Daikaffil Chemicals India Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

In 2025, the global economy confronts a highly challenging and uncertain environment, driven largely by an abrupt shift in international trade policy. Following a period of relatively stable but modest growth in 2024, the landscape changed markedly at the start of 2025 as governments reprioritized their economic agendas. The United States led the way, implementing wide-ranging new tariffs from January through April, with subsequent policies broadening tariff coverage to near-universal levels and driving effective tariff rates to their highest point in a century. These sweeping measures triggered retaliatory actions from major trading partners, intensifying global trade tensions and amplifying uncertainty in economic forecasts.

This volatility has cast a heavy shadow over the global outlook. According to the IMFs April 2025 reference forecast, which incorporates all major policy moves through early April, world GDP growth is now projected at 2.8% for 2025 and 3.0% for 2026. These figures mark a significant downgrade of 0.8% points cumulatively compared with January estimates, and remain well below the 2000 2019 average of 3.7%. Growth in advanced economies is expected to slow markedly to 1.4% in 2025, with the United States decelerating to 1.8% and the euro area to just 0.8%. Emerging and developing economies are forecast to expand by 3.7% in 2025, rising slightly to 3.9% in 2026, though countries most impacted by new trade measures, such as China, face the deepest downgrades. Meanwhile, global inflation is projected to ease more gradually than previously anticipated, reaching 4.3% in 2025 and 3.6% in 2026, with inflation forecasts revised up for advanced economies but down modestly for developing ones.

Risks to the outlook have tilted decisively to the downside. The escalating risk of a prolonged trade war, coupled with exceptionally high policy uncertainty, threatens both short and long-term growth prospects. Vulnerable economies, especially those with high debt levels, now face growing risks related to asset repricing, sharp exchange rate moves, and capital flow volatility. Demographic pressures, including aging populations and diminishing foreign labour forces, further weigh on economic potential and jeopardize fiscal sustainability. For many developing and low-income nations, waning international support may exacerbate debt distress, compelling abrupt fiscal tightening that would undermine growth and living standards.

Central banks must remain focused on safeguarding price and financial stability, fine-tuning policies amid increasingly complex trade-offs. Managing volatility may require targeted foreign exchange interventions and macroprudential tools to prevent new vulnerabilities. In addition, credible fiscal consolidation and structural reforms will be vital to rebuild fiscal space, reduce inequality, and restore medium-term global growth momentum.

Ultimately, the global economy stands at a pivotal moment. Progress will depend on stronger policy coordination and clear domestic action to bolster confidence and resilience against heightened adversity.

Source: IMF World Economic Outlook, April 2025

Amidst global challenges, the Indian economy maintained resilience and stability in FY 2024-25. India continued to be the worlds fastest growing major economy in 2024 and is on track to become the third-largest global economy by 2027, behind USA and China. As per the Second Advance Estimates of GDP 2024-25, Indias real GDP is estimated to grow steadily at 6.5% in FY 2024-25. Though this growth is lower compared to the 8.2% growth in FY 2023-24, a sequential uptick in demand, private and government spending and robust growth across services and agricultural sectors have helped maintain the economic pace. Despite challenges, manufacturing exports in premium segments like electronics and semiconductors remained strong, highlighting Indias expanding role in global value chains.

The Chemical Industry is essential for the economic development of any country, providing products and enabling technical solutions in virtually all sectors of the economy. The Chemical Industry in India is a key constituent of Indian economic contributory factor in the GDP. In terms of volume, Chemical industry in India is the third largest producer in Asia and sixth largest in the world.

Considering this fact, the Government is taking various initiatives for the growth and development of the sector. 100 per cent FDI is permissible in the Indian chemicals sector while manufacturing of most chemical products is de-licensed.

The Member may please note that your Company is now part of the Heranba Group led by Heranba Industries Limited (“Heranba/Company”), the flagship Company of the Heranba Group which comprises (a) Heranba, (b) its Wholly Owned Subsidiary Companies namely Heranba Organics Private Limited (“HOPL”) and Mikusu India Private Limited (“Mikusu”) and (c) Daikaffil Chemicals India Limited (“Daikaffil”) a subsidiary Company of Mikusu and a step down subsidiary Company of Heranba. HOPL, Mikusu, Daikaffil and Heranba are collectively referred to as “Heranba Group”

In the year 2023-24, Mikusu India along with Heranba acquired Daikaffil which strategically broadened its business portfolio.

This acquisition paves the way for establishing a world-class Research and Development (R&D) centre, one that will strengthen Heranbas internal R&D capabilities for its agrochemical business and serve as the cornerstone for its entry into the CRAMS, CRO, and CDMO (Contract Research/ Development and Manufacturing Organization) domains.

Because of the acquisition, the financial performance of the Company is improving in the F.Y. 2024-25. The following table exhibits, in summary, the financial performance of the Company for the year in relation to previous year.

In accordance with the Accounting Standard 17 notified by Companies (Accounting Standards) Rules, 2006 and based on characteristics of products, production processes and the class of customers, the Company is in one range of product i.e. Organic Dyes and Intermediaries:

Optical brighteners, or fluorescent whitening agents, are used to make plastics, fibers, coatings, inks, and detergents appear whiter and brighter. These products function by absorbing invisible ultraviolet light and re-emitting it as visible light in the blue range of the spectrum. These products are particularly useful to mask the yellowish cast sometimes observed in plastics and fibers after high temperature processing operations. They are also used in substrates containing pigments or dyes to make colours appear more brilliant. Optical brighteners are also used in the production of uncoated fine paper, particularly in uncoated fine paper grades containing high-yield pulp (HYP). Increasing level of whiteness and the HYP substitution in fine papers have increased the importance of optical brighteners globally in the recent years.

Naphthol is an organic compound used to manufacture organic Pigments/Master batch. Pigments are used for colouring paint, ink, plastic, fabric, cosmetics, foods and other materials. Most pigments used in manufacturing and the visual arts are dry colorants, usually ground into a fine powder.

The Company is very optimistic about Naphthol grounders because of its Japanese quality. The entire range of Naphthol grounders are being consumed by MNCs. and its printing Ink manufacturers in Japan. The demand of the product has been rising rapidly in Europe & Japan. Looking at the product portfolio and demand in international market the Company foresee a wide scope of the business in near future and may increase capacity subject to approval from Maharashtra Pollution Control Board.

The Company has adequate system of internal controls commensurate with its size and nature of its business and ensure proper safeguarding of assets, maintaining proper accounting records and providing reliable financial statements. These systems enable integrity of financial reporting and adherence to guidelines defined for the Company. Internal controls are regularly reviewed by both internal and external agencies for its efficiency and effectiveness. Corporate policies, management information and reporting system for key operational areas form part of overall control mechanism.

The Internal Audit plan and management actions are presented to the Audit Committee on quarterly basis. The Audit committee reviews adequacy of Internal Control System and the Internal Audit Reports and compliance thereof. The members of audit committee held discussions with the Internal and Statutory Auditors during the meetings of the Committee and all the quarterly and yearly financial statements of the Company were reviewed and recommended by Audit Committee for consideration and approval of the Board of directors.

The Company foreign currency revenue earnings are significant and any appreciation or depreciation in the rupee can have a significant impact on revenue and profitability. We evaluate exchange rate exposure arising from these transactions and enter into foreign exchange instruments to mitigate risks arising out of movements in the rupee (INR). The Company have an appropriate internal control for monitoring the Forwards and future contracts.

Your Company has also shown its concern towards the environment safety. It is becoming more and more conscious about environmental norms, discharge of effluents and better safety for employees, quality standards and has also shown considerable improvement in the recent past.

Your Company range of products are under Japanese technology and therefore we stand a better chance of facing competition from China and Indian manufacturers even though the prices are lower compared to ours. The Consumers are ready to pay the extra price for superior quality. The Company may consider expansion once it turns profitable.

Your Company emphasizes on the safety of people working in its premises, Structures safety meeting were held and safety programmes were organised for them throughout the year.

The total numbers of person employed in your Company as on March 31, 2025 were 33.