Neptune Petrochemicals Ltd Management Discussions

GLOBAL ECONOMY:

The global economy in 2025 is exerting a mixed influence on the petrochemicals industry, shaped by a combination of moderate growth, shifting geopolitical dynamics, and the accelerating transition toward sustainability. Global GDP growth is projected at around 2.5% to 3.0%, which is sufficient to support modest demand for petrochemicals, though not at the robust levels seen during previous industrial booms. The industry continues to face pressure from economic slowdowns in key markets such as Europe and a transitioning China. China, traditionally a major consumer of petrochemicals, is moving away from heavy industry toward a more service- and tech-oriented economy, dampening demand growth for core petrochemical products such as ethylene, propylene, and their derivatives. However, this decline is being partially offset by rising consumption in Southeast Asia, India, and parts of Africa, where urbanization, infrastructure development, and growing middle-class populations continue to fuel demand for plastic products, synthetic textiles, construction materials, and consumer goods.

Despite this regional shift in demand, the petrochemical industry is navigating a volatile operating environment. High energy prices, logistical challenges, and global supply chain disruptions are ongoing concerns. For instance, instability in key maritime routes, especially around the Red Sea and Suez Canal, has increased shipping costs and led to delays in the delivery of feedstocks and finished products. Moreover, sanctions on countries like Russia and Iran, coupled with trade tensions between major economies (particularly the U.S. and China), are disrupting traditional trade flows and forcing producers to explore alternative sourcing and distribution strategies. At the same time, many Western countries are adopting policies favoring supply chain resilience, such as onshoring or reshoring of chemical production, which could alter the global balance of petrochemical trade over time.

Feedstock dynamics are also playing a critical role in shaping competitiveness within the industry. The price of crude oil has stabilized somewhat in the $80-$90 per barrel range, while natural gas markets remain more volatile due to geopolitical influences and seasonal demand fluctuations. This has direct implications for petrochemical producers, as those in the U.S. and the Middle East?who largely rely on ethane (a gas-based feedstock)?continue to enjoy a cost advantage over Asian and European counterparts that depend heavily on naphtha, derived from oil. As a result, naphtha-based producers in Europe and parts of Asia are under mounting margin pressure, especially in commodity chemicals like polyolefins and aromatics, where global overcapacity is already an issue.

Indeed, overcapacity has emerged as a major structural challenge in the industry. Massive new capacity additions in Asia and the Middle East, particularly in China, India, and Saudi Arabia, have led to supply outpacing demand in several petrochemical segments. This is

especially evident in polyethylene, polypropylene, paraxylene, and methanol markets, where prices and margins have been declining. This trend is expected to persist in the near term unless there is a significant uptick in global demand or rationalization of capacity by higher-cost producers.

Sustainability and environmental regulations are further transforming the competitive landscape. Governments and consumers alike are placing increasing emphasis on carbon neutrality, circular economy practices, and the reduction of plastic waste. In regions such as Europe and North America, regulatory frameworks are tightening, with the introduction of carbon pricing mechanisms, bans on single-use plastics, and mandatory recycled content requirements. These changes are compelling petrochemical companies to invest in advanced recycling technologies, carbon capture and storage (CCS), and bio-based alternatives to traditional fossil fuel-derived chemicals. Furthermore, investors are placing a premium on Environmental, Social, and Governance (ESG) performance, pushing companies to not only reduce emissions but also improve transparency and sustainability across their value chains.

Despite these challenges, the industry also faces opportunities for innovation and growth. There is significant momentum behind the development of green petrochemicals, including bioplastics, renewable feedstocks, and low-carbon production technologies. Emerging digital technologies, including AI and advanced analytics, are being increasingly adopted to improve operational efficiency, predictive maintenance, and energy management in petrochemical plants. Additionally, strategic partnerships between traditional oil and gas players and companies in the recycling, technology, or renewable sectors are enabling more integrated and sustainable business models.

Regionally, the outlook remains diverse. Asia, particularly India and ASEAN countries, is expected to remain the key engine of growth for petrochemicals due to favorable demographics and industrial development. The Middle East continues to pursue diversification efforts, leveraging its feedstock advantage to expand downstream capabilities. Europe, on the other hand, is experiencing weaker demand and higher costs, primarily due to energy price pressures and strict environmental policies. North America shows moderate growth potential, with competitiveness supported by low-cost shale gas, though it too is being shaped by growing ESG expectations and evolving trade dynamics.

In summary, the petrochemicals industry is undergoing a profound transformation amid a complex global economic environment. While demand fundamentals remain intact in many developing regions, mature markets are shifting toward sustainability, requiring companies to adapt quickly. Success in this new era will depend on operational agility, feedstock flexibility, investment in innovation, and a clear strategy for navigating the transition to a low-carbon, circular economy.

INDIAN ECONOMY:

The Indian Petrochemical Industry in the Context of the Indian Economy (2025)

Indias petrochemical industry is closely intertwined with the countrys broader economic trajectory, which remains one of the fastest-growing in the world. As of 2025, Indias GDP is

growing at an estimated rate of 6.5-7%, supported by strong domestic consumption, infrastructure investments, and an expanding manufacturing base. This robust economic environment is creating significant downstream demand for petrochemical products used in packaging, construction, agriculture, automotive, healthcare, textiles, and consumer goods. The Indian petrochemical sector is poised for both expansion and transformation, driven by rising domestic demand, government policy support, and growing emphasis on self-reliance and sustainability.

Economic Drivers of Petrochemical Demand

Indias growing middle class, urbanization, and rising per capita income are major demand drivers for petrochemicals. The packaging industry?especially flexible packaging? continues to see high growth due to booming e-commerce and food processing sectors. Similarly, infrastructure development, fueled by government programs such as PM Gati Shakti, is boosting demand for construction-related chemicals, PVC, and synthetic materials. The automotive and textile sectors, though undergoing structural changes, remain major consumers of polymers and fiber intermediates.

Agriculture, another key driver, contributes significantly to demand for fertilizers and agrochemical intermediates, many of which are derived from petrochemicals like urea, ammonia, and other nitrogen-based compounds. Furthermore, the push toward electric mobility and clean energy solutions is opening up new application areas for petrochemicals, such as in battery casings, lightweight composites, and insulation materials.

Investment and Capacity Expansion

India is witnessing significant investments in petrochemical capacity expansions. Major players like Reliance Industries, Indian Oil Corporation (IOCL), ONGC Petro additions Ltd (OPaL), and Hindustan Petroleum Corporation Ltd (HPCL) are investing in large-scale integrated petrochemical complexes. IOCLs Paradip complex and HPCLs Barmer refinery project are key examples. These expansions aim to reduce import dependence, particularly for key polymers like polyethylene (PE), polypropylene (PP), and polyvinyl chloride (PVC), where India has traditionally relied heavily on imports.

The governments "Make in India" and "Aatmanirbhar Bharat" initiatives are further encouraging domestic production. Policies offering tax incentives, faster clearances, and infrastructure development in industrial corridors (e.g., Petroleum, Chemicals and Petrochemicals Investment Regions or PCPIRs) are making India more attractive for petrochemical investment. In 2025, India is increasingly positioning itself not just as a consumer, but as a competitive manufacturing hub for basic and specialty chemicals. Feedstock Challenges and Opportunities

One of the major challenges for Indias petrochemical sector is its feedstock disadvantage. Unlike the U.S. or the Middle East, which benefit from abundant and low-cost natural gas (ethane), India primarily uses naphtha-based feedstock, which is more expensive and linked to global oil prices. This raises production costs and makes Indian petrochemical exports less competitive. However, ongoing efforts to diversify feedstock sources?such as developing propane dehydrogenation (PDH) units and improving access to imported LNG?could improve competitiveness in the medium term.

Moreover, India is investing in bio-based and alternative feedstocks, exploring ethanol, biomass, and green hydrogen as potential inputs for chemical production in the future. This

aligns with Indias broader energy transition goals and commitment to net-zero emissions by 2070.

Sustainability and Circular Economy Initiatives

Sustainability is increasingly shaping the Indian petrochemical industry. The government has rolled out policies to reduce single-use plastics, increase recycling, and encourage circular economy practices. Extended Producer Responsibility (EPR) regulations require manufacturers and brands to collect and recycle plastic waste, boosting demand for recycled polymers and encouraging investments in advanced recycling technologies.

Major industry players are also aligning with ESG goals. Reliance Industries, for instance, has committed to becoming net carbon zero by 2035 and is investing in renewable energy- powered chemical production and chemical recycling. There is also growing interest in green chemicals, including bio-based polymers and biodegradable materials, particularly in the packaging and consumer goods sectors.

Trade and Import-Export Dynamics

India remains a net importer of several key petrochemical products, including ethylene derivatives, specialty chemicals, and certain grades of polymers. However, with upcoming capacities expected to come online in 2025-2027, India aims to reduce this import dependence and potentially emerge as a net exporter in selected value chains. The industry is also looking to tap into global markets, particularly in Southeast Asia and Africa, where Indian producers can benefit from logistical advantages and free trade agreements (e.g., India-UAE CEPA).

However, the sector faces some trade-related headwinds. Volatility in global shipping costs, competition from low-cost producers in China and the Middle East, and fluctuating foreign exchange rates continue to challenge Indias petrochemical export ambitions.

Challenges and Structural Risks

Despite the growth potential, several challenges remain:

• High feedstock costs due to import dependence and lack of domestic gas-based crackers.

• Over-reliance on commodity chemicals, with limited penetration in high-margin specialty segments.

• Infrastructure bottlenecks in logistics, port handling, and storage for hazardous chemicals.

• Environmental compliance costs and regulatory uncertainties in some states.

To address these, India needs coordinated action between government and industry, focusing on research & innovation, infrastructure upgrades, and skill development in chemical engineering and sustainable manufacturing.

OUTLOOK:

The outlook for the Indian petrochemical industry over the period 2025 to 2030 is broadly positive, driven by strong domestic demand, substantial investment in new capacity, and supportive government policies. Indias economy, expected to maintain a growth rate of 6.5-7% annually, is providing a solid foundation for increased consumption of petrochemical products. Rising urbanization, a growing middle class, and expanding sectors such as packaging, construction, agriculture, automotive, and healthcare are set to drive robust demand for key petrochemicals and polymers. This will result in sustained demand growth

across product categories like polyethylene, polypropylene, PVC, and various specialty chemicals.

To meet this growing demand, the Indian petrochemical industry is undergoing a major investment phase. Public and private sector players are developing large-scale integrated complexes, including Indian Oil Corporations Paradip expansion, HPCLs Barmer project, and Reliances new downstream chemical investments. These projects are expected to significantly enhance Indias petrochemical production capacity and reduce its dependence on imports, particularly for commodity polymers. The governments "Make in India" and "Aatmanirbhar Bharat" (self-reliant India) initiatives, combined with infrastructure support through projects like PM Gati Shakti and the development of Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs), are creating a conducive environment for both domestic and foreign investment in the sector.

However, the industry continues to face structural challenges, particularly regarding feedstock availability and cost. Unlike petrochemical producers in the U.S. or Middle East who benefit from cheap ethane-based feedstocks, Indian producers primarily rely on naphtha, which is costlier and linked to volatile crude oil prices. This feedstock disadvantage limits Indias ability to compete globally on price, especially in export markets. Although steps are being taken to diversify into propane and other alternative feedstocks?including bio-based options and green hydrogen?progress remains gradual and may not fully offset existing cost pressures in the near term.

Sustainability and environmental regulation are becoming increasingly important in shaping the industrys future. India is tightening its regulatory framework with measures such as extended producer responsibility (EPR) for plastic waste, bans on single-use plastics, and a growing focus on the circular economy. As a result, there is rising interest in chemical recycling, biodegradable plastics, and bio-based polymers. Major industry players are also aligning with national and global climate goals, with several investing in green hydrogen, carbon capture, and low-carbon process technologies. These sustainability efforts, while crucial for long-term resilience, will require significant capital investment, technology adoption, and policy clarity?especially for small and mid-sized enterprises.

Indias export potential in petrochemicals is also expected to improve over the coming years. As domestic production increases, India could gradually become an exporter of commodity polymers and select petrochemical intermediates, particularly to neighboring South Asian countries, Southeast Asia, and Africa. However, competitiveness will be constrained by high input costs, infrastructure bottlenecks, and strong competition from low-cost producers in China and the Middle East. Trade agreements like the India-UAE CEPA may open up some new opportunities, but consistent policy support and logistical efficiency will be key to unlocking Indias full export potential.

Technological advancement is another critical area of transformation. Over the next five years, the Indian petrochemical sector is expected to see increased adoption of digital technologies, such as automation, artificial intelligence (AI), and advanced process control. These technologies will enhance operational efficiency, reduce downtime, and support environmental compliance. At the same time, innovation in green chemistry and the

development of higher-value specialty chemicals could help the industry move beyond low- margin commodity segments.

In conclusion, the Indian petrochemical industry is on a growth trajectory, supported by strong market fundamentals, expanding industrial applications, and a proactive policy environment. However, to realize its full potential and emerge as a global player, the industry must address feedstock security, embrace sustainability, and invest in technology and infrastructure. With focused strategies and continued collaboration between industry and government, India could transform from a largely import-dependent market into a globally competitive hub for petrochemical production by 2030.

COMPANY OVERVIEW:

Neptune Petrochemicals Limited was incorporated in October 2021, evolving from a trading operations entity established in 2004. The company specializes in manufacturing and trading a comprehensive portfolio of bitumen-related products.

Product Portfolio

Neptune offers a diverse range of bituminous materials tailored to infrastructure and construction needs, including:

• Standard penetration-grade and viscosity-grade bitumen

• Bitumen emulsions

• Polymer-Modified Bitumen (PMB)

• Crumb Rubber Modified Bitumen (CRMB)

• Additional offerings such as lubricants, base oil, fuel oil, urea, sulfur, glycol, and heavy aromatics.

Manufacturing & Geographic Reach

Neptune operates three manufacturing units strategically located in:

• Ahmedabad, Gujarat

• Panipat, Haryana

• Kamrup, Assam

Theres also a blending/storage unit in Sanand, Gujarat. With these facilities, the company efficiently caters to diverse regional markets across India. In addition, Neptune exports to neighboring countries, including Nepal, Bhutan, and Bangladesh.

Quality Standards & Operational Excellence

Neptune holds multiple certifications demonstrating its commitment to global best practices:

• ISO 9001:2015 (Quality Management)

• ISO 14001:2015 (Environmental Management)

• OHSAS 18001/45001 (Occupational Health & Safety)

The company is equipped with fully automated bitumen emulsion plants and decanters, supported by a state-of-the-art R&D lab, enabling consistent quality control, innovation, and efficient production. It also boasts its own GPRS-enabled fleet for secure and timely deliveries.

Market Position & Strengths

0 As per industry reports, Neptune was the one of the largest importers of packed bitumen in India in 2024

0 It maintains a robust presence across numerous Indian states?including Gujarat, Maharashtra, Rajasthan, and several northeastern states?and has extending reach through exports to Nepal, Bhutan, and Bangladesh

Financial Highlights

Neptunes financial trajectory shows substantial growth:

• Revenue rose dramatically from ^82.16 crore in FY 2022 to ^675.97 crore in FY 2024; PAT increased from ^0.68 crore to ^20.82 crore during the same period.

• As of December 31, 2024, the company recorded ^620.16 crore in revenue and ^19.47 crore in PAT.

• Notably, Neptune showcased exceptional operational efficiency, with key metrics? ROE, ROCE, and RoNW?all exceeding 65%, and a PAT margin of around 3.1%

Management & Ownership

The company is guided by promoters Mr. Pareshkumar Subodhchandra Shah, Mrs. Riddhi Pareshkumar Shah, and Mr. Sanjaykumar Subodhchandra Shah.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Based on the financial results for FY 2024-25, the company has demonstrated strong operational performance with a significant 41.96% year-on-year increase in revenue from operations, rising from ^66,773.78 Lakh to ^94,793.78 Lakh. This growth reflects a healthy expansion in the companys core business activities. Total revenue, including other income, also rose by 41.96%, reaching ^95,916.72 Lakh. However, the Earnings Before Interest, Depreciation, Amortization, and Taxes (EBITDA) grew by only 21%, indicating that operating costs increased at a faster rate than revenue, which could have slightly compressed margins.

The Company operated in one segment area i.e. Manufacturing of Bitumen. During the financial year, our gross domestic sales amounted to Rs. 93,469.01 lakhs and Export Sale is Rs.935.94 Lakhs. Domestic Purchase of the company for the current financial year is Rs. 12,514.02 lakhs and import purchase is Rs. 71,733.08 Lakhs.

During the year under review, the Revenue from operations increased from Rs. 66,773.78 lakhs in FY 2023-24 to 94,793.78 lakhs in FY 2024-25. The Profit After Tax (PAT) attributable to the shareholders in FY 2024-25 was Rs. 2510.05 lakhs against Rs. 2077.42 lakhs in FY 202324. Higher sales volume, Use of technology, Higher market demand and Higher-margin products, were key factors that enhanced the companys profitability during the year.

(Rs. In Lakhs Except EPS)

Particulars	2024-25	2023-24
Revenue from Operations	94,793.78	66,773.78
Other Income	1122.94	823.02
Total Revenue	95916.72	67596.80
Earnings Before Interest, Depreciation and Amortization Expense and Taxes	3477.49	2862.30
Less: - A) Finance Cost	12.89	25.64
Less: - B) Depreciation and Amortization Expense	64.67	16.53
Profit / (Loss) before ExtraOrdinary Items and tax	3399.93	2820.13
Add/(Less): Extra-Ordinary Item	-	-
Profit/(Loss) after Extra Ordinary Items and before tax	3399.93	2820.13
Total Tax Expense	889.88	742.71
Share of Associates Profit	-	-
Profit / (Loss) After Tax	2510.05	2077.42
Earnings Per Share Basic / Diluted	15.62	20774.20

KEY FINANCIAL RATIOS:

Ratios	FY 2024-25	FY 2023-24
Current Ratio	1.46	1.31
Debt-Equity Ratio	0.16	0.00
Debt-Service Coverage Ratio	240.99	0.00
Return on Equity	50.83%	96.57%
Inventory Turnover Ratio	31.70	21.82
Debtors Turnover Ratio	13.61	10.81
Creditors Turnover Ratio	10.50	6.98
Net Capital Turnover Ratio	15.27	24.07
Net Profit Ratio	2.65%	3.11%
Return on Capital Employed	43.82%	89.21%

The SWOT ANALYSIS:

Strength	Weakness
• The company manufactures and trades a wide range of bitumen products? including emulsions, polymer-modified bitumen (PMB), crumb rubber modified bitumen (CRMB), base and fuel oils? serving construction and industrial sectors across India, Nepal, and the UAE	• Even with profit gains, revenue dipped around 4.5-4.7% from ^709 crore to ^676 crore between FY 2023 and FY 2024
• As of mid-2025, Neptune exhibits high performance metrics like ROE around 65-96%, and ROCE exceeding 89%, indicating effective asset utilization	• Theres a risk linked to not fully utilizing installed capacity, which can undermine efficiency
• Earnings grew by nearly 99-100% in the year up to FY 2024, while net profit rose from ^10.39 cr to ^20.82 cr, despite a slight decline in revenue	• The business is dependent on a few key customers and suppliers, increasing vulnerability if any relationships sour
• The company is nearly debt-free, reducing financial risk	• The company faces some legal proceedings, compliance discrepancies, and licensing challenges, which could impact operations or financials
Opportunities	Threats
• As a bitumen supplier, Neptune stands to benefit from Indias expanding infrastructure and road development sectors. The broader petrochemical market is growing steadily, with a projected CAGR of 6% from 2021 to 2025	• The segment is fragmented and highly competitive, typically characterized by high volumes but low margins
• The company has manufacturing units in Panipat, Assam, and Gujarat (including a blending unit in Sanand), which can be leveraged for scaling operations	• Bitumen manufacturing involves emissions and waste management risks, which can attract regulatory penalties or require costly mitigation
• With its IPO aspirations, Neptune could tap into fresh capital to fund capacity expansions, working capital needs, or diversify product offerings.	• Operations rely on rented facilities; lease terminations or failures to renew could disrupt production.
	• The business is exposed to staff shortages, strikes, and mechanical breakdowns that could elevate costs or alter output.

RISK AND CONCERNS:

The economic and commercial environment is rapidly evolving, necessitating a highly efficient and complex supply chain configuration due to the intricacies of the global market. The Companys risk management policy is periodically reviewed by the Audit Committee and the Board of Directors to ensure it remains effective. This policy is evaluated regularly by assessing the threats and opportunities that may affect the Companys overall objectives. The purpose of the policy is to categorize risks into potential threats, detailing their causes, effects, mitigation strategies, and control measures.

As part of this policy, relevant parameters at all manufacturing sites are thoroughly examined to mitigate risks associated with environmental protection and operational safety. The Company adheres to all relevant laws concerning emissions, wastewater, and waste disposal. Enhancing workplace safety remains a top priority across all manufacturing facilities. Furthermore, the Company has established a business continuity plan, which provides a structured framework, guidelines, and operational strategy to ensure the continuation or rapid restoration of essential business functions in the event of disruptions to normal operations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your company has a suitable and sufficient internal audit and control system in place to guarantee that all assets are protected from loss due to unlawful use or disposal and that all transactions are duly approved, duly documented, and duly reported. The organization consistently endeavors to enhance, develop, and apply optimal methodologies in order to fortify its internal control frameworks. Your Company has designated a reputable chartered accounting firm to handle internal auditing. To make sure the duties are carried out successfully, internal audits and checks are conducted on a regular basis.

The internal control systems are built on a solid foundation of good governance, clearly defined systems, processes, and policies, risk assessment, a watchful control function, communication and monitoring, and an independent internal audit function. The internal control is supplemented by effective internal audit being carried out by an external firm of chartered accountants. The Internal Auditors team carries out extensive audits throughout the year in all areas. The Internal Risk and Control function also evaluates organizational risk along with controls required for mitigating those risks. The control activities continue to

incorporate, among others, continuous monitoring, routine reporting, checks and balances, purchase policies, authorization and delegation procedures, audits including compliance audits, which are periodically reviewed by the Audit Committee.

The Audit Committee of Directors regularly reviews the findings of the Internal Auditors and effective steps to implement the suggestions/observations of the Auditors are taken and monitored regularly. The performance of the Internal Audit department is also reviewed by the Board and improvements advised. Your Company is fully geared to implement any statutory recommendation, which may be made in this regard.

HUMAN RESOURCES:

Your Company views human capital as a fundamental pillar for sustainable growth. It strives to provide a conducive workplace environment supported by people-oriented policies, with a strong emphasis on health, safety, and responsible care. Guided by core values such as high performance, collaboration, and continuous improvement, the Companys human resource policies focus on acquiring and retaining talent, as well as enhancing employee skills and competencies to align with business needs.

Your Company has implemented well-documented, employee-friendly policies to enhance transparency and foster a sense of teamwork, unity, and mutual trust. These policies contribute to a positive workplace environment and are crucial for successful talent acquisition and retention. We are committed in investing in the welfare, safety, and wellbeing of its workforce.

Overall, your Company has maintained harmonious relationships with employees and unions at its factories and offices, receiving support for implementing reforms aimed at enhancing safety, quality, cost efficiency, and productivity. By embracing diversity and inclusion, we leverage a wide range of skill sets across all operations and business activities.

CAUTIONARY STATEMENT:

In accordance with relevant securities laws and regulations, statements in this report on management discussion and analysis regarding the companys goals, plans, estimates, expectations, or predictions may be considered forward-looking. These claims are predicated on specific presumptions and projections of forthcoming occurrences. The actual results may differ significantly from the stated or implied results based on a variety of factors, including the weather, domestic and international demand-supply dynamics, raw material costs, finished goods availability and prices, fluctuations in the foreign exchange market, modifications to governmental laws and tax laws, political and economic developments in India and the other countries where the company operates, and other factors like litigation and labor relations. Regarding the forward-looking statements in this document, the Company disclaims all liability. These statements could change in the future based on new information, events, or developments that are outside the Companys control.

	For & on behalf of the Board of Directors
	Neptune Petrochemicals Limited
	Sd/-	Sd/-
Date: September 01, 2025	Pareshkumar S. Shah	Sanjaykumar S. shah
Place: Ahmedabad	Managing Director	Wh ole-Time Director
	DIN:03217789	DIN:00018115
Registered Office:
Block-B, Office No. 606, Mondeal Heights
Nr. Panchratna Party Plot, S. G. Highway,
Ahmedabad, Gujarat, India, 380015