Kothari Petrochemicals Ltd Management Discussions

Industry Structure & Development :

Polyisobutylene (PIB) is a highly versatile liquid polymer derived from isobutylene, used extensively across diverse industries, including automotive, adhesives, sealants, rubber chemicals, explosives, plastic masterbatches, and personal care. Our company primarily specializes in Conventional pIB, offering customized grades tailored to meet the specific needs of our clients across these varied applications.

In the automotive sector, PIB serves as a key additive in fuel and lubricants,enhancing combustion efficiency and optimizing dispersant performance. Our company has established a strong market presence and earned a trusted reputation in the adhesives and sealants segment, supported by robust customer relationships both domestically and internationally driven by our consistent quality and excellent product performance.

We are also proactively tapping into emerging market segments such as plastic masterbatches, including those based on both virgin polymer and recycled polymer. Another segment of key focus is cosmetics, with a focus on skin care, our PIB is gaining traction as a clean and sustainable alternative to traditional silicone and paraben- based formulations, aligning effectively with the modern consumer preferences. We believe that continuous exploration of new applications, either as a direct raw material or through formulations is a core driver of future growth and reinforces our vision of reducing dependence on any single end market.

Recent global geopolitical and trade disruptions have created unique opportunities for our company to expand internationally as well. We have responded proactively by increasing our export activities and converting previously opportunistic market exposures into long-term customer commitments. Our resilient supply chain and flexible production capabilities have enabled us to respond swiftly to shifting global demand.

With a focus on innovation, agility and reliability at the core of our operations, our company is well-positioned to capitalize on emerging industry trends and lead in the evolving landscape of Polyisobutylene applications.

outlook :

Kothari Petrochemicals Limited (KPL) is the largest domestic producer of Polyisobutylene in India, currently meeting majority of the countrys requirement, with a certain volume being met through imports. Domestic consumption has grown steadily at 4% year-over-year, and a trend expected to continue due to rising demand from sectors such as automotive lubricants, adhesives, and sealants.

After extensive discussions with Original Equipment Manufactures (OEM)s, we believe Indias automotive sector is headed toward a hybrid future - powered by a mix of internal combustion engines (ICE), electric vehicles (EVs). While the growth of electric vehicles is inevitable, it is not expected to significantly impact PIB consumption in the near term. As long as vehicles have moving parts, the demand for high-performance lubrication will persist. Based on current market indicators, we project continued steady market growth for PIB at a 4% CAGR.

KPL is strategically reinforcing its market position as a trusted and reliable PIB supplier both domestically and internationally, notably expanding its footprint in China, and Southeast Asia. Further expansions will focus on deepening our presence in these regions. Leveraging our enhanced production capacity, stringent quality standards, and robust logistic infrastructure, the company has successfully expanded its global customer base.

To support further growth and ensure uninterrupted supply capabilities, KPL is actively evaluating the establishment of strategic stock points in key markets. This initiative aims to optimize inventory management, improve logistical lead times, and enhance customer satisfaction.

opportunities :

KPL is well-positioned to capitalize on the rising demand for 2400 molecular weight PIB, especially as a preferred viscosity modifier in advanced lubricant formulations. Industry forecasts indicate robust growth opportunities within the adhesives and sealants markets, fueled by infrastructure development and industrial expansion.

The masterbatch segment is experiencing significant growth momentum, and KPLs expanding Pan-India dealer network further enhances the companys ability to scale distribution efficiently. The industry shift toward recycled plastics further increases the need for PIB as a stabilizer and performance enhancer.

Rising global demand for PIB derivatives presents substantial opportunities to innovate and introduce specialized, application-specific products tailored for sectors such as personal care, high management solutions, and specialty chemicals, thus helping us diversify our portfolio and deepen our competitive edge.

Increased adoption of automation, robotics, and precision engineering across industries is set to amplify demand for high-performance lubricants and metal working fluids. This trend underscores the strategic relevance of PIB products and bolsters our long-term growth prospects. Continued investment in R&D, product innovation, and customer- focused solutions will enable KPL to remain ahead of market demands and sustain its leadership position. J

Risks, Concerns & Threats :

KPL currently sources raw materials from nearby refineries and suppliers on Indias western coast, and some without exclusive or proprietary access. While this arrangement exposes a degree of supply risk, KPL is effectively mitigating these concerns through constant monitoring of raw material supply availability across the domestic market and maintain competitive procurement practices to mitigate potential disruptions.

Operational challenges persist, including variability in raw material quality and extended payment cycles from international customers. These factors, coupled with monthly raw material price fluctuations and foreign exchange volatility, add to financial risk and necessitate robust risk management practices and feedstock pretreatment investments.

In Asia, competition remains intense, from producers in Korea, Japan, and China. Although global PIB demand remains stable, supply chain disruptions, especially those stemming from Red Sea route instabilities and uncertainty in base oil availability add to logistical complexity. Nevertheless, KPL has ensured uninterrupted supply to critical markets through proactive logistical planning and strong customer coordination.

The automotive sectors rise in electric vehicles (EVs) sales has led to a reduction but not elimination in PIB usage in electric vehicles. However, we believe the future of transportation will be a “flex-fleet”, a combination of electric, internal combustion and hybrid engines. Our products has a very strong application in industrial lubricants, and advanced metalworking fluids.

On the regulatory front, developments such as the European Unions Carbon Border Adjustment Mechanism (CBAM) present emerging challenges. As CBAM gradually phases in, KPL may be required to address evolving carbon accouting measures and product-level emissions assessments. These changes highlight the importance of sustainable production practices and alignment with global environmental and compliance standards.

Internal Control Systems and their adequacy :

The Company has established a roburst internal control system framework encompassing all aspects of business operations, aimed at safeguarding assets, ensuring operational accuracy, and maintaining compliance with applicable regulations. Regular internal audits are systematically conducted across critical functional areas, and audit findings are reviewed by the Audit Committee, Board of Directors, and senior management, ensuring proactive risk mitigation and timely corrective actions.

Clear, documented policies govern expenditure, authorization, monitoring, and control processes. All capital investment decisions undergo detailed feasibility evaluations, and multi-level reviews, ensuring alignment with strategic objectives and risk tolerance. Both capital and revenue expenditures are tracked against approved budgets through comprehensive reporting systems, fostering financial discipline, transparency, and accountability.

Additionally, continuous investment in training and awareness programs ensure that employees remain compliant with internal control policies and risk protocols, thereby fostering a strong culture of integrity and governance.

Human resources / Industrial relations :

At KPL, our employees are our most valuable resource. Their continuous development, engagement, and performance are central to our long-term success and organizational stability.

Throughout the year, our employees participated in various in-house training programs under the Employee Development Program, designed to build both technical and soft skills. We introduced a structured Performance Management System to foster individual accountability, align objectives across teams, and promote a culture of continuous improvement through clear goal-setting, performance evaluations, and feedback.

Industrial relations remained harmonious throughout the year. Our proactive and collaborative approach, aligned with industry best practices in the manufacturing sector has fostered constructive dialogue and early resolution of issues, contributing to a positive and productive workplace environment.

As of 31^s* March 2025, our petrochemical operations employed a total of 194 employees.

Operational Performance :

Particulars	Year ended 31.03.2025	Year ended 31.03.2024
Number of days operated: Plant 1	358 days	351 days
Plant 2	350 days	351 days
Total Production in Metric Tons	37,995 MT	40,782 MT
Plant Capacity utilization based on stream days	87.6%	100%
Accident-free operation	365 days	366 days

Financial Performance :

The Company has reported total Revenue from operations of 57,733.94 lakhs for the year ended 31.03.2025 as compared to 59,590.63 lakhs for the year ended 31.03.2024. The Companys profit after tax (PAT) for the financial year 2024 - 2025 is 6,581.78 lakhs as against 6,378.41 lakhs in 2023-2024.

Key Ratios :

Description	U/M	2024-25	2023-24	remarks
Debtors Turnover	Days	32.70	30.67	Due to increase in Export sales.
Inventory Turnover	Days	22.89	19.61	Due to vendor managed inventory system.
Interest coverage Ratio	Times	75.52	80.91	Due to lower EBIT.
Debt Equity Ratio		0.24:1	0.29:1	Due to improved equity and relatively low debt.
Operating Profit Margin	%	15.89	17.29	Due to decrease in Sales volume.
Net Profit Margin %	%	11.40	10.70	Due to lower tax due to change over to concessional tax regime.
Current Ratio	Times	2.34	3.14	Due to redemption of investments, for purchase of land.
Return on Net worth	%	21.50	25.87	Due to no significant increase in the profits.

Also, Please Refer Note 40(i) of the financial statements.

	On Behalf of the Board
	for Kothari Petrochemicals Limited
	Nina B. Kothari
Place : Chennai	Chairperson
Date : May 28, 2025	DIN: 00020119