Punjab Chemicals & Crop Protection Ltd Management Discussions

Economic Review

Global Economy overview

The global economy demonstrated resilience in CY2024, maintaining a growth rate of 3.3% despite headwinds from geopolitical conflicts, trade tensions and monetary policy shifts. While advanced economies expanded at a modest 1.8%, emerging markets and developing economies (EMDEs) outperformed, growing at 4.3%. Along with this, the GDP of the United States and the European region grew by 2.8% and 0.9% in CY 2024. Global headline inflation continued its downward trajectory, declining from 6.6% in CY2023 to 5.7% in CY2024. However, inflation trends varied across regions- advanced economies moved closer to their target inflation rates while emerging markets faced persistent inflationary pressures due to currency depreciation and supply chain disruptions.

As inflationary pressures eased major central banks began to pivot away from tight monetary policies and initiating gradual interest rate cuts. However, fiscal consolidation became a key priority across economies aiming to address elevated debt levels and rebuild financial buffers. Trade dynamics saw growing regionalisation, although global trade volumes remained resilient despite evolving geopolitical risks.

Recent shifts in global trade policies, particularly the imposition of new tariffs, have created notable headwinds for businesses relying on international supply chains. These changes have led to disruptions in the flow of goods and intensified tensions between major trade partners. In light of these challenges, businesses are recalibrating their strategy to remain competitive, avoid disruption to supply chain and protecting their market share. The current shift is likely to have long term impact and result into new supply chain networks and trade shifts.

Outlook

While challenges remain and the global economy remains in a bit of churn, the outlook for CY2025 and beyond remains cautiously optimistic, and the inflationary pressures are expected to ease further. The global headline inflation is declining to 5.7% in CY2025, allowing central banks to continue their transition toward more accommodative monetary policies.

Trade tensions are likely to remain a significant factor in the economic landscape, as nations adjust to ongoing policy shifts and potential tariff adjustments in response to U.S. measures. For businesses, adaptability and strategic foresight will be essential. Countries are expected to prioritise regional trade partnerships and more resilient supply chains to mitigate the risks posed by trade disruptions. Emerging markets are expected to remain key drivers of global expansion. The Eurozone is expected to witness a gradual recovery, as consumer spending picks up and industrial output stabilises supported by monetary easing. With a foundation of resilient growth, policy adaptability and innovation-driven progress, the global economy is well-positioned to navigate challenges and unlock new opportunities.

Indian Economy

Indian Economy Overview

In FY 2025, the Indian economy remained resilient amidst trade conflicts, persisting geopolitical tension and challenging international trade. Indias GDP growth remained constant at 6.5%, positioning it as the worlds fastest-growing major economies. Private consumption was stable throughout the year, reflecting strong consumer confidence and demand. The expansion in the Indian economy was primarily fuelled by the Indian governments timely actions, which resulted in a transformation of the business environment.

Additionally, in the Union Budget 2024–2025, the Ministry of Agriculture and Farmers Welfare received a budget allocation of H 1.32 Lakhs Crores, up from H 1.25 Lakhs Crores, to enhance the agriculture industry.² Moreover, during the reported year, rural demand improved due to record Kharif production and good agricultural circumstances.

Further to this, the Reserve Bank of India maintained a vigilant stance on inflation while supporting growth. Headline inflation eased to 3.3%, primarily due to a moderation in food inflation. The governments emphasis on green energy and infrastructure development further spurred investment and created new opportunities across various sectors^.3

Headline Inflation over the years (in %)

Outlook

Looking ahead, the outlook for the Indian economy appears positive. Prospects of healthy Rabi harvesting, sustained manufacturing profitability and underlying service resilience are expected to support economic activity. The Union Budget has given significant income tax relief to salaried individuals, which will significantly boost urban spending. On the demand side, household consumption is expected to improve, while prospects of fixed investment remain bright. Additionally, there is an upturn in the private capital expenditure (CapEx) cycle, gradually improving business sentiments, healthy balance sheets of banks and corporates and the governments continued thrust on capital expenditure. Indias push towards bilateral agreements and "Make in India" is likely to sustain growth momentum in economy. Improvement in the outlook for global trade and rising integration in the global supply chain will support net external demand.

The retail inflation is also showing signs of easing, which will support the growth in the economic activities, ultimately leading to strengthening of the economy as a whole. While global uncertainties including geopolitical risks and financial market fluctuations persist, Indias strategic policy measures such as diversifying export markets, enhancing domestic production capacities and implementing structural reforms are strengthening its position within global supply chains and providing a solid foundation for sustained growth. Indias retail inflation, as measured by the Consumer Price Index (CPI), eased to 3.34% in March 2025 (provisional) compared to 3.61% in February 2025, marking a 27 basis point decline. This is the lowest year-on-year inflation rate recorded since August 2019. The easing was broad-based, with rural inflation moderating from 3.79% to 3.25%, and urban inflation rising slightly from 3.32% to 3.43%. The overall decline in headline inflation reflects improving supply conditions and continued efforts by policymakers to maintain price stability. This trend offers a positive outlook for input costs and consumer demand in the near term.

Industry Overview

Global Agriculture Sector ⁴

The global agriculture industry attained a market size of USD 14.36 trillion in CY 2024.⁵ This growth can be attributed to increased population, introduction of favourable government policies, rural development programs and introduction of crop protection products. The agriculture industry witnessed a dynamic shift through technology by the incorporation of cutting-edge innovations. Methods such as precision farming, drones and Internet of Things (IoT) are expected to enhance crop monitoring and management. Emerging economies, particularly India and Southeast Asia are expected to play a pivotal role in the growth of the industry and are set to account for 31% of global consumption growth by 2033. This surge is attributed to increasing urban populations and rising affluence in these regions.

In the coming years, the global agriculture industry is anticipated to continue its positive growth journey and attain a market size of USD 20.63 trillion by CY 2029. The growth is primarily augmented by sustainable agriculture practices, genetic engineering advancements and the rise of vertical farming. The future of agricultural production is expected to rely heavily on productivity enhancements rather than the expansion of arable land. It is estimated that about 80% of global crop production growth will stem from yield improvements, which highlights the importance of sustainable practices and the incorporation of technology in agriculture.

Global agricultural crop production by 2033⁶

Indias Agriculture Sector

Agriculture continues to play a pivotal role in the Indian economy by contributing approximately 18% to GDP and employing nearly 45% of the workforce. As a leading global agricultural producer, India plays a vital role in the cultivation of key crops such as rice, wheat, sugarcane and pulses. Despite global headwinds and climate challenges, the sector has shown resilience, supported by structural reforms, technological advancements and policy interventions. Indias agriculture market is estimated at USD 452 billion in FY2025 and is expected to grow to USD 563 billion by 2030, at a CAGR of 4.5% during the forecast period.⁷

Indias agriculture market

The Governments continued focus on modernising agricultural practices, coupled with investments in mechanisation and digital farming solutions, is expected to improve overall efficiency and sustainability. Furthermore, sustained government support through the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and Minimum Support Price (MSP) revisions continue to provide financial stability to farmers. The increasing demand for agriculture-inputs, including crop protection chemicals and specialised nutrients, presents significant opportunities for companies operating in the agriculture-solutions space. Slow and sustained reforms, crop diversification, bio fuels are all positives for this sector and agriculture sector may drive economy in coming years.

Global Crop Protection Industry

In fiscal year 2024, the global crop protection industrys market size was USD 64.18 billion. This expansion was aided by increased demand for agricultural products among the growing global population. Moreover, the global industry was aided by favourable regulatory policies and enhanced awareness of the advantages of agrochemicals. The emergence of pests and diseases caused by climate change, as well as an increased desire for efficient crop protection solutions, fuelled the demand for agrochemicals.

The global crop protection sector faced several headwinds in CY2024 due to factors such as agrochemical price deflation, lower commodity prices and adverse weather conditions across key regions. Despite these short-term challenges, the industry witnessed signs of volume stabilisation across major markets such as North America, Brazil and Asia-Pacific, driven by inventory correction and steady demand for differentiated products. Pricing remained under pressure, with declines of up to 6% reported across key product segments in CY2024. However, industry analysts anticipate that prices are close to bottoming out, with CY2025 expected to see a recovery led by innovative and sustainable agrochemical solutions.

North America experienced challenges from droughts, while extreme heat waves in China impacted the Asia-Pacific market. In addition to this, the crop protection industry in Europe experienced rapid technological advancement and innovation in the recent year. Further to this, the crop protection industry is anticipated to attain a market size of USD 97.01 billion in CY 2032. Along with this, Argentinas crop protection industry is anticipated to attain a market size of USD 6.28 by CY 2025. Moreover, as a major global agricultural producer and exporter, Argentinas focus on high-yield production systems has necessitated adopting to advanced crop protection chemicals strategies. Markets such as Brazil, and India are likely to witness renewed demand as inventory levels normalise and farmers increase investments in crop protection solutions. Advancements in sustainable agrochemicals, biologics and precision farming technologies are set to drive long-term growth to ensure resilience and innovation in the sector.

Indias Agrochemical Industry⁹

India remains one of the largest producers and exporters of agrochemicals, with a well-established manufacturing base and growing demand from domestic and international markets. The Indian Agrochemical industry grew at a CAGR 16% from FY 2021 to FY 2024, exhibiting a strong growth over the years.¹⁰ According to the forecasts, the market is expected to grow from USD 9 billion in FY2025 to USD 12 billion by FY2030, at a CAGR of 7%. With an accelerated focus on improving crop yields and ensuring food security, the demand for agrochemicals including pesticides, herbicides, fungicides and plant growth regulators has remained robust. The sector has also seen evolving trends driven by regulatory shifts, rising export potential and advancements in sustainable agricultural practices.In India, pests, weeds and diseases cause a significant loss of 15-25% in potential crop yields. Improving crop productivity through effective pest control and weed management practices is essential for a flourishing agricultural output. These factors are driving the growing use of agrochemicals to mitigate losses and enhance yields.

Specialty Chemical Industry

The Indian speciality chemicals sector, valued at $27,054.3 Million in FY2024, is expected for robust growth with projections expected to reach $41,256.1 Million by FY2033 at a CAGR of 4.8%. The sector has emerged as a key player on the global stage driven by rising investments, augmented export demand and supportive government policies.¹¹

The markets growth is mainly fuelled by rapid industrialisation across sectors such as agriculture, pharmaceuticals and automotive, alongside the burgeoning demand from end-user industries including healthcare, personal care and construction. Additionally, the industry has benefited from global supply chain diversification trends, with companies worldwide seeking alternative suppliers outside China. This shift has provided the Indian manufacturers with a distinct competitive edge owing to their cost-effective manufacturing capabilities, technical expertise and skilled labour pool.

Company Overview

Since its inception in 1975, Punjab Chemicals has evolved into a leading manufacturer of agrochemicals, speciality chemicals and industrial chemicals. The Company operates multiple state-of-the-art manufacturing facilities across India, including two in Punjab (Derabassi and Lalru) and one in Maharashtra (Pune) with a combined reactor capacity of 2000 KL. All the facilities are ISO certified and supported by robust R&D capabilities. Over the years, the Company has fortified its position as a preferred CRAMS (Contract Research and Manufacturing Services) provider for domestic and international agrochemical companies.

The Company remains committed to strategic initiatives such as, backward integration, process improvements and expansion into new geographies including Latin America, South Asia and European Union. With over four decades of expertise, the Companys facilities follow strict environmental protocols which include maintenance of zero liquid discharge and utilisation of advanced effluent treatment plants.

3

Manufacturing facilities

Location wise performance

Agrochemicals

The agrochemicals division primarily operates through the Derabassi facility with a product portfolio of more than 18 crop protection products and several intermediates and Specialty products. Over the past decade, Punjab Chemicals has established a strong presence in the agrochemicals sector, with majority products focussed on export markets. Major portfolio of the company is Herbicides followed by Fungicides and Insecticides. The Companys agrochemical division contributes approximately 67% to the total business.

Specialty Chemicals & Pharmaceuticals

The Specialty Chemicals & Pharmaceuticals division based in Lalru, manufactures APIs, intermediates and fine chemicals. It adheres to international quality standards and has a robust presence in global markets. The facility spans 10 hectares and adheres to stringent waste management protocols. The division contributes to 19% of the total business.

Industrial Chemicals

Based at the Pune facility, this division specialises in the production of high-purity phosphorus compounds and phosphates. It supplies food-grade phosphoric acid to many beverage giants and major pharmaceutical firms. Revenue Contribution from this division stood at 14% in FY2025, with plans to double the revenue - in the next 3-5 years through expansion and new customer additions.

Forward Looking Analysis

Opportunities

Strong focus on R&D and innovation

The Company strongly emphasises Research and Development (R&D) and focuses on new product registrations. This will help in driving innovation, expand its presence in the industry, and ultimately lead to strengthening its competitive edge in the industry.

Shift in global strategy

Escalated geopolitical risks and supply chain disruptions are influencing global manufacturers to reduce their dependence on China. This shift presents a significant opportunity for the Company to expand its partnerships with Multi-National Companies (MNCs) and fortify its position in the global supply chain.

Supportive Government initiatives

The Indian governments initiatives to enhance agricultural productivity, promote crop diversification and bolster domestic chemical manufacturing has created a favourable environment conducive to growth.

Focus on Sustainable Growth

There is a growing global demand for sustainable agrochemicals, bio pesticides and speciality chemicals. Punjab Chemicals is strategically positioned to leverage this trend by focusing on green chemistry innovations, solvent recovery systems and minimised carbon emissions in its production processes.

Diversified procurement practice

The Company is actively working to mitigate supply risks by sourcing materials from diverse geographies and developing local suppliers in India. This diversification can augment supply chain resilience and improve overall cost efficiency.

Threats

Pricing pressure

Chinas significant production capacity, technical expertise and aggressive pricing strategies continue to exert influence on global chemical markets. Punjab Chemicals faces pricing pressures in crucial segments that require continuous focus on cost optimisation and efficiency improvements

Competitive environment

Leading global and domestic agrochemical companies with strong brand recognition, robust R&D capabilities and extensive distribution networks pose a significant competitive threat

Regulatory framework

Increasing global and domestic regulations on chemical-based agrochemicals, combined with could result in more stringent compliance requirements. This shift in regulatory framework may result in a shift in demand in demand in the market towards organic alternatives.

Shift in consumers preference

Growing public awareness of the environmental and health impacts of agrochemical products is resulting in a growing trend of organic farming, and increasing popularity of bio-pesticides. This can undermine the Companys performance by negatively affecting the demand for traditional agrochemicals.

Business Outlook

Punjab Chemicals remains positive about its future growth despite the challenges faced during the year. While the global market saw lower prices and slow demand due to high inventory levels, the Company managed to maintain stable volumes and sustain profitability by controlling costs and improving efficiency.

Industry trends indicate that the crop protection market may be approaching an inflection point. While pricing challenges are expected to persist in the short term, volumes have begun stabilising across key regions. This is expected to support a gradual recovery, especially for players with strong product innovation and diversified customer portfolios. The Company is focusing on expanding its product range with more high-value and complex chemicals. In FY25, four new products were launched, contributing 12% to total revenue and this is expected to grow further in the coming years. More new products are planned for FY26, which are expected to boost both revenue and profitability. Investments in R&D, new technologies and skilled teams are helping the Company stay ahead in product development and customer solutions.

With strong relationships with global clients, steady order flows and better market visibility ahead, Punjab Chemicals is well-prepared for future growth. The Company is also working on increasing plant capacity through upgrades and new blocks to support rising demand. Backed by a healthy balance sheet, strong product pipeline and ongoing efficiency improvements, the Company aims to deliver consistent and sustainable performance going forward.

Consolidated Financial Review

Particulars	FY2025	FY2024
Revenue from Operations	90052	93423
Other Income	143	270
Total Income	90195	93693
EBITDA	10062	11608
EBITDA Margin (%)	11.17%	12.42%
Profit Before Tax	5357	7308
Profit After Tax	3893	5358
Profit After Tax Margin (%)	4.32	5.74
Earnings Per Share (C)	31.75	43.70
Cash Flow from Operations	2522	2989
Return on Net Worth (%)	10.67	16.23

Analysis of the Profit and Loss Statement

Revenues

Revenues from operations reported a 4% decline from C934 Crores in 2023-24 to C901 Crores in 2024-25.

Expenses

The Companys total expenses decreased by 2.31% from C864 Crores in FY 2023-24 to

C844 Crores in 2024-25. Major expenses items comprises the cost of material consumed, purchase of stock-in-trade, changes in inventories of finished goods, stock-in-trade and work –in-progress, employee benefits expenses, finance cost, depreciation and amortisation expenses.

Cost of material consumed increased by 6% from C553 Crores in FY 2023-24 to C587 Crores in

2024-25 due to changes in pricing and product mix.

Employee benefit expenses increased by 8% form C88 Crores in FY 2023-24 to C95 Crores in FY 2024-25, on account of annual increments and manpower additions to support expansion in R&D and new product commercialisation.

Depreciation and amortisation expenses increased by 13% from C22 Crores in FY 2023-24 to C25

Crores in FY 2024-25. This is on account of full year depreciation of capitalised assets.

Analysis of the Balance Sheet

Sources of funds

The capital employed by the Company increased by 15.38% to C525 Crores as on March 31, 2025, from C455 Crores as on March 31, 2024. Return on Capital Employed declined from 20.65% in 2023-24 to 14.39% in 2024-25. The net worth of the Company increased by 11%, from C330 Crores to C365 Crores as on March 31, 2025. The Companys paid-up equity share capital comprised 1,22,62,185 equity shares of C10 each.

Long-term debt of the Company increased by 15.93% to C60.98 Crores as of March 31, 2025, from C52.6 Crores in the previous year. The long-term debt-equity ratio stood at 0.17 in 2024-25 compared to 0.16 in 2023-24. Finance costs declined by 14.4% from C20.8 Crores in 2023-24 to C17.8 Crores in 2024-25, supported by effective borrowing management and reduction in high-cost debt. The Companys gross debt (including working capital borrowings) to equity ratio stood at 0.43 at the close of 2024-25, compared to 0.37 in the previous year.

Applications of funds

Fixed assets (net block) of the Company increased by 3.47% from C230 Crores as on March 31, 2024, to C238 Crores as on March 31, 2025. Depreciation on assets increased from C22 Crores in 2023-24 to C25 Crores in 2024-25 due to new capitalisation during the year. Non-current investments of the Company increased from C1.44 Crores as on March 31, 2024 to C1.57 Crores as on March 31, 2025.

Working Capital Management

Current assets of the Company increased by 38.46% from C377 Crores to C522 Crores as of March 31, 2025, led by higher trade receivables and inventory buildup. Inventories, including raw materials, work-in-progress, and finished goods, increased from C133 Crores in 2023-24 to C222 Crores in 2024-25 to support new product launches and anticipated demand. The inventory turnover ratio stood at 5.07 in 2024-25 compared to 6.21 in the previous year. Trade receivables rose from C197 Crores to C235 Crores in 2024-25. The trade receivable turnover ratio stood at 4.16 as on March 31, 2025, compared to 5.48 in the previous year.

Margins

Lower absorption of fixed costs due to flat revenues impacted margins during the year. The EBITDA margin of the Company stood at 11.17% in 2024-25, compared to 12.42% in 2023-24, while the net profit margin declined by 141 basis points in 2024-25 from 5.74% in the previous year.

Key Financial Ratios

Particulars	FY2025	FY2024	Reason for variance above 25% year on year
Current Ratio	1.51	1.59	No major variation
Debt Equity Ratio	0.43	0.37	No major variation
Debt Service Coverage Ratio	2.11	3.06	The ratio has decreased mainly due to decrease in profit
Return on Equity/Return on Investment (%)	11.21	17.55	The ratio has decreased mainly due to decrease in profit
Inventory Turnover	5.07	6.21	No major variation
Trade Receivables Turnover Ratio	4.16	5.48	No major variation
Trade Payables Turnover Ratio	4.95	5.39	No major variation
Net Capital Turnover Ratio	5.11	6.64	No major variation
Net Profit Margin (%)	4.32	5.74	No major variation
Return on Capital Employed (%)	14.39	20.65	The ratio has decreased mainly due to decrease in profit and increase in trade receivables
Interest Coverage Ratio	4.00	4.51	No major variation
Operating Profit Margin (%)	8.38	10.02	No major variation
Return on Net Worth	10.67	16.23	No major variation

Risks and Concerns

The Board holds the primary responsibility for overseeing risk management and internal controls, ensuring alignment with the Companys strategic objectives. This includes defining the Companys risk tolerance, continuously assessing and monitoring key risks and reviewing reports from internal auditors on risk assessments and control measures. Given the evolving regulatory landscape, market volatility and operational challenges, the Company remains committed to proactive risk mitigation through robust governance frameworks, compliance mechanisms and strategic decision-making to safeguard long-term business sustainability.

Human Resource

Punjab Chemicals places a strong emphasis on employee well-being, engagement and development. The Company promotes a supportive work environment through various initiatives, including first aid and safety training, sports activities and social responsibility programs like blood donation camps. Regular fire drills ensure workplace safety, while a holistic approach to employee welfare promotes both professional and personal growth. These efforts reflect the Companys commitment to creating a motivated and secure workforce.

1230

Total workforce as of March 31, 2025

Internal Control Systems and Their Adequacy

The Company upholds strong internal control systems governing its business processes, ensuring operational efficiency, precise financial reporting and rigorous compliance with applicable laws and regulations. The Company has engaged a reputable external firm to support and review the effectiveness and efficiency of internal control system. The Audit Committee meets periodically to oversees these systems and examine internal audit reports and follow up on action plans of significant issues

This committee not only evaluates suggestions for improvement but also actively oversees the implementation of corrective actions. Furthermore, it collaborates with the Companys statutory auditors to assess the efficiency of the internal control framework. Regular reports on its discoveries are presented to the board of directors, promoting transparency and informed decision-making.

Cautionary statement

The Management Discussion & Analysis (MD&A) section contains statements regarding the Companys objectives, expectations and forecasts that might be forward-looking as per relevant securities laws and regulations. Its important to note that actual results could vary from these statements due to economic conditions, climatic influences, government policies and other unforeseen factors. While the MDA includes all mandatory information, any missing details in this section are provided elsewhere in the Annual Report.