Nikhil Adhesives Ltd Management Discussions

REPORT ABOUT NIKHIL ADHESIVES LIMITED

With over three decades of industry experience, Nikhil Adhesives Limited (Nikhil) continues to be among the leading players in Specialty Chemicals, Industrial Emulsions, Adhesives (Mahacoi), and Construction Chemicals (Mahafix). With a strong domestic presence across PAN India supported by a robust distribution network, the Company leverages its state-of-the-art R&D, modern manufacturing Infrastructure, and committed team to deliver customer-centric solutions.

The major thrust continues to be the expansion of consumer products and value-added import substitutes, strengthening IMikhils position as a trusted solutions provider.

KEY HIGHLIGHTS FOR 2024-25

• Commissioning and stabilising of RDP capacity at Dahej.

• Further automation and digitalisation across Tumkur and Dahej plants.

• R&.D centre at Navi Mumbai upgraded with application testing facilities for construction chemical and wood adhesives products.

• Entry into new export markets.

GLOBAL ECONOMIC OVERVIEW

• IMF projects global GDP growth at 3.1% in 2025, down from 3.2% in 2024, with moderation in advanced economies.

• Commodity volatility persists: crude oil expected in the $75-85/bbl range; non-fuel commodities to remain firm.

• Inflationary pressures have eased, though higher-for-longer interest rates in the US and Europe continue to weigh on investment.

• Trade flows show improvement, with WTO estimating 3% global trade growth in 2025, though geopolitical risks remain elevated.

PERFORMANCE OF MAJOR ECONOMIES

United States: Real GDP growth projected at 1.9% in 2025 (IMF WEO Update, July 2025).

Euro area: Growth expected to accelerate to 1.0% in 2025 and 1.2% in 2026 (IMF WEO Update, July 2025).

Japan: Growth projected at 0.7% in 2025 (IMF WEO Update, July 2025).

China: Growth projected at 4.8% in 2025 (IMF WEO Update, July 2025).

Middle East & Central Asia: Regional growth projected at 3.4% in 2025, 3.5% in 2026 (IMF WEO Update, July 2025).

INDIAN ECONOMIC OVERVIEW

India remained the fastest-growing major economy in FY 2024-25.

• Real GDP growth (NSO Provisional Estimates, May 30, 2025): 6.5% for FY 2024-25; Q4 FY25 at 7,4%.

• Private Final Consumption Expenditure (PFCE): up 7.2% YoY in FY 2024-25; Gross Fixed Capital Formation (GFCF): up 7.1%.

• Sectoral performance: Construction +9.4%; Public Administration, Defence & Other Services +8.9%; Financial, Real Estate & Professional Services +7.2%.

• Trade (Commerce Ministry/PIB): Overall exports (merchandise + services) rose 5.5% to US$ 820.93 bn in 2024-25; merchandise exports were US$ 437.42 bn (+0.08% YoY).

• Inflation: CPI average eased to ~4.6% in FY 2024-25 (lowest in six years), within RBIs tolerance band.

• Monsoon 2025: India received above-average rains (106% of LPA), arriving early and aiding timely sowing. This boosted kharif crop output, strengthened rural consumption, stabilized food prices, and supported overall GDP growth.

UNION BUDGET 2025 - KEY PRIORITIES

• Rs.12 lakh crore capex outlay (10% higher YoY).

• Expanded PLI schemes covering chemicals and specialty intermediates.

• Focus on green energy, solarisation, and energy security to lower industrial costs.

• Stronger support to MSMEs through credit guarantees and skilling initiatives.

• Enhanced allocations for agriculture, employment, and social inclusion.

Paints & Construction Chemicals

• Organised paints capacity projected to double to ~15 blpa by FY 2028.

• Construction chemical market expected to grow at 7% CAGR, crossing USD 5.5 billion by 2030.

• Rising housing and infra projects to benefit adhesive & polymer demand.

Adhesives & Specialty Chemicals

• Adhesives market to grow at ~7% CAGR till 2028, reaching USD 3.9 billion.

• Growth driven by woodworking, packaging, automotive, and consumer repair segments.

Consumer Sector

• India expected to become the third-largest consumer market globally by 2027.

• Premiumisation trend continues, with affluent segments expected to expand to ~88 million individuals by 2028.

SWOT ANALYSIS

Strengths

• Over 40 years of promoter experience in specialty chemicals.

• Diversified product portfolio across industrial and consumer adhesives.

• Strong nationwide distribution with 5 plants and 22 warehouses and R & D center.

• Partnerships with leading corporates (Asian Paints, Berger, Akzo Nobel, JK Cement, Indigo, DOW, BASF,JSW).

• Ongoing R&D investments for import substitution and new products.

Weaknesses

• Consumer brand awareness still developing compared to established peers.

• Margins vulnerable to raw material volatility.

• Export business in early stages of scale.

Opportunities

• Make in India initiatives to drive import substitution.

• Expansion into untapped packaging adhesives and construction solutions.

• Growing demand in both domestic and overseas consumer markets,

• Export potential to South-East Asia, Middle East, and Africa.

Threats

• Raw material price fluctuations (linked to crude oil).

• Government policy changes on imports, duties, and quality standards.

• High competition in adhesives and construction chemicals.

• Currency volatility impacting exports.

OUTLOOK FOR FY 2025-26

• Nikhii Adhesives will deepen its consumer business (Wood Adhesives (Mahacol) and Construction Chemical (Mahafix)) footprint through brand-building, retail expansion and influencer engagement.

• Strong focus on cost-effective RDP for Putty and Tile Adhesive products.

• Cost efficiencies from automation and higher capacity utilisation to support margins.

• Cautiously optimistic stance, with growth driven by construction sector recovery, rising consumer demand, and product innovations.

• Development of specialized emulsion for paint industry.

Sources: IMF World Economic Outlook Update, July ; NSO/MOSPI Provisional Estimates (May 30, 2025); PIB/Commerce Ministry (Trade Data, 2025); RBI/PIB (Inflation Data, 2025).

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has strong internal control procedures in place that are commensurate with its size and operations. The Board of Directors, responsible for the internal control system, sets the guidelines and verifies its adequacy, effectiveness and application. The Companys internal control system is designed to ensure management efficiency, measurability and verifiability, reliability of accounting and management information, compliance with all applicable laws and regulations, and the protection of the Companys assets. This will help identify and manage the Companys risks (operational, compliance- related, economic and financial),

HUMAN RESOURCES/INDUSTRIAL RELATIONS

The Company believes that employees are the foundation for the superstructure of any corporate organisation. The Company considers its employees as its most significant asset and provides them with a healthy and competitive work environment to excel and set new standards of quality, productivity, efficiency and customer satisfaction. The Companys consistent HR policies aid in attracting and retaining the best talent pool.

FINANCIAL HIGHLIGHTS AT A GLANCE

SEGMENTWISE MANUFACTURING SALES IN VOLUMES in TONS

Adhesives & Construction Chemicals contribution 51% of the total sales volume

(i) Consumer &Contract Manufacturing Adhesives (MAHACOL/ EMDILITH)

Branded consumer & Contract manufacturing adhesives products contributed 19% of the total volume sales of the Company. Consumer products include Wood adhesives, Packaging and Lamination Adhesives, Sticker Adhesives and Art and Craft Adhesives, Rubber & PU Adhesives and Tape Adhesives. Contract Manufacturing is mainly for Asian Paints Ltd.

(ii) Industrial Adhesives

Industrial Adhesives contributes 9% of the total volume sales of the Company. Adhesives for Packaging Industries.

(iii) Construction Chemicals

Company has achieved 23% of total volume sales of the Company.

(iv) Speciality Emulsions

The Companys speciality emulsions contribute 48% of the total sales volumes

a) Paint Emulsions (EMDILITH, EMDICRYL)

Majority of the paint emulsions sales is supplied to large corporate paint manufacturers & the balance through distribution channels.

Out of the total sales volume of the Company, paint emulsions contribute 35%.

b) Textile (EMDITEX, EMDIBIND)

The Company has a network for textile emulsions and binders through distributors PAN India, textile emulsions contribute 12% of the companys total sales volume.

(v) Export:-

Company exports adhesives and emulsions to Nepal, Taiwan, Bangladesh, Shri Lanka, Philippines and Kenya which contributes to 1% of the total volume sales of the Company.

vl) Mahacol RDP: - Re-dispensible Polymer

We have launched new business in this financial year which is contributing 1% of the total sales volume, is expected to grow in future.

TURNOVER

For the year ended 31^st March, 2025 turnover isRs.. 585 cr. as compared to Rs.. 564 cr. in the previous year.

PROFITS

Profit Before Tax (PBT) has increased from Rs. 17.93 cr. (FY 2023-24) to Rs. 22.42 cr. (FY 2024-25) and Profit After Tax (PAT) has increased from Rs. 13.25 cr. (FY 2023-24) to Rs. 16.86 cr. (FY 2024-25).

TRADING

Revenue from trading segment has decreased from Rs. 42,95Crore to Rs. 35.96 Crore during the year ended 31^st March 2025 as there was a huge fluctuation in international market for the entire chemical segment, therefore the company has decided to reduce its activities.

FOREIGN EXCHANGE FLUCTUATIONS

Your Company had a foreign currency loss of Rs. 22.65 Lakh in current year (FY 2024-25) as compared to forex gain of Rs. 58.09 Lakh in the previous year (FY 2023-24).