Heranba Industries Ltd Management Discussions

ECONOMIC OVERVIEW

Global Economy

In 2025, the global economy confronts a highly challenging and uncertain environment, driven largely by an abrupt shift in international trade policy. Following a period of relatively stable but modest growth in 2024, the landscape changed markedly at the start of 2025 as governments reprioritized their economic agendas. The United States led the way, implementing wide-ranging new tariffs from January through April, with subsequent policies broadening tariff coverage to near-universal levels and driving effective tariff rates to their highest point in a century. These sweeping measures triggered retaliatory actions from major trading partners, intensifying global trade tensions and amplifying uncertainty in economic forecasts.

This volatility has cast a heavy shadow over the global outlook. According to the IMFs April 2025 reference forecast, which incorporates all major policy moves through early April, world

GDP growth is now projected at 2.8% for 2025 and 3.0% for 2026. These figures mark a significant downgrade of 0.8% points cumulatively compared with January estimates, and remain well below the 2000 2019 average of 3.7%. Growth in advanced economies is expected to slow markedly to

1.4% in 2025, with the United States decelerating to 1.8% and the euro area to just 0.8%. Emerging and developing economies are forecast to expand by 3.7% in 2025, rising slightly to 3.9% in 2026, though countries most impacted by new trade measures, such as China, face the deepest downgrades. Meanwhile, global inflation is projected to ease more gradually than previously anticipated, reaching 4.3% in 2025 and 3.6% in

2026, with inflation forecasts revised up for advanced economies but down modestly for developing ones.

Risks to the outlook have tilted decisively to the downside. The escalating risk of a prolonged trade war, coupled with exceptionally high policy uncertainty, threatens both short and long-term growth prospects. Vulnerable economies, especially those with high debt levels, now face growing risks related to asset repricing, sharp exchange rate moves, and capital flow volatility. Demographic pressures, including aging populations and diminishing foreign labour forces, further weigh on economic potential and jeopardize fiscal sustainability. For many developing and low-income nations, waning international support may exacerbate debt distress, compelling abrupt fiscal tightening that would undermine growth and living standards.

Central banks must remain focused on safeguarding price and financial stability, fine-tuning policies amid increasingly complex trade-offs. Managing volatility may require targeted foreign exchange interventions and macroprudential tools to prevent new vulnerabilities. In addition, credible fiscal consolidation and structural reforms will be vital to rebuild fiscal space, reduce inequality, and restore medium-term global growth momentum.

Ultimately, the global economy stands at a pivotal moment. Progress will depend on stronger policy coordination and clear domestic action to bolster confidence and resilience against heightened adversity.

Source: IMF World Economic Outlook, April 2025

Indian Economy

Indias economy in 2025 stands out as a model of resilience and dynamism amid a turbulent global landscape. As the worlds fastest-growing major economy, India has maintained robust momentum, with real GDP growth for

FY2024 25 estimated at 6.4% and forecasts for FY2025 26 ranging from 6.3% to 6.8%. This strong growth keeps India well ahead of its global peers and closely aligned with its decade-long trend, despite significant challenges from international trade disruptions, geopolitical uncertainties, and supply chain constraints.

Growth remains broad-based, fuelled by positive contributions across agriculture, industry, and services. The agricultural sector has rebounded convincingly, registering an expected growth of 3.8%, driven by record

Kharif production and rising rural consumption. The industrial sector is projected to expand by 6.2%, underpinned by solid performance in construction, utilities, and a resilient manufacturing base that has weathered external demand headwinds. The services sector continues to be the economys main driver, growing at a healthy 7.2%. Now accounting for more than 55% of total

Gross Value Added, services have seen buoyant gains in IT, financial services, and hospitality, particularly on the back of surging export demand. Industrial output, especially in steel, automobiles, and electronics, has also strengthened, with electronics seeing especially rapid expansion as global demand for digital infrastructure rises.

Inflation management stands out as a key policy success. Headline retail inflation eased from 5.4% in FY24 to 4.9% by the end of 2024, supported by improved food supply chains and timely government action. The Reserve Bank of India remains confident that inflation will approach its medium-term target of 4% by FY26, establishing a stable environment for both consumers and investors. This macroeconomic stability is bolstered by the governments commitment to fiscal discipline, featuring higher capital expenditures, especially in infrastructure, with enduring multiplier effects. The financial sector has also recorded major progress, as gross non-performing assets fell to a historic low of 2.6%, the credit-to-GDP gap narrowed, and the insurance industry expanded significantly, highlighting a more robust and efficient banking system.

Several persistent growth drivers continue to support Indias strong outlook. Domestic consumption remains vibrant, driven by recovering rural demand and steady urban spending. Public investment in infrastructure and manufacturing, along with increased credit availability and banking sector improvements, have further strengthened demand and job creation. The digital economy, in particular, is expanding rapidly and is set to surpass $1 trillion in value by the end of 2025, positioning India as a critical player in global digital transformation and deepening its integration with the world economy.

Nonetheless, challenges remain. Persistent global uncertainties, including ongoing trade disputes, geopolitical tensions, and volatile commodity prices, pose notable risks. Inflationary pressures, especially from food price swings and potential supply disruptions, require ongoing vigilance. Structurally, further reforms in taxation, labour laws, and governance are essential for sustaining high growth and boosting economic efficiency.

Looking ahead to 2025 26, Indias economic outlook remains broadly positive. Growth forecasts reflect confidence in underlying momentum, and continued government emphasis on fiscal consolidation, productive capital spending, and overdue structural reforms should help sustain progress. As India moves toward its longer-term goal of becoming a developed economy by 2047, key policy priorities will include managing inflation, improving workforce productivity, and nurturing a culture of innovation and enterprise. In short,

Indias economic story in 2025 is defined by its ability to weather global shocks, leverage its intrinsic strengths, and pursue a forward-looking reform agenda, reinforcing its status as a leading force in the global economy.

Source: Economic Survey of India 2024-25, RBI

INDUSTRY OVERVIEW

Global Crop Protection & Agrochemical Industry

The global crop protection and nutrition industry represents a critical component of modern agriculture, encompassing bio-fertilizers, pesticides, and bio-stimulants that are essential for maintaining global food security. This industry has demonstrated resilience and steady growth, despite facing various challenges including supply chain disruptions, regulatory changes, and geopolitical tensions.

Market Size and Growth Trajectory

During 2019-2024, the global crop protection and nutrition market experienced substantial growth at a compound annual growth rate

(CAGR) of 6.2%, expanding from approximately $75.7 billion in 2019 to $102.2 billion in 2024. The industry encountered a temporary setback in 2023 with a 2.4% decline due to factors including slowed global demand, elevated energy prices, and erratic monsoon patterns. However, the market recovered in 2024 with

2.2% year-over-year growth, driven by continuous product upgrades and technological advancements.

Looking ahead, the industry is projected to maintain robust growth at a CAGR of approximately 6.3% during the forecast period 2024-2029, potentially reaching $138.7 billion by 2029. This optimistic outlook is supported by shifting consumption patterns, evolving agricultural practices, increased fertilizer and chemical usage for crop yield enhancement, and growing consumer concerns about food safety.

Regional Market Dynamics

The Asia-Pacific (APAC) region dominates the global crop protection market with a commanding 42% market share in 2024, followed by

Europe and South America, each holding 18% of the market. North America accounts for 17% of global consumption, while Africa and the Middle East represent smaller but growing segments at 4% and 1% respectively.

Asia-Pacific Leadership: The APAC regions dominance stems from major agricultural economies including

China, India, Japan, Australia, Indonesia, and Vietnam, which are expanding their use of crop protection chemicals to boost overall production and yield. China stands out as both the largest producer and consumer of crop protection chemicals globally, while India represents one of the largest producers with diverse crops and agro-climatic zones.

Regional Growth Patterns: The APAC region is projected to grow at a CAGR of 5.9% during 2024-2029, while Europe is expected to grow at 5.6%, and South America at an impressive

7.2%. North America, though mature, is anticipated to grow at 4.5% during the same period.

Product Segmentation and Market Structure

The global crop protection industry exhibits interesting dynamics between volume and value across different product categories. Pesticides, despite representing only 12% of total volume consumed, contribute a substantial 68% of total industry revenue, highlighting their premium positioning and value density. In contrast, bio-fertilizers account for

87% of total volume but generate

30% of revenue, reflecting their bulk nature and lower unit prices. Bio-stimulants represent a smaller but growing segment at 2% of revenue.

The pesticide segment includes herbicides, fungicides, and insecticides, with herbicides dominating approximately half of the global crop protection market. This segment is expected to grow at a CAGR of 3.3% during 2024-2029, driven by benefits including increased crop productivity and protection from various pests.

Application Areas and Drivers

The industry serves diverse agricultural applications, with fruits and vegetables commanding the largest market share at 29% of revenue, followed by cereals and grains at 27%. Oilseeds and pulses contribute 22% of total revenue, while other crops account for the remaining

22%.

Several key factors drive industry growth: rising global population necessitating increased food production, shrinking arable land requiring enhanced productivity per hectare, growing awareness of sustainable farming practices, technological innovations in crop protection formulations, and increasing adoption of precision agriculture techniques.

Outlook and Sustainability Trends

The industry is witnessing a significant shift toward sustainable and environmentally friendly solutions. Bio-fertilizers are expected to experience accelerated growth due to increasing environmental awareness and soil contamination concerns. Similarly, bio-stimulants are projected to grow at 5.5% CAGR in value terms during 2024-2029, driven by the rising demand for organic food and sustainable farming methods.

The global crop protection and agrochemical industry stands at a pivotal juncture, balancing the imperative of food security with environmental sustainability, positioning itself as an essential enabler of modern agricultures evolution toward more efficient and responsible practices.

Source: CareEdge Research

Indian Crop Protection & Agrochemical Industry

The Indian agrochemical industry has witnessed remarkable growth over the past decade, reinforcing its pivotal role in the global market. Between

FY14 and FY23, the domestic pesticide market expanded from C368 billion to C655 billion, translating to a Compound Annual Growth Rate

(CAGR) of 6.6% in INR terms and 3.0% in USD terms, reaching an estimated

USD 7.9 billion by FY23. This upward trajectory is expected to continue, with projections indicating a CAGR of

6.0% 6.5% through FY28, driven by increasing domestic consumption and a surge in global demand for Indian agrochemical products.

A major factor fuelling this momentum has been the steady rise in pesticide production. Covering 42 technical grades, Indias total pesticide output increased from 217 thousand tonnes in FY19 to 280 thousand tonnes in FY24, reflecting a CAGR of 4.5%. In FY24 alone, production climbed by 9% year-on-year, supported by stable pricing trends and the clearance of excess inventory, which allowed for higher capacity utilization.

However, the industry continues to face certain structural challenges, particularly in terms of raw material dependencies. A significant portion of Indias pesticide intermediates, especially technical-grade insecticides, is imported from China. Supply chain disruptions arising from environmental compliance-related shutdowns in China have highlighted this vulnerability. To mitigate such risks, the Indian government is actively considering expanding the scope of the Production Linked Incentive (PLI) scheme to cover agrochemical manufacturing, thereby promoting backward integration, and reducing reliance on imports. Additionally, the global "China-plus-one" strategy, aimed at diversifying supply chains away from China, positions India, currently the fourth-largest producer and 13^th-largest exporter of agrochemicals, as a compelling alternative sourcing hub.

Indias export performance underscores this potential. The country is a net exporter of agrochemicals, with export volumes of technical-grade and formulated pesticides rising from 461 thousand tonnes in FY19 to 630 thousand tonnes in FY24, registering an impressive 8.1% CAGR significantly outpacing production growth. Export value grew even faster, at a CAGR of

18.2%, increasing from C23,71,993 million in FY20 to C34,70,745 million in FY24. These gains highlight not only robust global demand but also the growing value addition and pricing power of Indian manufacturers. Key competitive advantages such as cost-efficient labour, well-developed chemical manufacturing clusters, and proactive government policies aimed at boosting domestic production further reinforce Indias standing in the global agrochemical landscape.

COMPANY OVERVIEW

Heranba Industries Limited (HIL) is a leading agrochemical Company in India founded by technocrats Sadashiv Shetty and Raghuram Shetty. Heranbas mission is to improve Crop Productivity and Public Health, reflecting a deep commitment to global wellness through innovative, science-driven solutions. The passion lies in delivering innovative solutions to farmers that boost farm efficiency.

The Company is a leading manufacturer of intermediates, technical-grade products, and formulations catering to farmers as well as institutional clients. The Company delivers a complete range of crop protection solutions to the farming community, from insecticides, fungicides, herbicides, and plant growth regulators, as a trusted one-stop partner for its customers agricultural needs worldwide.

HIL operates 7 advanced manufacturing and packaging facilities strategically located across the industrial hubs of Vapi, Saykha, and Sarigam in Gujarat and Boisar in Maharashtra. The Companys operations are supported by 3 state-of-the-art Research and Development (R&D) centres, where a dedicated team focuses on new product commercialisation, process optimization, and continuous innovation. In addition, HILs strong product registration team plays a crucial role in expanding its global presence by ensuring timely approvals across international markets.

With a broad product portfolio, strong R&D expertise, and a disciplined growth strategy, Heranba Industries is well-positioned to strengthen its global footprint and emerge as a major player in the agrochemical sector. Its offerings span a wide range of crop protection solutions, including herbicides, insecticides, and fungicides, helping farmers protect their crops from weeds, pests, and diseases to enhance productivity and profitability.

Primarily operating in the off-patent segment, HIL focuses on delivering proven, cost-effective products while also developing proprietary formulations to meet evolving market needs. The Company is recognized as one of the largest domestic producers of synthetic pyrethroids and is actively diversifying into other agrochemical categories to expand its market reach. Its product range also includes an extensive portfolio of insecticides, herbicides, fungicides, and pest control products for public health applications.

Heranba Industries has established a strong international presence, exporting to key markets across the Middle East, Commonwealth of Independent States (CIS), Asia, Southeast Asia, and Africa. In addition, the Company is steadily advancing its expansion into developed regions such as the United States and Europe, leveraging its manufacturing expertise and innovative product pipeline to meet the growing global demand for effective and sustainable crop protection solutions.

RISKS AND CONCERNS

In FY25, Heranba Industries continued to navigate a challenging macroeconomic environment and persistent industry headwinds that first emerged in FY23. The agrochemical sector has been impacted by a variety of factors such as subdued demand driven by supply-chain destocking across key markets, a general slowdown in overall demand, and declining price realisations for agrochemical products. Additionally, heightened competition from Chinese manufacturers and elevated inventory levels within export market supply chains further intensified industry pressures.

Despite these challenges, the Company demonstrated resilience by maintaining its focus on strategic priorities, including new product commercialization, CAPEX projects execution at Saykha and Sarigam, and brand-building initiatives geared towards strengthening the domestic branded formulations vertical. Heranba Industries remains confident in its ability to overcome these industry headwinds and is committed to delivering sustained value to its customers and shareholders.

Given that agrochemical demand is closely linked to the agricultural sector, it remains sensitive to weather-related factors, including extreme conditions such as droughts, floods, intermittent rainfalls, and other natural calamities. Prolonged adverse weather patterns in India or the Companys international markets can significantly impact product demand and, in turn, affect operational and financial performance.

Furthermore, due to the nature of its product portfolio, Heranba Industries faces inherent risks related to contamination, adulteration, and tampering during manufacturing, transportation, and storage. Any such lapses could potentially result in product liability or recall claims if the goods fail to meet quality standards or are alleged to cause harm. While the Company adheres to stringent manufacturing protocols and rigorous quality testing to mitigate these risks, it cannot entirely eliminate them.

For a detailed overview of the Companys Risks and Risk

Management Framework, please refer to page number 36.

FY25 PERFORMANCE REVIEW & OUTLOOK

Revenue from Operations for FY25 stood at 1,495.90 crore, reflecting a YOY growth of 17% compared to 1,274.75 crore in FY24. While the

Company recorded healthy volume growth during the year, industry-wide pricing pressures limited the full translation of this growth into top line performance.

EBITDA for FY25 was 128.81 crore, a marginal increase from 126.99 crore in FY24. EBITDA margins, however, declined to 8.4% from 9.7% in the previous year, primarily due to lower price realizations and the impact of higher operating costs associated with the ramp-up of recently commissioned capacity expansion projects.

As a result, Profit After Tax (PAT) for

FY25 stood at 54.00 crore compared to 66.35 crore in FY24. The decline in profitability was further influenced by higher depreciation and finance costs during the year.

Despite these short-term challenges, Heranba Industries continues to maintain a strong balance sheet. With an expected recovery in product pricing, an improved demand outlook, and incremental capacities coming onstream, the Company remains optimistic about achieving a stronger financial performance in the coming years.

Financial Ratios & Remarks

Particulars	FY25	FY24	Change	Remarks
Current Ratio	1.21	1.56	-22.44%	-
Debt-Equity Ratio	0.26	0.16	62.68%	Fresh borrowings taken during the year
Debt Service Coverage Ratio	4.04	8.09	-49.99%	Fresh borrowings taken during the year
Return on Equity ratio (ROE)	5.99%	14.39%	-23.58%	-
Inventory Turnover Ratio	4.55	3.29	38.05%	Increase in cost of goods production
Trade Receivables Turnover Ratio	2.83	2.88	-1.79%	-
Trade Payables Turnover Ratio	3.67	4.65	-21.19%	-
Net Capital Turnover Ratio	6.75	3.22	109.61%	Increase in sales and decrease in working capital
Net Profit Ratio	3.61%	5.21%	-30.66%	Increase in cost of goods production
Return on Capital Employed (ROCE)	8.61%	10.04	-14.32%	-
Return on Investment (ROI)	0.43%	0.90%	-52.30%	-

HUMAN RESOURCE AND INDUSTRIAL RELATIONS

Heranba Industries regards its people as its greatest strength and the cornerstone of its sustained growth. The Company is committed to fostering both the professional and personal development of its employees, with the objective of unlocking their full potential and aligning individual growth with organisational goals.

To support this vision, Heranba places significant emphasis on training and upskilling programs designed to meet evolving business needs. By providing continuous learning opportunities, the Company empowers its workforce to remain agile, relevant, and capable of delivering high performance.

Employee motivation is further reinforced through performance-based compensation and recognition schemes that reward dedication, productivity, and exceptional contributions. This approach nurtures a culture of meritocracy, excellence, and continuous improvement across the organisation.

Heranbas management team represents a blend of experienced industry professionals and dynamic young talent. This balanced mix ensures a steady infusion of innovative ideas while leveraging deep industry expertise, creating a vibrant and collaborative work environment. The Company is committed to maintaining an equitable balance between employee satisfaction and organisational performance, recognising that an engaged workforce is critical to long-term success.

Heranba expresses its sincere appreciation to its employees for their dedication and invaluable contributions, which have been instrumental in driving the Companys growth and strengthening its competitive position in the agrochemical sector.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established a robust internal control framework to safeguard its assets, ensure operational efficiency, and maintain financial discipline. All business transactions are subject to strict approval protocols, systematically documented, and reported to management within defined timelines. Adherence to applicable accounting standards is ensured, thereby enabling the accurate and transparent presentation of financial statements.

The Audit Committee of the Board defines the scope, methodology, and frequency of internal audits. Internal auditors conduct detailed reviews of the Companys operations, evaluating the effectiveness of controls, compliance with policies and procedures, and adherence to sound accounting practices. Their findings are submitted in periodic reports to the Audit Committee, which in turn monitors the implementation of corrective measures by respective process owners.

Based on these reviews, internal auditors have confirmed that the Companys internal control framework is strong, efficient, and effective, providing a high degree of operational assurance.

In addition, the Board has put in place a comprehensive legal compliance framework that ensures adherence to all applicable laws and regulations. This framework reinforces the Companys commitment to ethical governance, risk mitigation, and responsible business conduct.

CAUTIONARY STATEMENT

Some of the statements in this "Management Discussion and Analysis", describing the Companys objectives, projections, estimates, expectations, and predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could materially differ from those expressed or implied, since the Companys operations are influenced by many external and internal factors beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, based on any subsequent developments, information, or events.