National Peroxide Ltd Management Discussions.

Global Economy

The global economy in 2020 faced a huge setback due to spread of the virus and its impact worldwide. It is the year that experiences the worst recession since a decade where the world experienced global financial crisis, the period of ‘the Great Depression’. The economy underwent a contraction of -3.3% for the year 20201. In emerging markets and developing countries, cumulative per capita income losses over 2020–22 are forecasted to be equivalent to 20% of 2019 per capita GDP, whereas losses in advanced economies are likely to be comparatively less, at 11%. Approximately 95 million people are estimated to have fallen below the brink of acute poverty, compared to that of pre-pandemic estimates. Despite considerable efforts and policy supports, unemployment rates in both advanced and emerging market and developing economies have grown by around 1 % points above pre-pandemic levels.

The first half of the year experienced lockdowns and stringent social distancing as critical measure of containment and recovery, allowing the health-care system to cope with the increased demand for its services while also affording researchers time to produce treatments and vaccines. To aid the crisis, governments at domestic levels have taken a number of fiscal measures, including initiatives to soften income losses, stimulate hiring, increase social assistance, guarantee credit, and inject ownership into businesses. The later part of the year witnessed slow but steady recovery in the economy, mostly in parts where lockdowns have been eased.

The advanced economies have been able to provide more direct expenditure and liquidity support in relation to GDP. The industrial production has restored to pre-pandemic levels through a V-shaped recovery curve after a brief and synchronized drop2. The release of repressed demand for durable goods in general and strong demand for products that facilitate working from home have been major elements driving the worldwide recovery since the second half of 2020. Although car industry accounts for the major driver in manufacturing sector, contributing to about 35% in recovery, demand for certain items, including electronics, plastic, rubber, and textiles as primary materials for personal protective equipment contribute for around 10% of the manufacturing recovery. In relation to international trade, merchandise trade volumes have restored to pre-pandemic levels but cross-border service commerce still remains sluggish.


In 2021, the global economy is expected to rise at 6%, subsequently slowing to 4.4% in 2022. Though the present situation is grim and uncertain, a road out of this health and economic distress is becoming clearer with time and experience. Multispeed recovery is underway in regions and across socio-economic classes, owing to significant variances in healthcare facilities, vaccine implementation and availability, economic policy assistance, and certain structural variables. Parallel to this, adaptability to pandemic life has allowed the global economy to thrive despite low overall mobility, resulting in a stronger-than-expected recovery in all areas. The near-term outlook for global manufacturing remains optimistic, as demonstrated by the global manufacturing purchasing managers’ index indications, which indicate that growth will continue, though at a slower rate. Among advanced economies, United States and among developing economies, China have done exceptionally well in respect to returning back to pre-covid GDP in 2020. Others are expected to recover by 2022-23.

Indian Economy

The financial year 2020-2021 witnessed an unparalleled economic turbulence with the outbreak of worldwide pandemic due to the coronavirus disease (COVID-19). All economic activities came to a grinding halt with the stringent countrywide lockdown from the mid of March’20. Followed by a period of subdued growth in 2019, the Indian economy that had begun to gain momentum in January 2020, experienced a dramatic drop of 23.9% in Q1: FY 2020-21 and 7.5 % in Q2: FY 2020-213. The real GDP is estimated to soften by 7.7% this year as compared to a growth of 4.2% in 2019-20. This is the fourth contraction in GDP in the history since 1960-61.

The production hampered to a great extent and it resulted in a subsequent derail in supply-chain. The industry and service sectors became the worst hit, with an estimated decline of 9.6% and 8.8% during the year. Among all odds, only agriculture contributed to positive growth to the GDP. With 3.4% growth in 2020-21, it is expected to soften the impact of the pandemic. On the supply side, Gross Value Added growth is pegged at -7.2% in 2020-21 as against 3.9% in 2019-20. The stifled credit appetite and risk-aversiveness of public slugged down overall bank-credit in the FY 2020-21. In the contrary, Government consumption sustained the growth of GDP with its share increasing by 2% compared to that of the previous year and Net Exports seem to buffer the contraction in GDP, largely due to a sharper contraction in imports than in exports. India sees the current account surplus of 2% of GDP this year, ‘a historic high after 17 years’. India also remained a preferred investment destination in FY 2020-21 with FDI flooding in, despite the global asset shifts towards equities. Investors’ risk appetite returned as net FPI inflows hit an all-time monthly high of USD 9.8 billion in November 2020.


Despite of the deep-rooted disruption in overall economy, the Country witnessed a perceptible V-shaped recovery. High frequency indicators such as E-way bills, GST Collection, rail freight and power consumption surpassed previous year levels4. The record-high monthly GST collections provided sufficient evidence for restarting of industrial and commercial activity. The plethora of reforms were enacted to guarantee that supply-side disruptions, which were unavoidable during the lockdown, were reduced in the medium to long term. With relaxations in lockdown phase, demand appetite of the nation seemed to regain confidence.

Economic mobility grew with a favourable monetary policy that ensured sufficient liquidity and prompt relief to debtors via temporary curtailments. Also, the positive value addition growth in most sectors in the second half provided for a fairly good indicator for the economy. This amounts to a 0.3% increase in the second half of 2020-21, compared to a 14.9% contraction in the first half. The impressive recovery pattern of the Country has caught the eye of the globe. The Organization for Economic Co-operation and Development (OECD) has raised the projection for India’s economic growth rate by 4.7% points at 12.6% for 2021-22. The IMF also forecasts India to become the fastest growing economy in next two years. But the prevail of the pandemic and unexpected fluctuations in COVID waves can jeopardize the future of the nation, alongside, the future of the world.

Hydrogen Peroxide Industry Overview

Hydrogen Peroxide (H2O2) is a transparent, pale blue chemical molecule in its purest form. It is a well-documented component of living cells that can be found naturally in biological systems. Because of its low molecular weight, hydrogen peroxide is also a popular oxidizing agent. In terms of revenue and volume, the market for hydrogen peroxide is forecasted to grow at a CAGR of 2.87% and 4.09% respectively, over the projected period of 2019-20245. The increased demand from the textile industry, paper and pulp sectors as bleaching agents, as well as its increasing usage as a raw material for propylene oxide manufacturing, are major factors driving the market in India.

Besides the obvious, the Government of India has promoted the use of hydrogen peroxide due to its emission-free and environmentally friendly properties through a number of environmental laws and regulations. As a result, the use of this compound for water treatment and pollution control has increased significantly. Furthermore, with the outbreak of the COVID-19, hydrogen peroxide is being frequently used in sanitizers and other sanitary items as it is a virus-fighting agent. The market is likely to maintain its moderate growth throughout the forecast period as a result of these factors.


With large-scale hydrogen peroxide consumption, Asia-Pacific is expected to hold a significant share of the market. The exports from India totaled at USD 981 thousand in 20206. Sales of “hydrogen peroxide, whether or not solidified with urea” from India went up by 63% compared to 2019. Qatar (29%), Nepal (12.2%), UAE (9.79%) remained as major export destinations for the year. The total of imports to India for $ 15.7 million in 2020. Sales to India have subdued by 33% in value terms compared to 2019.

Peracetic Acid Industry Overview

Peracetic acid is a functional product that is frequently used to treat wastewater as an environmentally favorable alternative to chlorine. It’s an excellent bleach and disinfectant substitute for chlorine. Due to its performance advantages over other biocides, peracetic acid is one of the most inventive advancements in the biocide sector. The global peracetic acid market is expected to increase at a CAGR of 7.6% from USD 813 million in 2020 to USD 1,685 million in 20307. With increasing demand from end-use industries, the global market is fast rising and is expected to continue to grow strongly in the future.

The prospects of this industry in Asia-Pacific are quite attractive. The key end-use sectors in this region are food, pharmaceuticals, pulp and paper, aquaculture and water treatment, all of which are rapidly expanding. Peracetic acid has been utilised in various industries since its inception, and it continues to be a significant market in the biocides business. It’s widely utilised in the food business, namely in the processing and packaging of juices, milk, tea and soft beverages. Because of the rising healthcare industry, peracetic acid is also employed in pharmaceutical, life sciences, hospitals, and other industries.

Compressed Hydrogen Gas Industry Overview

Compressed hydrogen is a type of storage in which hydrogen gas is held at high pressures to increase storage density. In industries and space programmes, compressed hydrogen in hydrogen tanks is employed as a propellant. The need to use hydrogen for on-board energy storage in zero-emission vehicles is driving the development of new storage systems that are better suited to this new application.

Industry Overview by End User Applications a) Paper and Pulp Industry

For both mechanical and chemical pulp bleaching, hydrogen peroxide is an effective chemical which guarantees high levels of brightness. Hydrogen Peroxide is active in alkaline circumstances, which are common in the repulping of papers. It also aids in ink removal. Hydrogen Peroxide is a very effective and convenient chemical for paper and waste paper upgrading for these reasons. Leading pulp and paper producing countries include China, the United States, India, and others. Global pulp and paper output is steadily expanding at a modest rate. Paper manufacturing is increasing in Asia-Pacific, as demand for packaging has expanded as a result of eco-friendly products and rising newspaper and book sales due to growing population.

The Indian paper sector has also grown more promising with increased domestic demand. The Indian paper industry is predicted to increase as the population grows, literacy rates rise, and the manufacturing sector improves. The paper industry’s focus is currently changing toward more environmentally friendly goods and technologies.

Although COVID-19 has undeniably posed significant issues to the pulp and paper sector around the world, this pandemic also provided pulp and paper manufacturers with unprecedented opportunities in areas such as rising demand for personal hygiene paper, food packaging, corrugated packaging materials, medical specialty papers, and so on.

b) Textile Industry

This is one of the leading industries in the Country.

The domestic textiles and clothing industry accounts for 2% of India’s GDP, 7% of industry output in value terms, and 12% of the Country’s export revenues. The textiles and apparel industry in India is the country’s second largest employer, employing 45 million people directly and another 60 million in affiliated businesses. In the textile industry, hydrogen peroxide bleaching in an alkaline media is utilized for pretreatments because it retains the intrinsic properties of the cellulose. Hydrogen peroxide has also been successfully employed in the cold bleaching of textile materials in both the organized and unorganized sectors. Even for synthetic fiber bleaching, the most common bleaching agent is Hydrogen Peroxide and it is used in both batch and continuous processes.

c) Sugar Industry

After Brazil, India is the world’s second largest producer of sugar and the world’s largest consumer. In about nine states of the Country, namely Punjab, Uttar Pradesh, Maharashtra, Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, and Tamil Nadu, the sugar sector supports an estimated 12% of the rural population through direct and indirect employment. Various ancillary operations such as transportation, trade service of machinery, and supply of inputs produce employment. According to Indian Sugar Mills Association (ISMA), India’s sugar output is predicted to increase by 17.69% to 32 MT in 2020-21. The Indian cane sugar market is expected to grow at a CAGR of 4.3% during the forecast period (2020-2025).

The Indian cane sugar segment is further segmented into categories such as organic & conventional sugar, crystallized sugar & liquid syrup, bakery and confectionery, dairy, drinks, and other applications. Hydrogen peroxide is a superb reagent for producing bright, long-lasting sugar. It can also be used in the sugar sector for syrup bleaching. This creates a numerous economic advances and opportunities, as it generates sugar with exceptional brightness, good keeping quality, and lower Sulphur dioxide and sulphated ash levels.

d) Water and Waste Water Treatment Industry

India is the second-largest water consumer in the world. To serve its population, the country requires approximately 740 billion cubic meters of water every year. Furthermore, within the next 20-25 years, water demand is predicted to outstrip supply. As a result, the water and wastewater treatment industry has a lot of room for expansion. Companies must also address avenues to meet the rising demand for pure water to address the water security issues combined with greater public knowledge about water quality and health. Furthermore, the sector has a high need for worldwide, cutting-edge water treatment technology. The water sector is expected to grow to USD 130 billion in investment potential by 20308.

Because of the increased awareness of hygiene during the epidemic, water consumption became comparatively high. According to the UN report, water sanitation is currently a profitable business. They believe that the water and wastewater treatment business has a high return on investment. Better sanitation has a cost-benefit ratio of 5.5, whereas improved drinking water has a cost-benefit ratio of 2.0.

e) Metallurgy Industry

The growing need for infrastructure projects and their restoration has had a significant impact on India’s metallurgy industry. However, the industry provides raw materials to more than simply these two industries. Rather, as a material provider, it is deeply intertwined with a variety of sectors. India is strategically located for exporting to both developed and rising Asian markets.

Hydrogen Peroxide is a very attractive reagent used in metallurgy. It also has its uses in purification of uranium and treating and brightening a number of metals and alloys. Though the initial phase of 2020-2021 witnessed subdued demand and supply in metal industry, with gradual ease in lockdowns, when industrial productions started recovering, the industry started gaining momentum.

f) Disinfectant Industry

The industry is currently gaining traction based on the rise in the utility of maintaining regularly touched surfaces sanitized, as a consequence of global pandemic. The industry has grown at par with growth in consumer awareness regarding importance of preserving health and hygiene in their surrounds and homes. Besides, with increase in healthcare associated infections (HAI) and rising safety and health standards in industries, new product launches are increasing the market for surface disinfectant in India. In FY 2020-21, the Indian Surface Disinfectant Market was worth USD 460.66 million, and it is expected to increase at a CAGR of 7.68% from 2020 to 20259.

Hydrogen peroxide solutions are presently used to sanitize public areas such as airports, roads, and train stations, among other things. Peroxide makers are assisting in the disinfection of physical surfaces by collaborating with numerous institutions and government organizations across India, such as municipal corporations, gram panchayats, and other agencies.

Company Overview

National Peroxide Limited (NPL) is a specialty chemical manufacturing company, established in 1956 by the Wadia Group, one of the oldest conglomerates of India and a major shareholder in the Company. The Company is a pioneer in the peroxygen chemicals which touches an individual’s life at multiple touchpoints and predominantly found in sanitizing formulations.

NPL is the largest producer of Hydrogen Peroxide in India with an installed capacity of 150,000 MTPA at its fully integrated manufacturing site at Kalyan, in Maharashtra. The facility manufactures a concentrated aqueous solution containing 50% Hydrogen Peroxide by weight, denoted as 50% w/w, as per the international standards using the auto-oxidation process.

Hydrogen Peroxide is widely used as antimicrobial chemical against a wide range of microorganisms, including bacteria, yeasts, fungi, viruses, and spores. It is used in both liquid and gas form for disinfection and sterilization. In the wake of the coronavirus outbreak in early 2020, the Company manufactured and supplied the 3% Hydrogen Peroxide (H2O2) technical grade and an economical grade disinfectant, used for destroying essential components of germ cells, to various local administrative bodies across the Country.

Along with Hydrogen peroxide, the product portfolio of the Company also includes Compressed Hydrogen Gas and Peracetic acid thereby catering to the requirement of various downstream sectors such as food processing, textiles, paper and pulp, pharmaceuticals and sanitizer production. The Company has consistently maintained leadership in terms of market share in the domestic market.

Operational Highlights

Discussion on financial performance has been dealt with in the Directors’ Report, which forms part of this Annual Report.

Key Financial Ratios

As per provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Key Financial Ratios are given below:

Key Financial Ratios FY 2020-21 FY 2019-20 Variance
1. Debtors Turnover Ratio (times) 7.64 6.07 Increased focus on sales collections.
2. Inventory Turnover Ratio (times) 6.13 4.00 Higher inventory of Raw Material in the previous year post expansion of the plant.
3. Interest Coverage Ratio (times) 3.16 2.33 Higher profitability in the current year.
4. Current Ratio (times) 1.03 0.87 Lower current liabilities due to reduction in capital creditors.
5. Net Debt Equity Ratio (times) 0.21 0.33 Due to commencement of installments of ECB Loan.
6. Adjusted Operating Profit Margin (%) 11.95% 6.61% Due to capitalisation of interest in previous year
7. Adjusted Net Profit Margin (%) 9.16% 8.33% Higher profitability in the current year.
8. Return on Net Worth (%) 3.87% 3.15% Higher profitability in the current year.


Opportunities for the Company exist in large-scale utilization of hydrogen peroxide in the pulp and paper industry as a bleaching agent and in the food processing industry as a disinfectant. The adoption of greener technologies in the paper manufacturing process has further augmented the demand for hydrogen peroxide in India. Furthermore, the eco-friendly benefits of hydrogen peroxide extend its application for water treatment and pollution control applications, over other conventional chemicals.

Nevertheless, the need for frequent sanitising of surfaces for safety and hygiene purposes amidst the COVID-19 is highly likely to propel the demand for hydrogen peroxide in producing disinfectant liquids and sanitizers in the short and long term.

Further, the drive towards carbon footprint reduction from transportation sector is likely to result in higher uptake of compressed hydrogen gas in the medium to long term as companies are developing hydrogen powered vehicles.

Alternatively, on the supply front, the tendency towards commodity super cycles and geopolitical developments could influence the price pressure on natural gas which is a critical input material.

SWOT Analysis


• More than six decades of experience in manufacturing and supplying peroxygen chemicals to domestic market.

• Largest manufacturer of Hydrogen Peroxide in India which finds application as an eco-friendly disinfectant.

• Integrated manufacturing plant with state-of-the-art equipment’s and technology at Kalyan facility.

• Production capacity of 150,000 MTPA representing nearly half the overall manufacturing capacity of Hydrogen Peroxide in India with few producers.

• Part of more than two and half century old Indian conglomerate, Wadia Group.

• Strategically located near the western coast with access to major ports and gas pipeline infrastructure.


• High demand potential from downstream sectors - textiles, sanitizers and disinfectants, pulp and paper, pharmaceuticals and hospitals.

• Limited players in the domestic industry and increasing demand may lead to cost optimisation and economy of scale.


• Price volatility of natural gas which is used to produce Hydrogen, the key input material.

• Potential threat from new players in the industry.

• Shift in foreign trade policies of the Government.

Risks and Concerns
Risk Concern Mitigating Strategy
Macroeconomic Risk Owing to the Indian economy’s integration with the global economy, possible negative spillover effect from geo political developments could hurt the business. The Company’s Management keeps a strong vigil on key issues across the global economy and adopts contingency plans as and when situation arises.
Input Material Risk Hydrogen, a key input material, is produced from natural gas. Given the Country’s dependency on import for natural gas requirements, any adverse event could create upward pressure on input cost. The Company enters into strategic partnership with key suppliers to hedge for any untoward incidents.
Single Product Risk With more than 98% of the revenue generated from a single product, Hydrogen peroxide, the risk could amplify with fluctuations in demand. The Company constantly monitors demand and looks out for market diversification to reduce dependency on few sectors. Moreover, the Company intends to increase focus on other products in the portfolio to grow their market.
Large Scale Imports Large scale imports from neighbouring and South East Asian countries due to surplus production and lowering of guard to protect domestic industry. The anti-dumping duty has been imposed to protect the domestic sector from cheap imports due to supply demand mismatch. However, the Company actively monitors foreign trade policies to bring to the Government’s notice of any uncompetitive and unfavorable conditions.

Internal Controls

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

M/s. PKF Sridhar and Santhanam LLP, are the Internal Auditors of the Company. The reports and findings of the internal auditors and the internal control system are periodically reviewed by the Audit Committee. To maintain its objectivity and independence, the Internal Audit function reports to the Audit Committee of the Board.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies of the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

Human Resources

At NPL, we value our employees and consider them to be the most important component of our organization. We are proud to always maintain cordial relations with our employees at all levels. For the benefit of our employees and to promote a motivated work force, we regularly implement engagement programs.

We are always striving to provide our employees the best tools to better themselves and become the best they can be. The Company provides in-house and external technical & leadership training to different level of employees for upgrading their technical & leadership skills. Some of our esteemed employees have also attended technical programs conducted by the Indian Chemical Council. We value the safety of our employees and have given various safety awareness trainings to majority of our people to enhance their knowledge about plant safety. All of our employees, including contract employees and security staff, take part in these safety awareness trainings which are conducted regularly.

The employee strength on the permanent rolls of the Company was 126, as on March 31, 2021.

Resources and Liquidity

The Company finances its long term and working capital requirements by a combination of internal cash generations and sourcing credit lines placed at its disposal by its bankers.

Cautionary Statement

Statements in this Management Discussion and Analysis Report describing the Company’s objectives, projections, estimates, expectations, or predictions may be “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include raw material availability and prices, cyclical demand and pricing in the Company’s principal markets, changes in Government regulations, tax regimes, US Dollar / Indian Rupee exchange rate, economic developments within India and the countries in which the Company conducts business and other incidental factors.

Mumbai, June 29, 2021