Gulshan Polyols Ltd Management Discussions

Market and Industry Context Global Economic Review

The Past year commenced with elevated global uncertainty, shaped by evolving trade policies, geopolitical tensions and uneven economic growth across regions. The world GDP grew at a rate of 3.4% in 2025. While moderating inflation and continued digital investments provided pockets of resilience, global GDP growth remained subdued, with enterprises exercising greater caution in discretionary spending. Technology spending faced sharper scrutiny, with decisions tied to clear business outcomes, productivity gains, and cost optimisation.

In recent months, new geopolitical tensions have emerged as a significant source of uncertainty for the global economy, particularly through disruptions to energy markets and global trade flows. The conflict has led to volatility in oil and gas prices due to supply risks and logistical constraints in critical transit routes, which has translated into higher input costs across industries and contributed to renewed inflationary pressures in several economies. Elevated energy prices have weighed on consumer purchasing power and corporate margins, while heightened geopolitical risk has increased financial market volatility, tightened financial conditions, and dampened investment sentiment globally. The broader global economy has experienced slower growth momentum and increased downside risks to the medium-term outlook, prompting the IMFto lower its 2026 global growth projection by 0.2% to 3.1%.

Global economic Outlook

The global economy in FY2026 demonstrated resilience despite persistent geopolitical, trade and energy-related uncertainties. Global GDP growth stabilised at modest but uneven levels across regions, supported by disinflation, a gradual shift toward monetary easing in select economies and continued investments in technology and remained constrained by structural challenges, including slowing productivity, elevated public debt and increasing geo-economic fragmentation. Energy prices remained volatile during FY2026, particularly crude oil and natural gas, with periodic fluctuations driven by geopolitical tensions in key producing and transit regions. While medium-term supply expectations improved, near-term volatility continued to impact cost structures across energy-intensive industries, including chemicals.

Overall, the macroeconomic environment in FY2026 was characterised by stable but modest growth, easing inflation and gradually improving financial conditions in the latter part of the year, offset by elevated geopolitical

Domestic Economic Review

The Indian economy demonstrated remarkable resilience and sustained growth momentum during FY 2025 26 despite heightened geopolitical tensions, trade disruptions, and global economic uncertainties. Supported by strong domestic demand, robust public capital expenditure, healthy corporate and banking sector balance sheets, and improving private investment, India retained its position as the fastest-growing major economy in the world for the fourth consecutive year. The First Advance Estimates placed Indias real Gross Domestic Product (GDP) growth at 7.4% in FY 2025 26, while Gross Value Added (GVA) growth was estimated at 7.3%.

In the 2025 26 fiscal year, Indian specialty chemical companies which focussed on the starch and sugar-to-alcohol value chain (Ethanol, Sorbitol, and Liquid Sugar/Glucose) are experiencing a significant divergence in performance. The industry is defined by an absolute boom in Bio-Ethanol due to aggressive government policy changes, while downstream functional ingredients like Sorbitol and Liquid Sugar are showing a gradual margin recovery after experiencing a severe squeeze in grain input costs earlier in the year.

India Economic Outlook

The Indian economy is estimated to have grown at around7.4-7.6% positionas the fastest-growing FY2026,reaffirmingits global economy. Growth was driven by strong domestic demand, sustained government capital expenditure and resilient performance across manufacturing and services sectors, particularly infrastructure, construction, financial services and technology-enabled services.

Inflation moderated during FY2026, with headline CPI inflation averaging around 4.0 4.5%, supported by easing food prices, improved supply-side management and relatively stable core inflation.

However, the outlook remains subject to certain external risks, including geopolitical tensions, global trade fragmentation, volatility in commodity prices, financial market uncertainties, and slower growth in major trading partners. Despite these challenges, Indias strong domestic demand, favourable demographics, accelerating digitalization, and continued policy reforms provide a strong foundation for sustained economic growth.

INDUSTRY OVERVIEW

The Indian Chemical Landscape: A Strategic Imperative

The Indian chemical industry, encompassing over 80,000 commercial products, remains a cornerstone of Indias industrial and economic framework. Serving as a critical enabler for core downstream industries including agriculture, construction, automotive, and fast-moving consumer goods (FMCG) the sector maintains a diverse and dynamic growth trajectory. Further, India is the sixth-largest producer of chemicals globally and the third-largest producer in Asia, underlining its strategic importance in the countrys manufacturing ecosystem.

Against a fragile global background, Indias macro performance stands out as the fastest-growing major economy. The Economic Survey 2025-26 points to a real GDP growth of 7.4% and a strong GVA growth of 7.3%. The industry continues to benefit from an open licensing regime, with regulatory restrictions limited to select hazardous chemicals. This liberal and business-friendly regulatory framework fosters enhanced ease of doing business, accelerates foreign and domestic investment inflows, and promotes rapid technology adoption across processing ecosystems.

India is steadily emerging as one of the fastest-growing chemical markets globally. The countrys chemical market is expected to reach approximately US$300 billion by 2030, driven by rising demand from pharmaceuticals, agrochemicals, personal care products, food processing, and advanced materials. Increasing investments in specialty chemicals and high-value-added products are further enhancing Indias global competitiveness.

Export Momentum and Supply Chain Realignment

During FY 2025 26, Indias chemical exports continued to gain significant global traction. This resilience is underpinned by structural tailwinds:

• Robust Demand for Specialty Portfolios: Sustained global demand for specialty chemicals, advanced intermediates, and active

• Competitive Structural Advantages: A highly competitive cost structure, access to skilled technical manpower, and a robust domestic R&D infrastructure.

• Global Supply Hub Diversification: Ongoing post-pandemic global supply chain realignments are driving. Global manufacturers are actively diversifying sourcing strategies away from single-country dependencies (the "China+1" strategy), firmly establishing India as a preferred alternative supply partner.

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.

StrategicMilestones&Structural

Ethanol Blending Achievement: India achieved an average ethanol blending rate of 19.8% in petrol during Ethanol Supply Year (ESY) 2024-25, effectively achieving the 20% blending target ahead of the original 2030 timeline. The Government subsequently set a target of achieving 30% ethanol blending by 2030.

Emergence of Overcapacity: Total national distillation capacity has expanded to nearly 1,990 crore (19.9 billion) litres. This capacity significantly outpaces the 11 billion litres needed annually to sustain a 20% blend. This mismatch creates localized capacity underutilization.

Policy Support: The Government continues to support the industry through interest subvention schemes, capital assistance for new distilleries,and incentives for grain-based and dual-feed ethanol projects, encouraging capacity expansion and investments across the value chain.

Regulatory & Fiscal Drivers

• Guaranteed Offtake Mechanisms : Public Sector Oil Marketing Companies (OMCs like IOCL, BPCL, HPCL) use Long-Term Offtake Agreements (LTOAs) to provide structural demand security.

• Administered Fixed Pricing: OMCs are legally requiredfixed, feedstock procureethanolatgovernment- -specific prices, insulating distilleries from standard market volatility.

• TaxationRelief : Goods and Services Tax (GST) on fuel-grade ethanol remains at 5% (down from 18%). Higher blend variations (E22 E30) are also exempted from central excise duty.

Challenges:

• Feedstock Price Volatility: Volatility in the prices of maize, rice, and other agricultural commodities has increased input costs and exerted pressure on operating margins, particularly for grain-based ethanol producers.

• Policy Changes onRiceAvailability: on the supply of rice from the Food Corporation of India (FCI) for ethanol Restrictions production have impacted feedstock availability and increased dependence on alternative grains, particularly maize.

• Regulatory Interventions and Intermittent Allocations: The industry is closely linked to central agricultural policies. Abrupt adjustments such as state-level sugarcane diversion caps or changes to Food Corporation of India (FCI) surplus rice allocations to recalibrate their processing setups among canrapidlyalterfeedstockeconomics.Distilleries damaged grains, maize, and heavy molasses based on shifting policy frameworks.

Opportunities:

• Emerging Demand Avenues: The increasing adoption of flex-fuel vehicles, development of Sustainable Aviation Fuel (SAF), and growing emphasis on low-carbon fuels are expected to create significant new demand opportunities for ethanol and biofuels.

• Technological Advancements: Innovations such as high-gravity fermentation, integrated biorefineries, process automation, and advanced biofuel technologies are expected to improve production efficiency, increase yields, reduce costs, and enhance environmental sustainability.

• Shift to Next-Generation Blends (E25, E85, and E100):With the nationwide 20% Ethanol Blending (E20) target successfully achieved, the government has introduced legal frameworks for higher-tierintegrations. This includes formal recognition and market rules for E85 and E100 fuels designed for flex-fuel vehicles. This structural pivot opens a large addressable market for high-volume producers capable of delivering advanced fuel-grade ethanol.

Having successfully advanced and met its foundational blending timelines, the Indian ethanol ecosystem is moving from a capacity-building phase to a nationwide integration phase.

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

COMPANY OVERVIEW

Gulshan Polyols Ltd is Indias leading manufacturer of Ethanol/Bio-fuel, Grain and Mineral based specialty products with more than three decades of experience.

Our business portfolio broadly spans across three main segments, viz., grain processing, bio-fuel/distillery and mineral processing operations that allow us to produce specialty products such as starch and starch derivatives, including sorbitol, calcium carbonate, ethanol (bio-fuel), country liquor, agro-based animal feed.

PERFORMANCE UPDATE-Segment Performance

Ethanol: Delivered our strongest performance to date, driven by successful capacity ramp-ups across all plants. Grain Processing: Headwinds are moderating, with early signs of demand recovery and operational stabilization. Mineral Processing: Delivered a stable performance in line with expectations,supported by steady demand and consistent execution.

Incentives and performance support

Received a total incentive of 21.8 crore from MPIDC1

500 KLPD2 MP Plant: Eligible for additional incentive of 1.5 per litre, over and above existing state incentives

250 KLPD Assam Plant: Eligible for an additional incentive of 2 per litre, in addition to existing state incentives.

KEY STRATEGIC INITIATIVES & ACHIEVEMENTS

Commissioned a 22,000 MTPA PCC Plant in Punjab: To design, engineer, procure, install, commission, operate, and maintain an Onsite Precipitated Calcium Carbonate manufacturing facility

Expansion in the Bio-Fuel Space: GPL has transformed its business model to aggressively target Indias Ethanol Blending Program (EBP). The company has scaled up from a minor producer to a high-capacity national contributor

Diversification of Raw Materials: To mitigate grain supplyvolatility, the company transitioned itsdistillery facilities to support a grain-agnostic setup, utilizing damaged food grains, brokenrice,andmaize/corntosecurestableproductionmargins.

RISKS AND CONCERNS

The strategic pivot of Gulshan Polyols Limited toward grain-based ethanol manufacturing has reached high maturity. While the company achieved a stellar turnaround in FY 2025 26, the structural risks inherent to the agro-energy sector require rigorous, active mitigation.

1. Operational & Supply Risk Mitigation Raw Material Price Volatility

Risk Context: Margins are highly sensitive to price shifts in corn, maize, and open-market damaged rice. Mitigation Actions:

Build local procurement hubs

Utilize price revisions

Grain Supply Disruptions

Risk Context: Government policy shifts, such as FCI halting or limiting surplus broken rice allocations, require unexpected production changes.

Mitigation Actions:

Deploy Multi-Feedstock Technology

Capitalize on the Maize Surge

3. Capacity Underutilization

Risk Context: Fixed-cost absorption suffers if multi-thousand kiloliter expansion plants face technical stabilization delays. Mitigation Actions: o Scale Plant Operations: o Monetize Distillers Dried Grains with Solubles (DDGS)

4. Oil Marketing Company (OMC) Dependency

Risk Context: Revenue is directly tied to price structures and long-term supply contracts mandated by state-owned enterprises Mitigation Actions:

Capture Incremental Tenders

Align with the National Blend Mandate E20:

INTERNAL CONTROLS SYTEM AND THEIR ADEQUACY

The operational scaling atGulshan Polyols Limited (GPL) driven by massive multi-location ethanol production expansion demands fiscperiod anadvancedinternalcontrolframework.Forthe 2025 26 , GPLs internal controls and governance focus heavily on mitigating technical disruptions, ensuring continuous statutory tracking, and enforcing board-level oversight over rapid growth. a well-established TheCompanyhas risk management independentInternalAuditfunction framework. The scope and authority of the Internal Audit function are derived from the Internal Audit Charter approved by the Audit Committee. The Company has engaged a reputable external firm to support the Internal Audit function Reviews are conducted on an ongoing basis based on a comprehensive risk-based audit plan, which is approved by the Audit Committee at the beginning of each year. The Internal Audit team reviews andreportstothemanagementandtheAuditCommittee about compliance with internal controls, the efficiency and effectiveness of operations, and The Audit Committee meets periodically to review and discuss the various Internal Audit reports and follow up on action plans of past GPL uses integrated ERP architectures toestablishsystemicsegregation across manufacturing zones. of duties

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

GPL considers its people as its greatest asset and is dedicated to their development and well-being. By creating a nurturing and collaborative environment, the Company encourages and develops talent. The Company ensures a vibrant, plural business environment that stimulates innovation, collaboration and open communication, providing its workforce with challenging and rewarding career opportunities. GPL also focuses on its nation-building role, providing the employees with a sense of purpose and opportunity to contribute meaningfully.

In FY 2025 26, the Company expanded its human resource frameworks to strengthen technical skill levels and protect personnel safety across all high-capacity distillery zones.

Key structuralinitiativesdeployedduringthefiscal period 2025 26 include:

• Localized Talent Acquisition: Successfully executed a micro-targeted hiring blueprint surrounding our Goalpara (Assam) and Borgaon (Madhya Pradesh) production facilities.

• Specialised Technical Intake: Recruited 120+ specialized chemical engineers, distillation operators, and bio-fuel technicians to handle increased automated processing infrastructure.

• On-Site Operational Readiness: Deployed veteran process engineering managers from core units to newly commissioned facilities to handhold, guide, and accelerate the local workforces learning curves.

• 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 well-being.

• Performance & Rewards: commitment to performance excellence.

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

Industrial Relations:

GPL maintained harmonious industrial relations across all manufacturing units with no disruptions to operations and continued to focus on strategic human capital development.

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

GPL continues to enhance its talent pool through forward-looking HR initiatives that support long-term corporate viability.

CAUTIONARY STATEMENT

This Management Discussion and Analysis (MD&A) report contains forward-looking statements that describe the Companys objectives, projections, expectations, and estimates for the Financial Year 2025 26 and beyond. These statements are based on certain assumptions, beliefs, and expectations of future events regarding the business environment in which Gulshan Polyols Limited operates. Actual results, performance, or achievements could differ materially from those expressed or implied in such forward-looking statements due to a variety of factors. The Company undertakes no obligation to publicly update, modify, or revise any forward-looking statements, whetherasaresult of newdata,futuredevelopments, or otherwise, except as strictly required by applicable securities laws and SEBI listingregulations.Readersareadvisedto exercise caution and not place undue reliance on these forward- eak only as of the date of this report. looking statements, which sp