Hi-Green Carbon Ltd Management Discussions

Global Economic Outlook

Global economic growth is projected to remain steady at 3.3% in both 2025 and 2026, slightly below the historical average of 3.7% recorded during 2000-2019. The outlook for 2025 remains broadly unchanged from earlier projections, with an upward revision for the United States offsetting downward revisions in several other major economies. Global inflationary pressures are expected to ease, with headline inflation anticipated to decline to 4.2% in 2025 and further to 3.5% in 2026. Inflation is projected to converge back to target levels sooner in advanced economies, while emerging and developing economies may witness a more gradual disinflation.

Global growth remains uneven. The US economy continues to show resilience, with growth revised upward to 2.7% in 2025 on the back of strong consumption and a firm labour market. The Euro Area is expected to expand by only 1.0%, constrained by weak manufacturing and policy uncertainty. Chinas growth slowed to 4.7% in Q3 2024, but fiscal measures should support a 4.6% expansion in 2025. India, after a brief industrial slowdown, is projected to sustain robust growth of 6.5% in both 2025 and 2026, reaffirming its long-term potential.

Across other regions, growth prospects remain mixed. The Middle East and Central Asia are projected to see softer growth, particularly due to downward revisions in Saudi Arabias outlook following OPEC+ production cuts. Meanwhile, Latin America, the Caribbean, and Sub-Saharan Africa are expected to witness an acceleration in growth, whereas emerging and developing Europe is likely to slow.

Financial conditions remain broadly accommodative but have tightened modestly since late 2024. US equity markets are at record highs, supported by business-friendly expectations, while emerging markets face tighter liquidity, capital outflows, and the impact of a stronger US dollar. Commodity trends are mixed, with energy prices projected to decline by 2.6% in 2025 on weaker Chinese demand, while non-fuel commodities are set to rise by 2.5%, led by food and beverages.

Diverging monetary policies continue to shape the global outlook. While some central banks hold a cautious stance amid sticky inflation, others are expected to cut rates at varying paces, with faster easing anticipated in the Eurozone and select emerging markets compared to the US. Risks stem from protectionist trade measures, fiscal slippages, and demographic constraints, though upside potential exists from stronger US growth, renewed trade agreements, and structural reforms. In this environment, effective global policy coordination remains essential to balance stability with growth.

(Source: IMF - World Economic Outlook Update, January 2025)

Indian Economy Outlook

India is expected to remain the worlds fastest-growing major economy, with GDP growth projections ranging between 6.3% and 6.7% for 2025-26, as per estimates from the IMF, World Bank, RBI, and Moodys. The IMF revised Indias 2025 forecast upward to 6.4%, citing strong domestic demand and investment momentum, while the World Bank projects growth around 6.3%, supported by resilient consumption and gradual recovery in private investments. The Reserve Bank of India anticipates 6.7% growth in FY 2025-26, aided by improving rural demand, government capital expenditure, and moderating inflation, which touched a multi-year low of 2.1% in mid-2025. Moodys, however, trimmed its 2025 estimate to 6.3%, highlighting global trade frictions, elevated geopolitical tensions, and policy uncertainties. Inflationary pressures have eased significantly, enabling the RBI to begin a calibrated monetary easing cycle. While Indias domestic fundamentals remain strong, global risks such as protectionism, capital outflows, and commodity price volatility continue to warrant close monitoring. Overall, Indias macroeconomic outlook remains positive, anchored by structural reforms, policy stability, and a robust consumption-led growth model. This favorable macroeconomic environment

provides a strong foundation for sectoral growth and creates a supportive backdrop for the Companys continued expansion and value creation initiatives.

(Source: RBI, Moody, World Bank, IMF)

Industry Outlook

Global Tyre Recycling Industry

The global tyre recycling market, valued at USD 9-10 billion, is undergoing a structural transformation driven by environmental awareness, regulatory mandates, and the push toward a circular economy. With over 1 billion end-of-life tyres (ELTs) generated annually, the industry is projected to grow at a CAGR of 5-6% over the next five years. Developed markets such as Europe and North America are leading this transition with stringent landfill bans, carbon reduction targets, and sustainable manufacturing policies.

Pyrolysis has emerged as the most commercially scalable recycling solution, yielding high-value products such as recovered carbon black (rCB), TPO, and recovered steel. These outputs are increasingly being adopted across automotive, plastics, paints, and construction industries as cost- effective, low-emission substitutes for virgin materials. Growing demand for traceable and sustainable inputs is also driving adoption of global certifications such as REACH, ISCC+, and carbon footprint disclosures.

Pricing trends are supportive of industry growth. rCB continues to command strong demand and premium pricing, particularly in Europe and Asia, reflecting its role as a viable replacement for virgin carbon black. TPO, while linked to crude benchmarks, is gaining traction as a biofuel and alternative energy source, enhancing price realization. Together, these factors present a compelling growth opportunity for investors, with tyre recycling positioned as a critical enabler of the global circular economy. Due to Biogenic Content in TPO, refineries are keen to use TPO as raw material for blending with Raw material. Carbon black manufacturing companies who are seeking sustainable Virgin carbon Black they will also use TPO as sustainable alternative.

Sources:

Research And Markets, Tyre Recycling Market Global Forecast 2024-2030 Markets and Markets, Recovered Carbon Black Market - Global Forecast 2024 World Business Council for Sustainable Development (WBCSD), TIP 2023 Report European Commission, Circular Economy Action Plan, 2023 US Environmental Protection Agency (EPA), Sustainable Materials Management Program

Indian Tyre Recycling Industry

India is the second-largest generator of waste tyres globally, producing over 3.5 million tonnes of ELTs annually. The domestic tyre recycling market, valued at ^8,000-^10,000 crore, is growing at a robust CAGR of 7-9%. Historically fragmented and dominated by unorganized players, the sector is now transitioning toward formalization, driven by regulatory reforms and rising demand for sustainable raw materials.

A key policy milestone was the introduction of Extended Producer Responsibility (EPR) for tyres in 2022 by the MoEFCC, mandating producers and importers to recycle a defined share of waste tyres each year. Complementing this, the CPCB has rolled out a digital tracking system to enhance ELT traceability and curb leakages. On the trade front, while ELT imports have been restricted since 2019 to promote domestic collection, India is increasingly emerging as an exporter of value-added products such as recovered carbon black (rCB) and TPO, catering to markets in Southeast Asia, Africa, and the Middle East.

Pricing trends remain favourable, with rCB gaining traction in non-tyre rubber goods and commanding healthy realizations, while TPO, though volatile, continues to find demand as an alternative fuel in cement, textiles, and power. With regulatory clarity improving and sustainability becoming a core driver across industries, Indias tyre recycling sector is poised for consolidation, with formal players scaling up capacity and informal units upgrading to meet environmental standards.

Carbon Black Sector Analysis

The global carbon black sector is undergoing a transition, driven by the twin imperatives of cost efficiency and sustainability. Traditionally, virgin carbon black (VCB) has been the dominant reinforcing filler in tyres and industrial rubber products, accounting for nearly 20-25% of raw material composition in tyres. Beyond tyres, carbon black is also widely used in conveyor belts, hoses, gaskets, plastics, inks, paints, pigments, and electronics. Demand for VCB has historically been tied to the crude oil cycle, since it is produced from heavy petroleum feedstock, making it carbon-intensive and price- volatile. Producing 1 tonne of VCB requires approximately 2.5 tonnes of crude oil and emits nearly 2 tonnes of CO₂, making it increasingly incompatible with global decarbonisation goals.

In this context, Recovered Carbon Black (rCB) has emerged as a cost-effective and sustainable alternative. Produced via pyrolysis of end-of-life tyres (ELTs), rCB offers 50-60% cost savings versus virgin carbon black while reducing emissions significantly. Current rCB quality typically ranges from 80-92% purity, but ongoing technological advancements are pushing this closer to 99.9%, expanding its applicability in high-performance tyre segments and premium industrial uses. Global tyre majors such as Michelin and Continental are already integrating rCB into their supply chains, supported by certifications like REACH, ISCC+, and carbon footprint disclosures. The demand for rCB is also reinforced by regulatory support·Indias EPR mandates for tyres (2022) and Europes Circular Economy Action Plan both encourage higher use of recycled inputs.

The sectors outlook is underpinned by several growth drivers:

• Sustainability Push: Rising ESG focus and decarbonisation targets are accelerating the shift toward rCB adoption.

• Cost Advantage: rCB is significantly cheaper than VCB, offering clear incentives for manufacturers.

• Policy Support: Regulations such as EPR, landfill bans, and green procurement standards are creating strong compliance-led demand.

• Market Opportunity: With over 1 billion ELTs generated annually worldwide, only a small fraction (~2% in India, ~6% globally) are fully recycled into rCB, leaving a vast untapped opportunity.

• End-use Diversification: Beyond tyres, rCB applications are expanding into plastics, paints, construction, and specialty chemicals.

Overall, the carbon black industry is at an inflection point where VCB and rCB will co-exist, but the share of rCB in the mix will rise steadily. As quality improves and global certifications deepen market acceptance, rCB is positioned to become a mainstream raw material, enabling both cost competitiveness and compliance with sustainability mandates.

TPO (Tyre Pyrolysis Oil) Market in India

The Tyre Pyrolysis Oil (TPO) market in India is an active but fragmented sector, largely dominated by small and mid-sized recyclers supplying TPO as an alternative industrial fuel to furnace oil and low- sulphur heavy stock (LSHS). The industry has matured since 2013, with hundreds of batch pyrolysis

plants across the country, though recent regulatory tightening under the Central Pollution Control Board (CPCB) and the Ministry of Environment, Forest and Climate Change (MoEFCC) is driving a shift towards more compliant, larger-scale, and increasingly continuous pyrolysis units. India generates roughly 1.5 million tonnes of end-of-life tyres (ELT) annually, which, at typical yields of 35-50%, translates into a theoretical TPO production potential of 0.5-0.75 million tonnes per year.

TPO in India is primarily used as a substitute fuel in boilers, furnaces, and MSME clusters in industries such as ceramics, metals, and small captive power plants. Its demand is strongly correlated to relative pricing with FO/LSHS and natural gas: when gas prices rise, TPO becomes a cost-effective alternative, whereas lower gas prices suppress demand. The regulatory environment has become a key determinant of market structure. The EPR (Extended Producer Responsibility) regime for tyres, introduced in 2022, formally recognized pyrolysis as recycling but restricted the downstream use of its products: TPO and char are classified strictly as fuels, while only recovered carbon black (rCB) can be used as a tyre manufacturing raw material. Importantly, imports of waste tyres for TPO and char production are prohibited, restricting feedstock availability to domestic ELT. In addition, the CPCBs Standard Operating Procedure for TPO units mandates stricter norms for siting, emissions control, product handling, and annual compliance verification, effectively screening out non-compliant plants.

Recent developments indicate a gradual technology shift from batch to continuous pyrolysis plants,

as seen in Gujarat where the state PCB has permitted continuous units that deliver better quality, lower emissions, and improved process efficiency, albeit at higher capital costs. Quality consistency, particularly sulphur content and stability, is another critical competitive factor, with plants investing in better condensation, fractionation, or post-treatment technologies able to command stronger pricing. The EPR certificate mechanism also provides an additional revenue stream for registered recyclers, as tyre producers are mandated to purchase recycling credits to meet their annual obligations. Going forward, the TPO market in India is expected to consolidate, with compliant and technologically advanced players gaining share. While risks remain·such as regulatory enforcement, feedstock constraints, and demand volatility linked to fuel price spreads·the medium-term outlook remains robust, anchored in Indias growing automotive base, the governments push for circular economy practices, and industrial demand for cost-effective alternative fuels.

Extended Producer Responsibility (EPR) Norms and their Impact on Hi-Green Carbon Limited

India discards over one million mt end-of-life tyres (ELTs) annually, with the majority historically dumped or burned. The introduction of Extended Producer Responsibility (EPR) mandates has formalised tyre collection and recycling, significantly boosting demand for sustainable products such as recovered carbon black (rCB), which produces far lower emissions than virgin carbon black. For Hi- Green Carbon Limited, this policy ensures a steady and abundant domestic feedstock supply, reducing reliance on imports and improving raw material security. Although Hi Green does not directly claim EPR credits to avoid double-claiming, it benefits indirectly as vendors who collect tyres pass on cost savings from credits valued at ^1-^1.5 per kg each in FY25, enhancing cost efficiency and competitiveness. The company views EPR as a long-term growth driver that will promote sustainable practices and secure market demand. However, as the framework is still new, challenges such as ambiguities, potential misuse, and fluctuating economics between burning and recycling remain. Hi Green has adopted a cautious approach, refraining from direct credit generation until the system matures. Overall, EPR is strengthening Indias tyre recycling ecosystem, providing Hi Green with a structural advantage in both supply security and cost competitiveness, while aligning with its expansion plans. Company views EPR as betterment of industry.

Financial Review:

During the year under review, the Company reported exceptional financial performance driven by... Below is the breakdown of the key metrics:

• Revenue from operations surged by an impressive 39.2% from Rs. 70.24 crores in FY24 to Rs. 96.78 crores in FY25

• EBITDA margins expanded with improved scale, self-sustaining energy process, and better cost management.

• Profit After Tax (PAT) also grew by 5%, amounting to Rs.11 crores, up from Rs.10 crore in FY 2024

• During FY25, the Company reported steady growth across its product portfolio.

o Tyre processing increased to 17,204 MT as compared to 15,532 MT in FY24 at Rajasthan plant, reflecting improved demand from downstream industries. o TPO also registered a healthy growth, rising to 8,034 MT in FY25 against 6,572 MT in FY24, supported by higher offtake from industrial users. o Sodium Silicate continued its upward trajectory with volumes reaching 12,089 MT in FY25 as compared to 10,485 MT in FY24, driven by strong market acceptance. o The newly commissioned Maharashtra facility, which commenced operations during the year, processed approximately 7,000 MT of waste tyres within just 4-5 months of operations, showcasing its robust operational efficiency and adding to the Companys recycling capacity.

Key Financial Ratios

Business Highlights

• The Company is executing its expansion strategy with Rajasthan (100 TPD) continuing to operate at 72% levels, While Maharashtra commercialised since November 2024, and Madhya Pradesh (100 TPD) expected to commence operations by November-December 2025. Hi-Green is targeting a tenfold capacity increase over the next 7-10 years through both brownfield and greenfield projects. Revenue is diversified across fuel oil (~46%), recovered carbon black (~20%), and sodium silicate/Power Plant/Bottling of Gas (~26%). rCB utilization follows a longer qualification cycle of 9-12 months with customers.

• The Company has been consistently focusing on process optimization, energy efficiency, byproduct utilization, and value addition.

• In Rajasthan, 50% Syngas after consumption in TPO and rCB, is being utilized to produce sodium silicate, effectively reducing the plants energy cost for sodium silicate production to zero.

• At the Maharashtra plant, the company is exploring captive power generation through power plant, which is expected to bring power consumption cost down to zero and may also generate additional revenue through grid sales. This strategy not only lowers working capital

requirements but also improves margins compared to sodium silicate production. Further, the Company is adapting syngas for use in DG sets, thereby enabling captive power generation at zero fuel cost, reducing reliance on grid electricity, and strengthening sustainability goals.

• Looking ahead, the Company has, at Madhya Pradesh, approved the bottling of syngas for sale to industries as an alternative to LPG, a commercialization opportunity that is expected to unlock incremental revenue streams. Parallelly, efforts are underway to enhance the quality of rCB and TPO, alongside R&D initiatives with Manipal University to identify cost-effective methods for chemical recovery from fuel oil.

• Due to introduction of EPR norms, the Company has been able to secure consistent and sizeable volumes of end-of-life tyres (ELTs) from select vendors. This development has not only streamlined procurement but also reduced logistical challenges. As a result, the Company does not foresee any constraints in sourcing raw materials for its existing operations, and is confident that future expansions into new geographies will also be well supported by assured ELT availability under the evolving EPR framework.

• Subsidiaries:

o Shantol Recycling Private Limited (Dhar, Madhya Pradesh): This subsidiary was incorporated in 2023 and will operate the third tyre pyrolysis plant of 100 TPD in Madhya Pradesh district, Madhya Pradesh.

o Green Valley Hydrocarbon Private Limited (J&K): This subsidiary was formed for a potential plant in Jammu & Kashmir, attracted by significant subsidies. However, there has been no major progress due to geopolitical issues and uncertainty regarding subsidy renewals, and the company is awaiting more clarity.

o Samsara Recycling Pvt Ltd: Hi Green acquired 100% stake in Samsara Recycling Private Limited in 2024. This company is engaged in the manufacturing of crumb rubber from waste tyres. The intent is for this company to handle raw material procurement as part of a backward integration strategy.

• Continuous pyrolysis provides scalability and consistent quality, giving Hi Green a distinct edge over batch technologies. The Company enjoys a cost advantage, with competitors incurring 2-3x higher capex per unit capacity, as it has bought machineries from Radhe Renewables a group company, which has indigenously manufactured pyrolysis Technology. Long-term demand prospects remain strong, supported by EPR regulations, sustainability mandates, and the growing global shift of tyre manufacturers towards recovered carbon black (rCB).

• In FY26, the Company expects full-year contributions from Rajasthan and Maharashtra plants, along with initial revenues from the Madhya Pradesh facility.

Strengths and Competitive Advantages:

Hi Green operates one of the worlds largest patented continuous pyrolysis plants, delivering higher efficiency, consistent quality, and lower emissions than batch systems. The process is highly energy- efficient, using ~50% of generated syngas internally, achieving zero external energy use for operations and enabling zero energy cost for sodium silicate production at Rajasthan. Lower capex per capacity further strengthens its cost advantage.

With over 15-19 years of promoter experience in waste recycling, carbon products, and renewable energy, Hi Green combines operational expertise with a diversified product portfolio·rCB, TPO, recycled steel, syngas, and sodium silicate·serving varied industrial applications.

The Company holds global-grade certifications (ISO 14001, ISO 9001, ISO 45001, REACH, ISCC Plus, GMP), supporting market acceptance, especially for sustainable products. A geographical diversification

strategy is underway, with plants in Rajasthan, Maharashtra, and upcoming capacity in Madhya Pradesh, reducing concentration risk and improving market access.

As part of our backward integration strategy, company acquired a 100% stake in Samsara Recycling Pvt. Ltd., a company engaged in the production of crumb rubber from waste tyres. This acquisition ensures seamless raw material procurement for our operations. Additionally, we have strategically positioned one of our facilities near Mundra Port, giving us convenient access to imported raw materials and enhancing our ability to service international clients while minimizing logistics costs.

Market Opportunities and Tailwinds:

Rising industrial demand for rCB and TPO, driven by global and national carbon reduction goals, is boosting adoption of sustainable, cost-efficient alternatives to virgin carbon black. Supportive policies like EPR mandates are formalising ELT recycling and reducing illegal disposal. New plants benefit from substantial state subsidies·80% in Maharashtra and 40% in Madhya Pradesh·along with interest and duty exemptions, enhancing profitability. Hi Green is also innovating in syngas utilisation, exploring captive power generation and bottling for industrial sale to unlock higher margins and operational flexibility.

Threats

Hi Green operates in a dynamic market where falling crude prices have reduced virgin carbon black rates p120 ^ ^90/kg), pressuring rCB realisations. In India, rCB demand remains value-driven, making it sensitive to conventional price swings. Initial output from new plants·primarily TPO and raw carbon·yields thinner margins, while dollar appreciation and higher shipping costs add to raw material expenses.

Operationally, new projects face stabilisation risk, with rCB sales ramp-up taking 9-12 months due to customer approvals. Geographic concentration, previously with 80% revenue from Rajasthan, is being addressed through capacity expansion. The sector is subject to strict CPCB/SPCB compliance, and EPR policy ambiguities persist, with Hi Green relying on indirect benefits via vendors. Tyre burning for fuel remains a competitive risk when coal prices fluctuate.

On the product side, adoption by 4-wheeler tyre manufacturers is slow, and industry-wide quality standardisation remains a hurdle. Expansion challenges include geopolitical delays for the planned J&K plant, achieving commercial viability for R&D outputs, and one-time commissioning costs of ^50-60 crores per plant. Financially, rapid growth increases operating expenses and working capital requirements, with inventory build-up impacting short-term cash flows.

Strategic Outlook:

Hi-Green Carbon Limiteds strategic outlook is anchored on aggressive capacity expansion, technological leadership, and product diversification to drive long-term growth. Over the next 7-10 years, the Company aims to increase capacity from pre-IPO levels, with one new plant targeted annually. FY 2024-25 marked a pivotal step with the commissioning of the 100 TPD Maharashtra plant, doubling capacity to 200 TPD, while the 100 TPD Madhya Pradesh plant is scheduled to commence operations by October-November 2025, taking total capacity to 300 TPD. Leveraging its proprietary continuous pyrolysis technology, Hi Green maintains a competitive edge through process optimisation, scalability, and consistent quality, outperforming conventional batch systems. The Company is enhancing value addition through initiatives such as using excess syngas for captive power generation, exploring syngas bottling for industrial LPG replacement, and advancing R&D with Manipal University to produce rCB comparable to virgin carbon and recover valuable chemicals from TPO. Rising industrial demand for sustainable, cost-effective alternatives like rCB and TPO, coupled with supportive government policies and Extended Producer Responsibility (EPR) mandates, provides a strong market

tailwind. Backward integration through the acquisition of Samsara Recycling ensures raw material security, while state subsidies, interest benefits, and a balanced 50:50 debt-equity expansion model underpin financial stability. The company is targeting sustainable EBITDA margins to capitalise on market opportunities while strengthening its leadership in the circular economy.

Risk Management

Hi-Green Carbon Limited operates in a highly regulated and evolving industry, which presents both opportunities and risks. The Company continuously monitors and manages these risks to safeguard business continuity and shareholder value.

• Operational & Project Risks:

The Maharashtra plant has been commissioned, reducing implementation risk, though stabilization and ramp-up challenges remain. The project faced cost and time overruns, but the facility is now operational. rCB market development typically requires 9-12 months for customer trials and approvals; Hi Green is actively engaging with potential clients to accelerate this process.

• Market & Industry Risks:

Revenue remains geographically concentrated at the Rajasthan facility, though commissioning of the Maharashtra plant has started diversifying this base. The business operates under stringent environmental regulations from CPCB, SPCB, and MoEFCC, which the Company complies with through robust monitoring and technology-driven processes. Profitability is influenced by fluctuations in crude oil and virgin carbon black prices; however, Hi Green cost-efficient operations and diversified product mix provide resilience.

• Policy & Regulatory Risks:

The Extended Producer Responsibility (EPR) framework is still evolving and may involve ambiguities. While direct financial benefit remains limited at present, the policy is expected to drive higher formal recycling volumes over time.

• External & Geopolitical Risks:

Progress on the J&K project under Green Valley Hydrocarbon Private Limited is currently on hold due to local geopolitical issues and subsidy uncertainty. Hi Green continues to evaluate the project in light of government directions and may reallocate capital prudently if required.

• Supply Chain & Backward Integration Risks:

Direct raw material sourcing and tyre processing involve operational complexities. For now, the Company prefers to rely on established suppliers to ensure steady supply, while selectively exploring deeper integration opportunities.

• T echnology & Competitive Risks:

Maintaining consistent quality of rCB is critical given the varying nature of raw materials. Hi Green leverages its proprietary technology to achieve greater consistency and has instituted strict quality control systems. The Company also safeguards its process know-how by limiting disclosure, thereby preserving its competitive edge.