Gsp Crop Science Pvt Ltd Management Discussions

The following discussion of our financial condition and results of operations should be read in conjunction with our Restated Consolidated Financial Information on page 317.

Our Company?s financial year commences on April 1 and ends on March 31 of the immediately subsequent year, and references to a particular fiscal year, are to the 12 months ended March 31 of that particular year. Unless otherwise indicated or the context otherwise requires, the financial information for the six months ended September 30, 2024 and Fiscals 2024, 2023 and 2022, included herein is based on or derived from our Restated Consolidated Financial Information included in this Draft Red Herring Prospectus. For details, please see “Restated Consolidated Financial Information” beginning on page 317. The Restated Consolidated Financial Information is based on our audited financial statements and is restated in accordance with the Companies Act, 2013, and the SEBIICDR Regulations. Our audited financial statements are prepared in accordance with Indian Accounting Standards, which differs in certain material respects with IFRS and U.S. GAAP. For details, see “Risk Factors - Significant differences exist between Ind AS used to prepare our financial information and other accounting principles, such as US GAAP and IFRS, which may affect investors ? assessments of our Company?s financial condition ” on page 69.

Unless otherwise indicated, industry and market data used in this section has been derived from the report titled “Assessment of the Global & Domestic Agrochemicals Market” dated December 2024 (the “ICRA Report”), prepared and issued by ICRA Analytics Limited (“ICRA ”), which was exclusively commissioned and paid for by our Company for the Offer, and was prepared and released by ICRA, who were appointed by us pursuant to the engagement letter dated July 26, 2024. ICRA is not, and has not in the past, been engaged or interested in the formation, or promotion, or management, of our Company. Further, it is an independent agency and neither our Company, nor our Directors, Promoters, KMPs, SMPs, and Subsidiaries, nor the BRLMs are a related party to ICRA as per the definition of “related party” under the Companies Act, 2013. The data included herein includes excerpts from the Industry Report which may have been re-ordered by us for the purposes of presentation. Further, the ICRA Report was prepared on the basis of information as of specific dates and opinions in the ICRA Report may be based on estimates, projections, forecasts and assumptions that may be as of such dates. ICRA has prepared this study in an independent and objective manner, and it has taken all reasonable care to ensure its accuracy and completeness. A copy of the Industry Report will be available on the website of our Company https://www. gspcrop. in/investors/icra-industry-report. Further, the ICRA Report is not a recommendation to invest or disinvest in any company covered in the ICRA Report. Prospective investors are advised not to unduly rely on the ICRA Report. For more information and risks in relation to commissioned reports, please see “Risk Factors - Certain sections of this Draft Red Herring Prospectus contain information from the ICRA Report which we commissioned and purchased, and any reliance on such information for making an investment decision in the Offer is subject to inherent risks ” on page 48. Also see, “Certain Conventions, Presentation of Financial, Industry and Market Data - Industry and Market Data ” on page 28.

For details relating to the defined terms in the section, please see “Definitions and Abbreviations” beginning on page 1. Unless the context otherwise requires, in this section, references to “our Company”, “the Company”, “we”, “us”, “our” refer to GSP Crop Science Limited and its Subsidiaries on a consolidated basis.

OVERVIEW

For details in relation to our business overview, competitive strengths, business strategies and business operations, please see “Our Business" beginning on page 237.

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATION

The results of our operations and our financial conditions are affected by numerous factors and uncertainties, many of which may be beyond our control, including as discussed in “Our Business” and “RiskFactors”, beginning on pages 237 and 32. Set forth below is a discussion of certain factors that we believe may be expected to have a significant effect on our financial condition and results of operations:

Ability to procure the desired quality and quantity of raw materials

We depend on external suppliers for the raw materials required for production and typically purchase raw materials on a purchase order basis and place such orders with them in advance on the basis of our anticipated requirements. As a result, the success of our business is dependent on maintaining good relationships with our raw material suppliers. If we cannot fully offset increases in raw material prices with increases in the prices for our products, we will experience lower margins, which will have a material adverse effect on our results of operations and financial condition.

Details of cost of materials consumed including purchases of stock-in-trade and changes in inventories of finished goods, stock-in-trade & work in progress, including as a percentage of our total expenses for continuing operations in the six months ended September 30, 2024, Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively are as provided below:

We cannot assure you that we will be able to enter into new or continue our existing arrangements with suppliers on terms acceptable to us, which could have an adverse effect on our ability to source raw materials in a commercially viable and timely manner, if at all, which may impact our business and profitability. There can be no assurance that we will procure the quantities and quality of raw materials commensurate with our requirements in the future. There can be no assurance that a particular supplier will continue to supply us with raw materials in the future.

We rely on historical trends and other indicators to purchase the required quantities of raw materials. We, therefore, run the risk of purchasing more raw materials than necessary, which could expose us to risks associated with prolonged storage of some of these materials, and materially affect our results of operations. Conversely, if our customers, dealers and/ or distributors place orders for greater quantities of products compared to their historical requirements, we may not be able to adequately source the necessary raw materials in a timely manner and may not have the required available manufacturing capacity to meet such demand. Continued supply disruptions could exert pressure on our costs, and we cannot assure you that all or part of any increased costs can be passed along to our customers, dealers and/ or distributors in a timely manner or at all, which could negatively affect our business, overall profitability and financial performance.

Approvals, licences and registrations

We are required to obtain regulatory pre-approval for our products. As per Section 9 of the Insecticides Act, any person desiring to import or manufacture any insecticide may apply to the registration committee, CIBRC, for registration of such insecticide and there is a separate registration for each insecticide. Accordingly, we provide our Technicals and Formulations to the CIBRC for their approval where they undertake testing to check the composition and purity profile before granting registrations. As of September 30, 2024, we have obtained 507 such registrations from the CIBRC. The classification of our 9(3) and 9(4) registrations is as follows:

There may be instances where we have not applied for or obtained licenses or registrations in the ordinary course of business. In the future, we will be required to renew such permits and approvals and obtain new permits and approvals for any proposed operations or products. An inability to renew, maintain or obtain any required permits, licenses, registrations or approvals may result in the interruption of a part or all of our operations and have a material adverse effect on our business, financial condition and results of operations.

For details of applicable regulations and approvals relating to our business and operations, including our Manufacturing Facilities, see “Government and Other Approvals” on page 434. We may, in the future, be subjected to regulatory actions for violations including closure of our Manufacturing Facilities, imposition of penalties and other penal actions against our Company and management, which may have a negative impact on our business, reputation, results of operations and cash flows. Further, any failure to comply with environmental laws and/or the terms and conditions of approvals issued under such environmental laws and regulations could also impact our ability to obtain or renew the approvals with respect to our Manufacturing Facilities in a timely manner or at all and may also adversely affect our ability to operate our units and consequently affect our results of operations.

We are also subject to a broad range of safety, health, labour, and workplace related laws and regulations in the jurisdictions in which we operate, which impose controls on the disposal and storage of raw materials, noise emissions, air and water discharges; on the storage, handling, discharge and disposal of chemicals, employee exposure to hazardous substances and other aspects of our operations. Failure by us to renew, maintain or obtain the required permits or approvals at the requisite time may result in the interruption of our operations and may have an adverse effect on our business, financial condition and results of operations.

R&D capabilities

Our business depends to a large extent on our R&D capabilities. Our business and results of operations have been and will be affected by our ability to continue to develop and commercialize new Technicals and Formulations. We have a strong focus on R&D and have sought to implement the inferences from our R&D at our manufacturing facilities, pursuant to our assessment of demand in the market and our customers. We have continuously invested in R&D, by setting up an (i) R&D facility for Formulations located at Kathwada and (ii) an R&D facility located at Odhav for Technicals. We have also employed experienced professionals at these R&D facilities and have a dedicated staff of 25 employees, three of whom hold PhDs. We place emphasis on strict quality control to ensure the reliability of our products and have implemented a quality control system for monitoring the entire manufacturing process, identifying potential areas for improvement and taking actions for continuous optimization. We have received quality control certifications such as ISO 9001-2015, ISO 14001-2015, ISO 45001-2018, Responsible Care Certification, amongst others. In 2022, our Company commissioned an R&D and pilot plant facility to test commercialization of our products.

However, our R&D efforts may not result in new technologies or products being developed on a timely basis or meet the needs of our customers as effectively as competitive offerings. Further, our ongoing investments in R&D for new products and processes may result in higher costs without a proportionate increase in revenues. In addition, once we develop our processes, obtaining relevant regulatory approvals and registrations and patents and other intellectual property protection is an important element to commercialize the products, which may require additional expenses. We must also adapt to rapid changes in our industry due to technological advances and scientific discoveries. If our existing products become obsolete, and we are unable to effectively introduce new products, our business and results of operations could be adversely affected. Although we strive to keep our technology, facilities, plants and machinery current with the evolving standards, the technologies, facilities and machinery we currently employ may become obsolete in the future. The cost of implementing new technologies and upgrading our manufacturing facilities could be significant and could adversely affect our profitability.

Relationships with key customers

We have historically derived, and may continue to derive, a portion of our income from our top customers. Details of revenue generated from our top three customers, top five customers and top ten customers for the six months ended September 30, 2024, Fiscal 2024, Fiscal 2023 and Fiscal 2022, including as a percentage of revenue from continuing operations are provided below.

We are focused on leveraging existing relationships with our customers for the sale of our products. Any reduction in orders from our top 10 customers would adversely affect our income. The demand from our key customers, in particular our top 10 customers, determines our revenue levels and results of operations, and our sales are directly affected by the production and inventory levels of our customers. Our customers in turn are dependent on demand from their customers who are the end users of finished products, as well as on general trends in the global agro-chemicals industry.

Over the years, we have developed strong relationships with a number of customers through which we have been able to expand our product offerings and also our geographic reach. Our business depends on the continuity of our arrangements with our international customers. Our sales to such customers are typically conducted on the basis of purchase orders that they place with us from time to time. Our arrangements with customers require our customers to include the quantity and price while certain agreements themselves include the purchase prices and minimum purchase quantities for the products during the tenure of the agreement.

Foreign currency fluctuations

We derive revenue from Domestic Business and International Business. Our results of operations are influenced by exchange rate fluctuations between foreign currencies of the markets in which we sell our products and the Indian Rupee. Currency exchange rate fluctuations and currency depreciation could have an adverse effect on our results of operations. Details of revenue generated from our International Business for the six months ended September 30, 2024 and Fiscals 2024, 2023 and 2022, including as a percentage of our revenue from continuing operations are provided below.

We also import a certain amount of raw materials from international suppliers, particularly from China. Details of our imports from China and other countries for the six months ended September 30, 2024 and Fiscals 2024, 2023 and 2022, including as a percentage of purchases for continuing operations are provided below:

Fluctuation in foreign currencies exchange rates could have adverse effects on our business, results of operations and financial condition. Details of foreign exchange fluctuations (Net) Gain/(Loss) for the six months ended September 30, 2024 and Fiscal 2024, Fiscal 2023 and Fiscal 2022 are provided below:

While we have a hedging policy as on the date of this Draft Red Herring Prospectus, our business and results from operations may be affected in the event that the exchange rate between the international currencies and the Indian Rupee fluctuates. Depreciation of the Indian Rupee against such international currencies may have an adverse effect on imports. Further, volatility in exchange rates would result in an increase in the cost of our products. We may not be able to pass on such increase in costs to our customers. Certain markets in which we sell our products may be subject to exchange control risks, which may result in either delayed recovery or even non-realization of revenue. While there have been no such instances of delayed recovery or non-realization of revenue in the six months ended September 30, 2024 and Fiscal 2024, Fiscal 2023 and Fiscal 2022, there can be no assurance that such instances will not occur in the future. In addition, the policies of the RBI may also change from time to time, which may limit our ability to effectively hedge our foreign currency exposures and may have an adverse effect on our results of operations and cash flows. Any gains or losses arising on account of differences in foreign exchange rates on settlement and translation of monetary assets and liabilities are recognized in the statement of profit and loss. If we are unable to effectively manage our foreign exchange risk, it could materially affect our business, financial condition and results of operations.