Chembond Material Technologies Ltd Management Discussions

Global Economy

The global economy navigated a complex and uncertain environment during the year, shaped by ongoing geopolitical conflicts, including the prolonged Russia- Ukraine war and tensions in the Middle East, which contributed to volatility in energy markets, raw material prices, and supply chains. Global industries faced challenges from uneven economic growth, fluctuating commodity prices, and persistent geopolitical risks, prompting businesses to focus on operational efficiency, supply chain diversification, and cost optimization. Looking ahead, the global outlook remains cautiously optimistic, supported by technological innovation, infrastructure investments, and the continued adaptation of businesses to a changing economic environment, although geopolitical developments and trade uncertainties continue to pose risks to the pace of recovery.

Indian Economy

Despite this challenging global environment, the Indian economy sustained its growth momentum during FY 2025-26, supported by domestic demand, infrastructure investments, and policy measures. Government initiatives such as the Production Linked Incentive (PLI) scheme, further strengthened Indias industrial and manufacturing ecosystem.

Chemical Industry

The Indian chemical industry demonstrated resilience during FY 2025-26 despite ongoing geopolitical uncertainties, volatile raw material prices, and uneven global demand. As the 6^th largest chemical producer globally and 3^rd in Asia, India continues to strengthen its position as a key manufacturing hub, with the sector contributing approximately 7% to the countrys GDP and 8.1% of manufacturing Gross Value Added (GVA)(source: PIB Note). Supported by robust domestic consumption, increasing investments, and the diversification of global supply chains, the industry benefited from growing demand across pharmaceuticals, agrochemicals, personal care, construction, automotive, and consumer goods sectors. The specialty chemicals segment remained a key growth driver, leveraging Indias cost competitiveness, process expertise, and innovation capabilities. Looking ahead, the Indian chemical industry, estimated at around US$250 billion, is expected to grow to nearly US$300 billion by 2028, supported by capacity expansions, export opportunities, sustainability-focused products, and government initiatives promoting manufacturing and self-reliance (source:IBEF). While challenges arising from geopolitical developments and global competitive pressures may persist, Indias strong manufacturing ecosystem and increasing focus on value-added specialty chemicals position the industry for sustainable long-term growth.

Industry Structure and Developments

The world navigated a period of uncertainty in the fourth quarter of FY26. Elevated crude oil prices caused cascading effects on raw material prices, supply chains were disrupted, and geopolitical uncertainties further contributed to cost volatility.

Due to continued good performance by the Indian economy in the previous quarters and the resilience shown by the manufacturing sector, Indias GDP grew by 7.7%, the highest again among major economies. Inflation remained within the band targeted by the RBI.

About Chembond Material Technologies and Chembond Biosciences

Founded in 1975 by Dr. Vinod D. Shah, Chembond Material Technologies Limited is a leading manufacturer of automotive sealants, adhesives, metal treatment chemicals and other high-performance products, recognized for innovation and long-standing customer partnerships. Listed on the NSE and BSE, Chembond Material Technologies delivers reliable solutions across multiple industries, supported by advanced manufacturing facilities, strong R&D capabilities, and internationally certified quality systems.

Chembond Biosciences Limited focuses on animal health and nutrition. Supported by strong scientific research and global quality standards, this division delivers trusted and advanced solutions for poultry, dairy, and aqua segments. With modern fermentation and manufacturing facilities, it produces high-quality enzymes, probiotics, prebiotics, and nutritional products, backed by robust technical support, consistent service, and a strong commitment to excellence.

Financial Performance

We achieved a significant milestone during the year, withsales growth of nearly25%at both standalone and consolidated levels. In absolute terms, both product margin and gross margin increased approximately by 17% and 16%, respectively, on a standalone basis, while on a consolidated basis, they registered growth of around 20% and 21%, respectively. However, the sharp increase in raw material prices from late Q3 onwards resulted in a decline of over 2% point in our product and gross margins. Despite this pressure, our operational EBITDA for the year grew by 2% and 29% respectively on standalone and consolidated basis. With no clarity yet on how long the prevailing crisis in the middle east will last, and with lag in our customers accepting the necessary price increases, we are dealing with an unique situation - our bottom-line is under stress due to elevated input cost but sales are growing, our investments over the past years in technology and people are resulting in increased acceptance and market penetration.

Standalone and Consolidated

Particulars	Standalone	Consolidated
	2025-26	2024-25	% ?	2025-26	2024-25	% ?
Net Sales	21,014.12	17,120.70	23	25,007.40	20,129.99	24
Product Margin	8,474.48	7,260.51	17	10,248.85	8,521.63	20
Gross Margin	7,231.93	6,234.62	16	8,988.55	7,458.01	21
Selling & Admin	2,831.98	2,420.14	17	3,435.21	3,020.13	14
Employee Cost	3,165.98	2,500.40	27	3,745.42	3,079.55	22
EBITDA#	1,718.83	1,684.27	2	2,277.83	1,770.25	29
PBT	1,021.01	1,919.05	-47	1,551.38	1,946.10	-20

Ratio Analysis

Particulars	Standalone	Consolidated
	2025-26	2024-25	2025-26	2024-25
Product Margin, % of Sales	40.33	42.41	40.98	42.33
Gross Margin, % of Sales	34.41	36.42	35.94	37.05
Selling & Admin Costs, % of Sales	13.48	14.14	13.74	15.00
Employee Costs, % of Sales	15.07	14.60	14.98	15.30
% EBITDA to Sales	8.18	9.84	9.11	8.79
Operating Profit Margin (%)	5.87	7.68	7.23	6.75
Net Profit Margin (%)##	3.65	9.65	5.10	8.41
Return on Net Worth (%)##	4.60	10.50	7.72	11.25
EPS (Basic & Diluted)	5.77	12.81	9.59	13.06
Debt / Equity Ratio	-	-	0.02	0.02
Debtors Turnover	4.24	4.19	4.71	4.98
Inventory Turnover	6.98	6.67	7.45	7.16
Current Ratio	2.76	2.66	2.37	2.23

# EBITDA excludes effect of unrealised gain/(loss) on fair value of investments. EBITDA on consolidated basis grew by 24% on the backdrop of significant increase in revenue from operations, better utilisation of existing resources and controlled cost, though there was sharp increase in raw material prices.

## Net profit margin, return on net-worth and return on capital employed has dropped due to fall in fair value of investments and rise in input cost.

There is no significant change(i.e.change more than 25% compared to FY2024-25) in other key financial ratios for FY2025-26.

The other important note about the results is the reduction in other income on account of reduction of the fair market value of our investments. This being a notional number, it is not too much of a concern. On a more positive note, you can see from the consolidated operating profit margins above, that we are now able to better absorb the resources after the demerger.

Segment Performance

Biotech

The Indian animal health market is witnessing strong growth, supported by government initiatives, improved veterinary infrastructure, rising awareness of preventive healthcare, and advancements in diagnostics. The market, valued at Rs 92.62 billion in 2025, is projected to reach^171.91 billion by 2034, growing ata CAGR of 7.11% (source:IMARC). Growth is further driven by expansion in commercial livestock, increasing pet ownership, and greater focus on the "One Health" approach integrating animal, human, and environmental health.

Animal feed supplements are additives or dietary components that are provided to animals, typically livestock and poultry, in addition to their regular feed or forage to enhance their nutritional intake and overall health. These supplements are carefully formulated to meet specific nutritional needs, promote optimal growth, improve feed efficiency, and address any deficiencies or health issues in animals. By incorporating these supplements, farmers and animal caretakers can maintain the health and productivity of their livestock, ensuring better quality products for consumers.

With an increasing population, changing dietary preferences, and a focus on sustainable and ethical farming practices, the demand for high-quality animal feed supplements is likely to remain strong.

Amidst this positive industry outlook, Chembond Biosciences achieved sales of Rs 42.15 Cr, registering a growth of 28.4% over the previous year. This performance was driven by focused seasonal campaigns, customer engagement initiatives, brand-building activities such as webinars and nukkad meetings. The introduction of new products also strengthened our market presence and competitiveness.

Material Technologies

The Material Technologies business grew by almost 25% over prior year led by good performance in automotive sealants and continued expansion in metal treatment chemicals, high-performance coatings, and engineering adhesives. Cost optimization, quality benchmarking and investment in newer product technologies remained key focus areas across all divisions. The Sealants business delivered an outstanding year. Continuing from the past couple of years, new customers were added and new business was won at existing customers. The highlight in this segment was the introduction of new products that are comparable to or more advanced in technology than what are offered by our competitors. A couple examples - a low density underbody coating that enables the OEM to reduce weight and material consumption without any compromise in performance and a seam sealant that eliminates the need for a separate curing oven. These are significant achievements and there are several such breakthroughs in the pipeline, which will lead to similar performance in the future with more OEM customers, Indian as well as multinational, getting added to our customer list.

The Metal Treatment Chemicals business expanded its footprint across all sub-segments and across the country.

In Engineering Adhesives, Chembond is expanding its product range to include electronic adhesives and battery pack adhesives for a strategic entry into new markets such as electronic components and battery packs for EVs & electricity storage. Your Company was also able to successfully develop products to replace imports from its erstwhile US based technical partner, ND Industries, Inc.

Outlook on Opportunities, Threats, and Risks & Concerns

Chembond is well placed to capitalise on the growing demand Indias economy is certain to generate. Chembond has taken several measures like strengthening its product development activities, improving its manufacturing efficiencies, attaining increasing quality standards, developing new technologies, to sustain in todays competitive world.

Opportunities:

a) Continued growth of the Indian economy and higher consumption driven by economic stability, moderate inflation, and the demographic dividend.

b) Growth of the Indian automotive industry and increasing adoption of advanced sealing technologies.

c) Large-scale expansion projects in the Indian steel industry leading to more demand for treatment solutions; environment-friendly chemistries;

d) Increasing penetration of white goods in the country and in the Indian subcontinent and neighbouring countries.

e) Rising per capita protein consumption and shift from vegetarian to flexitarian diets gives us an opportunity to increase our animal health & nutrition business.

Threats:

a) Intense competition from global MNCs with larger R&D capabilities and established OEM relationships.

b) Price-led competition in our market segments from global MNCs as well as local companies.

c) Impact on margins and sales due to economic or geopolitical events, like wars that result in higher raw material costs or delivery delays that create supply chain instability.

d) Digitization of the industry increases the risk of cyberattacks, which may lead to data loss, operational disruption and financial loss.

e) Chemical manufacturing processes are subject to environmental hazards, including pollution and waste management issues.

Risks & Concerns:

The growth of the performance materialsand 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 inhouse development capabilities.

The Company is exposed to safety, health, 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 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.

Research & Development

This area has seen substantial investment and effort over the past few years. Sales of the Automotive Sealants segment have increased at a CAGR of 30% over the last three years. Almost all of the sales growth has been from new products that were introduced during this period like the two new products mentioned in the section above. In FY26, a new product development center for sealants, adhesives, and coatings was established at Alandi at a cost of over Rs 5 crore including on infrastructure and state of the art instrumentation. We now have 14 scientists, engineers, chemists working at this facility (up from 8 last year). Similarly, the laboratories for metal treatment chemicals at the head office in Mahape are also being upgraded. Such investments, a higher than proportionate R&D spend, will continue in the medium term because we see the results of this focus and because this is possibly the only way in which we can outgrow the competition.

Safety, Health, Environment and Quality

At Chembond, health, safety, environmental and sustainability stewardship are deeply embedded in our organizational values. We remain committed to maintaininga safe and healthywork environment, beyond statutory compliance, while strengthening our position as the first-choice partner for our diverse customer base. Our operational framework focuses on exceeding customer satisfaction through implementation of management system standards such as ISO 9001, ISO 14001, ISO 45001, IATF 16949 and FAMI-QS. We consistently monitor and evaluate leading indicators and near-miss incidents, while sharing key learnings across the Group to foster proactive risk management. These initiatives are periodically reviewed at the Board and senior leadership levels, reinforcing accountability and governance. As a responsible organization, we actively support global climate action efforts by reducing our carbon footprint by using renewable energy sources in our operations. This process-driven approach ensures that partnering with Chembond means choosing operational excellence, enhanced safety, and a highly sustainable supply chain.

Human Resources

In the past year, our Human Resources function has taken a focused and forward-looking approach toward strengthening our people capabilities. We have invested in structured learning initiatives, with several senior leaders participating in leadership development programs at reputed institutes, enhancing strategic thinking and decision-making at the top. In parallel, selecting high-potential talent has undergone customized development journeys aimed at elevating both individual effectiveness and organizational performance. Our continued emphasis on digital transformation has led to significant upgrades in HR systems, enabling greater transparency, streamlined processes, and improved operational efficiency. We have introduced progressive policy enhancements designed to better support the evolving work-life needs of our employees, reinforcing our commitment to building a resilient, engaged, and future-ready workforce.

Industrial / Employee Relations

The Company maintained stable, cordial, and harmonious industrial and employee relations across all its operations throughout the year under review. The management continued to emphasize employee engagement, workplace well-being, skill development, and transparent communication as key drivers of organizational effectiveness. No man-days were lost due to industrial disputes, strikes, lockouts, or any other employee-related actions during the year.

Internal Control Systems and their Adequacy

The Company has established a robust internal control framework designed to ensure operational efficiency and effectiveness, reliability of financial reporting, compliance with applicable laws and regulations, prevention and detection of fraud and errors, and safeguarding of Company assets, while remaining aligned with its strategic objectives and evolving business requirements. The internal control systems are commensurate with the Companys size, nature, geographic presence, and the complexity of its operations across both entity and process levels.

Financial management is driven through a structured annual budgeting framework, with periodic reviews across operating and service functions to ensure alignment with business priorities and performance goals.

The Companys ERP platform incorporates comprehensive built-in checks and controls to strengthen operational governance and financial discipline. Chembond leverages the SAP S/4HANA platform for data capture, accounting, consolidation, and management reporting, enabling enhanced accuracy, transparency, and efficiency. Automated controls are embedded across key processes to minimise deviations and exceptions in line with global best practices. The system also maintains a comprehensive audit trail through logging, monitoring, and evaluation of data changes, while ensuring systematic recording of accounting entries across all business transactions.

The internal control framework provides reasonable assurance regarding the effectiveness of operations, reliability of financial reporting, compliance with applicable laws and regulations, prevention and detection of fraud and errors, and safeguarding of Company assets. To further strengthen financial governance, the Company has implemented an Internal Financial Controls (IFC) framework to ensure the adequacy and effectiveness of controls over financial reporting.

The internal control environment is further supplemented through independent internal audits conducted by external Chartered Accountants and periodic management reviews. The internal audit programme assesses the adequacy and effectiveness of controls across all significant operational areas of the Company. Based on audit findings, process owners undertake necessary corrective and preventive actions within their respective functions, thereby continuously strengthening the overall control environment.

The Audit Committee periodically reviews reports from Management, internal auditors, and statutory auditors to assess the adequacy and effectiveness of internal controls and monitor corrective actions. Significant audit observations and remediation measures are reviewed by the Committee, which also engages with Statutory Auditors on the effectiveness of the internal control framework and apprises the Board of key observations and recommendations.

Corporate Social Responsibility (CSR)

Chembond Childrens Centre

The Chembond Childrens Centre operates educational centres across six villages in the Tarapur region, reaching and supporting more than 300 children.

The primary objective of these centres is to complement the formal school curriculum by providing individualized academic support, while also fostering the holistic development of children. Special emphasis is placed on enhancing the self-confidence and self-esteem of girls through activities such as martial arts, sports, and life- skills training.

In addition to academic assistance, the Chembond Childrens Centre provides nutritious meals, organizes health-care and life-skills workshops, conducts educational camps, and supports students in accessing scholarship opportunities.

The key objectives of the Chembond Childrens Centre are:

To equip children, particularly girls, with diverse skills that enable them to shape their future with confidence and independence. Guided by a strong commitment to womens empowerment and education, the programme encourages girls and women to recognize their selfworth, realize their potential, develop sustainable livelihoods, and lead self-reliant lives.

To create opportunities for the overall development of children in rural communities, enabling them to become responsible individuals who actively contribute to society and their surroundings.

To strengthen academic achievement by building a robust foundation in literacy and numeracy, enhancing mathematical understanding, problem-solving capabilities, and reading, writing, and comprehension skills.

To support early childhood education through a focused approach to language development, motor skills, emotional well-being, and healthy habits, thereby establishing a strong foundation for future learning. The programme also promotes regular engagement with parents, encouraging their active participation in their childs educational journey.

During the year under review, the Company contributed Rs 21.55 lakhs to Visan Trust towards the operation of the Chembond Childrens Centre. Details relating to the Corporate Social Responsibility (CSR) Committee, CSR Policy, and other related matters form part of the Boards Report.

Disclosure of Accounting Treatment

Chembond has prepared financial statements for the FY 2025-26 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 2026-27 remains good.

The Economic Survey projects real GDP growth in FY27 in the range of 6.8 to 7.2%. The outlook, therefore, is one of steady growth amid global uncertainty, requiring caution, but not pessimism.

On behalf of the Board

sd/-

Sameer V. Shah

Chairman & Managing Director

DIN:00105721

Navi Mumbai

May 15,2026