Kotyark Industries Ltd Management Discussions

Global Biodiesel Industry

The global biodiesel industry has witnessed significant growth over recent years and is poised for robust expansion in the coming decade. The market was valued at USD 42.43 billion in 2024 and is expected to reach USD 45.87 billion in 2025. By 2034, the biodiesel market is projected to grow to an impressive USD 92.45 billion, registering a compound annual growth rate (CAGR) of 8.10% from 2025 to 2034. This growth is being driven by increasing concerns over climate change, the rising demand for clean and renewable energy, and supportive government policies promoting the reduction of greenhouse gas emissions through alternative fuels.

Europe currently dominates the global biodiesel market, holding the largest share with a valuation of USD 20.36 billion in 2024. The region is projected to reach a market size of USD 44.84 billion by 2034, growing at a CAGR of 8.20%. Germany is a particularly strong player within Europe, being one of the worlds leading biodiesel producers and exporters. In the first half of 2024 alone, Germany exported approximately 1.7 million tonnes of biodiesel · indicating a 16% YOY increase. The widespread use of a variety of feedstocks across Europe, including palm oil, animal fats, rapeseed oil, soybean oil, and sunflower oil, coupled with environmentally progressive legislation, has made the region a global leader in biodiesel adoption and innovation.

Asia Pacific is emerging as a rapidly growing market, supported by increasing government initiatives aimed at promoting green energy and reducing carbon emissions. In India, for instance, state-owned oil companies have planned to procure around 200 million litres of biodiesel in 2025. The Indian government has also set aggressive targets for biodiesel blending in transport fuels · efforts that are seen as critical for ensuring the countrys long-term energy sustainability. Countries like Indonesia and Thailand are also key contributors to the biodiesel supply chain, especially through palm oil production, with the two countries accounting for more than 79% of global palm oil output. A significant portion of this production is directed toward biofuel, bolstering biodiesel use both domestically and abroad.

South and Central America, too, are contributing steadily to global biodiesel output, with a projected production volume of about 10,960.1 million litres in 2023. This growth is largely driven by regional blending mandates and rising domestic consumption. Meanwhile, in the United States, the market continues to expand in response to increased environmental awareness and the greater compatibility of biodiesel with modern diesel engines. The push toward biodegradable and renewable fuel options is fostering substantial market opportunities across North America.

In terms of feedstocks, vegetable oils remain the dominant resource for biodiesel production, accounting for ~96% of total global revenue in 2024. Soybean, canola, palm, and corn oils are among the preferred raw materials, chosen largely based on their regional availability and cost- effectiveness. Animal fats, including tallow and poultry fat, also contribute to biodiesel feedstock, though to a lesser extent. The competition between food and fuel applications, especially with palm oil, remains a challenge in some areas, highlighting concerns over sustainability and supply chain stability. Nevertheless, increased research and development activities are aimed at discovering alternative, non-food-based feedstocks to mitigate these concerns.

On the applications front, the automotive sector continues to be the largest consumer of biodiesel. It is increasingly used in both passenger and commercial vehicles as a cleaner-burning alternative to traditional diesel fuel. The use of biodiesel helps reduce the emission of volatile organic compounds (VOCs), making it an attractive option in regions with strict emission regulations. Additionally, the fuels non-toxic, biodegradable properties have led to growing interest from the marine industry, where environmental concerns are equally pressing. Sectors such as agriculture and power generation are also anticipated to increase their biodiesel usage, supported by advances in automation and global commitments to expanding renewable energy sources.

While the biodiesel sector presents substantial opportunities, certain challenges continue to affect market dynamics. Key among these are the fragmented nature of the global supply chain, production capacity limitations in some regions, and feedstock competition with the food industry. However, growing public and private investments in bioenergy, coupled with favourable policy environments and rising consumer awareness of sustainable alternatives, are expected to drive continued growth in the industry.

In conclusion, the biodiesel market stands at a critical juncture, poised for expansive growth thanks to strong environmental imperatives, global policy support, and technological advancements. While Europe currently leads in market adoption and export, rapidly developing regions in Asia and South America are quickly rising as influential contributors. Sustained investment, innovation in feedstock sources, and increased international collaboration will be key to unlocking the full potential of biodiesel as a mainstream source of renewable energy in the decades ahead.

Source: Precedence Research

Indian Biodiesel Industry

The Indian biodiesel industry has experienced notable growth and strategic evolution, reflecting both domestic energy priorities and broader global trends in alternative fuels. In 2024, the market size for biodiesel in India reached USD 461.6 million, revealing a tangible shift towards sustainable energy solutions in response to environmental pressures and rising demand for cleaner alternatives. The sector is expected to more than double in value by 2033, climbing to USD 936.1 million, with an anticipated compound annual growth rate (CAGR) of ~8% during 2025-2033. This growth trajectory is underpinned by strong governmental policy impetus, volatility in global crude oil prices, and a nationwide push to enhance energy security and reduce greenhouse gas emissions.

Biodiesel in India is primarily produced from vegetable oils, animal fats, and recycled cooking grease through transesterification, making it a renewable, biodegradable, and cleaner-burning alternative to petroleum-derived diesel.

It is safely compatible with conventional diesel engines, can be blended in any ratio with traditional fuels, and delivers operational benefits such as improved engine lubrication and reduced emissions of sulfur oxides and particulate matter. Among the various types, blends like B5 (5% biodiesel, 95% diesel) have achieved the largest market share, driven by the practical need for drop-in compatibility and gradual integration with existing infrastructure.

The use of biodiesel in India spans a wide array of sectors, but its demand is especially pronounced in transportation and power generation. The transportation industry benefits from biodiesels higher efficiency and lower environmental impact compared to conventional gasoline and diesel, making it a compelling choice for commercial and public fleets. Additionally, the adoption of biodiesel has gained traction in the construction and mining sectors, where high-quality biodiesel not only improves operational efficiency but also presents a measurable reduction in overall emissions. The growth in biodiesel applications is further evidenced by its increasing use as heating oil in domestic and commercial boilers as well as in power generation facilities where it substitutes conventional fossil fuels.

A host of government initiatives and regulatory frameworks have been pivotal in shaping the industrys recent performance. The Indian government has set ambitious targets, such as achieving a 5% biodiesel blend in diesel fuels by 2030, reflecting policy alignment with international sustainable development goals and national interests in energy independence. Multiple programs, including mandates and fiscal incentives for producers and end-users, support the proliferation of biodiesel and facilitate investment across the value chain. The government has also recognized the importance of robust feedstock supply chains, promoting the use of non-edible oils, waste cooking oil, and agricultural by-products in line with the twin objectives of sustainability and circular economy.

However, there are tangible challenges that could affect the attainment of these targets. Feedstock availability remains constrained despite policy efforts, and the collection system for materials such as used cooking oil is still fragmented and inefficient. In addition, underutilization of certified biodiesel plants due to unreliable input supply highlights infrastructure mismatches within the sector. Addressing these inefficiencies will be critical to moving closer to the governments blend mandates and the broader strategic vision for biofuel deployment.

On a global stage, India is viewed as a significant contributor to future biofuel market expansion. The International Energy Agency (IEA) projects that, over the coming five years, India has the potential to almost triple its biofuel consumption and production if it can streamline regulatory bottlenecks · particularly related to increasing ethanol blends and broadening feedstock sources for both ethanol and biodiesel. Additionally, the IEA underscores the importance of diversifying and modernizing Indias biofuel sector not just to meet domestic targets but also to serve as a model for emerging markets around the world.

Further underpinning the optimism for the Indian biodiesel market is the broad suite of benefits offered by biofuels, such as improved air quality, enhanced energy security, and life cycle greenhouse gas reductions relative to traditional fossil fuels. With a sizable population and a rapidly growing demand for energy, the country stands to benefit on several fronts: curtailing its import dependence, advancing rural development through feedstock cultivation, and supporting a cleaner, lower- carbon future.

As India continues to refine its policy frameworks, invest in supply chain infrastructure, and encourage innovation in feedstock and production technologies, the outlook for the biodiesel industry remains promising. The continued alignment of governmental strategy, industry capability, and consumer adoption will be vital for positioning biodiesel as an integral component of Indias energy transition.

Growth Enablers

The Indian government has introduced a comprehensive National Biofuel Policy aimed at accelerating the adoption of biofuels within the countrys energy and transportation sectors. This strategic framework outlines specific targets, financial support mechanisms, and policy-driven incentives to promote the use of sustainable fuel alternatives and reduce dependence on imported fossil fuels.

Key highlights of the policy include ambitious blending targets, such as achieving 20% ethanol blending in petrol and 5% biodiesel blending in diesel by 2030. To support these goals, the government has earmarked H5,000 crore over six years to fund the establishment of Second-Generation (2G) ethanol biorefineries, in addition to offering targeted tax incentives to encourage industry participation.

The policy also places significant emphasis on research and development, with a strong focus on the production of biofuel feedstock and the advancement of conversion technologies using designated biomass sources. As part of infrastructure development, the creation of a National Biomass Repository aims to map and assess biomass resources available across the country, facilitating better planning and resource utilisation.

Flagship schemes such as the Pradhan Mantri JI-VAN Yojana (2019) have been launched to build an enabling ecosystem for commercial-scale biofuel projects and support innovation in the 2G ethanol segment. Similarly, the GOBAR (Galvanising Organic Bio-Agro Resource) Initiative is promoting the scientific management and efficient conversion of cattle dung and agricultural waste into biogas and bio-CNG, turning rural waste into clean energy.

Economic factors, particularly the rising cost of crude oil imports, further reinforce Indias urgency to develop alternative fuel sources. Together, these policy measures and economic drivers reflect the governments strong commitment to building a resilient, self-reliant, and sustainable biofuel industry for the future.

Source: Imarc Group & IEA

Company Overview

Kotyark Industries Limited is at the forefront of transforming the biofuels industry by offering sustainable alternatives to conventional fossil fuels. Established in 2016, Kotyark holds the distinction of being Indias only publicly listed Company exclusively focused on the production of biodiesel and related by-products. The Company operates 2 strategically located manufacturing facilities in Sirohi, Rajasthan, and Anand, Gujarat, with a combined annual production capacity of approximately 4,80,000 KL of biodiesel and ~63,000 KL of glycerine.

Driven by a strong commitment to green energy and the responsible utilisation of feedstock resources, Kotyark continues to advance the development of biodiesel through environmentally friendly and innovative technologies. These efforts are aimed at reducing the carbon footprint of the nation and contributing meaningfully to the global goal of lowering greenhouse gas emissions.

In a major achievement, Kotyark recently became the first Indian biodiesel Company to receive Verra accreditation, a globally recognised certification for carbon reduction initiatives. This milestone validates the Companys deep-rooted dedication to sustainability and further strengthens its position as a trailblazer in Indias rapidly evolving biofuel sector.

FY25 Performance Overview

In FY25, the Company reported Revenue from Operations of H288.10 Crores, marking a growth over H270.99 Crores in FY24. Operating profit for the year stood at H42.49 Crores, a marginal decline of 4.5% compared to H44.48 Crores in the previous year. Consequently, the operating profit margin moderated to 14.7% from 16.4% in FY24. Profit After Tax (PAT) for the year was H14.41 Crores, reflecting a decline of 35% from H22.20 Crores in FY24. The PAT margin stood at 5.0%, compared to 8.2% in FY24.

FY25 Financial Ratios

Ratios	FY25	FY24	Variance (%)	Remarks
Current Ratio (in times)	2.89	3.39	(14.69)%	NA
Debt-Equity Ratio (in times)	0.41	0.43	(3.82)%	NA
Debt Service Coverage Ratio (in times)	2.37	1.52	55.65%	Refer Note (1) Below
Return on Equity Ratio	9.82%	20.14%	(51.23)%	Refer Note (2) Below
Inventory Turnover Ratio (in times)	2.13	3.49	(38.94)%	Refer Note (3) Below
Trade Receivables Turnover Ratio (in times)	12.59	11.28	11.59%	NA
Trade Payables Turnover Ratio (in times)	18.42	Nil	100.00%	Refer Note (4) Below
Net Capital Turnover Ratio (in times)	2.97	4.13	(28.20%)	Refer Note (5) Below
Net Profit Ratio	4.97%	8.21%	(39.50%)	Refer Note (6) Below
Return on Capital Employed	12.34%	22.00%	(43.88)%	Refer Note (7) Below
Return on Investment	1.34%	3.01%	(55.29)%	Refer Note (8) Below

Remarks

1. The Debt Service Coverage Ratio (DSCR) has changed due to a decrease in the repayment obligations for the year

2. The Return on Equity has changed during the year due to a reduction in profit as compared to the previous year

3. The change in inventory turnover ratio during the year is due to an increase in inventory held as at the year-end

4. In the financial year 2023-24, there were no outstanding trade payables, whereas in the current year, trade payables were outstanding. This has resulted in a change in the ratio

5. There is increase in average working capital during the year and as a result there is a change in Net capital turnover ratio

6. The change in net profit ratio is primarily due to a change in depreciation. In the previous year, depreciation was charged on a proportionate basis, whereas in the current year, it has been charged for the full year

7. The Return on Capital Employed has decreased during the year due to a reduction in profit as compared to the previous year

8. There is decrease in interest income during the year and as a result there is decrease in Return on Investment ratio

Outlook

While FY25 presented several external and operational headwinds, Kotyark Industries remains confident about its trajectory heading into FY26. Challenges such as delays in the issuance of Purchase Orders (POs) and Indents despite sizable tender allocations led to elevated inventory levels and impacted short-term margins. However, with the Oil Marketing Companies (OMCs) now shifting to a more streamlined procurement process through direct Letters of Intent (LOIs), execution visibility has significantly improved. Encouragingly, Kotyark received LOIs worth R110.26 crores for the April-July 2025 period, laying a good start for FY26 performance. Additionally, more tenders are expected to open shortly, which should support further business momentum in the upcoming year. With continued government support for biofuels and an improving procurement landscape, Kotyark is well-positioned to strengthen its industry leadership. The Company remains focused on long-term growth, operational excellence, and creating sustainable value for stakeholders.

Internal Control and Adequacy

Kotyark Industries Limited has established a comprehensive internal control system that is well-aligned with the size, scale, and nature of its operations. This system is designed to provide reasonable assurance regarding the protection and effective management of the Companys assets, safeguarding them against unauthorised use, loss, or disposal. It also ensures that al business transactions are duly authorised, accurately recorded, and properly reported, maintaining strict adherence to the Companys policies, procedures, and regulatory requirements.

The internal control framework undergoes regular evaluation by both the Audit Committee and the management team to assess its adequacy and effectiveness. Based on these reviews, appropriate enhancements are implemented to strengthen the control environment and address emerging risks. This well-defined system of checks and balances plays a pivotal role in upholding the integrity of Kotyarks financial and operational processes, while supporting its broader business objectives and risk mitigation strategies.

Human Resource Development and Industrial Relations

Kotyark Industries recognises its human resources as a vital asset and a key driver of the Companys sustained growth and success. With this belief, the Company continues to invest in employee development, focusing on enhancing skills, expanding knowledge, and nurturing professional growth. Kotyark is also committed to building a strong employer brand, aimed at attracting, developing, and retaining top talent within the biofuel industry.

During the reporting period, the Company maintained a positive, collaborative, and harmonious work environment, fostering strong relationships across all levels of the organisation. As of March 31, 2025, Kotyarks permanent workforce stood at 148 employees. The Company remains committed to providing its team with a supportive and empowering workplace culture.

This continued emphasis on human capital development is closely aligned with Kotyarks long-term strategic objectives and plays a crucial role in strengthening its position within Indias dynamic and competitive biofuel sector.

Cautionary Statement

The Management Discussion and Analysis, as well as other sections of the report, may contain forward-looking statements detailing the Companys intentions, projections, estimations, and expectations. However, its important to note that actual outcomes may significantly diverge from these statements due to a range of risks and uncertainties. There are noteworthy variables that could influence the Companys operations, including economic and political conditions within India and other relevant nations where the Company may operate. Moreover, the Companys operations could be impacted by fluctuations in interest rates, alterations in government policies and regulations, modifications in tax laws, statutes, and other relevant factors. Its essential to emphasise that the Company has no intention of regularly updating these statements.