Heubach Colorants India Ltd Management Discussions

Economic Outlook Global

Despite uncertainty in the world economic outlook since April

2025, global growth is projected at 3.0% in 2025 and 3.1% in

2026, according to the International Monetary Funds World Economic Outlook Update (Duly 2025]. The 2025 forecast is 0.2 percentage points higher than Aprils projection, while the 2026 forecast is 0.1 points higher. The IMF attributes these upward revisions to front-loading of activity ahead of tariff measures, lower effective US tariff rates than previously assumed, and improved financial conditions, including support from a weaker US dollar.

At the same time, global headline inflation is expected to fall to 4.2% in 2025 and 3.6% in 2026, broadly unchanged from earlier projections.

World trade volume shows a short-term boost, with a +0.9 percentage point revision in 2025, followed by a -0.6 point adjustment in 2026. This reflects the temporary lift from front- loaded trade flows in the face of policy uncertainty, with a payback effect expected the following year.

Overall, the IMF notes that the global outlook shows resilience despite ongoing trade and policy uncertainty. Looking ahead, credible trade agreements, stronger labor market measures, and streamlined business regulations could provide fresh momentum to medium-term growth.

India

With RBIs GDP projection at 6.5% for FY2025 and FY2026, the Indian economys growth momentum remains balanced and strong, supplemented by reviving urban demand, surging investments, uniform rural demand, and the governments continued nudge on capex.

Indias headline consumer price index [CPI] inflation eased to 2.8% in May 2025, the lowest in six years, supported by steady crop production and moderating food prices. Softer commodity and crude oil prices, amid expectations of slower global growth, have also kept the risk of imported inflation relatively low, though geopolitical tensions remain a source of uncertainty.

On the growth front, India continues to draw strength from its resilient services sector, expanding manufacturing base under the Production-Linked Incentive [PLI] scheme, and a stable banking system. Fligh-value manufacturing and services-particularly in electronics and defence?€”underscore the countrys growing competitiveness and expanding role in global trade.

Overall, Indias economic trajectory reflects stability and resilience, supported by rural consumption, infrastructure investments, and favourable financing conditions, even as global headwinds persist.

Industry Overview

Global Speciality Chemical Industry

The global specialty chemicals market is looking at steady growth prospects, driven by rising demand across construction, water treatment, electronics, and personal care industries. Growth is further supported by advancements in process technology, trade liberalisation, and expanding opportunities in emerging economies. Increasing consumption of processed food and beverages in developed nations is boosting demand for flavouring agents, while novel flavours and fragrances continue to shape market growth. In the US, strong demand from the water treatment, automotive, and electronics sectors is expected to support expansion. Additionally, rising use of detergents, cleaning products, and crop protection chemicals is anticipated to further fuel market momentum over the forecast period.

The Asia Pacific region leads the specialty chemicals market, driven by rapid industrialisation, economic growth, and expansion of end-use sectors such as food and beverages, personal care, cosmetics, and pharmaceuticals. China, India, and Japan are key manufacturing hubs, with Chinas position as a global production leader further reinforcing regional market strength.

India Speciality Chemical Industry

India is rapidly emerging as a global hub for specialty chemicals, with growth underpinned by innovation, collaboration, and a strong focus on sustainability. Specialty chemicals make up about one-fifth of the $4 Trillion global chemicals industry. Indias market is projected to grow at a robust 12% CAGR to reach $64 Billion by 2025.

A major driver has been the surge in exports, as global supply chain diversification prompts the US, Europe, and Japan to seek alternatives beyond China. In this regard, Indias skilled workforce, technical expertise, and cost-efficient manufacturing give it a competitive edge. In response, domestic players are scaling up capacity and investing in R&D to capture rising global demand and strengthen their position in the value chain.

Furthermore, Indias expanding middle class, rapid urbanisation, and rising living standards are driving demand for specialty chemicals. Growth is evident across personal care, household cleaning, and water treatment products, while construction chemicals are gaining traction in line with the countrys infrastructure push and urban development goals.

Moreover, the government has prioritised specialty chemicals under its Make in India and Atmanirbhar Bharat programs, encouraging investment, localisation, and R&D. Measures include potential extension of the Production-Linked Incentive [PLO scheme to the sector and efforts to reduce import dependence on critical raw materials by promoting upstream integration and a stronger domestic supply chain.

Global Organic Pigments Industry

The global organic pigments market, valued at $5.7 Billion in 2023, is projected to grow at a CAGR of 4.7% to reach nearly $8.6 Billion by 2032. Growth is driven by expanding use in printing inks and paints & coatings, alongside rising demand from packaging and textiles. Emerging economies are expected to play a key role, supported by growing textile output and a shift in consumer preference toward eco-friendly products. The market is also witnessing a clear move toward low-VOC and sustainable pigment solutions, reinforcing their appeal across diverse applications.

Emerging economies are driving the growth of the global organic pigments market, supported by rapid industrialisation, urbanisation, and expanding consumer demand. Strong momentum in construction, automotive, packaging, textiles, and consumer goods across countries such as China, India, Brazil, Mexico, Indonesia, and Vietnam continues to fuel market expansion.

India Organic Pigments Industry

In India, growing environmental awareness and stricter regulations are driving a shift from synthetic to organic pigments, with rising demand across textiles, coatings, and polymers. This transition is creating opportunities for local manufacturers to develop innovative, eco-friendly formulations for diverse industries.

Indias rapidly expanding textile sector is a key driver of organic pigment demand. Government initiatives and budgetary support have provided strong momentum to the industry. Several initiatives have been introduced to support and grow the Indian textile market, with the Union Budget providing a notable boost.

Furthermore, Indias growing packaging industry is driving demand for organic pigments as brands shift to safer, recyclable options, while the automotive sector is adopting them for durable, eco-friendly, high-performance coatings. Moreover, process innovations are fuelling growth in Indias organic pigments market, with advances in biotechnology and nanotechnology enabling more vibrant, durable, and eco- friendly pigments. The Department of Science and Technology reports a 30% rise in pigment-related patents over the past five years, highlighting a strong R&D focus on efficiency and quality.

Company Overview

Fleubach Colorants India Limited [HCIL] (hereafter referred to as "FICIL" or "the Company"] is among the leading global producers of organic pigments, offering a comprehensive portfolio backed by sustainability. Responsible Care practices, and a strong commitment to product safety. The Company operates a dedicated R&D centre along with advanced application and analytical laboratories to develop pigments and preparations for diverse uses in paints, inks, and plastics. FICIL also brings expertise in high-value segments such as automotive coatings and digital printing. Over the years, the Company has maintained steady growth through forward, backward, and lateral integration, ensuring supply security and strengthening client relationships. As a Responsible Care-certified organisation, with ISO 14000 and ISO 18000 accreditations, HCIL embeds sustainability into every aspect of its operations, making it an intrinsic part of its culture.

FICIL, based in Navi Mumbai, India, has a strong manufacturing presence across India with manufacturing facilities strategically located in Roha (Maharashtra], Cuddalore (Tamil Nadu], and Nagda (Madhya Pradesh], The Company exports via associated entities to over 75 countries, serves more than 100 domestic customers, and offers over 500 products.

FICIL has a rich history of shaping the world of colors and has established a legacy of excellence. The Company is committed to pioneering sustainable color technologies to create a brighter future. It is dedicated to driving positive change in the pigments industry through industry-leading Environmental, Social, and Governance (ESG] measures. These measures ensure that HCILs operations meet the highest standards in quality and sustainability while maintaining ethical business practices.

On March 3, 2025, Sudarshan Chemical Industries Limited (SCIL], through its wholly owned subsidiary Sudarshan Europe B.V., completed the acquisition of Germany-based Fleubach Group in a combination of an asset and share deal, and as a result, 58 subsidiaries (including step-down subsidiaries] and two joint venture companies have now become a part of Sudarshan Chemical Group. SCIL, incorporated in 1951 in Pune, is a multinational pigment and color solutions leader. With over 270 years of combined expertise between Sudarshan Chemical Group and Fleubach Group, this strategic transaction has created a global pigment leader, combining SCILs operational expertise with Fleubachs advanced technological capabilities.

ONE Sudarshan is a unified brand identity that brings together the heritage and strengths of Sudarshan, Fleubach, and Clariant Pigments. The new identity reflects the ambition to build a global, customer-centric leader in colorants and pigments, while honouring the legacies that shaped its foundation. With an expanded, high-quality pigment range and a strong presence in key markets such as Europe and the Americas, ONE Sudarshan is well-positioned to deliver comprehensive, customer-focused solutions across the global pigments industry. While ownership has changed, the brand continuity and operational stability of Fleubach colorant India remain intact. The immediate priority is to operate as ONE unified organisation, integrating Clariant Pigments, Fleubach, and Sudarshan to drive synergies, unlock efficiencies, and build on shared values. Co

Product Portfolio

Organic Pigments: Offer vibrant colors across a broad range of colorful compounds derived from organic sources.

Inorganic Pigments: Known for excellent opacity and durability, though colors are less intense, and the range is narrower.

Pigment Preparations: Carefully formulated liquid or solid pigment mixes tailored for customised colors and specific uses.

Dyes: Sustainable specialty and aluminium dyes providing eco-friendly coloring solutions.

Product Features Organic Pigments

?€? High chroma

?€? High color strength

?€? Large coverage of color space

?€? Limited resistance Inorganic Pigments

?€? Lower chroma

?€? Lower color strength

?€? Limited color space

?€? High opacity

?€? High resistance/fastness properties Pigment Preparations

?€? Pre-dispersed pigment in liquid & solid form

?€? Custom color blends

?€? Specialised properties for specific use cases Dyes

?€? Specialty Dyes

?€? Aluminium Dyes

HCILs Colorants Portfolio Composition Organic Pigments

?€? Quinacridone

?€? Dioxazine

?€? Benzimidazolone

?€? DPP

?€? Isoindolinone

?€? Perylene

?€? Phthalos

Inorganic Pigments

?€? Bismuth Vanadate

?€? Rutile pigments

?€? Cobalt blue

?€? Spinel pigments Pigment Preparations

?€? Based on high-performance pigments

?€? Customised solutions Dyes

?€? Polymer soluble dyes

?€? Solvent dyes

?€? Water-soluble dyes Applications

The Companys products are used in various industries, including coatings, plastics, printing, and special applications. Coatings is the largest segment by revenue, followed by plastics, special applications and printing, amongst others.

Coatings

HCILs wide range of high-performance organic and inorganic pigments, as well as pigment preparations, are known for their brilliance and durability, especially in paints and coatings. They are highly effective in various applications, such as the following:

?€? Automotive coatings

?€? Coil coatings

?€? Corrosion protection

?€? Exterior paints and plasters

?€? Floor coatings

?€? Industrial coatings

?€? Interior decorative paints

?€? Powder coatings

?€? Road marking and traffic paints

?€? Wood coatings

Plastics

HCILs products for plastics meet strict global standards for environmental, health, and safety, aiming to conserve energy and reduce carbon footprint. They are used in diverse applications such as:

?€? Automotive plastics

?€? Construction and electrical components

?€? Consumer goods

?€? Fiber production

?€? Packaging

Printing & Digital Printing

Modern printing demands versatile and high-quality solutions. HCILs pigments and pigment preparations are tailored to meet the needs of inkjet, toner, offset, flexographic, and gravure printing, performing exceptionally well with UV, solvent, and water-based inks.

HCILs printing solutions serve various industries:

?€? Inkjet printing

?€? Packaging printing

?€? Publication printing

?€? Specialty printing

?€? Toner

Special Applications

The Companys wide range of pigment dispersions and pigments is suitable for a variety of applications, from vibrant textiles to high-quality handbags, lightweight aluminium casings to colorful balloons.

HCILs solutions are versatile and cater to:

?€? Home & fabric care

?€? Personal care products

?€? Seed coloration & crop protection

?€? Aluminium anodising dyes and chemicals

?€? Stationery

?€? Viscose coloration & Textile printing

?€? Latex coloration

?€? Leather and paper coloration

?€? Concrete & plaster

Innovations in Eco-Friendly Pigments and Colorants

The Company has introduced significant innovative products across the business segments that cater to its diverse customer base. The innovations include the following:

?€? Coatings:

- Shift to vibrant shades in automotive, especially EVs, leading to increased pigment consumption and the development of new shades in our portfolio

- Introduced low-VOC colorants for odourless paints along with water-borne systems [eco-friendly]

- Created lead-free pigments for eco-friendly paints

- Delivered high-quality pigments with strong color intensity for resource-efficient solutions, enhancing material longevity in paints and coatings

?€? Plastics and Printing:

- Enabled black polymer identification through Heubachs Near Infrared [NIR] technology, facilitating the recycling of black plastics

- Ensured biodegradability through selected products like PV Fast and Graphtol

- HCILs organic pigments comply with strict environmental standards and are suitable for coloring biodegradable polymers such as polylactic acid [PLA], polyhydroxyalkanoate [PHA], polybutylene succinate [PBS], and polybutylene adipate terephthalate [PBAT]

- Innovated pigments for NTNK packaging inks, replacing hazardous solvents like toluene and methyl ethyl ketone

- Promoted sustainability with biodegradable, OK Compost, and recyclable colorant options, prioritising environmental protection

?€? Others

- Developed water-based pigment preparations for three decades, catering to various applications without solvents for eco-friendliness

- Pioneering in zinc-free alternatives for a decade, HCILs exclusive access to the range of orthophosphates and polyphosphates offers effective protection in various applications

- Prioritised the safe handling of pigments, adhering to and often surpassing global regulations

- Easy to disperse pigments that make production efficient and optimise energy costs

Four Pillars of Our Core Strategy:

Growth

?€? Protect the core and grow the domestic business

?€? Commercialise the innovation pipeline to enhance value creation

?€? Further expand our global footprint

?€? Enhance product portfolio across organics

Green Innovation

?€? Keep sustainability as the central driver for business and innovation

?€? Responsible use of natural resources

?€? Shifting the plants energy source to renewable and enhancing focus on green chemistry

Efficiency

?€? Increase demand planning accuracy

?€? Focus on improving the production yield and implement a cost savings plan across sites

Ensure sales as per the set pricing guidance Co

?€? Optimise the net working capital and avoid any unnecessary cash blockages

Peace of Mind

?€? Focus on customer satisfaction by ensuring on-time and full delivery

?€? Focus on quality and a high complaint closure rate

?€? Product stewardship, safety and regulatory compliance are core differentiators

?€? Educate customers and the market on potentially harmful byproducts and regulatory issues

Financial Performance

The Company remains dedicated to achieving sustainable growth to meet stakeholder expectations. This commitment is driven by a strategic approach, efficient cost management, and the introduction of innovative products. The Company aims to capitalise on market opportunities, enhance its competitive position, and drive continued success by aligning these factors.

The Company ensures compliance with Indian Accounting Standards [Ind AS] for its financial statements in accordance with the Companies Act, 2013. In FY2025, the Company recorded net revenue of Rs.82,506 Lakh, compared to Rs.79,070 Lakh in FY2024, growing by 4.4%. Exports accounted for 32% of the total revenue from contracts with customers in FY2025, demonstrating its strong global reach and market presence. EBITDA grew by 24.5% from Rs.8,080 Lakh in FY2024 to Rs.10,057 Lakh in FY2025. EBITDA Margin also grew from 10.2% in FY2024 to 12.2% in FY2025. PAT registered 25.06% growth in FY2025, by growing from Rs.4,114 Lakh in FY2024 to Rs.5145 Lakh in FY2025.

Financial Highlights FY2025 (in Rs. Lakh)

Particulars	Year ended on March 31,2025	Year ended on March 31.2024
Income from Operations	82,506	79,070
Operational Profit (EBITDA]	8,180	7,208
Other Income	1,877	872
Profit Before Tax and Exceptional Items	7,693	5,600
Exceptional Item	(882]	-
Profit Before Tax	6,811	5,600
Profit After Tax	5,145	4,114
EPS ( Rs.]	22.29	17.82

Key Ratio Analysis FY2025

	Year ended	Year ended
Particulars	on March	on March
	31,2025	31.2024
DebtorsTurnover ratio (x]	4.7	3.8
Inventory Turnover Ratio (x]	3.7	3.8
Debt to Equity Ratio (x]	No borrowings	No borrowings

Particulars	Year ended on March 31, 2025	Year ended on March 31, 2024
Current Ratio [x]	2.8	2.2
Interest Coverage Ratio [x]	17.6	21.3
Returnon Net Worth (%]	10%	9%
Return on Capital Employed [ROCE](%]	13%	11%
Operating Profit Margin (%]	10%	9%
Net Profit Margin (%]	6%	5%

Outlook and Opportunities Growing Domestic Demand

As a pigment manufacturing company, FICIL can benefit from the rising chemical consumption in sectors such as FIPPC, textiles, and consumer goods, tapping into substantial growth opportunities. With projections indicating that 80% of Indian households will move into the middle-income bracket by 2030, a substantial rise in demand is anticipated for paints and coatings. The demand will also be driven by infrastructure development, residential & commercial construction, and industrial expansion. Government initiatives like the Smart Cities Mission and Housing for AH will further amplify these construction activities.

Strong Export Potential

With global companies diversifying supply chains away from China, Indias chemical sector has significant growth opportunities. Competitive manufacturing costs, high-quality products, and adherence to global standards position the Indian pigment chemicals industry for strong international expansion. Indias status as a major chemical exporter is enhanced by cost- effective manufacturing and strategic location, facilitating trade and export opportunities. The Company can leverage these advantages to expand internationally and capitalise on the shift towards alternative sourcing markets.

Sustainability Initiatives

The growing global demand for eco-friendly and sustainable chemicals presents opportunities for Indian companies to innovate and capture new markets. Companies that adopt eco-friendly practices and offer green alternatives can gain a competitive advantage. For instance, the Companys water-based pigment preparations, which are solvent-free, highlight its commitment to environmental responsibility. Moreover, the Company has invested in renewable energy sources to fulfil a significant portion of its energy requirements across its production facilities. Using biofuels for boilers and steam generation further mirrors HCILs dedication to sustainable practices.

Technological Advancements

Focusing on research and development for new products, improving existing ones, and adopting sustainable practices will strengthen the Companys product portfolio. A key factor that sets the Company apart is that it develops innovativesolutions by combining external insights with its core technical expertise. For example, its products address stringent regulatory requirements such as LVOC colorants, lead-free pigments, and pigments tailored for NTNK packaging ink.

Highly Fragmented Industry

The pigment chemicals industry is fragmented, presenting challenges like intense competition but also opportunities for companies to stand out and consolidate their position.

Customer-Centric Solutions through Product Innovation

HCIL uses its products to deliver meaningful solutions to customers. The Company regularly partners with customers to understand their most pressing challenges and develops solutions to address them. For example, in response to feedback to improve plastic recyclability, the Company introduced a black colorant. These colorants aid polymer identification using near-infrared technology sorting devices, offering a solution for enhancing plastic recycling processes.

Challenges Economic Fluctuations

The expansion of domestic production capacities aimed at exports, combined with declining demand in global markets, may affect the Companys business. Last year, downstream industrial demands from construction, paints, adhesives, and other fabric and packaging sectors dwelt at lower levels with stockpiling seen at customers end, especially in Europe.

Raw Material Dependency

The rising costs of essential raw materials due to inflation present further challenges to the Company. Reliance on imported raw materials with fluctuating prices can impact production costs and profitability. Exchange rate fluctuations can also affect profitability, especially for export- oriented businesses.

Geopolitical Events

Several geopolitical disruptions adversely affected the overall pigments industry, both on the demand and supply side, which continues to remain an overhang on the industry. For instance, rising energy costs across the EU due to the Russia-Ukraine conflict [i.e. cut off from a cheap power supply] continue to affect RM prices, and the Red Sea blockage, have led to increased lead times and rising freight costs globally.

Environment, Corporate Sustainability, and Social Responsibility

The Company is deeply committed to ethical and sustainable business practices, guided by principles such as ESG, Responsible Care, and its own Code of Conduct. FHCIL has set ambitious goals to reduce carbon emissions, supported by a clear roadmap for achieving them. Sustainability forms the foundation of FiCILs growth strategy, shaping its goals, market positioning, differentiation strategy, and risk management practices. The Company innovates constantly to offer sustainable solutions, enhancing its role as a trusted solution provider.

Corporate Social Responsibility (CSR] is integral to the Companys philosophy, aligning closely with the Companies (Corporate Social Responsibility Policy] Rules, 2014. HCIL focuses on significant contributions to areas like education, safety, healthcare, and community support to make a positive impact on society. The CSR strategy places a strong emphasis on integrating sustainable practices, with a focus on achieving measurable impacts and promoting partnerships with government agencies and other stakeholders. Employee engagement programmes are designed to cultivate a culture of volunteerism and active participation in CSR initiatives, which serve to uphold the Companys ethical standards and enhance its credibility within the community. The CSR committee plays a pivotal role in overseeing and conducting these CSR activities effectively. Internal Control Systems

The Company has established robust internal control systems tailored to its size and business scope, including corporate policies, management information, and reporting systems crucial for overseeing key operational areas. Adhering to stringent internal financial controls mandated by the Companies Act, 2013, and SEBI Regulations, 2015, is essential for ensuring accurate financial reporting, maintaining policy compliance, safeguarding assets, preventing fraud, and ensuring timely disclosure of both financial and non-financia information. These measures contribute to the Companys transparency, integrity, and overall operational efficiency.

Independent auditors, authorised by the Audit Committee, assess the adequacy and compliance of these controls, providing detailed reports with observations and recommendations. The Audit Committee oversees these controls, approving the annual audit plan covering all business operations and functions, and reviewing quarterly audit results and recommendations for management actions.

An independent chartered accountant conducted a thorough review of these controlsand governance processes, confirming their adequacy and effectiveness. The Audit Committee affirmed that as of March 31,2025, the internal financial controls were operating effectively and met required standards.

Human Resources (HR)

Communication and Engagement

Effective communication remains at the core of our HR strategy. Regular town halls and HR forums have helped maintain transparency and engagement across all levels of the organisation.

HR Listening sessions, or open house sessions, were conducted across all sites to gauge employee sentiments and gather pointed feedback. Detailed action plans have been implemented based on the insights gained from these sessions, with progress being closely monitored to ensure continuous improvement.

By creating a supportive and growth-focused work environment, the Company aims to retain employee confidence and inspire them to reach their full potential. Through our commitment to innovation, continuous learning, and open communication, we are dedicated to fostering a workplace where every employee can thrive.

Training and Performance Management

Employee engagement and development are key priorities. Our workforce, comprising 485 employees-454 male and 31 females, as of March 31, 2025, is supported through a variety of training programmes on topics of safety, behavioural skills, and technical knowledge.

Online sessions covered topics such as Leading Self, Communicating with Impact, Planning, Decision Making, Time Management and Execution, and Customer Centricity. Additionally, group learning opportunities like the Explorer Series and the Fireside Chats with senior organisational leaders provided employees with valuable insights and personal reflections. We also implemented our "Performance Management Cycle" in a timely and meaningful manner. This helped drive insightful performance conversations, laid the foundation for fair remuneration and ensured we retain the culture of transparency and meritocracy in the organisation.

Recognition and Rewards

To honour long-standing employees, various Long Service Awards were organised at our HQ, Roha, and Cuddalore locations, recognising their loyalty and commitment to the organisation.

We also launched a formal Reward and Recognition (R&R) programme to acknowledge exceptional performance and promote the Companys work culture. This programme included initiatives such as "On the Spot Appreciation Cards" for immediate recognition and special rewards for employees who embody the Companys values in action.

Dob Evaluation and Grading Roles

Grade harmonisation across all levels and roles was completed this year, which includes the evaluation of jobs to build a robust grading framework. This has enabled us to also benchmark remuneration for the roles with the market, which will be a useful insight to develop reward programmes and organisational structures and design for the near future.

Cautionary Statement

Certain statements under "Management Discussion & Analysis" that describe the Companys objectives, projections, estimates, expectations, or predictions may constitute "forward-looking" statements within the meaning of applicable securities laws and regulations. While these expectations are based on reasonable assumptions, actual results may differ from those expressed or implied due to various external and internal factors beyond the Companys control. The Company does not assume any obligation to publicly amend, modify, or revise any "forward-looking" statements based on subsequent developments, information, or events. Co