Chemcon Speciality Chemicals Ltd Management Discussions

ECONOMIC REVIEW World Economic Outlook

The global economy remained resilient during 2025 despite continued geopolitical uncertainties, trade policy shifts, and restrictive monetary conditions across major economies. According to the International Monetary Fund (IMF), global economic growth remained broadly stable at around 3.3%, while inflation moderated due to easing commodity prices, improved supply chain conditions, and lower energy costs compared with the previous year.

Entering 2026, global growth is projected to stay stable at around 3.2-3.3%, as per IMF estimates. Inflation is forecast to decline to 3.8% in 2026 and 3.4% in 2027. This outlook reflects strong investment momentum in technology and artificial intelligence, particularly in North America and Asia. However, evolving trade policies, geopolitical tensions, and energy market volatility are introducing uncertainty and may slow disinflation. Taken together, the global economy remains resilient and expanding, though growth is becoming more uneven and increasingly sensitive to external developments.

(Source: imf, world tconomic outlook, April 2U20)

Looking ahead, the IMF projects global GDP growth to remain broadly stable during 2026, while inflation is expected to moderate gradually over the medium term. However, geopolitical developments, evolving global trade policies, energy price volatility, and supply chain disruptions continue to present risks to the global economic outlook. These developments could influence raw material availability, logistics costs, foreign exchange movements, and customer demand across several chemical value chains.

Inflation is expected to ease gradually, though not linearly, with the IMFs April 2026 World Economic Outlook projecting global headline inflation to rise from 4.1 % in 2025 to 4.4% in 2026, before declining to 3.7% in 2027, as supply-side factors, particularly energy markets and trade frictions, introduce periodic volatility. Recent geopolitical tensions in West Asia could further disrupt energy prices, feedstock availability, shipping routes, and trade flows, potentially affecting inflation trajectories,

industrial demand, currency stability, and the timing of interest-rate normalization. Consequently, several prevailing macroeconomic growth and inflation assumptions may face downside risks in the evolving global environment. In this environment, central banks are likely to remain cautious and data- dependent, prioritizing policy credibility over rapid easing. Overall, the outlook points to a global expansion, but with greater regional divergence, slower normalization, and heightened sensitivity to external shocks.

Indian Economic Outlook

India continues to remain one of the fastest-growing major economies globally, supported by strong domestic consumption, sustained government capital expenditure, infrastructure development, and continued policy reforms. Stable macroeconomic fundamentals, controlled inflation, healthy foreign exchange reserves, and improving manufacturing competitiveness have strengthened Indias position as a preferred global manufacturing destination.

The Governments continued focus on manufacturing through initiatives such as Make in India, Production Linked Incentive (PLI) schemes, infrastructure development, and ease of doing business is encouraging domestic production across pharmaceuticals, chemicals, electronics, and other manufacturing sectors. Simultaneously, increasing investments by multinational companies in India are strengthening domestic supply chains and creating new opportunities for specialty chemical manufacturers.

India has also emerged as an increasingly important global supplier of pharmaceutical intermediates, agrochemical intermediates, and specialty chemicals. Growing investments in pharmaceutical manufacturing, contract development and manufacturing services (CDMO), and chemical exports are expected to support long-term demand for high-quality specialty chemicals.

For Chemcon Speciality Chemicals Limited, these developments present significant opportunities as the Company supplies critical specialty chemicals catering primarily to pharmaceutical, agrochemical, oilfield, and fine chemical industries. The Companys diversified product portfolio, established customer relationships, and manufacturing capabilities position it favorably to benefit from Indias expanding manufacturing ecosystem and increasing export opportunities.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian specialty chemicals industry continues to be one of the fastest-growing segments within the chemical sector. The industry has established itself as a reliable global supplier of high-value, technology-driven chemical products supported by strong process chemistry capabilities, competitive manufacturing costs, skilled technical manpower, and an improving regulatory framework.

The specialty chemicals market continues to benefit from structural shifts in global sourcing strategies, with multinational companies increasingly diversifying procurement beyond traditional manufacturing locations. Indias growing reputation for quality manufacturing, regulatory compliance, and supply reliability has enabled domestic manufacturers to strengthen their presence in international markets. Chemcon Speciality Chemicals Limited operates in niche segments of the specialty chemicals industry by manufacturing both organic and inorganic specialty chemicals with applications across pharmaceutical, agrochemical, oilfield, and fine chemical industries.

The Companys integrated manufacturing facilities at Manjusar, Vadodara, equipped with advanced manufacturing infrastructure, quality systems, and process capabilities, enable it to consistently manufacture high-purity specialty chemicals meeting stringent customer specifications. The Companys

focus on operational excellence, product quality, process innovation, and long-term customer relationships has helped establish a strong position in its chosen product segments.

Going forward, increasing demand for pharmaceutical intermediates, specialty bromine derivatives, and high-performance specialty chemicals, coupled with Indias growing role in global chemical supply chains, is expected to provide significant long-term growth opportunities. Chemcon intends to continue leveraging its technological expertise, manufacturing capabilities, customer-centric approach, and focus on sustainability to strengthen its competitive position in both domestic and international markets.

OPPORTUNITIES AND THREATS

Opportunities	Threats
Growing Demand Across End-User Industries: Rapid industrialization and increased consumption in sectors such as pharmaceuticals, personal care, textiles, and agrochemicals continue to drive demand for specialty chemicals.	Volatility in Raw Material Prices: Price fluctuations and availability of critical raw materials - particularly those imported from China - can impact profitability and production continuity.
Shift toward High-Value Specialty Chemicals: Increasing global demand for complex, high-margin chemistries across pharmaceuticals, agrochemicals, and electronics provides a strong growth runway. Favorable Macro and Industry Tailwinds: The	Stringent Environmental Norms: Increasing environmental compliance requirements, particularly at the state level, may lead to higher capital expenditure and operating costs.
ongoing China + 1 supply chain diversification, highlighted by International Monetary Fund and industry analyses, continues to create opportunities for Indian manufacturers to gain global market share. This is supported by Indias strong domestic	Geopolitical Risks and Trade Disruptions: International conflicts, shipping constraints, or trade policy changes can adversely affect exports and global supply chain linkages.
outlook, with the chemical industry expected to grow at 8-10% annually, as per Press Information Bureau and Indian Brand Equity Foundation, driven by rising consumption and export demand. Government Support: Policies such as the PLI	Competitive Intensity and Global Players: Competition from global chemical manufacturers, including low-cost producers in Asia, continues to exert pressure on pricing and market share.
(Production Linked Incentive) Scheme, infrastructure investments, and emphasis on Make in India create a conducive environment for expanding domestic manufacturing capacity.	Currency Fluctuations: As a significant portion of the revenue is export-driven, unfavorable movements in exchange rates can pose risks to financial performance.
Export Growth Potential: Indian specialty chemical players are gaining significant traction in global markets, especially in Europe and the US, due to cost competitiveness and regulatory compliance.	Talent Shortage: As the industry adopts more advanced technologies and automation, the need for skilled personnel is increasing, leading to a potential talent supply gap.

STRENGTHS AND WEAKNESSES

The Companys competitive position is supported by technological expertise, diversified end-use applications, and long-standing customer relationships. However, like all specialty chemical manufacturers, the Company also faces certain industry-specific challenges.

Strengths	Weaknesses
Diversified Product Portfolio: The Company manufactures a broad range of specialty chemicals, including HMDS, CMIC, Bromobenzene, inorganic bromides, and 2-Bromo Industrial Solvent, serving multiple end-use	Dependence on Key Raw Materials: Availability and price volatility of critical raw materials, including bromine and other chemical feedstocks, can impact production costs and margins.
industries. Diversified End-user Industries: Presence across pharmaceutical, agrochemical, oilfield, and fine chemical industries reduces dependence on any single sector and enhances business resilience.	Regulatory and Environmental Compliance: The specialty chemicals industry operates under stringent environmental, safety, and regulatory requirements, necessitating continuous investments in compliance and sustainability initiatives.
Strong Manufacturing Capabilities: Integrated manufacturing facilities at Manjusar, Vadodara, supported by robust quality systems, enable the Company to manufacture high-purity specialty chemicals meeting stringent customer specifications. Process Chemistry Expertise: Strong technical capabilities and continuous process improvements support product quality, operational efficiency, and cost competitiveness.	Exposure to Global Market Conditions: Export-oriented operations are susceptible to fluctuations in foreign exchange rates, international demand, geopolitical developments, and global trade policies. Capital-Intensive Operations: Specialty chemical manufacturing requires continuous investment in technology, plant modernization, environmental infrastructure, and capacity enhancement.
Export Presence: The Company serves customers across international markets, benefiting from Indias growing role as a global specialty chemicals manufacturing hub and supply chain diversification under the China + 1 strategy.	Competitive Industry Environment: Increasing domestic and global competition may exert pricing pressure and require continuous innovation and operational excellence to maintain market position.

COMPANY OVERVIEW

Chemcon Specialty Chemicals Limited offers a wide range of specialty chemicals, encompassing both organic and inorganic varieties. We are a leading manufacturer of specialized chemicals such as Hexamethyl disilazane (HMDS) and Chloromethyl Isopropyl Carbonate (CMIC), which are primarily used in the pharmaceutical industry. Additionally, we produce Bromobenzene, which serves as an agrochemical intermediate, and

inorganic bromides, which are predominantly used as completion fluids in the oilfield industry. Our portfolio also includes other 2-bromo industrial Solvent, widely utilized in the aromatic and fine chemical industries for the synthesis of various high-value compounds.

Our manufacturing plants are located at Manjusar, Vadodara in Gujarat. We have ten individual operational plants, along with warehouses for storage of the products and raw materials. Additionally, we have an in-house laboratory dedicated to testing procured raw materials and products at various stages of the manufacturing process.

RISKS AND CONCERNS

The Company operates in the specialty chemicals industry and is exposed to various business risks arising from its domestic and international operations. Key risks include fluctuations in foreign exchange rates, volatility in raw material and energy prices, changes in demand across the pharmaceutical, agrochemical, oilfield, and fine chemical industries, evolving environmental and regulatory

requirements, supply chain disruptions, interest rate movements, as well as liquidity and credit risks. These factors may affect the Companys operating performance, profitability, cash flows, and the fair value of its financial instruments.

To effectively manage these risks, the Company has established a robust risk management framework that focuses on the continuous identification, assessment, monitoring, and mitigation of key business risks. The Company regularly reviews its risk environment to evaluate both internal and external factors and formulates appropriate mitigation strategies aligned with evolving market conditions and business objectives. It also places strong emphasis on operational excellence, supply chain resilience, regulatory compliance, safeguarding people and assets, and maintaining uninterrupted manufacturing operations.

Risk oversight is exercised by the Board of Directors through the Risk Management Committee and the Audit Committee, with active support from the senior management team. Risks are periodically reviewed, and appropriate internal controls and mitigation measures are implemented to ensure that risk exposures remain within the Companys defined risk appetite. Through its proactive and integrated approach to risk management, the Company seeks to strengthen business resilience, support sustainable growth, and create long-term value for its stakeholders.

Risk	Mitigation strategies
Raw material risk	Our supply chain management practices are meticulously designed to secure a consistent and reliable supply of raw materials at competitive prices, bolstered by long-standing relationships with trusted suppliers. Moreover, our innovative raw material-plus pricing mechanism for the Specialty Chemicals segment mitigates the risk of margin pressures due to fluctuations in input costs. This strategic approach ensures that we maintain profitability and financial stability, even amidst market volatility.
Customer retention risk	The Companys unwavering commitment to delivering high-quality products and services has earned it a loyal customer base. By prioritizing customer satisfaction, the Company has become the preferred supplier for many of its clients, significantly reducing the risk of customer attrition. This strategic focus has also provided diversification benefits, lowering the risk associated with client concentration and ensuring continued growth and success.
Talent availability risk	The company values talent as crucial for organizational success and is dedicated to cultivating an environment that supports both personal and professional growth. Through investments in diverse training programs, we empower our employees with the skills needed to thrive in a rapidly evolving industry. By fostering a culture of collaboration and unity, we not only attract but also retain top talent in a competitive job market.
Foreign exchange risk	The Company proactively manages currency risk by closely monitoring the movement of the Rupee and taking strategic actions to mitigate any unfavourable fluctuations.
Regulatory risk	The company rigorously complies with regulatory mandates from relevant authorities and proactively meets international market standards. These efforts ensure smooth business operations and the effective execution of our strategies.
Risk of market volatility and instability	The company has embraced a forward-looking strategy to reduce reliance on any single geography or market. With a significantly expanded global footprint, our commitment to continued growth remains unwavering for the future

INTERNAL CONTROLS

The Companys Board of Directors holds the responsibility for establishing and ensuring robust internal financial controls. Comprehensive internal control mechanisms are in place throughout the organization to enhance operational efficiency and compliance with regulatory requirements. The Board oversees the adequacy and effectiveness of these controls, aligning them with the Internal Financial Controls framework under the Companies Act, 2013.

Our internal control systems are tailored to the nature, scale, geographical reach, and complexity of our operations. They provide reasonable assurance regarding operational efficiency, the reliability of financial reporting, compliance with laws and regulations, fraud prevention, error detection, and asset protection.

Regular internal inspections and audits verify compliance with obligations. Senior Management evaluates and certifies the effectiveness of financial reporting controls, adherence to codes of conduct and Company policies, and compliance with established procedures, particularly in transactions involving personal or potential conflicts of interest. Independent internal auditors further strengthen our control processes.

The Company has established comprehensive internal control systems, processes, rules, policies, and procedures across its entire organization and subsidiaries. The Audit Committee reviews and approves the audit plan, convening regularly to discuss auditor reports and significant findings, and receives updates on measures taken in response to audit findings.

HUMAN RESOURCES

The Company values its employees as its greatest assets and has a proficient human resource team that implements employee-centric policies aimed at the holistic development of both the Company and its employees. To promote inclusive growth, the Company has established employee-friendly policies designed to attract top talent, provide continuous training and engagement, and ensure high retention rates. This approach lays a solid foundation for a strong human capital. Furthermore, the Company regularly conducts programs and initiatives focused on talent management, capability development, and employee performance enhancement. As of March 31, 2026, the Company boasted a dedicated team of 238 permanent employees.

In addition, the Company prioritizes the training of employees in safety protocols and compliance with industry regulations and standards. Regular safety training sessions, meticulous record-keeping, and a culture that prioritizes safety are fundamental practices. Health and safety regulations remain a top priority for the Company.

FINANCIAL REVIEW OF THE YEAR

The table below sets forth some of the key financial indicators for and FY 2025-26 and FY 2024-25:

(Rs. in Crore)

Particulars	FY 2025-26	FY 2024-25
Revenue from Operations	240.0	207.4
Cost of Goods Sold	155.9	120.5
Employee Cost	20.1	19.5
Particulars	FY 2025-26	FY 2024-25
Other Expenses	33.9	34.5
EBITDA	30.2	32.9
EBITDA Margin %	12.6%	15.9%
Other Income	15.5	14.3
Depreciation	11.6	10.5
EBIT	34.1	36.6
EBIT Margin %	14.20%	17.6%
Finance Cost	2.1	3.5
Profit Before Tax	32.0	33.1
Tax	8.4	8.7
PAT	23.6	24.5
PAT Margin %	9.8%	11.8%
Basic EPS (In INR)	6.44	6.68

During FY 2025-26, the Company operated in an environment of improving demand but elevated input costs, which exerted pressure on margins despite a healthy recovery in the top line.

- Revenue from Operations for the year stood at Rs. 240.0 crore, as against Rs. 207.4 crore in FY 2024-25, reflecting a 15.7% year-over-year growth. The increase was primarily driven by improved demand across key product categories and better price realisation.

- EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) declined to Rs. 30.2 crore in FY 2025-26 from Rs. 32.9 crore in the previous year. The EBITDA margin moderated to 12.6%, compared to 15.9% in FY 2024-25, primarily on account of a sharper rise in cost of goods sold relative to revenue growth.

- EBIT (Earnings Before Interest and Tax) stood at Rs. 34.1 crore, down from Rs. 36.6 crore in FY 2024-25, reflecting an EBIT margin of 14.2% (down from 17.6%).

- Profit Before Tax (PBT) stood at Rs. 32.0 crore, marginally lower by 3.3% over the previous years Rs. 33.1 crore, aided in part by a reduction in finance costs.

- Profit After Tax (PAT) stood at Rs. 23.6 crore, a decline of 3.7% compared to Rs. 24.5 crore in FY 2024-25. The PAT margin moderated to 9.8% from 11.8%, reflecting the impact of cost pressures on profitability despite revenue growth.

- Basic Earnings Per Share (EPS) for the year was Rs. 6.44, compared to Rs. 6.68 in the previous year.

The financial results reflect the Companys ability to drive top-line growth in a recovering demand environment, even as elevated input costs weighed on margins. Moving forward, the Company remains committed to strengthening its cost management framework, improving operational efficiencies, and pursuing initiatives aimed at restoring and enhancing profitability, while continuing to invest in high- margin, value-added product segments.

KEY FINANCIAL RATIOS

Sr. No. Particulars	FY 2025-26	FY 2024-25	% of Variance	Reason for Variance if above 25%
1. Debtors Turnover Ratio (times)	4.15	3.09	34.45%	The improvement is primarily attributable to reduction in average trade receivables outstanding.
2. Inventory Turnover Ratio (times)	3.14	2.71	15.80%	No Significant Changes
3. Debt service coverage Ratio (times)	2.35	10.10	-76.72%	The improvement is primarily attributable to scheduled repayment of long-term borrowings.
4. Current Ratio (times)	4.41	6.69	-34.11%	The decline is primarily attributable to increased current liabilities on account of availment of short-term borrowing facilities.
5. Debt Equity Ratio (times)	0.11	0.05	123.02%	The increase is primarily attributable to augmentation of debt through availment of short-term borrowing facilities.
6. Operating Profit Margin (%) (EBIT)	14.20%	17.6%	3.40%	No Significant Changes
7. Net Profit Margin (%) (PAT)	9.87%	11.86%	-1.99%	No Significant Changes
8. Return on Net Worth (%)	4.88%	4.88%	0.00%	No Significant Changes

CAUTIONARY STATEMENT

Certain statement in the management discussion and analysis may be forward looking within the meaning of applicable securities law and regulations and actual results may differ materially from those expressed or implied. Factors that would make differences to Companys operations include competition, price realization, currency fluctuations, regulatory issues, changes in government policies and regulations, tax regimes, economic development within India and the countries in which the Company conducts business and other incidental factors.