Jocil Ltd Management Discussions

a Industry Structure and Developments :

The Company is engaged in the manufacture of Stearic Acid, Fatty Acids, Refined Glycerine, Soap Noodles, Toilet Soap, Industrial Oxygen and in the generation of Power from biomass and wind. Non edible vegetable oils, both indigenous and imported, are used as raw materials for the manufacture of the finished products. The products manufactured are marketed directly from the factory as well as through Depots and C&F Agents located in major cities across the country. The Company also undertakes to manufacture major portion of Soap Noodles and Toilet Soap on contract basis for reputed customers and some portion of Soap Noodles to other medium to small size customers on regular sale basis.

The Company is having 6 MW Biomass Cogeneration Captive Power Plant located within the factory premises. It is also having four Wind Energy Generators (WEGs) of total 6.30 MW setup in Tamil Nadu and the power generated from these plants is sold to Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO).

Majority of the Fatty Acids produced in the industry are consumed as raw material in Toilet Soap industry for making Soap Noodles and Toilet Soap. Hence performance of that industry will also have its impact on the demand for fatty acids. Stearic Acid used in rubber, plastic, metal polish, cosmetics, paints and number of other industries. Any changes in consumption pattern by the major user industries may lead to fluctuations in demand. Glycerine and Industrial Oxygen are the by-products.

The country is short of both edible and non-edible vegetable oils. However, in India, refineries with huge capacities have been setup for processing Crude Vegetable Oils like Palm Oil mainly imported from Malaysia and Indonesia and some that is available domestically. By-products generated from these refineries viz., RBD Palm Stearin (RBDPS) and Palm Fatty Acid Distillate (PFAD) are the raw materials to the Company. As a result, the Company indirectly depends on imports of crude vegetable oils for refining. Consequently the supply and demand position in the international market for vegetable oils influence the domestic market.

The Malaysian and Indonesian Governments vary export duty from time to time on crude oil to encourage value addition within their country prior to exports. This turns out as additional cost to consumers in India. Further, fluctuation in crude oil (fossil) prices also have impact on edible and non-edible oils due to their usage in production of bio-diesel.

The fuels intended for running the biomass power plant are Rice Husk, fire wood like Cotton Stalk, Chili Stalk, Juliflora etc., available in the surrounding areas. Their availability is seasonal and also depends on availability of labour and farm works during the season. Transportation and storage of biomass fuels are the other problems due to their low bulk density. They are also more fire hazardous.

Scheduled maintenance activities are being carried out regularly for optimum capacity utilization of the power plant. Steam and power requirements of Process Plants are met from the Biomass Power Plant. Surplus power after internal consumption is sold to Indian Energy Exchange through PTC India Ltd.

Continuous development efforts are being made to absorb the latest technologies and practices. Quality Management Systems (QMS) Standard ISO 9001:2015 obtained from a renowned certification agency, TUV SUD South Asia Pvt. Ltd., Mumbai is being followed by the Company, Det Norske Veritas (DNV) also confirmed ISO 22716:2007 on the Company for following GMP Guidelines of Standards in the manufacture of Stearic Acid and Glycerine.

Raw materials and semi-finished soap products are tested in Companys laboratory having Micro-organism Testing facility for reliable and consistent results. It also saves time involved in sending samples to outside laboratories situated far away from the Company.

As indicated in the previous report, Companys existing Enterprise Resource Planning (ERP), SAP Application 2016 version implemented from 1 July 2017 is upgraded to 2025 version. In this upgradation process, its connected Hardware i.e., Servers, Storage, Switches and operating system were also upgraded to latest version. Total cost of entire upgradation is around Rs 1.77 Crores and the entire upgradation was completed on March 22, 2026.

b. Opportunities and Threats:

Raw material cost is a major component in the cost of production of fatty acids and soap products. International market prices of edible and non-edible oils highly influence the raw material prices in the domestic market. Competitors having backward integration have an edge over the Company because of cheaper and secured source of raw materials. Volatility of raw material prices and demand by bulk consumers of fatty acids for contracts of large quantities for future delivery is a big challenge to the Company when similar facility for advance coverage of raw materials is not available to hedge the risks. Retention of high volume customers is considered very important and hence very competitive rates are having to be quoted with hidden risks.

The US-Iran war is impacting the Companys raw material needs during the current period due to abnormal rise in prices. Imports from Indonesia and Malaysia may be significantly impacted due to logistics disruptions. Also, availability of raw materials locally may be impacted if the war continues further and we may have to procure the raw materials at higher price.

During the year under review, Company was unable to sustain reasonable volume of orders for Stearic Acid from major customers due to competition.

Even though there is an opportunity for higher sale of Biomass Power to Indian Energy Exchange (IEX) through PTC India Limited by way of Open Access arrangement, it will not be viable due to increase in the cost of fuels used for generation of power without a commensurate increase in selling price as prices prevailing in the Exchange are very competitive. As such Company is planning to produce Power according to its internal requirements.

The generation of power from Wind Energy Generators (WEGs) has increased to 143.69 lakh units as against 115.72 lakh units in the previous year mainly due to decrease of grid failure from 4.67% to 2.86%. As a result, revenue from sale of power from Wind Energy Generators increased to Rs 416.78 lakhs from Rs 335.96 lakhs. Payments from TANGEDCO are being received as per Late Payment Surcharge (LPSC) Scheme opted by TANGEDCO as per Notification dated 3.6.2022 issued by Ministry of Power.

c. Segment-wise or Product-wise performance:

Segment-wise performance of the Company is at Note No. 31 to the Accounts.

d. Outlook:

The demand for Stearic Acid is expected to remain same as that of the year under review due to severe competition. The demand for Soap may increase from existing level due to anticipated increase in orders from existing customer. Soap Noodles and Glycerine demand is also expected to remain the same.

e. Risks and Concerns:

Inverted duty structure for imports (higher duty for raw materials and lower duty for finished products) is a major problem for manufacturers of Soap Noodles. There is no customs duty on Soap Noodles imported from Asian countries under Indian Free Trade Agreement. Whereas, Lauric Acid and PFAD, the major raw materials in the manufacture of Soap Noodles attracts basic customs duty at 7.5% and 5% respectively. As a result, indigenous manufacturers are placed at a disadvantage in competing with import of Soap Noodles. The Company expects the Government to recognize the inverted duty structure for Soap Noodles and correct the anomaly to enable the industry to face the competition from import of soap noodles effectively.

The wide fluctuations in raw material prices in the international market affect the prices of final products which may result in conditions favourable at times or unfavourable at other times to the Company, in spite of taking precautions to avoid risks in price fluctuations.

Availability of Palm Fatty Acid Distillate (PFAD) and RBD Palm Stearin, the major raw materials for fatty acids production is a bit of concern as processing of Crude Palm Oil (from which PFAD & RBD Palm Stearin are derived as by products) has come down substantially at refineries due to lower demand in the market for Palm Olein as prices are almost equal to Soya and Sunflower oils. As a result, Company may have to import PFAD & RBD Palm Stearin at increased costs in case of shortage.

Generation of power by Biomass Power Plant depends on availability of biomass and its cost. Generation of power by windmills depends on wind velocity and the policy of TANGEDCO to prioritize evacuation over the other sources of energy available to it. The profitability of Wind Energy Generators largely depends upon the purchase price fixed by the Government for purchase of energy from renewable sources of energy as a promotional measure.

f. Internal Control System and their adequacy:

The Company has proper and adequate internal control procedures commensurate with its size and nature of business. These internal control procedures ensure protection to the resources of the Company and compliance with the policies, procedures and statutes.

The internal controls are supplemented by internal audit by M/s. Mastanaiah & Co., Chartered Accountants, Guntur. The internal controls and internal audit ensure that appropriate financial records are available for preparing financial statements and other data for maintaining accountability of assets. The Report of the Auditors on Internal Financial Controls under Sec.143(3)(i) of the Act is provided as Annexure-B to the Independent Auditors Report.

g. Discussion on Financial Performance with respect to Operational Performance:

The operations of Fatty Acids and Toilet Soap & Soap products increased by 3.88% and 47% respectively due to increase in sales volume of Soap Noodles. The operation of Biomass Power declined by around 4% due to decrease in sales to IEX due to lower prices. However, the operations of Wind Power increased by around 24% due to decrease in grid failures. The profit before interest & depreciation increased by around 136% due to increase in sales volume of Soap Noodles and also due to decrease in fuel prices.

h. Material developments in Human Resources/Industrial Relations front, including number of people employed:

The Company employed 731 persons as on 31 March 2026 both in the factory and office. The Management of the Company maintains good relations with the employees. There have been no labour problems since the inception of the Company in 1980.

i. Details of significant changes in Key Financial Ratios.

Ratio	Formula	2025-26	2024-25	Change % increase/ (decrease)	Explanation for change beyond 25%
Debtors Turnover	Net credit sales /Avg. Accounts receivable	13.99	14.93	(6.28)	-
Inventory Turnover	Net sales / Average Inventory	9.07	7.69	18.04	-
Interest Coverage Ratio	EBIT / Interest	3360.79	72.69	4523.46	Increase in EBIT due to Increase in sales volume of Soap noodles and decrease in fuel prices
Current Ratio	Current Assets / Current Liabilities	3.09	2.99	3.21	-
Debt Equity Ratio	Debt / Equity	-	-	-	-
Operating Profit Margin(%)	Operating Profit / Sales	1.10	0.16	596.09	Increase in EBIT due to increase in sales volume of soap noodles and decrease in fuel prices
Net Profit Margin (%)	Net Profit / Sales	0.80	0.12	573.80	Increase in PAT due to increase in sales volume of soap noodles and decrease in fuel prices

j. Details of change in Return On Net Worth

Ratio	Formula	2025-26	2024-25	Change % increase/ (decrease)	Explanation for change
Return on Net Worth	Profit after tax/ Net worth	3.96	0.49	708.25	Increase in PAT due to increase in sales volume of soap noodles and decrease in fuel prices.