DMCC Speciality Chemicals Ltd Management Discussions

Global Economy

The global economy in CY2025 evolved within a complex and shifting macroeconomic environment, characterised by persistent geopolitical tensions, changing trade dynamics and recalibrating policy frameworks. Rising geoeconomic fragmentation, driven by ongoing conflicts such as the Russia-Ukraine war and instability in the Middle East, continued to disrupt supply chains and energy markets, resulting in periodic volatility in commodity prices and financial conditions.

During the year, fragmentation intensified alongside a renewed wave of protectionist trade policies. Escalating geopolitical tensions and the resurgence of tariff-led measures, particularly by the United States and corresponding responses from major economies, contributed to a more fragmented global trade architecture. These developments elevated trade policy uncertainty and introduced distortions in global trade flows, investment decisions and supply chain configurations.

A notable feature of CY2025 was the sharp escalation in trade restrictions, with effective tariff rates rising to multi-decade highs. This heightened policy uncertainty weighed on crossborder investment and global trade momentum. Economic activity in the early part of the year remained relatively resilient, supported by temporary factors such as the front-loading of trade and industrial production, as businesses advanced shipments and investments ahead of anticipated tariff increases.

As the year progressed, the effects of these measures became more visible. The broadening of tariffs and the tightening of trade policies moderated global trade growth and reinforced concerns around supply chain realignment. While some stabilisation emerged in the latter half of the year, supported by selective negotiations and temporary pauses in tariff escalation, underlying structural fragmentation remained a defining feature of the global economic landscape.

According to the International Monetary Fund, global growth is estimated at 3.4% in CY2025, reflecting gradual adaptation to evolving trade policies and continued investment in artificial intelligence, which supported asset markets and productivity expectations. Advanced economies are estimated to grow by 1.9%, constrained by earlier tight financial conditions, elevated public debt and structural challenges in parts of Europe and Japan, although North America benefited from fiscal support and technology-led investment. Emerging market and developing economies are estimated to expand by 4.4%, supported by resilient domestic demand, infrastructure investment and policy support across key Asian economies, with India and South-East Asia remaining key contributors to global growth.

Source: IMF, World Economic Outlook, April 2026.

Global headline inflation is estimated to moderate to 4.1% in CY2025, reflecting easing commodity prices, normalising supply conditions and the lagged impact of prior monetary tightening. Disinflation trends remained uneven across regions. In response, central banks in major

economies, including the United States and the United Kingdom, began cautiously transitioning towards a more accommodative monetary stance, while remaining vigilant to residual inflationary pressures.

Source: IMF, World Economic Outlook, April 2026.

Global Economy: Outlook

As CY2026 unfolds, the global economy faces renewed uncertainty, with escalating geopolitical tensions emerging as a significant downside risk to a fragile recovery. The conflict involving the United States, Israel and Iran, ongoing as of mid-April 2026, has become a key source of global instability. The escalation, together with the breakdown of negotiations in Islamabad, has heightened risks to the security of the Strait of Hormuz, a critical energy transit route accounting for a substantial share of global oil and LNG flows. These developments have contributed to increased volatility in energy prices and heightened concerns around potential supply disruptions, with implications for global inflation, trade balances and financial stability.

This evolving geopolitical backdrop comes at a time when global growth had begun stabilising, supported by easing financial conditions, technology-led investment and policy support, even as structural headwinds from elevated trade barriers and persistent policy uncertainty remained in place. The current conflict introduces a fresh supply-side shock, reinforcing inflationary

pressures and tightening global financial conditions, thereby weighing on consumption and investment.

Global growth is projected to slow to 3.1% in CY2026, before improving marginally to 3.2% in CY2027. Growth in advanced economies is expected to remain subdued at 1.8% in CY2026 and 1.7% in CY2027, reflecting tight fiscal conditions, ageing demographics and modest productivity gains. Emerging market and developing economies are projected to grow 3.9% in CY2026 and 4.2% in CY2027, supported by domestic demand resilience, infrastructure investment and stronger macroeconomic buffers.

Source: IMF, World Economic Outlook, April 2026.

Inflation dynamics are expected to remain uneven. Global headline inflation is projected to rise to 4.4% in CY2026, driven by commodity price volatility and supply disruptions, before moderating to 3.7% in CY2027 as these effects ease. The combination of slower growth and elevated inflation is expected to be more pronounced in emerging market and developing economies, where external vulnerabilities and currency pressures may amplify inflationary trends. The outlook remains contingent on the trajectory of geopolitical developments and the effectiveness of policy responses.

Source: IMF, World Economic Outlook, April 2026.

Indian Economy

Despite global uncertainty and volatility, India has reaffirmed its position as one of the worlds fastest- growing major economies for the fourth consecutive year in FY2025-26. Indias real GDP is estimated at 7.6% in FY2025-26, according to the Second Advance Estimates of gross domestic product released by the government on 27 February 2026, based on the new and updated series. Economic performance in FY2025-26 was supported by robust real growth in the second quarter (8.4%) and the third quarter (7.8%). Under the new and updated series, real GDP has been revised to 7.2% and 7.1% for FY2023-24 and FY2024-25 respectively.

Source: Second Advance Estimates, Ministry of Statistics and Programme Implementation (MoSPI), 27 February 2026.

Real Gross Value Added is estimated at ^294.40 lakh crore in FY2025-26, up from ^273.36 lakh crore in FY2024-25, reflecting a growth rate of 7.7%, up from 7.3% in FY2024-25. Growth was driven mainly by domestic consumption. Private consumption and investment provided consistent momentum, with the services sector continuing to be the main driver on the supply side. Manufacturing showed further improvement, and agriculture offered stability despite structural constraints.

Source: Second Advance Estimates, MoSPI,

27 February 2026.

India recorded a sharp decline in inflation during FY2025-26. Average headline Consumer Price Index inflation for the April to December 2025 period declined to 1.7%, driven primarily by corrections in vegetable and pulse prices, supported by favourable farm conditions, supply-side interventions and a strong base effect. In December 2025, the Reserve Bank of India projected inflation of 2.0% for FY2025- 26, down from 4.6% in FY2024-25.

Source: Reserve Bank of India, December 2025.

In response to the easing inflationary environment, the RBIs Monetary Policy Committee cumulatively reduced the repo rate by 100 basis points across its meetings from April to December 2025. As of December 2025, the repo rate stood at 5.25%. In its meeting on 8 April 2026, the RBI kept the repo rate unchanged and maintained a neutral stance, reflecting the balance required amid evolving macroeconomic conditions, particularly geopolitical uncertainties and global supply chain disruptions. The inflation outlook remains benign, supported by favourable supply-side conditions and the gradual pass-through of GST rate rationalisation, though the trajectory of core inflation will need to be monitored.

Source: Reserve Bank of India, Monetary Policy Committee, April 2026.

Source: Economic Survey 2025-26, Government of India; Reserve Bank of India. P: Projected.

Indian Economy: Outlook

Following a year marked by major structural reforms, particularly in labour laws and the GST framework, India enters 2026 on a more confident growth path. A diversified domestic consumption base, sustained government capital expenditure, resilient services and support to the manufacturing ecosystem are expected to support a potential growth rate of around 6.8% to 7.2% in FY2026-27.

Source: Economic Survey 2025-26, Government of India.

Global trade protectionism, rising geopolitical conflict and potential shocks from financial volatility are key downside risks to Indias economic momentum. Domestic factors that could hamper growth include weak urban consumption, a slow revival of private investment, low agricultural productivity and adverse climate events.

Global Chemical Industry

In 2025, the global chemical industry recorded a measured and uneven performance, reflecting subdued industrial activity and persistent macroeconomic uncertainty. Growth remained modest across key end-use sectors such as automotive, construction and consumer goods, while operating conditions continued to be influenced by elevated input costs and cautious demand recovery. Geopolitical tensions, including the Russia-Ukraine conflict and instability in

the Middle East, disrupted the availability and movement of critical feedstocks and intermediates, leading to supply chain inefficiencies and higher logistics costs. Energy markets remained volatile, with fluctuations in crude oil and natural gas prices affecting petrochemical cost structures and compressing margins, particularly in energyintensive regions such as Europe.

Global trade dynamics further weighed on industry performance, as tariff measures and protectionist policies, particularly between the United States and its key trading partners, contributed to trade imbalances and pricing disparities across regions. Export-oriented markets experienced reduced competitiveness, while regional fragmentation accelerated a shift towards localisation and supply chain diversification. Performance remained regionally divergent, with North America relatively resilient on stable energy availability, Asia recording mixed demand trends, and Europe continuing to face structural cost pressures. The industry response was characterised by a sharper focus on cost optimisation, portfolio realignment towards higher-value segments and strategic adjustments to mitigate ongoing geopolitical and economic uncertainties.

At the same time, sustainability imperatives, evolving environmental regulations and increased investment in research and development continued to reshape the industry. Companies increasingly prioritised low-carbon production,

circular economy models and sustainable feedstock alternatives, driven by stricter regulatory frameworks across Europe and North America and growing stakeholder expectations. Innovation remained central to long-term competitiveness, with heightened focus on speciality chemicals, green chemistry and digital-enabled process efficiencies.

The global chemical market is estimated at US$5.33 trillion in 2025 and is projected to reach US$5.68 trillion in 2026, reflecting a growth rate of approximately 6.6%. This growth is underpinned by continued expansion in industrial manufacturing, infrastructure development, agrochemical demand, personal care consumption and oil and gas processing. The market is expected to grow to US$7.58 trillion by 2030, registering a CAGR of 7.5%, driven by increasing demand for speciality chemicals, rising investment in advanced manufacturing technologies, stronger regulatory focus on sustainability and emissions, and wider adoption of digital process optimisation.

Source: Chemicals Market Report 2026, Research and Markets.

Indian Chemical Industry

In 2025, the Indian chemical industry delivered a resilient performance despite global volatility, geopolitical disruption and increasing trade fragmentation. Growth was supported by robust domestic demand across key end-use

sectors such as pharmaceuticals, agrochemicals, construction, textiles and personal care, alongside continued government thrust on infrastructure and manufacturing. Indias structural advantages, including cost competitiveness, a diversified manufacturing base and favourable policy support, enabled the industry to sustain momentum even as global demand remained uneven. The sector faced margin pressure from volatility in feedstock and energy prices, while excess supply from global markets, particularly China, weighed on pricing in select segments. Export competitiveness was also affected by tariff uncertainty and shifting trade dynamics, prompting companies to focus on operational efficiency, product diversification and strengthening their domestic presence.

The speciality chemicals segment continued to outperform, driven by rising global demand for high-performance and value-added products and by the ongoing supply chain realignment under the China-plus-one strategy. Indian manufacturers benefited from rising export opportunities, deeper integration into global value chains and improved customer diversification, supported

by investment in R&D, process innovation and capacity expansion. Challenges persisted in the form of pricing pressure from global oversupply, rising environmental compliance costs and continued dependence on certain imported intermediates. The segment remains structurally well positioned, supported by sustained global outsourcing, an increasing focus on sustainability and a gradual shift towards complex, technology- driven chemistries.

Sustainability and decarbonisation are increasingly shaping the industrys strategic direction, with regulatory mandates around net-zero targets and carbon emission reductions driving transformation. Companies are aligning product development and manufacturing with stricter environmental standards, focusing on low-carbon technologies, energy efficiency and sustainable feedstocks. This is accelerating investment in green chemistry, circular solutions and process innovation.

Indias chemical market is projected to expand at a CAGR of 8% to 9% over the next five to six years, reaching US$230 billion to US$255 billion from the current US$155 billion to US$165 billion, potentially outpacing GDP growth and presenting a significant opportunity for companies to scale capabilities and compete as global suppliers beyond domestic demand.

Source: McKinsey & Company, From challenges to possibilities: leading Indias chemical industry through global headwinds.

Performance Overview and Outlook

In FY2026, DMCC Speciality Chemicals Limited reported consolidated revenue from operations of ^581.58 crore, an increase of 34.84% over FY2025. Growth was led by the bulk chemicals segment, where a sustained rise in sulphur prices translated into higher sulphuric acid realisations through the year. Bulk chemicals accounted for the larger share

of the topline, with speciality chemicals making up the balance. Profit after tax rose 26.95% to ^27.33 crore. The consolidated EBITDA margin moderated to 11.04% from 13.49% in FY2025, as the higher revenue base created by elevated commodity prices diluted percentage margins even as absolute profitability was protected. Interest cost for the year declined 8.48% to ^9.61 crore, although short-term borrowings rose in the second half to fund higher working capital.

Bulk Chemicals

The bulk chemicals segment was the principal driver of revenue growth in FY2026, supported almost entirely by domestic demand. Sulphur, the key raw material for the segment, recorded a steady and substantial price increase through the year. Tight global availability was compounded in the second half by disruption to shipments through the Strait of Hormuz, the route for a significant share of world sulphur trade, following the conflict in the Middle East. The Company passed the higher input costs through to customers and protected absolute profitability, though the elevated revenue base moderated margin percentages. Volumes held broadly steady. The Dahej facility, which sources sulphur domestically, operated at normal levels, while the Roha site, which relies on imported sulphur, faced raw material availability constraints towards the year end and operated at reduced capacity for a period. The Company made no significant investment in the segment, meeting demand from its existing infrastructure.

Speciality Chemicals

Speciality chemicals operated against subdued demand in the Companys traditional European markets through FY2026. In response, the Company continued to reduce its dependence on Europe and expanded its presence in alternative

geographies, recording improved offtake in Latin America, China, Japan and Korea. The impact of newly imposed tariffs in the United States was contained, with supply maintained and the associated costs passed on to customers in that market. Price passthrough in this segment operates with a lag, reflecting quarterly contract cycles rather than spot pricing. Towards the close of the year, the Company observed an increase in enquiry levels from overseas markets, an early indication of a possible revival in demand that is yet to translate into firm orders. Capacity utilisation in the segment continued to carry headroom, providing scope for scale-up as demand recovers.

Boron Chemicals

The boron chemicals business had an uneven year.

In the first half, the Company lost a substantial part of its production owing to a disruption in the supply of boron ore from its principal supplier in Turkey, which affected availability across India and left the segment close to non-operational for a period. Supply was restored in the second half, allowing the plants to run at full capacity with inventory rebuilt. At its present scale, the boron business has the potential to add meaningful diversification to the overall portfolio. In the final quarter, boric acid operations ran normally, while the non-boric acid portion saw some moderation in offtake as certain end-use industries were affected by gas shortages. The change in procurement terms, from credit-based purchases to advance payment with extended delivery lead times, added to the segments working capital requirement.

Consolidated Outlook

The operating environment across commodity and speciality chemicals remained challenging and continues to be shaped by several external variables, including the trajectory of sulphur prices and the situation in the Middle East. A reopening of the Strait of Hormuz would not bring immediate relief, as the restoration of normal supply chains would take time given shipping lead times, inventory rebuilding across the value chain and the period required for prices to settle. The Company has not experienced any order cancellations and its operations have continued without interruption. In the near term, the focus is on maintaining operational stability and managing working capital prudently. Over the medium term, the Company remains reasonably confident in its prospects. It carries no major capital expenditure obligations and has built the asset base, capability and capacity to scale as conditions stabilise. The diversification of the portfolio across commodity, speciality and boron chemistry, the rebalancing of the geographic footprint, and a strengthened sustainability profile, with the solar project at Roha and the waste heat recovery and cogeneration facilities at Roha and Dahej now meeting over 80% of the Roha facilitys energy requirements, position the Company to recover as the operating environment normalises.

Key Financial Ratios
Financial Ratio	FY2026	FY2025 FY2024
Operating Profit Margin (%)	11.04%	13.49% 13.81%
Net Profit Margin (%)	4.70%	4.99% 3.53%
Debtor Turnover (x)	6.84	7.20 6.71
Inventory Turnover (x)	6.08	6.17 4.13
Interest Coverage (x)	5.05	3.97 2.25
Debt-Equity (x)	0.44	0.32 0.42
Current Ratio (x)	1.37	1.23 1.08
11.01%	9.46% 5.53%

Industry Trends, R&D and Growth Drivers

The chemical industry continues to evolve towards higher value-added products, driven by increasing demand for speciality chemicals, sustainability requirements and technological advancement. There is a visible shift towards a higher focus on speciality and performance chemicals, increased adoption of process efficiencies and digital integration, and strengthening of domestic manufacturing capabilities.

For the Company, this transition is reflected in its continued focus on expanding the speciality chemicals portfolio, strengthening the boron segment through downstream integration, and leveraging existing infrastructure to introduce new products without significant capital expenditure. The Company continues to prioritise process improvement and product development aligned with its core sulphur and boron chemistry platforms, enabling a gradual movement towards higher-margin segments.

Risks and Concerns

The Company operates in a cyclical and globally interconnected industry and is exposed to multiple risks.

? Market and Economic Risks

Demand for the Companys products is influenced by global and domestic economic conditions, industrial activity and end-use sector performance. A slowdown in key markets, particularly Europe, affected demand during the year.

H Geopolitical Risks

Ongoing geopolitical developments, including global trade disruptions and regional conflicts, continue to affect supply chains, commodity prices and trade flows, and may lead to volatility in both input costs and export demand.

HRaw Material Risks

Sulphur remains a key input, and volatility in its price directly affects margins. Dependence on imported boron raw materials exposes the Company to supply chain disruption and longer lead times.

H Pricing and Industry Risks

The commissioning of new smelter capacity is expected to increase the domestic supply of sulphuric acid, which may exert pressure on realisations in the near term.

H Operational Risks

Chemical manufacturing involves inherent risks related to safety, process stability and environmental compliance. The Company continues to mitigate these through established operating procedures and control systems.

H Foreign Exchange Risks

Exposure to exports and imports subjects the Company to currency fluctuations, which may affect financial performance.

H Human Resource Risks

The availability of skilled talent remains critical to sustaining operations and growth. The Company manages these risks through diversification, operational discipline and continuous monitoring of market conditions.

Internal Control Systems and Their Adequacy

The Company maintains an internal control framework designed to keep pace with the scale and complexity of its operations and with the expectations of its stakeholders. The controls rest on defined policies, standard operating procedures and guidelines that together safeguard the Companys assets against unauthorised use, loss or misappropriation. Operational and financial transactions are subject to established authorisation protocols, supporting documentation and transparent reporting, which sustains accountability across the organisation.

The framework is supported by an independent internal audit function with a mandate to assess, monitor and strengthen controls across business processes. Audits are carried out under a risk- based plan that gives priority to critical areas and emerging risks. The internal audit teams findings and recommendations are reviewed by the Audit Committee of the Board, which provides oversight, directs corrective action and ensures that sound governance and risk management practices are followed. Management implements the agreed actions within defined timelines.

The Company regards a sound internal control system as central to managing operational, financial and compliance risks, to the reliability of financial reporting and to the achievement of its objectives. It reviews and upgrades its controls periodically, drawing on technology and industry benchmarks to address new challenges and regulatory requirements.

Human Resource

The Company continues to focus on building a capable and adaptable workforce to support its growth and value creation. Its approach to human resources is built on transparency, meritocracy and inclusivity, and on an environment of open communication, mutual respect and continuous improvement. The Company considers its people to be its most important asset and views their development as integral to meeting its objectives and delivering value for stakeholders.

During FY2026, the Company continued to attract, develop and retain talent across functions, so that its evolving business needs are served by a skilled and agile workforce. Human resource policies and processes were refined further, with emphasis on performance and leadership development, and training programmes were conducted across all levels to build the technical, managerial and behavioral capabilities required in a dynamic business environment.

Industrial relations remained cordial through the year, reflecting the Companys collaborative approach and its engagement with employee representatives and unions on shared organisational goals. As at 31 March 2026, the Company had 450 permanent employees. Through these practices and a people-centred culture, the Company continues to attract, develop and retain talent and to support long-term performance.

Cautionary Statement

Statements in this Management Discussion and Analysis 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, on account of risks and uncertainties that are beyond the control of the Company and its Directors.