Daikaffil Chemicals India Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy remained resilient during FY 202526 despite continuing geopolitical tensions, inflationary pressures and trade policy uncertainties in several regions. Growth across advanced economies remained moderate, while emerging markets continued to drive a significant share of global economic expansion.

Although inflationary pressures have gradually moderated in major economies, businesses continue to face challenges arising from volatility in commodity prices, energy costs, supply chain realignments and foreign exchange fluctuations. The chemical industry globally witnessed mixed trends, with specialty chemicals and value-added products demonstrating relatively stronger demand compared to commoditized chemicals.

The long-term outlook for the global chemical sector remains positive, supported by increasing industrialization, technological advancements, sustainability initiatives, and growing demand from end-user industries including agriculture, pharmaceuticals, coatings, plastics, personal care and industrial manufacturing.

INDIAN ECONOMIC OVERVIEW

India continues to remain one of the fastest-growing major economies globally, supported by strong domestic consumption, increasing government expenditure on infrastructure, manufacturing growth and favorable demographic trends.

Government initiatives such as Make in India, Production Linked Incentive (PLI) Schemes, improving logistics infrastructure and ongoing policy reforms continue to strengthen Indias manufacturing ecosystem. The chemical sector remains an important contributor to the Indian economy and is expected to benefit from increasing global diversification of supply chains and growing demand for specialty chemical products.

Indias chemical industry is well-positioned to emerge as a preferred manufacturing destination due to its strong technical capabilities, skilled workforce and expanding domestic market.

INDUSTRY STRUCTURE AND

DEVELOPMENT

The chemical industry plays a critical role in industrial development by supplying essential raw materials and performance-enhancing products to numerous sectors. India remains one of the leading producers of chemicals in Asia and continues to attract investments owing to supportive government policies, availability of skilled manpower and growing domestic demand.

Within the specialty chemicals segment, emulsifiers have emerged as important performance chemicals with applications across agrochemicals, pharmaceuticals, personal care products, food processing, paints & coatings, textiles and industrial formulations.

The increasing need for product stability, improved performance and enhanced process efficiency is expected to support long-term demand for emulsifiers and related specialty chemical products.

FINANCIAL AND OPERATIONAL PERFORMANCE

Daikaffil Chemicals India Limited continues to operate as a subsidiary within the Heranba Group.

During FY 2025-26, the Company focused on strengthening its core operations, improving process efficiencies and optimizing available resources in a challenging business environment. The management remained focused on prudent cost management, customer engagement and improving utilization of existing assets.

While the overall financial performance continues to be impacted by market conditions and competitive pressures, the Company has undertaken various initiatives aimed at improving operational efficiencies and enhancing its product portfolio.

The Company has realigned its strategic priorities towards strengthening its specialty chemical portfolio, improving operational efficiencies, enhancing customer engagement and expanding market development initiatives. Such measures are expected to support sustainable growth over the medium term.

During the year, the Company undertook certain organizational initiatives to strengthen its international business structure and support future growth opportunities. The management continues to evaluate overseas markets in line with the Companys long-term business strategy.

The Company remains committed to building a sustainable business model and identifying opportunities within specialty chemical segments that offer long-term growth potential.

During the financial year ended 31 March 2026, the Company recorded a significant improvement in its operational scale with Revenue from Operations increasing by 77.99% to 1,334.75 Lakhs as against 749.84 Lakhs in the previous financial year. Total Revenue increased correspondingly to 1,340.06 Lakhs from 796.60 Lakhs in FY 2024-25.

Despite the substantial growth in revenue, the Company reported a Loss Before Tax (PBT) of 218.28 Lakhs as compared to a loss of 160.29 Lakhs in the previous year.

The Loss After Tax (PAT) stood at 214.07 Lakhs against 158.98 Lakhs in FY 2024-25. The increase in losses was primarily attributable to higher operating expenses incurred during the year in connection with business expansion and operational activities.

The Companys EBITDA stood at negative 181.04 Lakhs compared to negative 133.11 Lakhs in the previous year. However, the EBITDA Margin improved from negative 16.71% in FY 2024-25 to negative 13.51% in FY 2025-26, indicating better operating efficiency relative to revenue generation.

The Net Worth of the Company stood at 673.77 Lakhs as on 31 March 2026 as against 885.22 Lakhs as on 31 March 2025. The reduction in Net Worth was primarily on account of the loss incurred during the year.

Earnings Per Share (EPS) stood at negative 3.57 per share compared to negative 2.65 per share in the previous year, in line with the higher loss recorded during the year.

FINANCIAL RATIOS & REMARKS:

Particulars	FY26	FY25	Variance	Remarks
Current Ratio	2.68	2.31	-15.95%	-
Debt-Equity ratio			NA	-
Debt Service Coverage ratio			NA	-
Return on Equity ratio ( ROE)	-27.46%	-16.40%	-67.46%	Due to increase in losses in current year as compared to previous year
Inventory Turnover Ratio	3.28	2.28	-43.94%	The increase in Inventory Turnover Ratio to 3.28 in FY 25-26 from 2.28 in FY 24-25 indicates improved inventory management and faster movement of stock during the year.
Trade Receivables turnover ratio	3.31	2.47	-33.94%	Due to better realization of receivables.
Trade payables turnover ratio	4.27	3.43	-24.68%	-
Net capital turnover ratio	1.48	1.01	-47.57%	Indicates more efficient utilization of working capital in generating revenue.
Net profit ratio	-16.04%	-21.20%	24.36%	-
Return on Capital employed (ROCE)	-32.28%	-18.10%	-78.37%	The decline is primarily due to higher negative EBIT during the year, reflecting continued pressure on operating profitability. Additionally, increase in capital employed without proportionate earnings growth has further diluted returns. This is largely attributable to the ongoing scale- up phase and cost absorption challenges, with improvement expected as profitability stabilizes.
Return on Investment (ROI)	NA	NA	NA	-

PRODUCT-WISE PERFORMANCE AND

OUTLOOK

Optical Brighteners

Optical Brighteners continue to be an important product category for the Company. These products find application across textiles, plastics, detergents, coatings and paper industries.

The Company continues to maintain product quality and customer relationships in this segment. Demand remains linked to developments in downstream industries and export markets.

Naphthol Products

The Companys Naphthol products continue to cater to customers requiring superior quality standards. Demand from pigment and printing ink manufacturers remains an important contributor to the business.

The Company continues to explore opportunities for expanding customer reach in domestic and international markets while maintaining its commitment to quality and consistency.

Emulsifiers

The Company has identified emulsifiers as a strategic focus area for future growth. Emulsifiers are specialty chemical products that facilitate the stable mixing of two or more immiscible substances and are widely used in agrochemicals, pharmaceuticals, personal care products, coatings, construction chemicals and various industrial applications.

Growing demand for high-performance formulations across industries is expected to create opportunities for emulsifier manufacturers. The Companys focus will be on product development, customer-specific solutions and leveraging technical expertise to strengthen its presence in this segment.

The management believes that emulsifiers offer promising long-term growth prospects and may contribute positively to the Companys business diversification strategy.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established adequate internal control systems commensurate with the size and nature of its business. These systems are designed to ensure safeguarding of assets, accuracy of accounting records, compliance with applicable laws and regulations and reliability of financial reporting.

Internal audit reviews are conducted periodically and findings are placed before the Audit Committee. The Audit Committee regularly reviews the adequacy and effectiveness of the internal control framework and recommends corrective actions wherever necessary.

RISKS AND CONCERNS

The Companys operations are exposed to various business risks including:

• Fluctuations in raw material prices.

• Foreign exchange variations affecting exports and imports.

• Competitive pressures from domestic and international manufacturers.

• Changes in environmental, safety and regulatory requirements.

• Demand fluctuations in key end-user industries.

The Company continuously monitors these risks and takes appropriate measures to mitigate their impact through effective planning, process improvements and prudent financial management.

The Company remains committed to maintaining high standards of environmental compliance, workplace safety and sustainable business practices.

OPPORTUNITIES AND THREATS Opportunities

• Growing demand for specialty chemicals in India and overseas markets.

• Expansion opportunities in emulsifier and performance chemical segments.

• Increasing preference for quality-focused suppliers.

• Potential synergies arising from association with the Heranba Group.

• Import substitution opportunities in specialty chemical products.

Threats

• Intense price competition from domestic and overseas manufacturers.

• Raw material cost volatility.

• Regulatory and environmental compliance requirements.

• Global economic slowdown affecting industrial demand.

The Company intends to leverage its technical capabilities, product quality and industry experience to address competitive challenges and capitalize on emerging market opportunities.

HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIONS

Human resources continue to be one of the Companys key strengths. The Company remains committed to developing employee capabilities, maintaining a safe working environment and fostering a culture of continuous improvement.

Regular safety awareness programs, training initiatives and compliance reviews are conducted to promote operational excellence and workplace safety.

Industrial relations remained cordial throughout the year.

The Company appreciates the continued contribution, dedication and support of its employees in navigating a challenging business environment.

The total number of employees on the rolls of the Company as at March 31, 2026 was 36.