Chemcon Speciality Chemicals Ltd Management Discussions

ECONOMIC REVIEW

World Economic Outlook

In 2024, the world economy grew at a moderate rate of 3.3%, according to the IMF, signifying a phase of relative stability. As we progress through 2025, the global environment is seeing a substantial transformation, prompted by nations realigning their policy priorities in response to escalating geopolitical tensions and increasing economic difficulties.

The United States has implemented a series of additional tariff measures, eliciting immediate and vigorous responses from key trading partners. This resulted in the enactment of nearly universal tariffs on April 2, 2025. Consequently, effective tariff rates have escalated to unprecedented heights, inflicting a significant negative impact on global GDP.

In light of this uncertainty, worldwide headline inflation is projected to decrease at a slower rate than previously planned. IMF projection indicates a decline to 4.3% in 2025 and thereafter to 3.6% in 2026. The revision indicates elevated inflation projections for industrialised nations, somewhat counterbalanced by slight downward modifications in emerging markets and developing economies.

Regardless of the difficulties that the global economy is currently experiencing, this period presents a one-of-a-kind chance to increase resilience and map out a more sustainable route forward. There is a possibility of recovery if the appropriate combination of coordinated policies and proactive reform is implemented, as seen by the adaptability displayed by many economies that are under strain.

Countries can assist a global recovery that is more balanced and inclusive if they collaborate to create a trading environment that is stable and transparent, make progress towards timely debt resolution, and address structural imbalances

The road that lies ahead will require international cooperation to be successfully navigated. It is possible for the global economy to restore momentum, rebuild buffers, and open new chances for prosperity across regions if coherent strategy, strong leadership, and commitment to shared progress are implemented.

During the financial year 2024-25, India also witnessed the continuation of the existing Government for the third term and their continuing focus on economic reforms and infrastructure development. The agricultural sector, the backbone of the Indian economy, is forecast to grow by 3.8% in FY 2024-25. While the industrial output grew by 2.9% year-on-year falling short of the expected 4%, favorable monsoon conditions are anticipated to boost agricultural output, stabilize food prices, and support economic growth. Advancement of new technologies, increasing productivity and income of farmers are some of the challenges in the agricultural sector.

As per IMF, Indias GDP expanded by 6.5% in FY 2024-25, solidifying its status as one of the fastest growing major countries amid global uncertainties. This performance was supported by structural reforms, swift digital transformation, and ongoing infrastructure investments, which together fortified the countrys economic base. Strong domestic demand and ongoing private sector investment contributed further impetus across several sectors.

Indias FY 2025-26 economic outlook is cautious and resilient due to domestic strengths and global uncertainties. Commodity price volatility, trade interruptions, and geopolitical concerns may hinder growth. Due to structural stability and a strong policy framework, the economy should be able to weather these threats. Maintaining momentum requires accelerating corporate wage growth, improving consumer mood, and boosting private sector investment in critical industries. Agriculture, lower food inflation, and macroeconomic stability should boost rural demand. These factors are crucial for driving inclusive growth and boosting consumption. Indias global competitiveness is likely to improve with targeted deregulation and grassroots structural reforms.

The Indian Specialty Chemicals Industry continues to be a key growth engine within the chemical sector, showing resilience and adaptability amid global economic uncertainties. Unlike commodity chemicals, specialty chemicals are value-added products with specific end-use applications and performance-enhancing properties. These chemicals cater to a diverse range of sectors, including pharmaceuticals, agrochemicals, textiles, personal care, construction, automotive, and electronics, among others.

Indias specialty chemicals sector is structured as a robust blend of large multinational corporations, well-established Indian enterprises, and agile small-to-medium enterprises (SMEs). This ecosystem has enabled the country to emerge as a global hub for pharmaceutical intermediates, custom synthesis, and contract manufacturing. The countrys success is underpinned by:

A strong manufacturing base supported by cost-effective operations.

Availability of technically skilled manpower.

An evolving regulatory framework that encourages sustainable and compliant manufacturing practices.

Several Indian companies are now integrated into the global supply chain, offering niche chemical solutions tailored to customer needs worldwide.

Indias specialty chemicals industry is well-positioned for sustained growth, supported by strong domestic demand, increasing export potential, and a favorable policy environment. Strategic initiatives around innovation, sustainability, and global integration will continue to shape the future of the industry.

As the sector continues to evolve, companies that invest in technology, compliance, and customer-centric solutions will emerge as long-term winners in the global specialty chemicals value chain.

Pharmaceutical intermediaries play a pivotal role in the drug manufacturing process by providing the necessary chemical compounds and materials that form the foundation of pharmaceutical products. Here are some potential opportunities and threats in the pharmaceutical intermediaries industry:

Pharmaceutical intermediaries play a crucial role in the drug manufacturing process, serving as the link between the raw materials and the final pharmaceutical products. Here are some strengths and weaknesses associated with pharmaceutical intermediaries:

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 nine 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.

In the normal course of business, the Company is primarily exposed to fluctuations in foreign exchange rates, interest rates, equity prices, as well as liquidity and credit risks - all of which may affect the fair value of its financial instruments.

These risks, driven by both internal and external factors, may lead to asset impairment and negatively impact the Companys ability to achieve its strategic, operational, and financial goals, ultimately affecting its earnings and financial standing.

To address this, the Company regularly assesses and reviews its risk environment to formulate strategies aligned with changing market dynamics. It emphasizes early-stage risk mitigation to ensure smooth and uninterrupted operations, safeguarding both People and Property. With active involvement from the Audit Committee, Risk Management Committee and Management, risks are systematically identified and reduced to manageable levels that can be reasonably anticipated. The Companys strong commitment to risk management is a cornerstone of its broader mission to build a resilient, sustainable, and successful enterprise capable of withstanding future challenges.

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.

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, 2025, the Company boasted a dedicated team of 237 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.

The table below sets forth some of the key financial indicators for FY 2024-25 and FY 2023-24:

(Rs. in Crore)

During FY 2024-25, the Company navigated a challenging demand environment and rising input costs with operational efficiency and cost control initiatives. Despite a decline in revenue, the Company has made robust improvements in profitability and margins.

Revenue from Operations for the year stood at 207.4 crore, as against 267.1 crore in FY 2023 24, reflecting a 22% year-over-year decline. The reduction was primarily due to subdued export demand and pricing pressures in certain product categories.

EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) increased to 32.9 crore in FY 2024 25 from 26.9 crore in the previous year, registering a 22% growth. The EBITDA margin improved significantly to 15.9%, compared to 10.1% in FY 2023 24, driven by better cost management and improved operational efficiencies.

EBIT (Earnings Before Interest and Tax) stood at 36.6 crore, up from 29.8 crore in FY 2023 24, reflecting an EBIT margin of 17.6% (up from 11.2%).

Profit Before Tax (PBT) rose to 33.1 crore, a growth of 26% over the previous years 26.3 crore, indicating strong control over finance and operating expenses.

Profit After Tax (PAT) grew by 27% to 24.5 crore, compared to 19.2 crore in FY 2023 24. The PAT margin improved to 11.8% from 7.2%, reflecting the Companys continued focus on profitability despite a drop in top-line revenue.

Basic Earnings Per Share (EPS) for the year was 6.68, compared to 5.24 in the previous year.

The financial results underscore the Companys resilience and ability to optimize operations in a volatile market environment. Moving forward, the Company remains committed to maintaining cost discipline, enhancing operational productivity, and investing in high-margin, value-added product segments.