Chembond Chemicals Ltd Management Discussions

Industry Structure & Developments

The global economy continues to expand at a steady yet moderate pace. For the current fiscal, the outlook for the Indian economy remains promising. The Indian chemical industry too is expected to be on a growth trajectory, supported by rising demand.

Outlook on Opportunities, Threats, and Risks & Concerns

The markets your Company caters to are growing. Your Company, with its infrastructure, human resources, sales and technical service expertise, financials, and product development, is well placed to capitalise on the growing demand. The company is further strengthening its product development activities, improving its manufacturing efficiencies, attaining increasing quality standards, among other initiatives, in order to remain competitive.

Opportunities

1. India is one of the faster growing large economies. As our standards of living improve, the demand for manufactured products will increase, which augurs well for your Company.

2. As the Indian consumers purchasing power increases and they start to buy more two wheelers, cars, trucks, build more houses, buy more appliances, add more protein to our diets, etc. the demand for your Companys products will increase.

3. Being a well-known, professionally managed Company, customers will appreciate your Companys product offerings.

4. Indias faster integration in global trade can open up more opportunities for export of your Companys products and for goods that use the same.

Threats

1. Volatility in raw material prices, exchange rates, global trade, geopolitics.

2. Threats from low-cost manufacturers and global manufacturers.

3. Obsolescence of your Companys technologies.

4. Changes in environmental regulations, automotive regulations, safety norms.

5. Cyber-attacks or data breaches.

6. Failure to attract or retain top talent.

7. Failure to innovate or meet customer needs.

8. Outbreak of infectious diseases could lead to death or precautionary destruction of farm animals as well as the reduced consumption and demand for animal derived protein.

9. Extreme weather or global warming events, infectious diseases, outbreaks, can impact demand or result in regional or seasonal fluctuations of sales as well as our operations.

Risks & Concerns

The growth of the performance materials and biosciences industry is driven by a need for constant innovation. A strong R&D focus ensures such innovation, quality management, and cost reductions. Your Company has been increasing its investments in strengthening its in-house development capabilities.

The Company is exposed to safety, health, security, and environmental risks, given the diversity and complexity of the industry in which your Company operates. The Managements commitment towards employee safety, health and the environment extends beyond accidents and occupational health hazards to social well-being of employees. The Company conducts frequent SHE audits to confirm its framework protocol and regulatory compliances, safety trainings are conducted across all our locations to nurture a culture of awareness and responsible behaviour. The Company has a Safety, Health and Environment Policy entailing its commitment towards high standards across its facilities.

Macro-economic conditions like the policy decisions of the government, currency fluctuations and volatility in commodity prices can affect the business of the Company. As the Companys revenue generating sources are diversified into various sectors having strong domestic demand, such risks are mitigated to some extent.

Financial Performance

During the year under review, your Company has achieved revenue from operations of 17,120.70 lakhs on a standalone basis and 20,129.99 lakhs on a consolidated basis. The comparative highlights and analysis are tabulated below.

Standalone and Consolidated (Rs in Lakhs)

Particulars	Standalone		Consolidated
	2024-25	2023-24	2024-25	2023-24
Net Sales	17,120.70	15,334.04	20,129.99	17,824.43
Product Margin	7,260.51	6,173.68	8,521.63	7,172.78
Gross Margin	6,234.62	5,234.75	7,458.01	6,158.25
Selling & Administration	2,420.14	2,057.18	3,020.13	2,600.66
Employee Cost	2,500.40	2,325.66	3,079.55	2,924.28
EBITDA	1,684.27	1,633.89	1,770.25	1,415.94
PBT	1,919.05	1,942.87	1,946.10	1,669.47

Ratio Analysis

Particulars	Standalone		Consolidated
	2024-25	2023-24	2024-25	2023-24
Product Margin, % of Sales	42.41	40.26	42.33	40.24
Gross Margin, % of Sales	36.42	34.14	37.05	34.55
Selling & Admin Costs, % of Sales	14.14	13.42	15.00	14.59
Employee Costs, % of Sales	14.60	15.17	15.30	16.41
% EBITDA to Sales	9.84	10.66	8.79	7.94
Net Profit Margin (%)	9.65	8.26	8.41	5.81
Return on Net Worth (%)	10.50	9.13	11.25	7.80
EPS (Basic & Diluted)	12.81	10.28	13.06	8.31
Debt/Equity ratio	-	0.01	0.02	0.05
Debtors Turnover	4.19	3.15	4.98	3.65
Inventory Turnover	6.67	6.98	7.16	6.81
Interest Coverage ratio	795.49	122.17	3.00	1.80
Current ratio	2.66	2.65	2.23	2.13

Operating profit, net profit margin and return on equity have improved on the backdrop of sales growth and introduction of new products with higher margins across operating business units.

Improvement in collection days and better realisation from trade receivables enabled the Company to reduce borrowings, thus resulting in improved debtors turnover ratio, debt equity ratio and interest coverage ratio for standalone and consolidated financials.

There is no significant change (i.e. change more than compared to FY2023-24) in other key financial ratios for FY 2024-25.

Segment Performance Biotech

The India animal healthcare market encompasses a wide range of products and services, including veterinary pharmaceuticals, vaccines, feed additives, and diagnostics. Livestock accounts for approximately 65% of market share, companion animal care at 25%, and aquaculture at 10%. The India animal health market is estimated at Rs 86 billion in 2024.

The Indian animal healthcare market growth is fuelled by the need to enhance livestock productivity, prevent zoonotic diseases, and meet the rising demand for animal protein. Technological advancements and government initiatives are playing a pivotal role in shaping the market. Government initiatives, such as the National Animal Disease Control Program (NADCP), are further propelling the market by enhancing vaccination coverage, disease prevention/surveillance efforts and livestock insurance schemes. Moreover, the rise of telemedicine and digital platforms for animal healthcare is transforming how veterinarians access services, ensuring timely and efficient care.

Chembond Biosciences is present in the feed additives segment which is experiencing rapid growth, focusing on improving animal nutrition and productivity. Your Companys nutritional supplements cater to the Poultry, Dairy and Aqua segments with a presence nationwide. Our in-house manufacturing and R&D are focused on,

• Probiotics, Prebiotics & Enzymes

• Biosecurity & Farm Management

• Feed Additives

• Vitamin & Mineral Premixes

In the financial year 2024-25, Chembond Biosciences Limited achieved sales of Rs 32.8 cr, a creditable growth of 14.5% over the previous year. Sales to the dairy segment grew by an impressive 34%. Vitamin premix sales in the poultry segment were affected by a sudden rise in input costs but were still able to grow by 11%. Our focused approach on improving overall hygiene of the business have resulted in positive results. We remain committed to developing quality products, delivering operational excellence, navigating challenges, and improving cash flows.

Looking forward, based on information from industry and market research groups, we expect the market for animal nutrition supplements to grow at a CAGR of above 7% till 2030.

Material Technologies

The Material Technologies business grew by 12%, primarily by continued growth in Automotive Sealants, Metal Treatment Chemicals, and Engineering Adhesives. In Metal Treatment the Company made continued progress in expanding its Surface Treatment business in General Industry, Steel, and Automotive Components. The Sealants business grew due to higher production of passenger vehicles, breakthroughs in the passenger vehicle category with wins of new customers / new lines. Introduction of newer technologies to the automotive industry continues to be a focus. In order to remain competitive, cost optimization, quality improvement, and improvement in productivity via initiatives like value stream mapping have been initiated.

Sealants

This year marked important strides for our sealants business. We successfully entered the passenger vehicle segment by starting supplies of paint shop sealants—an important step toward broadening our presence in high- volume automotive markets. Additionally, we developed butyl tapes used in the construction industry, opening up new opportunities beyond automotive. On the export front, we have focused efforts on tack cloths, with shipments now reaching global markets, reflecting a small but growing international interest in our product range.

Metal Treatment Chemicals

In our metal treatment chemicals portfolio, weve continued to build on our strengths while expanding into new territories. We reinforced our position in the white goods industry, securing supply relationships with more new lines. Our reach now extends to international markets as well, with exports of products for the steel industry to Africa. Weve also deepened our presence in the cold forming industry, offering solutions tailored to evolving customer needs. Our focus remains on performance, reliability, and sustainability as we grow our domestic and global footprint.

Research & Development

Key customer wins in Metal Treatment Chemicals, Automotive Sealants, and Engineering Adhesives can be attributed to initiatives taken over the past years in product development. New sealants with better properties that met customer needs were developed. Energy and water saving cleaners were introduced in the metal treatment chemicals segment. The Biosciences team introduced new probiotics with better delivery systems. Products with further environmental advantages for the steel and coil industry are under advanced stages of development.

In our endeavour to build a growing, profitable, and sustainable Company, these activities are being strengthened across all segments. Going forward, investment in R&D will be a priority for your Company and we will strive to reach an investment target of 5 to 10 % of sales in product development in the near future.

Safety, Health, Environment and Quality

At Chembond, safety, health, and environmental responsibility are core to our culture. We are committed to providing a safe and healthy workplace, exceeding statutory norms, and being the “supplier of choice” for our diverse customers. Our integrated operating management system is built on recognized engineering practices and international standards (ISO 9001, ISO 14001, ISO 45001), ensuring continuous improvement. We proactively track and analyse leading indicators, near-misses, and share learnings across our group, with regular reviews at the Company Director level to reinforce leadership accountability. As a responsible manufacturer, we support global climate change initiatives to actively reduce our carbon footprint by generating clean, renewable energy on-site. Our process-oriented approach enables us to meet goals efficiently while enhancing safety and sustainability performance..

Human Resources

The Company remains committed to fostering a culture of continuous people development and building a workplace rooted in trust, empathy, and mutual respect. During the year, we focused on strengthening our performance monitoring and feedback mechanisms to promote transparency, accountability, and individual growth. To support capability building, we introduced structured leadership development programs enabling employees to enhance their managerial effectiveness, strategic thinking, and people leadership skills. These initiatives are designed to bring greater consistency across our expanding operations and ensure stronger alignment between organizational objectives and employee aspirations. Through these efforts, we continue to uphold and reinforce our core values across every level of the organization.

Industrial / Employee Relations

The Company has maintained harmonious industrial / employee relations throughout and no man-days were lost due to industrial / employee actions.

Internal Control Systems and their Adequacy

Chembonds sound internal control system, aims to ensure that operations are effective and well aligned with the strategic goals and its evolving needs. The Companys internal controls are commensurate with its size, nature, geographical spread and complexities of its operations both at the entity and the process levels. The Companys ERP system has been designed to have in-built checks and controls. The Company leverages an advanced SAP S/4HANA system for data capture, accounting, consolidation and management information purposes. Automated controls are integrated into processes to minimise deviations and exceptions, aligning with global best practices. It provides a full audit trail, logging and evaluation of all changed data in the system. Accounting documents are recorded for all business transactions. The internal control framework is intended to provide reasonable assurance towards the effectiveness and efficiency of its operations, reliability of financial reporting, compliance with applicable laws and regulations, prevention and detection of frauds and errors and safeguarding its assets.

The Company has implemented the Internal Financial Control (IFC) framework to ensure proper internal controls over financial reporting. The internal control system is further supplemented by internal audits carried out by independent Chartered Accountants and periodic reviews by the Management. The internal audit process is designed to assess the adequacy of internal checks and controls in the system and covers all the significant areas of the Companys operations. Process owners undertake corrective actions in their respective areas based on the internal audit observations, thereby further strengthening the controls. The Audit Committee reviews the adequacy and effectiveness of the internal control systems and tracks the implementation of corrective actions. Significant audit observations and corrective actions taken by the Management are presented to the Audit Committee. The Audit Committee also meets the Statutory Auditors to ascertain, inter alia, their views on the adequacy of internal control systems and keeps the Board of Directors informed of its major observations.

Corporate Social Responsibility (CSR)

The Chembond Childrens Centre runs educational centres in six villages around Tarapur. In these villages (padas), the Childrens Centre works with over 200 children in the 1^st to 4^th standard group and almost 100 balwadi kids. The objective of these centres is to augment school curriculum by providing individual attention to students and improving the self-esteem of girls via skills like martial arts. In addition to the above, the Chembond Childrens Centre provides a nutritious meal, conducts camps and workshops in the areas of health care, life skills and assists students in obtaining scholarships.

The fundamental goals of the Chembond Childrens Centre are:

- to teach kids, especially girls, a variety of skill sets that would enable them to carve their future. Our unwavering thought and support towards women empowerment and education has led to encouraging women to realize their self-worth and potential, develop a source of income for themselves and to stand strong in life independently.

- to ensure that children in rural areas get opportunities for overall development and take responsibility for their lives and the world around them.

- to promote academic development by building a strong foundation in numeracy and literacy skills through the enhancing mathematical concepts, problem-solving abilities, as well as reading, writing, and comprehension skills.

- to support early childhood education, the program places special emphasis on langua ge development, motor skills, emotional growth, and the cultivation of healthy habits—laying a strong foundation for the childs future learning. It also encourages regular interaction with parents, fostering their active involvement in their childs early educational journey.

During the year under review your Company donated 18.60 lakhs to the Visan Trust for running the Chembond Childrens Centre. Details pertaining to CSR Committee, Policy etc. are given in the Boards Report.

Disclosure of Accounting Treatment

Chembond has prepared financial statements for the FY 2024-25 in accordance with the Indian Accounting Standards (IND AS) as specified under Section 133 of the Companies Act, 2013.

Outlook

The outlook for the Indian economy and your Company in 2025-26 remains good.

On behalf of the Board

sd/-

Sameer V. Shah

Chairman & Managing Director

DIN:00105721

Navi Mumbai

May 30,2025