Indo Gulf Industries Ltd Management Discussions

Financial Performance

The Company achieved a Turnover of Rs 17924.53/- during the financial year under review as compared to Rs. 20695.38 in the preceding year. The financial year 2023-24 closed at a net profit of Rs. 147.78/- (amount in Lakhs) as compared to net profit of Rs. 643.79/- (amount in Lakh) in the preceding financial year.

Industry Structure and development:-

The global explosives industry saw moderate growth in FY 2024-25, driven by increased mining activities, infrastructure development, and defense modernization across key markets. However, supply chain volatility, geopolitical tensions, and rising environmental and regulatory scrutiny presented challenges across the value chain.

In mining, strong demand for base metals and rare earth elements supported explosive consumption, particularly in regions like Australia, South America, and parts of Africa. Infrastructure-led government stimulus in emerging economies further bolstered demand for civil explosives. Meanwhile, defense explosives faced renewed procurement interest in NATO and Indo-Pacific countries amid geopolitical uncertainties

India, a potential market for industrial explosives and its accessories, has witnessed a radical shift from complete import dependence in the past decades to self sufficiency with an exportable surplus presently. The explosives industry in India is robust with an exportable surplus. Rising construction activities and significant growth of the mining industry is expected to further boost the demand for various materials such as coal, electricity and cement. This in turn will lead to an increase in the consumption of explosives.

The Indian economy grew at an estimated 6.8% in FY 2024-25, driven by infrastructure development, industrial growth, and sustained mining activity. The explosives industry in India is closely linked to sectors like mining (coal, limestone, iron ore), infrastructure, and defense.

Government initiatives such as:

• PM Gati Shakti,

• National Mineral Policy, and

• Make in India (Defense Manufacturing)

have directly contributed to increased demand for industrial and defense-grade explosives. The Ministry of Mines reported a 9.2% increase in mineral production over the year, further supporting industry growth.

However, challenges such as raw material price volatility (especially ammonium nitrate), increased regulatory scrutiny, and logistics constraints affected margins across the sector.

Industry Prospect and Outlook

Global industrial explosives industry Industrial explosives are used in blasting that are typically employed in mining and construction. Explosives in mining have the biggest market share and may be found in coal mining, quarrying, non-metal mining, and metal mining. The market is witnessing growth, due to the rising demand for blasting materials from the mining and construction industry. Increasing population and rapid urbanization are ensuring significant opportunities for ongoing and upcoming Industrial and commercial projects, which need explosives for various purposes. With inflation on a declining path ongoing and upcoming Industrial and commercial projects, which need explosives for various purposes. It is expected to drive the Industrial Explosives market substantially during the forecast period. With a CAGR of 5.4%, the global industrial explosives industry is expected to grow to more than US$ 16 billion, between 2023 and 2028.

Indian Explosives Industry

The global explosives market is expected to grow from USD 44.09 billion in 2022 to USD 47.88 billion in 2023 at a CAGR of 8.6% and is forecast to grow to USD 61.83 billion in 2027 at a CAGR of 6.6%. Asia Pacific was the largest region in the explosives market in 2022 and western Europe is expected to be the fastest growing region till 2027. Stringent regulations imposed by the government on the manufacturing and usage of explosives are expected to limit the growth of the explosives market. Indian has one of the worlds fastest growing market for explosives. The total use of explosives in India is about 5,50,000 tonnes per annum and it is expected to reach USD 159.2 million by 2028. Indias explosives industry is growing rapidly. The main reason for this growth is the high demand for explosives in the mining, construction, and infrastructure industries.

Below are the growth drivers for the Indian explosives industry and where IGIL is involved -:

Roads and infrastructure sector:-

India has the second-largest road network in the world at about 62.16 lakh km. The Nations pride, the visionary project of Atal Tunnel that runs under the ‘Rohtang Pass which was constructed on the ‘Manali - Leh Highway under the challenging conditions of freezing temperatures in extremely difficult terrain, has officially been certified by the World Book of Records, as the ‘Worlds Longest Highway Tunnel above 10,000 Feet.

Outlook -

Outlook The budget for FY 2024-25 has signalled a renewed focus on infrastructure and housing, with a significant increase in the outlay for Roads and Highways. The allocation for this sector has been raised from H 1,99,000 crore to H 2,70,000 crore, indicating a strong commitment to the development of National Highways in the country. This increased investment is set to give a substantial boost to the National Highway Construction Sector. In FY 2024-25, the National Highway construction fell short of its target of 12,000 KM due to land acquisition issues. However, the Ministry plans to construct 14,000 KM of highways in FY 2024-25. The development of rural roads under the Gram Sadak Yojana will also receive significant attention in the coming year.

Mining:-

The mining sector in India is one of the countrys most important. Many key businesses rely on it for essential raw materials. India has 1,531 active mines and produces 95 minerals, including four fuels, ten metallic, twenty-three nonmetallic, three atomic, and 55 minor minerals (including building and other

materials). Based on the countrys geological mapping, an area of 571,000 square kilometres (out of a total of 3.1 million square kilometres) has been designated as an Obvious Geological Potential (OGP) area, where the geological potential for the occurrence of mineral deposits is greater. Minerals such as manganese, lead, copper, and alumina are predicted to expand by double digits in the next few years. There is significant scope for new mining capacities in iron ore, bauxite, and coal. Since major reforms in the Mining Policy from 2021, 108 Mineral Blocks other than Coal have been auctioned. India is the Worlds second largest Coal producer and Fifth largest in Country in terms of Coal deposit. Indias target is 1.2 Billion Tons Coal Production by FY 2024-25. Countrys Coal Production has increased considerably from 646 Million Tons in 2014 to 893 Million Tons in FY 2023-23. Coal India the Worlds largest Coal producer produced 703.22 Million Tons in F-23 registering an increase 12.94% over previous year. The other public sector coal company Singareni Collieries registering an all time high production of 67.14 Million Tons registering an increase of 3.26. The major growth have been in the private and captive mines which produced 122.38 Million Tons registering a massive growth of 35.14%. This substantial growth has considerably increased the availability of Coal to the Power Sector. Despite this increase, the countrys coal imports have also risen, highlighting the need for continued efforts to reduce dependence on foreign coal.

Mining Sector Expansion

• Coal Mining: Coal India Ltd and private players are ramping up production to meet Indias energy needs.

• Metallic and Non-metallic Mining: Growing demand for iron ore, limestone, bauxite, and rare earth minerals is increasing blasting activity.

• New Mining Leases: Government auctioning new mineral blocks under MMDR Act, increasing demand for explosives.

Q Mining accounts for 70-75% of industrial explosive consumption in India.

Infrastructure Development

• Government spending on:

o Roads and Highways (NHAI, Bharatmala) o Railways (DFCCIL) o Smart Cities and Urban Expansion o Metro and Tunnel Projects

Q Infrastructure contributes to bulk blasting needs, especially in rock excavation and tunnelling.

Defense and Strategic Applications

• Growth in indigenous defense manufacturing under Atmanirbhar Bharat and Make in India

initiatives.

• DRDO and private defense OEMs increasing orders for high-energy materials, propellants, and warhead components.

• Expansion of ordnance factories and private-sector defense production.

Q The defense explosives segment is expected to grow at 10-12% CAGR.

Outlook -

Outlook To achieve the governments aim of eliminating the need for steam coal imports, there is a renewed focus on increasing production from Coal India and private sector mines. The Coal Ministry has set a target of 1017 Million Tons for the year 2024-25 and the target set for Coal India is 780 Million Tons, Singareni Collieries 75 Million Tons and Private & Captive Mines is 162 Million Tons. Coal India has planned a Capital expenditure of H 16,500 crore for the year F-24 and accelerating rail connectivity for major mines under PM Gati Shakti. The Coal Ministry is also undertaking 52 First Mile Connectivity projects for Coal India, Singareni Collieries, and Neyveli. Additionally, 133 blocks will be up for auction in the 6th and 7th Tranche of Commercial bids, with 15 blocks planned for MDOs. All of these initiatives demonstrate the countrys determined efforts to meet the rising demand for power by increasing coal production. Coal Indias capital expenditure for the year is also significant, reflecting the governments commitment to the industrys growth. Overall, the coal industry is poised for growth, and with continued support, it will play a vital role in powering the nations progress.

Segment wise or Product wise performance

The Company has been carrying out business activity during the year under review. However, the companys primary business is manufacture of ‘explosives as a single business segment. The company has achieved a turnover of Rs. 24701.51/- during the year under review.

Opportunities and Threats

Opportunities:

• The Governments thrust on indigenous defence manufacturing under the “Make in India” initiative and the proposed amendments in the Defence Procurement Policy 2016 demonstrate rising opportunity for the Companys growth.

• Mining Sector Growth

Expansion of coal, limestone, iron ore, and bauxite mining due to power demand and infrastructure growth.

Government auctions of mining leases under MMDR Act open new markets for explosives.

Rise in private commercial mining creates demand for customized blasting services.

0 Estimated 10-12% increase in blasting demand from the mining sector by 2030.

• Increase in coal demand The countrys energy needs will rise in the future as a result of urbanisation and economic growth. In the foreseeable future, coal would continue to be the dominant source for supplying Indias expanding electricity needs, despite rising investments in renewable capacity.

• Government schemes - The governments focus on “Make in India” to establish “Atmanirbhar Bharat” is expected to decrease import dependency and raise domestic demand for Indias defence industry. The government further aims to support MSMEs in the defence export sector through favourable policies and initiatives. The government liberalised and authorised FDI under automatic route up to 74% and through government route up to 100% where it is likely to lead an access to modern technology.

• Infrastructure investments The governments Gati Shakti master plan for multimodal connectivity is expected provide major impetus to the infrastructure sector. A capital outlay of H 10 lakh crore has been allocated by the government in Union Budget 2025-26 for infrastructure development which would boost the economic growth and aid the industry18. The development of Smart Cities is also likely to increase investments in infrastructure

Infrastructure Development Boom

- Projects like Bharatmala, Sagarmala, DFCC, and metro rail require large-scale rock excavation.

- Use of controlled and precision blasting in urban tunneling increases demand for initiating systems and electronic detonators

• Defense & Strategic Materials

Indias push for self-reliance in defense (Make in India, Atmanirbhar Bharat) is creating long-term opportunities in:

High-energy materials Warhead fillings Propellants and pyrotechnics

Export opportunities to friendly countries under strategic defense partnerships.

? Premier Explosives and Solar Industries are already tapping into this.

• Shrinking global economies provide opportunity for new competitive player to enter into the market.

• Technological Modernization

- Shift toward electronic and wireless detonators, digital blast design, and blasting analytics.

- Demand for green explosives with low NOx emissions opens space for innovation.

- Opportunity for SAAS-based blast optimization and drone-assisted blast monitoring

Threats:

At this point, there arent any significant risks to the long-term viability of IGILs business. Driven by robust financials good operational efficiencies, and improved intellectual capital capabilities, IGIL is well positioned to keep providing value to stakeholders. However, supply chain constraints and geopolitical ambiguity are important dangers that could result in short-term economic difficulties.

1. Raw Material Price Volatility

• Dependence on imports for ammonium nitrate, nitric acid, and fuel oils.

• Global supply chain disruptions (e.g., Red Sea crisis, geopolitical tensions) impact costs and delivery timelines.

0 Fluctuations directly affect margins, especially in bulk explosives.

2. Stringent Regulatory Environment

• High compliance burden under:

o PESO (Petroleum and Explosives Safety Organisation) o MoD Licensing for defense explosives o Environmental norms (CPCB, SPCBs)

• Delays or violations can result in plant closures or license suspensions.

3. Security and Theft Risks

• Explosives are highly sensitive and prone to misuse.

• Risk of pilferage, diversion, or unauthorized use requires constant surveillance and digital tracking.

4. Environmental and Social Pushback

• Blasting near populated areas often faces local opposition and litigation.

• Growing scrutiny over dust, vibration, noise, and groundwater contamination.

• ESG (Environmental, Social & Governance) requirements from clients and investors are increasing.

Risk and Concerns

Risk is an integral part of the business process. To enhance the risk management process, the company has mapped the risks. Risk arises for achieving business objectives are identified and prioritized. Risk mitigation activity plans are established and executed as and when need arises. Periodical reviews are carried out to assess the risk levels. The Board at IGIL continues to be in charge of risk management and internal control,

with a focus on defining the companys risk appetite, regularly assessing and monitoring key risks, and reviewing reports generated by internal auditors on internal controls and risk reports

Internal Control System and their Adequacy

The Company has in place an adequate internal control system to safeguard all assets and ensure operational excellence. The system also meticulously records all transaction details and ensures regulatory compliance. The Company has an Audit Committee in place which guides and provides proper measure for controlling the affairs of the Company.

Human Resource

Your company has 137 employees as on 31st March, 2025. Relations between the management and employees have been cordial. Your company maintains a work environment that is free from any harassment.