HP Adhesives Ltd Management Discussions

Economic Review

Global Economic Review

Global growth held steady in 2025, matching the pace recorded in 2024. That momentum broke in the first quarter of calendar 2026, when conflict in the Middle East delivered a negative supply shock. Pulling the other way, the accelerating global technology cycle, driven by artificial intelligence (AI) adoption, held demand up. The global economy has, so far, weathered the conflict better than anticipated, though transmission effects remain at an early stage. On this basis, the IMF projects global growth to moderate in 2026, before recovering in 2027, leaving the cumulative outlook broadly unchanged from its April 2026 forecast. Global headline inflation, which stood at 4.1% in 2025, is expected to rise to 4.7% in 2026 before easing to 3.9% in 2027, so the disinflationary trend running since early 2024 has stalled.

The forecast assumes the Strait of Hormuz volatility to continue with conditions normalising only by March 2027. On that basis, oil prices average USD 89 per barrel in 2026, approximately 9% above the April 2026 forecast and 32% above 2025 levels. Advanced economies are projected to grow only modestly across both years, while emerging market and developing economies moderate in 2026 before recovering the following year. Within that group, China is projected at 4.6% and India, on a fiscal year basis, at 6.4%.

On a purchasing power parity weighted basis, the World Banks Global Economic Prospects of June 2026, cited in the Reserve Bank of Indias June 2026 Bulletin, puts world growth at 2.9% in 2026 and 3.4% in 2027, revised down from the 3.2% projected in January 2026 to reflect the conflict.

GDP Growth Projections (%)

World Output CY 2025 CY 2026 (P) CY 2027 (P)

3.5 3.0 3.4

Advanced Economies

CY 2025 CY 2026 (P) CY 2027 (P)

1.9 1.7 1.8

Emerging Markets and Developing Economies

CY 2025 CY 2026 (P) CY 2027 (P)

4.5 3.8 4.5

P: Projected

Outlook

The IMF describes the path ahead as a V-shaped recovery. The weaker 2026 now expected, set against the pre-war forecast, is followed by a rebound in 2027, as the quickening global technology investment cycle offsets part of the drag from the conflict and the energy shock that came with it. Countries will not travel that path together. Energy exporters outside the conflict zone are better placed, as are economies wired into the AI-driven technology value chain, while energy importers with little part in that cycle carry the heavier burden.

Policy priorities centre on restoring price stability, supported by central bank independence and clear communication, and on rebuilding fiscal buffers through durable revenue measures rather than broad-based subsidies or price controls. Risks to the outlook are more balanced than they were in April 2026 but remain tilted to the downside. A re-escalation of the conflict in the Middle East is the most immediate of them, while a durable peace agreement, or a faster-than-assumed reopening of the Strait of Hormuz, represents the principal upside.

Indian Economy

Indias economy maintained strong growth momentum during FY 2025-26, sustaining its position among the worlds fastest-growing major economies even as global conditions turned more uncertain towards the close of the fiscal year. Real GDP growth quickened over the previous year, led by private consumption, which grew 7.7% against 5.8% the previous year, and fixed investment, which grew 8.2% against 6.4%.

Government capital spending is a direct driver of the construction and infrastructure activity that underpins demand for the Companys plumbing and construction adhesive products, which puts the Union Budget 2026-27 squarely in view. Total capital expenditure is budgeted at 12,21,821 Crs for FY 2026-27, up 11.5% over the FY 2025-26 revised estimate, while effective capital expenditure, which takes in grants-in-aid to states for the creation of capital assets, is budgeted to grow 22.1% to 17,14,523 Crs. Of particular relevance to the Company, the allocation for the Jal Jeevan Mission, the Governments flagship rural piped water supply scheme, has been raised sharply to 67,670 Crs for FY 2026-27, from a revised estimate of 17,000 Crs for FY 2025-26, while the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), which funds urban water and sewerage infrastructure, has been allocated 8,000 Crs for the year.

The south-west monsoon remains a key factor for the Company, given the link between agricultural income, rural construction and plumbing activity. Cumulatively, from 1st June to 5th August, 2026, rainfall across the country was 11% below the Long Period Average (LPA). However, rainfall during the week ended 5th August, 2026 was 7% above LPA. Moderate El Nino conditions were prevailing and were expected to strengthen during the remainder of the south-west monsoon season.

GDP Growth Trajectory (%)

Real GDP Growth

FY 2023-24 (Final Estimate) FY 2024-25 (First Revised Estimate) FY 2025-26 (Provisional Estimate)

7.2 7.1 7.7

Outlook

The RBI has projected real GDP growth of 6.6% and CPI inflation of 5.1% for FY 2026-27, having kept the policy repo rate unchanged at 5.25% with a neutral stance at its June 2026 review. It cited the need for greater clarity on the West Asia conflict and the risk of a sub-normal monsoon compounded by El Nino conditions. Sustained government capital expenditure, particularly under the Jal Jeevan Mission and AMRUT, is expected to support construction and plumbing-related demand through the year. The uncertainty of the US-Iran war and corresponding geo-political shocks and the progress of the south-west monsoon remain the principal swing factors for growth and rural demand.

Global Adhesives Market

The global adhesives market forms the broader competitive and demand backdrop against which the Companys plumbing, sealant, and construction adhesive categories operate. The market is estimated at approximately USD 82.67 bn in 2025, rising to approximately USD 89.29 bn in 2026, and is projected to reach USD 125.31 bn by 2030, at a CAGR of approximately 8.8% over the 2026 to 2030 forecast period. Automotive is the principal driver of that growth, with construction and infrastructure projects expanding alongside it. The second of these is the segment that matters most to the Company. Asia-Pacific remains the largest and fastest-growing regional market, which works in the Companys favour given its India-based manufacturing and distribution footprint.

The Business Research Company, Adhesives Market Report 2026

Global Adhesives Market Size (USD bn)

2025 2026 2030 (P)

82.67 89.29 125.31

P: Projected

Indian Adhesives Market

The Indian adhesives market spans a range of end-use segments. Packaging is the largest, accounting for 46.58% of demand by revenue in 2025, while aerospace, though from a small base, is the fastest growing at a 7.22% CAGR through 2031. In absolute terms, construction is the largest source of growth. National Infrastructure Pipeline projects across metro rail, highways, and smart city development are gathering pace, and each of them calls for structural, tile, and waterproofing formulations. Within construction, the solvent cement segment tracks the plastic pipes and fittings industry, which draws on continued public investment in water supply and urban infrastructure as well as housing growth.

Woodworking demand is tracking affordable housing and the growth of ready-to-assemble furniture, with a shift towards formaldehyde-free polyurethane dispersions. The automotive segment is moving away from mechanical fasteners towards adhesive-based bonding, with demand shifting to battery and lightweight vehicle assemblies. Demand overall clusters in Maharashtra, Gujarat, and Karnataka, reflecting concentrated industrial corridor activity in these states.

Against this backdrop, the market is estimated to grow from approximately USD 3.07 bn in 2025 to USD 3.28 bn in 2026 and is projected to reach around USD 4.58 bn by 2031, a CAGR of approximately 6.88% over the 2026 to 2031 forecast period.

*

Opportunities

Strong Growth Outlook for Indias Plastic Pipes Market

Rapid urbanisation, infrastructure development, and modernisation in agriculture are expanding Indias plastic pipes market. Government initiatives, including the Smart Cities Mission, AMRUT, and the Pradhan Mantri Krishi Sinchayee Yojana, are stimulating demand across urban utilities and irrigation systems. The market, valued at approximately USD 7.40 bn in 2025, is projected to more than double to approximately USD 16.54 bn by 2031, a CAGR of approximately 14.18%.

TechSci Research, India Plastic Pipes Market

Booming Construction and Infrastructure

The Indian construction market has expanded at a CAGR of approximately 14.2% between 2021 and 2025, and is expected to hold that trajectory. Rapid urbanisation, ongoing infrastructure development, and Government-backed initiatives, including affordable housing schemes and large-scale urban infrastructure programmes, are supporting that growth. The market reached approximately 25.31 tn in 2026, growing approximately 11.2% over the year, and is projected to grow at a CAGR of approximately 8.8% through 2030, reaching close to 39.10 tn.

ResearchAndMarkets/Business Wire, India Construction Industry Databook, Q1 2026 Update

Home Improvement Boom

Rising DIY culture and rapid urbanisation across Asia Pacific, including India, continue to sustain demand for bonding and sealing products used in interior renovation and repair. Sealing and gasketing applications address bathroom, kitchen, window, and door tasks in particular [Market.us, DIY and Household Adhesives and Sealants Market]. Indias modular kitchen segment is growing strongly on rising renovation activity, greater adoption of built-in appliances, and increasing organised retail presence, which supports demand for speciality adhesives used in furniture assembly and fitting15.

Market Report Analytics, India Adhesives Market

IMARC Group, India Wood Adhesives Market

Technavio, India Automotive Market

Market.us, DIY and Household Adhesives and Sealants Market

IMARC Group, India Modular Kitchen Market

Technological Advancements and Product Innovation

Continuous research and development is broadening the scope of adhesive applications across industries, with rising demand for high-performance adhesives in specialised applications. Hot-melt and reactive adhesive technologies are gaining adoption for their ease of use and superior performance11.

Growth in End-User Industries

Demand is rising from specialised applications in aerospace and healthcare, beyond the plastic piping, construction, and automotive sectors. Packaging continues to grow alongside them10.

Company Overview

HP Adhesives Limited (HP Adhesives or The Company) manufactures adhesives, sealants, and related bonding products for domestic and export markets. Manufacturing is centred at its facility in Khalapur Taluka, Raigad district, Maharashtra, with installed capacity of approximately 18,600 metric tonnes as at 31st March, 2026. As at that date, its distribution network spanned 25 states and 5 Union Territories within India and 22 export markets.

Operations during the year were affected by a fire at the Companys Unit I facility on 17th January, 2026. Unit I sustained damage to property, plant, equipment and inventory that temporarily halted solvent cement production. No injuries were reported. Standby arrangements at adjoining facilities were activated to keep customer supply running, and the Company is in the process of lodging an insurance claim covering both asset reinstatement and business interruption, with final settlement outstanding as at year-end. Further detail is provided under Financial Performance and Risk and Mitigation below16.

The Companys priorities for the year ahead centre on restoring Unit I to full production, maintaining product quality standards across its portfolio, and ensuring customers are catered to in an uninterrupted manner.

How Woodworking and Furnishing are Shaping Indias Adhesive Market

Rapid urbanisation, rising demand for modular and ready-to-assemble furniture, and continued growth in residential and commercial construction are shaping Indias wood adhesives market. Government housing initiatives such as the Pradhan Mantri Awas Yojana, and a growing consumer preference for eco-friendly, low-emission adhesives, are supporting demand. The market reached approximately USD 249.6 mn in 2024 and is projected to grow at a CAGR of approximately 8.3% to approximately USD 510.5 mn by 2033.12.

Automotive and Transportation Growth

Indias automotive market continues to expand, supported by rising household incomes, policy-backed electrification, and a broadening manufacturing base. That expansion sustains demand for adhesives in vehicle assembly and interior applications. The market is projected to grow by approximately USD 51.76 bn between 2026 and 2030, a CAGR of approximately 6.5%13.

Summary of Product Categories During FY 2025-26

Solvent Cement

Solvent cement remains the Companys flagship category, spanning PVC, CPVC, and uPVC formulations under a portfolio of over 200 Stock Keeping Units (SKUs). Pack sizes range from 10 m tubes up to 5,000-litre (5 KL) bulk containers, covering regular-bodied, medium-bodied and heavy-duty variants. Applications span irrigation, sewage and drainage systems for PVC grades, hot and cold-water plumbing for CPVC, and high-pressure piping for uPVC, supported by a companion range of primers and cleaners. Products in this category are primarily sold under the HP and StrongWeld brands.

Silicone Sealants

Marketed under the Strong Seal brand, the Companys silicone sealant range serves glazing, external weatherproofing, interior fitting, bathroom installation, and general construction applications. It is offered across 260 ml, 280 ml and 300 ml cartridges, as well as sausage-pack formats, in a range of finishes. The Company has also gained traction for its MS polymer range of sealants which has applications primarily in the automotive space.

Epoxy Adhesives

Sold under the StrongTite brand, suitable for bonding a wide variety of substrates such as glass, metals, stone, wood, ceramic, dry concrete, cement & bison board & fabric.

The epoxy adhesive range comprises two variants. ULTIMATE Epoxy Adhesive with pot life approx. 45 to 50 minutes depending on mix quantity & application conditions; ZATPAT Epoxy Adhesive with Pot life approx. 2 to 3 minutes depending on mix quantity & application conditions.

Distribution Channel

Corporate Social Responsibility (CSR)

Contact Adhesives and PVA Adhesives

Marketed under the Strong Fix brand, this category covers PVA adhesives used principally as woodworking glue in furniture and interior applications, alongside rubber (contact) adhesives used across woodworking, foam furnishings, automotive interiors, footwear manufacturing, and handicrafts. Products are offered in both sprayable and brushable formats across multiple SKUs to accommodate different application methods.

Ball Valves and Tapes

Ball Valves, PTFE tape, and masking tape continue to be sold as complementary products alongside the Companys core solvent cement range. This supports the installation and maintenance of PVC and CPVC pipe fittings, reinforcing the Companys positioning as a single-source supplier for plumbing, construction, repair, and finishing requirements.

The Company reaches its customers through distributors in India and across international markets. For the year ended 31st March, 2026, Company catered to more than 1,750 customers.

Depth matters as much as spread in the domestic market, the Company works through domestic distributors to engage retailers and end-users directly, on the view that relationships built at that level hold longer than those built on price.

Overseas, the Companys products reached customers across 22 countries during FY 2025-26. The Company continues to evaluate opportunities in new international markets through a focused expansion strategy.

The Company continues to recognise its responsibility towards society and communities in which it operates. During the financial year, HP Adhesives Limited undertook CSR initiatives in accordance with the provisions of the Companies Act, 2013 and the Companys CSR Policy, with a focus on areas including education, healthcare, community development and other activities for the benefit of society.

The Company is committed to undertaking CSR initiatives in a responsible and sustainable manner and contributing towards inclusive growth and social well-being. The details of the CSR activities undertaken during the year, including the amount spent and other disclosures as applicable under the Companies Act, 2013, are provided in the Annual Report on CSR Activities forming part of this Report.

Epoxy Putty

Sold under the StrongTite brand, the epoxy putty range comprises three variants. General Purpose Epoxy Putty serves everyday repairs, Sanitary Epoxy Putty is formulated for plumbing and sanitary installations, and Fast Epoxy Putty sets rapidly for time-sensitive repair work.

Spray Paints

The Companys spray paint range covers both indoor and outdoor use, including home decor and automotive refinishing applications, positioned on fast-drying times, surface coverage, and resistance to chipping, fading, and peeling.

Marketing Strategy and Brand Awareness

The Company markets its portfolio primarily through its brands viz. Strong Weld, HP, Strong Seal, Strong Fix and StrongTite. Its marketing reaches dealers and distributors, but also the plumbers, carpenters, and masons who, in practice, decide which product goes on the job. During FY 2025-26, the Company hosted more than 2,600 applicator gatherings for plumbers, carpenters, and masons, introducing new products and variants through live demonstrations and hands-on testing.

Incentive programmes for applicators are designed to turn that familiarity into preference. In export markets, the Company builds visibility through international trade exhibitions. During FY 2025-26, the Company participated in 2 trade exhibitions internationally.

Cyanoacrylates

The Company markets two cyanoacrylate (instant-bonding) variants suited to general fastening applications, valued for rapid cure time, bond strength, and ease of use across a range of substrate materials.

Financial Performance on a Consolidated Basis ( ?‚? in Lakhs)

Particulars	FY 2025-26	FY 2024-25	Change (%)
Revenue from Operations	24,928	24,979	(0.21)
Profit Before Tax (PBT) (Before Exceptional Items)	819	2,373	(65.50)
Profit After Tax (PAT)	698	1,824	(61.76)
Cost of Materials	15,390	15,595	(1.31)
Employee Benefits Expenses	3,995	3,404	17.37
Depreciation and Amortisation	583	472	23.54
Tax Expense	40	548	(92.71)
Other Expenses	4,234	3,379	25.32

Revenue held broadly flat over the year, and the cost of materials moved with it, easing marginally. The pressure on profit came from below the gross margin line. Employee benefits expenses rose 17.38% depreciation and amortisation 23.53% and other expenses 25.33% together adding more than 1,500.00 Lakhs to the cost base against a revenue line that was flat. PBT, before exceptional items, fell 65.50% as a result, and PAT by 61.76%. The tax expense fell 92.71% broadly in line with the lower profit before it. The primary reason for the flat revenue was a fire incident which disrupted operations post 17th January, 2026. The company responded swiftly to re-initiate production and packaging of solvent cement at the earliest and was successful to quite an extent by the end of the financial year.

Profit before tax after exceptional items was 737.70 Lakhs, after a net exceptional charge of 80.98 Lakhs for the year. Three items make up that charge in full: a GST audit demand of 32.34 Lakhs, a payment of 6.58 Lakhs under a CESTAT order, and one-time gratuity impact of 42.06 Lakhs arising from the new Labour Codes. Separately, the Company recognised a preliminary loss of 2,498.50 Lakhs from the fire at its Unit facility on 17th January, 2026, offset in full by a corresponding insurance claim receivable, with no net impact on this years exceptional items. The auditor has noted that the insurance claim remains unsettled, and the final recovery may differ from the amount currently recognised.

Risk and Mitigation

Risk Category Description Mitigation Measures

Economic, Political, and Market Risk Shifts in the geopolitical and macroeconomic landscape can disrupt regular operations and affect financial stability. HP Adhesives monitors global economic trends and developments, and its profitable growth allows it to absorb unforeseen external shocks. Management holds the flexibility to respond as conditions change.

Supply Chain Risk Dependence on suppliers for raw materials, packaging materials, and capex components could leave the Company vulnerable to disruptions in production and delivery. The Company diversifies its supplier base for key inputs, maintains strong relationships with multiple vendors, regularly assesses supplier reliability, and optimises inventory to minimise the impact of any disruption.

Quality Control Risk Product quality is critical to the Companys reputation and any lapse could lead to customer dissatisfaction and brand damage. The Company applies stringent quality control protocols, conducts regular audits, deploys advanced manufacturing technology, trains staff comprehensively, and resolves issues promptly to maintain product integrity.

Product Concentration Risk Over-dependence on a single product category could leave the Company vulnerable to competition or obsolescence. The Company broadens its product range across multiple adhesive and sealant categories to reduce dependency and mitigate category-specific demand fluctuations.

Revenue Concentration Risk Heavy reliance on a few key customers could expose the Company to client attrition or defaults. With a network of 1,750 customers as on 31st March, 2026, the Company holds a broad revenue base, reducing reliance on any single client and safeguarding against the impact of bad debts.

Competition Risk Intense competition from domestic and global players could affect the Companys market share and pricing power. HP Adhesives focuses on innovation, operational efficiency, competitive pricing, strong customer engagement, and continuous market analysis to remain responsive and differentiated.

Compliance and Legal Risk Non-compliance with applicable laws and regulations could lead to penalties and reputational harm. The Company maintains a strong governance framework, monitors compliance regularly, and upholds transparency in all communications with regulatory bodies and stakeholders.

Internal Control Systems and Their Adequacy

The Company maintains an internal control framework matched to the scale and complexity of its operations. It is designed to safeguard assets, maintain operational efficiency, and maintain compliance with applicable laws and regulations. The framework rests on well-documented policies and procedures, including clearly defined authorisation and approval hierarchies. These are reviewed regularly against evolving business needs and regulatory requirements.

The Internal Auditor conducts periodic audits to identify gaps or risks across the organisation. Findings and recommendations from both internal and statutory audits are evaluated by the Audit Committee, which reviews audit plans, tracks outcomes, and oversees the implementation of corrective measures. That oversight is what keeps the control environment adequate as the business changes.

Human Resources

Developing its people remains central to the Companys growth, and the workplace it seeks to build is one rooted in safety, collaboration, fairness, and inclusivity. The Company is committed to career progression and continuous upskilling across all functional areas, including R&D, manufacturing, supply chain, sales, administration, and business development.

Employee health and safety, particularly within manufacturing operations, remains a top priority. Rigorous safety protocols are in place to ensure a secure and compliant working environment. As of 31st March, 2026, the Company employed 705 individuals, comprising men and women, maintaining harmonious industrial relations throughout the year.

HP Adhesives continues to promote gender diversity and equal opportunity, and is committed to empowering women across all levels, from factory operations to the boardroom, as part of building a supportive, progressive, and inclusive work environment.

Cautionary Statement

This Management Discussion and Analysis may contain certain forward-looking statements relating to HP Adhesives Limiteds objectives, expectations, estimates, strategies, plans and future performance. Such statements are based on current assumptions and expectations and are subject to risks, uncertainties and other factors that may cause actual results or developments to differ materially from those expressed or implied.

HP Adhesives Limited may, from time to time, make additional written or oral forward-looking statements, including those contained in its filings with BSE Limited and the National Stock Exchange of India Limited and in communications to shareholders. The Company does not undertake any obligation to update or revise such forward-looking statements, except as may be required under applicable laws and regulations.

The Company accepts no liability for any loss arising from the use of, or reliance on, this Annual Report or its contents.