The United States has demonstrated resilience in consumption and employment, although trade- related uncertainties and tariff measures continue to influence investment decisions. Europe is witnessing gradual recovery supported by easing inflation and monetary policy adjustments, whereas Asian economies continue to drive global growth through strong domestic demand, manufacturing activity and technology investments.

Inflationary pressures have moderated across major economies compared to the post-pandemic period, enabling central banks in several regions to adopt a more accommodative policy stance. Nevertheless, volatility in energy markets, geopolitical developments and disruptions in global trade routes continue to influence commodity prices and business sentiment worldwide

The global outlook has abruptly darkened following the outbreak of war in the Middle East on February 28, 2026. The closure of the Strait of Hormuz and serious damage to critical production facilities in a region central to global hydrocarbon supply could cause an energy crisis on an unprecedented scale. The duration and scale of the conflict and the time it will take for energy production and transit to normalize after the end of hostilities will determine the ultimate size of the shock to the global economy.

The reference forecast (of World Economic Outlook of IMF), assuming a short-lived conflict, projects global growth of 3.1 percent for this year, a downward revision of 0.2 percentage point from our January projections, while headline inflation is expected to rise from 4.1 percent in 2025 to 4.4 percent in 2026. However, more attacks on critical energy facilities and the prospect of a longer shutdown of the Strait of Hormuz are raising the spectre of a more significant and persistent conflagration for the global economy. Under an adverse scenario, broadly anchored to market conditions prevailing toward the end of March, global output would be expected to decline to 2.5 percent, with inflation rising to 5.4 percent. Under severe scenario —assuming dislocations in energy markets that extend to next year, together with a de-anchoring of inflation expectations and a tightening of financial conditions, the global economy would come close to experiencing a recession, with growth around 2 percent this year and next and global headline inflation near 6 percent. Clearly, the downside risks are tremendous.

According to the IMFs April 2026 World Economic Outlook, India has slipped to the 6th largest economy in the world with a nominal GDP of approximately $4.15 trillion. India dropped below Japan and the UK due to significant rupee depreciation (about 11%) against the dollar and a one-time statistical revision. Despite this, India remains the fastest-growing major economy. The IMF has raised its GDP growth forecast for India to 6.5% for the 2026-27 financial year (FY27), positioning it as one of the fastest-growing major economies, supported by robust domestic demand, sustained government capital expenditure, improving manufacturing activity and strong services sector performance. The countrys macroeconomic fundamentals remained resilient, aided by healthy GST collections, infrastructure investments, digital transformation initiatives and a stable financial system.

Indias growth trajectory continues to be supported by increasing urbanisation, rising disposable incomes, expanding manufacturing capabilities and favourable demographic trends. Government initiatives such as Make in India, Production

Linked Incentive (PLI) schemes, logistics infrastructure development and focus on ease of doing business are expected to strengthen the countrys position as a preferred global manufacturing destination

As per the Press Information Bureau, the real annual GDP growth for FY 2025-26 is 7.6%, higher than the 7.1% recorded in FY 2024-25, while nominal GDP measured at current prices, is projected to grow by 8.6% during FY 2025-26. Within this, the manufacturing sector has recorded double-digit growth in both FY 2023-24 and FY 2025-26, emerging as a key contributor to the economys resilient performance. The secondary and tertiary sectors have strengthened overall economic performance, recording growth rates exceeding 9.0% in FY 2025-26. Also, the ‘Trade, Repair, Hotels, Transport, Communication and Services related to Broadcasting and Storage sector recorded a growth rate of 10.1% at constant prices in FY 2025-26.

Total gross GST collection for the financial year 2025-26 surpassed 22.27 lakh crore, marking an 8.3% year-on-year growth driven by strong domestic consumption and import activity. Monthly collections consistently broke records, crossing the 2 lakh crore mark by March 2026, while net revenue after refunds reached approximately Rs. 19.34 lakh crore.

Looking ahead, the Indian economy is expected to maintain healthy growth momentum, supported by private consumption, infrastructure spending and increasing investments in manufacturing and technology. While external risks arising from geopolitical tensions (particularly in West Asia) affecting commodity / oil prices volatility and global trade uncertainties remains, Indias domestic demand-driven growth model provides a strong foundation for long-term economic expansion.

The automobile industry is one of the key drivers of the Indian economy. Since the liberalization of the sector in 1991 and allowing 100 per cent FDI through automatic route, Indian automobile sector has come a long way. The automotive industry contributes 6 per cent to Indias GDP and 35 per cent to Manufacturing GDP

Indias automobile industry recorded its highest-ever annual sales of approximately 2.83 crore vehicles in FY 2025-26, registering growth of 10.4% over the previous year, reflecting strong demand across passenger vehicles, two-wheelers, commercial vehicles and three-wheelers, supported by a series of structural policy reforms that have strengthened demand fundamentals and significantly boosted consumer confidence.

Passenger vehicle sales reached a record 46.43 lakh units in FY 2025-26, while two-wheeler sales crossed 2.17 crore units, indicating sustained consumer demand and favourable industry fundamentals.

Indias auto components industry has significantly expanded its market share, driven by rising automobile demand from the growing middle class and strong global exports. The sector has attracted both Indian and international players and is broadly classified into organised and unorganised segments. While the unorganised sector primarily caters to the aftermarket with low- value items, the organised sector focuses on supplying high-value precision instruments to Original Equipment Manufacturers (OEMs).

In FY 25 the auto-components industry grew 9.6% y-o-y on account of increased supply to OEMs, exports and aftermarket. Supply to OEMs was increased up 10%, driven by 8% rise in total vehicles production. Trade surplus widened to $453 million (vs $300M in FY24); Exports were up by 8% whereas imports were up by 7.3%. Aftermarket grew 6%, supported by a growing and aging vehicle base.

Indias Automotive Mission Plan 2047 aims to boost vehicle production to 50 million by 2030 and 200 million by 2047, positioning India among the top two global auto producers. It prioritizes sustainable vehicle production with hydrogen, electric, CNG, and biogas, while not curbing petrol or diesel vehicles immediately.

The Indian household appliances industry continued to witness healthy growth during FY 2025-26, supported by rising disposable incomes, increasing urbanisation, expanding electrification and growing consumer preference for premium and energy-efficient products. Demand remained strong across key categories such as refrigerators, air conditioners, washing machines, microwave ovens and small kitchen appliances.

The major home appliances market in India was estimated at approximately Rs. 1.86 lakh crore in 2025 and is projected to grow steadily over the coming years, supported by increasing household penetration, replacement demand and the expansion of organised retail and e-commerce channels. Growth in Tier-II and Tier-III cities, along with government initiatives promoting domestic manufacturing, is expected to further support industry expansion.

The increasing adoption of premium appliances, smart home solutions and energy-efficient products is driving demand for high-performance engineering plastics. ABS resins continue to find extensive applications in appliance housings, interior components, control panels and other moulded parts owing to their superior impact resistance, aesthetics and processing characteristics. Accordingly, the long-term outlook for engineering thermoplastics used in household appliances remains positive.

Opportunities: There is immense scope for growth, considering the existing supply and demand mismatch, and knowing the fact that the consumption of ABS in India is voluminously larger as compared to the combined output of the domestic manufacturers.

Threats: The limitation arises out of deliberate decision on the part of domestic manufacturers to keep low inventories of its imported key raw materials which is more than 85% (i.e. Styrene and Acrylonitrile monomers) to limit the risk of price fluctuations which may result in huge loss, if the price of monomers drastically falls in the international market, which happen many a times due to unpredictable reasons, i.e. fluctuation in price of crude oil, benzene and ethylene.

The ABS business in India is exposed to the risk of foreign exchange fluctuations, as the key raw materials viz. ‘Styrene and ‘Acrylonitrile are import dependent, as there is no indigenous producer for these monomers. The only raw material which is indigenously available is Butadiene monomer, which constitutes around 15 per cent (weight wise) of the total raw material composition.

The Company has long term contracts for smooth supply of basic raw materials and maintains appropriate level of inventories for smooth operations. Further, the Company is taking various steps for energy saving by way of efficient equipment and alternative sources of energy.

Update on ABS capacity Expansion: The implementation of capacity expansion from existing 75000 TPA to 1,00,000 TPA is progressing well and orders have been placed for critical long delivery equipment(s). The balance engineering, procurement and construction work is in progress and the commissioning of enhanced capacity is expected to be completed by end of September, 2026.

The Company deals with single business segment viz. manufacturing of ABS and SAN resins (which is classified under the category of Highly Specialized Engineering Thermoplastics).

Financial performance: During the financial year 2025-26, the Company achieved a production volume of 71,601.50 TPA against installed capacity of 75,000 TPA. Sales volume for the year stood at 71,501.12 TPA as compared to 74,381 in FY 2024-25.

During the year under review, the net operational revenue (on standalone basis) amounted to Rs. 1,27,600.40 lakhs as against Rs. 1,39,774.37 lakhs during last fiscal. The EBIDTA for FY 2025-26 stood at 25,633.73 lakhs as against 25,278.60 lakhs for FY 2024-25. The PBT was 24,776.61 lakhs as against 24,359.02 lakhs for previous financial year. After considering the provision for tax of 6730.02 lakhs (previous year 6377.09 lakhs), the profit from continuing operations after tax stood at Rs. 18,046.59 lakhs as against Rs. 17,981.93 lakhs in FY 2024-25. The total Comprehensive Income for FY 2025-26 amounted to Rs. 18,100.80 lakhs as compared to Rs. 17,863.38 lakhs for FY 2024-25.

The Key Financial ratios as per Schedule V of the LODR Regulations have been disclosed in the Boards Report, under the head ‘Financial Highlights.

The Company has an effective internal control system considering the size of its operations. It maintains its accounting records on SAP, a well renowned software. The financial transactions are properly documented in accordance with the policies & procedures, as set out by the management from time to time and are properly approved and authorized, as per the approval matrix and reported to the management in a prescribed manner.

The Company has appropriate and adequate insurance cover for its immovable and movable assets. Both, the insurance cover and the assets are closely and consistently monitored by the management from time to time.

The Report on Internal Audit, carried by an independent Internal Auditor is placed before the management on quarterly basis, and requisite corrective actions, if any, are being taken. Observations of the auditors are properly reviewed and appropriate follow-up action(s) are taken by the concerned department(s) and reported to the management, who in turn, also reviews the sufficiency and effectiveness of the internal control system and monitors the implementation of audit recommendations, including those relating to strengthening of the Companys internal policy and management practices.

The Company firmly believes that an able, disciplined, motivated, trained and skilled manpower is the key for sustaining growth of an organization. The Company has strengthened the team of top management by recruitment of strong talent pool.

The Company organizes and provides requisite training to its employees from time to time. Periodical appraisal and rewarding systems are in place. Industrial Relations at both the plants (i.e. Abu Road, Rajasthan and Satnoor, Madhya Pradesh) as well as inter-se relationship between employer and employee have been cordial and conducive during the year.

The Company follows the principle of Mr. Peter Drucker (Management Consultant and Educator) of "Right Person for Right Job" and takes appropriate steps towards the same. As on 31st March, 2026, permanent employee strength of the Company was 509 (previous year 496).