Paragon Fine and Speciality Chemical Ltd Management Discussions

BUSINESS OVERVIEW

We are engaged in the business of custom synthesis and manufacturing of chemical intermediates involving complex and differentiated chemistry. We commenced business as a partnership firm in the year 2004 and have, over the years, evolved into custom synthesis and manufacturing of Pharma Intermediates, AGRO intermediates, Cosmetics Intermediates, Pigment Intermediates and Dye Intermediates etc. for a diverse base of Indian and global customers. We work with an approach towards chemistry combined with technology and systems that would lead to sustained product development. Our diverse range of products finds applications across various industries, including pharma, agrochemicals, cosmetics, pigments and dyes.

We have a state-of-art Pilot Plant, which is a vital link between R&D and large scale production. We have a pilot plant with two glass line assembly and three reactors installed, for batch reaction technology. We use various chemistry compositions like: Acetylation, Amination, Catalytic hydrogenation, Chlorosulfonation, Methoxylation, Nitration, Amidation, Ethoxylation, Sulphonation etc which enables us to cater to niche and advanced intermediate requirements of a wider range of end- products and applications.

We have a dedicated in-house R&D facility which is equipped with laboratories engaged in development and innovation of catalytic process, new chemical screening, which assists us in pursuing efficiencies from the initial conceptualization up to commercialization of a product. The Department of Scientific and Industrial Research has also recognized our in-house R&D facility. We have a diversified products portfolio due to our research and development ("R&D”) and technological capabilities. Our R&D team has successfully carried out multi-step synthesis and scale-up for several new molecules in the area of specialty intermediates and as a result expanded our commercialized product portfolio from around 100 products in Fiscal 2021 to around 140 products in Fiscal 2023. As of March 31, 2025, we have a team of 14 technocrats (with degrees such as Bachelor of Science, Master of Science, B. Pharma or Bachelor of Engineering.)

We are a One Star Export House exporting in countries like: USA, Israel, Spain, United Kingdom, China, Switzerland, Taiwan, Thailand, Mexico, Japan, Russia, France, Indonesia, Latvia, Germany etc. As of March 31,2023, our product portfolio comprised of around 140 products.

Our Company is led by our Promoters Dr. Pravinchandra Jasmat Vasolia, Kishorkumar Panchabhai Patolia and Vallabh Ratanji Savaliya each of whom is having an experience of more than 3 decades in the chemical and associated industry. Each of our Promoters is actively involved in the critical aspects of our business, including R&D, catalytic process and production, finance and marketing.

INDUSTRY OVERVIEW

SPECIALITY CHEMICAL AND INTERMEDIARIES

Indias chemicals industry is de-licensed, except for few hazardous chemicals. In the Indian chemical industry, alkali chemicals have the largest share with ~71.9% in the total production from April to July 2021 (FY22); production of polymers accounts for ~59% of the total production of basic key petrochemicals in 2019. The chemical industry is expected to contribute US$ 300 billion to Indias GDP by 2025.

India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals). The chemicals industry in India covers more than 80,000 commercial products with overall market size standing at US$ 178 billion in 2018-19. The industry is expected to grow at 9.3% to reach US$ 304 billion by 2025 on the back of rising demands in the end-user segments for specialty chemicals and petrochemicals. The specialty chemicals sector is expected to reach US$ 40 billion by 2025.

Indian manufacturers have recorded a CAGR of 11% in revenue between FY15 and FY21, increasing Indias share in the global specialty chemicals market to 4% from 3%, according to the Crisil report. A revival in domestic demand and robust exports will spur a 50% YoY increase in the capex of specialty chemicals manufacturers in FY22 to Rs. 6,000 - 6,200 crore (US$ 815-842 million). Revenue growth is likely to be 19-20% YoY in FY22, up from 9-10% in FY21, driven by recovery in domestic demand and higher realisations owing to rising crude oil prices and better exports. In FY22, Indias dye exports totalled US$ 3.24 billion.

Chemical production reached 907,639 MT in August 2022, while pet rochemical production reached 1,727,019 MT. In August 2022, production levels of various chemicals were as follows: Soda Ash: 267,416 MT, Caustic Soda: 283,279 MT, Liquid Chlorine: 203,195 MT, Formaldehyde: 26,842 MT and Pesticides and Insecticides: 18,881 MT. A 2034 vision for the chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector. The government plans to implement production-link incentive system with 10-20% output incentives for the agrochemical sector; to create an end-to-end manufacturing ecosystem through the growth of clusters.

• Specialty chemicals account for 20% of the global chemicals industrys US$ 4 trillion, with India s market

• expected to increase at a CAGR of 12% to US$ 64 billion by 2025. This gain would be driven by a healthy demand growth (CAGR of 10-20%) in the export/end-user industries.

• The Indian dyes and pigments market is projected to reach US$ 63 billion by 2022, accounting for about 16-18% of the global dye production.

• The agrochemicals market in India is expected to register 8.6% CAGR to reach US$ 7.4 billion between 2021 and 2026.

• The import of agro-chemical was US$ 1.79 billion, dyes were US$ 0.31 billion and the other dye intermediates were US$ 1.22 billion during April-March 2023.

• Around 50% of the agro-chemicals are exported from India to the world.

• India is the top producer and exporter of castor oil, with 85-90 % of total global exports in the world.

• India holds a strong position in international trading of chemicals and ranks 9th in exports and 6th in imports at a global level (excluding pharmaceuticals).

• The specialty chemicals market in India would grow faster than China, increasing its market share to 6% by 2026 from 3-4% in fiscal 2021.A shift in the global supply chain brought on by the China+1 strategy and a resurgence in domestic end-user demand will fuel significant revenue growth of 18-20% in 2022 and 14-15% in 2023.

SPECIALTY CHEMICALS - AGGRESSIVE CAPEX TO DRIVE GROWTH

• Specialty chemical companies in India have started accelerating their capex plan on the back of strong growth visibility and emerging opportunities

• Due to growing environmental concerns, many chemical companies in China ceased activities in

2018; this led to an increase in manufacturing of specialty chemicals in the Indian market to ensure uninterrupted supply

• Indian manufacturers have recorded a CAGR of 11% in revenue between FY15 and FY21, increasing Indias share in the global specialty chemicals market to 4% from 3%, according to the Crisil report.

• A revival in domestic demand and robust exports will spur a 50% YoY increase in the capex of specialty

• chemicals manufacturers in FY22 to Rs. 6,000-6,200 crore (US$ 815-842 million).

• Revenue growth is likely to be 19-20% YoY in FY22, up from 9-10% in FY21, driven by recovery in domestic demand and higher realisations owing to rising crude oil prices and better exports.

OPPORTUNITIES, THREATS AND CONCERN

OPPORTUNITIES

• Indias specialty chemicals companies are expanding their capacities to cater to rising demand from domestic and overseas.

• In July 2021, the government announced discovery of indigenous deposits of phosphatic rocks. This will help expand fertiliser production domestically and boost self-reliance in fertiliser production.

• The Odisha government accepted investment applications worth ~US$ 345.3 million in the metal, cement, chemical, plastic, food processing and manufacturing sectors in April 2021. This is likely to generate 2,755 jobs.

Important factors that could cause actual results to differ materially from our expectations include but are not limited to:

1. General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies;

2. Inability to promptly identify and respond to changing customer preferences or evolving trends and If one or more of our major customers choose not to source their requirements from us or to terminate our long-term contracts;

3. Our ability to effectively manage the operations of and costs associated with our manufacturing facilities;

4. Any slowdown or shutdown in our manufacturing operations or strikes, work stoppages or increased wage demands by our employees that could interfere with our operations;

5. Certain risks consequent to our operations involving the manufacture, usage and storage of various hazardous substances;

6. Our operations are dependent on our R&D capabilities and an inability to continue to design catalytic processes may adversely affect our business;

7. Our reliance on a combination of trade mark, trade secret, copyright law and contractual restrictions and our inability to protect our intellectual property rights;

8. Exchange rate fluctuations that may adversely affect our results of operations, since our sales from exports and a portion of our expenditures are denominated in foreign currencies;

9. We may not be able to sustain our historical growth rates, and our historical performance may not be indicative of our future growth or financial results;

10. Failure to successfully upgrade our product portfolio, from time to time;

11. Any change in government policies resulting in increases in taxes payable by us;

12. Our ability to retain our key managements persons and other employees;

13. Changes in laws and regulations that apply to the industries in which we operate;

14. Our ability to grow our business;

15. Restrictions on the import of our raw materials and/or an increase in shipment costs;

16. Reduction in the demand of our products;

17. Failure to comply with the quality standards and requirements of our customers;

18. Inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

19. Companys ability to successfully implement its growth strategy and expansion plans ;

20. Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

21. Inability to successfully obtain registrations in a timely manner or at all;

22. Occurrence of Environmental Problems & Uninsured Losses;

23. Conflicts of interest with affiliated companies, the promoter group and other related parties;

24. Any adverse outcome in the legal proceedings in which we are involved;

25. Concentration of ownership among our Promoters;

26. Other factors beyond our control.

OUTLOOK

Our company is well-poised to capitalize on opportunities and initiatives by the Government of India, creating value for all of the stakeholders involved, in the process. We believe a significant demand for our products is generated in India owing to our governments objective to enhance domestic sourcing as well as self-reliance, and that our ability to supply chemical intermediates enables us to tap growth opportunities. We also intend to capitalize on the unutilized capacity at our manufacturing facilitiy to further increase production of our current portfolio and take advantage of the experience of our sales and marketing team to increase our visibility in the domestic and international market.

INTERNAL CONTROL FRAMEWORK

Your Company conducts its business with integrity and high standards of ethical behaviour, and in compliance with the laws and regulations that govern its business. Your Company has a established framework of internal controls in operation, supported by standard operating procedures, policies and guidelines, including self-assessment exercises. The Company time to time seek evaluating the adequacy of all internal controls and ensuring that operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements.

PEOPLE AND PRACTICES:

The Board of Directors continues to challenge the management and push for higher targets. The Boards well-rounded experience comprises individuals with experience in the field the Company operates. The Board continues to provide long term direction to the Company and engages actively towards initiatives inputs on the Companys long-term vision.

The Company recognizes the importance and contribution of its human resources for its growth and development and values their talent, integrity and dedication. With the focus to develop leadership talent from within, the Company conduct various programmes. Employee motivation is key to organization success. On these lines, the Company conducts its various social programs and motivate them. As on March 31,2025, the Company has 84 employees.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Your Company has achieved a total income of Rs. 11711.85 Lakh during the year under review as

against Rs. 12265.99 Lakh in the previous financial year. The net profit after tax of the Company for the year under review is Rs. 591.80 Lakh as compared to profit of Rs. 1431.08 Lakh for the previous year. The net profit before tax for the year under review is Rs. 828.19 Lakh as compared to profit of Rs. 1923.62 Lakh for the previous year.

FINANCIAL RATIOS

Particulars	As at 31-3-2025	As at 31-3-2024	% Variance
Current Ratio	6.96	6.74	3%
Debt-Equity Ratio	0.04	0.10	-63%
Debt Service Coverage Ratio	19.65	16.62	18%
Return on equity ratio	0.07	0.27	-75%
Inventory Turnover Ratio	3.79	4.48	-15%
Trade Receivables Turnover Ratio	3.52	4.58	-23%
Trade payables Turnover Ratio	7.33	5.69	29%
Net Capital Turnover Ratio	1.63	2.34	-30%
Net Profit Ratio	5.18%	11.87%	-56%
Return on Capital Employed	8.97%	21.84%	-59%

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report containing the objectives, expectations or predictions of the company may be forward-looking within the meaning of securities laws and regulations. Actual results may differ materially from those expressed in the statement. The operations of the Company could be influenced by various factors such as domestic and global demand and supply conditions affecting sales volumes and selling prices of finished goods, input availability and cost, tax laws, economic developments within the country and other factors such as litigation and industrial relations.