Mahickra Chemicals Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy continued to navigate a period of moderated growth during FY 2025-26, shaped by persistent inflationary pressures, elevated interest rate regimes in major economies, and continuing geopolitical uncertainty. Within this environment, the specialty chemicals and reactive dyes industry has had to contend with elevated and volatile raw material costs and continued disruption to established supply chains — factors that have tested the operating discipline of manufacturers worldwide.

Notwithstanding these headwinds, the industrys medium-term growth outlook remains constructive, supported in particular by Indias continued emergence as one of the fastest-growing major economies globally. For the reactive dyes segment specifically, this has translated into a genuine opportunity: as global demand patterns shift and buyers seek more resilient, diversified sourcing bases, Indias cost competitiveness and manufacturing scale have positioned domestic producers favourably.

Structural demand tailwinds are also emerging from end-markets. The expansion of Indias textile and broader manufacturing base is driving incremental domestic demand for reactive dyes, while government programmes such as Make in India and Production- Linked Incentive (PLI) schemes are supporting capacity expansion and encouraging investment in more sustainable manufacturing processes. In parallel, global customers are placing increasing emphasis on environmentally responsible dye chemistry, a trend that aligns closely with the industrys own innovation priorities.

On the export front, Indian reactive dye manufacturers have continued to strengthen their standing in international markets, aided by consistent product quality and a well-established manufacturing base. Continued investment in technology and digitisation across the sector is improving quality control, reducing wastage, and streamlining supply chains — collectively strengthening the competitive position of Indian manufacturers in the global marketplace.

In summary, while near-term macroeconomic conditions remain uncertain, the structural positioning of the Indian chemical and reactive dye industry — underpinned by policy support, a growing domestic market, and rising global demand for sustainable chemistry — provides a constructive foundation for continued growth.

INDIAN ECONOMIC OVERVIEW

The Indian economy continued to demonstrate resilience during the year, supported by robust private consumption and sustained public investment. Government policy continues to prioritise supply chain efficiency and raw material security, creating an environment conducive to both domestic growth and continued foreign investment.

Within this backdrop, the Indian chemicals industry has remained a significant contributor to the countrys manufacturing growth story. The sector is projected to reach approximately USD 304 billion in size by 2025 and to contribute approximately USD 383 billion to Indias GDP by 2030, driven by rising demand across specialty chemical applications including food processing, personal care, and home care. Indian manufacturers, including your Company, continue to expand production capacity and deepen their presence in both domestic and export markets.

Government initiatives, including the Make in India campaign and Production-Linked Incentive schemes, continue to accelerate this growth trajectory. Planned investment in the sector exceeding Rs. 8 lakh crore (approximately USD 107 billion) by 2025, with particular emphasis on segments such as agrochemicals, underscores the scale of ambition to establish India as a world-class chemical manufacturing hub. Regulatory simplification, together with permission for 100% foreign direct investment in the sector (barring hazardous chemicals), continues to make India an increasingly attractive destination for global chemical investment.

Indias expanding footprint in both chemical exports and imports reflects its growing weight in global chemical trade. The stated policy objective of raising the chemical industrys contribution to manufacturing GDP to 25% by 2025 further underscores the strategic importance accorded to this sector by policymakers.

Indias leadership of the G20 under the theme "One Earth, One Family, One Future" reaffirmed the countrys broader commitment to sustainability, climate action, and international collaboration — priorities that align closely with the direction in which the global chemical industry is evolving.

Taken together, the combination of a resilient domestic economy and a rapidly scaling chemicals sector continues to create a supportive environment for innovation, investment, and export- led growth — one in which your Company is well positioned to participate.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The reactive dye industry continued to operate in a challenging environment through FY 2025-26, shaped by cost pressures and volatility linked in part to uncertain rainfall patterns affecting production schedules and global supply chain efficiency. While the pricing of certain raw materials has shown signs of stabilisation relative to the prior year, elevated input costs and continued volatility in select key chemical inputs remain an industry-wide concern.

Ongoing global trade uncertainty — including the continuing conflict in Ukraine, instability in the Middle East, and elevated freight costs — has weighed on competitiveness in export markets. While domestic demand has shown gradual signs of recovery, subdued export order flows, extended credit cycles, and working capital constraints have continued to place pressure on industry margins. In this environment, companies across the sector are placing greater emphasis on operational efficiency, disciplined inventory management, and strategic market diversification to sustain growth and protect resilience.

OUTLOOK

Your Company continues to pursue a disciplined and deliberate growth strategy, structured around the following priorities:

Market Expansion. Your Company is actively expanding its dealer network across India and internationally, with particular focus on regions characterised by economic and political stability. This targeted approach is intended to build durable, longterm partnerships that support sustained growth, rather than opportunistic expansion into higher-risk markets.

Portfolio Value Migration. Consistent with prevailing industry trends, your Company is deliberately shifting its product mix away from lower-margin commodity offerings toward a broader portfolio of higher-margin, value-added products. While this transition may moderate sales volumes in the near term, it is intended to enhance profitability on a sustained basis and to build a business model more resilient to market volatility.

Innovation and Sustainability. Research and development remains central to your Companys strategy. The R&D team continues to focus on developing new, sustainable products that anticipate evolving customer requirements and regulatory standards, positioning your Company to capture rising global demand for environmentally responsible chemistry while reinforcing its record of regulatory compliance.

Strengthened Export Capability. To support its export growth agenda, your Company has strengthened its sales organisation with the appointment of an International Marketing Manager, tasked with driving growth in untapped international markets, deepening customer relationships, and navigating the operational complexity of diverse regulatory and commercial environments.

Digital Enablement. Your Company continues to invest in digital tools and data analytics to sharpen its sales strategy, improve responsiveness to customer needs, and strengthen overall commercial efficiency.

Collectively, these initiatives are designed to support sustainable, long-term value creation — through a broader global footprint, a more diversified and higher-margin product portfolio, continued investment in innovation and sustainability, and a strengthened, professionally managed sales organisation.

COMPANY OVERVIEW

Mahickra Chemicals Limited, headquartered in Ahmedabad, Gujarat, is an established manufacturer of pigments, dyes, intermediates, and specialty chemicals, serving customers across India and internationally. The Companys operations support a diverse set of end-user industries, including textiles, coatings, plastics, and printing inks.

Guided by its stated vision — "Diversify with Insight. Grow with Impact." — your Company has pursued a deliberate strategic evolution away from lower-margin commodity products toward higher-value, more sustainable product lines that serve both customer requirements and broader environmental objectives. This transition is anchored by the Companys R&D function, which continues to develop solutions aligned with international quality standards and evolving customer expectations.

Mahickras commercial presence extends across Asia, Europe, Africa, and the Americas. During the year, the Company participated in leading global industry platforms, including the Dye Chem World Exhibition (India), Dye Chem Bangladesh, Morocco Fashiontex, and Interdye & Textile Printing Eurasia (Istanbul), reinforcing customer relationships and brand visibility on the international stage. The Companys continued focus on quality and innovation has been recognised through several industry awards during the year.

Looking ahead, your Company remains focused on expanding its product offerings, improving operational efficiency, and advancing its sustainability agenda, underpinned by responsible governance and a continued commitment to its employees, partners, and the communities in which it operates.

FINANCIAL PERFORMANCE

During the year under review, the Company delivered a strong improvement in financial performance on both a standalone and consolidated basis, reflecting the combined effect of revenue growth, operating leverage, and continued cost and working-capital discipline.

Standalone Performance: Revenue from Operations increased to Rs. 10,632.81 lakhs in FY 2025-26 from Rs. 8,997.77 lakhs in FY 2024-25, representing growth of approximately 18.17%. Profit before Tax increased to Rs. 688.77 lakhs from Rs. 352.77 lakhs, while Profit after Tax increased by approximately 103.50% to Rs. 515.51 lakhs from Rs. 253.34 lakhs — reflecting improved operating performance, disciplined cost control, and effective working capital management.

Consolidated Performance: On a consolidated basis, Revenue from Operations similarly stood at Rs. 10,632.81 lakhs, compared to Rs. 8,997.77 lakhs in the previous year, representing growth of approximately 18.17%. Consolidated Profit before Tax was Rs. 688.77 lakhs, compared to Rs. 352.77 lakhs in the prior year, and Consolidated Profit after Tax was Rs. 515.44 lakhs, compared to Rs. 253.25 lakhs in FY 2024-25. The marginal difference between standalone and consolidated Profit after Tax is attributable to the Companys share of loss from its associate.

SUMMARY FINANCIAL STATEMENTS:

Particulars	Consolidated	Standalone
	2025-26	2024-25	2025-26	2024-25
Revenue from Operations	10,632.81	8,997.77	10,632.81	8,997.77
Other Income	116.71	65.66	116.71	65.66
Total Revenue	10,749.52	9,063.43	10,749.52	9,063.43
Earnings Before Interest, Depreciation and Amortization Expense and Taxes	880.56	511.90	880.56	511.90
Less:- A) Finance Cost	160.01	129.23	160.01	129.23
Less:- B) Depreciation and Amortization Expense	31.78	29.90	31.78	29.90
Profit / (Loss) before Extra-Ordinary Items and tax	688.77	352.77	688.77	352.77
Add/(Less): Extra-Ordinary Item	-	-	-	-
Profit/(Loss) after Extra Ordinary Items and before tax	688.77	352.77	688.77	352.77
Total Tax Expense	173.26	99.43	173.26	99.43
Share of Associates Profit	(0.07)	(0.09)	-	-
Profit / (Loss) After Tax	515.44	253.25	515.51	253.34
Earnings Per Share Basic / Diluted	6.28	3.12	6.28	3.12

KEY FINANCIAL RATIOS:

Ratios	FY 2025-26	FY 2024-25
Current Ratio	3.06	1.92
Debt-Equity Ratio	0.24	0.43
Debt-Service Coverage Ratio	6.34	0.51
Return on Equity	10.06	7.34
Inventory Turnover Ratio	3.12	3.22
Debtors Turnover Ratio	3.59	3.60
Creditors Turnover Ratio	6.85	6.29
Net Capital Turnover Ratio	1.75	3.00
Net Profit Ratio	4.85	2.87
Return on Capital Employed	10.26	9.44
Return on Investment	Nil	Nil

Explanation of significant variances (change of 25% or more):

• Current Ratio improved to 3.06 from 1.92, primarily on account of strengthened current assets following the fresh growth capital raised during the year and improved working capital management.

• Debt-Equity Ratio declined to 0.24 from 0.43, reflecting a reduction in reliance on borrowed funds relative to net worth, supported by capital raised during the year and retained earnings.

• Debt-Service Coverage Ratio improved sharply to 6.34 from 0.51, driven by significantly higher operating profitability relative to debt service obligations during the year.

• Return on Equity improved to 10.06% from 7.34%, reflecting the growth in net profit outpacing the increase in shareholders equity.

• Net Capital Turnover Ratio declined to 1.75 from 3.00, primarily due to the increase in net working capital following the capital raise, relative to the proportionate increase in revenue.

• Net Profit Ratio improved to 4.85% from 2.87%, on account of operating leverage, cost discipline, and margin improvement during the year.

THE SWOT ANALYSIS:

Strengths

• Established market position in reactive dyes, supported by a diversified product portfolio and consistent product quality.

• Established global commercial presence, supported by a well- developed distribution network.

• Sustained investment in research and development, with particular focus on sustainable chemical solutions aligned with evolving customer requirements.

• Cost competitiveness supported by Indias manufacturing base and supportive government policy.

• Experienced management team with a clearly defined strategic direction.

• Strategic alignment with rising global demand for environmentally responsible and sustainable chemical products.

• Robust supply chain management and long-standing customer relationships that support operational resilience.

Weaknesses

• Exposure to rapid technological change and shifting customer preferences inherent to the reactive dyes and dyestuff industry, which carries a risk of product or process obsolescence.

• Continued reliance on certain legacy products and manufacturing processes, which the Company is addressing through targeted modernisation and innovation.

• Dependence on imported raw materials, which exposes the Company to supply chain disruption and price volatility; the Company continues to pursue supplier diversification and greater self-reliance to mitigate this exposure.

Opportunities

• Sustained demand growth for dyes and dyestuffs across textiles, printing, and packaging end-markets.

• Rising global preference for sustainable and eco-friendly dye chemistry, creating scope for differentiated, higher-value offerings.

• Continued expansion of Indias textile sector, supporting growth in domestic sales and production.

• Scope to deepen international market access through joint ventures, technology partnerships, and collaborative arrangements.

• Continued digitalisation of supply chain and commercial operations, supporting efficiency and customer engagement.

Threats

• Sensitivity of demand for specialty chemicals to broader macroeconomic slowdowns.

• Exposure to geopolitical developments, trade disputes, and regulatory change affecting global operations and supply chains.

• Increasingly stringent environmental regulation, requiring continued compliance investment.

• Competitive pressure from lower-cost global manufacturers, which may affect pricing and market share.

• Cybersecurity risk, requiring continued investment in information security infrastructure and practices.

The Company believes its financial strength, diversified operations,

and disciplined management approach position it to navigate

these risks effectively.

RISKS AND CONCERNS

The Companys risk management framework is reviewed periodically by the Audit Committee and the Board of Directors to ensure it remains responsive to emerging risks and opportunities. Risks are categorised by cause, potential impact, and mitigation approach, with particular emphasis on environmental protection and operational safety across all manufacturing facilities. The Company maintains strict compliance with applicable regulations governing emissions, effluent discharge, and waste disposal, and continues to prioritise workplace safety across its operations.

The Company maintains a business continuity framework designed to ensure the continuity, or prompt restoration, of essential operations in the event of disruption. The risk management framework is further supported by technology-enabled, realtime risk monitoring and a broader organisational culture of proactive risk awareness. Sustainability and operational resilience remain integral to the Companys overall risk strategy, supporting consistent performance across varying market conditions.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains an internal control framework designed to safeguard its assets against loss, misuse, or unauthorised disposal. All transactions are subject to appropriate authorisation, are accurately recorded, and are reported in a manner consistent with applicable accounting standards, ensuring transparency and accountability. The Company remains committed to the continuous strengthening of its internal control environment in line with evolving best practice.

Internal audits are conducted by an independent firm of chartered accountants on a regular and systematic basis across all functional areas, enabling the timely identification and remediation of control gaps. The Companys internal control framework is built on sound governance, clearly defined systems and processes, structured risk assessment, ongoing monitoring, clear communication protocols, and an independent internal audit function.

The internal audit function conducts comprehensive reviews across all significant areas of operation throughout the year. This is complemented by the Companys internal risk and control function, which continuously evaluates organisational risk and determines appropriate mitigating controls. Key elements of the control environment include continuous monitoring, routine management reporting, structured checks and balances, defined procurement policies, and clearly delineated authorisation and delegation protocols.

Compliance audits are conducted periodically and reviewed by the Audit Committee to confirm adherence to applicable statutory and regulatory requirements. The Audit Committee reviews internal audit findings on an ongoing basis and oversees the implementation of audit recommendations, ensuring timely corrective action.

The performance of the Internal Audit function is periodically reviewed by the Board of Directors, with recommendations made where appropriate to enhance its effectiveness. The Company remains committed to the timely implementation of statutory and regulatory recommendations. The internal control framework extends beyond financial and operational matters to include cybersecurity controls designed to safeguard sensitive data and protect against unauthorised access, supported by an organisational culture of accountability and ethical conduct at every level.

HUMAN RESOURCES

The Company recognises its employees as central to the achievement of its strategic and operational objectives, and remains committed to maintaining a safe, supportive, and inclusive workplace. The Companys human resource policies place particular emphasis on employee health, safety, and wellbeing, ensuring teams are appropriately equipped to meet the Companys evolving business requirements.

Guided by its core values of high performance, collaboration, and continuous improvement, the Company continues to focus on attracting and retaining skilled talent, while supporting the ongoing development of employee capabilities in line with business needs. The Companys human resource policies are designed to build trust, encourage cross-functional collaboration, and reinforce organisational alignment.

The Company continues to invest in the wellbeing, safety, and long-term development of its workforce. Constructive engagement with employees and, where applicable, unions has supported the successful implementation of reforms aimed at improving safety, quality, cost efficiency, and productivity across the Companys manufacturing and administrative operations.

The Company continues to prioritise diversity and inclusion as a means of strengthening organisational capability through a broader range of perspectives and experience, contributing to a collaborative environment in which employees are supported to contribute meaningfully to the Companys growth.

CAUTIONARY STATEMENT

In accordance with applicable securities laws and regulations, statements contained in this Management Discussion and Analysis regarding the Companys objectives, projections, estimates, expectations, or predictions may constitute "forward-looking statements." Such statements are based on certain assumptions and expectations of future events. Actual results may differ materially from those expressed or implied due to a variety of factors, including but not limited to weather conditions, domestic and global demand-supply dynamics, raw material costs, availability and pricing of finished goods, foreign exchange fluctuations, changes in applicable government regulations and tax laws, political and economic developments in India and other countries in which the Company operates, and other factors including litigation and industrial relations. The Company undertakes no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future events, or otherwise, and disclaims any liability in this regard.