Hindustan Organic Chemicals Ltd Management Discussions

The Management of Hindustan Organic Chemicals Ltd (HOCL) presents its Analysis Report covering the Performance and Outlook of the Company. The Report contains business prospects and perspectives based on the current environment and strategic options to steer the Company through unforeseen and uncontrollable external factors.

HOCL Kochi Unit is having Integrated Management System Certification comprising ISO 9001:2015 (Quality Management system), ISO 14001:2015 (Environment Management System), ISO 45001:2018 (Occupational Health and Saftey Management system) and ISO 50001:2018. All the products of HOCL are certified by BIS.

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

Over the past decade, the Government of India has introduced a series of transformative policies aimed at accelerating economic growth, enhancing competitiveness, and integrating key sectors into Global Value Chains (GVCs). Reforms such as the implementation of the Goods and Services Tax (GST), initiatives like "Make in India" and "Aatmanirbhar Bharat" have significantly contributed to improving the business environment, bolstering manufacturing, and fostering industrial growth.

Among the other sectors, the chemicals industry stands as a pillar of India?s industrial and economic landscape. With a market size of approximately $220 billion in 2023, the sector is poised to grow exponentially, reaching around $400 to 450 billion by 2030 and $850 to 1,000 billion by 2040. India is currently the world?s sixth-largest and Asia?s third largest producer of chemicals, supplying essential raw materials to industries such as pharmaceuticals, textiles, automotive, and agriculture. The sector?s dynamic growth trajectory underscores its potential to play a key role in India?s aspiration of achieving a $5-trillion economy.

2. KEY OPPORTUNITIES

Capacity utilization of main products (Phenol and Acetone) of Kochi Unit has improved substantially after restructuring. This was mainly due to improved working capital position. The operating loss has been reduced due to improved working capital position and reduced interest expenditure, after the initiation of the restructuring process. New Air Compressor was commissioned and utilizing the Air for Phenol Plant, Hydrogen Peroxide which gives an annual saving of Rs.1.5 Cr. Change of the fuel from furnace oil to LNG in Boilers and Heaters will save an amount of Rs.14 Cr. per year. Further, manufacture of Acetophenone will bring additional income of Rs. 2.00 Cr. (approx.) to the Unit.

3. KEY THREATS INCLUDE

HOCL has only one unit at Ambalamugal, in the District Ernakulam in the state of Kerala, which is functioning at present. Kochi unit is engaged in manufacturing of Phenol, Acetone, and Hydrogen Peroxide.

The market for main products at Kochi had high degree of volatility and was largely determined by international prices. Due to severe working capital deficiency, the Unit often worked below its capacity. There is severe competition in the horizon with private sector players set to establish capacities up to 6 lakh MT of Phenol against 40000 MT that the Unit had. Without anti-dumping duties, HOL Kochi unit will be unable to compete against imports. Kochi unit has its own inherent deficiencies such as outdated technology leading to productivity loss, high levels of fixed cost which is not being absorbed due to lower scale of operations, constraints in capacity expansion, absence of product diversification, lack of market competitiveness, etc.

Company?s products such as Phenol, Acetone and Hydrogen Peroxide which satisfies the requirements of key customers who procure multiple products. Your Company?s products cater to wide range of end- use sectors such as dyes & pigments, agrochemicals, pharmaceuticals companies. This assists the organization in obtaining new clients and addressing huge spectrum of their demands.

One of the key challenge faced by HOCL is the logistics. As majority of the phenol Customers are in North India and in South HOCL is able to sell only less than 1,000 MT of Phenol per month. In order to match our price and to mitigate the competition, HOCL is forced to sell at discount in the North, West and Eastern region. A possible way forward can be using the railway coaches in collaboration with BPCL for transporting Phenol to norther regions. This can reduce the cost of transportation. The technology used by the company for the production of Cumene is very old technology compared to the competitors in the market. HOCL is using SPA1 (Solid Phosphoric Acid) as the catalyst for conversion of Benzene & LPG to Cumene. This generates more by-product (Heavy End of Cumene) when compared with the lead competitor who uses Zerolite catalyst where lesser quantity of the by-product is generated. Adoption of Zerolite Catalyst for production is a possible solution which require Rs. 200 Cr (approx.) investment with two years for commissioning and resulting an estimated profit of Rs.13 Cr per year. The life of one load Zerolite Catalyst is six (6) years whereas life of one load current SPA1 catalyst if two (2) years only resulting a saving of 60 days production in six years period.

It is expected that few more Phenol Plants are coming up in various locations in India with higher production capacity. Our lead competitor is also planning to increase production capacity of more than 3 lakh MT per annum. Since the domestic demand is likely to be met by upcoming plants, HOCL should target overseas market in future.

3. SEGMENTWISE PERFORMANCE

The Company is primarily in the business of manufacture and sale of chemicals.

ALIGN=RIGHT>75090

Product Segment	Year ended 31/03/2025	Year ended 31/03/2024
	Target MT	Actual MT	Percentage Achieved	Target MT	Actual MT	Percentage Achieved
Chemicals	66815	88.98	75090	87710	116

4. PRODUCT WISE PERFORMANCE (Main Products)

Sr. No. Name of Product	F.Y. 2024-25	F.Y. 2023-24
	Installed Capacity	Actual	Actual
1 Phenol	40000	34874	47518
2 Acetone	24640	21790	29613
3 Hydrogen Peroxide	10450	10151	10579
TOTAL	75090	66815	87710

5. OUTLOOK FOR THE NEXT YEAR

Upgrade to the latest technology so as to improve productivity; Explore the diversification into value added products to maximum extent possible so as to gain some level of protection against swings in the market prices.

Your Company will continue to be vigilant and will capitalize on the opportunities that arise as a result of swift transformation in the industry landscape.

6. SOME RISKS & CONCERNS.

Lack of product diversification or downstream value addition

Competition from cheaper Imports of main product Phenol and Acetone.

Volatility in raw material feed stock prices based on fluctuations in crude prices.

Inability to pass on the increase in raw material cost to the consumers due to availability of imported finished product at cheaper prices. Huge investments requirements to revamp/replacement/modernization of the old plants.

7. INTERNAL CONTROL SYSTEMS & THE ADEQUACY

Internal controls are supported by Internal Audit and Management Reviews.

With the objective of improving the systems and removing bottlenecks, systems review is carried out and policies and procedure manuals are amended on need based manner. HOCL Kochi unit is having ISO 9001:2015 (Quality Management System) and ISO 14001:2015 (Environmental Management System) certification. Your Company has Corporate Governance structure that govern its operations and the management team follows sound financial policies as well as processes and systems.

8. REVIEW OF FINANCIAL & OPERATIONAL PERFORMANCE:

As per accounts of FY 2024-25, your Company has earned a net profit of Rs.391.54 Cr. (after tax) as against net loss incurred during the previous FY 2023-24 of Rs.55.32 Cr. due to waiver of Govt. of India loan.

Phenol plant and Hydrogen Peroxide plant at Kochi achieved 87% and 97% capacity utilization during year ended 31st March 2025 as against 119% and 101% during the corresponding previous year ended 31^st March 2024 mainly due to shut down during the year for replacement of catalyst and major repair works.

9. INFORMATION TECHNOLOGY

Company has effective information systems for core business areas. However, company has envisaged a plan to meet changing demands keeping in view the technological changes and the way information & communication technology offering innovative services suiting to every business need. The core business functions are performed using Tally Prime ERP system. The integration of different modules of the ERP system resulted in better functioning, timely and smooth completion of our business process and transactions. Management ensures continual effort in the ever-changing technological environment, for improving and meeting with requirement like data security, information availability, transparency and accuracy. The IT infrastructure of the company is audited by CERT-In empaneled audit authority to ensure the compliance with IT policies & standards. Company is using open tendering/e-Tendering solution being provided by National Informatics Centre (NIC). Company has also registered with GeM Government platforms for procurement and TREDs for payment to MSMEs.

Company is also following various guidelines of procurement through MSME?s.

10. OTHER INFORMATIONS:

The details regarding Human Resources, Industry relations, CSR activities, Environment protection, technology absorption, energy conservation etc. are provided in the Directors Report.

11. CAUTIONARY STATEMENT

Statement in this Management Discussion and Analysis describing the Company?s objectives, projections, estimates and expectations may be ‘forward looking statements? within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Company?s operations include a downtrend in the chemical industry-global or domestic or both, significant in political and economic environment in India or key markets abroad, tax laws, litigation, manpower cost, exchange rate fluctuations, interest and other costs.

Date: 13.08.2025	For and on behalf of the Board of Directors
Place: Ernakulam, Kerala	of Hindustan Organic Chemicals Limited
	Sd/-
	Yogendra Prasad Shukla
	Chairman and Managing Director
	DIN: 09674122