Gujchem Distillers India Ltd Management Discussions

(MDAR)

1. Corporate & Business

Overview - Rebranding & Foundational Steps

• In FY 2024-25, Gujchem Distillers India Ltd was renamed ZR2 Bioenergy Ltd, reflecting a strategic pivot towards bioenergy and green hydrogen.

• The company entered into an MOU to execute a BOOT Agreement to take over a canebased biorefinery and an integrated biogas plant and associated assets from Pravara Sugar Factory, plus two separate land parcels on longterm lease for 29 years (15 years extendable by 14 years).

• The acquisition includes a fully operational distillery/ethanol/ENA/raw biogas/MEE/RO plant and skilled employees, enabling seamless operational continuity.

• Additionally, ZR2 leases two land parcels of 82.75 acres and 24.48 acres for expansion- all part of a comprehensive integrated bioenergy strategy (in BOOT Arrangements)

2. Industry Structure & Trends - National Context & Government Policies

• Indias ethanol blending reached a record 14.6% in CY 2023-24, with average blending rising to nearly 19% in early 2025, courtesy of strong E20 policy momentum.

• Ethanol blending is projected to exceed 10 billion litres by CY 2025-26, targeting national E20 goals and deeper energy independence.

• From 2014 to date, the EBP programme has saved over 1 lakh crore in foreign exchange and cut ~544 lakh tonnes of CO₂ emissions.

• Incentives include:

o Subsidies and interest subvention schemes (EISS), o Longterm offtake agreements with OMCs,

o SATAT Biogas scheme

• Feedstock diversification is accelerating: grain-based ethanol now constitutes ~40% of capacity; maize, broken rice, and cane syrup are aggressively promoted to balance water stress and food security concerns.

• Despite challenges - such as general static procurement pricing amid rising raw material costs and infrastructure gaps - the outlook remains robust. Growth prospects are underpinned by the IMARC Growth forecast, projecting a CAGR of ~14.4% (2025-33) from the current base of USD 9 billion in 2024-25.

3. Detailed Operational & Expansion Milestones

3.1. Acquisition & Corporate Transformation

• Completed acquisition and rebranding from Gujchem Distillers, including formal inprinciple approval for BOOT t biorefinery and land; BOOT agreement expected once mutually formalised.

• Transferred workforce of existing employees, ensuring expert operations.

3.2. Fundraising & Balance Sheet Strengthening

• Raised equity via Preferential Issue of Compulsory Convertible Debentures (CCDs) and Warrants, fully subscribed by promoter (ZR2 Group) and public investors.

• No external debt taken; legacy liabilities cleared, ensuring a clean capital structure with future equity infusion assured if needed.

3.3. Phase-wise Business Roadmap

Phase	Activities
Phase I	Operate the existing cane-based biorefinery; stabilize operations; Environmental Clearance Approval obtained; land secured for expansion
Phase II (FY 202526)	Expand ethanol capacity; upgrade existing biogas plant; implement Zero Liquid Discharge (ZLD) via ATFD (powder); install biopotash recovery; expand MEE capacity, build W2E cogeneration unit
Phase III (FY 202627)	Develop solar plant; green hydrogen plant, linked to BPCL pipeline; Additional refinery capacity expansion

• Environmental Clearance already granted for Phase II assets and expansion; No further extension needed for solar plant, hydrogen plant, MEE plant, ethanol and W2E co-generation plant

4. Sustainability & ESG Imperatives

• Commitment to Zero Liquid Discharge (ZLD) aligns with CPCB norms and best industry practice (as applied by leading distilleries like Radico Khaitan)

• The biopotash powder generated from ATFD will enable an additional revenue stream while enhancing rural agricultural productivity.

• Cogeneration, solar and CBG/hydrogen integration ensures minimal carbon footprint and energy reuse within operations.

• Plans to collaborate with local farmers for feedstock procurement extend the circular rural bioeconomy model, supporting income stability and rural welfare.

5. Financial Performance & Capital Structure

• Phase I entirely financed through private equity instruments (CCDs and Warrants), with further details provided in the notes to accounts. The outstanding warrants are required to be converted by the end of February 2026.

• No financial leverage; no debt incurred in acquisition phase.

• The Company retains financial flexibility, with the Promoter (ZR2 Group) prepared to infuse additional capital for Phase II and

Phase III expansions during the later part of the current financial year, as may be required."

• Cash flow projections indicate an early breakeven for Phase II expansions, driven by improved efficiency, a diversified revenue mix (ethanol, CBG, hydrogen, bio-potash, and power exports), assured feedstock availability, and firm off-take commitments from OMCs and Government agencies, providing strong protection to the bottom line.

6. Opportunities, Risks & Outlook

Opportunities

• Benefiting from the National Policy on Biofuels and E20/E30 roadmap; by 2030 India may target 30% ethanol blending boosting demand further

• Assured feedstock from co-location and BOOT Arrangement.

• Integration with green hydrogen and CBG opens new low-carbon fuel avenues; first-mover advantage in hydrogen-CBG blending directly integrated with City gas distribution (CDG) network located 1.5 kms from the plant.

• Additional revenues from exportable power, bio-potash, and potential industrial ethanol sales.

Risks & Mitigations

• Feedstock price volatility: mitigated via diversified sourcing (cane + grain) and long-term procurement agreements.

• Policy risk: Ethanol prices linked to administered pricing mechanism offset by integrated bio-refinery operations.

• Environmental constraints: ZLD compliance, water usage, and sustainability are central to design.

Outlook

ZR2 Bioenergy Ltd is firmly aligned with Indias energy transition roadmap. By executing Phasewise expansions and adhering to

sustainability and regulatory standards, ZR2 is wellpositioned to capitalize and unlock value in the bioenergy industry, delivering not only

shareholder value but also enabling sustainable rural development and farmer participation.