Deep Polymers Ltd Management Discussions

A. Overview of the Global Economy:

The global chemical industry outlook in 2025 is expected to be cautiously optimistic. The industry grew ~9.5% in FY 2024-25 driven by strong demand recovery post pandemic and gradual easing of supply chains towards the end of the year. In 2025, the industry faces pressure from rising inflation (increase in energy and raw material costs), supply chain disruptions, ongoing geopolitical tensions and conflict in Europe.

Geopolitical uncertainty pushed inflation to an unprecedented level at the beginning of the year. In the last few quarters, inflation has been perceived to be stabilising, indicating a positive outlook.

The global economy appears poised for a gradual recovery from the powerful blows of the pandemic and Russia-Ukraine war. The global economic output is expected to witness steady growth, driven by stabilizing inflationary pressures, reviving consumer sentiment and investor confidence. The employment scenario in the US and other advanced economies has recovered from pandemic levels and rising disposable income is also likely to support growth in the coming years.

B. Overview of the Indian Economy:

The Indian chemical industry makes up 3.9% of the global chemicals industry and is expected to grow to US$ 300 billion by 2025. The domestic chemicals sector is expected to showcase high revenue and volume growth in FY 2024-25, owing to an improvement in domestic demand, increased Government spending and better price realization of chemicals. Bulk chemicals (Basic Chemistry) constitute 25% of the market, while Specialty chemicals, Petrochemicals, and Agrochemicals have 21%.

C. Outlook:

Many emerging markets and economies (EMDEs) have already recovered, which has bolstered real incomes. An optimistic global outlook would also be determined by the speed and effectiveness of fiscal and monetary policy actions implemented to boost economic expansion. Trade is also expected to remain a crucial engine of growth. Despite challenges like supply chain disruptions, the World Trade Organization anticipates a 4% growth in the volume of world merchandise trade in 2023, reflecting the robust demand and supply adaptions. The central banks have been tightening monetary policy, which is expected to curb sticky inflation and foster long-term growth.

D. Industry structure and developments

The company serves customers in more than 25+ countries worldwide by supplying One of the vital components of plastics industry worldwide is masterbatch, which consists of pigments and additives used for imparting required color and characteristics to the end products. The Company is brand and market leader in manufacturing of all kind of Masterbatches and has presence in practically all segment of Masterbatch i.e. White, Black, Colour, Additive, Antifab (filler masterbatch) and all plastics & textile application i.e. Household, furniture, Bulk packaging, Film Packaging, roof coverings, Flexible and Rigid packaging (Containers & pouches), Non-woven Bags, PET (POY/PSF) Fiber Masterbatch for textile & yarn application, also contributing to save environment by producing Bio- Degradable raw material for manufacturers to reduce plastics waste, this all makes the company market leader as most of other competitors are not present in all categories. The company have Strong application support, which enables close coordination with the customer on new product development projects, provides a deep understanding of a customer s requirements. Use of Masterbatches in production process offers many benefits like cost-effectiveness, easy to use, helps achieve the desired color and ensures a dirt-free production environment. According to report issued by Indian Brand Equity Foundation (IEBF) the Indian plastics industry has advanced significantly over past few decades, becoming one of the Indias most significant sector. Plastic material is becoming increasingly important across various industries, and per capita consumption is rising quickly. Indian plastic Industry has over 50,000 plastic processing units employing more than 50 lakhs people across the Country. It contributes 3.5 Lakh crore to Indias economy. Almost 80 to 90% of the total manufacturing units are in small and medium scale sector. The Industry is very fragmented and majority of the manufacturers are from unorganized sector and very few are from organized sector. The Indian Governments initiatives like "Atmanibhar Bharat", "Make in India", "Swachh Bharat" and "Digital India" are contributing to increasing plastics production and by 2027 it is expected that the plastics industry will generate 10 Lakh billion annual revenue.

E. Opportunities and Threats:

Opportunities:

Network area: The Company has diverse product portfolio, wide network area of sales, marketing and distribution, wide range of fill volumes etc. Management: The Company has experienced management team and well qualified senior executives. Alternative Fuel Utilization: A region with an alternative abundant fuel, such as coal can help in increasing its chemical production. There is an increase in demand for petrochemicals, which can be mitigated through the utilization of coal gasification technology to produce more chemicals and petrochemicals. Market: Company s manufacturing and institutional sales stabilize revenue stream and helps in targeting new domestic and export markets. Hence, the Company has a wide range of network area for trading its products online or offline. Technological developments: The ongoing adoption of technological developments is a feature of the chemicals industry that can be seen in every segment and creates both opportunities and risks. There is also an increasing adoption of block chain technology to enable supply chain transparency and product traceability around the time-specific delivery of chemicals in end- markets.

Threats:

High Competition Era: The Plastics Industry has entered into the orbit of the high competition. The market fights are set to intensify with unstoppable capacity build up. The competition from both organized and unorganized players, leading to difficulties in improving market share. For this issue company reviews the market scenario and comes up with new products and developments to sustain and capture more share in the market. Manpower: The one of the common problems emerged for finding talent with competence or even skilled man power for Plastic Industries irrespective of the Company s Brand or Size.

Under cutting of price: Due to high competition in market, the competitors are doing price cutting of Services to compete or keep their existence in markets which is ultimate big problems for the industries. New Entrance: More and more new organized players are entering into market which will increase competition in organized sector also.

F. Segment-wise or Product-wise performance:

The Company is primarily engaged in single segment i.e. Manufacturing of Masterbatch and Polymer.

B.Future Outlook:

The Company s outlook for the year 2024-25 is to add more products in the product range as per requirement in both Indian and Global market.

G. RISKS AND CONCERNS

Polymer Industry has a certain specific set of risk characteristics, which needs to be carefully evaluated and mitigated. In order to effectively manage the same, the Company has evolved proactive Risk Management System, which is adhered to. The risk management covers the entire process from capital investment, competitors activities, new entrants etc. Continual reforms and emphasis on technological developments shall reduce the exposure to risk.

H. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL

RELATIONS

Industrial Relations continued to be harmonious and cordial throughout the year. The Company always valued its Human Resources and believes in unlimited potential of each employee. Your directors believe and affirm the importance of developing human resources, which is the most valuable asset of your Company and the key element in bringing all round improvements and achieving growth. The human resource philosophy and strategy of your Company has been designed to attract and retain the best talent. In practice, it creates and nurtures a work environment that keeps employees engaged & motivated. Employee relations during the year under review were peaceful. The contribution and co-operation received from employees across all levels was excellent and the same has been appreciated & supported by the management through its continuous & systematic training programmes.

Internal control systems and their adequacy:

The Company has an independent Internal Audit function with a well-established risk management framework. The scope and authority of the Internal Audit function are derived from the Internal Audit Charter approved by the Audit Committee. The Company has engaged a reputable external firm to support the Internal Audit function for carrying out the Internal Audit reviews.

The Audit Committee meets every quarter to review and discuss the various Internal Audit reports and follow up on action plans of past significant audit issues and compliance with the audit plan. The Chairperson of the Audit Committee has periodic one-on-one meetings with the Chief Internal Auditor to discuss any key concerns.

Additionally, the following measures are taken to ensure proper control: Budgets are prepared for all the operational levels.

Any material variance from budget has to be approved by the Commercial director. Any major policy change is approved by the managing director. Any deficiency in not achieving target is reviewed at management meetings. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2024-25 is described in the Directors Report of the Company.

Material developments in Human Resources / Industrial Relations front including number of people employed:

The cordial employer - employee relationship also continued during the year under the review. The Company has continued to give special attention to human resources.

Caution Statement:

Statements made in the Management Discussion and Analysis describing the various parts may be " forward looking statement " within the meaning of applicable securities laws and regulations. The actual results may differ from those expectations depending upon the economic conditions, changes in Govt. Regulations and amendments in tax laws and other internal and external factors.