Indokem Ltd Management Discussions

OVERVIEW OF ECONOMY, INDUSTRY STRUCTURE AND DEVELOPMENTS:

A. Business Environment

i. Global Economic Outlook

The global economy in FY2026 demonstrated resilience despite persistent geopolitical, trade and energy-related uncertainties. Global GDP growth stabilised at modest but uneven levels across regions, supported by disinflation, a gradual shift toward monetary easing in select economies, continued investments in technology, particularly Artificial Intelligence (AI), and infrastructure. Growth was further supported by favourable financial conditions, a relatively weaker US dollar and proactive fiscal measures in certain major economies. Global trade moderated during the year following an inventory-led recovery. The trading environment was shaped by tariff measures, industrial policies, selective trade restrictions and disruptions to key shipping routes, leading to a heightened focus on supply chain localisation and resilience. Inflation eased across most major economies, supported by softer commodity prices, improved supply chains and the lagged effects of tighter monetary policy, although services inflation remained sticky in several regions. Energy prices remained volatile during FY2026, particularly crude oil and natural gas, with periodic fluctuations driven by geopolitical tensions in key producing and transit regions. While medium-term supply expectations improved, near-term volatility continued to impact cost structures across energy-intensive industries, including chemicals. Overall, the macroeconomic environment in FY2026 was characterised by stable but moderate growth, easing inflation and gradually improving financial conditions, although geopolitical tensions, trade uncertainties and energy price volatility continued to pose challenges for global businesses.

ii. Indian Economic Outlook

The Indian economy is estimated to have grown at around 7.4-7.6% in FY2026, reaffirming its position as the fastest growing major global economy. Growth was driven by strong domestic demand, sustained government capital expenditure and resilient performance across manufacturing and services sectors, particularly infrastructure, construction, financial services and technology-enabled services.

India continues to strengthen its position as a key global chemicals manufacturing hub. As of FY2026, India remains among the top six producers of chemicals globally and among the top three in Asia, with the sector contributing approximately 5–6% to Indias GDP and around 9% to manufacturing gross value added. With production spanning over 80,000 chemical products, India represents one of the most diversified chemical manufacturing bases globally.

iii. Industry Overview: Dyes, Sizing Chemicals, Auxiliaries, and Pigments

The textile chemicals market in India is a significant contributor to the global value chain, with the country being a major exporter and processor of textiles and garments. Indokem Limited, with its strong presence in dyes and chemicals, is well-positioned to benefit from evolving industry trends across four key verticals:

a. Textile Dyes:

India ranks among the top global producers of reactive, disperse, and acid dyes, serving both domestic and international markets. With increasing consumer awareness and global retail brands demanding sustainable sourcing, there is a rising preference for low-impact, eco-friendly, and high-performance dyes that are GOTS, REACH, and ZDHC compliant. Demand is expected to remain robust, driven by the growing textile and garment manufacturing sectors and increasing export opportunities.

b. Sizing Chemicals

Sizing chemicals are used in the pre-weaving stage to strengthen yarns and reduce breakages, ensuring smoother loom performance. The market is witnessing a shift toward synthetic and biodegradable sizing agents, especially with the proliferation of high-speed looms and automated weaving units. With continued modernization in the textile industry, demand for superior sizing products is expected to grow steadily.

c. Textile Auxiliary Chemicals

Auxiliary chemicals play a vital role in various textile processing stages such as pre-treatment, dyeing, printing, and finishing. These include soaping agents, wetting agents, sequestering agents, fixing agents, and softeners. The industry is increasingly moving toward multi-functional and low-emission auxiliaries that enhance operational efficiency and meet global environmental standards. The push for energy and water conservation in processing is also boosting demand for specialized auxiliaries.

d. Pigments

Pigments are widely used in textile printing and coloration, particularly for synthetic fabrics and blends. The Indian pigment market benefits from strong demand in digital textile printing, home furnishings, and sportswear. Environmental compliance, product consistency, and colorfastness are becoming critical differentiators. Indokems experience in manufacturing high-purity pigments gives it an edge in addressing customized requirements for both bulk and niche customers.

Given its diversified portfolio comprising textile dyes, sizing chemicals, textile auxiliaries and pigment products, the Company is well positioned to capitalize on these evolving market trends through continuous product development, customer-centric innovation and compliance with global sustainability standards.

Market Drivers:

Rising global and domestic textile consumption, particularly in fast fashion and athleisure.

Growing adoption of sustainable and eco-certified chemicals across all product categories.

Digitalization of textile processing (e.g., digital printing) driving demand for new-generation pigments and auxiliaries.

Indias emergence as a reliable global sourcing hub amid realignment of global supply chains.

Government-led textile cluster and infrastructure initiatives (e.g., Textile Parks, RoDTEP, TUFS, etc.)

B. Company Overview - Indokem Limited

Indokem Limited is a leading manufacturer and exporter of Textile Dyes and Chemicals. The Company continues to respond effectively to market dynamics and remains well positioned to capitalize on emerging growth opportunities.

During FY 2025-26, the Company continued to strengthen its manufacturing capabilities, product portfolio, sustainability initiatives and customer relationships while maintaining focus on operational excellence and regulatory compliance.

Revenue for FY 2025 26 stood at 154 crore, reflecting the Companys resilient market presence amid a dynamic pricing environment for inputs and finished goods.

Invested in new machinery at the Ambernath Unit for a broader product range and modernized Effluent

Treatment Plants.

Strengthened Quality Control infrastructure, backed by skilled personnel aligned with global standards.

Enhanced IT systems and digital infrastructure.

Key product lines received GOTS certification, reaffirming our commitment to sustainable and globally compliant textile processing.

Most products successfully registered under ZDHC (Zero Discharge of Hazardous Chemicals).

Continued certifications: ISO 9001:2015 and ISO 45001:2008.

Focused R&D on Reactive Dyes and now expanding into Pigment Emulsions.

Enhanced product packaging and branding initiatives to improve product presentation and customer appeal.

Ongoing Trademark registration and renewals to safeguard IP.

Addition of new corporate clients, strengthening brand trust and reach.

C. Financial Performance and Analysis

Revenue remained broadly stable despite pricing pressure in certain product segments. Profitability improved on account of better operating efficiencies, improved product mix and cost optimization initiatives. The Company continued to maintain a prudent approach towards cost management, working capital optimisation and operational efficiency during the year ( in Lakhs)

Particulars	Standalone		Consolidated
	FY 2025-26	FY 2024-25	FY 2025-26	FY 2024-25
Net Sales	14,744	15,297	16,879	17,741
Earnings before Interest, Depreciation and Tax	764	570	785	837
Profit before Tax	213	91	204	329
Profit/ (Loss) for the year	213	92	185	314

D. Financial Ratios and Analysis:

Parameters	FY 2025-26	FY 2024-25	% change
Debtors Turnover Ratio (number of times)	4.42	5.46	(18.92)
Inventory Turnover Ratio (number of times)	4.99	6.06	(17.62)
Interest Coverage Ratio (number of times)	0.36	1.04	(65.16)
Current Ratio (number of times)	1.54	1.07	43.29
Debt Equity Ratio (number of times)	0.48	0.42	16.58
Operating Profit Margin Ratio (%)	1.53%	2.28%	(32.89%)
Net Profit Margin Ratio (%)	1.44%	0.60%	139.37%
Return on Net Worth (%)	3.92%	1.49%	163.08%

Current Ratio improved primarily due to better working capital management and reduction in current liabilities. Operating Profit Margin improved primarily on account of enhanced operating efficiencies and a favourable product mix. Net Profit Margin increased primarily due to improved operating profitability and lower finance costs. Return on Net Worth improved owing to higher profitability during the year. Interest Coverage Ratio declined primarily due to higher finance costs during the year, despite improvement in operating profitability.

E. Opportunities and Challenges: Opportunities:

The Company believes the following long-term industry trends provide growth opportunities.

Rising demand for specialty chemicals.

Cost and quality advantages offer export potential.

Reduced Chinese manufacturing opens a strategic window for Indian producers.

Enhanced R&D investment in sustainable and high-performance sizing agents, especially for non-woven fabrics (medical, automotive, construction).

The Company will continue to invest in environmental infrastructure, process improvements and regulatory compliance to support sustainable long-term growth.

Challenges:

Volatile raw material prices and import dependency.

High regulatory compliance costs.

Need for continuous technological upgrades, challenging for smaller players.

Environmental regulations could limit expansion and profitability.

Increasing competition from low-cost imports.

Volatility in foreign exchange rates affecting export competitiveness.

F. Risks and Concerns

The Company faces multiple categories of risks including:

Sectoral, operational, sustainability, cyber, and financial risks.

Increasing environmental regulations and compliance costs.

Volatility in global raw material supply and pricing.

Heightened geopolitical tensions, particularly in the Middle East, along with increasing trade fragmentation between major economies, have led to volatility in energy prices and disruptions in supply chains. Additionally, volatility in foreign exchange rates and uncertainties in raw material availability may impact sales realisations and margins. Environmental compliance costs are expected to remain elevated, given the inherently high effluent treatment requirements in the Dyes and Pigments industry.

During the year under review, the Company received certain regulatory directions relating to environmental compliance from the Maharashtra Pollution Control Board relating to environmental compliance at its Ambernath manufacturing facility. The Company promptly undertook the necessary corrective actions and compliance measures, pursuant to which manufacturing operations were permitted to resume. The incident did not have any material adverse impact on the Companys financial performance or its ability to serve customers. The Company continues to strengthen its environmental management systems and regulatory compliance framework to mitigate similar risks in future.

Risk Management Framework ensures identification, assessment, monitoring and mitigation strategies aligned with industry standards. Indokem adheres strictly to statutory environmental regulations and continuously invests in safety and compliance systems.

The Board of Directors and the Audit Committee periodically review the Companys risk management framework to ensure that key business risks are identified, monitored and appropriately mitigated.

Internal Control Systems:

The internal control systems are commensurate with the size, scale and complexity of the Companys operations. An independent Internal Auditor, under the supervision of the Audit Committee, periodically assesses compliance and control effectiveness. Systems are in place to ensure:

Adherence to policies,

Asset protection,

Fraud prevention,

Accuracy of financial reporting,

Timely dissemination of information.

G. Human Resource Management:

Our people strategy continues to be anchored in building a future-ready, agile and inclusive workforce that can support the Companys growth ambitions while delivering sustained value to customers and stakeholders. The Company also continued to focus on employee training, workplace safety and capability development to support sustainable business growth. Indokem emphasizes people-centric growth:

Enhanced HR processes for recruitment, L&D, and performance management.

Focus remained on employee engagement, diversity, and fostering an inclusive work culture.

The Company had total of 193 permanent employees on its roll as on March 31, 2026.

Industrial relations remained cordial during FY 2025 26.

H. Outlook

The Company remains cautiously optimistic regarding growth prospects in the textile chemicals industry. Demand is expected to be supported by increased domestic consumption, export opportunities, government initiatives and growing preference for sustainable chemical solutions. The Company will continue to focus on expanding its product portfolio, strengthening customer relationships, enhancing operational efficiency, improving environmental performance and creating long-term value for stakeholders. The Company will continue to pursue innovation, strengthen regulatory compliance and enhance operational resilience to create sustainable long-term value for all stakeholders.

I. Quality Management / ESG

Indokem maintains stringent quality, safety and environmental management systems across its operations. The Company complies with ISO, GOTS and ZDHC certifications, reinforcing its commitment to product quality and sustainable manufacturing. During the year, the Company further strengthened its environmental compliance framework, pollution control systems and operational processes to ensure continued adherence to applicable statutory requirements. The Company remains committed to responsible waste management, efficient utilisation of natural resources and continual improvement in environmental performance.

J. Cautionary Statement:

This report contains forward-looking statements based on certain assumptions and expectations of future events. Actual outcomes may differ materially due to various risks including market conditions, regulatory changes, and other factors beyond the Companys control.

Conclusion:

FY 2025–26 marked a continued improvement for the Company, driven by strategic investments in operations, R&D, and compliance. The management remains cautiously optimistic about sustained revenue growth and improved operating margins in the medium term.

	For and on behalf of the Board
	Sd/-
	Mahendra K. Khatau
Place: Mumbai	Chairman & Managing Director
Date: July 31, 2026	DIN: 00062794