Camlin Fine Sciences Ltd Management Discussions

GLOBAL ECONOMIC OUTLOOK

The global economy is projected to grow at 3.3% in both 2025 and 2026, as per the IMFs January 2025 World Economic Outlook Update. This reflects a moderate pace, influenced by multiple structural and cyclical challenges. While the U.S. economy benefits from strong consumer spending and resilient employment, the eurozone struggles with manufacturing stagnation, and China faces deflationary pressures linked to real estate overhang and subdued domestic consumption.

Key Trends and Risks:

Persistent Inflation: Headline inflation may cool due to easing food and energy prices, but persistent core inflation—driven by labor shortages, wage increases, and strong demand in services—continues to challenge central bank targets. Sticky inflation forces monetary authorities to balance interest rate adjustments cautiously.

Trade Fragmentation: The rise of economic nationalism and strategic autonomy agendas in major economies is leading to "friend-shoring" and localization of supply chains. This disrupts traditional trade routes and adds to input costs for global manufacturers.

Geopolitical Tensions: Ongoing military conflicts, trade sanctions, and global security disputes (e.g., Ukraine, Red Sea, China-Taiwan) are creating uncertainty in commodity markets and energy routes, which in turn are raising hedging and inventory costs.

Policy Divergence: As countries face different economic cycles, policy responses have become asynchronous. While the U.S. and Europe consider easing, some emerging economies are still hiking rates to manage currency volatility. This divergence affects investor confidence, capital allocation, and debt sustainability in vulnerable regions.

Impact of climate change: Climate change has exerted significant pressure on the global economy manifesting through extreme weather events, disruptions in agriculture and supply chains, and escalating financial risks. These impacts are increasingly evident across various sectors and regions around the globe. China growth deceleration: The ramifications of Chinas economic slowdownflextend beyond its borders, affecting global trade, supply chains, and financial markets. As the worlds second-largest economy, China is a major importer of raw materials and a key player in global manufacturing. A deceleration in Chinese economic activity translates to weaker demand for commodities such as metals, oil and agricultural products, impacting economies that rely on exports to China, including Australia, Brazil, and many African nations. Moreover, disruptions in Chinese manufacturing have led to supply chain shortages in various industries, from electronics to automotive production, further exacerbating global inflationary pressures. US-China potential trade war 2.0: The second inauguration of US President-elect Donald Trump marked a turning point in US–China economic relations and, by extension, the global economy. The trade war ushered in by the second Trump-era clearly highlights the growing challenges to global trade and economic cooperation. It marks a return towards economic nationalism and a retreat from multi-lateralism. As countries prioritize self-sufficiency and seek to protect domestic industries, the future of global trade will once again become increasingly uncertain. The World Trade Organization, which traditionally mediates trade disputes, will struggle to remain relevant in the face of unilateral actions by major powers. These trade wars will not only be viewed as bilateral disputes — they will serve as transformative events for the global economy. Disrupting trade flows, raising costs, and sowing uncertainty will require businesses, governments, and international institutions to adapt to a new reality.

To succeed, global firms must strengthen hedging strategies, redesign supply chain networks for resilience, and engage in advocacy and adaptation around emerging trade regulations.

Performance of Major Economies

India

FY 2025 saw a slowdown in investment with a weaker manufacturing sector, but the agriculture and services sector demonstrated resilient steady growth. Despite all the global headwinds, India is expected to maintain its current growth rate of 6.5%. The economy, though buoyed by private consumption driven by improving rural income and improved agricultural output, could see a hampered growth rate on account of elevated inflation and lack of credit expansion.

United States of America

The US economy is currently a mixed bag of indicators with some suggesting a shift towards recession and others pointing towards heightened inflation due to the newly imposed tari_ regime. Though there is no debate that there are signs of an economic slowdown with growth rate projected to decline to 2.1% in 2026, in the short term, inflation is likely to decline, allowing federal reserve to have a relook at the monetary policy. The anticipated rate of growth is more than likely to be sustained on robust customer spending and higher productivity in agriculture and industry.

European Union

Europes economic struggle continues with low consumption, subdued investment and inconsistent industrial activities. Uncertainties in policy making and the current political scenario have further affected the growth rate. Nevertheless, it is estimated that the growth rate will improve to 1.4% in 2026 from the tepid 1% in 2025 on account of increased global trade and controlled interest rates. With the service sector looking promising and increasing income levels, a boost in domestic consumption is seeming very plausible.

China

The growth rate is estimated to decline slightly from 4.6% to 4.5% in 2026. This reflects faltering consumer confidence, a sluggish labour market and an unstable real estate sector. The policies introduced by the government and Central Bank to provide an impetus to the economy seem to have been dampened by negative market sentiment and subdued credit demand. The whole precipice of the Chinese economy hinges on its export growth. The struggle of China is in some way impacting the global trade with excess supply and predatory pricing. To add to its woes, the domestic demand remains extremely weak. Rising debt and declining but ageing population pose a further risk amidst the strained relations with the US.

INDIA ECONOMIC OUTLOOK

India is expected to grow at 6.2% in FY 2024–25 and 6.3% in FY 2025–26, sustaining its position as the fastest-growing economy in the world. Structural tailwinds—like a young labor force, formalization of the economy, and digital financial inclusion—are propelling investment and consumption. The governments focus on supply-side reforms, infrastructure, and manufacturing is reshaping the growth narrative.

Growth Drivers

Manufacturing & Capex Cycle: India is witnessing a resurgence in capital formation. Gross Fixed Capital Formation as a percentage of GDP is rising, with robust traction in roads, railways, electronics, and process industries like chemicals. The PLI schemes, spanning 14 sectors, are expected to generate incremental output worth 30 lakh crore over five years.

Monetary Policy: The RBI has kept the repo rate unchanged, maintaining a focus on anchoring inflation while supporting growth. Systemic liquidity is being closely managed through variable rate reverse repo operations. Sector-specific refinance schemes continue for MSMEs and export-oriented units.

Digital & Infrastructure Push: India has added over 1.2 million km of fiber optic coverage and leads in digital transactions globally. Concurrently, infrastructure outlay through the National Infrastructure Pipeline (NIP) is expanding port, airport, and road logistics capacity, reducing lead times and enabling lower landed costs. Risks: External trade dependence for critical inputs, unpredictable monsoons, and potential delays in the disbursal of central and state capex budgets could moderate short-term growth. Political transitions in the 2026 election cycle may introduce policy volatility.

Impact of US-China stando_: The global economy is more connected than ever. When two giants like the U.S. and China clash, the rest of the world—especially countries like India—feels the impact. While some sectors might find opportunities, overall uncertainty tends to slow down growth and affect livelihoods. As this new chapter of U.S.-China tensions unfolds, businesses, markets, and consumers in India will all be watching closely. Because whether we like it or not, what happens there will shape what happens here. The continued momentum in public investment, expanding formal sector employment, and steady credit flow underpin Indias robust medium-term prospects.

The Consumer Price Index was 5.4% in FY 2024, which reduced moderately to 4.6% in FY 2025, but elevated food prices pose a major risk in controlling inflation. The fiscal deficit, an important indicator of growth and stability, is expected to drop to 4.4% of the GDP in FY 2026 from 4.8% of the GDP in FY 2024. RBI has pitched in to infuse liquidity first but slashing interest rates by 25 basis points and announcing liquidity infusion of 1.5 trillion through purchase of government securities, repo auctions and dollar swaps.

GLOBAL CHEMICAL INDUSTRY OUTLOOK

The global chemical industry is forecasted to expand at 3.4% in 2025, driven by strong demand from electronics, construction, auto components, and sustainable packaging. Growth in specialty chemicals is outpacing bulk commodities, which are still adjusting to post-COVID inventory cycles and feedstock volatility.

Sustainability Integration: ESG scoring is now central to supplier selection in Europe and North America. Companies are transitioning toward low-carbon pathways, using biocatalysts, recycled feedstocks, and modular process designs. Disclosures under ISSB and EU taxonomy frameworks are becoming a prerequisite for securing large corporate contracts.

Technology Adoption: Digital twins, IoT sensors, and AI-powered control systems are being deployed for process optimization, predictive maintenance, and emissions tracking. Top quartile performers are achieving up to 15% cost savings via smart manufacturing.

Regional Shifts: De-risking from China is leading to investment shifts to ASEAN, India, and Mexico. Latin Americas strength in bio-feedstocks and proximity to North American demand centers is encouraging investments in renewable chemistry hubs.

M&A Landscape: Larger players are divesting low-margin commoditized assets and acquiring firms with IP in high-growth verticals like bio-degradable materials, nutrition enhancers, and aroma molecules. Private equity interest in contract development and manufacturing organizations (CDMOs) is growing.

Challenges and risks

Climate change control: Stringent environmental regulations are one of the biggest challenges that the global chemical industry faces. Governments worldwide have been imposing stricter laws to counter climate change, pollution, and sustainability, all of which directly affect chemical manufacturers. Such regulations often oblige companies to use cleaner technologies, reduce their greenhouse gas emissions, and restrict the use of harmful substances in their products and in the production process.

International Tari_s: The U.S. and China trade war will significantly disrupt the global chemical industry, leading to increased costs, supply chain disruptions, and shifts in trade routes. Companies will likely diversify sourcing, explore alternative export markets, and potentially invest in domestic production. Players aligning their innovation, ESG compliance, and digital maturity with global customer expectations are gaining wallet share in key export markets.

INDIA CHEMICAL INDUSTRY OUTLOOK

Indias chemical industry is projected to reach a market size of $300 billion by 2028, driven by increased global outsourcing, domestic manufacturing expansion, and policy tailwinds. It accounts for over 10% of global dye production and is a key supplier in agrochemicals, APIs, food preservatives, and aroma intermediates.

With its rank as the sixth largest chemical manufacturer in the world and the third largest in Asia, India remains a formidable force in global chemical trade. The impact of chemical trade can be highlighted by the sectors 7% contribution to the GDP. The strong position of India in global chemical trade is underscored by its 14^th rank in export and 8^th rank in imports.

The Indian chemical industry is expected to grow by 8.10% in FY 2026 with a large chunk of FDI flowing into the chemical sector as Asian countries seek to diversify their supply chains.

Growth Drivers:

Structural Advantages: Indias cost competitiveness, coupled with its strong tertiary education base in chemical engineering and allied sciences, ensures a steady flow of skilled professionals. The presence of allied industries (textiles, agriculture, pharma) creates a captive downstream market. Mega clusters such as Dahej, Jhagadia, and Cuddalore provide integrated logistics, utilities, and waste management systems. China +1 Opportunity: As clients seek alternatives to overconcentration in China, Indian firms are securing long-term contracts with global players in agrochemicals, flavors & fragrances, and food antioxidants. Export subsidies and Production Linked Incentives (PLIs) are reinforcing this trend. The US-China trade war will give a further boost to Indias rapidly developing manufacturing sector.

Regulatory Evolution: CMSR aims to replicate global chemical control standards domestically. It mandates substance registration, safety assessments, and responsible disposal—thus improving Indias eligibility for supplying to Japan, EU, and the U.S.

Sustainability Push: Customers are demanding greener portfolios, leading Indian firms to invest in waste recovery plants, solar- and biomass-fired boilers, and enzymatic process routes. Compliance with international frameworks such as REACH and GreenScreen is rising.

These trends are being augmented by investor confidence, as evidenced by increased FDI inflows and IPO activity in the specialty chemicals segment.

Challenges:

Infrastructure bottlenecks, overdependence on Chinese intermediates, and raw material price volatility continue to pose short-term hurdles.

Nonetheless, with rising global relevance and supportive policy reforms, Indias chemical industry is poised for long-term structural growth.

ESG INITIATIVES

Climate change continues to cause unprecedented disruptions worldwide, leading to significant economic and financial losses. The urgent need to conserve depleting natural resources, adopt sustainable practices, and reverse environmental damage is a shared global responsibility. At Camlin Fine Sciences (CFS), sustainability is at the heart of our innovation and operations. Through focused efforts across our product lines, partnerships, and internal practices, we are committed to building a more resilient and environmentally conscious future.

1. Reducing Food Loss Through Shelf-Life Solutions: CFS plays a pivotal role in addressing global food waste and supply chain pressures through its Shelf-Life Solutions portfolio, which prolongs the viability of food and feed products. By tailoring blends and additives to suit regional conditions via our local application laboratories, we provide targeted, science-based interventions that reduce food spoilage and loss. This not only supports local communities but also alleviates pressure on the global food system—contributing to better food security and a healthier society.

2. Sustainable Livestock Health & Nutrition: Our Animal Nutrition Portfolio enhances the health, hygiene, and productivity of livestock through science-backed solutions that improve Food Conversion Ratio (FCR). By offering antibiotic alternatives, sanitization services, and holistic healthcare approaches, we enable farms to operate more sustainably. These interventions promote animal well-being, reduce the risk of contamination in the food chain, and strengthen food security.

3. AlgalR – Vegan Omega-3s for a Marine-Friendly Future: Our nutraceuticals subsidiary, AlgalR, has developed a pioneering product line under the ‘BioSus brand. Using proprietary fermentation technology, we produce DHA (Omega-3 fatty acids) from microalgae—an environmentally friendly, vegan alternative to marine-sourced omega-3s. This innovation helps relieve pressure on marine biodiversity, providing consumers with the same health benefits while protecting ocean ecosystems.

4. Decarbonizing Operations & Energy Transition: CFS is actively reducing its carbon footprint across facilities:

At our Tarapur plant, we have replaced coal with eco-friendly briquettes, resulting in substantial carbon emission reductions.

We are accelerating the transition from brown to green power at both Tarapur and Dahej sites. These initiatives will significantly cut emissions and reduce energy costs. Agreements are already in place and are expected to be signed in the coming year.

These efforts are part of our broader goal to make manufacturing fully sustainable, supporting our long-standing commitment to a circular economy model across all operations.

5. Breakthrough in Energy Storage: Partnership with Lockheed Martin: In a strategic partnership with Lockheed Martin, CFS is supporting the deployment of cutting-edge flow battery technology that can sustain power cycles of 10–11 hours, making them ideal for both stable grid operations and emergency scenarios. This innovation enables the maximization of renewable energy use and represents a leap forward in energy resilience and sustainability.

6. Driving Sustainability Across the Value Chain: True change requires collective commitment. CFS is now extending its sustainability standards to its vendors, alliance partners, and employees, ensuring that environmental responsibility is embedded throughout our value chain. We are not only focused on minimizing further harm to the planet but are equally driven to restore ecological balance and reverse damage done.

At CFS, sustainability is not just a goal, it is our responsibility and our promise. Through thoughtful innovation and action, we aim to preserve the planet for generations to come.

COMPETITION

The Company operates in a competitive business, both in India and overseas. We try to remain competitive by seeking better understanding of the markets in which we operate and identify emerging opportunities. We believe that our consistent tracking of markets, developing new products and our consistent interaction with our customers is a key to our competitiveness and these factors inter alia enable us to anticipate the needs of our customers.

BUSINESS OVERVIEW

The Company is an integrated Company, and specializes in research, development, manufacturing, commercialising, and marketing of specialty chemicals and blends which are used in a wide array of food, feed, animal and pet nutrition, fragrance, pharma and industrial products. The Company market products globally including in Europe, Asia Pacific (including India), Africa, Middle East, South, Central and North America. The business is structured into four distinct verticals, based on Companys diverse product portfolio:, namely: (i) Diphenols; (ii) Shelf-life Extension Solutions (which include antioxidants, its value-added blends, ingredients and additives); (iii) Performance Chemicals; (iv) Aroma ingredients.

The Company has recently achieved a significant milestone in developing a high-quality specialised grade for Hydroquinone, leading the Company into the crucial phase of conducting plant trials. The Company has also successfully developed and implemented enhanced quality of antioxidants, tailored specifically for discerning customers. These products have smoothly transitioned from R&D to full-scale production and have been successfully introduced in the market. The Companys newest offerings include emulsifier-based ingredients designed to enhance texture, consistency, mouthfeel, appearance, process efficiency and yield for diverse range of food industry applications.

Contd.

Diphenols

The Diphenols business of involves the manufacturing of Hydroquinone and Catechol, which are essential raw materials used across various product lines within different business segments. While a significant portion of the Diphenols produced is used for captive consumption, The Company also supplies these products to external customers. Diphenols are key raw materials for chemicals used in industries such as petrochemicals, pharmaceuticals, flavours and fragrances, agrochemicals, dyes and pigments. Further, Hydroquinone by itself has application as polymerisation inhibitor in petrochemical industry. The Dahej SEZ Facility provides captive requirements of key raw materials Hydroquinone and Catechol. Diphenols are primarily marketed across Europe and Asia, with a customer base that includes large multinational corporations, regional enterprises, and local manufacturers in the specialty chemicals, pharmaceuticals, agrochemicals, aroma chemicals, and petrochemicals sectors.

The turbulent economic conditions prompted the Company to mothball its Diphenol facility of its European subsidiary CFS Europe S.p.A., Italy which was closed its operations in July 2023. This closure does not affect the business as the situation was mitigated by setting up of Diphenol manufacturing facility in Dahej, India.

Shelf-life Extension Solutions

The Companys Shelf-life Extension solutions include a range of antioxidants, its blends and additives. Shelf-life Extension solutions are used to delay certain types of deteriorations, by delaying the chain reaction of oxidation, thereby extending shelf life of various products. The Companys Shelf-life Extension solutions primarily include antioxidant chemicals and antioxidant blends, which could be sourced from natural or synthetic substances, and are available both in liquid and dry solutions.

Shelf-life Extension solutions consist of traditional antioxidant solutions, which is branded and marketed as "xtendra" and also natural shelf-life extension solutions, which marketed under the brand "Nasure". Traditional antioxidant solutions are primarily sourced from Diphenols, while natural shelf-life extension solutions are sourced from rosemary extracts, green tea and mixed tocopherols. Additives are used as adsorbents, acidifying agents, energy products, bactericides, binders and mould inhibitors which are primarily used in animal feed and pet food.

Feed additives play an important role in animal nutrition as it helps in enhancing animal performance and health, ensures feed safety, optimizes feed conversion and improves profitability of customers business. Some of the common feed additives used are mycotoxin binders, mold inhibitors, antibacterials, antioxidant blends, glucose precursors in ruminants etc.

Our Company is one of the leading manufacturers of food grade antioxidants TBHQ, BHA and Ascorbyl Palmitate, which are manufactured at its Tarapur Facility. The basic raw material required for manufacturing TBHQ and BHA is Hydroquinone, which is primarily sourced from Dahej SEZ Facility. We develop and offer products to existing and new customers based on customer requirements. We blend antioxidants and additives to meet customer needs. The Company considers customer requirements to be an important manufacturing factor. It relies on its R&D unit to customise products as per customer needs. Further, blending and additives business is conducted in its facilities at (i) Tarapur (ii) Brazil (iii) Mexico and (iv) Belgium. The Company also has a contractual arrangement in USA with a third party to outsource the manufacturing of its antioxidant blends and additives products on a need basis.

The Company primarily markets its Shelf-life Extension Solutions products in North America, Central America, South America, Europe, Asia Pacific (including India) and Middle East. The global antioxidants market was valued at USD 4.09 billion in 2024 and is expected to reach USD 7.90 billion by 2034, growing at a CAGR of 6.80%.

The customers include large multi-national companies, regional companies and local manufacturers of antioxidant formulators and blending companies, food processing and oil and fat producing companies, pet food, feed and animal nutrition segments.

In FY 2025 the consolidated sale of basic ingredients, viz., TBHQ, BHA, ASP and BHT stood at 38,207 Lakh as against 40,738 Lakh in FY 2024. The decrease was primarily due to pricing pressure.

Blends business recorded a healthy growth of around 18% to 87,840 Lakh in FY 2025 from 74,739 Lakh in FY 2024. The growth was buoyed by increase in portfolios across all subsidiaries and due to inorganic growth through acquisition of Vitafor in Belgium.

On June 11, 2024, Dresen Quimica SAPI De CV, Mexico, acquired a 100% stake in Vitafor Invest NV, Belgium, along with its subsidiaries and associates, for a nominal cash consideration of €1 (Euro One). This strategic acquisition leverages Vitafors established network to expand and strengthen Dresen Quimicas presence in the European and African feed and pet food markets. Founded on February 21, 2018, and located 20 km south of the Port of Antwerp, Vitafor Invest NV specializes in manufacturing and trading products for the animal feed industry. The acquisition is expected to create synergies, enhancing the product lines of Vitafor and driving growth with existing customers.

Further, on February 24, 2025 the Company has entered into a Share Purchase Agreement (SPA) to acquire a majority stake in Vinpai S.A. (‘Vinpai), along with an investment of €3.3 million in Vinpai through convertible bonds. The acquisition will involve a Share Swap, with the consideration paid through the issue of new equity shares. A mandatory cash tender offer will be made for the remaining shares of Vinpai at €3.60 per share, subject to regulatory approvals and a fairness opinion. If the Company acquires over 90% of Vinpais shares, it may initiate a squeeze-out process under French law.

Vinpai is an ingredientech specializing in the design, manufacture and marketing of functional ingredients based on algae, plants, minerals, and fibers, offering manufacturers natural alternatives to chemical additives. Positioned in the most promising market segments, Vinpai provides support to food, cosmetics and nutraceutical manufacturers, thanks to its cross-technology know-how, enabling them to upgrade the nutritional qualities of their end products. The combination of mixing of ingredients and food additives enables manufacturers to accelerate their development, optimize their production costs and generate profitability. Vinpai has a subsidiary namely Based Algae and Plants, which is mainly a sales arm and a vehicle Company. Vinpai has presence with Europe, North Africa, West Africa, and South-east Asia being key end-markets for the Company.

The Company is confident of increasing the footprint of Vinpais product into feed market by extending the technology in production and marketing. This would give additional revenue which are not available hitherto Vinpai. From the perspective of the Company, the technological prowess of Vinpai provides an interesting avenue for increasing the basket of its existing product range, usage of technology to improve the quality and yields of the existing products. This acquisition would pave way to enter into new technological advancements and thus help to increase the customer satisfaction and growth of business.

Performance Chemicals

The Performance Chemicals products are speciality chemicals, which are derivatives of either Catechol or Hydroquinone and have wide applications in sectors such as food flavouring, pharmaceuticals intermediate, petrochemicals, agrochemicals, dyes, pigments, energy storage and fragrance industry. The few products from the Performance Chemicals product portfolio are Guaiacol, Veratrole, TBC, PDMB, CME, MEHQ, TBHQ, HQEE and ODEB.

We markets its Performance Chemicals under the brand name ‘Dinamic.

The Performance Chemicals products are manufactured in the Tarapur Facility and Khopoli Facility. These chemicals are also manufactured in an outsourced facility at Mahad on a contractual basis. The Company primarily markets Performance Chemicals in Europe, Asia, South America and the Middle East.

Consolidated Revenues of Performance Chemicals stood at 19,560 Lakh in FY 2025 as against 24,120 Lakh in FY 2024. The reduction in volume was primarily due to closure of our Diphenol facility in CFS Europe S.p.A.

The customers include large multi-national companies, regional companies and local manufacturers, operating primarily in the petrochemical, energy storage, agrochemical, dyes and pigments, pharmaceutical, aroma and fragrance segments.

During the year, the management of the Group has decided to abandon the production of Diphenols at its facility in Italy, under its wholly owned subsidiary CFS Europe S.p.A. This plant had undertaken a shutdown in July 2023 due to unfavorable economic conditions. Since this operation is not economically viable with remote possibility of revival in the foreseeable future, an appropriate impairment provision of its assets has been considered in standalone and consolidated financial statements and in terms of IND AS the results thereof are shown as "Discontinued Operations".

Aroma Ingredients

Aroma Ingredients business involves production of Vanillin Products. The brand ‘adorr has grown its customer base not only from the food and flavour industry, but also manufacturers of fragrances, incense sticks, pharmaceutical industries, and perfumeries. The Company has expanded its bouquet of fragrance application products to cater to the growing needs of its customers. The Vanillin Products manufactured in Dahej SEZ Facility are commercialised and sold under the brand name ‘adorr.

The Vanillin Products are currently manufactured in the Dahej SEZ Facility. The basic raw material required for manufacturing of the Vanillin Products is Guaiacol, which is primarily sourced from the Mahad Facility on a contractual basis.

We primarily markets Vanillin Products in Europe, Asia, South America, North America, and the Middle East. Globally, the Vanillin market has been valued at USD 1.04 billion in 2024 and is expected to reach USD 1.54 billion by 2029, growing at a CAGR of 8.17% during the forecast period (2024–2029).

Consolidated revenue of Aroma Ingredients in FY 2025 was at 17,581 Lakh as against 3,465 Lakh in FY 2024. The increase was due to stabilization of the quality of the products, higher volumes and improved realisations.

The customers include large multi-national companies, regional companies, and local manufacturers, operating primarily in the food and beverage, feed, pharmaceutical, and flavours and fragrance segments.

The antidumping duties levied on Chinese manufacturers in USA and Europe, would help the Group to increase its realisations in the future.

The Vanillin manufacturing facility of our subsidiary, CFS Wanglong Flavors (Ningbo) Co. Ltd., Yuyao, China was under shutdown since February 19, 2021 due to a legal action against our JV partner. Since there are no chances of revival of this facility for any alternate use, it has been decided to close the operations and consider liquidation of this subsidiary. Accordingly, an appropriate provision for impairment of assets has been made in standalone and consolidated financial statements in FY 2025. The results of this operations are also disclosed as discontinued operations.

Other Business

The Company is also engaged in manufacturing and marketing of hardware and decorative accessories for door and window locks, handles etc. on behalf of Hardware Renaissance, USA, pursuant to a licensing agreement (the "H&R Agreement"). Under the H&R Agreement, its authorised to manufacture and market hardware and decorative accessories for door and window locks, handles etc. under the brand name "Hardware Renaissance" and as a consideration, pay royalty to Hardware Renaissance, USA. The Company also make direct sales to Hardware Renaissance, USA and outsource the manufacturing to third parties on job work basis.

RESEARCH AND DEVELOPMENT

R&D units are focused on developing chemical compounds, new manufacturing processes and improving existing processes and new chemistry with a focus on developing new derivatives of Diphenols or improve the commercial viability thereof. New processes which are developed in our R&D units are implemented in small scale in our pilot plant to understand the efficacy and challenges before commercially manufacturing such products. The R&D units are located in Tarapur, India and in Ravenna, Italy.

We focus on research and development which has been instrumental in enabling the number of products it has introduced over the years, which we believe improves the performance of its business. Most of the products have been developed in-house by the Companys R&D units. The research and development abilities have led to the grant of four patents. The Company has also applied for a process patent for generating a mixed multicomponent vapour for the preparation of Monoalkyl Ethers of Diphenols in India. The R&D unit in Tarapur, has been recognised by the Government of Indias Department of Scientific and Industrial Research as an in-house R&D unit.

Innovation at Work

The Company continues to drive process optimization through several key initiatives aimed at enhancing production efficiency and product quality. At the Dahej plant, continuous improvements are being made in Vanillin production to align with future strategic goals. Additionally, the development of a novel HQ derivatives process offers improved selectivity, and research into dyes and pigments has led to the introduction of a zero-liquid discharge process, effectively tackling impurity challenges. In animal nutrition, the Company is leveraging the expertise of CFS Dresen to develop customized products that meet market needs, while quality enhancements focus on instrumental analysis and method development to ensure product integrity.

Driven by vertical integration, the Company is focusing on both organic and inorganic expansion to solidify its market position. By emphasizing captive consumption of raw materials, the Company ensures efficient use in downstream products. The forward integration into blends and vanillin further positions the business for high-value additives and solutions. In product development, the Company is making strides in producing high-quality Hydroquinone, antioxidant innovations, and new emulsifiers tailored to the food industry. Looking ahead to FY2024-25, the commercialization of new products in dyes, pigments, and agrochemicals is expected to further expand the Companys portfolio.

CUSTOMER SERVICE AND APPLICATIONS LABORATORY

The Company continues to prioritize customer-centric innovation through its Customer Service and Applications Laboratory. Building on the strong foundation laid previously, our team remains dedicated to delivering excellence by closely engaging with customers across key verticals such as Diphenols, shelf-life solutions, performance chemicals and aroma.

In alignment with our strategic focus on resource efficiency and cost optimization, the lab continues to play a pivotal role in co-creating solutions that deliver measurable value to our customers and strengthen long-term partnerships.

The Company has Application Labs in Ravenna, Italy, Mumbai - India, Urbandale - USA, Mexico City - Mexico, Sint-Niklaas, Belgium and Indaiatuba - Brazil. Application Labs are primarily involved with customising blends for various applications across our Shelf-life Extension Solutions. Application Labs also provide technical assistance and development support to our customers, test the efficacy of various products that are produced by our customers on defined parameters relevant to our products and conduct studies to determine the shelf life of various products.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company places importance on developing its human resources and strong emphasis on fostering a positive, inclusive, and engaging work environment that aligns with industry best practices. During the year, The Company conducted sessions on work-life balance, personal growth goals, and self-care workshops etc., reinforcing its commitment to the holistic development of employees. Various initiatives under the wellness revolution were introduced to promote mental and physical well-being. The Company also celebrated various festivals and organized culturally enriching events to nurture camaraderie and employee engagement across all locations. In line with industry standards, The Company continues to invest in professional development, employee wellness, and workplace diversity to ensure a high-performance culture and sustainable talent retention.

The total employee count of the Company as on March 31, 2025 was 661.

INFORMATION TECHNOLOGY

The Companys information technology systems provide support to all aspects of business, from manufacturing, sales, planning, operations and documentation to accounts and customer service. The information technology team does regular inspection and audits of all our network systems and servers to prevent them from external threats. We believe that its advanced information technology systems not only enhance the Companys operational efficiency and customer service quality, but also reduce operating costs of the Company, enable the Company to respond to the market promptly and enhance its ability to handle emergency situations, making it more competitive in the market.

The Company uses SAP to control its financial and operational functions. Further, legacy application platforms are used for some functions like payroll management.

The Company is in the process of implementing more advanced SAP platforms so as to standardize workflows, improve user experience and enhance global reporting and compliance.

RISKS AND CONCERNS

The Company continues to operate in a complex global environment and is subject to various internal and external risks. Internally, key risks include dependency on R&D capabilities, potential underutilization of manufacturing capacities, and challenges in managing a diversified international subsidiary network. Externally, any adverse developments in end-user industries such as food, animal nutrition, fragrance, and pharmaceuticals could significantly impact demand for our products. Additionally, the Company faces substantial exposure to foreign exchange volatility, as a large portion of revenues and raw material costs are denominated in foreign currencies.

Operational risks such as supply chain disruptions, breakdowns in manufacturing infrastructure, environmental and quality compliance, and availability of critical utilities (electricity, water, fuel) remain areas of concern. The Company was also exposed to legal proceedings, including an intellectual property-related case involving its Chinese subsidiary, which resulted in production halts and impairment provisions in FY24. Additionally, a recent downgrade in the Companys credit rating, due to reduced operating performance and margin pressures, underscores financial risk sensitivity.

Multiplicity of operations and geographical spread has led to decentralized operations which poses risks on certain operational and financial controls. The management under the advise of the Board, continuously analyses the risks and implement risk mitigation steps.

From a strategic and regulatory standpoint, the Company faces risks related to non-renewal of critical licenses, the ability to penetrate new export markets, and the ongoing need for compliance with increasingly stringent environmental, safety, and labor regulations. Rising raw material costs and inability to pass these on to customers, along with short-term supplier contracts, pose further margin and supply assurance risks. Despite these challenges, the Company maintains a structured risk governance framework, supported by the Risk Management Committee and oversight from senior leadership, Audit Committee and the Board. The Company is proactively addressing these risks through a robust risk management framework that integrates both strategic and operational measures. To mitigate operational risks, the Company has invested in advanced technologies, quality control systems, and has diversified its supplier base to ensure a stable supply of raw materials. Additionally, by expanding its international footprint and optimizing foreign exchange management strategies, the Company is reducing its exposure to currency fluctuations. To overcome financial challenges, including the impact of credit rating downgrades, the Company is focusing on improving operational efficiencies, enhancing product offerings, and strategically managing costs. In terms of legal and regulatory risks, the Company is closely monitoring compliance requirements across all markets, ensuring timely renewals of permits and licenses, and actively managing legal disputes. Furthermore, the Companys commitment to R&D and innovation positions it well to adapt to market changes and maintain competitive advantage, while ensuring long-term sustainability.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate system of internal controls in place. The system consists of documented policies, guidelines and procedures which cover all important financial and operating functions. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, protecting of assets from unauthorised use or loss, and complying with regulations.

The Company consistently strives to improve its processes and align them with the highest standards. An established framework is in place to monitor the controls through the Risk Management Committee as well as the Audit Committee. The Audit Committee comprises Independent Directors who regularly review audit plans, significant audit findings, adequacy of internal controls, compliances with accounting standards and changes thereto. The Risk Management Committee reviews business risk areas covering operational, financial, strategic and regulatory risks.

The scope and authority of the Internal Audit function is approved by the Audit Committee. The Company has engaged a reputable external-internal audit firm to support the internal audit function for carrying out the internal audit reviews. These reviews are conducted on a regular basis on a risk-based audit plan which is approved by the audit committee at the beginning of each financial year. The internal auditors review and report to the management and the audit committee about compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks.

The Audit committee meets every quarter to review and discuss the internal audit reports and follow up on the action plans of past significant audit issues and compliance with the audit plan. Our internal control system is further fortified by the steps taken to address risks and concerns referred under the section, "Risks and Concerns." There have been no significant changes in our internal control over financial reporting that occurred during the period of the annual report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. During the financial year, we have assessed the effectiveness of the internal control over financial reporting and have determined that the system was effective as on March 31, 2025.

FINANCIAL PERFORMANCE REVIEW

Standalone Annual Performance

1. Standalone Financial Results Analysis

(in Lakh)

		(in Lakh)
	FY2024-25	FY2023-24
Revenue From Operations	88,649.13	77,326.21
EBITDA*	7,060.22	2,712.94
Profit before tax (PBT)**	(2,742.84)	(5,770.40)
Profit after tax (PAT)***	(7,631.05)	(5,138.92)

* Excluding foreign exchange (gain)/loss and other income ** Before Exceptional Items

*** After Exceptional Items of 9,600.21 lakh in FY2025 and 192.84 lakh in FY2024

2. Standalone performance for the year ended March 31, 2025

				(in Lakh)
Particulars	FY2024-25	FY2023-24	% Change	Remarks
Revenue from Operations	88,649.13	77,326.21	14.6%	Increase in revenue of Aroma ingredients
Cost of Material Consumed	48,126.40	44,366.76	8.5%	Increase in volumes & product mix
Purchases of Stock-in- Trade	1,695.32	845.85	100.4%	Higher mainly on account of higher opportunity in trading of antioxidant ingredients
Employee Benefit Expenses	7,248.10	6,594.84	9.9%	Mainly due to increase in sales team & Bonuses
Power & Fuel Expenses	9,850.32	8,995.61	9.5%	Due to increase in volume of production
Sub-Contract charges	2,296.19	1,886.41	21.7%	Due to increase in volume of production
Labour charges	2,473.92	2,105.87	17.5%	Due to increase in volume of production
Transport and forwarding charges	2,860.04	1,701.08	68.1%	Due to increase in sales volume & rates due to global supply chain disruptions & geopolitical tensions
Finance Cost	6,611.93	5,432.60	21.7%	Increase due to foreign exchange impact, increase in rate of interest, high cost borrowing of NCD and higher utilization of working capital.

3. Exceptional Items for FY2025 Includes primarily impairment provision of Investments and current assets (net) of 9,600.21 lakh

4. Standalone Balance Sheet Analysis

a. Investment: (Non-Current and Current)

(in Lakh)

Particulars	FY2024-25	FY2023-24	% Change
Investment in Equity – Subsidiaries*	6,352.91	7,986.27	-20.4%
Investment in Equity – Others	0.50	0.50	0%
Investment in Listed Securities – Bonds	3,801.28	-	NA

*Reduction due to impairment provision of 1,633.36 lakh

b. Trade Receivable:

Particulars	FY2024-25	FY2023-24	% Change
Trade Receivables (Net of Provision)	41,447.74	49,181.14	-15.7%
Reduction due to impairment provision of	7,870.56 lakh

c. Other Assets: (Non-Current and Current)

			(in Lakh)
Particulars	FY2024-25	FY2023-24	% Change
Other Financial Assets	3,642.03	2,761.63	31.9%
Advance Tax Assets (net)	701.31	1,079.37	-35.0%
Other Assets	10,121.30	8,300.43	21.9%

Increase is mainly due to fresh loans given, increase in accrued interest, higher prepaid expenses, increase in balance with statutory authorities, advance to vendors and disclosures due to regrouping.

d. Deferred Tax Assets (Net)
			(in Lakh)
Particulars	FY2024-25	FY2023-24	% Change
Deferred Tax Assets (Net)	4,223.28	-	NA
Deferred Tax Liabilities (Net)	-	683.74	NA

Increase is due to recognition of deferred tax assets on tax losses incurred during the year.

e. Equity Share Capital and related Securities Premium

The increase in equity and securities premium is on account of the right issue of shares 1 each at share premium of 109 each. Accordingly, the increase in equity capital 204.26 lakh and securities premium is 22,264.13 lakh respectively. An amount of 174.83 lakh pertaining to the expenses of rights issue has been adjusted to securities premium. The rights entitlement of 439 equity shares relating to the original holding of 3,600 equity shares of one of the shareholders has been kept in abeyance due to the legal dispute of the ownership of the shareholder. The shares against this rights entitlement will be issued on resolution of the dispute. The Company also issued 30,000 equity shares on account of its various ESOP schemes during the year.

f. Borrowings (Net) / Cash & Cash equivalent (Net)

(in Lakh)

			(in Lakh)
Particulars	FY2024-25	FY2023-24	% Change
Non-Current Borrowings	17,185.96	22,230.80	-22.7%
Current Borrowings	26,995.67	26,931.59	0.2%
Total Borrowings	44,181.63	49,162.39	-10.1%
Less: Cash & cash equivalents (including bank balances)	8,485.71	1,415.32	499.56%
Borrowings (Net)	35,695.92	47,747.07	-25.4%

Reduction in total borrowing is due to repayment of long-term borrowings. Increase in Cash & cash equivalents are due to unutilized funds from the proceeds of Right Issue.

g. Trade Payables

Particulars	FY2024-25	FY2023-24	% Change
Trade Payables	26,786.35	28,420.71	-5.8%

Balances as on March 31, 2025 are net of adjustments of payables from certain related parties with corresponding receivables. The increase in balance creditors is on account of increased volumes and liquidity stress.

h. Other Liabilities (Non-Current and Current)

(in Lakh)

Particulars	FY2024-25	FY2023-24	% Change
Other Financial Liability	2,327.33	2,157.74	7.9%
Other Liability	892.92	2,429.44	-63.2%
Provisions	867.17	798.99	8.5%

Decrease is mainly due to the adjustment of customer advances.

5. Standalone Cash Flow Analysis

(in Lakh)

Particulars	FY2024-25	FY2023-24
Cash from Operating activities	2,186.47	8,210.27
Cash from Investing activities	(8,766.34)	(5,172.45)
Cash from Financing activities	10,118.72	(3,405.18)

a. Net Cash flow from operating activities-Decrease is due to losses & reinvestment of cash flows in working capital.

b. Net Cash flow from investing activities- Higher investing cash outflow for FY2025 on account of current investments and proceeds from Right Issue, which were net of reduction in capital expenditure.

c. Net Cash flow Net cash inflow is due to proceeds from Right Issue andfromfinancingactivities-are net of repayment of loan & interest payments.

6. Key Standalone Financial Ratios

Financial ratios are disclosed under note 49 of financial statements.

The details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in financial ratios are as follows. a. Interest Service Coverage Ratio (times): This ratio improved to 0.59 times (FY24 negative 0.06 times) due to increase in earnings before interest during FY25. b. Debt Equity Ratio (times): Debt Equity Ratio improved to 0.51 times (FY24 0.69 times) due to increase in equity capital and repayment of borrowings.

c. Net Profit Margin (%):

This ratio decreased to negative 8.61% (FY24 negative 6.65%) due to higher net loss incurred during the year on account of impairment provisions. d. Return on Equity (%) This ratio decreased to negative 9.67% (FY negative 7.57%) due to higher net loss incurred during the year on account of impairment provisions. e. Debt-Service Coverage Ratio (times): Ratio decreased to 0.54 times (FY24 0.82 times) due to higher net loss incurred during the year on account of impairment provisions. f. Trade Receivables Turnover Ratio (times): Ratio improved to 1.96 times (FY24 1.52 times) due to increase in revenues & reduction of receivables owing to impairment provision. g. Return on Capital Employed (%): Ratio improved to 2.97% (FY24 negative 0.28%) due to improvements in earnings.

Consolidated Annual Performance

During the year, the Company has disclosed financial results under the heads "Continuing Operations" and "Discontinuing Operations".

Discontinuing Operations includes operations of cash generating units relating to diphenol facilities of CFS Europe Spa, Italy and the entire Vanillin manufacturing facility of CFS Wanglong Flavors (Ningbo) Co. Ltd., China.

1. Consolidated Financial Results Analysis (Continuing Operations)

	FY2024-25	FY2023-24
Revenue From Operations	166,652.66	145,391.22
EBITDA*	20,811.25	18,360.21
Profit before tax (PBT)**	5,928.62	5,859.21
Profit after tax (PAT)***	4,940.45	5,296.05

* Excluding foreign exchange (gain)/loss and Other Income ** Before Exceptional Items

*** Before Non-Controlling Interests (NCI) from continuing operations and after exceptional items of 981.52 lakh in FY2025 (Nil in FY2024)

2. Consolidated performance for the year ended March 31, 2025 a. Revenue from Continuing operations

	FY2024-25	FY2023-24	%Change
Camlin Fine Science Ltd., India	88,649.13	77,326.21	14.64%
CFS Mexico Group*	50,617.59	48,216.80	4.98%
CFS Brazil Group**	17,290.09	17,638.85	-1.98%
CFS North America LLC	35,957.21	25,522.07	40.89%
CFS Vitafor Group***	8,488.30	-	NA
Others & Eliminations	(34,349.66)	(23,312.71)	47.34%
Total	166,652.66	145,391.22	14.62%

*CFS Mexico Group Includes operations of Dresen Quimica, S.A.P.I. de C.V. and its 100% subsidiaries excluding CFS Vitafor Group.

** CFS Brazil Group Includes operations of CFS Do Brasil, CFS Argentina S.A. and CFS De Chile SpA.

*** CFS Vitafor Group Includes operations of Vitafor Invest NV, Vitafor NV, Addi-Tech NV, Vitafor China, Europe Bio Engineering BV and Associate Vial Sarl. b. Cost of materials has increased by 10.3% to 84,925.83 lakh due to an increase in volume and product mix c. Employee Benefit Expenses incurred by 26.1% to 19,229.13 lakh due to an increase in global sales, technical teams and annual increments. d. Power and fuel increased by 10.1% to 10,103.67 lakh due to increase in volume of production primarily in CFS India. e. Sub-contract and labor charges increased by 18.3% to 5,316.08 lakh due to increase of volume of production primarily in CFS India. f. Transport and forwarding expenses increased by 33.3% to 6,966.68 lakh due to an increase in sales volume and rates owing to global supply chain disruptions and geopolitical tensions. g. Other expenses for FY2024 included foreign exchange loss of 2,389.77 lakh. h. Balance other expenses increased due to increase business operations and acquisition of Vitafor group. i. Finance cost increased by 65.6% to 9,988.22 lakh in FY 2025, due to impact of foreign exchange impact, increase in rate of Interest, high cost borrowing of NCD in CFS India, additional loan on acquisition of Vitafor and higher utilization of working capital. j. Exceptional items for FY 2025 primarily include on account of embezzlement of funds by an employee in Britec, S.A. Guatemala 640.48 lakh and acquisition related cost of Vitafor group 201.72 lakh.

3. Consolidated Balance Sheet Analysis a. Non-Current Assets:

Capital expenditure incurred during the year net of impairment provision was 2,639.72 lakh which was primarily maintenance related capital expenditure, further non-current assets include 2,774.96 lakh on acquisition of Vitafor group. b. Borrowings (Net) / Cash & Cash equivalent (Net)

Particulars	FY2024-25	FY2023-24	% Change
Non-Current Borrowings	26,830.33	33,271.85	-19.4%
Current Borrowings	37,734.19	32,493.91	16.1%
Total Borrowings	64,564.52	65,765.76	-1.8%
Less: Cash & cash equivalents (including bank balances)	15,401.62	9,373.09	64.3%
Borrowings (Net)	49,162.90	56,392.67	-12.8%

The reduction in borrowings is attributable to the net effect of long-term loan repayments and the borrowings taken over from the Vitafor group upon acquisition, amounting to 5,891.05 lakh. The increase in cash and bank balances is due to unutilized funds remaining from the proceeds of the Rights Issue.

REFERENCES

1. IMF World Economic Outlook, January 2025 – https://www.imf.org/en/Publications/WEO/ Issues/2025/01/17/world-economic-outlook-update-january-2025

2. Ministry of Finance (India) and PIB – https://pib.gov.in/PressReleasePage.aspx?PRID=2123826

3. American Chemistry Council CP Index – https://www.americanchemistry.com/chemistry-in-america/ data-industry-statistics/chemical-production-regional-index

4. Invest India – https://www.investindia.gov.in/team-india-blogs/chemical-industry-growth-drivers-and-investment-opportunities-india

5. Oliver Wyman, Brookings, OECD, McKinsey, Angel One (2024–2025 outlooks)

6. https://www.henleyglobal.com/publications/global-mobility-report/2025-january/uschina-trade-war-applying-lessons-10-address-reality-20#:~:text=Trade%20War%201.0%20disrupted%20 global,to%20adapt%20to%20new%20realities.

7. https://www.livemint.com/market/stock-market-news/uschina-trade-war-2-0-how-does-it-impact-india-11740981326240.html 8. https://www.marketsandmarkets.com/Market-Reports/global-chemical-industry-outlook-89294716. html 9. https://thegeopolitics.com/chinas-economic-slowdown-unraveling-structural-causes-and-global-repercussions/