Mangalam Organics Ltd Management Discussions

The Financial Performance of our Company reflects the collective efforts of our team, and we remain committed to driving our growth, innovation and sustainability in the years to come."

BUSINESS OVERVIEW

Global Economic Overview

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024-25. The forecast for global growth five years from now—at 3.1 percent—is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023-24 to 5.9 percent in 2024-25 and 4.5 percent in 2025-26, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually. The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability. Risks to the global outlook are now broadly balanced. On the downside, new price spikes stemming from geopolitical tensions, including those from the war in Ukraine and the conflict in Gaza and Israel, could, along with persistent core inflation where labour markets are still tight, raise interest rate expectations and reduce asset prices. A divergence in disinflation speeds among major economies could also cause currency movements that put financial sectors under pressure. High interest rates could have greater cooling effects than envisaged as fixed-rate mortgages reset and households contend with high debt, causing financial stress. In China, without a comprehensive response to the troubled property sector, growth could falter, hurting trading partners. Amid high government debt in many economies, a disruptive turn to tax hikes and spending cuts could weaken activity, erode confidence, and sap support for reform and spending to reduce risks from climate change.

Geo-economics fragmentation could intensify, with higher barriers to the flow of goods, capital, and people implying a supply-side slowdown. On the upside, looser fiscal policy than necessary and assumed in projections could raise economic activity in the short term, although risking more costly policy adjustment later on. Inflation could fall faster than expected amid further gains in labour force participation, allowing central banks to bring easing plans forward. Artificial intelligence and stronger structural reforms than anticipated could spur productivity. (Source: IMF - World Economic Outlook Update, April 2024)

The global economy has remained surprisingly resilient despite repeated and overlapping shocks and unprecedented monetary tightening. Growth in the US and several major emerging market economies (EMEs) has held up better than expected. Sectorally,

manufacturing activity has remained subdued, but services have exhibited strength. Headline inflation has come down across countries although the descent in core and services inflation has been slow amidst continuing tightness in labour markets. Major central banks in advanced economies (AEs) have kept policy rates on hold to ensure the aligning of inflation with targets.

Incoming data on the economic outlook and evolving expectations about monetary policys trajectory in AEs reverberated through global financial markets imparting high volatility. A faster-than- expected decline in inflation fuelled expectations of an early reversal in the US monetary policy cycle, leading to a sharp correction in sovereign bond yields in November and December 2023. Yields have, however, hardened since the beginning of 2024 as central bank communication pushed back on market exuberance related to the magnitude and pace of monetary policy easing. Following the correction seen in Q2:2023 (July-September), global equity markets posted strong gains in November-December, primarily in AEs. The US dollar (US$) depreciated to a 6-month low at end-December but recovered subsequently on stronger- than-expected US economic data. Crude oil prices declined during October-December 2023 on slowing global demand and improved supply from countries outside of organization of the petroleum exporting countries (OPEC) but recovered thereafter in the wake of supply disruptions in key shipping routes and extension of production cuts by OPEC plus through June 2024. Food prices eased with the decline in prices of cereals, meat and vegetable oils, although sugar prices have firmed up. (RBI Monetary Policy Report-April 2024)

India Economic Overview

Indias GDP took a big leap on Leap Day in 2024: The countrys remarkable growth rate of 8.4% in the third quarter of the fiscal year 2024 surpassed all expectations, as market analysts had penciled in a slower growth this quarter, between 6.6% and 7.2%. Deloittes projected growth for the quarter was between 7.1% and 7.4% (as published in January 2024). With substantial revisions to the data from the past three quarters of the fiscal year, Indias GDP growth already touched 8.2% year over year (YoY) in these quarters. (Deloitte Global Economics Research Center-India Economic Outlook, April 2024).

Turning to the domestic economy, the second advance estimates (SAE) released by the National Statistical Office (NSO) placed real gross domestic product (GDP) growth for 2023-24 at 7.6 per cent, underpinned by strong investment activity. On the supply side, gross value added (GVA) expanded by 6.9 per cent in 2023-24, with manufacturing and services sectors turning out to be the key drivers. Real GDP growth for Q3:2023-24 was placed at 8.4 per cent,

outpacing consensus forecasts by a wide margin, underpinned by strong investment and an improvement in private consumption.

Headline CPI inflation moderated to 5.3 per cent in October 2023-February 2024 from an average of 5.5 per cent in H1:2023-24. Sporadic food price shocks continued to impart significant volatility to the inflation trajectory, with headline inflation rising sharply in November and December 2023 due to a spike in vegetable prices. Core inflation (i.e., CPI excluding food and fuel) has, however, been on a steadily declining path. In February 2024, it fell to 3.4 per cent, among the lowest prints in the current CPI series (2012=100), driven by both core goods and services components. With the cumulative rate hike of 250 basis points (bps) undertaken during May 2022-February 2023 working its way through the economy, the Monetary Policy Committee (MPC) kept the policy repo rate unchanged at 6.50 per cent through H2 and remained resolute in its commitment to align inflation with the target, keeping in mind the objective of growth. Amidst global challenges, the Indian economy has stayed resilient. Buoyed by strong domestic demand and backed by robust macroeconomic fundamentals, India has emerged as the fastest growing major economy of the world in 2023-24.

The upturn in the investment cycle, broad-based revival in manufacturing and services sectors, governments capex push, upbeat business and consumer sentiments and strong corporate and bank balance sheets provide impetus to the growth momentum going forward. Volatile food prices, however, interrupt the path of disinflation and cloud the inflation outlook. The continuing effect of monetary policy action and stance is keeping core inflation muted. Spillovers from geopolitical hostilities, volatile global financial markets and climate shocks are the key risks to the growth and inflation outlook. (RBI Monetary Policy Report-April 2024)

Real GDP or GDP at Constant Prices is estimated to attain a level of ?173.82 lakh crore in the year 2023-24, against the First Revised Estimates (FRE) of GDP for the year 2022-23 of ?160.71 lakh crore. The growth rate in Real GDP during 2023-24 is estimated at 8.2% as compared to 7.0% in 2022-23. Nominal GDP or GDP at Current Prices is estimated to attain a level of ?295.36 lakh crore in the year 2023-24, against ?269.50 lakh crore in 2022-23, showing a growth rate of 9.6%.

Real GVA is estimated at ?158.74 lakh crore in the year 202324, against the FRE for the year 2022-23 of ?148.05 lakh crore, registering a growth rate of 7.2% as compared to 6.7% in 2022-23. Nominal GVA is estimated to attain a level of ?267.62 lakh crore during FY 2023-24, against ?246.59 lakh crore in 2022-23, showing a growth rate of 8.5%. (Press Information Bureau- Government of India)

CHEMICAL INDUSTRY

Global Chemical Industry

The chemicals market size has grown strongly in recent years. It will grow from $5115.19 billion in 2023 to $5574.05 billion in 2024 at a compound annual growth rate (CAGR) of 9.0%. The expansion

observed in the historical period can be ascribed to factors such as global economic conditions, trends in the global economy, costs of raw materials, market consolidation, and the grow The chemicals market size is expected to see strong growth in the next few years. It will grow to $7788.18 billion in 2028 at a compound annual growth rate (CAGR) of 8.7%. The anticipated growth in the forecast period can be linked to factors such as stringent environmental regulations, shifts in consumer preferences, the adoption of renewable and bio-based materials, geopolitical considerations, and an increased prioritization of health and safety. Prominent trends projected for the forecast period encompass sustainability and green chemistry, digital transformation, the circular economy, advancements in materials and nanotechnology, supply chain resilience, and the integration of digitalization and industry 4.0.

The anticipated growth in the chemicals market is expected to be propelled by industrial and economic expansion. Various factors contribute to this expansion, including technological advancements, increased productivity, and improved transportation systems. Industrialization signifies the shift of an economy from predominantly agrarian production to the mass production of technologically advanced goods and services. Several industries, such as paper and pulp, energy, packaging, adhesives, and sealants, extensively utilize diverse types of chemicals in their production processes. For instance, in September 2023, the Bureau of Economic Analysis (BEA) reported that the real gross domestic product (GDP) of the United States grew at an annual rate of 2.1% in the second quarter of 2023. Additionally, the Federal Reserve Board noted a 0.4% increase in industrial production in August 2023, with capacity utilization reaching 79.7%, aligning with its historical average. Therefore, the chemicals markets growth is being driven by ongoing industrial and economic expansion.th of the global population. (Chemicals Global Market Report 2024)

Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. India accounts for 16-18% of the worlds production of dyestuffs and dye intermediates. Indias agrochemicals export was estimated to be at US$ 3.12 billion from April 2023 to December 2023. Indian colourants industry has emerged as a key player with a global market share of ~15%. The countrys chemicals industry is de-licensed, except for a few hazardous chemicals. India has traditionally been a world leader in generics and biosimilars and a major Indian vaccine manufacturer, contributing more than 50% of the global vaccine supply. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at the global level (excluding pharmaceuticals). From April 2023 to December 2023, Indias dye exports (Dyes and Dye Intermediates) totalled US$ 1.69 billion

Indian Chemical Industry

Covering more than 80,000 commercial products, Indias chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilizers. India is the 6th largest producer of chemicals in the world and 3rd in Asia, contributing 7% to Indias GDP. Indias chemical sector, which was estimated to be worth US$ 220 billion in 2022, is anticipated to grow to US$ 300 billion by 2025 and US$ 1 trillion by 2040.

Indias proximity to the Middle East, the worlds source of petrochemicals feedstock, enables it to benefit on economies of scale. The government has started various initiatives such as mandating BIS-like certification for imported chemicals to prevent dumping of cheap and substandard chemicals into the country.

The Indian government recognises the chemical industry as a key growth element and is forecast to increase share of the chemical sector to ~25% of the GDP in the manufacturing sector by 2025. Despite the pandemic situation, the Indian chemical industry has numerous opportunities considering the supply chain disruption in China and the trade conflict between the US, Europe and China. Anti-pollution measures in China will also create opportunities for the Indian chemical industry in specific segments.

Additional support, in terms of fiscal incentives, such as tax breaks and special incentives through PCPIRs or SEZs to encourage downstream units will enhance production and development of the industry. The dedicated integrated manufacturing hubs under the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy to attract an investment of Rs. 20 lakh crore (US$ 276.46 billion) by 2035.

To bring about structural changes in the working of the domestic chemical industry, future investments should not only focus on the transportation of fuels such as petrol and diesel but also on crude-to-chemicals complexes or refineries set up to cater to the production of chemicals.

(Source: India Brand Equity Foundation - Chemical Industry India) INDUSTRY OVERVIEW Pine Chemicals

The viability of the pine chemical industry lies in the principles of sustainability. The industry has been a pioneer in developing sustainable value added products from a renewable resource, even before the term became popular globally. Pine chemicals are recovered from the pine tree (genus Pinus) through three different methods of craft pulping, tree tapping and wood stumps. The biomass is extracted in the form of crude sulphate turpentine, gum turpentine and wood turpentine. They are processed in a bio refinery into a spectrum of marketable products used in a wide array of applications such as paints, inks, adhesives, perfumes, edible flavours, fragrances, food additives, vitamins, automobile tires etc. Because of its multiple uses and organic properties, pine chemical market is on a high growth trajectory.

According to a report of IndustryArc, the global pine-derived chemicals market is projected to reach USD 5.91 Billion by 2025, after growing at a CAGR of 4.20% during 2020-2025.

Terpenes

Terpenes are aromatic compounds found in many plants, especially conifers. The term terpenes originates from turpentine, which is a pine chemical and it contains resin acid and hydrocarbons. Because of its strong odour and high resistance capabilities it is widely used in various applications like essential oil, fragrance, flavouring agent in industrial uses. Demand for terpenes is being driven by its growing use in industries such as cosmetics, food & beverages, paints & coatings, rubber, and pharmaceuticals. However, fluctuation in supply of terpenes and high cost extraction process are creating market challenges. Despite the challenges, with growing market applications and increasing investment, more players are expected to enter the terpenes industry.

The global Terpenes market was valued at USD 991 Million in 2022 and is expected to reach USD 1450 Million by 2027, growing at a CAGR of 7.9% from 2022-2027.

Synthetic Resins

Synthetic or manmade polymers, such as polyacrylamide, polymethacrylate, and polystyrene, are used as media in different chromatography applications. Synthetic copolymers, such as polystyrene divinylbenzene and methacrylate copolymers, are used as base matrices in chromatography. These resins are suitable in laboratories or analytical-scale experiments because of their high mechanical stability and ability to withstand large pH ranges. All these factors drive the market for synthetic resin.

The Synthetic Resin Market size is projected to reach a value of USD 521.6 Billion by the end of 2027 after growing at a CAGR of 4.8% during the forecast period 2022-2027

Aroma Chemicals

Aroma chemicals are cyclic compounds that find application in additives and fragrances. They can be either synthetic aroma chemicals, or natural aroma chemicals. Key factor driving demand for aroma chemicals is its increasing application in Flavour & Fragrance (F&F) and nutraceutical sector.

Aroma chemicals are used in various applications and are mostly found in spices, food, perfumes, soaps, wines, detergents, fragrance oils, and others. Increasing consumer demand for natural-based products over synthetic chemicals and a shift of consumers towards fragrances and exotic scents are likely to drive the market growth. The growing demand from the fragrance and food & beverage industries, along with the rise in consumer spending is driving the overall market size.

The latest report by IMARC Group, titled "India Aroma Chemicals Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2022-2027," finds that the India aroma chemicals market reached a value of USD 235.2 Million in 2021. Aroma chemicals are chemical substances that are used as ingredients in flavors and fragrances.

The global aroma chemicals market is expected to grow from USD 5.41 Billion in 2022 to USD 5.81 Billion in 2023 at a compound annual growth rate (CAGR) of 7.4%. The aroma chemicals market is expected to reach USD 7.42 Billion in 2027 at a CAGR of 6.3%.

India represents one of the leading consumers and exporters of aroma chemicals in the Asia Pacific region. Various types of chemical aromatics, such as benzene and toluene, are used to enhance the flavour of food and beverages, thereby making them more appealing to consumers.

Growing Demand from Fine Fragrances Application:

• Aroma chemicals are an important group of organic molecules used as ingredients in flavours and fragrances.

• Formulations of fragrance from aroma chemicals are used globally, for imparting attractive aroma and pleasing scents to perfumes, toiletries, and detergents.

• The growth of the fragrance industry is primarily driven by the increase in demand for natural fragrances from developing nations and significant technological advancements to meet the changing consumer demands.

• Additionally, the increasing demand for customizable and niche fragrances is driving the consumption of aroma chemicals, since consumers are looking for personalized fragrance experiences and exotic scents.

• Further, the rising importance of organic and natural fragrances in aromatherapy, which influences the emotional and psychological wellbeing, is expected to drive the demand for the market studied.

Opportunities and Threats

Opportunities	Threats
1. Demand for Pine chemicals is growing because of its organic and environment friendly properties and numerous benefits	1. Raw Material Price Volatility
	2. Intense competition from Chinese and other international players
2. India has abundance of natural ingredients like spice and herb used for making aroma chemicals
	3. Potential impact of global economic downturns
3. The growth of population in India will lead to more demand and consumption of Camphor for religious purposes.
	4. Volatility in foreign exchange rate
4. Apart from religious use, Camphor is also being used by the young generation as car freshener and room freshener for its numerous benefits related to air purification	5. Competition from unorganised players
	6. Geopolitical tensions impacting export
5. Demand for synthetic resin is growing fast due to its applications in flexible packaging and automotive sector	7. Lack of adequate research and development in the sector.
6. Growth of Flavour & Fragrance (F&F) and nutraceutical sector is driving demand for aroma chemicals significantly	8. FMCG slowdown

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The key operational segment of the Company is Chemical manufacturing.

Company OVERVIEW

Mangalam Organics Limited (henceforth referred to as MOL or the Company) is a leading pine chemicals manufacturer in India. The Company produces Terpenes from Pine chemicals, from which a number of sub products like Camphor, Isobornyl Acetate, Isoborneol and Dipentene and Sodium Acetate are manufactured. It also produces Synthetics Resins under the single segment of chemicals. It is engaged in the manufacturing and selling of Camphor and by-products and various Synthetic Resins in India and abroad. The strength of its pine chemical products lies in the fact that they are extracted from natural resources and are devoid of the side effects of synthetic chemicals. The market performance of these products is not dependent on crude oil and the volatility of its prices.

Applications and uses

The Companys products have applications in a number of sectors such as religion and worship, pharmaceuticals, flavour and fragrance, rubber & tyre chemicals, paints and varnishes, among others. The Company caters to both domestic and the international market. In addition to having a wide reach and strong footprint in the domestic market, it is expanding its global operations. As its products have a variety of industrial applications, it has established a strong B2B and B2C presence, despite facing competition from domestic and international players.

Geographical presence

The Company has created a niche for itself in the pine chemicals industry as one of the major players with its customers spanning across Europe, Asia, Africa, USA and Middle East. With its decades of domain experience and backed by an experienced management team, MOL is creating its base in the Indian retail market with its branded offerings in camphor. The Company is tying up with a number of retail brands and e-commerce platforms to augment its B2C business.

Products and Applications

Business Segments		Products		Applications
B2B - Terpene		• Camphor		Camphor: Camphor: Religious use, healthcare products, hygiene products
		• Isobornyl Acetate
				Isobornyl Acetate: Fragrance
		• Isoborneol		and flavor
		• Dipentene		Isoborneol: Fragrance and flavor
		• Sodium Acetate		Dipentene: Paints, cleaning and degreasing agents
				Sodium Acetate: Textile and dyes industry, Leather tanning
B2B - Synthetic Resin	• Terpene Phenolic Resin		Adhesives, Tyres, Rubbers, Chewing Gum, Printing Ink
	• Alkyl Phenolic Resin
	• Rosin Esters

Note: The retail percentage is NIL in the standalone revenue because the retail business of Mangalam Organics Limited has been transferred to its wholly owned subsidiary Mangalam Brands Private Limited from FY 2022-23

Manufacturing Capabilities

The Company has a state-of-the-art manufacturing facility spread across about 25 acres (101,200 Sq. Meters) at Kumbhivali village in the Raigad district of Maharashtra. The manufacturing site also has a logistic advantage as it is situated on the Mumbai-Pune expressway for Pan-India Road connectivity. Container terminal Jawaharlal Nehru Port (JNPT) is situated about 60 kms away from the plant.

The manufacturing operations are highly automated and run by a robust operation system that efficiently integrates the functions related to quality control, stores, packing, dispatch, maintenance and R&D. The Company regularly reviews the plant systems, procedures and practices to enhance productivity, efficiency and safety. The manufacturing activities of the products confirm to statutory pollution control standards.

Product Portfolio

1. TERPENES

MOL manufactures a wide range of high demand products under this sub-segment. This is the key raw ingredient for producing camphor and related products. The Company is focusing on production efficiency and quality control so that it can produce international quality intermediate products and their derivatives for the fragrance and flavour industry. The Company has been exploring new product development from terpenes and is further exploring the retail opportunity to expand its market reach through diversification.

Camphor

Camphor is the primary product of the Company which contributes 80% of total sales in Terpenes. Due to its ability to impart a sense of complete purity to the religious devotees, it finds the widest application in religious use in the domestic market. This is a naturally derived product that completely burns off with no residue. Camphor was earlier sold as a commodity. However, as it presents a large retail opportunity, it enables the Company to forward integrate and diversify into the FMCG space by retailing the products through Modern Trade, General Trade and E-Commerce.

The Company continues to leverage the growing retail opportunity and is confident of continuing growth in the years ahead. It continues to grow capacities and grades offered from the same unit to capture a larger market share in the domestic and export markets. MOL has the following registered brands.

Retail Portfolio

Mangalam	Camphor tablets for religious purposes and Bhimseni Camphor for Aroma therapy
CamPure	Home care products based on camphor such as Camphor Cone, Camphor Sticks, Camphor Air Purifiers, Camphor Hand Wash, Camphor Soap Bar, Camphor Hand Sanitizer, Camphor Liquid Vaporiser.

Isobornyl Acetate

With the expansion coming online MOL is able to expand its product offering by also supplying intermediate product Isobornyl Acetate to leading fragrance and flavour companies across the world. Presently the product is in approval stage at various companies and we look forward to the time when the product will be a major driver for growth

Isoborneol

Isoborneol finds application in fragrance and flavour industries across the world. The product has also got accelerated growth in the last few years on account of increased consumption of isoborneol flakes used for aromatherapy and well-being.

Dipentene

Dipentene is a by-product in Camphor manufacturing and is used as a solvent in the paints industry. The Company offers various grades of this material. Dipentene is a ready substitute in formulations of cleaning and degreasing agents, as Limonene faces supply shortages. It is also witnessing demand growth in the export market as a substitute for Limonene.

Sodium Acetate

Sodium Acetate is used as a dye intermediate by textile and dye manufacturers. It also finds application in leather tanning industry and is exported to Europe.

2. SYNTHETIC RESINS

MOL manufactures three broad types of synthetic resins, with each of them having a large domestic and export market. The Company is confident of all the categories in this segment and is continuing its efforts to enhance margins and build higher volumes in each of them.

Terpene Phenolic Resin

Terpene Phenolic Resin finds application in the adhesive, tyre and rubber industries as a tackifier. The Company foresees an increase in volumes, revenue and profitability over the years ahead.

Alkyl Phenolic Resin

Alkyl Phenolic Resin finds application in Neoprene and Chloroprene rubber-based adhesives. The Company is working with consultants to improve its quality of products as per global standards and leverage the growing export opportunities.

Rosin Esters

Rosin Esters finds application in pressure sensitive adhesives. The Company is working with consultants to improve its quality of products as per global standards and leverage the growing export opportunities.

FINANCIAL PERFORMANCE

During the year under review, Standalone Revenue from operations for FY 2023-24 stood at Rs. 405.43 crore, as against Rs. 466.97 crore in FY 2022-23 a negative growth of 13.18%. At consolidated level Revenue from operations for FY 2023-24 stood at Rs. 493.52 crore, as against Rs. 492.53 crore in FY 2022-23 a growth of 0.20%. Flat Growth in revenue was due to continuous corrections in sales price of camphor in FY 2023-24 and increased competition in domestic market. In FY 2023-24 Retail operations have been totally demerged and transferred to wholly owned subsidiary of the Company.

Further, on Standalone basis, Company registered a Net Profit of Rs. 4.08 Crore for FY 2023-24, a growth as compared to Rs.25.27 Crore loss for FY 2022-23. At Consolidated level, Company registered a Net Profit of Rs.4.22 crore for FY 2023-24, a growth as compared to Rs. 27.09 crore loss for FY 2022-23. The substantially increase in profit ratio was due to continuous cost cutting measures adopted and improved yield in Camphor. On Standalone basis, Companys EBIDT increased to Rs.36.91 crore in FY 2023-24, from Rs. -2.01 crore for previous year. On Consolidated level also EBIDT increased to Rs.39.45 from Rs.-2.43 crore in FY 2022-23.

Details of Significant Changes in Key Financial Ratios

Key Financial Ratios for FY 2023-24 are as under:

1. Interest Coverage Ratio

FY 2023-24	FY 2022-23
1.24%	-1.47%

Increase in Interest Coverage Ratio was due to profit on account of better yield and various cost cutting measures adopted and well stocked up raw material by the Company as compared to FY 2022-23.

2. Current Ratio

FY 2023-24	FY 2022-23
1.32%	1.41%

Company has availed substantial working capital facility which resulted in marginally lower Current ratio as compared to FY 2022-23.

3. Debt Equity Ratio

FY 2023-24	FY 2022-23
0.67%	0.76%

Decrease in Debt Equity Ratio as compared to FY 2022-23 was due to considerable increase in profit and decrease in long term liability of the Company.

4. Operating Profit Margin (%)

FY 2023-24	FY 2022-23
4.46%	-3.99%

Increase in Operating profit margin was due to better yield and various cost cutting measures adopted and decrease in raw material prices during the year as compared to FY 2022-23.

5. Net Profit Margin (%)

FY 2023-24	FY 2022-23
1.01%	-5.41%

Increase in Net profit margin is due to better yield and various cost cutting measures adopted and decrease in raw material prices during the year as compared to FY 2022-23.

6. Return on Net Worth

FY 2023-24	FY 2022-23
1.44%	-9.09%

Profitability has been increased due to better yield and various cost cutting measures adopted and decrease in raw material prices during the year, which resulted in high return on net worth as compared to FY 2022-23

RISKS AND CONCERNS

Risks are a part of any organizational setup, the bigger the market, higher the risks. Operating in a highly competitive and changing economic and business environment brings its own share of risks. Some of the key risks specified by the Company are:

Raw material price risk: Fluctuation in the price of raw materials or shortage in the supply of raw materials used by the Company poses a threat to its revenue and competitive position.

Operational risk: Functional and Operational risks arising out of various operational processes.

Business Continuity risk: Business Continuity risks arising out of climate change related and other disruptions like natural disasters, IT outages, pandemic, terror and unrest, power, water and other resource disruptions etc. which may challenge or impact our customers business and availability of People and process, Technology and Infrastructure.

Competition risk: Any market share losses for the Company to the global and domestic players will adversely impact the financial results of the Company.

Macroeconomic risk: Any slowdown in economic growth of the country and resulted drop in consumption may lead to a slowdown in FMCG sector. Consequently, this would adversely affect Indian Chemical industry causing lower capacity utilizations for the Company.

Concentration of customers risk: Dependency on a few large clients also poses a risk to revenue as any fall in the order book number can impact the business negatively.

Regulatory Compliance risk: Regulatory Compliances covering various federal, state, local and foreign laws relating to various aspects of the business operations are complex and non-compliances can result in substantial fines, sanctions etc.

The Company monitors and analyses all relevant parameters relating to above risks for the manufacturing site to minimise risk associated with protection of environment, safety of operations and health of people at work with reference to statutory regulations and guidelines defined. The Company fulfils its legal requirements concerning emission, waste water and waste disposal. Improving work place safety continued to be top priority at the manufacturing sites.

MANAGEMENT & INDUSTRY OUTLOOK

Management Outlook:

For the year 2024-25, the Company will further continue to look at sustainable growth by focusing on:

• Quality and purity standard to maintain market reputation

• Expansion of production capacity for meeting growing demand

• Emphasis on sustainability and environmental responsibility

• Development of strategic partnership and collaborations

• Focus on employee safety, training and Development

• Effective supply chain management to reduce cost and improve efficiency

• Continuous monitoring of market trends and regulatory changes

This outlook assumes a positive industry growth trajectory and the managements focus is on leveraging opportunities, mitigating risks and ensuring sustainable growth.

Industry Outlook:

• Growing demand from pharmaceutical, fragrance and Flavour industries

• Increasing domestic and export market share

• Increasing efficiency of the Companys present production capacity

• Boosting the B2C business

• Rising use in Medicine and wellness products

• Growing focus on sustainability & eco-friendly products

Increased competition from global and domestic players is putting pressure on sales prices. Increase in prices of certain raw materials also puts pressure on contribution. However, with global growth of chemicals focused more on Asia, it is expected that there will be further growth in the chemical industry.

During the year 2024-25, the Company further expects its investments in various projects to add to the top and bottomline.

The Company will continue with its efforts to improve the bottom line by further increasing efficiency in their existing production capacity, while re-looking at business strategies and models, wherever necessary.

INTERNAL CONTROLS

The Company has a well-established system of internal control and internal audit, commensurate with its size and complexity of the business, with regards to efficiency of operations, financial reporting, compliance with applicable laws and regulations. The Company continually upgrades internal control systems by adding better process control, various audit trails and use of external management assurance services, whenever required. The internal control system is supplemented by extensive internal audits, conducted internally by the finance and account department. The findings of Audit Team are discussed internally as well as in audit committee meetings. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them.

HUMAN RESOURCES

At MOL, we acknowledge the transformative power of Artificial Intelligence dominating the global conversation, innovation, and human ingenuity in creating a more equitable world. we believe that everyone is born with equal potential, but not equal opportunity. Our vision is to Empower individuals and communities to build self-reliance while promoting the core values of fairness, equity, and respect for human rights.

Therefore, we strategically plan the training and development of our human capital to unlock their full potential, fostering growth, innovation and success within our organisation. The headcount as on March 31, 2024 was 307 employees on the payrolls of the Company.

CAUTIONARY STATEMENT

This document contains some statements about expected future events, financial and operating results of Mangalam Organics Limited, which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and

uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements.