Lords Chloro Alkali Ltd Management Discussions

CAUTIONARY STATEMENT

The statement made in this report describing the Company s expectations and estimations may be a forward looking statement within the meaning of applicable securities laws and regulations. Actual results may differ from those expressed or implied in this report due to the influence of external and internal factors which are beyond the control of the Company.

1. ALKALI INDUSTRY OVERVIEW

The chlor-alkali sector constitutes a foundational segment of the global chemical industry, producing core components such as caustic soda, chlorine, and soda ash that underpin a vast array of downstream processes. From pulp and paper bleaching to water treatment disinfection, these high-value chemicals enable critical industrial operations while driving significant economic activity.

Asia-Pacific was the largest region in the chlor-alkali market in 2024. North America was the second-

largest region in the chlor-alkali market share.

The global caustic soda market is projected to reach approximately USD 71.0 billion by 2033, growing at a CAGR of around 4.7% from 2025 to 2033. India is witnessing a significant rise in the demand for chlorine and caustic soda, driven primarily by the expansion of PVC and alumina production. PVC is extensively utilized in construction, agriculture, and infrastructure, especially for pipes, cables, and fittings. With government initiatives such as

" Housing for All " and infrastructure modernization, domestic PVC manufacturing is growing, consequently increasing chlorine consumption an essential raw material in PVC production. Similarly, alumina refining, vital for the aluminium industry, consumes large quantities of caustic soda. India s alumina production is expanding to meet rising domestic and export demand for aluminium, particularly in sectors like transportation, packaging, and renewable energy. As a result, caustic soda consumption has surged across major alumina-producing states, such as Odisha and Andhra Pradesh. Furthermore, the growing focus on self-reliance and import substitution in both PVC and aluminium sectors is likely to sustain this trend.

Rapid urbanization, growing population and disposable income in developed and developing economies are considered as the key factors to generate numerous opportunity for the global chlor-alkali market. Consumption of caustic soda for individual packaging solution is expected to boost the global Chlor-alkali market in the upcoming forecast.

Present annual capacity of caustic soda in India is 5.7 million Tonnes, occupying 3rd position in the world after China and US. There have been rapid expansions in the Indian chlor-alkali industry over the last decade and the growth is anticipated @ 9.9% CAGR during 2023-2028, whereas demand CAGR during the same period is expected to be 4.8%. This capacity addition exceeding demand growth has resulted in increased exports of caustic soda, with a trade surplus in the last three years.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

The alkali industry, primarily the chlor-alkali sector, is a major player in the chemical industry, producing essential chemicals like caustic soda, chlorine, and hydrogen. These chemicals serve as crucial components in various other industries, including textiles, paper, PVC, water treatment, and more. The industrys structure is characterized by a relatively large number of plants, with a significant portion of capacity concentrated in Western India. Growth in the alkali industry is closely linked to the overall economic growth and industrial development of a region.

Structure of the Alkali Industry

Chlor-Alkali Sector:

This is the core of the alkali industry, producing chlorine, caustic soda, hydrogen, and hydrochloric

acid.

Key Products:

Caustic soda is a major product, finding applications in diverse sectors like pulp & paper, alumina,

textiles, and more.

Geographic Concentration:

A significant portion of Indias chlor-alkali capacity is located in Western India, particularly in

Gujarat

Development and Growth:

Dependence on Industrial Growth:

The demand for alkali chemicals is directly tied to the growth of downstream industries like

textiles, paper, and construction.

Impact of Economic Cycles:

The industry experiences cyclical downturns and upturns, often influenced by global and regional

economic conditions.

Technological Advancements:

Membrane cell technology is gaining prominence due to its energy efficiency and reduced

environmental impact compared to older technologies.

Government Policies:

Government initiatives like the PAT scheme (Perform, Achieve, Trade) encourage energy efficiency

in energy-intensive sectors like chlor-alkali.

Market Drivers:

Factors like infrastructure development, urbanization, and increasing industrial production fuel

the demand for alkali chemicals.

3. OPPORTUNITIES AND THREATS

The Indian alkali industry, primarily focused on caustic soda and soda ash, presents a mix of opportunities and challenges. Following are some of the Opportunities and Threats in Alkali Industries.

Opportunities:

Growing Demand:

The global chlor-alkali market is experiencing steady growth, driven by increasing demand for its

key products, caustic soda and soda ash, in various industries.

Alumina Industry Growth:

The alumina industry, a major consumer of caustic soda, is predicted to grow significantly, further

boosting demand for chlor-alkali products, according to a market report.

Expanding Applications:

Besides alumina, chlor-alkali products are essential inputs for a wide range of industries, including

chemicals, paper, textiles, and water treatment, offering further avenues for growth.

Focus on Sustainability:

The shift towards membrane cell electrolysis, a more environmentally friendly technology, is

creating opportunities for innovation and investment in sustainable production processes.

Potential for Carbon Capture:

Research into carbonating alkaline residues, like red mud from alumina production, could lead to

CO2 capture and storage, addressing environmental concerns and creating a new revenue stream.

Threats:

High Energy Consumption:

The chlor-alkali process is energy-intensive, making it vulnerable to rising energy costs and

impacting profitability, particularly in regions with high electricity prices.

Environmental Regulations:

Stringent environmental regulations, especially those phasing out mercury-based processes, are

pushing the industry towards more sustainable but also more costly technologies

Volatile Raw Material Prices:

Fluctuations in the prices of sodium chloride and other raw materials, along with supply chain

disruptions, can significantly impact production costs and profit margins.

Competition from Imports:

The chlor-alkali industry faces competition from cheaper imports, requiring it to focus on cost-

efficiency and technological advancements to remain competitive.

Environmental Concerns:

The industrys environmental footprint, including mercury emissions and high energy consumption, continues to be a major concern that needs to be addressed through sustainable practices

Waste Management:

Disposal and management of by-products like red mud, which can be environmentally hazardous,

pose a challenge for the industry.

Corrosion and Moisture:

The produced gases, chlorine and hydrogen, can cause corrosion issues during storage and

transportation if not properly managed.

4. SEGMENT WISE OR PRODUCT-WISE PERFORMANCE

The Company is operating in only one segment i.e. Chloro Alkali. The company was able to achieve a production of 65,275 tons of Caustic soda during the year. The turnover of the company was Rs. 27022.53 lakh for the year against Rs. 22,111.36 lakh for the previous year. The profitability of the Company has taken a significant jump to Rs.618.06 Lakh from Rs. (479.51) Lakh.

5. OUTLOOK

As we look ahead, the Company is well-positioned to benefit from its strategic capacity expansions and sustainability initiatives. In FY25, we successfully completed the addition of 90 TPD caustic soda capacity, taking our total installed capacity to 300 TPD. Additionally, we commissioned a 16MW solar power plant, marking a significant step in our journey towards cleaner and more cost-efficient operations. These initiatives are expected to improve energy efficiency and operating profitability over the long term. The global caustic soda industry is projected to experience a demand-supply imbalance in the latter half of this decade, with demand likely to outstrip supply due to tightening production regulations and rising energy costs. Current projections indicate that global capacity may fall short between 2026 and 2027, unless new investments materialize. This structural shift presents a compelling opportunity for the Company, particularly as we continue to explore further expansions and downstream product integration to diversify our portfolio and enhance margins. In line with our growth strategy, we are also focusing on increasing our capacity utilization of the 50TPD CPW capacity and are actively looking out for new customers by leveraging our market reach. As we enter FY26, our focus remains on maximizing asset utilization, expanding our renewable energy footprint, and delivering sustainable growth. With our strong foundation and forward-looking investments, we are confident in our ability to drive long-term value for all stakeholders.

6. RISKS AND CONCERNS

The Indian alkali industry, particularly the chlor-alkali sector, faces significant risks and concerns, including high energy consumption, environmental pollution (especially mercury contamination), and challenges related to infrastructure and competitiveness. The industry is also susceptible to market fluctuations and faces pressure from international competition.

Environmental Concerns:

Mercury Pollution:

The traditional mercury cell process used in chlor-alkali production results in significant mercury emissions, posing a severe threat to human health and the environment. While the industry is transitioning to membrane cell technology, which is cleaner, legacy mercury contamination remains a major issue.

High Energy Consumption:

Chlor-alkali production is energy-intensive, leading to high production costs and environmental

concerns related to greenhouse gas emissions.

Water Consumption:

Indian companies, particularly those using mercury cell technology, consume significantly more

water than global best practices, contributing to water scarcity issues.

Waste Generation:

The industry generates substantial wastewater and brine sludge, and very few companies

effectively recycle or reuse these wastes.

Economic and Market-Related Issues:

High Input Costs:

The industry faces challenges related to high input costs, including energy, salt, and other raw

materials.

Lack of Infrastructure:

Inadequate infrastructure, particularly in terms of power supply and transportation, can hinder

the industrys growth.

Weak Chlorine Demand:

Limited demand for chlorine, especially due to the lack of a robust PVC industry, can lead to

oversupply and price fluctuations.

International Competition:

The industry faces competition from cheaper imports, particularly from China and the Gulf region,

which can impact pricing and profitability.

Other Risks and Concerns:

Process Safety:

Like other chemical industries, the chlor-alkali sector is susceptible to accidents due to process

malfunctions, faulty electrical systems, or inadequate safety measures.

Disposal of Chlorine:

Chlorine is not easily stored or disposed of, posing logistical and environmental challenges for the

industry.

7. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has well-established and robust internal control systems in place that are commensurate with the nature of its businesses, size & scale and complexity of its operations. Roles and responsibilities are clearly defined and assigned. The Company has also put in place adequate internal financial controls with reference to the financial statements by adopting accounting policies which are in line with the Accounting Standards as prescribed. The Management periodically reviews the financial performance of the Company against the approved plans across various parameters and takes necessary action, wherever necessary.

8. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE The total revenue from operations was Rs. 27022.23 Lakhs during the year as compared to total

revenue from operations of Rs. 22,111.36 Lakhs previous year. Further, the Company has earned profit after tax and exceptional items of Rs. 618.06 lakhs in the current financial year as against loss of Rs. (479.51) lakhs in the previous financial year.

1. Key Financial Ratio Analysis

Particulars	FY 2024-25	FY 2023-24	% Variance	Detailed Explanation of Ratios
Current Ratio	1.21	2.61	-53.71%	Current ratio Sharp decline due to
				increased current liabilities from
				new project-related borrowings.
Debt-to-Equity	0.69	0.22	215.87%	Debt equity increased
Ratio				significantly due to long-term
				loans raised for solar, CPW, and
				CSL expansion.
Debt Service	1.49	0.50	197.49%	DSCR Improved due to much
Coverage Ratio				higher EBITDA and better cash
				generation.
Return on Equity	0.03	(0.03)	213.40%	Turnaround to Profit positive in
				current financial year 2024-25 vs
				Loss in previous financial year
				2023-24
Inventory	9.36	11.69	-19.97%	Inventory turnover ratio is down

Turnover Ratio					due to Slower inventory
					movement due to higher raw
					material and finished goods
					holding.
Receivables	8.64	11.66		-25.87%	Receivable turnover decreased
turnover					due to Increased sales on credit
					terms led to higher receivables.
Trade Payable	31.47	21.56		45.97%	Slight improvement due to timely
Turnover Ratio					vendor payments.
Net Capital	7.91	3.78		109.31%	Net Capital turnover increase due
Turnover Ratio					to Stronger sales generated from
					better working capital
					deployment.
Net Profit Margin	2.29%	-2.17%		205.40%	Net profit margin ratio increase
Ratio (%)					due to Turnaround to Profit
					positive in current financial year
					2024-25 vs Loss in previous
					financial year 2023-24
Return on Capital	0.05	(0.02)		294.85%	Return on Capital Employed Ratio
Employed					has increased due to profitability
					in current year.
Interest Coverage	2.43	(3.40)		1.71%	Interest coverage ratio has
Ratio					increased due to increase in profit
					as compare to previous year.
Operating Profit	2.29	0.68		2.37%	Operating profit margin has
Margin (%)					increased as compared to
					previous year due to increase in
					Turnover and increase in margin.
Return on Net	0.03	(2.92)		1.01%	Return on net worth has
Worth					increased as compared to
					previous year due to increase in
					Turnover and increase in
					margin
Return on	4.58%	-2.18%		309.64%	Return on Investment Ratio has
Investment (%)			increased due to profitability in
			current year.

9. HUMAN RESOURCES

Company continues to focus on training its employees on a continuous basis. The Company is having a very harmonious relationship with its work force and constantly work for their intellectual and financial betterment. As on 31 st March 2025 Company has a strong workforce of over 201 employees who supports drives the company.

10. DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements of the Company are prepared in accordance with Indian Accounting Standards (Ind AS) under historical cost convention on accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act 2013(the Act) and guidelines issued by the Securities & Exchange Board of India (SEBI). The Ind AS are prescribed under section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standard) Rules, 2015 and relevant amendment rules thereafter.