Dhansa Labs Ltd Management Discussions

1. Economic Overview

Indias economy grew by approximately 7.7% in FY 2025 26, the growth momentum reflects the strength of domestic economic fundamentals and Indias continued position as one of the fastest-growing major economies. Domestic demand remained an important driver for the economic activity during the year, supported by private consumption and investment. The Governments continued focus on infrastructure development, capital expenditure, manufacturing, employment generation and structural reforms further supported economic activity. The services sector remained a key contributor to growth, while manufacturing activity also witnessed strengthening momentum during the year.

Inflationary pressures moderated significantly during F.Y. 2025 26, supported by easing food prices, favourable agricultural conditions and improved supply-side dynamics. Headline Consumer Price Index (CPI) inflation averaged 1.7% during April December 2025, reflecting a broad-based moderation in price pressures and providing support to household purchasing power and domestic consumption.

The external sector remained resilient despite an increasingly uncertain global environment. Geopolitical tensions and armed conflicts in various parts of the world, including the continuing Russia Ukraine conflict and heightened tensions in the Middle East, contributed to uncertainty in global trade, commodity markets, logistics and supply chains. These developments had the potential to affect crude oil prices, freight costs, availability of key inputs and international trade flows. The Economic Survey 2025 26 also highlighted the intensification of geopolitical competition and the increasing influence of security and political considerations on global trade and economic relationships.

Overall, the moderation in inflation, comfortable foreign exchange reserves and a manageable external balance contributed to a stable macroeconomic environment during FY 2025 26. While global trade uncertainties, geopolitical developments and currency movements remained key external risks, Indias strong domestic fundamentals continued to support its economic resilience.

2. Industry Overview & Key Trends

The Indian agriculture and agrochemical sectors continued to play a significant role in the countrys economic development during FY 2025 26. The agriculture and allied sector is estimated to have grown by approximately 3.1% during the year , supported by favourable monsoon conditions, improved agricultural production and steady growth across allied activities. Agricultural activity remained resilient during the first half of the financial year, aided by favourable weather conditions and improved agricultural output.

Indias agriculture sector continues to benefit from several structural growth drivers, including a growing population, rising food demand, the need for higher agricultural productivity, increasing cultivation of high-value crops and greater adoption of modern and technology-enabled farming practices. Continued government initiatives focused on irrigation, rural infrastructure, agricultural mechanisation, food security, enhancement of farmers incomes and sustainable farming are expected to provide further impetus to the sector.

The agrochemical industry remains an essential component of modern agriculture, supporting crop protection and contributing to improved farm productivity by addressing challenges posed by weeds, pests and diseases. India has strengthened its position in the global agrochemical value chain, supported by its manufacturing capabilities, cost competitiveness, skilled human resources and expanding export base. During FY 2025 26, Indias agrochemical exports remained robust, reaching approximately US$3.57 billion during April 2025 to February 2026, highlighting the countrys growing importance as a global supplier of agrochemical products.

The industry continues to witness opportunities arising from the increasing adoption of herbicides, fungicides, insecticides and other crop protection products. Growing awareness among farmers regarding the benefits of scientific crop protection, the need to reduce crop losses and the adoption of improved agricultural practices are expected to support sustained demand for agrochemical solutions. Further, relatively lower agrochemical consumption per hectare in India compared with several developed agricultural markets indicates considerable potential for increased adoption over the long term.

Indias emergence as a competitive and reliable manufacturing base is creating additional opportunities for domestic agrochemical manufacturers. Global efforts towards supply-chain diversification, increasing demand for generic agrochemical products and the expansion of international markets are providing Indian manufacturers with opportunities to strengthen their global presence. The continued growth in Indias agrochemical exports over the years reflects the countrys increasing competitiveness and its position among the leading agrochemical exporting nations.

Going forward, the outlook for the Indian agrochemical industry remains positive, supported by favourable agricultural fundamentals, increasing focus on crop productivity, growing domestic demand, export opportunities and Indias expanding role in the global agrochemical supply chain. At the same time, raw material price volatility, regulatory developments, climatic conditions, geopolitical uncertainties and changes in global trade policies will remain important factors influencing the industry.

3. Company Overview Dhansa Labs Limited

Dhansa Labs Limited is one of Indias leading manufacturers of 2,4-D, with a strong and established presence in the agrochemical industry. With over four decades of experience and a legacy spanning three generations, the Company has built its business on strong values, operational discipline and a continued commitment to innovation, sustainability and long-term growth.

The Companys manufacturing operations are substantially backward integrated up to base chemicals across most of its product lines, enabling greater control over product quality, manufacturing processes and costs. Its manufacturing facility is spread across approximately 5 acres (20,000 sq. metres) and is equipped to support efficient and reliable production operations.

The Company has a portfolio of more than 200 product and combination registrations, reflecting its strong focus on regulatory compliance, product development and market access. With a diversified customer base comprising more than 250 customers, the Company has established enduring relationships across its markets.

Supported by a prudent and low-debt capital structure, integrated manufacturing capabilities and a continued focus on operational excellence, Dhansa Labs Limited remains committed to strengthening its market position, expanding its product portfolio and delivering sustainable and consistent growth.

4. Companys Standalone Performance Overview Operational Highlights (Standalone figures):

Revenue growth of approx. 7.82% YoY, from INR 13,126.99/- (in lacs) to INR 14,153.72 (in lacs) thereby reflecting a sustained business momentum and improved market performance.

Profit Before Tax (PBT) improved to 26% YOY, which was primarily driven by improved operational efficiency, reduced high-cost debt and prudent cost management across key inputs and processes.

Profit After Tax (PAT) stood at INR 573.26 Lacs, reflecting 19.86% YoY growth. The improvement in profitability reflects stronger operating performance and effective cost management during the year.

5. Standalone Financial Performance

(in INR Lacs)

Particulars	2025-26	2024-25	% Change
Revenue from operation	14153.72	13126.99	7.82%
Other Income	151.30	191.61	-21.03%
Profit before Tax	760.63	603.83	25.96%
Net Profit after Tax	573.26	478.27	20%
Payment of Dividend	-	-	-
EPS	2.30	2.06	11.65%
Debtors Turnover Ratio	3.00	4.44	-32%
Inventory Turnover Ratio	4.61	5.20	-11%
Interest Coverage Ratio	4.24	3.3	28%
Current Ratio	3.20	2.19	46%
Debt Equity Ratio	0.48	0.53	-10%
Operating Profit Margin %	7.03%	6.60%	6.6%
Net Profit Margin %	4.05%	3.64%	11%
Return on Net Worth%	7.00%	9.00%	-26%

6. Opportunities

New Product Development through Capital Expenditure

The Company is undertaking targeted capital expenditure to strengthen its manufacturing capabilities and facilitate the introduction of new products. Investments in additional manufacturing infrastructure, process capabilities and related facilities are expected to enable the Company to expand its product portfolio, address evolving customer requirements and tap into new market opportunities. The addition of new products is also expected to support revenue diversification, improve capacity utilisation and strengthen the Companys long-term growth prospects.

Expansion into Exports & Intermediates

The company is actively exploring growth opportunities in export markets, which could diversify revenue streams thereby strengthening the Companys market presence and reduce its over-reliance on domestic markets.

Strong Manufacturing Credentials

With more than four decades of industry experience, Dhansa Labs Ltd. has built a strong foundation of technical expertise, process reliability, and regulatory compliance. The companys long-standing presence in the agrochemical space positions it as a trusted partner for environmentally conscious clients seeking quality-assured and sustainable solutions. This credibility not only enhances its appeal to both domestic and international customers but also provides a solid platform to scale operations efficiently while meeting evolving regulatory and market demands

Rising Domestic Demand

The broader growth of Indias agrochemical sector driven by rising exports, crop diversification, and the China+1 sourcing trend presents a supportive market backdrop for Dhansas expansion.

Entry into New Business Vertical (Compressed Biogas)

The Company has identified the Compressed Biogas (CBG) sector as a potential avenue for business diversification and long-term growth through its wholly owned subsidiary, M/s Dhansa Green Energy Private Limited. The proposed entry into the CBG business is aligned with the growing focus on renewable energy, clean fuel alternatives, waste-to-energy solutions and the circular economy. I t also aligns with the Government of Indias GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) initiative.

This initiative is expected to provide an opportunity to diversify the Companys business portfolio, participate in emerging opportunities in the renewable energy sector and contribute towards sustainable and environmentally responsible growth.

7. Threat:

Monsoon Dependency and Demand Fluctuations

Our Company remains heavily dependent on monsoon patterns, as rainfall directly influences crop sowing and input consumption. An inadequate or delayed monsoon can significantly reduce farmers demand for crop protection products, leading to sharp fluctuations in sales volume and excess inventory in the supply chain. This seasonal and weather-related unpredictability poses a key risk to revenue consistency.

Working Capital Strain Due to Delayed Payments

Delayed payments from customers, particularly in the domestic market, continue to pose a challenge to the companys working capital cycle. Extended credit periods or payment defaults can constrain liquidity, affect operational efficiency, and increase dependence on short-term borrowings. This can impact the companys ability to invest in growth initiatives or manage day-to-day expenses smoothly .

Inability to Meet Market Demand in Peak Cycles

At times, the company may face challenges in scaling up production or fulfilling large-volume orders during peak agricultural seasons, resulting in an inability to fully capitalize on market demand. This could lead to lost sales opportunities, customer dissatisfaction, or loss of market share to more agile competitors especially in a fast-moving, season-sensitive industry like agrochemicals.

8. Risk:

The Company operates in a dynamic environment and is exposed to a range of internal and external risks that may impact its operational and financial performance. Key risk factors include:

Monsoon Dependency and Seasonal Demand Volatility

Agriculture in India remains heavily dependent on monsoon rainfall. Any deviation from normal monsoon patterns, such as droughts or floods, can result in reduced demand for agrochemicals, affecting sales and profitability.

Working Capital and Liquidity Risk

Delayed payments from customers or extended credit cycles can strain working capital and impact day-to-day liquidity. This may necessitate increased reliance on external borrowings, potentially affecting the Companys financial stability.

Raw Material Supply and Pricing Risk

The Company depends on specific raw materials, some of which are imported. Volatility in raw material prices or supply chain disruptions particularly from global suppliers like China can impact production costs and timelines. Geopolitical tensions, armed conflicts and war-related disruptions in key regions may further affect global trade routes, shipping costs, availability of raw materials and lead times.

Company continues to monitor global developments and supplier availability and endeavors to mitigate such risks through prudent inventory management, supplier diversification and appropriate sourcing strategies.

9. Concern

While the Company continues to show resilience and pursue growth opportunities, certain concerns persist that may affect short- to medium-term performance:

Macroeconomic Uncertainty

Volatility in global and domestic economic conditions, including inflation, interest rates, currency fluctuations, commodity prices and changes in trade policies, may impact input costs, customer demand and overall business performance, particularly in international markets.

Geopolitical Tensions and War-Related Supply Chain Disruptions

The Company is actively exploring opportunities to expand its presence in international markets; however, export-oriented growth is subject to various risks, including changes in international trade policies, tariffs, import regulations, product registration requirements, foreign exchange fluctuations, geopolitical developments and changing demand conditions across markets. Competition from global manufacturers and potential disruptions in international logistics may also affect the Companys ability to capitalise on export opportunities. The Company continues to evaluate international markets prudently and seeks to mitigate these risks through customer and market diversification.

Delayed Customer Payments

A persistent concern is the delay in receiving payments from customers, particularly in the domestic market. Prolonged collection cycles may affect the Companys working capital position and liquidity and could constrain its ability to deploy funds towards expansion, capital expenditure and research and development activities.

Weather and Climatic Risks

Demand for agrochemical products is closely linked to agricultural cycles, weather conditions and rainfall patterns. Adverse or abnormal climatic conditions, including droughts, floods, unseasonal rainfall and extreme weather events, may affect crop cultivation and farmers purchasing patterns, thereby impacting product demand, sales volumes and seasonal performance.

10. Internal control systems and their adequacy.

Dhansa Labs Ltd. has established a robust internal control framework that is commensurate with the size and scale of its operations. It serves as critical mechanism for management to function effectively while ensuring rigorous oversight and accountability.

The Company has developed a robust and comprehensive internal control system to mitigate risks and support achieving its strategic objectives.

The system is designed to ensure the accuracy and reliability of financial reporting, safeguard assets, maintain operational efficiency, and ensure compliance with applicable laws and regulations. Based on ongoing evaluations, the management believes that the existing internal control systems are adequate and operating effectively, with no material weaknesses observed during the year under review.