Fine Organic Industries Ltd Management Discussions

GLOBAL ECONOMY

In 2023, the global economy demonstrated remarkable resilience, recovering from the prolonged impact of the COVID-19 pandemic despite ongoing geopolitical tensions and challenges related to the cost of living. While inflation reached its peak in 2022, it is now receding more rapidly than initially anticipated, leading to a less severe impact on employment and economic activity. This encouraging trend is credited to favourable supply-side advancements and proactive measures implemented by central banks to stabilise inflation expectations.

The forecast for global GDP growth predicts stability at 3.1% in 2024, with a slight increase to 3.2% in 2025. Led by solid growth in mainland China and India, Asia-Pacifics real GDP is forecast to pick up from 3.2% to 4.1% in 2023 and 4.6% in 2024, accounting for about 60% of global growth. This resilience is attributed to stronger-than-expected performance in the United States and several major emerging market economies, as well as ongoing fiscal stimulus in China. However, these projections fall below the historical average of 3.8% (2000-2019) due to factors such as high central bank rates, reduced fiscal support amid significant debt burdens, and sluggish productivity growth. Inflationary pressures are easing across regions due to the resolution of supply-side constraints and tighter monetary policies. Global headline inflation is projected to decrease from 6.8% in 2023 to 5.8% in 2024 and further to 4.4% in 2025.

(Source: https://www.cnbc.com/2024/04/16/imf-upgrades- global-growth-forecast-as-economy-proves-surprisingly- resilient-despite-downside-risks.html)

Outlook

In 2024-25, the global economy has a more precarious path to cover. Despite headwinds from tighter monetary policies, reduced government stimulus, and sluggish productivity, growth is projected to reach a modest 3.1% and 3.2% in 2024 and 2025, respectively. The inflation is expected to cool off at 5.8% in 2024 and 4.4% in 2025, which calls for policymakers to exercise caution in managing its descent to prevent impeding growth. Faster disinflation and Chinas recovery present an optimistic outlook, while geopolitical tensions and persistent inflation pose downside risks. Long-term growth, especially in emerging markets, hinges on structural reforms aimed at boosting productivity and ensuring debt sustainability.

(Source:https: //mediacenter.imf.org/news/imf-world- economic-outlook-?anuary-update/s/23d478e1-994f-41c4- b428-879d0e0e68ef)

INDIAN ECONOMY

Indias economy continues on a robust growth trajectory despite global uncertainties, achieving an 8.2% growth rate during 2023-24, according to the PIB. This growth is driven by increased public sector investment and a strong financial sector. This growth is driven by strong domestic demand for consumption and investment, along with the governments continued emphasis on capital expenditure. The industry and service sectors were the primary growth drivers in the first half of the financial year, with India registering the highest growth among major advanced and emerging market economies during 2023-24. The economy is expected to become the third-largest in 2027 in US$ at the market exchange rate, with its contribution to global growth rising by 200 basis points in 5 years.

Indias robust economic growth can be attributed to the governments focussed economic policies aimed at revitalising the countrys growth potential. The manufacturing, services, and agriculture sectors have all played significant roles in driving Indias GDP growth. Notably, the manufacturing sector has seen remarkable expansion, contributing approximately 17% to the GDP. With ambitious projections of a 21% growth trajectory over the next 6-7 years, manufacturing stands as a pivotal driver of economic advancement. This success is further strengthened by transformative initiatives such as the PM GatiShakti initiative, the National Logistics Policy, and the Production Linked Incentive (PLI) scheme.

The service sector, representing the largest segment of Indias economy, has demonstrated remarkable growth, with Gross Value Added (GVA) at current prices estimated at 146.35 lakh crores in 2023-24. Comprising 54.86% of Indias total GVA of 266.78 lakh crores this sectors expansion is fueled by factors such as the increasing number of educated and skilled workers, the burgeoning middle- class population, and the burgeoning digital economy.

In agriculture and allied sectors, the growth rate of GVA has shown a notable increase from 2.10% in 2018-19 to 3.96% in 2022-23. Government policies, reforms, developmental programmes, and schemes have aimed at improving agricultural growth prospects and farmer incomes. These efforts have yielded tangible results, with the GVA of the agriculture and allied sector registering an average annual growth rate of 4% over the past five years.

(Source: https://pib.gov.in/PressReleasePage.aspx Rs.PRID=2001124. https://prsindia.org/budgets/parliament/demand-for- grants-2023-24-analysis-agriculture-and-farmers- welfare#:~:text=The%20Ministry%20has%20been%20 allocated.of%20the%20total%20Union%20Budget.)

Outlook

Indias growth outlook remains optimistic and promising, with ambitious targets set to propel the nation towards economic milestones. Aspiring to become a US$ 7 trillion economy by 2030, India is poised to reach the significant milestone of a US$ 5 trillion economy within the next three years, making it the third-largest economy globally. This trajectory is driven by the stability and robustness of domestic demand, along with the expansion of private consumption and investments, underpinned by ongoing structural reforms. With a firm commitment to transformation, India not only focusses on economic growth but also aims to transition into a developed country by 2047. These ambitious goals, coupled with sustained efforts to enhance competitiveness and foster innovation, pave the way for continued growth and prosperity on Indias journey to becoming a global economic powerhouse.

(Source: https://www.crisil.com/en/home/events/india- outlook.html )

INDUSTRY OVERVIEW

Specialty Chemicals

Globally, the specialty chemicals industry has emerged as a vital segment within the chemical sector, experiencing substantial growth and significance. The growth is driven by factors, including the rising demand for sustainable specialty chemicals, high-performance materials, and downstream value-added opportunities. Moreover, the increasing per capita disposable income and shifts in consumer preferences have led to an improvement in demand for end- user industries like agrochemicals and home/personal care products. Furthermore, this has led to rising demand for specialty chemicals.

In 2023, the chemical industry encountered challenges like global inflation, oil price volatility, and geopolitical tensions, posing potential headwinds for Companies.

To add to this, the Red Sea crisis significantly impacted the industry, particularly in Europe, disrupting raw material supply chains and leading to increased freight surcharges

and increased lead time. Despite these challenges, the industry is adapting by diversifying sourcing channels, optimising inventory management, and exploring alternative transportation routes. While the initial impact was substantial, proactive measures have mitigated some of the disruptions.

Today, the industry is positioned to lead the material transformation and combat climate change, with chemical producers playing a crucial role in addressing these pressing issues. The market is propelled by ongoing research and development efforts, facilitating the production of goods with optimal and sophisticated characteristics. In the global specialty chemicals market, the Asia-Pacific region takes the lead as the largest and fastest-growing, fuelled by rapid urbanisation, growing demand for application-specific chemical specialties, and increasing population growth led by India and China.

INDIAN SPECIALTY CHEMICALS MARKET

In recent years, the Indian specialty chemicals industry has undergone remarkable growth, solidifying its position as a pivotal player in the countrys chemicals and petrochemicals market. This growth is characterised by record-high investments in capex and robust revenue, driven by strong demand from global clients.

(Source: https://assets.kpmg.com/content/dam/kpmg/in/ pdf/2022/ll/Specialtv-Chemicals-industrv-India.pdf )

The specialty chemicals industry is experiencing robust growth propelled by heightened demand across various end- user sectors worldwide, including textile, food processing, and personal care. This demand highlights the versatility and applicability of specialty chemicals across industries. India is poised to emerge as a compelling alternative hub for specialty chemical manufacturing, fuelled by reduced operational cost disparities with China and the implementation of the China plus one strategy. Consequently, this strategic shift has enticed numerous global manufacturers to relocate their capacities to regions like India, enabling Indian Companies to produce specialty chemicals at a competitive cost and export them to major international markets, particularly the US and the European Union.

Indias appeal as a manufacturing hub is reinforced by several factors. Firstly, its low-cost operations, abundant feedstock, skilled labour, favourable government policies and improved infrastructure create a conducive environment for industry growth. Additionally, its extensive coastline and navigable waterways facilitate efficient trade routes, while import substitution prospects further enhance its attractiveness. Moreover, the countrys enhanced ease of doing business and a supportive macroeconomic environment continue to attract foreign specialty chemical manufacturers. With strategic investments in research and development, operational scaling, and efficiency measures, India is well-positioned to expand its global market share and gain a competitive edge in the specialty chemicals industry.

Oleochemicals

In 2023, the global oleochemicals market hit a significant milestone, reaching a valuation of US$ 37.88 billion, marking a pivotal moment in its growth trajectory. Forecasts predict a steady ascent at a Compound Annual Growth Rate (CAGR) of 6.3%, projecting the market to soar from US$ 40.37 billion in 2024 to US$ 65.38 billion in 2030, underscoring its resilience and potential for further expansion. The markets momentum is driven by the rise in demand for sustainable alternatives to petroleum-based chemicals and the surge in the implementation of stringent regulations promoting sustainability. This shift is attributed to the increasing adoption of oleochemicals across a diverse range of end-use sectors. These sectors include industrial, personal care & cosmetics, and food processing.

Oleochemicals, sourced from natural and renewable origins like vegetable oils, offer a greener alternative for various industries, including personal care, cosmetics, food & beverages, plastics, lubricants, and biofuels. Their versatility allows them to replace petrochemical-based products in various applications, ranging from animal feed to surfactants and plasticisers. Whether as essential components in industrial processes or as key ingredients in personal care, oleochemicals significantly enhance product quality, sustainability, and performance. Moreover, their natural origin and environmentally friendly attributes resonate with the growing consumer preference for eco-conscious and sustainable solutions. As a result, oleochemicals are poised for sustained growth momentum, driven by shifting market dynamics and the continuous pursuit of innovation and sustainability across industries worldwide.

(Source: https://www.fortunebusinessinsights.com/ oleochemicals-market-106250 )

INDUSTRY SEGMENT

Food Additives

Food additives play an important role in preserving the freshness or enhance their colour, flavour, or texture. While the preservation of food dates back thousands of years, with ancient techniques using natural additives like salt, vinegar, and spices to extend shelf life and enhance flavour, recent years have witnessed significant advancements in the food additive industry. Particularly significant are the bio-synthesis methods for colourants and additives. Today, the use of food additives is integral to the production of numerous modern

produc?s, including processed food, bakery, chocolate, and dairy produc?s, and confectionary highlighting their indispensable role in contemporary food manufacturing.

Global Outlook

The food additives market size is projected to grow from an estimated US$ 141 billion in 2024 to US$ 167.88 billion by 2029, registering a CAGR of 3.55% during the forecast period (2024-2029). This growth is driven by several factors, including the increasing popularity of functional foods, the growth of the processed food industry, and the rising demand for convenience foods. Additionally, increased awareness of food safety standards and the desire for extended shelf life are contributing to the markets upward trajectory.

The Asia-Pacific regi?n is poised to witness the fastest CAGR during the forecast period, attributed to the increasing awareness of healthy lifestyles and nutrition, coupled with rising per capita disposable income levels.

(Source: https://www.mordorintelligence.com/industry- reports/global-food-additives-market-industry)

India Outlook

The demand for processed food in India is witnessing a notable uptick, driven by shifting lifestyles and a growing inclination towards convenience among consumers. This trend is accompanied by a newfound openness to exploring new and unconventional flavours. Consequently, there has been a significant increase in the consumption of various packaged and processed foods, including cereals, and beverages like soft drinks, bakery items, and ready-to-eat meals. This surge in demand has propelled the sales of food additives in India, with the market reaching US$ 26.34 billion in 2023 and anticipated to hit US$ 28.77 billion in 2024. Moreover, projections indicate further growth, with the market expected to reach US$ 42.15 billion by 2029. Despite a relatively low market concentration, the additives market is forecasted to expand at a CAGR of 6.5% during 2024-2029.

Indias rich tapestry of cultures and regions gives rise to diverse food consumption patterns nationwide. This diversity underscores the need for a range of food additives to cater to varying culinary preferences, driving demand. Additionally, Indias status as a top global milk producer has fostered a thriving dairy industry, further boosting the need for food emulsifiers.

(Source: https://www.techsciresearch.com/news/338-india- food-additives-market-to-register-growth-at-over-12-cagr.html.

https://www.mordorintelligence.com/industry-reports/ india-teod Rs.dditives-market, Perry Hope Partners - 2023 Global Innovative Markets Forecast)

Factors Driving the Food Additives Industry

• Increasing demand for processed and convenience foods, driven by shifting consumer lifestyles, propels the food additives industry

• Growing awareness of food safety and a preference for natural or organic products also contribute to market growth

• Requiring superior food additives for food preservation, Asia, African and Middle Eastern countries, with hotter climates and rapid economic growth, face unique challenges

• Rising disposable incomes and urbanisation rates are fuelling an expansion in the food additives market

• Improving functionality and meeting consumer demands, advances in food science and technology lead to the development of new additives

• Rising demand for food additives in the hospitality sector, particularly in hotels and restaurants, is driven by trends in advanced nutrition and food preservation to prevent spoilage

Plastics and Packaging

Plastic additives are essential for modifying the properties of plastic products during compounding and processing, enhancing performance, durability, and protection from weather, UV light, and water damage. They also provide crucial characteristics like flame retardancy for safety. Advancements in the plastic industry focus on promoting a circular economy and addressing plastic waste challenges, with trends favouring bio-based raw materials and increased plastic recycling. In this context, plastic additives play a vital role in developing sustainable and eco-friendly plastic products.

(Source: https://plastics-rubber.basf.com/global/en/ plastic_ additives.html)

Global Outlook

The pl?stic additives market is undergoing signiflcant growth, driven by various factors such as the expansi?n of the packaging industry, changing lifestyles, urbanisation trends, and increased plastic usage across different sectors. With a forecasted CAGR of 5.3% between 2023 and 2030, the market indicates sustained momentum. Moreover, the Asia-Paciflc regi?n dominated the market in 2023, holding a substantial share of 55%.

One of the primary drivers of this growth is the escalating demand for packaging solutions, both in industrial and household contexts. Plastic additives play a crucial role in enhancing the properties of plastics, rendering them vital across a spectrum of applications, including rooflng, pipes, cables, safety gear, household products, and kitchenware.

The versatility of plastic additives flnds application across multiple industries, including packaging, processing and polymers, rubbers, pipes, construction, automotive, consumer goods, textiles, agriculture, and the medical sector. Particularly, the automotive and construction industries are major consumers of plastic additives, leveraging their desirable qualities, such as increased impact strength, improved coupling, higher elongation, reduced brittleness, and enhanced plasticity.

In addition to conventional plastic additives, the market is witnessing a growing interest in bio-plastic, bio-degradable plastic, and compostable plastic additives. These eco-friendly alternatives align with the global push towards sustainability, offering biodegradable solutions that mitigate environmental impact and promote a circular economy.

(Source: https://www.marketresearchfuture.com/ reports/plastic-additives-market-1753https:// www.precedenceresearch.com/plastic-additives market#:~:text=The%20global%20plastic%20 additives%20market.expansion%20of%20the%20 automotive%20sector.)

India Outlook

Indias consumption of plastic additives, including plasticisers, flame retardants flllers, and stabilisers, represents a signiflcant statistics. These additives serve as pivotal ingredients in plastic production, essential for enhancing their longevity and safety. The Indian Plastic Additives Market was US$ 58.056 billion in 2022 and is projected to register a CAGR of 5.44% from 2022 to 2028.

Indias plastic industry is experiencing growth due to factors such as urbanisation, a growing middle class, strong economic growth, and efflcient manufacturing centres. Plastic additives are witnessing high demand across various industries, including packaging, automotive, consumer goods, construction, electronics, agriculture. This surge in demand is primarily fuelled by the increased production of finished goods, such as wires, cables, pipes, packaging films, and auto parts, particularly within the Indian market.

Furthermore, the government has implemented strict regulations regarding the use of non-biodegradable plastics and is promoting the use of biodegradable plastics. This move is expected to increase demand for biodegradable plastics in the coming years, leading to a subsequent increase in demand for green additives in India.

(Source: https://www.techsciresearch.com/report/india- plastic-additives-market/3803.html)

Growth Drivers of Plastic Additives

• Increasing demand for plastic materials across industries and consumer goods

• Packaging industry drives growth in plastic additives demand

• Shifting consumer preferences towards eco-friendly plastic products, especially in food packaging

• Rising adoption of polymers for their unique properties

• Enhancing the durability, heat sensitivity, and strength of polymers & plastic additives play a crucial role in various industries

Cosmetics

Cosmetics encompass a wide range of products designed to cleanse, beautify, alter appearance, and maintain or enhance the condition of the skin or hair with minimal impact on the body. These products utilise various additives such as emollients, cosmetic emulsifiers, preservatives, fragrances, colorants, surfactants, water, vitamins, and antioxidants. These additives facilitate the manufacturing of cosmetics in diverse forms, including creams, gels, pastes, lotions, solutions, lipsticks, powders, and sprays. They play a crucial role in ensuring the long-term physical stability of products during transport and storage, while also preventing microbial contamination by inhibiting the growth of yeast and bacteria. Additionally, additives help maintain the freshness and safety of cosmetics for consumer usage. The cosmetics market comprises several primary product categories, including

skincare, haircare, makeup, perfumes, toiletries, oral cosmetics, and deodorants. Each category caters to speciflc consumer needs and preferences, contributing to the overall diversity and growth of the cosmetics industry.

(Source: https://www.fortunebusinessinsights.com/ cosmetics-market-102614)

Global Outlook

The global cosmetic ingredients market is propelled by a growing awareness of beauty and personal care, evolving consumer lifestyles and trends, increased usage of cosmetics, and rising disposable incomes worldwide. Cosmetic ingredients flnd application in skincare, hair care, facial makeup, colour cosmetics, and fragrances.

Moreover, theres a global trend towards safer and more natural options in cosmetic chemicals. This shift is driven by consumer preferences for organic products and concerns about hazardous chemicals. Stringent government regulations aimed at limiting the use of harmful substances further influence the cosmetic chemical industry. Additionally, these regulations prioritise consumer safety by promoting the adoption of safer, organic alternatives and restricting the use of hazardous elements in cosmetic formulations.

(Source: https://www.industrvresearch.biz/.https://www. alliedmarketresearch.com/cosmetic-chemicals-market)

India Outlook

India is one of the fastest-growing countries in Asia. The countrys cosmetic ingredients market reached US$ 87.4 billion in 2023 and is projected to record robust growth between 2025-29, registering a CAGR of 4.25%. In the Indian cosmetics ingredients market, there is a growing demand for high-quality ingredients, such as botanical extracts and advanced formulations, to cater to the increasing demand for premium skincare products. As income levels rise, consumers are more willing to invest in premium skincare products that offer superior quality and efflcacy. The demand for premium products has paved the way for the introduction of innovative and high-end skincare brands in the Indian market.

The personal care ingredients industry, which encompasses essential components such as emollients, surfactants, emulsiflers, rheology modiflers, and conditioning polymers, has experienced a signiflcant surge in demand. This growth can be attributed to several factors, including the rise in

disposable income among Indian consumers, changing consumer preferences towards organic and natural cosmetics, and the booming cosmetic industry in India.

Digitalisation has spurred online beauty retail, granting access to a wider array of products. As lifestyles evolve, consumers seek holistic beauty solutions, contributing to a paradigm shift in product choices.

(Source: https://www.techsciresearch.com/report/india- personal-care-ingredients-market/1255.html )

Growth Drivers in Cosmetics Additives

• Desire for self-care and grooming

• Increase in demand for skincare and haircare products

• Rise in consumer awareness

• Focus on improving ingredient texture

• Trends in mens and womens cosmetics

• Preference for natural products

• Importance of personal and feminine hygiene

• Impact of social media on product exposure

Coating Additives

Additives serve as essential raw materials in coatings, enhancing product quality, stability, and performance for various end-user applications. While the quantities used may be modest, their impact on functional improvement is signiflcant. In the printing process, additives play a crucial role in enhancing the properties of printed surfaces, which may include materials like plastic, cardboard, paper, and metals. Coating additives flnd applications across diverse industries, including automotive, industrial, architectural, wood, and furniture sectors. In the automotive industry, these additives contribute to improving coatings durability, corrosion resistance, and aesthetic appeal. Similarly, in the industrial and architectural sectors, they enhance substrate adhesion, impact resistance, viscosity control, and surface finish quality. Additionally, coating additives are integral to construction paints, where they play a vital role in improving substrate preparation, impact resistance, viscosity adjustment, and overall surface effectiveness.

(Source: https://www.coatingsworld.com/issues/2015-12 01/view features/understanding-the-function-of- additives/)

Global Outlook

The coating additives market had a value of US$ 11.12 billion in 2023 and is expected to hold a market share of US$ 17.77 billion by 2033. The industry is anticipated to flourish at a healthy CAGR of 4.8% between 2023 and 2033. The Asia-Paciflc region accounts for the largest market share and is primarily driven by rapid industrialisation, growing construction activities, and the expanding automotive sector. Meanwhile, the North American market thrives on a combination of technological advancements, a discerning consumer base, and stringent environmental regulations. The coatings additives market is set to grow due to rising demand from various industries, including construction, building, automotive, architecture, wood and furniture, among others. These additives are commonly used in the construction industry to improve viscosity and surface effectiveness.

(Source: https://www.futuremarketinsights.com/reports/ coating-additives-market https://www.imarcgroup.com/coating-additives-market )

Indian Outlook

The Indian coating additives market is a signiflcant and rapidly growing segment within the global coating additives industry. Indias market for coating additives is experiencing substantial growth, with the Indian coating additives market being identifled as the fastest-growing market in the Asia- Paciflc region. The market is being primarily driven by factors such as rapid urbanisation, infrastructure development, and a growing automotive sector in India. Additionally, the demand for advanced, environmentally friendly coatings and additives is on the rise in India, aligning with global trends towards sustainability and eco-friendly products. The growing emphasis on architectural coatings in India is contributing to the expansion of the coating additives market in the country.

(Source: https://www.technavio.com/report/coating- additives-market-industry-analysis)

Growth Drivers for Coating Additives

• Growing demand for consumer goods like paint boosts packaging sales

• Escalating production of paints and coatings in automotive, equipment manufacturing, and consumer durables drives demand for additives

• Rising demand for coating additives in the construction industry can signiflcantly affect crop availability, consequently leading to price hikes in commodities. These price fluctuations may, in turn, influence farmers decisions regarding the types and quantities of crops to plant. Ultimately, such shifts in agricultural practices can have implications for the cost of additives within the industry.

Business Overview

Fine Organic Industries Limited (referred to as Fine Organics or the Company) stands at the forefront of pioneering and innovating unique specialty additives tailored for a diverse range of industrial applications. These additives, spanning from plastics to packaging, foods, cosmetics, rubbers, feed nutrition, and coatings, play a pivotal role in enhancing everyday life.

The increasing demand for oleochemical-based additives underscores the signiflcance of the Companys contributions to the market. The Companys eco-friendly additives have received acclaim for replacing potentially harmful chemicals across various industries, ensuring top-notch performance without compromising on safety. With growing environmental awareness among consumers, there is a notable shift towards green and sustainable products. Additionally, the Company leads this movement by providing environmentally friendly alternatives that meet stringent performance standards.

The Companys state-of-the-art production facilities located in Patalganga, Badlapur, and Ambernath reflect its commitment to manufacturing excellence. Backed by a highly dedicated team of scientists and technicians operating within an innovative R&D centre, the Company is primed to deliver cutting-edge solutions tailored to the precise needs of its customers. The Companys approach not only emphasises technological prowess but also demonstrates a keen understanding of market demands. This is further bolstered by the Companys in-house manufacturing capabilities and robust design & engineering facilities, ensuring seamless integration from conception to execution.

Furthermore, the Company has established a wholly owned subsidiary Company named Fine Organic Industries (SEZ) Private Limited in India. This new subsidiary is formed with the intent of manufacturing specialty chemical products for exports, further strengthening the Companys presence and capabilities in the industry.

Food Additives

As a trailblazer in emulsifier manufacturing and marketing in India, the Company caters to the diverse needs of the food industry with its range of emulsifiers and functional additives. Expanding its product offerings, the Company now provides a comprehensive range of additives, including anti-fungal agents, bread improvers, beverage clouding agents, and other specialised blends. These additives not only uphold the quality of food products but also enhance their structure and extend their shelf life. The Company serves a wide-ranging customer base, including bakeries, ice cream manufacturers, dairy product manufacturers, confectionery manufacturers, and chewing gum manufacturers, ensuring its products cater to diverse culinary needs.

Polymer Additives

Leveraging the versatility of oleochemistry, the Company has nurtured a robust portfolio of additives tailored for various polymers, rubbers, and elastomers. These plastic additives deliver a spectrum of advantages lubricant additives alleviate surface friction between plastic film-to-film and film-to- metal interfaces, enhancing operational efficiency; antistatic additives aid in the dissipation of static charges, rendering plastics safer to handle; and anti-fog agents restore visibility by mitigating fog formation on plastic films. Moreover, through continuous innovation and expertise in oleochemistry, the Company pioneers solutions that optimise performance across diverse plastic applications.

Specialty Additives for Cosmetics

This product range serves cosmetic and pharmaceuticals (CosPha) applications, comprising functional additives and base ingredients crucial for skincare and haircare formulations. These offerings are instrumental in crafting an array of products, including creams, gels, pastes, lotions, and ointments, each customised to meet diverse consumer needs. By providing essential components for formulation, the Companys products in CosPha empower manufacturers to create products with varied compositions, ensuring versatility and efficacy across skincare and haircare segments.

Feed Nutrition Additives

The Companys innovative range of feed additives is crafted to substitute hazardous antibiotics commonly administered to poultry, offering numerous commercial advantages. One key beneflt of the Companys green supplements is their capability to boost antibiotic properties, while simultaneously reducing mortality rates. Additionally, these supplements improve fat digestibility and energy efflciency in poultry and cattle. Furthermore, the Companys additives elevate feed effectiveness and efflciency, imparting a myriad of technical beneflts to end products, thereby enhancing safety and nutritional value.

STANDALONE FINANCIAL HIGHLIGHTS

Particulars	2023-24	2022-23	Change(%)
Revenue from Operations ( Rs. in lakhs)	1,95,114.29	3,02,914.62	(35.59%)
EBITDA ( Rs. in lakhs)	55,251.94	84,537.03	(34.64%)
EBITDA Margin (%)	28.32%	27.91%	1.47%
PAT ( Rs. in lakhs)	36,755.15	59,059.89	(37.77%)
PAT Margins (%)	18.83%	19.50%	(3.38%)

 

Key Ratios Variance	2023-24	2022-23	Variance (%)	Comments
Inventory Turnover (%) Net Credit Sales/Average Inventories	7.90	12.11	(34.75%)	The ratio has reduced mainly due to decrease in sales as compared to previous year.
Interest Coverage Ratio (%) (Earnings Before Interest and Taxes (-) Other Income/Finance Cost)	182.20	164.18	10.97%	The debt has been fully repaid during current financial year.
Current Ratio (%) (Current Assets/Current Liabilities)	8.67	5.50	57.62%	The Ratio has improved due to efficient usage of working capital and full repayment of debt.
Debt-Equity Ratio (%) (Total Debt/Shareholders Equity)	0.00	0.02	-	The debt has been fully repaid during current financial year.
Debtors Turnover (%) (Net Sales/Average Accounts Receivables)	4.73	7.49	(36.88%)	The ratio has reduced mainly due to decrease in sales as compared to previous year.
Operating Profit Margin (%) (Profit before Interest and Taxes (-) Other Income/Net Sales)	21.74%	24.21%	(10.21%)	Reduction in sales and operating profit has impacted the ratio.
Net Profit Margin (%) (Net Profit after Taxes/ Net Sales)	18.84%	19.50%	(3.38%)	-
Return on Net-Worth (Net Profit after Taxes/ Average Shareholders Equity)	21.73%	47.62%	(54.37%)	Ratio has been reduced on account of reduction in net profit after tax of the Company as compared to previous year.

RISK MANAGEMENT

The Company acknowledges the multifaceted nature of its operations, recognising the myriad risk factors that could potentially affect its future operational and financial performance. Through its dedicated risk governance team, the Company diligently identifies and assesses these risks, devising strategic mitigation plans to minimise their impact and optimise business growth. With an integrated approach, the Company aims to enhance value for every customer by responsibly managing associated risks. The organisations robust risk governance structure includes a Board-level Risk Management Committee chaired by an Independent Director, overseeing the review of risk management guidelines, frameworks, and recommended limits. Additionally, operating units manage risk at their respective levels, ensuring alignment with overarching risk management policies and systems, thereby safeguarding the Companys interests, while fostering sustainable growth.

Economic and Market Risk

The economic and market risks faced by the Company are intertwined with global economic conditions. The Company heavily relies on export customers and end-users spread across Europe, North and South America, the Middle East, Africa, Australia, and Asia. Economic downturns in these markets, coupled with disruptions in banking and financial systems, unfavourable government policies, rising inflation, reduced spending power and consumer confidence, and political uncertainties, pose significant challenges. Further complicating matters are the varying economic conditions across different countries. Collectively, these factors impact the Companys operations, potentially leading to credit market risks, diminished consumer and business confidence, fluctuating commodity prices, volatile exchange rates, and various other challenges.

Response

The Company regularly monitors the macro-environmental landscape, conducting thorough and timely assessments to safeguard business continuity. The Companys extensive product portfolio and global presence, combined with a diverse customer base, serve as effective measures to mitigate risks associated with specific sectors.

Increase in Freight Cost

The Red Sea crisis and potential geopolitical scenarios have further heightened concerns not only in terms of the security

of maritime trade routes, but also the impact on overall trade and ultimately leading to disruption in global commerce. The situation has highlighted the vulnerability of critical infrastructure in the value chain, such as shipping lanes and location of ports, to asymmetric threats. This crisis has led to longer transit times, un-announced changes in certain routes and thereby delays of 2 to 3 weeks or more, congestions and container availability issues. Route changes have become necessary to navigate around the affected area, adding further complexity to logistics operations and exacerbating existing challenges in the shipping industry.

Response

To mitigate these challenges, the Company has diversified transportation modes, optimised shipping routes, enhanced supply chain visibility, collaboration with stakeholders, and continuous monitoring of market conditions.

Competition Risks

The Company encounters substantial competition from numerous prominent players across all product lines and markets. Competitors may innovate and introduce superior products, potentially impacting the markets acceptance of the Companys offerings. These developments could have a negative influence on the Companys margins and profitability.

Response

Renowned for delivering best-in-class products, the Company is esteemed for its development of unique specialty additives that are both environmentally friendly and sustainable, serving a diverse range of everyday applications. The Company remains committed to innovation, continually striving to develop new products and investing in advanced technologies to facilitate the commercial production of its latest innovations.

Commodity Price Risk

Agricultural commodity prices are prone to substantial fluctuations, influenced by factors such as weather conditions, government policies, global demographic changes, and competition from substitute products. India, being a net importer of edible oils, relies on imports for around 70% of its consumption, including oils like palm, soybean, and sunflower. The volatility in commodity markets can significantly affect the profitability of businesses engaged in sourcing raw materials and selling finished products to various industries.

Response

The Company faces commodity price risk in its operations, although it does not currently partake in direct commodity hedging activities. However, the Company employs internal systems to monitor raw material prices derived from commodities to the fullest extent possible. Additionally, the Company mitigates commodity price risks by establishing long-term or short-term contracts with vendors and customers whenever feasible, thus enhancing stability in its operations.

Foreign Exchange Risks

The Company is exposed to foreign exchange risks stemming from its business activities, assets, and liabilities denominated in foreign currencies. Approximately 52% of the Companys revenue from operations is generated through export sales, with a significant portion invoiced in US$ and Euro. Additionally, the Company imports goods, primarily raw materials, which account for around 31% of its total raw material procurement value, mostly denominated in US$.

Response

To mitigate foreign currency exposure, the Company occasionally employs forward contracts as hedging instruments for both export and import transactions.

Human Resource Risk

The success of the Company hinges significantly on the dedication and expertise of its employees. Furthermore, the ability to sustain and appoint key personnel plays a pivotal role in shaping the Companys future performance. The departure of one or more key personnel, or a decrease in their level of involvement, could adversely affect the Companys business, financial health, and operational outcomes. Inadequate attraction and retention of skilled talent could further impede the Companys growth trajectory.

Response

The Company implements a robust remuneration strategy along with comprehensive incentives and recognition programmes to mitigate attrition risks. Additionally, regular employee training initiatives are conducted to ensure their skills remain current and aligned with evolving industry demands.

Regulatory Risks

The stringent regulatory standards govern various aspects, including food products, ingredients, food contact packaging materials, feed nutrition additives, and cosmetic substances.

These standards serve to safeguard consumers against health risks across all countries where the Company operates. Similarly, regulations extend to plastic additives used in manufacturing packaging materials for food and medical products. In addition to complying with Indian laws, rules, and regulations, the Company must adhere to the legal frameworks of each country where it markets its products, in line with industry norms. Additionally, The Company is subject to diverse foreign, central, state, and local laws and regulations pertaining to pollution, environmental protection, storage, handling, transportation, treatment, disposal, and remediation of hazardous substances and waste materials. Moreover, changes in environmental regulations have the potential to hinder or disrupt the Companys operations.

Response

The Company maintains strict adherence to applicable regulatory standards, ensuring compliance across its manufacturing processes. Moreover, the Company emphasises the integration of environmentally sustainable practices, aiming to minimise its ecological footprint while delivering high-quality products.

Quality Risk

Additives, despite being used in minute quantities, significantly influence the performance of end-use materials across sectors like foods, plastics, cosmetics, feeds, and coatings, among others. Hence, it is imperative for customers to thoroughly validate their quality and performance. Additionally, since many additives are used in foods, feeds, cosmetics, and food packaging materials, they must meet stringent health and environmental regulations globally. Any lapse in quality standards could result in reputational damage, order cancellations, and loss of customer trust, necessitating the importance of rigorous quality assurance measures.

Response

The Company maintains a firm commitment to enhancing quality standards through internal process development, automation, instrumentation, and quality management initiatives. These efforts are aimed at upholding the highest levels of quality and consistency across the Companys operations.

Environment, Health and Safety

The Company rigorously complies with safety, health, environmental, labour, workplace, and associated laws and regulations. Non-compliance with existing or forthcoming laws or regulations could significantly impact the Companys business, financial status, and operational results.

Response

The Companys strategic Environmental, Health, and Safety (EHS) policies serve as a foundation for risk mitigation. Decisions are guided by the framework outlined in these policies, effectively minimising associated risks.

HUMAN RESOURCES

The Company highly values its employees, considering them integral to the Companys success. The loss of skilled personnel could potentially impact the Companys performance. Therefore, the organisation is committed to promoting and initiating skill development programmes to equip its employees to effectively tackle major challenges. These initiatives not only boost employee morale but also foster a healthy work environment.

The organisation considers its human capital as its most valuable asset, essential for shaping a sustainable future and ensuring the smooth functioning of the Company. Consequently, the HR policy prioritises the identification and retention of talented individuals. As of March 31, 2024, the Companys workforce comprised 850 dedicated individuals.

In essence, the Company recognises the importance of nurturing its human capital and strives to create an environment where employees can thrive, ensuring the Companys sustained success.

INTERNAL CONTROL SYSTEMS

The Company rigorously implements and oversees robust internal control systems to safeguard all assets against unauthorised use or disposition. This is achieved through meticulous maintenance of records and timely reporting. Moreover, complementing these efforts is an extensive internal audit programme, thoroughly reviewed by the Companys management along with relevant policies, guidelines, and procedures.

The primary objective of the internal control system is to ensure the reliability of financial and other records, enabling the accurate the preparation of financial statements and ensuring accountability for assets. The management is committed to periodically reviewing and making necessary adjustments to the internal control system to effectively address emerging needs effectively.

To strengthen internal control further, the Companys process framework encompasses well-documented standard operating procedures and clearly defined authorities with built-in controls. Additionally, the internal control system continuously improves through extensive internal and external audits, as well as periodic reviews by management.

Furthermore, the Company employs a proactive risk mitigation strategy, systematically assessing and addressing potential risks. The Risk Management Committee convenes at regular intervals to review key risks and mitigation measures, initiating corrective actions as needed. This approach ensures the Company remains resilient in the face of evolving challenges and uncertainties.

CAUTIONARY STATEMENTS

The Management Discussion and Analysis Report containing the Companys objectives, projections, estimates and expectations may constitute certain statements that are forward-looking within the meaning of applicable laws and regulations. The statements in this Management Discussion and Analysis Report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.