GFL Ltd Management Discussions.

Economic Overview

Indias US$ 2.6 trillion economy makes it the 6th largest in the world in terms of nominal Gross Domestic Product (GDP). It is on track to overtake the United Kingdom and France to become the worlds 5th largest economy in 2018, and vault to the 3rd spot by 2032, according to the Centre for Economics and Business Research, a London-based consultancy. India has grown by an average 7.5% in the past three years.

In FY2018, its economy grew by 6.7%, as compared with 7.1% in FY2017, the slowest pace in five years. As per a report by PriceWaterhouseCoopers (PWC), India is expected to edge past the US to become the worlds 2nd largest economy in purchasing power parity (PPP) by 2040. Several reforms and policies have been implemented with the intent of building a more productive and efficient economy. India continues to benefit from strong private consumption and the gradual introduction of significant domestic reforms, according to the International Monetary Fund (IMF). The nation is witnessing a strong growth rate of more than 10% in per capita GDP and Gross National Disposable Income.

Source: Central Statistical Organisation; FY2019 GDP Growth is based on projection by IMF

Industry Overview

The Fluoropolymers Industry

The market size of high performance _uoropolymers is estimated to grow from US$ 3.69 billion in 2017 to US$ 5.08 billion by 2022, at a CAGR of 6.6%, according to the report "High Performance Fluoropolymers Market – Global Forecast to 2022" by Markets and Markets, a global research firm. The market is driven due to the replacement of conventional materials by HPFs in various end-use industries such as electrical & electronics, medical industrial processing, and transportation for high temperature applications, as well as improved regulations by the regional environment associations.

Fluoropolymers play a vital role in numerous services and products that are frequently used by human beings in their day-to-day activities. They are extensively used in numerous applications for various industries including automobiles, electrical and electronics and chemicals processing industries owing to its high heat resistance and excellent tensile strength. Rising demand for the polymer for manufacturing semi-conductors which are used in electrical appliances including computers and smart phones is expected to drive growth. The growing electronics industry, particularly in China, South Korea and Japan, in light of increasing domestic demand, along with presence of R&D base, is expected to augment growth in the near future, according to a report by Grand View Research.

Uses of Fluoropolymers

? Data Communication

? Renewable Energy

? Chemical Process Industries

? Automotive

? Electricals & Electronics

? Cookware

? Fabrics

? Aerospace

? Building Applications

The utility of _uoropolymers arises from properties such as high temperature resistance, outstanding chemical resistance, better toughness, outstanding electrical properties, and low coefficient of friction. Fluoropolymers are also being used in coatings for all-weather apparel and non-stick cookware. Fluoropolymers are widely used in numerous chemical plants and various semiconductor parts as they are maintenance-free even under severe circumstances and contribute to improving productivity. The excellent performance of _uoropolymers in extreme environments and demanding applications act as major drivers for the global _uoropolymer market.

The PTFE Landscape

Polytetra_uoroethylene (PTFE) is a fast-growing _uoropolymer formed by the polymerisation of monomer tetra_uoroethylene (TFE) in presence of an initiator. It is also combined with other materials such as glass _bers, carbon, and graphite to improve its mechanical properties. It is found in numerous product types ranging from flexible foam to elastomers, and from rigid foams to solid compositions.

Features of PFTE:

? Extreme chemical inertness

? Excellent heat resistance

? Optimum dielectric properties

? Low frictional co-efficient

Key Growth Drivers for PTFE

? Consumption of PTFE by the medical industry is high in North America and Europe.

? In North America, PTFE is also used by the chemical and industrial processing and automotive sectors.

? Development in the automotive, aerospace, and other transportation systems is anticipated to drive the _uoropolymer market in Asia Pacific.

? Lightweight materials are preferred in most industries owing to the need for enhanced fuel efficiency and lower emission, giving rise to the growth of _uoropolymers market in India, China and Japan.

? Electronics and electrical is the largest end-user industry of _uoropolymers, where they are gradually being preferred for usage in cable and wire insulation, jacketing, lithium-ion batteries, and semiconductor fabrication.

? Technological development in the field of electronics, particularly in South Korea and Taiwan, has led to increase in utilisation of these materials to enable superior tensile strength and high thermal stability.

Global PTFE Market

The global PTFE market is forecast to exhibit a CAGR of 4.6% between 2016 and 2024, reaching a size of US$ 3.57 billion by 2024, up from US$ 1.87 billion in 2015. Market demand for PTFE is growing considerably due to the emerging industry applications. Asia Pacific is anticipated to be the fastest-growing market for _uoropolymers. Asia Pacific held the dominant 44.3% of the global PTFE market in 2015, followed by Europe and North America. The demand in this region is projected to grow on account of persistent growth in the chemical industry in this region.

Demand for _uoropolymer materials in the region is estimated to be chie_y driven by a swift rise in consumption of _uoropolymers in India and China. There is also a growing demand for PTFE in Asia-Pacific due to the continuous industrial expansion there. An increase in the purchasing power of PTFE in the developing countries and the need for high-performance products is adding to the high demand in the future. Over the next few years, US and Europe will contribute majorly to the rising demand, fueling the PTFE market in North America. Untapped opportunities across developing regions and innovative strategies adopted by leading players is seen resulting in faster growth over the years.

Company Overview

Gujarat Fluorochemicals Limited (GFL), a subsidiary of Inox Leasing and Finance Limited, and incorporated in 1987, has evolved as the largest producer of chloromethanes, refrigerants and Polytetra_uoro-ethylene (PTFE) in India. The Company is a part of the Inox Group, which is diversified across the industrial gases, engineering plastics, refrigerants, chemicals, cryogenic engineering, renewable energy and entertainment sectors.

GFL was incorporated in 1987 after it set up Indias largest refrigerant plant in Ranjitnagar, Gujarat. The Company primarily supplied CFC and HCFC to more than 75 countries across the globe. As CFC and HCFC were eventually phased out under the Montreal Protocol, in 2007 the Company forward integrated into PTFE (Poly Tetra Fluoro Ethylene) by commissioning one of the worlds most integrated and technologically advanced PTFE facility in Dahej, Gujarat.

The Company is listed on both the national stock exchanges of India – NSE (GUJFLUORO) and BSE (500173). It has been accredited AA (stable) rating for long term credit and A1+ rating for short term credit by CRISIL, Indias largest rating agency.

GFL is fully focused on and diversified within _uorine chemistry, making refrigerant gases, Fluoro-intermediates and a host of _uoropolymers. Fluorine chemistry is the most interesting molecule today due to its increasing use in life saving pharma molecules, dose efficient and ecofriendly crop protection chemicals a host of _uoropolymers meeting increasing demands from automotive, semis, mobile telephony, oil & gas, and high speed LAN cables.

Our Key Market Di_erentiators

? Complete integration: We are the most integrated player globally making _uoropolymers from mother earth (own _uorspar mining) to most value-added grades valued at >25 $/kg.

? Global market network: Our global market network is manned by domain experts from Europe/USA and warehouses in Europe/USA for door-to-door and just-in-time delivery.

? Locational advantage: Our location in Dahej, India and efficient technologies offer us cost benefits.

? Fully focused: We are fully focused on _uorine chemistry, unlike many of our dominant competitors in the western world. We have a professional management with the most dynamic and fast decision-making abilities.

Our Subsidiaries

Inox Leisure Limited:

Inox Leisure Limited, the theatrical exhibition business, is largely in line with Indias growing consumption story. The Company, which was listed on stock exchanges in 2006, is today Indias 2nd largest national multiplex chain operator, with 509 screens in 127 properties across 64 cities in India, with a total capacity of 1,24,941 seats.

Inox Wind Limited:

Inox Wind Limited is amongst the top 3 wind turbine manufacturers in India. Commenced in 2009, the Company has a wind turbine manufacturing capacity of 1,600 MW and a cumulative installed base of 2.4 GW which translates into a market share of 7% of Indias installed base of 34 GW.

Inox Renewables Limited:

The renewable energy business consisted of wind farming business, which was started in 2007 and carried out by the subsidiary Inox Renewables Limited. Today, Inox Renewables Limited operates wind farms with a total capacity of 31 MW.

Our Joint Ventures and Foreign Subsidiaries

GFL has made investments in joint venture, Morocco, to strengthen its supply chain of critical raw materials. It has incorporated two subsidiaries to strengthen its presence in the international markets - Gujarat Fluorochemicals Americas LLC and Gujarat Fluorochemicals GmbH.

Our Competitive Advantages

? Over 25 years of experience in handling _uoro molecules, offering a wide range of _uoro building blocks

? Most integrated facility, offering cost competitiveness

? Philosophy of accessing global talent of scientists, consultants and marketing professionals for supporting product development and market development activities

? Tie-ups with global majors for supplying their needs of _uoropolymers

Our Manufacturing Facilities

We have two manufacturing facilities in Gujarat, Indias largest refrigerant plant at Ranjitnagar; and amongst the worlds most integrated and technologically advanced PTFE facility at Dahej, the worlds fourth largest PTFE facility. Both manufacturing sites are synergistically connected, making us probably the most vertically integrated _uorochemicals company globally.

25

No. of Years of Experience in handling Fluoro Molecules

Description of Manufacturing Plants

A. Ranjitnagar Plant, Gujarat:

Commissioned in October 1989, the Ranjitnagar facility is situated around 57 kms from Vadodara. It manufactures a refrigerant known as HCFC22, used as a cooling agent in air-conditioning and refrigeration applications, and as a feedstock in the manufacture of PTFE. The facility has the capability to manufacture and supply special grade HCFC22 with 99.999+% purity for applications such as the manufacturing of specialty chemicals and _uoro-polymers. There is also an AHF plant at the plant, used in the manufacture of HCFC22. Multi-purpose plants for the _uorospeciality business are also being set up within the facility.

B. Dahej Plant, Gujarat

Set up in 2007, this is a world-class manufacturing facility to produce polytetra_uoroethylene (PTFE) resin, based on state-of-the-art international technology. It produces a variety of Suspension and Emulsion PTFE resins. The manufacturing complex at Dahej enjoys international quality and process certifications, including ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007.

The plant covers a broad product portfolio of granular virgin and modified PTFE resins, _ne powder virgin and modified PTFE resins, PTFE based aqueous dispersions and PTFE micro powders. We are the largest manufacturers of chloromethanes, hydro-chloro-_uorocarbons (HCFC) and various grades of PTFE in India. PTFE also provides longevity to GFLs refrigerant business, and provides a platform for GFL to enter into the new-age of refrigerants.

Our Dahej plant owns facilities to manufacture a host of other Fluooropolymers such as PFA, FEP, PVDF and Fluoroelastomers such as FKM. The other plants cover VDF, Refrigerant Gases, and R-125, among others. There is a facility for producing PTFE micropowders and FKM blends going as additives.

The facility is deeply backward integrated into producing HCFC22, AHF, chloromethanes and caustic soda / chlorine. The forward and backward integration not only diversifies our product portfolio, but also makes us amongst one of the most cost competitive producers of these chemicals globally.

Exports

Around 75% of our HCFC22, PTFE, PFA, FEP, FKM sales are in the export markets. The major markets that we export HCFC22 to are the Middle East, South Asia and Japan. PTFE exports are largely to Europe and USA.

Business Diversification

As part of a long-term business diversification strategy embarked upon between 2002 and 2006, the Company followed McKinsey & Cos advice to identify new business opportunities. Based on the management consultancys advice, the Company forayed into the Indian theatrical exhibition business and a renewable energy business.

What Sets Us Apart

A. Scale:

GFL is a leading player in PTFE market and operates one of the largest PTFE facilities in the world, accounting for 11% of the global PTFE capacity.

B. High Entry Barriers:

High capex intensity, restricted access to technology, the availability of key raw materials, long and stringent product development, and an approval cycle with customers are the key entry barriers to this industry. GFL benefits from the advantage of these barriers as new players cannot easily enter this market on a standalone basis.

C. Cost Competitive:

GFLs ability to produce a wide range of chemicals through its vertically integrated facility makes it one of the most cost competitive producers of PTFE globally. The operational and costing advantage of this integration has ensured that the Company is well placed competitively and is less susceptible to the volatility of the commodity cycle.

D. Operating Leverage:

GFL has strong potential for business scalability with only minimal incremental investments in the future.

E. Future Growth:

GFL is poised to reap benefits from increasing capacity utilisation which will lead to increase in operating leverage, higher operating margins and better return ratios. GFLs gradual shift to value added products for its customers will allow the Company to generate better margins and more stable pricing for its products.

F. Raw Material Security:

GFLs vertically integrated facility provides its self-sufficiency with respect to availability of key raw materials like Chlorine, Chloroform, Power and HCFC 22. GFL has also safeguarded availability of Fluorspar, a key raw material required for production of PTFE. In addition to own mine in Morocco, GFL also has signed long-term supply agreements for ensuring adequate _uorspar supply.

G. Customer Stickiness:

GFL works closely with customers to develop grades and qualities to suit customers requirements. Further, strong focus on service, quality consistency and continual technical support results in high customer retention. GFL is strongly placed to absorb the incremental demand by offering most cost competitive solutions to its customers.

Management Outlook

We aim to become a leading _uoropolymer player globally. The outlook for our business is steadfast with a robust business model, competition from China lessening and with _uoropolymers growing at a healthy pace of 6% to 7% CAGR globally. Our vision for 2020 is to consolidate the capacities we have created in each business segment, especially in _uoropolymers and operate these in a world-class and safe manner to serve our global customers as a reliable, long-term and high-quality supply chain partner. Our backward integration plan also provides us with a competitive base to stand upon. Further, PTFE, FKM, FEP, PFA and PVDF are versatile _uoropolymers going into about 20 top industries, which take care of >75% of Indias GDP. As the GDP grows, we hope to leverage on this, being the only producer of _uoropolymers.

Over the next few years, the Company will be ramping up capacity utilisation, improving realisations by churning product mix in favor of higher value added grades, and implementing cost reduction schemes. It will also be value adding by diversifying into _uoro-speciality chemicals as well as other _uoro-polymers, based on low-cost captive availability of a host of _uoro-feedstocks.

The Company has already incurred a capex of around Rs 2,000 crore to build-up the current capacities and the integrated value chain. Since most of the capex on creating capacities has already been incurred, the proposed value addition will need a marginal capex. Barring unforeseen circumstances and considering build-up for these initiatives, the Company plans to incur additional capex and estimates to reap the benefits of these initiatives by April 2020.

Our Operational Performance

The key operational highlights of the year were:

? Capacity enhancement in PTFE

? Setting up of new polymers (PFA, FEP, PVDF) and VDF, and additives plants

Key Operating Metrics in FY2018

PTFE:

Products/Chemicals Unit of Sales Volumes Sold Volumes sold Growth
during FY2017 during FY2018 (%)
PTFE (Polytetra_uoroethylene) MT 10,257 12,478 22
Caustic Soda:
Products/Chemicals Unit of Sales Volumes Sold Volumes sold Growth
during FY2017 during FY2018 (%)
Caustic Soda MT 1,24,187 1,24,587 0
Chloromethane:
Products/Chemicals Unit of Sales Volumes Sold Volumes sold Growth
during FY2017 during FY2018 (%)
Chloromethane MT 64,760 64,259 -1
Refrigerants:
Products/Chemicals Unit of Sales Volumes Sold Volumes sold Growth
during FY2017 during FY2018 (%)
HCFC 22 MT 14,076 15,915 13

Note: Annual capacity is provided in Tonnes Per Annum

Our Financial Performance

GFLs Consolidated Result comprises of essentially four different businesses. The Chemicals business is housed within GFL itself. There is a Wind Turbine manufacturing business that is conducted by Inox Wind Limited and its subsidiaries. Inox Wind Limited is independently listed. The Wind Farming business is owned by Gujarat Fluorochemicals Limited through its subsidiary Inox Renewables Limited. The Film Exhibition business is conducted by Inox Leisure Limited. Inox Leisure Limited is also listed independently and therefore the consolidated revenues of GFL and the consolidated profitability reflects the revenues and the profitability of all four of these businesses put together.

The key financial highlights in terms of Revenue, EBITDA and PAT for the full Financial Year 2017-18 from all the four businesses are:

Revenue

? Revenue growth from the Chemical business (other than subsidiaries) went up by 36% from 15.32 billion to 20.84 billion

? Revenues from the Wind Turbine manufacturing business declined by 86% from 34.15 billion to

4.80 billion

? Revenues from the Wind Farming business declined by 16% from 2.24 billion to 1.89 billion

? Revenues from the Cinema Exhibition business went up by 10% from 12.21 billion to 13.48 billion

? As a result of the above, Aggregate Revenue for the full year declined by 39% from 63.93 billion to

39.21 billion

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EBITDA

? Chemical business grew by 99% from 3.00 billion to

5.96 billion

? Wind Turbine business declined by 115% from 5.60 billion to (-)0.81 billion

? Wind Farming business declined by 67% from 2.01 billion to . 0.66 billion

? Cinema Exhibition business grew by 44% from 1.46 billion to 2.10 billion

? As a result, EBITDA for the full year declined by 37% from 12.05 billion to 7.57 billion

PAT

? Chemicals PAT jumped from 1.46 billion to 4.87 billion, a growth of 233%

? Wind Turbine manufacturing business PAT declined by 162% from 3.03 billion to (-) 1.87 billion

? Wind Farming business PAT reported a loss of 2.74 billion in FY2017, which converted into a profit of

0.13 billion for the full year FY2018, a growth of 105%

? Film Exhibition business PAT grew from 0.31 billion to 1.15 billion ,that is a growth of 274%

? As a result of the above, PAT for full year grew from

2.15 billion to 2.40 billion, indicating 12% growth

Performance of our Chemical Business

Standalone product-wise performance of Chemicals Business for FY2018:

? Caustic Soda revenue grew by 35%, from 3.41 billion to 4.60 billion

? Chloromethane revenue grew 13%, from 2.35 billion to 2.65 billion

? Refrigerants revenue grew 36%, from 2.30 billion to

3.13 billion

? PTFE revenue increased by 47%, from 5.09 billion to

7.50 billion

? Other products went up by 137% from 1.13 billion to

2.68 billion

? As a result, overall sales from the Chemical business (inclusive of excise duty), which was 15.32 billion in FY2017, went up by 36% to 20.84 billion in FY2018

Awards

? Quality Circle (Gold Award) from Quality Circle Forum of India

? Six Sigma Project (Gold Award) from Quality Circle Forum of India

? Environmental Award for Best Innovative Project in Chemical Industry on Cleaner Production from Confederation of Indian Industries

Information Systems (IT)

The Company uses a powerful platform of SAP for all its transactions and activities. The high-end computing servers and modern data center caters business information for real time business decisions. High-speed data connectivity across the locations for business communication like emailing, audio and video conferencing, which drives the quick business information for stack holders. The SAP solution for enterprise resource planning, customer relationship management, materials management, production planning management, financial management is the cornerstone of our IT infrastructure. It provides an easy-to-use tool that is widely considered one of the strongest solutions for SAP integration. Its proven solution for SAP integration lets us rapidly integrate data, systems, services, devices, processes and business partners to maximize performance and business value of our investment. Newer modules are being added further to invigorate SAP. The Salesforce CRM is being established to provide a strong handle to the Sales & Marketing field force to serve the customers better and faster.

Human Resources

The Company believes that its employees are its most valuable asset and that our human resources play a pivotal role in realising the Companys strategic goals and ensuring a consistent global quality in the delivery of all its products and services, within the framework of a customer-focused culture. The Company encourages an environment of development and empowerment, enabling each staff member to contribute his/her skills and talents towards sustaining high performance.

The Company has established a structured process to be in touch with the pulse of the people through annual people surveys. The Annual Employee Satisfaction (E-SAT) (for technicians) Survey and Employee Effectiveness Survey (EE2) (engineers and executives up to managerial level) is administered across locations, which highlights the strengths and major areas of improvement to enhance employee satisfaction and their effectiveness for sustained profitable growth. The E-SAT scores of both Ranjitnagar and Dahej plants saw a marked improvement this year. The EE2 scores also saw an improvement in both the locations – 15% and 31% in Dahej and Ranjitnagar, respectively.

Skill Development

We strive to continuously upgrade the skills of our operators and technicians to ensure productivity and enhanced output, matching the required quality. A special tool ‘Skill – Will has been introduced to determine and map the performance of operators and technicians, based on the skill and willingness of the employees and arrive at their individual training needs. During the financial year, a total of 320 training sessions were held covering more than 3,500 man-days.

Leadership development and succession planning has been taken up in the right earnest to ensure business continuity and to build the internal talent pool. The process of identifying high potential employees has been institutionalised using the latest psychometric tools, 360-degree assessment and the Development Centre.

Creating Leaders of Tomorrow

With the growth in our product portfolio and increase in customer base across the globe, it has become imperative to create a talent pipeline of bright and young leaders. This will ensure our growth plans are sustained through a continuous induction of well-groomed talent, and a Business Leadership Trainee (BLT) scheme has been launched, with 12 such BLTs created in the first batch through a rigorous Campus Recruitment process. These BLTs will undergo a one-year well-planned and balanced training programme, where they will not only be exposed to the technical aspects of their future assignments, but also be exposed to various leadership training programmes and workshops.

Employee Engagement

Strengthening the employer-employee relationship is the strategic role of the Human Resources (HR) function. The HR function ensures that all our employees are engaged and put in their discretionary effort to stay ahead of competition through proactive employee relation interventions. Various participatory platforms, such as Quality Circles and Six-Sigma teams involving grass-root employees to focus on cost reduction, quality improvement and improve yield, are well in place.

Five QC teams with 30 members from our Dahej Plant participated in the Sixth Gujarat State Level – Quality Control Circle Competition organised by the Confederation of Indian Industry (CII), Gujarat, with the TFE Team winning the Continuous Improvement Award for their project. To keep the employees motivated, Functional Heads and Supervisors are encouraged to spontaneously recognise their team members for a small, but significant, contribution in their day-to-day work. During the year, 584 employees were recognised for their great work. Employees are encouraged to give their workplace improvement suggestions through the "Prayas" employee suggestion scheme in the Plants. For the Company, our employees are partners in our progress where the relationship is built on trust and mutuality.

Enabling Digitisation

The Human Resources function continues its journey to make the HR processes "One Touch" and "Paperless" through the process of digitisation. New employee joining, onboarding, confirmation, and performance management process are now paperless and digitised. It is worth mentioning that this digital HR transformation which is happening across the company is totally driven internally.

Risk Management & Internal Controls

The Company ensures that all the current and future material risk exposures are identified, assessed, quanti_ed, appropriately mitigated, minimised and managed. The Company has a risk management framework in place to ensure the implementation of a risk management process. This process is formulated on the principles of Business Risk Assessment, Operational Controls and Compliance to various Policies. The Company proactively identifies and systemically resolves all the major risks in business. The Company undertakes the exercise to document all the risks and corresponding controls.

The Company believes that sound internal controls and systems are related to the principle of good governance, and should be exercised within a framework of proper checks and balances. Accordingly, the Company has devised and implemented such internal control systems as are required in its business processes; the adequacies of these are commented upon by the Independent Auditors in their Report.

The Company remains committed to ensuring a reasonably effective internal control environment, that provides assurance on the operations and safeguarding of its assets. The internal controls have been designed to provide assurance about recording and providing reliable financial and operational information, complying with the applicable statutes, safeguarding assets, executing transactions with proper authorisation, and ensuring compliance with Corporate Policies.

The Company has devised and implemented such internal financial control systems. These controls are routinely tested and certified by Independent as well as Internal auditors, and covers all the key business operations of the Company. Key Audit findings, along with their action plans, are thereon reported to the Audit Committee, which monitors the overall control environment of the Company.

Opportunities, Risks, Threats and Concerns

Due to the commodity nature of some of the products produced by GFL, the Company is susceptible to the vagaries of the commodity cycle. GFL mitigates the intensity of such fluctuations on both their inputs and outputs through a combination of strategic business approaches, that include value added customisation; higher margin products; low-cost integrated manufacturing; long term supply agreement on raw materials and assuring the continuous sourcing of Fluorspar, a key raw material used by the Company.

GFL has embarked upon significant initiatives in the area of _uoropolymers, specialty intermediates as well as refrigerant gases, which are expected to add handsomely to the bottom line over the next few years, without adding any significant capex. This growth would include addition of new _uoropolymers, new age refrigerant gases, entry into agro and pharma intermediates as well as increasing capacity utilisation of TFE and PTFE. The Company is well resourced financially for these additions and maintain smooth operations. Its accruals, cash flows, lines of credit and banking arrangements are well balanced to ensure continuity.

The Company can comfortably raise more capital at any time should the need arise. However, any non-payment or delayed collection of receivables from customers could materially and adversely affect liquidity, financial condition and results of operations.

With respect the currency volatility, GFL business has a natural hedge. GFL imports raw materials and simultaneously exports its finished goods. It adopts a natural hedge policy by balancing its payables and working capital loans versus its receivables denominated in foreign currencies to mitigate the foreign currency risks to protect its bottom lines and return ratios.

A key risk includes increased competition and impact on pricing, due to any additional capacities set up by Chinese manufacturers. GFL remains confident of being able to maintain its competitive position due to its cost competitiveness derived from its integrated operations and its strong marketing and customer retention strategies.

The key opportunities in the PTFE business include the vast undeveloped potential in the Indian markets that will be converted into market demand by new products and application development. The market gaps created by established players moving to higher value-added polymers also gives GFL the opportunity to absorb new unmet demand. There also exists the potential to work with reputed global players of PTFE based components to expand the PTFE market in India. GFL also sees major opportunities in United States, Latin America and Far East to expand its sales and global market share. The Company is considerably strengthening its marketing capability and reach overseas by hiring experienced people from the industry. The Company has taken appropriate steps to market into and service these markets to achieve this goal.

a. Fluoropolymers and Fluorine-based Intermediates

Fluoropolymers is a large global industry including many chemicals such as PTFE, PVDF, FEP, FKM, PFA, Micro powders and ETFE. Over the last 7-8 years, GFL has consolidated its position in the PTFE space and enjoys a top 4 ranking based on its PTFE capacity, making a wide range of variants including Fine Powders, Aqueous Dispersions, Modi_ed PTFE, and Post Treated PTFE Grades. In particular, the commercial plant for manufacturing FKM is already in production and, for other products samples have been sent to the market for approvals, which are in advanced stages. The Company sees substantial opportunities of growth from this family of products.

Because natural sources of _uoro-organic compounds are extremely rare, the industrial synthesis of _uorinated organic compounds and production of _uorinated natural product derivatives have greatly expanded in recent years because of their increasing importance in the agrochemical and pharmaceutical industries. Since the use of Fluorine delivers healthier crops and more effective medicines, it is expected that in the next few years, about 40% of all pharma molecules will have F-molecules from 20% now. The Company has several products in the pipeline, out of which for commercial plants many products have been set up. The Company also expects this family of products to be a robust growth driver for the future. Going forward, there are some products in the pilot stages for commercial production.

b. Agriculture and Pharma use of Fluoro-organic compounds

Investigations on diverse aspects of _uoro-organic compounds have rapidly increased during the past decades. Due to structural complexity or instability, synthetic modification is often not possible, and various bio _uorination strategies have been developed in recent years for applications in the anti-cancer, anti-viral and anti-infection fields. Despite the industrial importance of _uorinated compounds, there have been serious concerns worldwide over the levels and synthetic routes of certain _uorinated organic compounds, in particular per_uorinated chemicals (PFCs). PFCs are emerging and recalcitrant pollutants which are widely distributed in the environment and have been detected in humans and wildlife globally. PFCs have been demonstrated to be potentially carcinogenic, adversely affect the neuroendocrine and immune systems, and produce neurotoxicity, hepatotoxicity and endocrine disrupting effects in vertebrate animals. Here, we provide an overview of recent advances in our understanding of the biology of various _uoro-organic compounds and perspectives for new enzymes and metabolic pathways for bioremediation of these chemicals.

Cautionary Statement

This document contains statements about expected future events, financial and operating results of Gujarat Fluorochemicals Limited, which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirely by the assumptions, qualifications and risk factors referred to in the managements discussion and analysis of Gujarat Fluorochemicals Limiteds Annual Report, 2017-18.

GFL SEES MAJOR OPPORTUNITIES IN UNITED STATES, LATIN AMERICA AND FAR EAST TO EXPAND ITS SALES AND GLOBAL MARKET SHARE. IT HAS TAKEN APPROPRIATE STEPS TO GET INTO AND SERVICE THESE MARKETS TO ACHIEVE ITS GOAL.