Punjab Alkalies Management Discussions

Global Economy

The global economy witnessed a muted FY23 with the economy growth at 3.4% and FY24 is estimated to see a slower growth estimated at ~ 2.8%. Soaring global energy and food prices, the resurgence of Covid caseloads in few countries, the fallout of recessionary trends in various markets & end-user industries have led to slower-than-expected economic growth resulting in stringent monetary policies by many central banks.

The near-term outlook for global economies remains unclear. However, the note of optimism stems from the opening up of Chinas economy and the cooling down of energy prices. It is expected the slowdown in global economic growth will bottom out in 2023 but will start picking up in 2024. Advanced economies, compared to emerging markets, are expected to experience a more significant growth slowdown, from 2.7% in 2022 to 1.3% in 2023. According to the IMF, global GDP growth will recover to 3.1% in 2024, driven by domestic factors such as robust private consumption and investments. The US Federal Reserves shift towards a less aggressive monetary policy will likely set the tone for the coming year. However, the geopolitical conflict in eastern Europe and its impact on global tensions remain a significant risk. [Source: IMF Report 2022-23].

Surpassing global slowdown, the Indian economy grew by 7.2% during the fiscal year 2022-23, outpacing the Governments projection of 7.0% GDP growth. This growth was driven by strong domestic macroeconomic fundamentals, increased exports, reduced oil prices, higher capital investments, and a decrease in import-intensive consumption demand.

The Indian economy has demonstrated extraordinary resilience despite facing several challenges such as rising inflation and supply shocks caused by geopolitical crises and continues to recover. Strong growth is anticipated because of strong investment activity bolstered by the Governments capex push coupled with an upswing in manufacturing activity, robust consumption trends, etc. India has managed to uphold its status as the worlds fastest-growing economy. With an ambitious target of becoming a $5 trillion economy by 2025 and more than doubling annual exports to $2 trillion by 2030, aided by the rise in services and electronics exports, India has announced several initiatives to achieve these goals and sustain its growth momentum. The Governments proactive measures and policies are expected to contribute to a healthy GDP growth rate in FY24, forecasted at 6.3%. [Source: National Statistical Office (NSO); IMF]


India, being one of the worlds largest economies, has played an important role in global economic growth, adding about $1.3 trillion to global demand over the last decade. The Indian economy has emerged stronger and fared better than many major global economies, because of its growth-oriented policy reforms and effective regulatory measures. Many policy initiatives such as the Production Linked Incentive (PLI), de-leveraging of private sector, increased spending on infrastructure, and various other Government policies have propelled the Indian economy to its new heights.

Union Budget FY 2023-24 provisions

The Union Budget FY24 aimed at enhancing the nations positioning and accordingly set an increased capital expenditure outlay of Rs. 10 Lac crore, a 33% increase over FY23. The governments focus on capital expenditure, strong manufacturing capacity utilization, double-digit credit growth, and moderation in commodity prices are likely to further enhance manufacturing and investment push. Governments introduction of measures to support economic growth including the National Infrastructure Pipeline (NIP) and the Production-Linked Incentive (PLI) schemes etc. will provide a fillip to key industries like manufacturing, infrastructure and healthcare.

Industry Overview

Indian Chemical Industry

The Indian chemical industry has emerged as a formidable global player, claiming 6th position worldwide and 3rd spot in Asia. The industry recorded a volume of US$ 232 billion in 2022, and is expected to reach US$ 304 billion by 2025, registering a CAGR of 9.3%. Currently, Indias chemical exports have reached the 14th position, while imports stand strong at the 8th rank. The cumulative FDI equity inflow in the chemical industry (excluding fertilizers) was US$ 20.96 billion from April 2000 to December 2022. This constituted 3.35% of the total FDI inflow across sectors.

The recent Union Budget for 2023 sets the stage for growth, stability, and inclusive development, with an array of policies aimed at igniting robust demand for a diverse range of chemicals. The budget allocation for the Department of Chemicals and Petrochemicals stood at Rs. 173.45 crore (US$ 20.93 million).

The Government is also considering launching a production-linked incentive (PLI) scheme in the chemical sector to boost domestic manufacturing and exports. The industry continues to explore opportunities to obfuscate itself from supply chain disruptions in China and trade conflicts among the US, Europe, and China. Additionally, anti-pollution measures in China have created specific segments of opportunities for the industry.

To bolster growth, the government has implemented the Petroleum, Chemicals, and Petrochemicals Investment Regions (PCPIR) policy. This ambitious plan aims to attract an impressive investment of Rs. 20 lakh crore (US $276.46 billion) by 2035, establishing dedicated integrated manufacturing hubs. Providing special incentives through PCPIRs and Special Economic Zones (SEZs) to encourage downstream units will further boost production and overall industry growth.

Industry, today, is at the cusp of becoming a dominant global industry. No doubt, its future looks very promising. With a stable and favourable policy regime from the government and with the industrys aggressive focus on EHS and R&D, India will grow to become a safe, sustainable, and vibrant global chemical manufacturing hub. [Source; IBEF, AMAI]

Global and Indian Caustic Soda Industry

FY23 witnessed robust growth in the industry, bolstered by strong demand and stable international prices up till October 2022. However, from November 2022, the prices declined due to the easing of global supply chain conditions, destocking of overstocking done in Europe earlier in anticipation of high energy prices and recession in European Union economies. Among the prominent segments within the inorganic chemicals sector, Chlor-Alkali played a pivotal role as a fundamental building block for the overall chemicals industry. Its applications span a wide range of sectors

including textiles, alumina, organics, inorganics, pesticides, soap & detergents, dyes, paper & pulp, water treatment, chemical & petrochemical processing, and power & steel.

Indian Caustic Soda, with an annual capacity of approximately 5.04 million metric tonnes, accounts for approximately 5-6% of the global capacity. It is projected to grow in tandem with the countrys GDP. Initial estimates indicate that the industry produced around 4.13 million metric tonnes of Caustic Soda, reflecting an 8% increase compared to the previous year. In terms of international trade, Caustic Soda continued its trend of surpassing imports with exports reaching 458,000 metric tonnes, while imports stood at 139,000 metric tonnes. Notably, exports witnessed an increase while imports remained lower.

The geopolitical conflict in eastern Europe had an impact on the global economy; however, the governments interventions and balanced approach mitigated its effects on our economy. The higher GDP growth of over 7.0% for FY23 and the strong indicators of the Indian economy are indicative of sustained growth momentum.

For the Alkali industry, FY24 is expected to begin with signs of declining international prices and high imports on our west coast. However, the expectation of overall strong economic growth could provide some respite to our industry. [Source: IBEF; AMAI]

Business Overview

Primo Chemicals Limited, formerly known as Punjab Alkalies & Chemicals Ltd (PACL), is a prominent company in the chemical industry. The company specializes in the production of caustic soda and related chemicals. Primo Chemicals Limiteds strong market presence, commitment to sustainability, focus on quality, and expansion plans position the company for continued growth in the chemical industry. With its expertise and dedication to meeting customer needs, Primo Chemicals Limited aims to deliver superior value and contribute to the industrys development in the years to come.

Performance Review

Primo Chemicals Limited delivered a robust performance in FY23, achieving significant growth in revenues and profitability surpassing all previous records. Despite the considerable increase in Salt prices, the Company experienced positive trends in key performance indicators.

In FY23, the company recorded a Revenue from Operations of Rs. 7,074 million, marking a substantial increase of 56% from Rs. 4,541 million in FY22. The EBITDA showed remarkable growth, more than doubling to Rs. 2,185 million compared to Rs. 1,018 million in FY22. Similarly, the Net Profit also moved to Rs. 1,374 million from Rs. 592 million in FY22 resulting an increase of 132%. These financial achievements reflect the companys effective cost management and revenue growth strategies.

The Cash Flow from Operations stood at Rs. 1,496 million, indicating the companys ability to generate positive cash flows from its core business operations.

Furthermore, the ECU realization increased by 26.2% on a year-on-year basis. The Caustic Soda Lye rate per metric ton (PMT) also showed growth, with a 32.3% increase on a year-on-year basis.

Overall, Primo Chemicals Limiteds consolidated performance in FY23 demonstrates its strong financial achievements and its ability to achieve substantial growth, enhance profitability, and optimize its operations. The companys focus on cost management, efficient production utilization, and favorable market conditions contributed to its strong financial performance.

Growth Strategy and Outlook for Primo Chemicals Limited

Primo Chemicals Limited has outlined a robust growth strategy to capitalize on market opportunities and drive sustainable expansion in the chemical industry in line with the Companys aims to enhance

its competitive edge, diversify its customers portfolio, expand its market reach and capture a larger customer base.

Primo has been strategically pursuing its forward integration plan of implementation of Aluminum Chloride project and acquisition of 100% stake in Flow Tech Chemicals Pvt. Ltd. Primo has successfully commissioned the commercial production of Stable Bleaching Powder to further enhance the companys product diversification and strengthens its position in the market. Primo Chemicals Limited continues to explore opportunities for forward integration to secure its supply chain, improve operational efficiencies, strengthen its downstream portfolio, and to add more value-added products in its product portfolio.

Primos ongoing expansion plans, including the 35 MW Coal and Biomass based Thermal Power Plant and Caustic Flaker unit, are developing as planned and it is anticipated that these projects will have a positive impact on the companys revenue and profitability in FY 2023-24.

Primo remains committed to operational excellence by continually improving its manufacturing processes, optimizing resource utilization, and implementing cost-effective measures. Primo Chemicals Limited aims to enhance productivity, reduce costs, and improve overall operational efficiencies to drive profitability and competitiveness.

Overall, Primo Chemicals Limited has a positive growth outlook, driven by its strategic initiatives, market expansion, product portfolio enhancement, and operational excellence. By capitalizing on these factors, the company aims to achieve sustainable growth, increase market share, and deliver long-term value to its stakeholders.


Primo has implemented various marketing initiatives to strengthen its brand presence in the market, expand its customer base, and drive growth in the chemical industry. The company has invested in developing a cohesive brand identity, including a visually appealing logo, tagline, and brand messaging. Primo has aimed to enhance brand awareness and create a positive perception among customers and stakeholders. Primo recognizes the importance of nurturing strong relationships with its existing customers. By understanding customer needs and providing tailored solutions, the company aims to enhance customer satisfaction, loyalty, and long-term partnerships.

Advantages & Opportunities

Primo has locational advantages of availability of uninterrupted Power supply - a major input, perennial source of water, skilled labour and close proximity to road/rail and the presence of several end-user Units in industries like paper, fertilizers, soaps and detergents, etc. in its Natural Marketing Zone as its Caustic Soda Plants are located in its Plant Complex at Naya Nangal, District Ropar, Punjab in close vicinity of a State Highway and around 12 Kms from the Bhakra Left Bank Power Generating Station and about 2.5 Kms. from Sutlej River.

The Company is supplying Chlorine Gas through pipeline to one of its Promoter Group Chlorinated Paraffin Wax (CPW) Plant situated within its Complex and Hydrogen Gas through pipeline to one Hydrogen Compressing & Bottling Unit situated near PCL Complex. Primo is also utilising Hydrogen as a fuel, which result in a considerable improvement of utilisation of its by-product Hydrogen Gas. This results in regular supply of Chlorine & Hydrogen besides saving on transportation cost.

Chlor-Alkali business is seeing opportunities in capacity expansion to meet the medium-term demand growth as well as in downstream products that will help Chlorine evacuation and other value- added downstream products.

With a growing focus on sustainability and environmental regulations, there is a rising demand for sustainable and eco-friendly chemicals. Primo Chemicals Limited can seize this opportunity by investing in research and development to develop and offer sustainable chemical solutions that align with market trends and customer preferences.

Primo Chemicals Limited can explore opportunities to expand its presence in international markets. By targeting emerging markets or regions with high demand for chemicals, the company can tap into new customer segments and diversify its revenue streams.

By diversifying its product portfolio and focusing on value-added products, the Companys endeavor is to capture higher margins and differentiate itself from competitors. Identifying customer needs and developing specialized chemical solutions, can lead to increased market share and profitability.

Threats, Risks & Concerns

The expansion of installed capacities by other domestic players in the caustic industry poses a competitive threat. Increased supply of Caustic and Chlorine in the market can lead to pricing pressures and intensified competition for market share besides intense competition from Global players.

The chemical industry is subject to stringent regulatory standards and environmental regulations. Noncompliance with these regulations can lead to fines, penalties, and reputational damage. Additionally, increasing environmental concerns and the need for sustainable practices require chemical companies to make substantial investment in pollution control measures and adopt cleaner technologies, which can add to operational costs. Being a producer of chemicals with hazardous properties, safety is a major concern. Primo must adhere to stringent safety protocols and invest in measures to mitigate any potential risks to workers, the environment, and surrounding communities.

In addition to the above, Primo is exposed to the risk of increasing input costs such power tariffs, raw materials, transportation, and other essential resources. Escalating prices of these inputs can squeeze profit margins and affect the overall cost- effectiveness of the companys operations.

The Indian chemical industry faces intense competition from global players. Global companies often have established market presence, advanced technologies, and economies of scale, which can make it challenging for Indian companies to compete on price and quality. Protectionist measures, trade barriers, and fluctuations in foreign exchange rates can also impact the competitiveness of Indian chemical manufacturers in the global market.

Geopolitical tensions, trade disputes, and changes in government policies can introduce uncertainties and impact the global supply chains of the chemical industry. Trade barriers, tariffs, and protectionist measures can limit market access and create challenges for Indian chemical companies operating in international markets.

Risk Management

Risks refer to potential threats or negative occurrences that can lead to damage, loss, liability, or other adverse consequences. Risk management involves the identification, assessment, and prioritization of risks, followed by the application of resources to mitigate/minimize, monitor, and control the probability and impact of such events. The Company has in place an adequate Risk Assessment and Minimization System. Major risks for the Company are a) Cost of Power: Being a power-intensive industry, minimizing power cost is crucial to maintaining profitability, b) Production of Hazardous Chemicals, which presents inherent risks: The Company must adhere to strict safety protocols and industry regulations to mitigate the potential risks associated with these operations, c) Locational Disadvantage: Being far from its major raw material i.e. Industrial Salt which involves transportation costs and supply chain complexities, posing challenges to the Companys operations and cost efficiency, d) Import of Caustic at Cheaper Rates: poses a competitive threat to the Company. Cheaper imports may affect the Companys pricing, market share, and overall profitability, e) Increasing regulatory enactments have brought in the need for

additional compliances. With various statutes and regulations, non-compliance may not only lead to monetary penalties but also have an impact on the reputation of the organization and the goodwill it enjoys. The risk is mitigated through regular monitoring and review of changes in the regulatory framework to ensure compliance with all the applicable statutes and regulations. Other Risk includes Operation Risk including Cyber risk, Financial Risk, Sustainability Risk, Recession Risk, Digitalisation Risk, Talent Retention Risk, etc.

To address these risks, the Company focuses on proactive risk management strategies, such as optimizing power consumption, maintaining rigorous safety measures, exploring alternative sourcing options for raw materials and enhancing operational efficiencies. By continuously monitoring and mitigating these risks, the Company aims to safeguard its business and maximize opportunities for growth.

Internal Control Systems

The Company has in-place appropriate internal control systems in line with its size and business operations and these are strengthened through internal audits being conducted by independent auditors. The findings of the internal audit are reviewed by both the management team and the Audit Committee of the Board of Directors. In addition to the internal audits, the adequacy and effectiveness of the internal control systems are also assessed by the Companys statutory auditors. This comprehensive approach ensures that the internal control systems are adequate, reliable, and aligned with industry best practices, thus enabling the Company to effectively manage risks, safeguard assets, and maintain the integrity of its financial reporting processes.

Place: Chandigarh Date: 14th August, 2023

Human Resources

Primo Chemicals Limited attaches great value to its human resources and places great emphasis on upgrading and enhancing their skills and capabilities. The Company considers training and development as one of the key area for its personnel at all levels. Throughout the financial year under review, the Company maintained cordial industrial relations. As of March 31, 2023, Primo Chemicals Limited had a total of 385 permanent employees, including 40 employees on deputation, contributing to the organizations success.

Cautionary Statement

The statements made in this Management Discussion and Analysis Report regarding the Companys objectives, projections, estimates, expectations, or predictions may be considered as "forward-looking statements" in accordance with applicable laws or regulations. These statements are based on certain assumptions and expectations regarding future events. However, actual results may differ materially from those expressed or implied in these statements. Various factors could affect the Companys operations, including economic conditions that impact global and domestic demand and supply, fluctuations in prices of finished goods, availability and costs of power and raw materials, restrictions and charges related to power wheeling, changes in government regulations and tax regimes, economic developments in India, and other factors such as litigation and industrial relations. The Company does not assume any obligation to publicly amend, modify, or revise any forward-looking statements based on subsequent developments, information, or events.

For and on behalf of the Board


(Sukhbir Singh Dahiya)


DIN: 00169921