Kronox Lab Sciences Ltd Management Discussions

ECONOMIC OUTLOOK

Global Economy

Global growth, which stood at 3.2% in CY23, is anticipated to maintain this rate throughout CY24 and CY25. The CY24 forecast has been adjusted upwards by 0.1 percentage point compared to the January 2024 World Economic Outlook (WEO) Update, and by 0.3 percentage point compared to the October 2023 WEO. Despite this, the expansion remains historically low, attributed to factors including sustained high borrowing costs, reduced fiscal support, lingering effects of the COVID-19 pandemic and Russias Ukraine invasion, sluggish productivity growth, and heightened geo-economics fragmentation.

Advanced economies are expected to experience a gradual increase in growth, climbing from 1.6 % in CY23 to 1.7% in CY24 and further to 1.8% in CY25. The projection for CY24 has been adjusted upwards by 0.2 percentage points compared to the January CY24 WEO Update, while the forecast for CY25 remains unchanged. This adjustment primarily reflects a revision in US growth, compensating for a slight downward revision in the euro area for CY25.

The United States is expected to see growth rise to 2.7% in CY24, followed by a slight slowdown to 1.9% in CY25. This deceleration is attributed to gradual fiscal tightening and labor market softening, which dampen aggregate demand. The CY24 projection has been revised upward by 0.6 percentage points since the January CY24 WEO Update. This revision primarily reflects carryover effects from stronger-than-expected growth in the fourth quarter of CY23, with some of this momentum expected to continue into CY24.

The Euro Areas growth is anticipated to rebound from its sluggish rate of 0.4% in CY23, mainly influenced by significant exposure to the conflict in Ukraine. Projections indicate an increase to 0.8% in CY24 and further to 1.5% in CY25. This recovery is driven by stronger household consumption, as the impact of elevated energy prices diminishes and declining inflation bolsters real income growth. Despite a downward revision of 0.3 percentage points for Germany in both CY24 and CY25 due to persistent weak consumer sentiment, this adjustment is largely balanced by upgrades for several smaller economies, including Belgium and Portugal.

Emerging Market and Developing Economies Group

Emerging market and developing economies are forecasted to maintain stable growth at 4.2% in both CY24 and CY25. While theres a slowdown expected in emerging and developing Asia, this is counterbalanced by increasing growth in economies across the Middle East, Central Asia, and sub-Saharan Africa. Low-income developing countries are anticipated to experience a gradual growth uptick, starting at 4.0% in CY23 and climbing to 4.7% in CY24 and 5.2% in CY25, as certain constraints on near-term growth begin to ease.

The economic forecast for emerging and developing Asia reveals a modest deceleration in growth, with projections indicating a decline from 5.6% in CY23 to 5.2% in CY24 and 4.9% in CY25. Chinas trajectory reflects a slowdown, transitioning from 5.2% in CY23 to 4.6% in CY24 and 4.1% in CY25 due to fading post-pandemic stimuli and ongoing property sector challenges. In contrast, Indias growth remains robust, with anticipated rates of 6.8% in CY24 and 6.5% in CY25, bolstered by resilient domestic demand and a burgeoning working-age populace.

The Indonesian economy is expected to register growth of 5.0% in CY24 and 5.1% in CY25 with a strong domestic demand, a healthy export performance, policy measures, and normalization in commodity prices. In CY22, Saudi Arabias growth slowed at -0.8% in CY23 attributed to lower oil production. CY24 is predicted to see a revamp in the growth rates to 2.6% on account of Vision 2030 reforms that helped advance the countrys economic diversification agenda, including through reduced reliance on oil. Going forward, GDP is expected to grow at 6.0% and 4.0% in CY25 and CY26, respectively. On the other hand, Brazils growth is projected to ease to 2.2% in CY24, driven by fiscal consolidation, the lingering impact of tight monetary policies, and reduced contributions from the agricultural sector.

Despite the turmoil in the last 2-3 years, India bears good tidings to become a USD 5 trillion economy by CY27. According to the IMF dataset on Gross Domestic Product (GDP) at current prices, the nominal GDP has been estimated to be at USD 3.6 trillion for CY23 and is projected to reach USD 5.3 trillion by CY27 and USD 6.4 trillion by CY29. Indias expected GDP growth rate for coming years is almost double compared to the world economy.

Besides, India stands out as the fastest-growing economy among the major economies. The country is expected to grow at more than 6.5% in the period of CY24-CY29, outshining Chinas growth rate. By CY27, the Indian economy is estimated to emerge as the third-largest economy globally, hopping over Japan and Germany. Currently, it is the third-largest economy globally in terms of Purchasing Power Parity (PPP) with a ~7.6% share in the global economy, with China [~18.7%] on the top followed by the United States [~15.6%]. Purchasing Power Parity is an economic performance indicator denoting the relative price of an average basket of goods and services that a household needs for livelihood in each country.

Despite Covid-19s impact, high inflationary environment and interest rates globally, and the geopolitical tensions in Europe, India has been a major contributor to world economic growth. India is increasingly becoming an open economy as well through growing foreign trade. Despite the global inflation and uncertainties, Indian economy continues to show resilience. This resilience is mainly supported stable financial sector backed by well-capitalized banks and export of services in trade balance. With this, the growth of Indian economy is expected to fare better than other economies majorly on account of strong investment activity bolstered by the governments capex push and buoyant private consumption, particularly among higher income earners.

Indian Economic

Indias real GDP grew by 7.0% in FY23 and stood at ~Rs. 161 trillion despite the pandemic in previous years and geopolitical Russia-Ukraine spillovers. In Q1FY24, the economic growth accelerated to 8.2%. The manufacturing sector maintained an encouraging pace of growth, given the favorable demand conditions and lower input prices. The growth was supplemented by a supportive base alongside robust services and construction activities. This momentum remained in the range in the Q2FY24 with GDP growth at 8.1%, mainly supported by acceleration in investments. However, private consumption growth was muted due to weak rural demand and some moderation in urban demand amid elevated inflationary pressures in Q2FY24.

Indias GDP at constant prices surged to Rs. 43.72 trillion in Q3FY24 from Rs. 40.35 trillion in Q3FY23, marking an 8.4% growth rate. This upswing was fueled by robust performances in construction, mining & quarrying, and manufacturing sectors and investment drove the GDP growth, while both private and government consumption remained subdued. In 9MFY24, GDP surged by 8.2% to Rs. 126 trillion compared to 7.3% in the previous year largely due to increase in investments and growth in domestic demand (investment growth increased 10.6% y-o-y while private consumption was 3.5% higher).

Real GDP in the year FY24 is estimated to grow at 7.6% at Rs. 172.90 trillion as per second advance estimate of the Ministry of Statistics and Programme Implementation. It is expected that domestic demand, especially investment, to be the main driver of growth in India, amid sustained levels of business and consumer confidence.

GDP Growth Outlook

• Driven by resilience in urban demand and the front loading of the governments capital expenditure, the H1FY24 witnessed a strong growth. Thereafter Q3 was propelled by strong performances in sectors like construction, mining & quarrying, and manufacturing.

• The recent announcements of various relief measures such as LPG price reduction and extension of Pradhan Mantri Garib Kalyan Anna Yojna (PMGKAY) are expected to provide some cushion and so far, investment demand has remained robust. However, there could be some moderation in H2FY24 as both the government and private sector may restrain their capital spending ahead of the general elections. Despite some expected moderation in the H2FY24, Indias overall GDP growth for FY24 is expected to remain on a firm footing. In terms of fiscal deficit for the year, the Finance Ministry has estimated it to be at 5.1% of GDP.

• Strong credit growth, resilient financial markets, and the governments continual push for capital spending and infrastructure are likely to create a compatible environment for investments. In the Interim Budget 2024-25, significant emphasis is placed on infrastructure development with an increased capital expenditure outlay of Rs. 11,11,111 crores, amounting to 3.4% of the GDP.

• External demand is likely to remain subdued with a slowdown in global activities, thereby indicating adverse implications for exports. Additionally, heightened inflationary pressures and resultant policy tightening may pose a risk to the growth potential.

COMPANY OVERVIEW

Kronox Lab Sciences Ltd is a renowned manufacturer of high purity speciality fine chemicals, catering to a diverse range of industries including pharmaceuticals, scientific and laboratory research, nutraceuticals, biotech, agrochemicals, personal care, metallurgy, and animal health. Originally incorporated as Kronox Lab Sciences Pvt. Ltd on November 18, 2008, in Gujarat, the company transitioned to a public limited entity on May 25, 2019, and adopted its current name..

Kronox Lab Sciences Ltd boasts a comprehensive product portfolio with over 185 chemical products spanning various chemical families such as phosphate, sulphate, acetate, chloride, citrate, nitrates, nitrites, carbonate, EDTA derivatives, succinate, and gluconate. The products are available in different grades and particle sizes, ranging from 10 mesh to 100 mesh. Adhering to stringent industry standards like IP, BP, EP, JP, USP, FCC, LR, AR, GR, and ACS, Kronox ensures high-quality production. The company also accommodates custom manufacturing specifications to meet specific customer requirements.

KRONOX Lab Sciences is a distinguished manufacturer of high-purity specialty fine chemicals, with a state-of-the-art manufacturing facility strategically located near Vadodara,

Gujarat, INDIA. Our company stands at the forefront of the chemical manufacturing industry, committed to delivering the highest standards of quality and purity in our extensive range of chemical products. With a highly experienced production team and a fully equipped laboratory, KRONOX Lab Sciences ensures that every product we deliver meets the stringent quality requirements of both national and international standards.

Our operations are strategically located across three advanced manufacturing units situated within a 1 km radius. This proximity allows for streamlined operations and efficient logistical management, ensuring high-quality production and timely delivery of our products. Our in-house production capabilities are robust and state-of-the-art, enabling us to maintain a high level of control over the quality of our chemicals. We have a capacity to manufacture approximately 7200 MT per annum, meeting the demands of various industries and applications worldwide.

Certifications and Standards

KRONOX Lab Sciences operates a facility that is certified under several rigorous quality management systems, including FSSC 22000, GMP (Good Manufacturing Practices), GLP (Good Laboratory Practices), and ISO 9001:2015, ISO 14001:2015, ISO 45001:2018. Additionally, where applicable, our products are certified KOSHER and HALAL, ensuring compliance with diverse cultural and religious standards. These certifications underscore our commitment to maintaining the highest levels of quality, safety, and efficacy in our products.

Commitment to Quality

At KRONOX Lab Sciences, quality is not just a goal but a fundamental part of our operations. We adhere to strict Good Manufacturing, Laboratory, and Documentation Practices that guarantee consistently high-quality results. Our state-of-the-art analytical facilities are equipped with the latest technology to monitor and maintain the strict quality of our products, processes, and services. This meticulous attention to detail ensures that we consistently meet and often exceed the quality requirements set by national and international regulatory bodies.

MAJOR MILESTONES ACHIEVED

2008

Incorporation of our Company.

2009

Commencement of manufacturing of High Purity Speciality Fine Chemicals at Unit I.

2010

Commenced export of products.

2011

Our Company expanded our Unit I for manufacturing of High Purity Speciality Fine Chemicals used in pharmaceutical and nutraceutical industries.

2011

Our Company started manufacturing High Purity Speciality Fine Chemicals to cater to the solar industries.

2014

Acquisition of land along with factory shed for Unit II.

2014

Receipt of FSSC 22000 certification from ISOQAR, UK for our Unit I.

2015

Commencement of manufacturing operations at Unit II.

2015

Obtained FSSAI certification for manufacturing of food grade fine chemicals and ingredients.

2017

Receipt of ISO 14001: 2015 & OHSAS 18001:2007 certification in respect of Unit I.

2019

Started manufacturing of products at our Unit III.

2022

Acquisition of land along with factory shed for Unit I and Unit III.

2023

Acquisition of land for proposed Unit IV at Dahej

2024

Company got listed on BSE Ltd. and National Stock Exchange Ltd.

MANUFACTURING INFRASTRUCTURE

Our manufacturing infrastructure is a key growth driver for our business. Currently we have three units strategically located Manufacturing Facilities which are located in Padra, Vadodara, Gujarat, in close proximity to several ports including Kandla, Mundra, Hazira and Nhava Sheva which ensures that we have ready access to port facilities and are able expediently import our raw materials and export