DMCC Speciality Chemicals Ltd Management Discussions

Global Economic Performance and Outlook

The global economy demonstrated encouraging resilience in 2024, with growth holding steady at 2.7%, as highlighted in the World Banks January 2025 Global Economic Prospects report. This stable trajectory is expected to continue through 2025 and 2026, reflecting a gradual return to pre-pandemic growth patterns. Notably, inflation and interest rates have moderated, creating a more predictable environment for businesses. Emerging markets and developing economies (EMDEs) are forecast to achieve a robust 4% annual growth, supporting global trade and investment flows.

While challenges such as trade policy shifts and climate-related events persist, the outlook is underpinned by ongoing policy reforms, technological advancements, and a renewed focus on sustainable development.

The global chemical industry in 2024 experienced a year of cautious recovery and transformation, shaped by a complex interplay of macroeconomic, geopolitical, and structural factors.

After a subdued 2023, where global chemical production increased by a marginal 0.3% due to economic realignments and persistent inflation, the industry rebounded in 2024 with production growth of 3.4%. This recovery was underpinned by stabilising energy prices, the gradual easing of supply chain bottlenecks, and renewed demand from critical end-use sectors such as semiconductors, automotive, construction, and electronics. Despite the upturn, the global chemical landscape remained marked by significant volatility and uneven regional performance. Geopolitical tensions, most notably the ongoing Russia-Ukraine conflict and trade policy shifts, continued to disrupt global supply chains and contributed to fluctuations in energy and feedstock costs. These pressures were particularly acute in Europe, where high energy prices and supply chain disruptions in previous years had led to reduced production and increased reliance on imports. However, as energy costs stabilised and economic recovery gained traction, the Eurozone chemical sector began to show signs of improvement in 2024, albeit from a low base.

A defining feature of 2024 was the industrys intensified focus on operational resilience and cost efficiency. Companies responded to persistent cost pressures-particularly in warehousing, transportation, and raw materials-by rolling out aggressive cost-reduction programmes and asset rationalisation strategies. There was a marked shift towards digitalisation, with the adoption of artificial intelligence and predictive analytics to optimise supply chains, reduce waste, and engineer more sustainable products.

Sustainability and innovation continued to drive strategic priorities. Regulatory requirements and policy incentives accelerated the adoption of clean energy, circular economy concepts, and sustainable manufacturing practices. The industry invested in R&D for advanced materials, green hydrogen, battery chemicals, and carbon capture technologies, aiming to capture emerging opportunities in the energy transition and high- performance specialty chemicals segments. However, the recovery was not uniform across all segments or geographies. Inventory reductions that had impacted several industries in previous years began to abate, supporting a rebound in production for different chemical segments.

Yet, the growth rate in chemical sales during the first three quarters of 2024 showed mixed performance, reflecting ongoing adjustments to post-pandemic economic realities and shifting customer preferences. The industry also faced challenges from tightening regulations, evolving trade dynamics, and the need to re-strategise raw material sourcing models in response to both environmental and economic imperatives.

According to a Markets and MArkets report, looking ahead to 2025, the global chemical industry is expected to maintain its growth trajectory, with production projected to rise by 3.5% and the market size anticipated to reach USD 6,324 billion, up from USD 6,182 billion in 2024-a year-on-year increase of 2.3%. The outlook remains positive, supported by stabilising economies in Europe and the US, continued expansion in Asia- Pacific, and the abatement of inventory-related headwinds. However, the industry will continue to navigate a landscape characterised by ongoing geopolitical risks, supply chain realignments, and the imperative to balance cost efficiency with investments in innovation and sustainability.

India continued to reinforce its position as the worlds fastest-growing major economy in 2024, demonstrating remarkable resilience and adaptability amid a challenging global environment. According to the World Banks Global Economic Prospects report published in January 2025, Indias GDP growth is estimated at a robust 6.7% for both FY2025-26 and FY2026- 27, far outpacing the projected global average of 2.7%. This strong performance is attributed to a thriving services sector, a revitalised manufacturing base, and transformative government initiatives that have modernised infrastructure and simplified taxation. The World Bank highlights Indias ability to sustain momentum despite subdued global growth and external headwinds, noting that the countrys economic fundamentals remain sound.

Continued fiscal consolidation, buoyant revenue growth, and a manageable current account deficit further underpin the positive outlook. As India leverages its demographic dividend and deepens its integration into global value chains, it is well positioned to drive regional and global economic expansion in the years ahead.

The Indian chemical industry delivered a robust performance in 2024 even as the broader global chemical sector navigated a landscape marked by volatility, shifting demand patterns, and persistent supply chain disruptions. The industrys resilience was evident in its ability to maintain a strong growth trajectory, supported by dynamic domestic consumption, rising export opportunities, and a strategic pivot toward specialty and value-added chemicals.

The year was not without its challenges.

The industry faced headwinds from volatile energy and feedstock prices, global geopolitical tensions, and logistical disruptions, particularly those emanating from the Red Sea and other key shipping routes. Despite these pressures, Indian producers demonstrated remarkable adaptability by optimising supply chains, diversifying sourcing strategies, and leveraging digital technologies to enhance operational efficiency.

A significant highlight for 2024 was the continued expansion of Indias specialty chemicals segment. This high-margin, innovation-driven sub-sector grew and benefited from global customers seeking alternatives to China for sourcing advanced intermediates, agrochemicals, and performance materials. The “China+1” strategy adopted by multinational corporations played to Indias strengths, with the countrys proven technical expertise, favourable policy environment, and expanding manufacturing capacity making it an attractive destination for new investments and long-term supply partnerships.

Sustainability and decarbonisation also rose to the forefront in 2024. Indian chemical companies accelerated investments in green chemistry, renewable feedstocks, and circular economy initiatives, responding to both regulatory requirements and evolving customer expectations. Projects in green hydrogen, bioplastics, and waste-to-chemicals gained traction, positioning India as a potential leader in sustainable chemical manufacturing in the Asia-Pacific region.

Despite these positive developments, the industry continued to grapple with structural challenges. R&D spending, while growing, still lagged behind global peers, and the sector faced ongoing competition from lower-cost imports, particularly from China. Supply chain resilience remained a priority, with companies investing in digital tools and regional diversification to mitigate the impact of future disruptions.

The imposition of new tariffs by the United States, presents both challenges and opportunities for the Indian chemical industry. On the risk side, higher tariffs on Indian chemical exports can reduce price competitiveness, potentially impacting export volumes and pressuring industry margins. This is especially pertinent as global supply chains remain volatile and competition from other low-cost manufacturing hubs intensifies. However, these developments also create new strategic openings. As global buyers seek to diversify their sourcing away from traditional suppliers, Indias strong manufacturing base, improving compliance standards, and government support for the sector position it as an increasingly attractive alternative. Additionally, ongoing policy initiatives and investments in innovation and sustainability can help Indian producers capture market share in regions seeking reliable and compliant chemical suppliers.

Looking ahead to 2025, the outlook for the Indian chemical industry remains highly optimistic. The sector is projected to reach a market size of USD 300 billion, with exports expected to grow as global supply chains continue to diversify and demand for specialty and sustainable chemicals rises.

Surging Domestic Demand and End- User Diversification: Indias chemical sector is fundamentally driven by strong domestic consumption, with nearly 70% of output absorbed by local industries such as agriculture, pharmaceuticals, textiles, automotive, construction, and electronics (Invest Indial). This broad base not only insulates the sector from global volatility but also positions it to capture a significant share of incremental global chemical demand-India is expected to account for 20% of global consumption growth over the next two decades. The sectors deep integration with downstream industries ensures sustained growth as Indias economy expands and consumer preferences evolve.

Global Supply Chain Realignment and Export Momentum: Indias chemical exports now reach 175 countries. The global search for resilient supply chains, accelerated by geopolitical tensions and pandemic disruptions, has positioned India as a trusted partner. Specialty chemicals, agrochemicals, dyes, and food additives are leading export categories. This export momentum is supported by policy reforms, improved infrastructure, and the sectors reputation for quality and reliability.

Policy Support, Investment, and Infrastructure Expansion: The Indian governments targeted policy interventions- such as the Production-Linked Incentive (PLI) scheme, Remission of Duties and Taxes on Exported Products (RoDTEP), and the development of Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs)- are catalysing investment and capacity expansion. The sector also benefits from 100% FDI under the automatic route (except for select hazardous chemicals), tax incentives, and new plastic parks. Budget 2025s allocation of T20,000 crore for R&D and innovation is expected to further boost technology adoption and value creation.

Sustainability, Green Chemistry, and Digital Transformation: Sustainability is now a strategic imperative. Indian chemical companies are investing in green chemistry, renewable feedstocks, and circular economy models, driven by both regulatory mandates and global customer expectations. The industrys greenhouse gas intensity dropped by 7.4% and energy efficiency improved by 6.9% between 2018 and 2022 (Deloitte). Companies are embracing Industry 4.0 technologies-AI, IoT, and advanced analytics-to optimise operations, reduce waste, and enhance supply chain resilience. These trends are not only improving environmental performance but also boosting competitiveness and profitability.

R&D, Innovation, and High-Value Segment Expansion: Innovation is at the heart of the sectors evolution. Leading companies are ramping up R&D spending. The focus is on developing indigenous technologies, and advanced materials for high-growth sectors such as semiconductors, battery chemicals, and clean energy. The governments push for research hubs and Centres of Excellence is fostering collaboration between academia and industry, ensuring that India remains at the forefront of global chemical innovation.

DMCC Speciality Chemicals Limited, formerly known as The Dharamsi Morarji Chemical Company Limited, is one of Indias oldest and most trusted names in the chemical sector.

With a heritage dating back over a century, the Company has evolved into a leading manufacturer of both bulk and speciality chemicals, serving a broad spectrum of industries including agriculture, pharmaceuticals, textiles, detergents, dyes, and more.

DMCCs operations are structured around two principal business verticals: bulk chemicals and speciality chemicals. The bulk chemicals division focuses on high-volume products such as sulphuric acid, oleum, and chloro sulphonic acid, which form the backbone of several downstream industries.

The speciality chemicals segment is dedicated to high-value, low-volume sulphonating agents and their derivatives, with a strong emphasis on innovation, customisation, and value addition for clients in India and across international markets.

The Company is committed to sustainable manufacturing practices, continuous process improvement, and technological advancement. Its integrated manufacturing facilities, robust R&D capabilities, and experienced management team have enabled DMCC to build enduring relationships with a diverse customer base. With a focus on quality, reliability, and customer-centricity, DMCC Speciality Chemicals Limited remains a preferred partner for leading companies in the Indian and global chemical landscape.

In FY25, DMCC Speciality Chemicals Limited delivered a resilient performance with consolidated revenues of T431.3 crore, marking a 31.5% year-on-year growth. Bulk chemicals contributed 56% to the topline, while speciality chemicals accounted for the remaining 44%.

The bulk chemicals segment remained a backbone of operational stability throughout FY25, driven entirely by domestic demand. Despite elevated sulphur prices-particularly in the second half of the financial year -the company successfully navigated cost volatility by timely pricing actions. Volume momentum remained steady through the year, with capacity utilisation consistently above 90%. The uptick in sulphuric acid prices provided interim tailwinds, though these gains were partially offset by a corresponding rise in raw material costs. The company made no significant investments during the year, leveraging its existing infrastructure to meet demand without capacity constraints.

Speciality chemicals remained a key strategic focus in FY25, demonstrating progressive recovery despite persistent headwinds in export markets. The segment exhibited encouraging traction domestically, driven by higher volumes and selective price enhancements. During the year, the Company continued its strategic shift away from an over-reliance on European exports, expanding its presence in alternative markets such as Latin America and China. While these newer geographies have yet to match the scale of traditional markets, initial progress has been promising.

Operationally, the company utilised its multipurpose infrastructure to introduce several niche sulphur and boron-based downstream molecules. These are aligned with core competencies and were produced without major incremental capex. Capacity utilisation within this segment improved, though significant headroom remains, with utilisation rates ranging from 50% to 85% depending on product lines. Importantly, margin pressure in Q4 attributable to a sharp spike in sulphur prices was managed through contract-linked price resets that are expected to take effect from Q1FY26.

The boron chemicals business continued to build on its positive momentum, with growth supported by capacity debottlenecking and deeper downstream integration. The Company maintained strong customer engagement in this segment, with incremental investments directed towards operational optimisation rather than large-scale expansion. The future product development in this segment will remain centred around specialty applications.

Looking ahead, DMCC enters FY26 with cautious optimism. The company anticipates a temporary impact in Q1FY26 from a planned maintenance shutdown at its Roha plant. In parallel, industry dynamics are expected to shift with the commissioning of a large copper smelter in Gujarat. This development is projected to significantly increase domestic sulphuric acid supply, potentially leading to a softening of sulphuric acid prices in the coming quarters.

While these factors may exert pressure in the short term, DMCC is strategically well-positioned The company enters the new financial year with no major capex obligations, declining debt, and adequate working capital buffers. Operational capacities are in place, and infrastructure across both Roha and Dahej is underutilised in key product areas, offering an immediate platform fo scale-up as demand revives.

Importantly, the renewed focus on the Speciality Chemicals segment-via both product diversification and geographic rebalancing-has laid the groundwork for sustainable, higher-margin growth. As broader industry demand trends recover, particularly in key end-use sectors domestically, DMCC is poised to capitalise on its integrated manufacturing base, R&D investments, and stron< customer relationships to drive value creation.

At DMCC Speciality Chemicals Limited, risk management is embedded within our organisational culture and strategic decision-making. The Company recognises that a proactive and structured approach to identifying, assessing, and mitigating risks is essential to safeguarding stakeholder interests and ensuring long-term sustainability. Our risk management framework is periodically reviewed and enhanced to address the evolving dynamics of the chemical industry and the macroeconomic environment.

The Company is exposed to fluctuations in demand and pricing for its products, which may arise from changes in global and domestic economic conditions, industry cycles, and customer preferences. To mitigate these risks, DMCC maintains a diversified product portfolio and serves a broad base of customers across multiple sectors and geographies.

The Company continuously monitors market trends and adapts its business strategies to respond swiftly to emerging opportunities and challenges, thereby reducing its dependence on any single market or product segment.

Volatility in the prices and availability of key raw materials, such as sulphur, ore for boron, and other chemical feedstocks, poses a significant risk to operations and margins. DMCC addresses this risk by establishing long-term relationships with reliable suppliers, maintaining adequate inventory buffers, and exploring alternative sourcing options where feasible. The Company also employs efficient procurement practices and regularly reviews its supply chain to ensure continuity and cost competitiveness.

Operating in a highly regulated industry, DMCC is subject to stringent environmental, health, and safety regulations, as well as evolving international standards. Non-compliance could result in operational disruptions, penalties, or reputational harm. The Company mitigates these risks through a robust compliance management system, continuous monitoring of regulatory developments, and regular training requirements. Investments in advanced effluent treatment and emission control technologies further strengthen compliance.

Increasing stakeholder expectations and regulatory requirements around environmental sustainability present both risks and opportunities. DMCC is committed to minimising its environmental footprint through resource-efficient manufacturing processes, waste reduction initiatives, and adoption of cleaner technologies. The Companys sustainability roadmap includes ongoing investments in renewable energy, water conservation, and circular economy initiatives to ensure alignment with global best practices and future regulatory norms.

The chemical manufacturing process inherently involves operational hazards, including equipment failure, fire, explosion, and accidental release of hazardous substances. DMCC prioritises safety through rigorous standard operating procedures, regular safety audits, and comprehensive emergency response plans. The Company invests in modernising its infrastructure and provides continuous training to employees to foster a culture of safety and operational excellence.

Given the Companys exposure to international markets for both exports and imports, fluctuations in foreign exchange rates can impact financial performance. DMCC employs prudent hedging strategies and closely monitors currency movements to mitigate adverse effects. The Company also maintains a conservative approach to financial leverage and liquidity management to ensure financial stability.

Attracting, retaining, and developing skilled talent is critical to sustaining growth and innovation. The Company implements structured talent management programmes, offers ongoing training and development opportunities, and promotes a healthy, inclusive, and engaging work environment to ensure a motivated and capable workforce.

DMCC Speciality Chemicals Limited has established a robust and dynamic internal control framework, designed to align with the evolving complexities of its operations and the expectations of a diverse stakeholder base. The Companys internal controls are anchored in clearly articulated policies, standard operating procedures, and comprehensive guidelines that collectively ensure the safeguarding of assets against unauthorised use, loss, or misappropriation. Every transaction- whether operational or financial-is subject to stringent authorisation protocols, meticulous documentation, and transparent reporting, thereby upholding the highest standards of accountability and integrity.

The internal control environment is further reinforced by an independent and well- structured internal audit function, which operates with a clear mandate to assess, monitor, and enhance the effectiveness of controls across all business processes. Regular internal audits are conducted in accordance with a risk-based audit plan, focusing on critical areas and emerging risks. The findings and recommendations of the internal audit team are reviewed in detail by the Audit Committee of the Board, which provides strategic oversight and direction for continuous improvement. The Audit Committee ensures that management implements corrective actions promptly and that best practices in governance and risk management are consistently adopted.

DMCC recognises that a resilient internal control system is fundamental to mitigating operational, financial, and compliance risks, as well as to ensuring the reliability of financial reporting and the achievement of strategic objectives. Accordingly, the Company is committed to periodic evaluation and upgradation of its internal controls, leveraging technology and industry benchmarks to address new challenges and regulatory requirements.

DMCC Speciality Chemicals Limited remains steadfast in its commitment to cultivating a high-performance, future-ready workforce that underpins the Companys sustained growth and value creation.

Our human resource philosophy is anchored in transparency, meritocracy, and inclusivity, fostering an environment where open communication, mutual respect, and a culture of continuous improvement thrive. We recognise that our people are our most valuable asset, and empowering them is fundamental to achieving our strategic objectives and delivering superior stakeholder value.

In FY25, DMCC continued to invest in attracting, developing, and retaining top-tier talent across disciplines, ensuring that the Companys evolving business needs are met by a skilled and agile workforce. The Company has further refined its human resource policies and processes, emphasising performance excellence, and leadership development. Comprehensive training and development programmes were rolled out at all levels, equipping employees with the technical, managerial, and behavioural competencies required to excel in a dynamic business environment.

Industrial relations remained cordial throughout the year, reflecting DMCCs collaborative approach and commitment to maintaining a harmonious and productive workplace. The Company values constructive dialogue with employee representatives and unions, ensuring alignment on organisational goals and fostering a spirit of partnership. As of 31 March 2025, DMCCs workforce comprised 451 permanent employees.

By upholding best-in-class human resource practices and a people-centric ethos, DMCC continues to attract, nurture, and retain exceptional talent, thereby driving organisational excellence and securing long-term success.

The statements contained in this Management Discussion and Analysis Report that describe the Companys objectives, projections, estimates, expectations, or predictions may be considered forward-looking statements within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied, due to various risks and uncertainties beyond the control of the Company and its Directors.