IOL Chemicals & Pharmaceuticals Ltd Management Discussions

The global Active Pharmaceutical Ingredients (API) market is rapidly growing, fuelled by rising healthcare needs, chronic diseases and pharmaceutical innovation. Investments in R&D have led to efficient, high-quality and sustainable API production methods. Favourable regulatory reforms are streamlining approvals and promoting access to essential drugs. The market is projected to grow from USD 232.13 billion in 2025 to approximately USD 328.94 billion by 2030, with a CAGR of 7.22%. This highlights the increasing role of APIs in global healthcare.

The API industry is set to thrive with the rise of biologics and biosimilars for complex diseases. Advancements in biotechnology lead to sophisticated biologic drugs, requiring specialised API manufacturing. The generic API market is expanding as major drug patents expire. The Asia-Pacific region, especially China and India, is emerging as a powerhouse in API production due to healthcare investments and supportive government policies. North America and Europe maintain strong API demand for advanced therapies and precision medicine. With continuous technological advancements, regulatory support and global collaboration, the future of the API industry looks promising, ensuring better access to essential medications and sustainable healthcare solutions worldwide.

The Indian API industry is on a remarkable growth trajectory, valued at approximately USD 14.77 billion in 2025 and projected to reach USD 22.02 billion by 2030, with a CAGR of 8.31%. This expansion is driven by increasing healthcare needs, a rising burden of chronic diseases, and the demand for affordable yet high-quality generic medicines. World-class manufacturing facilities, skilled workforce and strong R&D make India a global leader. The COVID-19 pandemic further highlighted Indias critical role in the global supply chain, promoting efforts towards self-sufficiency. Advances in high-value APIs for oncology, cardiovascular and anti-infective treatments has positioned India as a leader in both generic and specialty API segments.

The industry is poised for unprecedented growth, driven by favourable policies, increasing Foreign Direct Investments (FDIs) and technological advancements. The PLI scheme will boost local production and reduce reliance on imports. Strategic collaborations and investments in green chemistry and sustainable API production will further enhance Indias competitiveness. Digital manufacturing processes, AI-driven drug discovery and advanced biopharmaceutical technologies will shape the industrys future. With a focus on innovation, quality and sustainability, India is set to lead the next wave of pharmaceutical advancements.

The global chemical industry is expected to rise from USD 6,182 billion in 2024 to USD 6,324 billion by 2025, fuelled by increasing demand for innovative materials that support the energy transition, such as battery chemicals, lightweight composites and sustainable feedstocks. Key sectors such as automotive, construction and electronics continue to drive this demand. Asia Pacific, led by Chinas strong growth momentum, remains at the forefront. Despite challenges in Europe, the industrys adaptability and innovation position it well for long-term success.

Looking ahead, the chemical industry is poised for growth, with specialty chemicals playing a crucial role in meeting the evolving needs of automotive, electronics, agriculture, pharmaceuticals, and personal care industries. Innovations in biodegradable products, bio-based chemicals and sustainable manufacturing are paving the way for a greener, efficient future. Companies that embrace digitalisation, sustainability and innovative supply chain solutions will thrive, ensuring strong growth and global impact.

Indias chemical industry, valued at around US$250 billion, is crucial to sectors such as agriculture, pharmaceuticals, textiles and construction. The cumulative FDI equity inflow in the chemical industry reached US$ 22.87 billion from April 2000 to September 2024. Indian companies are attracting investments from Japan,

Korea and Thailand, who are seeking to diversify supply chains. As the sixth-largest global producer, it is poised for significant growth, aiming for US$300 billion by 2025 and US$383 billion by 2030. This is fuelled by strong domestic demand, rising exports, favourable government policies and technological advancements. Initiatives such as Production Linked Incentive (PLI) schemes, Make in India and Aatmanirbhar Bharat enhance competitiveness, attracting investments. The focus on innovation, sustainability and digital transformation unlocks new opportunities, solidifying Indias role as a global leader in the sector.

Looking ahead, the Indian chemical industry is poised for extraordinary growth, aiming for a market size of US$1 trillion by 2040 with a 9.3% compound annual growth rate (CAGR). Key drivers include rising per capita consumption, diverse industrial applications, expansion into new markets and a strong emphasis on R&D. Government initiatives, such as the establishment of Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs) and plastic parks, will attract significant investments. The sector is also witnessing a shift towards sustainability, decarbonisation and circular economy practices. Indias strategic location, skilled workforce and cost advantage make it an ideal global chemical supply hub. With massive investments expected, the industry is set to become a major player in the global market, driving innovation, economic growth and sustainability.

The global specialty chemicals market, valued at USD 780.3 billion in 2024, is a vital segment within the chemical industry. Its growth is driven by strong business performance, rising consumer demand, changing lifestyles, and globalisation. A key catalyst has been the increasing use of these chemicals in industries such as oil & gas and personal care. Unlike bulk chemicals, these are produced in smaller volumes but are highly valued for their unique properties. They are essential for enhancing manufacturing processes and product performance across industries such as agriculture, automotive, aerospace, pharmaceuticals and food and beverages. Their applications range from improving crop yields to providing advanced materials for electronics and personal care products.

The specialty chemicals market is projected to reach USD 1,054.7 billion by 2033, growing at a CAGR of 3.23%. This growth is driven by the increasing demand for high-performance, specialised chemicals across diverse industries and a shift towards eco-friendly alternatives due to environmental concerns. Industry leaders are investing in R&D to develop innovative, custom-made solutions, expanding their product offerings and market presence while promoting sustainability.

13https://www.marketsandmarkets.com/Market-Reports/global-chemical-industry-outlook-89294716.html

14https://www.ey.com/en_in/insights/chemicals/catalyzing-growth-india-s-chemicals-and-petrochemicals-drive-growth, Ministry of commerce, Indian ministry of chemicals and petrochemicals, News articles, Expert Market Research

15https://www.grandviewresearch.com/industry-analysis/specialty-chemicals-market, The Business Research Company- Specialty Chemicals Global Market Report- By Product Type, By Source, By End Use- Market Size, Trends, and Global Forecast 2025-2034

Indias specialty chemicals sector is growing recently, driven by various domestic and international factors. Increased demand in personal care, construction and pharmaceuticals, along with urbanisation and improved living standards, fuels this growth. Government initiatives in R&D and infrastructure development further strengthen the industry.

The industry produces essential products like agrochemicals, dyes, pigments and pharmaceutical ingredients. The industry has a bright future with significant growth ahead. Key strategies include optimising cost-effective manufacturing and investing in R&D for innovation. Addressing challenges such as reliance on imported raw materials will be crucial for long-term success.

Creating a favourable business environment through supportive policies will aid further expansion. The "China plus one" strategy and government initiatives in innovation and technology are driving domestic production of high-value specialty chemicals. With growing global demand in sectors like electric vehicles, green energy and digital infrastructure, India is well-positioned to expand its global market share. The countrys cost-competitive manufacturing base and strong process engineering capabilities make it an attractive hub for both domestic and international companies, ensuring Indias emergence as a key player in the global specialty chemicals market.

IOL Chemicals & Pharmaceuticals Ltd is a key player in the pharmaceutical and specialty chemicals sectors, serving both domestic and international markets. It leads the global Ibuprofen market with a 35% share and manufactures APIs like Ibuprofen, Metformin and Paracetamol for various therapeutic needs. The pharmaceuticals segment has witnessed robust growth due to healthy demand. The specialty chemicals division serves industries such as food processing, textiles pharmaceuticals, inks, paints and pesticides, remaining integral despite revenue challenges.

The Company is diversifying its API portfolio by targeting high- demand, non-ibuprofen segments to enhance patient outcomes. This strategic shift has significantly boosted revenue from products like Paracetamol, Metformin, Pantoprazole and Clopidogrel. The Company operates multiple manufacturing facilities and recently acquired land for a new greenfield manufacturing facility for future expansions. With an emphasis on R&D, it has several commercialised products, patents and regulatory submissions. Serving customers in more than 80 countries, the Company is solidifying its position as a global leader in pharmaceuticals and specialty chemicals.

In FY25, IOL continued to reinforce its leadership in the pharmaceuticals segment, driven by its position as the worlds largest manufacturer of Ibuprofen with over 30% global market share and a capacity exceeding 12,000 MT. The company remains the only fully backward-integrated player for Ibuprofen intermediates and KSMs, ensuring consistent quality and cost efficiency. Backward integration has also been extended to Paracetamol, with the commissioning of Unit-11 at Barnala, offering 10,800 MTPA of installed capacity. With 16 DMFs filed with the USFDA and 19 CEPs granted by the EDQM, IOL is well-positioned in regulated markets. Its API portfolio spans key therapeutic areas including anti-inflammatory, anti-diabetic, anticonvulsant, and cardiovascular segments. The company continues to drive a strategic shift towards high-value APIs, increasing their share from 18% in FY21 to 34% in FY25.

IOL is among the leading specialty chemical players in India, with strong global positioning as the second-largest producer of Iso Butyl Benzene (IBB), a key starting material for Ibuprofen, holding approximately 30% market share. The companys integrated operations include captive production of Acetic Anhydride and Acetyl Chloride, which are critical inputs for both Ibuprofen and Paracetamol, ensuring cost and supply chain advantages. With over

100,000 TPA capacity for Ethyl Acetate and a REACH certification enabling exports to more than 40 countries, IOL remains a key supplier to diverse sectors including pharmaceuticals, packaging, textiles, paints, food processing, and inks. Notably, its green chemistry-based dual technology plant for MCA and Acetyl Chloride enhances environmental sustainability while supporting operational excellence.

At IOL Chemicals and Pharmaceuticals, innovation remains a cornerstone of our growth strategy. In FY 2025, our 114-member strong R&D team, including over 50 highly skilled scientists,

continued to drive progress across key therapeutic areas. With a robust infrastructure backed by DSIR recognition and equipped with advanced technologies, our research efforts led to the commercialisation of 20 products, with 8 more currently in the pipeline. We achieved significant regulatory milestones, holding 16 Drug Master Files (DMFs) with the USFDA, 19 Certificates of Suitability (CEPs) with EDQM and securing 3 patents. Our focus on developing complex, multi-step products and enhancing generic molecule capabilities underscores our commitment to quality, compliance, and sustainable innovation. With a future-ready R&D ecosystem, we remain well-positioned to deliver high-impact solutions for global healthcare needs.

The Board plays a critical role in managing risks and ensuring robust internal controls, which involves defining the Companys risk tolerance, regularly assessing major risks and meticulously reviewing internal audit reports.

The Company is exposed to various risks that could affect its operations and financial performance. Dependence on key products like Ibuprofen makes it vulnerable to market fluctuations and regulatory changes. Operational risks related to safety, health and environmental compliance in the chemical and pharmaceutical sectors require continuous management and investment. Supply chain disruptions can hamper raw material availability and production costs. Furthermore, domestic and international policy changes could influence operations, particularly in major markets such as the USA and Europe.

To address these risks, IOL has implemented a comprehensive strategy. By diversifying its product portfolio beyond Ibuprofen to include other APIs and specialty chemicals, the Company reduces dependency on a single product line. It adheres to international regulatory standards, invests in cutting-edge technology and infrastructure to elevate safety and compliance as well as conducts regular risk assessments. This approach ensures resilience against operational disruptions and market volatility.

For an in depth note on Risk Management of the Company, please refer to page number 34.

At IOL Chemicals and Pharmaceuticals, our people are at the heart of our progress. In FY 2025, we intensified our focus on building a future- ready, resilient, and high-performing workforce by investing in talent development, employee well-being, and inclusive engagement.

To support career advancement and attract top industry talent, we launched comprehensive training programmes tailored to enhance professional capabilities and foster a culture of continuous learning. These structured initiatives have enabled employees at all levels to grow within the organization and contribute meaningfully to our business objectives

Employee engagement remains central to our workplace philosophy. During the year, we strengthened communication channels and set up employee committees to promote open dialogue, active listening, and collaborative problem-solving. These measures have helped cultivate a sense of ownership and belonging among our employees.

Recognising that a healthy workforce is key to sustained success, we rolled out a range of wellness programmes focused on physical, mental, and emotional well-being. These initiatives are designed to ensure that our people feel supported, empowered, and equipped to meet the demands of a dynamic business environment.

As of March 31, 2025, IOL Chemicals and Pharmaceuticals employed 2,891 permanent staff across its facilities and offices. Our commitment to developing strong leadership and deepening employee engagement has played a crucial role in driving our recent growth. As we continue to scale new heights, we remain steadfast in our commitment to nurturing talent, encouraging innovation, and building a workplace that inspires excellence.

The Company has aligned its current systems of internal controls including financial controls with the requirement of Companies Act 2013. The Companys internal controls are commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies.

The Company uses best IT system to record data for accounting, consolidation and management information purposes and connects to different locations for efficient exchange of information.

The Audit Committee reviews reports submitted by internal auditors regularly and suggest the improvements from time to time which are being implemented by the Company.

Statements in Management Discussion and Analysis describing Companys objectives, projections, estimates and expectations may be "Forward-Looking Statements" within the meaning of applicable laws & regulations. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to Companys operations include but are not restricted to the economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which Company operates, changes in the Government regulations, tax laws, and other statues, as also other incidental factors.