Nahar Polyfilms Ltd Management Discussions

ECONOMIC SCENARIO

The global economic environment during FY 2025-26 and the period thereafter remained marked by geopolitical uncertainty, trade-policy changes, volatile energy and freight costs, and uneven growth across major economies. Developments in West Asia, continuing Russia-Ukraine tensions and changes in tariff and trade policies have periodically disrupted supply chains and influenced crude oil, petrochemical feedstock and logistics costs. For an industry such as BOPP films, where polypropylene is the principal raw material and exports form an important balancing outlet for domestic capacity, these developments continue to require close monitoring.

Against this backdrop, the Indian economy has remained comparatively resilient. Domestic consumption, infrastructure expenditure, manufacturing activity, formalisation of retail and continued growth in packaged food, FMCG, pharmaceuticals and e-commerce provide a constructive medium-term demand environment. The Reserve Bank of India has maintained a measured monetary-policy approach, while Indias growth outlook continues to compare favourably with most major economies. At the same time, inflationary pressures, crude-oil dependence, exchange-rate movements and global trade uncertainty remain important macroeconomic risks.

Government initiatives aimed at strengthening infrastructure, logistics and manufacturing competitiveness, including PM Gati Shakti, the National Logistics Policy and broader measures supporting domestic manufacturing, are expected to improve supply-chain efficiency over time. The continuing development of organised retail, modern trade and e- commerce is also increasing the requirement for efficient, lightweight and high-performance flexible packaging materials.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Biaxially Oriented Polypropylene (BOPP) film is a lightweight, durable and versatile packaging material used extensively in flexible packaging, labels, tapes, lamination and industrial applications. Its moisture barrier, clarity, printability, stiffness, sealability and favourable economics make it an important substrate for food, beverages, FMCG, personal care, pharmaceutical and other consumer-product applications.

The global BOPP films market continues to expand, supported by urbanisation, packaged-food consumption, modern retail and demand for convenient and resource- efficient packaging. Published industry estimates indicate a global market size of approximately US$32.8 billion in 2026, with the market projected to reach about US$49.8 billion by 2033. Asia Pacific remains the largest producing and consuming region.

India remains one of the more attractive long-term BOPP markets because of rising per-capita packaging consumption, growth of branded products and a large food and FMCG base. Industry research points to continued growth in Indian BOPP demand over the medium term. However, the Indian industry is simultaneously passing through a significant capacity- addition cycle. New and expanded film lines by existing as well as new manufacturers have increased competitive intensity. Consequently, industry operating rates, domestic realisations and contribution margins may remain under pressure whenever incremental supply runs ahead of demand.

This demand-supply situation is particularly relevant for commodity and standard film grades, where product differentiation is limited and price competition can be intense. Producers with efficient assets, scale, disciplined working-capital management, a diversified customer base, export access and the ability to manufacture specialised or value-added grades are expected to be better placed to navigate such periods.

INDIAN MARKET CONDITIONS- KEY MANAGEMENT VIEW

The underlying Indian consumption story remains positive, but near-term profitability in BOPP should not be assessed only by demand growth. The more immediate industry issue is the pace at which new capacity is being absorbed. Domestic BOPP demand has historically grown at healthy rates, yet announced and commissioned capacity additions can temporarily create surplus availability. During such phases, manufacturers may seek higher exports to maintain plant utilisation, which exposes the industry more directly to international pricing and freight economics.

Raw-material movement remains another major determinant of margins. Polypropylene prices are linked to crude oil, naphtha/propylene economics, refinery and petrochemical operating rates, import parity, currency movements and regional supply disruptions. Film selling prices generally adjust to raw-material changes, but not always with the same timing. Sharp movements can therefore create temporary inventory gains or losses and can compress spreads where pass-through is delayed. The Indian BOPP market is also becoming more quality and sustainability conscious. Brand owners increasingly seek down gauging, better barrier performance, improved machinability, recyclable mono-material structures and consistent print and sealing performance. This creates an opportunity to move the product mix towards differentiated films and closer customer partnerships rather than competing solely on commodity volumes.

Management therefore views the medium-term Indian market as structurally attractive but operationally competitive. The key priorities are expected to remain high and stable capacity utilisation, cost efficiency, optimisation of product mix, customer retention, disciplined credit control, export-market development and prudent management of raw-material and finished- goods inventory.

OPPORTUNITIES

Growth in packaged food, snacks, bakery, confectionery, beverages, personal care, pharmaceuticals, labels, tapes, e-commerce and organised retail should continue to support BOPP consumption. Indias relatively low per- capita flexible-packaging consumption compared with developed markets provides a long runway for volume growth.

The shift towards modern packaging formats creates opportunities in transparent, heat-sealable, metallisable, matte, label and other specialised BOPP grades. Increasing focus on recyclable mono-material packaging can also support polypropylene-based structures in applications where multilayer combinations can be simplified.

Scale benefits from the Companys proposed expansion can improve operating leverage, procurement efficiency, product availability and the ability to serve larger customers, provided the additional capacity is commissioned with appropriate market development and product-mix planning.

THREATS, RISKS AND CONCERNS The principal near-term industry risk is excess or rapidly expanding domestic capacity. If supply growth exceeds consumption growth for sustained periods, selling spreads and utilisation levels across the industry may come under pressure. Aggressive pricing by new entrants or existing producers seeking to fill new lines can intensify this effect.

Volatility in polypropylene and crude-linked feed stocks, exchange rates, energy costs and freight can affect profitability and working-capital requirements. Geopolitical disruptions in West Asia or major shipping routes can increase import and export logistics costs and disturb raw-material availability.

Exports provide an important outlet for surplus domestic production, but are exposed to international competition, trade barriers, anti-dumping or safeguard actions, freight differentials and currency volatility. Weakness in overseas markets can therefore increase pressure on the domestic market.

Environmental regulation and Extended Producer Responsibility requirements are progressively influencing packaging design and recycling obligations. The industry will need continued investment in recyclable structures, waste reduction, energy efficiency and customer-specific sustainable solutions. Failure to adapt product portfolios to changing regulatory and brand- owner requirements could affect competitiveness.

Other normal business risks include customer concentration, credit risk, equipment downtime, quality claims, cyber security, availability of skilled manpower, interest-rate movements and execution risk associated with major capital projects.

COMPANYS CAPACITY EXPANSION In line with the long-term growth potential of the Indian flexible-packaging market, the Company is expanding its BOPP film capacity at Village Simrai, near Mandideep, District Raisen, Madhya Pradesh. The proposed project involves a capital outlay of approximately Rs. 595 crores. Upon implementation, the Companys installed BOPP film capacity is expected to increase to 96,000 MT per annum.

The expansion is expected to provide economies of scale and improve the Companys ability to address a broader customer base. Nevertheless, considering the ongoing capacity-addition cycle in the Indian BOPP industry, the commercial success of the project will depend on timely commissioning, efficient ramp-up, cost competitiveness, product mix, customer development and the Companys ability to place incremental volumes in domestic as well as export markets without compromising return thresholds.

Management will accordingly continue to evaluate market conditions, customer requirements and competitive behaviour while implementing the expansion. Focus on operational efficiency, energy optimisation, quality consistency and value-added products will be important to support sustainable returns on the enlarged capital base.

FUTURE OUTLOOK

The long-term outlook for BOPP films remains favourable, particularly in India, where demographic trends, urbanisation, higher disposable incomes, growth of branded packaged goods and expansion of organised retail support increasing packaging intensity. Industry research continues to project growth in Indian BOPP demand over the coming years.

For FY 2026-27, however, the operating environment is expected to remain dynamic. Demand growth should be healthy, but the benefit may be partly offset by additional industry capacity and competitive pricing. Margins are therefore likely to remain sensitive to utilisation levels, polypropylene-film spreads, raw-material volatility, export realisations and the speed at which new capacity is absorbed by the market.

The Company intends to remain focused on profitable volume growth rather than volume alone. Strengthening customer relationships, improving the share of differentiated products, maintaining manufacturing efficiency, controlling finance and logistics costs and preserving a sound balance between domestic and export sales will be central to the Companys strategy. Subject to stable macroeconomic conditions and disciplined industry behaviour, the Companys expanded capacity should position it to participate in the next phase of growth in the Indian flexible-packaging market.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company is maintaining an efficient and effective system of Internal Financial Control for facilitating accurate compilation of financial statements. The companys Internal Control system is designed to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliance with procedures, laws and regulations. The Internal Audit Reports are discussed with the Management and are reviewed by the Audit Committee of the Board which also reviews the adequacy and effectiveness of the internal controls in the Company. The Companys internal Financial Control system commensurate with the nature of its business and the size of its operations. In order to further strengthen the Internal control system and to automate the various processes of the business, the company is making use of SAP S4 HANA application, which is based on SAP Hana database. It keeps all the data processing that is magnitude faster than that of disk based system, allowing for advanced, real time analytics. The Company has also appointed Piyush Singla & Associates, Chartered Accountants Firm, as Internal Auditors of the Company. The Company is also having Internal Audit Department to test the adequacy and effectiveness of Internal Control Systems laid down by the Management and suggests improvement in the systems. Internal Audit Reports are discussed with the Management. During the year, Companys Internal Controls were tested and no reportable weakness in the system was observed.

Apart from this, an Audit Committee consisting of three non-executive directors has been constituted. All the significant audit observation and follow up action thereon are taken care of by the Audit Committee. The Audit Committee met four times during the financial year under review. The Company has also established a Vigil Mechanism as per section 177(9) of Companies Act, 2013 read with Rule 7 of the Companies (Meeting of Board and its Powers) Rules, 2014.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE AND FINANCIAL/OPERATIONAL PERFORMANCE

The Company is operating in single segment i.e. BOPP Films as such disclosure requirements of Ind AS-108, issued by the Institute of Chartered Accountants of India are not applicable on the company. During the year under review, Company has achieved a total income of Rs. 729.03 Crores with a net Profit of Rs. 68.27 Crores. The detailed performance has already been discussed in the Directors Report under the column "Financial Performance".

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS

Beyond Balance Sheet lies Companys singly biggest Asset Human Resources. The Company is of firm belief that the Human Resources are the driving force that propels a Company towards progress and success. The Company continued its policy of attracting and recruiting the best available talent so that it can face business challenges ahead. The Company also offers attractive compensation packages to retain and motivate the professionals so that they can give their best. The Company has also ensured that Companys factories and offices are sanitized at regular interval to safeguard its worker/ employees. The total permanent eemployees strength of the Company was 317 as on 31^st March, 2026. The industrial relation continued to remain cordial during the year.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Ratio	31.03.2026	31.03.2025
Operating Profit	18.74%	14.28%
Net Profit	13.01%	7.86%
Return on capital Employed	16.30%	10.87%
Return on Equity	13.33%	7.53%
Debt Service coverage ratio	3.60 (times)	2.43(times)
Interest Coverage ratio	16.82 (times)	9.3 (times)
Current Ratio	2.04 (times)	3.19(ti mes)
Inventory Turnover	9.34(times)	11.80 (times)
Debt Equity Ratio	0.12 (times)	0.20 (times)
Debtors Turnover	25.26 (times)	23.46 (times)

The Operating Profit ratio, Net Profit ratio, Return on Capital Employed, Return on Equity, Debt Service Coverage Ratio, Interest Coverage ratio changed significantly due to Increase of profits in comparison to that of previous year. The Company earned net profit of Rs. 68.27 Crores as against Rs. 36.36 Crores in the previous year. The Current Ratio changed significantly due to repayment of debt and capital expenditure, whereas the Debt-Equity Ratio changed significantly due to repayment of debt.

CAUTIONARY STATEMENT

Statements in this report on Management discussion and analysis relating to the Companys objectives, opportunities, estimates, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. These statements are based upon certain assumptions and expectations of future events. Actual results may however differ materially from those expressed or implied.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS	JAWAHAR LAL OSWAL
PLACE : LUDHIANA	(CHAIRMAN)
DATED : 5th AUGUST, 2026	(DIN: 00463866)