Prasol Chemicals Ltd Management Discussions

OPERATIONS

The following discussion is intended to convey the managements perspective on our financial condition and results of operations for the three month period ended June 30, 2025 and for Fiscals 2025, 2024 and 2023. Our Companys financial year commences on April 1 and ends on March 31 of the immediately subsequent year, and references to a particular financial year or a ‘Fiscal are to the 12 months ended March 31 of that particular year. We have included in this section a discussion of our financial information on a restated basis. The Restated Financial Information included in this Draft Red Herring Prospectus are prepared and presented in accordance with requirements of Section 26 of the Companies Act, the SEBI ICDR Regulations and the Guidance Note on ‘Reports in Company Prospectuses (Revised 2019) issued by the ICAI, which differ in certain material respects from IFRS, U.S. GAAP and GAAP in other countries, and our assessment of the factors that may affect our prospects and performance in future periods.

Unless otherwise stated, or the context otherwise requires, the financial information used in this section is derived from our Restated Financial Information included in this Draft Red Herring Prospectus on page 342. Ind AS differs in certain respects from Indian GAAP, IFRS and US GAAP and other accounting principles with which prospective investors may be familiar. Also see ‘Risk Factor - Significant differences exist between Ind AS and other accounting principles, such as U.S. GAAP and IFRS, which may be material to the Restated Financial Information prepared and presented in accordance with SEBI ICDR Regulations contained in this Draft Red Herring Prospectus on page 71.

This discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as the risks set forth in the chapters entitled "Risk Factors" and "Forward-Looking Statements" on pages 37 and 35, respectively.

Unless otherwise indicated, industry and market data used in this section has been derived from industry publications, in particular, the report titled ‘Industry Report on Speciality Chemicals Sector dated October 7, 2025 (CARE Report), prepared and issued by CARE, exclusively commissioned and paid for by our Company in connection with the Offer. Unless otherwise indicated, all financial, operational, industry and other related information derived from the CARE Report and included herein with respect to any particular year, refers to such information for the relevant calendar year. CARE was appointed by our Company and is not connected to our Company, our Directors, our Promoters, our Key Managerial Personnel, Senior Management or BRLM. A copy of the CARE Report is available on the website of our Company at https://prasolchem.com/investor-relations/. For further information, see ‘Risk Factor - Certain sections of this Draft Red Herring Prospectus contain information from CARE Report which has been exclusively commissioned and paid for by our Company on page

71. Also see ‘Certain Conventions, Presentation of Financial, Industry and Market Data and Currency of Presentation on page 32.

Overview

Our Company was incorporated in 1992 and with over 33 years of experience in the specialty chemicals industry, we are a forward integrated manufacturer of acetone and phosphorous based specialty chemicals and other specialty chemicals involving complex and differentiated chemistries. According to the CARE Report, we are a highly diversified specialty chemical player with over 150 specialty chemical products and 1,107 customers and exports to 69 countries, as of July 31, 2025. Our products find diversified applications across numerous industries with 5 key segments being: (a) performance chemicals (including lubricant additives and mining chemicals); (b) PICA viz., paints, inks construction, & adhesives; (c) pharmaceuticals; (d) agrochemicals; and (e) home and personal care (Application Industries).

As of July 31, 2025 our comprehensive product portfolio comprised over 150 specialty chemical products comprising:

- 21 acetone-based specialty chemicals. Acetone is a colourless, highly volatile and flammable organic chemical compound with a pungent odour;

- 53 phosphorous-based specialty chemicals. Phosphorous is a highly reactive chemical element; and

- 76 other specialty products including non-acetone and non-phosphorous based customised specialty chemicals such as surfactants, performance additives, ethers, esters, polymers, and acids.

According to the CARE Report, during the calendar years 2022-2024, we were the largest importer of acetone in India to produce the most diversified range of acetone-based specialty chemicals in India such as diacetone alcohol, and isophorone. We were also the only manufacturer of isophorone in India. During the calendar years 2022-2024, we were also among the top 5 users of yellow phosphorous in India to produce phosphorous-based specialty chemicals such as phosphorous pentasulphide and diethyl thiophosphoryl chloride.

Further, according to the CARE Report, specialty chemicals are specifically produced or formulated substances designed for functions and applications. Unlike commodity chemicals, which are mass-produced, specialty chemicals are manufactured in smaller quantities, with a strong emphasis on quality, performance, and customization to meet the unique demands of various industries. The quality of these chemicals is crucial, as it directly impacts the performance and safety of the end products.

Set out below is our product offering along with the revenue generated, in terms of percentage of the revenue from operations, from each of our product categories, in the 3 months ended June 30, 2025 and in Fiscal 2025, Fiscal 2024 and Fiscal 2023, based on our Restated Financial Information:

Products	3 months ended June 30, 2025		Fiscal 2025		Fiscal 2024		Fiscal 2023
	Amount (in million)	% of total revenue from operations	Amount (in million)	% of total revenue from operations	Amount (in million)	% of total revenue from operations	Amount (in million)	% of total revenue from operations
Acetone based specialty chemicals	1,365.01	42.72%	4,833.26	47.74%	4,116.88	46.97%	4,079.16	43.86%
Phosphorous based specialty chemicals	1,247.75	39.05%	3,489.61	34.47%	2,789.19	31.82%	3,379.25	36.33%
Other specialty chemicals*	563.76	17.64%	1,745.45	17.24%	1,825.79	20.83%	1,769.40	19.02%
Other operating and service revenue**	19.08	0.60%	56.62	0.56%	33.78	0.39%	73.00	0.78%
Total	3,195.60	100.00%	10,124.94	100.00%	8,765.65	100.00%	9,300.82	100.00%

*Includes non-acetone and non-phosphorous based customised specialty chemicals such as surfactants, performance additives, ethers, esters, polymers, and acids.

** Comprises job work sales, commissions, scrap sales and other operating income.

We are a 3 Star Export House company as certified by the Government of India certified with a robust global distribution network spread across 69 countries in Asia-Pacific (APAC), North America, South America and Europe as on July 31, 2025. Set out below is a break-up of our revenue from domestic sales and export of our products during the 3 months ended June 30, 2025 and in Fiscal 2025, Fiscal 2024 and Fiscal 2023, based on our Restated Financial Information:

Particulars	3 months ended June 30, 2025		Fiscal 2025		Fiscal 2024		Fiscal 2023
	Amount (in million)	% of total revenue from operations	Amount (in million)	% of total revenue from operations	Amount (in million)	% of total revenue from operations	Amount (in million)	% of total revenue from operations
India	2,316.27	72.48%	7,255.03	71.65%	6,546.46	74.68%	6,591.24	70.87%
Exports	879.34	27.52%	2,869.92	28.35%	2,219.19	25.32%	2,709.58	29.13%

As a manufacturer of specialty chemicals, it is imperative for our products to be approved by the customers. According to the CARE Report, a key entry barrier in our industry is the requirement to be registered and approved by the customer before any supply can commence. The approval cycle, which typically takes 1-4 years, involves extensive testing of product purities and impurities, customization to customer-specific needs, performance validation, shelf-life studies, and end-use application testing. This creates significant stickiness for existing suppliers and makes it difficult for new entrants to displace them. Additionally, the high cost of product development, the complex chemistry involved in manufacturing, the time and capital required to develop new technologies, achieving and maintaining certifications in accordance with stringent international and domestic regulations, and the long gestation period before commercial viability acts as entry barriers.

We benefit from our experience in the industry and long-standing relationships with customers such as Alembic Pharmaceuticals Limited, Auchtel Products Limited, Bharat Rasayan Limited, Carl Bechem Lubricants (India) Private Limited, CentiChem b.v., Clean Science and Technology Limited, Croda India Company Private Limited, Coromandel International Limited, DutCH2 B.V., Everest Organics Limited, Gharda Chemicals Limited, GreenChem Industries LLC, GSP Crop Science Limited, Hari Orgochem Private Limited, Indian Additives Limited, Jalnidhi Bitumen Specialities Private Limited, Kalium Chemical Comercio Importacao e Exportacao Ltda., Lubrizol India Private Limited, MSN Laboratories Private Limited, NGL Fine-Chem Limited, Rossari Boitech Limited, Special Materials Company, dba SMC Global, Superform Chemistries Limited, Supriya Lifescience Limited, TJS Pte. Ltd., PT WWRC Indonesia and Yasho Industries Limited.

We attribute our growth and our industry standing to our continued focus on enhancing our existing products and developing new specialty products based on market demand and customer requirements. For instance, as of July 31, 2025, our product portfolio consists of over 150 specialty chemical products, and we have 40 products which are in the pipeline at various stages of development. Our new products have enabled us to further diversify our customer base across various industries. We remain focused on research and development (R&D) and continually invest in product development. We continuously monitor industry trends to ensure that our products remain relevant in helping our customers meet the evolving market demands. As part of our R&D efforts, we also undertake collaborative product development with our customers, which enables us to customize our products in line with customer expectations whilst simultaneously reducing lead-times. As on July 31, 2025 we had a dedicated in-house R&D team of 18 members comprising 3 members holding PhD and 15 chemists focusing on product development across segments.

Our portfolio of specialty chemicals strengthens the Make in India or "Atma Nirbhar" campaigns of the Government of India by delivering locally manufactured solutions that reduce dependence on imports and build self-reliance in certain Application Industries. We were also awarded as ‘Make in India partners by Rallis India Limited for Fiscal 2024.

We operate 2 manufacturing facilities located in Khopoli, Maharashtra, (Khopoli Manufacturing Facility) started in 1995 spanning a total area of 118,004.00 square metres and Mahad, Maharashtra (Mahad Manufacturing Facility started in 2020 spanning a total areas of 79,423.00 square meters and along with our Khopoli Manufacturing Facility the Manufacturing Facilities) with an aggregate installed capacity of 87,914 metric tonnes per annum. For details of our installed capacity and actual production capacity, see ‘Our Business Manufacturing Facilities on page 288. Each of our Manufacturing Facilities has obtained ISO 9001:2015, ISO 45001:2018 and ISO 14001:2015 certifications. Additionally, we have a facility located in Dheku, Khopoli, Maharashtra which is similarly certified and is currently used for repacking, storage and dispatch, which can be re-purposed for carrying out manufacturing activities. Our facilities are also subject to periodic audits by our customers, which ensures that our customers are able to confirm the continuance of quality of our facility and processes. Our facilities are focused on usage of environmentally efficient equipment with zero liquid discharge for minimal emissions and wastage. All processes at our facilities are undertaken with engineering systems such as such as liquid extractions, aqueous stripping columns, aqueous organic decanter separators, brine chilled recovery systems for fugitive emissions and an effluent treatment plant with live bacterial digestion to minimize organic emissions.

We are led by qualified and experienced Board of Directors and key managerial personnel, who have extensive domain knowledge and understanding of the industry and the business environment in which we operate. Also, see ‘Our Business Our Strengths - Experienced, Qualified and Professional Leadership Team with a focus on business sustainability on page 281.

Key Financial Information

Set out below are some of our key financial and operational parameters.

KPI	Unit	As of/ for the
		Three months ended June 30, 2025	Financial year ended March 31, 2025	Financial year ended March 31, 2024	Financial year ended March 31, 2023
Financial KPI
Revenue from Operations(1)	in million	3,195.60	10,124.94	8,765.65	9,300.82
Operating EBITDA(2)	in million	406.01	877.66	605.28	869.51
Operating EBITDA Margin(3)	%	12.71%	8.67%	6.91%	9.35%
PAT(4)	in million	243.37	435.69	181.31	485.88
PAT Margin(5)	%	7.62%	4.30%	2.07%	5.22%
Adjusted RoAE(6)*	%	6.41%	12.57%	5.71%	17.01%
Adjusted RoCE(7)	%	7.08%	14.95%	12.61%	14.84%
Net Debt to Equity(8)	Times	0.28	0.23	0.22	0.53
Operational KPI
Countries Served(9)	Numbers	45	50	50	56
Export Revenue %(10)	%	27.52%	28.35%	25.32%	29.13%
No. of Customers(11)	Numbers	1,015	1,586	1,560	1,597
Top 10 Customers %(12)	%	23.91%	21.96%	18.46%	23.27%

* Not annualised for the three months ended June 30, 2025.

(1) Revenue from operations of the Company for respective fiscal / period

(2) Profit before exceptional items and tax (after profit/loss of associate + finance cost (excl. interest on lease liabilities) + Depreciation + impairment loss (if any) other income ⁽³⁾ Profit before exceptional items and tax (after profit/loss of associate) + finance cost (excl. interest on lease liabilities) + Depreciation + Impairment Loss (if any) other income / Revenue from Operations *100 ⁽⁴⁾ Profit / (loss) for the year / period ⁽⁵⁾ PAT / Revenue from Operations * 100

(6) PAT / Average Shareholders Equity

(7) Profit before exceptional items and tax (after profit/loss of associate) + Finance costs (excl. interest on lease liabilities) / Capital Employed (Net Debt* + Net Worth) *Net debt = non-current borrowings + current borrowings - cash & cash equivalents - bank balances other than cash. ⁽⁸⁾ Net Debt* / Total Equity * Net debt = non-current borrowings + current borrowings - cash & cash equivalents - bank balances other than cash. ⁽⁹⁾ Number of countries wherein the Company has sold its products / services during the fiscal/ period ⁽¹⁰⁾ Revenue from operations derived from the export of the products / services divided by the Revenue from operation * 100 ⁽¹¹⁾ Number of Customers to whom the Company has sold its products during the fiscal / period ⁽¹²⁾ Revenue derived from our top 10 customers from sale of products / services during the fiscal / period.

Principal Factors Affecting our Financial Condition and Results of Operations

Dependency on our end customers

We are a forward integrated manufacturer of acetone and phosphorous based specialty chemicals and other specialty chemicals involving complex and differentiated chemistries. According to the CARE Report, we are a highly diversified specialty chemical player with over 150 specialty chemical products and 1,107 customers and exports to 69 countries, as of July 31, 2025. Our products find diversified applications across numerous industries with 5 key segments being: (a) performance chemicals (including lubricant additives and mining chemicals); (b) PICA viz., paints, inks construction, & adhesives; (c) pharmaceuticals; (d) agrochemicals; and (e) home and personal care (Application Industries).Therefore, our sales are dependent on the success of our customers products in the Application Industries. The success of our customers products are dependent on a number of factors, such as general customer preferences, the ability of our customers to successfully market their products, the competitive environment in which our customers operate, invention of more advanced and cost effective alternatives at the end product level, the shift of the practice in these industries towards developing substitutes of our products in-house and general economic conditions. Therefore, the success of our customers business has a direct impact on our business and results of operations.

Price at which we procure our raw materials

The primary raw materials used for our manufacturing process are acetone and yellow phosphorous. In the three month period ended June 30, 2025 and for Fiscals 2025, 2024 and 2023, cost of goods sold (which comprise inventories at the beginning of the year, purchase of raw materials, purchase of traded goods, purchase of packing materials and inventories at the end of the year) aggregated 2,237.18 million, 7,243.51 million, 6,478.28 million and 6481.70 million constituting 69.82%, 71.33%, 72.99% and 69.50% of our total income. We do not have long term agreements for raw material procurement. We source our raw materials from a diversified base of vendors, on monthly, bi monthly and quarterly basis. As a result, raw material supply and pricing can be volatile due to a number of factors beyond our control, including demand and supply, general economic and political conditions, transportation and labour costs, natural disasters and pandemics. Further, we procure a large portion of our raw materials from a few key suppliers and any disruption of supply of raw materials from such suppliers is a significant factor that can affect our results of operations. Increase in raw material prices may result in corresponding increases in our product costs. Therefore, raw material cost is a critical component of our business and results of operations.

Government Regulations and Policies

Government regulations and policies of India as well as the countries from which where we import our raw materials can affect the availability of raw materials that are critical to our operations. We have incurred and expect to continue incurring costs for compliance with such laws and regulations. These regulations and policies and the tax regimes to which we are subject could change at any time, with little or no warning or time for us to prepare. Any changes in government policies relating to the chemicals sector or adverse changes in commodity prices could adversely affect our business and results of operations. Further, all our manufacturing facilities are located in Maharashtra and any significant changes in the policies of the state or local government or the Government of India, could require us to incur significant capital expenditure and change our business strategy.

Research and development initiatives

R&D has played a key role in our corporate growth and remains a focus area in our business. We believe that continued innovation through R&D is critical to a company engaged in the manufacture of speciality chemicals. We have invested significant time and effort on R&D initiatives. We have a dedicated in-house R&D team, which focuses on product development across segments. We maintain our R&D Centre at Navi Mumbai, Maharashtra. The R&D Centre has been recognized by the Department of Science and Technology, Government of India. Through our R&D initiatives, we also undertake collaborative product development with our customers, which enables us to customize our products in line with customer expectations and consumer preferences, whilst simultaneously ensuring shorter lead-times.

Non-GAAP Measures

Operating EBITDA, Operating EBITDA margin, PAT margin, Adjusted RoAE, Adjusted RoCE and Net Debt to Equity (together, ‘Non-GAAP Measures), presented in this Draft Red Herring Prospectus is a supplemental measure of our performance and liquidity that is not required by, or presented in accordance with, Ind AS. Further, these Non-GAAP Measures are not a measurement of our financial performance or liquidity under Ind AS and should not be considered in isolation or construed as an alternative to cash flows, profit/ (loss) for the years/ period or any other measure of financial performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities derived in accordance with Ind AS. Also, see ‘Risk Factors Certain non-GAAP financial measures and certain other statistical information relating to our operations and financial performance such as Operating EBITDA, Operating EBITDA margin, PAT margin, Adjusted RoAE, Adjusted RoCE and Net Debt to Equity have been included in this Draft Red Herring Prospectus. These non-GAAP financial measures are not measures of operating performance or liquidity defined by Ind AS and may not be comparable. on page 71.

In addition, since these Non-GAAP Measures are not standardised terms, a direct comparison of these Non-GAAP Measures between companies may not be possible. Other companies may calculate these Non-GAAP Measures differently from us, limiting its usefulness as a comparative measure. Although such Non-GAAP Measures are not a measure of performance calculated in accordance with applicable accounting standards, our Companys management believes that they are useful to an investor in evaluating us as they are widely used measures to evaluate a companys operating performance.

Basis of preparation of financial information

The discussion and analysis of our financial condition and results of operations is based on the Restated Financial Information. The preparation of the Restated Financial Information requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and accompanying disclosure of contingent liabilities and other attributes of our income, expenditure and cash flows. Our results of operations and financial condition are sensitive to accounting methods, assumptions and estimates that underly the preparation of our financial information. We evaluate these estimates on an on-going basis. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount values of assets and liabilities that are not readily apparent from other sources. For details of significant accounting policies followed by us while preparing our financial information, see "Restated Financial Information" on page 342.

Principal Components of Statement of Profit and Loss

Income

Our total income comprises revenue from operations and other income as mentioned below:

Revenue from operations

Our revenue from operations primarily includes revenue from sale of manufactured products in domestic as well as export markets, revenue from services provided in relation to job work and other operating revenue. Our sale of manufactured products includes acetone based specialty chemicals, phosphorus based specialty chemicals and other specialty chemicals. Job-work services include processing the raw materials or semi-finished goods provided by the principal manufacturer and other operating revenue includes revenue from commission received, scrap sale and other operating revenue.

Other income

Our other income primarily includes interest income, insurance claim received, net gain or loss on foreign currency transactions, export incentives, profit / loss on sale of fixed assets / written off, expenses no longer payable written back, and other miscellaneous income (recovery from employees and write back of previous years MSME interest) which are not related to operations.

Expenses

Our total expenses include the below mentioned expenses:

Cost of goods sold

Our cost of goods sold which primarily includes the inventories at the beginning of the year, purchase of raw materials, purchase of traded goods, purchase of packing materials and inventories at the end of the year.

Employee Benefit Expense

Our employee benefit expense comprises salaries, wages and bonus, contribution to provident and other funds, and staff welfare expenses.

Finance Costs

Our finance costs comprise interest, other borrowing cost, and exchange differences regarded as an adjustment to borrowing costs.

Depreciation and Amortization Expense

Our depreciation and amortization comprise depreciation of property, plant and equipment, amortization of intangible assets, amortization of leasehold land and amortization for right of use assets.

Other Expenses

Our other expenses included manufacturing expenses which included power and fuel expenses, water charges, repairs and maintenance expenses, stores and spares consumed, labour charges and other manufacturing expenses; (ii) selling and distribution expenses which included freight, handling and other sales and distribution expenses, commission on sale and advertisement and publicity; and (iii) establishment expenses which included rent, rates and taxes, insurance, communication cost, travelling and conveyance, repairs and maintenance (others), printing and stationery, legal and professional charges, auditors remuneration, subscriptions, irrevocable receivables written off, expenses towards corporate social responsibility, administrative expenses, net gain /(loss) on foreign currency translation and transaction, profit / (loss) on sale of fixed assets / written off, and expected credit allowance.

Tax Expense

Our tax expenses primarily include current tax, deferred tax and adjustment for tax of earlier years.

Results of Operations based on Restated Financial Information

The following table sets forth select financial data from our restated statement of profit and loss for the three month period ended June 30, 2025 and for Fiscals 2024, 2023 and 2023, the components of which are also expressed as a percentage of total income for such periods.

Particulars	Three month period ended June 30, 2025		Fiscal 2025		Fiscal 2024		Fiscal 2023
	( in million)	(% of Total Income)	( in million)	(% of Total Income)	( in million)	(% of Total Income)	( in million)	(% of Total Income)
Revenue from Operations	3,195.60	99.73%	10,124.94	99.70%	8,765.65	98.76%	9,300.82	99.73%
Other income	8.76	0.27%	30.46	0.30%	109.97	1.24%	25.03	0.27%
Total Income	3,204.36	100.00%	10,155.40	100.00%	8,875.62	100.00%	9,325.85	100.00%
Expenses:
Cost of materials consumed	1,705.29	53.22%	6,075.99	59.83%	5,174.02	58.29%	4,877.20	52.30%
Purchase of stock-in-trade	468.21	14.61%	1,343.12	13.23%	1,364.94	15.38%	1,541.87	16.53%
Changes in inventories of finished goods, work-in-progress and stock- in-trade	63.68	1.99%	(175.60)	(1.73) %	(60.68)	(0.68)%	62.63	0.67%
Employee Benefits Expense	106.26	3.32%	416.99	4.11%	328.31	3.70%	300.41	3.22%
Finance costs	26.75	0.83%	82.48	0.81%	108.89	1.23%	120.26	1.29%
Depreciation and Amortization	60.18	1.88%	232.77	2.29%	213.62	2.41%	191.55	2.05%
Expenses
Other Expenses	446.16	13.92%	1,586.78	15.62%	1,353.66	15.25%	1,649.20	17.68%
Total Expenses	2,876.52	89.77%	9,562.53	94.16%	8,482.76	95.57%	8,743.12	93.75%
Profit before exceptional items and tax	327.84	10.23%	592.87	5.84%	392.86	4.43%	582.73	6.25%
Share in Net Profit / (Loss) of	-	-	-	-	(0.12)	Negligible	-	-
Associate
Profit /(loss) before exceptional items and tax	327.84	10.23%	592.87	5.84%	392.74	4.42%	582.73	6.25%
Exceptional items	-	-	-	-	57.64	0.65%	-	-
Profit before Tax	327.84	10.23%	592.87	5.84%	335.10	3.78%	582.73	6.25%
Tax Expense:
- Current Tax	76.57	2.39%	154.32	1.52%	80.23	0.90%	128.80	1.38%
- Deferred Tax	7.89	0.25%	(2.38)	(0.02) %	73.41	0.83%	(31.67)	(0.34)%
- Adjustment for Tax of earlier years	-	-	5.24	0.05%	0.15	Negligible	(0.28)	Negligible
Profit for the year / period	243.37	7.59%	435.69	4.29%	181.31	2.04%	485.88	5.21%

Three month period ended June 30, 2025

Income

Our total income was 3,204.36 million for the three month period ended June 30, 2025, which comprised of:

Revenue from operations

Our revenue from operations was 3,195.60 million, which was 99.73% of our total income for the three month period ended June 30, 2025. Such revenue from operations comprised sale of products, revenue from services i.e., job work sales, and other operating revenue which comprised commission received, scrap sale and other operating income.

Other Income

Our other income was 8.76 million, which was 0.27% of our total income for the three month period ended June 30, 2025. Such other income comprised interest income, net gain or loss on foreign currency transactions, export incentives, expenses no longer payable written back, and other miscellaneous income which are not related to operations.

Expenses

Our total expenses were 2,876.52 million for the three month period ended June 30, 2025, which primarily comprised of:

Cost of goods sold

Our cost of goods sold comprises of the inventories at the beginning of the year, purchase of raw materials, purchase of traded goods, purchase of packing materials and inventories at the end of the year were 2237.18 million, which was 69.82% of our total income for the three month period ended June 30, 2025. Such cost of goods sold primarily comprised of inventories at the beginning of the period, purchase of raw materials, purchase of traded goods, purchase of packing materials and inventories at the end of the period.

Employee Benefit Expense

Our employee benefit expense was 106.26 million, which was 3.32% of our total income for the three month period ended June 30, 2025, which comprised of salaries, wages and bonus, contribution to provident and other funds and staff welfare expenses.

Finance Costs

Our finance costs were 26.75 million, which was 0.83% of our total income for the three month period ended June 30, 2025. Such finance cost comprised of interest paid, exchange differences regarded as an adjustment to borrowing costs, and other borrowing costs.

Depreciation and Amortization Expense

Our depreciation and amortization expense were 60.18 million, which was 1.88% of our total income for the three month period ended June 30, 2025. Such depreciation and amortization expense comprised of depreciation of property, plant and equipment, amortization of intangible assets, amortization for right of use assets and amortization of leasehold land.

Other Expenses

Our other expenses were 446.16 million, which was 13.92% of our total income for the three month period ended June 30, 2025. Such other expenses primarily comprised of (i) manufacturing expenses aggregating 291.30 million which was 9.09% of our total income for the three month period ended June 30, 2025 which included power and fuel expenses, water charges, repairs and maintenance expenses, stores and spares consumed, labour charges and other manufacturing expenses; (ii) selling and distribution expenses aggregating 124.05 million which was 3.87% of our total income for the three month period ended June 30, 2025 which included freight, handling and other sales and distribution expenses, commission on sale and advertisement and publicity; and (iii) establishment expenses aggregating 30.80 million which was 0.96% of our total income for the three month period ended June 30, 2025 which included rent, rates and taxes, insurance, communication cost, travelling and conveyance, repairs and maintenance (others), printing and stationery, legal and professional charges, auditors remuneration, subscriptions, irrevocable receivables written off, expenses towards corporate social responsibility, administrative expenses and expected credit allowance.

Tax Expense

Our tax expenses were 84.46 million, which was 2.64% of our total income for the three month period ended June 30, 2025. Such tax expenses comprised current tax and deferred tax.

Profit

For the reasons mentioned above, our profit for the three month period ended June 30, 2025 was 243.37 million, which was 7.60% of our total income for this period.

Fiscal 2025 compared to Fiscal 2024

Income

Our total income increased by 14.42% to 10,155.40 million in Fiscal 2025 from 8,875.62 million in Fiscal 2024, primarily on account of the factors discussed below.

Revenue from operations

Our revenue from operations increased by 15.51%to 10,124.94 million in Fiscal 2025 from 8,765.65 million in Fiscal 2024 primarily on account of an increase in revenue from sale of products from 8,731.86 million in Fiscal 2024 to 10,068.32 million in Fiscal 2025. The aforementioned increase was on account of an increase in sales volume and price of our specialty chemicals sold.

Other income

Our other income decreased by (72.30)% to 30.46 million in Fiscal 2025 from 109.97 million in Fiscal 2024, primarily due to gain on foreign exchange fluctuations aggregating 63.36 million in Fiscal 2024 to nil in Fiscal 2025, decrease in interest received to 0.49 million in Fiscal 2025 as compared to 12.10 million in Fiscal 2024 and decrease in insurance claim received of 0.43 million in Fiscal 2025 as compared to 20.02 million in Fiscal 2024. Foreign exchange fluctuation occurs due to the difference between the prevailing foreign currency rate at the time of booking orders, prevailing foreign currency rate at a particular Fiscal and the exchange rate at the time of receipt payment in foreign currency.

Expenses

Our total expenses increased by 12.73% to 9,562.53 million in Fiscal 2025 from 8,482.76 million in Fiscal 2024, due to:

Cost of goods sold

Our cost of goods sold which comprises inventories at the beginning of the year, purchase of raw materials, purchase of traded goods, purchase of packing materials and inventories at the end of the year, increased by 11.81% to 7,243.51 million for Fiscal 2025 from 6,478.28 million for Fiscal 2024 due to higher sales volume and raw material prices however our cost of goods as percentage of total income reduced from 72.99% for Fiscal 2024 to 71.33% for Fiscal 2025.

Employee Benefit Expense

Our employee benefit expense increased by 27.01% to 416.99 million in Fiscal 2025 from 328.31 million in Fiscal 2024 primarily due to an increase in the salary, wages and bonus cost from 302.05 million in Fiscal 2024 to 321.51 million in Fiscal 2025 and increase in contribution to provident and other funds from 19.51 million in Fiscal 2024 to 83.60 million in Fiscal 2025, which was due to an increase in the number of employees from

485 employees as on March 31, 2024 to 621 employees as on March 31, 2025 as well as annual increments for existing employees.

Finance Costs

Our finance costs decreased by (24.25)% to 82.48 million in Fiscal 2025 from 108.89 million in Fiscal 2024, primarily due to decrease in interest costs from 102.20 million in Fiscal 2024 to 73.89 million in Fiscal 2025 due to voluntary prepayment of 94.00 million of higher interest bearing term loans.

Depreciation and Amortization Expense

Our depreciation and amortization expenses marginally increased by 8.96% to 232.77 million in Fiscal 2025 from 213.62 million in Fiscal 2024, primarily due to increase in depreciation on property, plant and equipment which was due to addition in property, plant and equipment of 227.32 million during Fiscal 2025.

Other Expenses

Our other expenses increased by 17.22% to 1,586.78 million in Fiscal 2025 from 1,353.66 million in Fiscal 2024, primarily due to (i) increase in manufacturing expenses from 928.45 million in Fiscal 2024 to 1,024.22 million in Fiscal 2025; (ii) increase in selling and distribution expenses from 298.01 million in Fiscal 2024 to 381.16 million in Fiscal 2025; and (iii) increase in establishment expenses from 127.19 million in Fiscal 2024 to 181.41 million in Fiscal 2025.

Tax Expense

Our tax expenses increased by 2.21% to 157.18 million in Fiscal 2025 from 153.79 million in Fiscal 2024 primarily due to increase in current tax from 80.23 million in Fiscal 2024 to 154.32 million in Fiscal 2025 which was partially offset by decrease in our deferred tax from 73.41 million in Fiscal 2024 to (2.38) million in Fiscal 2025.

Profit for the Year

As a result of the foregoing factors, our profit for the year increased by 140.30% to 435.69 million in Fiscal 2025 from 181.31 million in Fiscal 2024.

Fiscal 2024 compared to Fiscal 2023

Income

Our total income decreased by (4.83)% to 8,875.62 million in Fiscal 2024 from 9,325.85 million in Fiscal 2023, primarily on account of the factors discussed below.

Revenue from operations

Our revenue from operations decreased by (5.75%) to 8,765.65 million in Fiscal 2024 from 9,300.82 million in Fiscal 2023 primarily on account of decrease in revenue from sale of products from 9,227.81 million in Fiscal 2023 to 8,731.86 million in Fiscal 2024. The aforementioned decrease was on account of reduction in selling price of our specialty chemicals and our Mahad Manufacturing Facility being non-operational from October 27, 2023 to May 3, 2024. Also, see ‘Risk Factors - Our business is dependent on our manufacturing facilities and we are subject to certain related risks. Unplanned slowdowns, unscheduled shutdowns or prolonged disruptions in our manufacturing operations or under - utilization of our manufacturing capacities could have an adverse effect on our business, results of operations, cash flows and financial condition on page 39.

Other income

Our other income increased by 339.35% to 109.97 million in Fiscal 2024 from 25.03 million in Fiscal 2023, primarily due to gain on foreign exchange fluctuations aggregating 63.36 million in Fiscal 2024 from nil in Fiscal 2023, increase in interest received of 12.10 million in Fiscal 2024 as compared to 1.83 million in Fiscal 2023 and increase in insurance claim received of 20.02 million in Fiscal 2024 as compared to 0.91 million in Fiscal 2023. Foreign exchange fluctuation occurs due to the difference between the prevailing foreign currency rate at the time of booking orders, prevailing foreign currency rate at a particular Fiscal and the exchange rate at the time of receipt payment in foreign currency. The increase was on account of effectively management of the number of imports and exports and hedging actions.

Expenses

Our total expenses decreased by (2.98) % to 8,482.76 million in Fiscal 2024 from 8,743.12 million in Fiscal 2023, due to:

Cost of goods sold

Our cost of goods sold which comprises inventories at the beginning of the year, purchase of raw materials, purchase of traded goods, purchase of packing materials and inventories at the end of the year, decreased by 0.05% to 6,478.28 million for Fiscal 2024 from 6,481.70 million for Fiscal 2023 due to reduction in raw material prices despite increase in sales volume as stated above However our cost of goods sold as percentage of total income increased from 69.50% for Fiscal 2023 to 72.99% for Fiscal 2024.

Employee Benefit Expense

Our employee benefit expense increased by 9.29% to 328.31 million in Fiscal 2024 from 300.41 million in Fiscal 2023 primarily due to an increase in the salary, wages and bonus cost from 271.54 million in Fiscal 2023 to 302.05 million in Fiscal 2024 which was primarily due to annual salary increments.

Finance Costs

Our finance costs decreased by (9.45)% to 108.89 million in Fiscal 2024 from 120.26 million in Fiscal 2023, primarily due to decrease in interest costs because of repayment of term loans including an additional pre-payment of 67.50 million as well as better management of working capital requirements which led to reduced requirement of working capital borrowings.

Depreciation and Amortization Expense

Our depreciation and amortization expenses increased by 11.52% to 213.62 million in Fiscal 2024 from 191.55 million in Fiscal 2023, primarily due to increase in depreciation on property, plant and equipment which was due to addition in property, plant and equipment of 584.46 million during Fiscal 2024.

Other Expenses

Our other expenses decreased by (17.92)% to 1,353.66 million in Fiscal 2024 from 1,649.20 million in Fiscal 2023, primarily due to (i) decrease in manufacturing expenses from 1,143.46 million in Fiscal 2023 to 928.45 million in Fiscal 2024; and (ii) decrease in selling and distribution expenses from 385.24 million in Fiscal 2023 to 298.01 million in Fiscal 2024, which was partially offset by increase in establishment expenses from 120.50 million in Fiscal 2023 to 127.19 million in Fiscal 2024.

Tax Expense

Our tax expenses increased by 58.79% to 153.79 million in Fiscal 2024 from 96.85 million in Fiscal 2023 primarily due to increase in our deferred tax from (31.67) million in Fiscal 2023 to 73.41 million in Fiscal 2024 which was partially offset by decrease in current tax from 128.80 million in Fiscal 2023 to 80.23 million in Fiscal 2024.

Profit for the Year

As a result of the foregoing factors, our profit for the year decreased by (62.68)% to 181.31 million in Fiscal 2024 from 485.88 million in Fiscal 2023.

Liquidity and Capital Resources

Historically, our primary liquidity requirements have been to finance our working capital needs for our operations. We have met these requirements through cash flows from operations, and borrowings. As of June 30, 2025, we had 206.67 million in cash and cash equivalents, 0.74 million as bank balances (other than cash and cash equivalents), 858.83 million in short term borrowings and 436.91 million in long terms borrowings (after excluding current maturities of long term borrowings). We believe that, after taking into account the expected cash to be generated from operations, our borrowings and the proceeds from the Offer, we will have sufficient liquidity for our present requirements and anticipated requirements for capital expenditure and working capital for 12 months following the date of this Draft Red Herring Prospectus.

Our total liabilities as on June 30, 2025, March 31, 2025, March 31, 2024 and March 31, 2023 were 4,064.68 million, 3,556.17 million, 3,005.22 million and 3,833.24 million, respectively.

Our current credit ratings have been assigned by Acuite Ratings & Research who have assigned ACUITE A+/Stable/Reaffirmed to our long term borrowings and ACUITE A1+/Stable/Reaffirmed to our short term borrowings.

Cash Flows based on Restated Financial Information

The table below summarizes the statement of cash flows, as per our cash flow statements, for the periods indicated:

Particulars	Three month period ended June 30, 2025	Fiscal
		2025	2024	2023
		(in million)
Net cash (used in)/generated from operating activities	(128.46)	222.60	1,156.06	290.27
Net cash (used in)/generated from investing activities	(93.10)	(224.75)	(178.96)	(522.73)
Net cash (used in)/generated from financing activities	259.88	102.30	(1,151.14)	114.14
Cash and cash equivalents at the end of the period / year	206.67	166.51	99.65	210.32

Operating Activities

Net cash flows used in operating activities was (128.46) million for the three month period ended June 30, 2025. While our restated profit before tax was 327.84 million, we had cashflow before changes in working capital of 414.40 million due to adjustments for depreciation and amortisation of 60.18 million, finance cost of 25.34 million, and remeasurement of net defined benefit plans of 3.64 million, and provision for doubtful debts of 0.80 million, which were offset by adjustment on account of interest income of (1.32) million and net gain on foreign exchange fluctuation of (1.84) million. Our working capital adjustments for the three month period ended June 30, 2025 consisted of increase in trade receivables and other receivables of (485.82) million, increase in inventories of (143.21) million, increase in other current financial assets of (51.84) million, increase in trade payables of 167.33 million, decrease in other financial liabilities of (10.59) million, increase in other current liabilities of 27.23 million, and increase in other provisions of 1.62 million. Our cash generated from operations was (80.88) million, adjusted by payment of income taxes of (47.58) million.

Net cash flows generated from operating activities was 222.60 million for the Fiscal 2025. While our restated profit before tax was 592.87 million, we had cashflow before changes in working capital of 1,013.27 million due to adjustments for depreciation and amortisation of 232.77 million, finance cost of 72.02 million, remeasurement of net defined benefit plans of 71.82 million, loss on foreign exchange fluctuations of 33.29 million and provision for doubtful debts of 14.56 million, loss on sale of fixed assets of 0.41 million, offset by interest income of (0.49) million and expenses no longer payable written back of (3.99) million. Our working capital adjustments in Fiscal 2025 consisted of increase in trade receivables and other receivables of (374.13) million, increase in inventories of (518.71) million, increase in other current financial assets of (29.03) million, increase in trade payables of 256.09 million, decrease in other financial liabilities of (2.35) million, increase in other current liabilities of 27.69 million, and increase in other provisions of 2.73 million. Our cash generated from operations was 375.55 million, adjusted by payment of taxes of (152.94) million.

Net cash flows generated from operating activities was 1,156.06 million for the Fiscal 2024. While our restated profit before tax was 335.10 million, we had cashflow before changes in working capital of 596.64 million due to adjustments for depreciation and amortisation of 213.62 million, loss on sale of fixed assets of 14.93 million, finance cost of 100.15 million, remeasurement of net defined benefit plans of 7.16 million and provision for doubtful debts of 1.14 million, offset by net gain on foreign exchange fluctuation of (63.36) million and interest income of (12.10) million. Our working capital adjustments in Fiscal 2024 consisted of decrease in trade receivables and other receivables of 74.08 million, decrease in inventories of 322.45 million, decrease in other current financial assets of 81.90 million, increase in trade payables of 88.27 million, decrease in other financial liabilities of (23.60) million, increase in other current liabilities of 64.46 million, and decrease in other provisions of (1.31) million. Our cash generated from operations was 1,202.89 million, adjusted by payment of taxes of (46.83) million.

Net cash flows generated from operating activities was 290.27 million for the Fiscal 2023. While our restated profit before tax was 582.73 million, we had cashflow before changes in working capital of 892.59 million due to adjustments for depreciation and amortisation of 191.55 million, finance cost of 107.30 million, remeasurement of net defined benefit plans of 9.58 million, loss on foreign exchange fluctuations of 12.97 million and provision for doubtful debts of 0.31 million, offset by profit on sale of fixed assets of (1.46) million, interest income of (1.83) million and expenses no longer payable written back of (8.56) million. Our working capital adjustments in Fiscal 2023 consisted of decrease in trade receivables and other receivables of 56.89 million, decrease in inventories of 40.47 million, increase in other current financial assets of (6.50) million, decrease in trade payables of (511.07) million, increase in other financial liabilities of 2.62 million, decrease in other current liabilities of (56.37) million, and decrease in other provisions of (6.32) million. Our cash generated from operations was 412.31 million, adjusted by payment of taxes of (122.04) million.

Investing Activities

Net cash flows used in investing activities was (93.10) million for the three month period ended June 30, 2025, comprising of purchase of property, plant and equipment of (94.42) million, offset by interest received of 1.32 million.

Net cash flows used in investing activities was (224.75) million in Fiscal 2025, comprising of purchase of property, plant and equipment of (225.82) million which was partially offset by investment in subsidiary of 0.39 million, proceeds from sale of property, plant and equipment of 0.18 million, and interest received of 0.49 million.

Net cash flows used in investing activities was (178.96) million in Fiscal 2024, comprising of purchase of property, plant and equipment of (191.38) million and investment in subsidiary of (0.39) million, which was partially offset by proceeds from sale of property, plant and equipment of 0.71 million, and interest received of 12.10 million.

Net cash flows used in investing activities was (522.73) million in Fiscal 2023, primarily comprising of purchase of property, plant and equipment of (528.57) million, which was partially offset by proceeds from sale of property, plant and equipment of 4.01 million and interest received of 1.83 million.

Financing Activities

Net cash flows generated from financing activities was 259.88 million for the three month period ended June 30, 2025, primarily comprised finance costs paid of (25.34) million and proceeds from borrowings (net of repayments) of 285.22 million.

Net cash flows generated from financing activities was 102.30 million in Fiscal 2025, primarily comprising of proceeds from long-term loans (net of repayments) of 189.84 million which was partially offset by finance costs paid of (70.15) million and dividend paid of (17.40) million.

Net cash flows used in financing activities was (1,151.14) million in Fiscal 2024, primarily comprising of repayment of borrowings (net of proceeds from borrowings) of (1,035.63) million, finance costs paid of (98.11) million and dividend paid of (17.40) million.

Net cash flows generated from financing activities was 114.14 million in Fiscal 2023, primarily comprising of proceeds from borrowings (net of repayments) of 237.83 million which was partially offset by finance costs paid of (106.29) million and dividend paid of (17.40) million.

Indebtedness

As of August 31, 2025, our total sanctioned and outstanding indebtedness (excluding accrued interest) was 4,541.00 million and 2,961.05 million, respectively. For further details pertaining to our indebtedness, see

" Financial Indebtedness" on page 412.

Contractual Obligations

The table below sets forth our contractual obligations as of June 30, 2025 as per the Restated Financial Information:

	Total	Less than 1 year	1 year to 5 years	More than 5 years
			( in million)
Borrowings	1,295.74	858.83	402.71	34.20
Lease Liabilities	5.16	0.48	2.40	2.28
Trade and other payables	2,135.82	2,135.82	-	-
Other financial liabilities	22.07	22.07	-	-
Total	3,458.79	3,017.20	405.11	36.48

Contingent Liabilities and Off-Balance Sheet Arrangements

Our contingent liabilities and commitments as of June 30, 2025 were as follows:

( in million)

Particulars	As of June 30, 2025
	( in million)
Contingent Liabilities
Claims against the group not acknowledged as debt
c. DRI Mumbai and Ahmedabad	3.62
d. Income Tax Liability that may arise in respect of matters in appeal	1.82
Guarantees excluding financial guarantees	79.80
Total of Contingent Liabilities	85.24
Commitments
c. Estimated amount of contracts to be executed on capital account and not provided for (Net off Advances)	96.31
d. Letter of Credit Outstanding	638.54
Total of Commitments	734.85

Our Company does not have any off-balance sheet arrangements.

Related Party Transactions

We have engaged in the past, and may engage in the future, in transactions with related parties, including with our Subsidiaries, Directors, and Key Managerial Personnel on an arms length basis, in compliance with applicable law. For details, see "Restated Financial Information - Note 46 - Disclosure in accordance with Ind AS - 24

"Related Party Disclosures", of the Companies (Indian Accounting Standards) Rules, 2015" on page 401.

Quantitative and Qualitative Disclosures about Market Risk

Credit Risk

Credit risk is the risk of financial loss to our Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from our Companys trade and other receivables, cash and cash equivalents and other bank balances. The maximum exposure to credit risk in case of all the financial instruments is restricted to their respective carrying amount.

Market Risk

Market Risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the market prices. Market risk comprises three types of risk: currency risk, interest rate risk and price risk. Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices will affect our Companys income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. We are exposed to market risk primarily related to foreign exchange rate risk. Thus, our exposure to market risk is a function of revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs. Our Company uses derivative to manage market risk. Generally, our Company seeks to apply hedge accounting to manage volatility in profit or loss.

Currency Risk

Our Company is exposed to currency risk on account of its operations in other countries. The functional currency of our Company is Indian Rupee. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, our Company uses both derivative instruments, i.e., foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognized assets and liabilities. Our Company enters into foreign currency forward contracts which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables/receivables.

Interest Rate Risk

It is measured by using the cash flow sensitivity for changes in variable interest rates. Any movement in the reference rates could have an impact on our Companys cash flows as well as costs. Our Company also uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like short-term loans.

Liquidity Risk

Our Company follows a conservative policy of ensuring sufficient liquidity at all times through a strategy of profitable growth, efficient liquidity at all times through a strategy of profitable growth, efficient working capital management as well as prudent capital expenditure. Our Company has an overdraft facility with banks to support any temporary funding requirements. Our Company believes that current cash and cash equivalents, tied up borrowing lines and cash flow that is generated from operations is sufficient to meet requirements.

Capital Expenditures

Our historical capital expenditures were, and we expect our future capital expenditures to be, primarily for purchase of plant and equipment.

During 3 month ended June 30, 2025, Fiscal 2025, Fiscal 2024 and Fiscal 2023 our capital expenditures towards additions to property, plant and equipment, intangibles and capital work in progress including capital advances) were 107.62 million, 237.49 million, 218.00 million and 535.25 million, respectively as per our Restated Financial Information.

Significant Economic Changes

Other than as described above under " Principal Factors Affecting Our Financial Condition and Results of Operations," to the knowledge of our management, there are no other significant economic changes that materially affect or are likely to affect income from continuing operations.

Competitive Conditions

We operate in a competitive environment. For further information, please see ‘Risk Factors, ‘Industry Overview,

‘Our Business - Competition on pages 37, 200, and 291, respectively.

Unusual or Infrequent Events of Transactions

Except as set out in this Draft Red Herring Prospectus, there have been, to our knowledge, no unusual or infrequent events or transactions that have in the past, or may in the future, affect our business operations or future financial performance.

Segment Reporting

Our Company operates in a single segment i.e., specialty chemicals and we do not follow any segment reporting.

Extent to which material increases in net sales or revenue are due to increased sales volume, and increased sales prices

Except as set out in this chapter above, our net sales or revenue are not dependent on sales volume and sale price.

Total turnover of each major industry segment in which our Company operated

Our revenue from operations are derived from sale of acetone based specialty chemicals, phosphorus based specialty chemicals and other specialty chemicals and we do not follow segment reporting. ). Our products have end uses in five segments namely performance chemicals (paints, construction, inks and adhesives), other performance chemicals (including lubricant additives and mining chemicals), pharmaceuticals, agrochemicals and home and personal care.

Known Trends or Uncertainties

Our business has been affected and we expect will continue to be affected by the trends identified above in the heading titled "Principal Factors Affecting Our Financial Condition and Results of Operations" and the uncertainties described in the section titled "Risk Factors" on pages 419 and 37. To our knowledge, except as described or anticipated in this Draft Red Herring Prospectus, there are no known factors which we expect will have a material adverse impact on our revenues or income from continuing operations.

Future Relationship between Cost and Income

Other than as described in this Draft Red Herring Prospectus, to the knowledge of our management, there are no known factors that might affect the future relationship between costs and revenues.

New Products or Business Segments

Except as disclosed in this Draft Red Herring Prospectus, we have not announced and do not expect to announce any new services or business segments in the near future.

Seasonality of Business

Our business is not subject to seasonal variations.

Suppliers or Customer Concentration

While our customers may vary annually, we generate significant revenue from our top 10 customers every year. Consequently, our business and financial condition in any given financial year is reliant on our top 10 customers.

See, "Risk Factors - Our business is significantly reliant on certain key customers. Our top 10 customers contributed 23.91%, 21.96%, 18.46% and 23.27% of our total revenue from operations during three month period ended June 30, 2025, Fiscal 2025, Fiscal 2024 and Fiscal 2023, respectively. The loss of any of these customers or loss of revenue from sales to any key customers could have a material adverse effect on our business, financial condition, results of operations and cash flows" on page 38. We are not dependent on few suppliers. However, we procure a large portion of our raw materials from a few key suppliers. See, "Risk Factors - Any increase in the cost of our raw material or other purchases or a shortfall in the supply of our raw materials, may adversely affect the pricing and supply of our products and have an adverse effect on our business, results of operations and financial condition" on page 45.

Summary of reservations or qualifications or matters of emphasis or adverse remarks of auditors

There are no reservations, qualifications or matters of emphasis included in the Restated Financial Information. However, the report of our Statutory Auditors on the Audited Consolidated Financial Statements for Fiscal 2025 contains the following emphasis of matter:

"… Emphasis of Matter

As stated in Note No. 14, the Company proposes to go in for an Initial Public Offer (IPO) and has incurred an expenditure of Rs. 3.27 Million in connection therewith. The same is included under Other Current Assets in Note No. 14. The Company proposes to charge the same to Securities Premium Account once the IPO process is completed.

Our report is not modified in respect of the above matter…"

The report of our Statutory Auditors on the Audited Consolidated Financial Statements for Fiscal 2025 also contains the following modified opinion in relation to internal financial controls:

"…Report on the Internal Financial Controls with reference to the aforesaid Consolidated Financial Statements under clause (i) of sub-section 3 of section 143 of the Companies Act, 2013 (the "Act")

Modified Opinion

We have audited the internal financial controls over financial reporting of Prasol Chemicals Limited ("the Parent) as of March 31, 2025, in conjunction with our audit of the Consolidated Financial Statements of the Company for the year ended on that date.

In our opinion, and to the best of our information and according to the explanations given to us, the Parent needs to strengthen controls over maintenance of quantitative item-wise details and corresponding values of Inventory at year-end (including stages at which inventory is lying) and allocation of overheads.

Subject to the above, the Parent has in all material respects, adequate internal financial controls with reference to Consolidated Financial Statements and such internal financial controls over financial reporting were operating effectively as at March 31, 2025; based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (the "Guidance Note").

The provisions of section 143(3)(i) are not applicable to the subsidiary Company…"

Also, see "Risk Factor - The report of our Statutory Auditors on the Audited Consolidated Financial Statements for Fiscal 2025 contains an emphasis of matter. Further, the report of our Statutory Auditors on the Audited Consolidated Financial Statements for Fiscal 2025 is also modified to the extent of internal financial controls of our Company" on page 54.

Change in accounting policies

Other than as disclosed in the Restated Financial Information, there have been no changes in accounting policies in the last three Fiscals and 3 months ended June 30, 2025.

Significant Developments after June 30, 2025

Except as set out below, no circumstances have arisen since the date of the Restated Financial Information as disclosed in this Draft Red Herring Prospectus which materially and adversely affect or are likely to affect our operations, trading or profitability, or the value of our assets or our ability to pay our liabilities within the next twelve months:

Our Company had acquired additional shareholding in our associate company viz., Prasol Aromatics Private Limited, from other shareholders pursuant to which this company became our wholly owned subsidiary with effect from January 24, 2025. Subsequently, Prasol Aromatics Private Limited applied to the Registrar of Companies, Gujarat at Ahmedabad for a voluntary strike-off from the records of Registrar of Companies, Gujarat at Ahmedabad, and on July 22, 2025, the name of this company was struck off by the Registrar of Companies, Gujarat at Ahmedabad.