Primo Chemicals Ltd Management Discussions

FOR THE FINANCIAL YEAR 2025-26

GLOBAL ECONOMY

The global economy navigated an uncertain operating environment in CY25, shaped by shifting trade dynamics, policy uncertainty, inflationary pressures and uneven industrial demand. According to the IMF World Economic Outlook, global growth stood at 3.5% in 2025 and is projected to moderate to 3.0% in 2026 before improving to 3.4% in 2027.

While easing financial conditions and investment activity supported economic resilience, industrial sectors continued to face challenges from commodity-price volatility, energy-market disruptions and changing global trade flows. For chemical manufacturers, these conditions remain relevant because end-use demand, energy costs, trade policies and supply-chain movements directly influence volumes, pricing and margins.

OUTLOOK:

Looking ahead, the global economic outlook is expected to remain shaped by moderate growth, inflation volatility, geopolitical uncertainty and changing trade flows. Demand from manufacturing, infrastructure and consumer-facing sectors is expected to support industrial activity, although energy costs, protectionist policies and supply-chain disruptions remain key monitorable.

WORLD ECONOMIC OUTLOOK UPDATE JULY 2026

GROWTH PROJECTIONS BY REGION

INDIAN ECONOMY

The Indian economy demonstrated resilience during FY26, supported by domestic demand, public capital expenditure, manufacturing activity and continued policy support. Indias real GDP growth was estimated at 7.7% during FY26, reflecting broad-based growth across key sectors.

Manufacturing and infrastructure activity remained important contributors to the economys growth momentum. Continued investment in infrastructure, industrial capacity and domestic manufacturing supported demand across core sectors such as chemicals, power, construction, water treatment, pharmaceuticals, textiles, pulp and paper and aluminium.

Inflation remained within a manageable range during the year, while GST collections reflected continued formalisation and steady business activity. Gross GST collections stood at H22.27 lakh crore in FY26, compared with H20.56 lakh crore in FY25, registering growth of 8.3%. Net GST collections stood at H19.35 lakh crore, increasing by 7.1% from H18.07 lakh crore in the previous year.

OUTLOOK:

Looking ahead to FY27, Indias economy is expected to remain supported by domestic demand, manufacturing activity, infrastructure investments and policy-led industrial development. These factors are expected to support demand across end-use sectors relevant to Primo Chemicals, including industrial manufacturing, water treatment, textiles, aluminium, pharmaceuticals, pulp and paper and construction-linked applications.

INDIAN CHEMICAL INDUSTRY:

The Indian chemical industry entered FY26 amid a mixed operating environment, characterised by geopolitical tensions, uneven global demand, supply-chain realignments and pricing pressure in several commodity chemical segments. However, India continued to strengthen its position as a competitive chemical manufacturing destination, supported by domestic demand, cost competitiveness, policy continuity and global supply-chain diversification.

Demand remained supported by manufacturing, infrastructure, pharmaceuticals, agrochemicals, personal care, construction, water treatment and industrial applications. While commodity chemicals continued to face pricing pressure from global oversupply, particularly from China, specialty and value-added segments remained comparatively more resilient. Industry participants increasingly focused on operational efficiency, portfolio quality, sustainability and higher-value products to protect margins.

OUTLOOK:

The medium-term outlook for the Indian chemical industry remains constructive despite near-term uncertainties. Indias chemical market is expected to grow at 8-9% annually over the next five to six years, potentially reaching USD 230-255 billion. Continued manufacturing expansion, infrastructure investments, specialty chemical demand and global supply-chain diversification are expected to support growth. However, geopolitical tensions, tariff- related uncertainties and chinese overcapacity remain key risks.

GLOBAL CAUSTIC SODA INDUSTRY:

The global caustic soda industry continued to be supported by its critical role across alumina refining, pulp and paper, soaps and detergents, textiles, water treatment and chemical manufacturing. Demand trends remained linked to industrial activity, regional supply-demand balance, energy costs and end-use sector growth.

While the global market is expected to grow over the medium term, the industry remains exposed to pricing volatility, capacity additions and regional oversupply. Asia- Pacific, particularly India and China, is expected to remain an important demand and supply centre, supported by industrialisation, infrastructure growth and chemical manufacturing activity.

INDIAN CAUSTIC SODA INDUSTRY:

The Indian caustic soda industry witnessed a mixed but resilient performance in FY26. Demand remained supported by key consuming sectors such as alumina, textiles, pulp and paper, soaps and detergents, chemicals and water treatment. However, profitability remained exposed to pricing pressure from global oversupply, particularly from China, as well as volatility in energy costs.

The industrys long-term prospects remain supported by Indias manufacturing growth, infrastructure investments, water treatment requirements, aluminium production and demand from downstream chemical applications. At the same time, energy efficiency, membrane-cell technology, chlorine utilisation and downstream value addition are becoming increasingly important for managing cyclicality and protecting margins.

OUTLOOK:

The outlook for the Indian chlor-alkali and caustic soda industry remains constructive. The Indian chlor-alkali market reached approximately USD 2.5 billion in 2025 and is projected to grow to USD 3.6 billion by 2034 at a CAGR of around 4.0%. The Indian caustic soda market is also expected to expand steadily over the long term, supported by manufacturing growth, infrastructure investments, water treatment demand, aluminium production and supply-chain diversification. Companies with energy- efficient operations, integrated production models and higher- value downstream products are expected to be better placed to manage cyclicality and protect margins.

CHLOR-ALKALI INDUSTRY LENS FOR PRIMO:

Industry Driver: Demand from industrial and infrastructure- linked sectors

Relevance to Primo Chemicals: Primos caustic soda and chlorine-based products serve end-use sectors such as textiles, pulp and paper, water treatment, chemicals, aluminium, pharmaceuticals and industrial manufacturing.

INDUSTRY DRIVER: Chlorine utilisation and downstream integration

Relevance to Primo Chemicals: Products such as Stable Bleaching Powder, Sodium Hypochlorite and other downstream derivatives help improve chlorine off-take and support value addition across the chlor-alkali chain.

INDUSTRY DRIVER: Energy intensity in chlor-alkali manufacturing

Relevance to Primo Chemicals: Power remains a major cost driver in caustic soda production, making the Companys strategic focus on captive power, renewable energy, and process efficiency essential. To this end, a H21 crore investment in TPCS Private Limited for a 49.998 MW AC captive solar plant, securing grid stability, boosting EBITDA, and advancing industrial clean energy sourcing.

INDUSTRY DRIVER: Cyclicality and pricing pressure

Relevance to Primo Chemicals: Primos integrated operations, strong regional market position, downstream portfolio, and chlorine integration with Flow Tech Chemicals·following the Board and shareholder approval to make it a wholly- owned subsidiary·provide key levers to manage volatility and enhance resilience.

For Primo Chemicals, the opportunity is not limited to caustic soda demand growth. It lies in strengthening an integrated chlor-alkali platform through energy-cost control, downstream value addition, chlorine utilisation and disciplined operational execution.

COMPANY OVERVIEW:

Established in 1975, Primo Chemicals Limited is an integrated and progressively diversified chemical manufacturing company with a strong presence in Indias chlor-alkali industry. Over five decades, operating from its manufacturing plant in Punjab, the Company has built a robust presence across the northern region and established itself as a trusted manufacturer of caustic soda and related chemicals, while steadily expanding its portfolio to include value-added downstream products such as Caustic Soda Flakes and Stable Bleaching Powder.

Having Plant in Punjab, Primo Chemicals operates its manufacturing complex at Naya Nangal, supported by integrated production infrastructure, downstream product capabilities and a 35 MW captive power plant. The Companys integrated business model supports by-product utilisation, energy-cost management and the ability to serve diverse industrial applications across water treatment, textiles, pulp and paper, chemicals, pharmaceuticals, aluminium and industrial manufacturing.

FY26 marked another important milestone in Primo Chemicals journey with the listing of its equity shares on the National Stock Exchange, complementing its existing BSE listing and strengthening its presence in Indias capital markets. The Company continues to be distinguished by its integrated operations, diversified product offerings, regional market position and commitment to responsible and sustainable growth.

OPERATIONAL PERFORMANCE:

During the year, the company recorded a capacity utilization of 82% with a total Caustic Soda Lye (CSL) production of 1,36,055 MT, compared to 84% and 1,38,068 MT previously. While performance was positively supported by improved sales realizations, disciplined cost management, and lower distribution expenses, overall profitability faced headwinds from rising raw material costs and higher power consumption per ton.

To ensure a reliable and sustainable fuel supply for its Captive Power Plant, the Company entered into a Fuel Supply Agreement with Northern Coalfields Limited on July 1,2024. This 10-year contract (or life of the mine, whichever is earlier) secures an Annual Contracted Quantity of 1,25,000 MT of coal. Simultaneously, the Company is actively addressing operational bottlenecks at the power plant to enhance efficiency and optimize overall performance.

To further future-proof operations and optimize energy costs, Primo has approved strategic investments for a 49.998 MW captive solar power plant on OPEX Model. This initiative will significantly lower long-term power expenses, provide a structural hedge against grid volatility, establish reliable energy security, and accelerate the Companys green transition by expanding clean, renewable energy sourcing.

Furthermore, operations were bolstered by steady volume growth across higher-margin downstream products viz- a-viz Caustic Soda Flakes. Finally, Primo initiated the full acquisition of Flow Tech Chemicals, a move designed to guarantee better chlorine off-take control, enhance backward integration and expand its overall product portfolio. This integration grants Primo superior supply chain control with advanced visibility into future utilization, ensuring efficient capital utilization by eliminating uncertainty in chlorine disposal. Furthermore, as the caustic soda industry is inherently cyclical, expanding our product lines with additional downstream offerings provides a crucial risk hedge during downturns, unlocking risk-bearing economies and significantly strengthening Primos overall market position.

FINANCIAL PERFORMANCE:

Primo Chemicals delivered an improved financial performance in FY26, supported by stable revenue, improved profitability, downstream product contribution and energy-cost management. On a standalone basis, revenue from operations stood at H561.69 crore, while Profit After Tax stood at H10.56 crore. Standalone cash flow from operations remained healthy at H64.68 crore.

On a consolidated basis, total revenue stood at H581.49 crore and Profit After Tax stood at H15.37 crore. The improvement in profitability was supported by higher contribution from downstream products, stabilised ECU realisations, energy- cost discipline and contribution from Flow Tech Chemicals, an Associate Company.

The Companys focus remains on improving operating resilience through energy efficiency, downstream value addition, integration across the chlorine value chain, capacity utilisation and disciplined cost management.

Key financial ratios

Ratios	March 31, 2026	March 31, 2025	Remarks
Debtors Turnover	24	26	-
Inventory Turnover (Days)	22	18	-
Interest Coverage Ratio	1.91	1.65	-
Current Ratio	0.65	0.69	-
Debt Equity Ratio	0.22	0.28	-
Operating Profit Margin (%)	6.07	6.61	-
Net Profit Margin (%)	1.88	0.42	It has been increased on account of increase in profitability during the year ended 31.03.2026.
Return on Net Worth (%)	2.95	0.68

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Primo Chemicals maintains internal control systems aligned with the scale and nature of its operations. The framework is supported by independent internal audits, management review and oversight by the Audit Committee of the Board. Statutory auditors also evaluate the adequacy and effectiveness of internal financial controls.

These systems support risk management, asset safeguarding, operational discipline and the integrity of financial reporting. The Company continues to review and strengthen its control environment in line with business requirements, regulatory expectations and operational complexity.

HUMAN RESOURCES:

At Primo Chemicals, people remain central to the Companys operational progress and long-term competitiveness. The Companys human capital strategy is focused on building a capable, engaged and safety-conscious workforce aligned with the requirements of a chemical manufacturing business.

During the year, the Company continued to focus on skill development, leadership capability, employee engagement, workplace safety and continuous learning. These initiatives are intended to strengthen operational discipline, support future growth and reinforce a culture of responsibility and performance.

As of March 31, 2026, the Company had a workforce of more than 350 permanent employees and over 350 temporary personnel.

OPPORTUNITIES:

Primo Chemicals is well positioned to benefit from medium- term opportunities across the chlor-alkali value chain. Rising demand for caustic soda and chlorine derivatives from aluminium, pulp and paper, textiles, pharmaceuticals, infrastructure, water treatment and industrial manufacturing is expected to support long-term consumption growth.

The Companys downstream portfolio, including Caustic Soda Flakes and Stable Bleaching Powder, provides opportunities to broaden applications, improve chlorine utilisation and serve higher-value customer requirements. Increasing focus on water treatment, sanitation and industrial hygiene is also expected to support demand for chlorine-based products.

Global supply-chain diversification and the China-plus-one approach may create selective opportunities for Indian chemical manufacturers. Primos regional presence in Northern India, integrated operations and diversified product portfolio position it to explore these opportunities in a measured manner.

As the industry prioritises energy efficiency, sustainability and integration, Primo Chemicals focus on captive power, renewable energy, downstream integration and operational efficiency positions it favourably to create sustainable longterm value.

THREATS, RISKS AND CONCERNS:

Primo Chemicals operates in an industry that is cyclical and exposed to external and operational risks. Volatility in caustic soda and chlorine prices, global demand-supply imbalances, oversupply from major producing regions and changes in international pricing trends may affect realisations and industry profitability.

Energy cost remains a key risk, as power is a significant cost component in chlor-alkali manufacturing. Any disruption in energy availability or increase in energy costs may affect operating economics. The Company is also exposed to raw material availability, logistics costs and sourcing-related risks.

The chemical industry is subject to stringent environmental, safety and regulatory requirements, particularly for companies handling hazardous chemicals such as caustic soda and chlorine. Any tightening of compliance norms or operational incident may require additional investments in safety, technology, emissions management and process controls.

Demand fluctuations in end-use sectors such as aluminium, textiles, pulp and paper, construction, pharmaceuticals and water treatment may affect product demand and capacity utilisation. The Company also faces risks from geopolitical uncertainty, supply-chain disruptions, trade restrictions, currency volatility and competition from domestic and international players.

RISK MANAGEMENT:

Operating in the chemical manufacturing sector requires continuous identification, assessment and mitigation of business, operational, financial, regulatory and safety-related risks. Primo Chemicals has embedded risk management into its governance and decision-making processes through defined policies, periodic reviews and monitoring mechanisms.

The Companys risk management approach focuses on energy security, process safety, environmental compliance, hazardous chemical handling, sourcing and logistics, chlorine off-take, pricing volatility, working capital discipline and operational reliability. Senior management and the Board are periodically apprised of key risks and mitigation actions.

The Company continues to strengthen its resilience through energy-cost management, captive power and renewable energy initiatives, downstream product diversification, safety systems, compliance monitoring, sourcing discipline and process reliability. These measures support business continuity and sustainable growth.

CAUTIONARY STATEMENT:

This Management Discussion and Analysis contains forward-looking statements based on current expectations, assumptions, and estimates of the management of Primo Chemicals Limited. Actual results may differ materially from those expressed or implied due to factors such as changes in macroeconomic conditions, international disruptions, geopolitical tensions, demand from end-use industries, caustic soda and chlorine prices, energy costs, raw material availability, regulatory requirements, environmental norms, supply-chain disruptions, competition, currency movements, and other factors affecting the Companys operations. The Company assumes no obligation to update or revise these statements except as required by applicable laws and regulations.

	For and on behalf of the Board
	sd/-
	(SUKHBIR SINGH DAHIYA)
Place: Chandigarh	Chairman
Date : 14th August,2026	DIN: 00169921