Panama Petrochem Ltd Management Discussions

The management of Panama Petrochem Limited presents the analysis of the Company for the year ended March 31, 2025 and its outlook for the future. This outlook is based on assessment of the current business environment. It may vary due to future economic and other developments both in India and abroad.

This Management Discussion and Analysis ("MD&A") Report of Panama Petrochem Limited for the year ended March 31, 2025 contains financial highlights but does not contain the complete financial statements of the Company. It should be read in conjunction with the Companys audited financial statements for the year ended March 31, 2025.

GLOBAL ECONOMY

In 2024, the global economy experienced moderate growth of 3.3% (IMF World Economic Outlook, April 2025) amid a challenging macroeconomic environment. Persistent geopolitical tensions, disruptions in trade routes, and high interest rates in major economies created headwinds for global trade and consumption. However, resilient labour markets, easing inflationary pressures, and stable private consumption helped sustain economic activity, particularly in emerging markets.

Global headline inflation continued its downward trajectory, declining from 6.7% in CY 2023 to 5.8% in CY 2024. However, it varies widely across regions— while many advanced economies are making significant progress towards meeting their target inflation rates, some emerging markets continue to grapple with high inflation due to currency depreciation and lingering supply chain disruptions. As inflationary pressures eased, major central banks began to pivot away from tight monetary policies and initiate gradual interest rate cuts, potentially improving liquidity conditions and supporting a revival in private investment.

Looking ahead to 2025, the IMF has cut its forecast for the global economic growth to 2.8% following tariff measures being announced by the United States and countermeasures taken by its trading partners. Global growth is expected to recover to 3% in 2026. The United States and the Euro Areas are expected to grow at 1.8% and 0.8% respectively. The emerging markets while impacted by the tariff shocks continue to be the growth drivers and are expected to grow by 3.7% in 2025 and 3.9% in 2026.

INDIAN ECONOMY

India has firmly established itself as the worlds fastest-growing majoreconomy,withanestimatedGrossDomesticProduct(GDP) growth of 6.5% for FY 2024-25. Inflation has declined from 5.4% in FY 2023-24 to 4.6% in FY 2024-25, resulting in a more stable economic environment and improved consumer sentiment. Government supported structural reforms, deregulation efforts and substantial infrastructure investments have significantly created a conducive environment for businesses.

With sustained investments in critical sectors such as agriculture, healthcare, infrastructure and education, coupled with prudent fiscal management and sound monetary policies, India is set to maintain its impressive growth trajectory in the coming years.

The Indian economy is expected to remain resilient, supported by robust consumption from households, alongside the governments continued focus on capital expenditure. Capacity utilisation in manufacturing remains high and balance sheets of banks and corporates remain healthy. The economy has also undergone rapid digitalisation over the past decade, significantly boosting productivity.

The risks to growth remain largely external – rising tariff barriers, stretched supply chains and continuing geopolitical tensions. The country will have to adapt to the evolving global landscape and harness its domestic strengths to drive growth in a sustainable manner. The Indian economy is projected to grow by approximately 6.3-6.8% in the financial year 2025-2026, driven by moderating inflationary pressures and continued momentum in the manufacturing and service sectors.

INDUSTRY OVERVIEW

The petroleum specialty industry is poised for steady growth in the coming years, driven by increasing demand across diverse end-use sectors such as automotive, personal care, construction, agriculture, and industrial manufacturing.

This niche segment of the petrochemical industry produces high-value, performance-specific products like specialty oils, waxes, lubricants, solvents, additives, and asphalt derivatives. Market expansion is being fueled by technological advancements that enable customized formulations, rising infrastructure development in emerging economies, and a growing emphasis on sustainability.

Companies are increasingly investing in eco-friendly and biodegradable alternatives, blending bio-based feedstocks with conventional ones to meet evolving environmental regulations and consumer expectations. Additionally, digitalization and smart manufacturing practices are enhancing operational efficiency and product quality. Despite positive trends, the industry faces challenges such as volatile crude oil prices, stringent environmental regulations, and global supply chain disruptions. Nevertheless, with projected Compound Annual Growth Rates (CAGR) of 4% to 6% over the next 5–7 years, the petroleum specialty market is expected to maintain a stable upward trajectory.

Factors such as population growth, technological advancements, and rising awareness are driving the demand for petrochemical products, especially in developing nations like India.

Indias petroleum sector is poised to be a key economic driver, with both public and private oil companies increasing investments in refineries to meet the rising demands and reduce import dependency.

The availability of resources and a favorable geopolitical environment in India are attracting investments from global oil companies into the petroleum sector.

The governments focus on research and development in the petrochemical industry, along with initiatives like expanding gas pipelines and refining capacity, is driving growth. Tax concessions on petrochemical products further stimulate the industrys expansion, particularly in polymers, synthetic fibers, and plastics.

BUSINESS OVERVIEW

Established in 1982, Panama Petrochem Limited is one of the leading manufacturers & exporters of nearly 80 variants of petroleum specialty products.

The products are vital for various industries like inks and resins, textiles, rubber, pharmaceuticals, cosmetics, and other industrial purposes. With an object to continue its expansion, the Company has established a subsidiary in UAE i.e. Panol Industries RMC FZE, in order to cater the markets of middle east and African Continent.

Given the pace at which the investments are happening in this sector and how the government is shaping its policies to give a push to petrochemical products, it comes as no surprise that Indias petrochemical sector provides lucrative opportunities to investors, and there is huge potential that still needs to be tapped, Panama Petrochem Limited is working towards creating a difference in Indias petrochemical industry by continuously creating products that are safe and drive the nation to become self-reliant.

MANUFACTURING FACILITIES

The Company has four manufacturing units, all located in western India, namely in Ankleshwar (Gujarat), Daman (Union Territory), Taloja (Raigadh, Maharashtra) and Dahej (Bharuch, Gujarat). The Companys products are exported to more than 55 countries globally. Additionally, the Company has been certified as a Star Export House with a fully equipped state-of-the-art Research and Development Centre at its Ankleshwar unit where it formulates new and value-added products. The Company manufactures nearly 80 product variants used across 6-7 broad industry segments and is accredited as ISO 9001:2015; ISO 14001:2015; ISO 45001:2018 certification by Benchmark.

The Company also develops customized products as per client specifications in the field of petroleum and feeds to various industries like Printing Ink, Resin, Cosmetics, Rubber products, Pharmaceuticals, Engineering, and Chemicals including Petro Chemicals.

With the vision to fuel growth and meet the rising needs of our clients, the Company has made a significant expansion by acquiring approximately 4.5-acre (approx.18,000 sq. meters) land in Thane, Maharashtra, to boost its manufacturing capacity and effectively address the growing demands of the market.

Moreover, the Wholly-Owned Subsidiary of the Company namely, Panol Industries RMC FZE incorporated in UAE has also initiated an expansion project by securing an additional property located at RAK Maritime City Free Zone, thereby enhancing its operational capacities and positioning itself to provide even greater service and achieve newer heights.

Over the years, the Company has formed strong relations with its clientele, comprising of leading names across sectors. Its ability to offer customized products complying with global quality standards has enabled to generate business not only from existing clients, but has also added new clients through business referral.

PRODUCT WISE SALES BREAK-UP FOR THE FINANCIAL YEAR 2024-25

Panoil is the key product of the Company, it has various variants depending upon its end use application.

FUTURE OUTLOOK

The launch of Make in India initiative by the government and investments in smart cities are strengthening the industrial sector which is driving the demand for petroleum Speciality Products. As a result, the aggregate demand of all the key segments in the petrochemical industry is likely to regain a sharp positive trajectory, with key players aiming to ramp up scale.

Increased automobile production, Investments in distribution and branding, demand for advanced lubricants and manufacturers focus on expanding production capacities are expected to further drive the growth of Indias industrial lubricant market.

Panama Petrochem Limited being a provider of various petroleum specialty products across multiple industries is well-positioned to capitalize on growth.

Furthermore, the Company is actively expanding its manufacturing facilities and operations to cater to the growing demands globally and withstand against the negative market forces. Simultaneously, it remains optimistic about mitigating the impacts of price fluctuations in the petroleum industry.

In the managements view the Company will continue to strengthen its financial position and is poised for a promising business growth, with a bright outlook for the coming year. The robust GDP growth, coupled with Panama Petrochem Limiteds diverse product offerings and focus on innovation, creates a highly favorable environment for the Company to thrive and succeed in the market.

OPPORTUNITIES

The recent positive signs emerging from the western world, augur well for our international business particularly for some of the specialized products strategically earmarked for export markets.

With increasing industrialization, focus on infrastructural development and outsourcing boom, the demand for the petroleum products manufactured by the Company is likely to further improve in the coming years. Demand for intermediates, specialty chemicals etc. will increase the demand for petroleum specialty products. This will result in a significant growth in this industry. Growing demand from the rubber industry, personal care industry, and power sector will lead to a strong demand in petroleum products. The relationship established by the Company with the clientele would help in further growth in its business. Moreover, the Company has been increasing its presence in the export markets like USA, Africa, Europe and Asia.

THREATS

Changes in Government policies, especially regarding import of Base Oil will have an adverse impact on the performance of the Company. However, considering the multifarious purposes for which it is used, the domestic supplies are not adequate to meet such domestic demands, hence, the possibilities for any extreme changes in Government policies appear to be remote.

PERFORMANCE

Earnings before Interest, Depreciation, and Tax & Amortization (EBIDTA) on a standalone basis for F.Y. 2024-25 was H 180.38 Cr., which has resulted in a decrease of 9.91 % in comparison with the previous years EBIDTA.

The Net profit after tax for F.Y.2024-25 was H 116.59 Cr., as against H131.25 Cr. in the previous year, resulting in 11.17 % decrease.

The Companys standalone revenue from operations for F.Y. 2024-25 was H 1,775.72 Cr. which is an increase of 2.95% over the previous years revenue.

Additionally, the consolidated revenue from operations of the Company for the year ended March 31, 2025 was H 2792.89 Cr. which has increased by 18.51% on a Year on Year basis.

Net Profit of the Company on a consolidated basis was H 187.03 Cr. which has decreased by 4.16% as that of the previous year.

EPS on standalone basis is H 19.27 as against H 21.70 in the previous year.

Furthermore, EPS on consolidated basis is H 30.92 from H 32.26

During the financial year 2024–25, the Company reported a standalone EBIDTA of H 180.38 Cr., reflecting a decline of 9.91% compared to the previous year. Decrease in EBITDA margin was mainly on account of lower margins and increase in other expenses. The increase in other expenses was largely attributed to the freight cost. The standalone Net Profit after Tax stood at H 116.59 Cr., down by 11.17% from H 131.25 Cr. in the preceding year. However, standalone revenue from operations witnessed a modest growth of 2.95%, reaching H 1,775.72 Cr.

On a consolidated basis, the revenue from operations increased significantly by 18.51% year-on-year to H 2,792.89 Cr., indicating strong performance of the subsidiary.

Despite the revenue growth, consolidated Net Profit declined by 4.16%, amounting to H 187.03 Cr. for the year ended March 31, 2025. These fluctuations in profitability were primarily driven by geopolitical tensions, foreign exchange fluctuations, and ongoing disruptions in the global supply chain.

KEY FINANCIAL RATIOS

		Standalone		Consolidated
Ratio Analysis	Units	F.Y 2025	F.Y 2024	F.Y 2025	F.Y 2024
Trade Receivable/Debtors Turnover Ratio	Times	4.59	4.99	6.14	6.25
Inventory Turnover Ratio	Times	5.17	5.41	6.20	5.78
Current Ratio	Times	4.09	3.15	5.18	3.81
Debt Equity Ratio	Times	0.00	0.03	0.00	0.02
Operating Profit Margin	%	10.16	11.54	9.27	11.33
Net Profit Margin	%	6.57	7.61	6.70	8.28
Return on Networth	%	18.49	22.63	19.64	23.46
Debt Service/Interest Coverage Ratio	Times	12.46	11.97	14.26	14.95
Return On Equity Ratio	%	18.49	22.63	15.87	18.99
Trade Payables Turnover Ratio	Times	6.96	6.42	9.90	8.44
Net Capital Turnover Ratio	Times	2.90	3.05	2.96	2.86
Return on Capital Employed	%	18.49	22.63	19.64	23.46

HUMAN RESOURCE/INDUSTRIAL RELATIONS

The Company considers its employees as the most important asset and integral to its growth and continued success. Over the past years, the Company has increased its focus on its employee engagement and development, launching various new initiatives with the goal of attracting, engaging, retaining, and fostering key talent and diversity across the organization. The Company has increased its investments in learning and skill development initiatives.

The Company recognizes the importance and contribution of human resources in its growth & development and values their talent, integrity and dedication. The Company offers a highly entrepreneurial culture with a team based approach that we believe encourages growth and motivates its employees. The Company has been successful in attracting and retaining key professionals and intends to continue seeking fresh talent to further enhance and grow its business.

It is the people that make an organization. With human resources department being the custodian of all people related processes, it becomes a critical factor in organisational success. The HR works with an objective of aligning the aspirational needs of the people with the organizational objectives of sustained growth, market leadership and cost competitiveness. Its sole aim is to build the Company an exemplary organisation that inspires excellence every day. People development has been a constant focus of HR.

SUSTAINABILITY

It has been a constant endeavor of the Organization to formulate, adopt and improve its business model, embracing both sustainability and growth agenda. This model helps us build efficiencies to achieve sustainable business performance. As part of our sustainability agenda, we focus on conservation of environment, natural resources and energy efficiency. Our operational strategy is built on a long term commitment to experiment and implement new ideas for improving efficiencies and minimizing the use of input resources. Our continued endeavours towards improving productivity and efficiency of all processes, equipments and systems as well as optimization measures have made the Company as one of the most efficient players in terms of energy consumption and resource utilization.

Additionally, the Company has a robust ESG Risk Analysis and monitoring framework which is directly overseen by the Risk Management Committee of the Company.

Moreover, focus on renewable energy continues to remain a thrust area in our sustainability agenda. This has helped the Company in conserving precious natural resources.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has a robust internal control mechanism in place commensurate with the size and nature of its business. The internal control systems comprising policies and procedures are designed to ensure that operations are efficiently managed and aligned with the strategic objectives of the Company and address various aspects of governance, compliance, audit, control, and reporting. The internal controls are responsible for complying with the regulatory requirements, preventing fraud and errors, safeguarding the Companys assets and finances, and preserving the accuracy and reliability of financial transactions and reporting.

The Company has an effective internal audit and control system. The Internal audits are conducted by a firm of Chartered Accountants, ably supported by an internal team staffed with qualified and experienced people. All operational activities are subject to internal audits at frequent intervals. The existing audit and inspection procedures are reviewed periodically to enhance their effectiveness, usefulness and timeliness.

The Audit Committee of the Board of Directors, regularly reviews the findings of the internal auditors, adequacy of internal controls, financial controls, compliance with the accounting standards, as well as recommends to the Board, the adoption of the quarterly and annual results of the Company and appointment of auditors. The Audit Committee also reviews the related party transactions, entered into by the Company during each quarter.

CAUTIONARY STATEMENT

Readers are cautioned that this Management Discussion and Analysis Report may contain certain forward looking statements based on various assumptions on the Companys present and future business strategies and the environment in which it operates. The Companys actual performance may differ materially from those expressed or implied in the statement as important factors could influence Companys operations such as effect of political conditions in India and abroad, economic development, new regulations, Government policies and such other factors which are beyond the control of the Company and may impact the businesses as well as its ability to implement the strategies.

	By Order of the Board of Directors
	For Panama Petrochem Limited
	Amirali E. Rayani
Date: May 26, 2025	Chairman
Place: Mumbai	DIN:00002616