Gulshan Polyols Ltd Management Discussions

ECONOMIC OVERVIEW

Global Economic Review

In FY 2024 25, the global economy continued to face volatility arising from ongoing geopolitical conflicts, commodity price fluctuations, and effects of monetary tightening by central banks worldwide. The aftershocks of the Russia-Ukraine and Israel-Hamas conflicts continued to disrupt supply chains and raise input costs across sectors. Nevertheless, inflation has moderated in most advanced and emerging economies, with global headline inflation showing a downward trend.

Global Outlook

Growth in FY 2025-2026 is expected to be led by the United States, where resilient consumer spending, a strong labor market, and technological investments are underpinning expansion. In Asia, large emerging markets like India, China, Indonesia, and Vietnam are expected to remain key contributors to global growth. India, in particular, continues to stand out as one of the fastest-growing major economies, supported by domestic demand, infrastructure development, and structural reforms.

China is also playing a significant role, with fiscal and monetary stimulus supporting growth amidst a sluggish real estate sector and subdued consumer sentiment. Government-led investments in manufacturing and clean energy are expected to stabilize activity in the medium term. Europe is forecast to grow at a slower pace, weighed down by elevated energy costs, weak industrial output, and ongoing geopolitical uncertainty due to the Russia-Ukraine conflict. Meanwhile, developing economies in Africa and Latin America are projected to show mixed results depending on commodity cycles, domestic reforms, and external financing conditions.

In summary, the outlook for FY 2026 is cautiously optimistic. Global GDP is expected to grow in the range of 2.3% to 2.7%, supported by robust domestic demand in key economies, policy support, and gradual easing of financial conditions.

Domestic Economic Review India

India has retained its position as the fastest-growing major economy, demonstrating resilience in a challenging global macroeconomic environment. In FY 2024-2025, Indias GDP grew at an estimated 6.2%, propelled by government-led capital expenditure, strong service sector output, and private investment. Despite weather-related disruptions impacting rural consumption and agricultural output, the economys structural fundamentals remain strong.

The Reserve Bank of India (RBI) has maintained a 5.5% repo rate, with an emphasis on aligning inflation to its 4% target, while ensuring adequate liquidity and supporting growth.

Domestic Outlook

The outlook for the Indian economy remains strong and resilient, with GDP growth projected in the range of 7.0% to 7.2% for FY 2024 25. India continues to be one of the fastest-growing major economies in the world, buoyed by favourable macroeconomic Indias structural reforms including tax rationalization, digital governance initiatives, and financial sector strengthening continue to improve ease of doing business and attract foreign direct investment. The rapid adoption of digital infrastructure, especially in fintech, e-commerce, and public services, is enabling greater inclusion and economic efficiency.

The governments sustained focus on renewable energy, electric mobility, and green hydrogen is transforming India into a future-ready, climate-conscious economy. Simultaneously, large-scale infrastructure projects under the National Infrastructure Pipeline (NIP) and Gati Shakti initiatives are expected to unlock further economic potential by enhancing connectivity and logistics efficiency.

With its favourable demographics, expanding middle class, and proactive policy environment, India is uniquely positioned among emerging markets. It is on course to become the worlds third-largest economy by 2030, with increasing global relevance across manufacturing, services, and sustainable innovation.

In summary, Indias growth story remains compelling, underpinned by domestic strength, structural resilience, and a forward-looking policy framework. The economic momentum is expected to remain strong in FY 2025 26 and beyond.

INDUSTRY OVERVIEW

Indian Chemical Industry

Indias chemical industry, encompassing over 80,000 commercial products, continues to be one of the most diverse and dynamic sectors in the global economy. It serves as a critical enabler for industries such as agriculture, pharmaceuticals, textiles, construction, automotive, and consumer

th goods, making it a cornerstone of Indias industrial and economic framework.

The sector benefits from an open licensing regime, with restrictions limited to select hazardous chemicals. This liberal regulatory environment promotes ease of doing business, investment inflows, and technology adoption, attracting both domestic and foreign players. Indias chemical exports continue to gain global traction, underpinned by:

Robust demand for specialty chemicals, intermediates, and active pharmaceutical ingredients (APIs).

Competitive cost structure, skilled technical manpower, and strong R&D infrastructure.

Post-pandemic supply chain realignment, with global manufacturers seeking diversification from China, enhancing Indias position as an alternative supply hub.

Looking forward, the growth of the chemical sector will be driven by:

Rising domestic consumption across industries like automotive, electronics, construction, and FMCG.

Increased capital investments in specialty chemicals, green chemistry, and environmentally sustainable production.

Policy support through Production-Linked Incentive (PLI) schemes, export incentives, and infrastructure investments under the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) program.

With a strong export base, growing domestic demand, and favorable government policies, Indias chemical industry is well-positioned for sustained growth in FY 2025 26 and beyond.

Ethanol Industry

India has emerged as the third-largest ethanol producer globally, following the United States and Brazil, underlining its growing commitment to green energy and reduced dependence on fossil fuels. The ethanol industry plays a pivotal role in supporting the governments Ethanol Blended Petrol (EBP) programme, which aims to improve energy security and reduce carbon emissions.

Key Developments:

As of March 2025, India achieved a 19.8% ethanol blend in petrol, firmly on track and effectively reached the 20% target ahead of schedule in early 2025.

Installed annual ethanol production capacity expanded to 1,810 crore litres (18.10 billion litres) by mid2025. Of this, 858 crore litres is grain-based and 816 crore litres molasses-based, with the remainder from dualfeed facilities

Government initiatives now allow the use of surplus grain (including corn), not just damaged stock, as a feedstock a strategic move to scale up domestic production.

Policy support includes capital subsidies, easier financing for new distilleries, and incentives for dual-feed and grain-based ethanol plants.

Challenges:

Volatile feedstock prices, such as maize and rice, have put pressure on operating margins.

Policy shifts, such as the restriction on rice supply from the Food Corporation of India (FCI), have impacted grain availability for ethanol producers.

Opportunities:

Increasing adoption of flex-fuel vehicles and the introduction of Sustainable Aviation Fuel (SAF) is expected to open new demand avenues.

Technological advancements such as high-gravity fermentation and integrated bio refineries promise to improve yield, reduce costs, and minimize environmental impact.

With strong policy backing, growing infrastructure, and evolving market demand, the Indian ethanol sector is expected to play a transformative role in the countrys green energy transition and contribute significantly to the biofuel economy in the years ahead.

COMPANY OVERVIEW

Gulshan Polyols Limited, a multi-location, multi-product manufacturing enterprise, is one of Indias leading producers of grain-based chemicals, mineral-based products, and biofuels. With a presence in over 40 countries and a diversified product portfolio, GPL operates nine manufacturing facilities across India.

The Company continues to expand its presence in core sectors such as pharmaceuticals, food & beverage, personal care, paints, paper, and agrochemicals.

Segment Performance

1. Ethanol (Bio-Fuel)/Distillery

The Ethanol segment has firmly established itself as the leading contributor to the Companys revenue and profitability in FY 2024 25. With revenue of approximately 1,18,680 lakhs, it accounted for nearly 59% of the total segment revenue. This marks a substantial increase over the previous year and reflects the impact of higher production capacity, strong demand from oil marketing companies, and favorable regulatory support for ethanol blending.

The segment also contributed the majority of the operating profit during the year, driven by improved scale, operational efficiencies, and better capacity utilization. The Company continues to focus on expanding its ethanol capabilities, positioning itself to play a larger role in national bio-fuel transition strategy.

2. Grain Processing

Grain Processing contributed around 72,851 lakhs in revenue during the year, making up about 36% of the total segment revenue. However, this marked a decline from the previous year, as the segment faced a combination of lower realizations and rising input costs. Profitability remained under pressure, and the segment reported negative results for the year.

Despite these challenges, the Company remains committed to improving operational efficiency in this segment and is exploring opportunities to optimize its product mix and reduce cost pressures.

3. Mineral Processing

The Mineral Processing segment generated approximately 10,436 lakhs in revenue, contributingabout 5% to the total segment revenue. While the segment maintained stable operations with a slight improvement over the previous year, its scale remains modest compared to the Ethanol and Grain segments.

Margins in this business remained relatively healthy, and the segment delivered a positive contribution to profits. However, its overall impact on the Companys performance was limited due to its smaller size. Future plans for this segment will focus on incremental growth, process optimization, and value-added product opportunities.

KEY STRATEGIC INITIATIVES & ACHIEVEMENTS

Commissioned 250 KLPD Ethanol Plant in Assam: Strengthened regional supply capacity and aligned with EBP programme goals. Expanded Grain-Based Ethanol Production: Enhanced capacity utilization to support Indias 20% blending target by 2025-26. Diversified Feedstock Strategy: Shifted focus to surplus grain and corn following FCI rice supply restrictions.

RISK AND CONCERN

Gulshan Polyols Limited (GPL) has a robust and proactive Risk Management Framework guided by a dedicated Risk Management Committee. The Committee regularly reviews enterprise risks and ensures that timely mitigation strategies are embedded across all operational levels. The key risk categories and mitigation strategies for FY 2025 26 are outlined below:

1. Environmental & Sustainability Risk

Regulatory pressure and environmental impact from manufacturing operations.

Mitigation:

Deployment of eco-efficient technologies.

Focused efforts on water conservation, solid waste management, and emission reduction.

Ongoing initiatives to align operations with ESG standards and support long-term environmental compliance.

2. Feedstock & Commodity Price Volatility

Rising prices and inconsistent availability of grains, critical to ethanol production.

Mitigation:

Diversified feedstock strategy, emphasizing surplus grains and corn over FCI rice.

Strategic inventory management and multi-location procurement to ensure supply continuity.

Strengthening of supplier relationships and long-term contracts to hedge input price fluctuations.

3. Policy & Regulatory Risk

Policy shifts impacting raw material sourcing (e.g., FCI restrictions) and ethanol blending mandates.

Mitigation:

Operational agility with quick realignment of sourcing, production, and capacity planning.

Proactive government engagement to promote ethanol-friendly policies and resolve bottlenecks.

Continuous process optimization to manage costs and maintain margin stability amid policy uncertainty.

INTERNAL CONTROLS & GOVERNANCE

Gulshan Polyols Limited has established a robust internal control framework designed to ensure operational efficiency, regulatory compliance, and financial integrity across all levels of the organization. These controls are reviewed periodically to remain aligned with evolving business needs and statutory requirements.

Key Elements of the Control Environment:

Structured SOPs & Policies: Well-documented Standard Operating Procedures (SOPs) guide day-to-day operations and are regularly updated for relevance and regulatory alignment.

Internal Audits: A dedicated internal auditor has been appointed to conducts independent, risk-based audits, reporting to the Audit Committee to ensure accountability and corrective actions.

Board-Level Oversight: The Audit Committee and Board of Directors provide strategic supervision of control systems, ensuring governance standards are upheld.

System Integration: ERP systems and digital workflows enhance data integrity, enable real-time monitoring, and reduce process inefficiencies

Compliance Monitoring: Continuous tracking of legal, tax, and environmental compliances to avoid any regulatory breaches.

GPLs internal controls are commensurate with its scale and complexity, ensuring that assets are safeguarded, transactions are authorized and recorded accurately, and risks are proactively managed. This framework enables informed decision-making and enhances stakeholder confidence.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

At GPL, employees are recognized as the companys most valuable asset. The organization continues to foster a high-performance culture built on empowerment, well-being, and continuous development.

Key Initiatives in FY 2025 26:

Upskilling & Development: Ongoing training, leadership programs, and digital learning initiatives to enhance workforce capabilities and adaptability.

Health & Wellness: Company-wide health check-ups, mental wellness drives, vaccination camps, and fitness initiatives ensure holistic being.

Performance & Rewards: Competitive compensation structures, ESOPs, and a merit-based appraisal system reinforce GPLs commitment to performance excellence.

Inclusive Work Culture: Emphasis on diversity, open communication, and a collaborative environment that encourages innovation and accountability.

Industrial Relations:

Harmonious labor relations were maintained across all manufacturing units.

There were no disruptions or loss of working hours due to labor disputes during the year.

GPL remains committed to strengthening its human capital through strategic HR practices that align with the companys long-term growth and sustainability goals.

CAUTIONARY STATEMENT

This Management Discussion and Analysis contains forward-looking statements that are based on certain assumptions, expectations, and projections about the companys business and the environment in which it operates. These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Factors such as market conditions, regulatory changes, raw material availability, and other risks may impact the companys future performance.

GPL undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Readers are advised to exercise caution and not to place undue reliance on such statements.