Punjab Chemicals & Crop Protection Ltd Management Discussions

Economic Overview

Global Economic Overview1

The global economy exhibited measured resilience in CY2025, expanding by 3.4% amid persistent geopolitical and trade-related headwinds. Growth was supported by a strengthening investment climate, declining inflation and a more accommodative monetary stance across major economies. According to recent IMF estimates, the US economy is estimated to record a growth of 2.1%. Economic activity in the US remained strong, primarily driven by investments in Artificial Intelligence (AI). The eurozone is expected to exhibit a growth rate of 1.4%, while China is expected to grow at approximately 5%. Although tariff-induced tensions persisted, trade patterns adapted through strategic realignments and new bilateral agreements between major economies.

The Emerging Markets and Developing Economies (EMDEs) continued to be vital drivers of global growth, expanding by an estimated 4.4%. Conversely, Advanced Economies grew at a moderate 1.9% in CY2025. Despite labour market weakness in some advanced economies due to AI-led restructuring and mobility constraints, the EMDEs enjoyed positive financial spillover effects owing to the depreciating US dollar.

Risks to growth remain tilted to the downside, stemming primarily from potential escalations in trade tensions and a deterioration in financial sentiment. Global growth is expected to moderate at 3.4% in CY2026 then slightly improving to 3.2% in CY2027. Over the longer term, this reflects the impact of easing inventory cycles, trade-related pressures and softer consumption trends across major economies.

Nevertheless, productivity gains from AI-enabled technologies, combined with sustained investments are expected to enhance output potential. The demographic dividend in developing countries, with a growing working-age population is foreseen to drive global demand. Meanwhile, advanced economies are likely to pursue an accommodative fiscal stance, prioritising climate transition, green infrastructure and food security. Together, these factors indicate that even amid fragmentation risks, the global economy retains sufficient structural resilience to maintain a stable growth trajectory.

The global macroeconomic landscape is increasingly interacting with long-term climate trends, as continued global warming coincides with the strengthening of an El Ni?o event in 2026. Ni?o pattern is expected to persist into early 2027, introducing notable shifts in global atmospheric circulation. From an economic perspective, these combined climate factors influence primary sectors by altering seasonal weather patterns, which in turn necessitates strategic planning within agricultural supply chains, energy distribution systems, and commodity markets. Industries worldwide are proactively adapting to these shifts by adopting climate-resilient practices, diversifying inventories, and enhancing resource management to maintain operational continuity amid changing environmental conditions.

Indias economy exhibited notable momentum in FY2026, navigating an external environment marked by trade fragmentation and geopolitical uncertainties. GDP growth is estimated at 7.7%, up from 7.1% in FY 2025, attributable to robust domestic demand and stable private consumption. With this performance, India retained its position as one of the fastest growing economies worldwide. Policy-led improvements further reinforced investor sentiment and productive capacity.

The evolving geopolitical situation in West Asia has introduced both complex macroeconomic challenges and unique structural opportunities. For the Indian economy, these external pressures have acted as a catalyst for policy-led improvements, particularly in accelerating strategic measures to secure energy supply chains and enhance domestic self-reliance. Government initiatives have increasingly focused on the diversification of energy sourcing, the optimization of alternative trade corridors. The domestic economy continues to exhibit significant resilience. This underlying macroeconomic strength, combined with robust domestic consumption and structural stability, enables the nation to maintain its growth momentum while successfully navigating global supply chain realignments.

Monetary policy remained prudently calibrated. The Reserve Bank of India balanced growth imperatives with steady inflation control. Headline inflation remained controlled, as reflected in the latest CPI data of 3.40%3 on the revised 2024 base, supporting real income growth and consumption across both urban and rural markets.

The governments sustained prioritisation of green energy and infrastructure development has further strengthened the countrys medium-term growth trajectory. The agricultural sector also received renewed policy impetus, with budgetary allocation rising to H1.32 lakh Crores under the Union Budget FY2026-27, up from H1.25 lakh Crores the previous year. Favourable agronomic conditions and record kharif output strengthened rural incomes, supported consumption demand and contributed to broader macro-economic stability.

The outlook for the Indian economy remains favourable, supported by a healthy Rabi sowing, sustained manufacturing profitability and a resilient services sector. Policy-led tax relief is expected to aid urban consumption, thereby bolstering the overall domestic demand. With inflationary pressures subdued and commodity inputs stable, the economy is anticipated to sustain its growth trajectory, with real GDP growth for FY 2026-27 expected in the range of 6.8% to 7.2%4. despite lingering global uncertainties. The revival of the capex cycle, with steady corporate balance sheets and improved banking sector health augurs well for investment-led growth.

Trade policy momentum, including multiple new Free Trade Agreements (FTA) should broaden export opportunities and enhance agricultural market access. At the same time, Indias increasing participation in global supply chains and the improving global trade environment are expected to augment net external demand. Collectively, stable macro-fundamentals, renewed capital formation and expanding external linkages are envisioned to support sustained growth of the economy in the year ahead.

The year under review witnessed unprecedented agricultural production and divergent trends in commodity prices. While surplus production in farm products of major grains exerted pressure on prices, livestock and vegetable oil products experienced price hikes due to strong demand and relatively inadequate supplies. Continued evolution of trade patterns, with developing countries further consolidating their position as crucial drivers of both supply and demand was another highlight of the year.

The structural dynamics of Chinas agricultural sector reflect a notable shift toward demand stabilization and domestic supply optimization. While China historically served as the primary accelerator of global commodity consumption, structural shifts including stabilizing dietary patterns and a transitioning population baseline have moderated its share of incremental global demand growth.

On the supply side, the domestic focus centres heavily on yield enhancement, farm automation, and advanced seed genetics to maximize internal output. Despite these substantial domestic production gains, particularly in staples and livestock feeds.

Consumption patterns across the region are increasingly influenced by evolving consumer dietary preferences and a long-term focus on nutritional quality, resulting in flat volume growth for traditional agricultural commodities. To adapt to these consumer shifts and stringent regional production frameworks, European producers are aggressively adopting precision farming technologies, automated machinery, and climate-resilient solutions to sustain output. Through these significant gains in operational efficiency and output per acre, Europe continues to reinforce its position as a major net exporter of high-value agrifood products, capitalizing on global trade opportunities while managing structural resource limits.

Demand within the region remains steady, supported by consistent urban consumption, while the continents primary economic impact lies in its massive export capacity. Despite navigating localized structural pressures and variable credit conditions, the region led by major agricultural economies like Brazil and Argentina has achieved substantial gains in output through the adoption of integrated tech packages, improved germplasms (genetic breeding materials), and large-scale precision farming.

Looking ahead, the global agricultural sector is projected to experience significant structural shifts over the next decade, driven primarily by evolving demographic profiles and changing dietary preferences. Global agricultural production is anticipated to expand by 14% over the next ten years. Most of this supply growth is expected to come from improving crop yields through the introduction of more advanced crop protection solutions and farming efficiency driven by advanced tools and technology for farming.5

Overall, 2025 proved to be a year, where supplies of principal staples were rebuilt, effectively mitigating worries regarding global levels of caloric intake. However, rising trade restrictions continue to pose threat to global food and nutritional security.

Over the past five years, Indias agricultural sector has recorded a steady average annual growth rate of 4.4%,9 contributing approximately 13.8% to Indias Gross Value Added (GVA) growth in FY 2026. Sub-normal temperatures, combined with an above-average monsoon, created highly conducive agricultural conditions domestically, resulting in an enhanced foodgrain inventory.

Domestic foodgrain production continued its upward trajectory, with total output estimated at 3,577.3 Lakh Metric Tonnes (LMT) for the Agriculture Year (AY) 2024-25, rising 254.3 LMT compared to the previous year. This increment was propelled by higher yields of rice, wheat, maize and coarse cereals.

The horticulture segment emerged as a significant growth area, accounting for approximately 33% of GVA. As of August 2025, horticulture production increased from 280.70 million tonnes in (AY) 2013-14 to 367.72 million tonnes in (AY) 2024-25. The AY 2024–25 output comprised 114.51 million tonnes of fruits, 219.67 million tonnes of vegetables and 33.54 million tonnes of other horticultural crops, reflecting sustained expansion across categories.

India holds the leading global position in dry onion production, accounting for nearly 25% of total global output. The country is also the second largest producer of vegetables, fruits and potatoes globally, accounting for 12-13% to worldwide production in each category. These data represent the scale and competitiveness of Indias horticulture sector along with its growing role in addressing global food demand, particularly in high-value crop segments. The agricultural sector remains crucial to the attainment of the Viksit Bharat vision, promoting inclusive development and improving livelihoods for millions across the country.

The tariffs on some products, products in the US market. which had been raised to as high as 50%, were revised to zero under a historic trade deal with the US, strengthening export competitiveness.

The global crop protection chemicals market continues to expand steadily, with its valuation estimated at USD 109.67 billion in 2026 and projected to reach USD 137.49 billion by 2031, representing a compound annual growth rate (CAGR) of 4.62%. From an overall perspective, the Asia-Pacific region stands out as the fastest-growing geographical market worldwide, a momentum driven by commercial farming, rising chemical intensity, and shifting agricultural practices in key agrarian economies like India.

This growth is speeding up the shift toward modern farming technologies, such as drone spraying, targeted soil treatments, and advanced chemical formulas. These new methods help large-scale commercial farmers use fewer crop protection chemicals, reduce environmental impact, and manage pests driven by changing weather patterns. Even though stricter global safety and environmental rules mean companies have to constantly adapt, the ongoing modernization and steady growth of commercial farming in the Indian market continue to provide long-term stability and strength for the industry.

Herbicides lead global consumption, projecting the highest CAGR of 5.02% through 2031. Grains and cereals are the primary application crop type, accounting for 43.10% of global consumption. The Asia-Pacific region is the fastest-growing market, with a projected CAGR of 4.73% through 2031. Growth here is heavily tied to government-backed land consolidation and commercial farming initiatives, which have significantly increased per-hectare chemical intensity.

The domestic crop protection chemicals market, also referred to as pesticides, is expected to grow from an estimated $2.59 billion in 2025 to $2.71 billion in 2026. Growth is likely to be catalysed by the increasing adoption of precision and digital farming practices, government initiatives promoting indigenous manufacturing and the need to address pesticide resistance. Farmers are steadily transitioning from blanket chemical usage towards digital application, reducing wastage and aligning with evolving sustainability benchmarks.

Public investments, including the $338 million Digital Agriculture Mission, are expected to expedite the demand for products compatible with soil mapping, drone application and chemigation networks. However, the industry continues to face structural challenges, including state-level bans on molecules, spurious products entering rural markets and stricter residue policies. Looking ahead, the Indian crop protection industry is forecasted to is reach $3.36 billion by 2031, exhibiting a CAGR of 4.45% over 2026-2031.

As crop prices remain low, farmers are switching to more effective pest control solutions to protect their yields, which is boosting the industry. At the same time, several major chemical formulas are losing their patent protection, opening up new opportunities for manufacturers to produce them more affordably. To capitalize on this, more companies are bringing raw material production in-house (backward integration) to expand their product ranges for both local and export markets. Backed by supportive government policies, increasing investments in research and development are expected to drive steady long-term growth for the sector.

The Indian agrochemicals market continues to demonstrate expansion, with an estimated market value of USD 9.59 billion in 2026 and projected to reach USD 13.25 billion by 2031, registering a compound annual growth rate (CAGR) of 6.66%. From an overall perspective, this momentum is supported by robust domestic manufacturing infrastructure, a highly competitive export pipeline, and expanding rural digital networks that streamline product access for farmers.

The market is experiencing a structural shift as precision agricultural practices, such as drone-based spraying and nano-nutrient technologies, gain broader field acceptance. These advanced formulation methods enhance input efficiency and improve crop yield quality across primary agricultural zones. While raw material dependencies and evolving state-level regulatory frameworks present ongoing operational variables, proactive government policy incentives for domestic production and sustainable bio-inputs are successfully fostering long-term stability and resilience across the sector.

The specialty chemicals industry comprises thousands of fine chemicals, largely marketed as proprietary formulations. Indias domestic chemicals market is currently estimated at approximately $150 billion. Domestic consumption continues to rise, driven by improving incomes. Premiumisation and functionality trends are accelerating, reflected in the double-digit growth in the beauty and personal care market, as consumers are moving toward high-value products. In construction, advanced waterproofing, sealants and coatings are also witnessing robust demand.

The share of specialty chemicals within the overall market is expected to expand significantly, driven by consumer demand for high-performance products. Strategic platform-based acquisitions may serve as entry pathways into high-value niche segments. By 2030, the market is expected exceed $300 billion, facilitated by capital availability, policy incentives and the growing appeal of India as a cost-effective manufacturing hub.

Year represents Companys move towards growth with addition of multiple products, large scale volume for long term sustainability and foundation for future capacity expansion and growth has been set. Company is accelerating product registration, developing more products for high growth domestic market, based on unique capabilities and develops multistep process with backward integration for import substitution and create dominant market position

The company has developed 2-3 agro products for the domestic market, which are slated for launch in FY27 with unique technological advantages to be market leaders. Agro-intermediates introduced 2-3 years back is seeing very good market access and capacity debottlenecking for the same was completed in FY26. Specialty Chemicals product launches will also see maturity and growth from FY27 onwards.

This coupled with new production blocks, third party manufacturing lays foundation for the future growth of the company.

The Company remains focused on portfolio diversification, with supplementary products scheduled for commercialisation in the coming quarters, indicating strong growth momentum. Capital is being directed towards the commissioning of a new manufacturing block at the existing site and capacity debottlenecking across current lines over the coming six quarters. Strategic emphasis remains on R&D, supply chain integration and adoption of advanced technologies. The Company plans to double its R&D expenditure over the next two years to strengthen its presence in higher-value intermediates, enhance upstream integration, serve global clientele and further scale exports.

The Company has allocated approximately H100 Crores in capital expenditure for two multi-purpose plants to support domestic and export growth over the next 2-3 years. Concurrently, the Company is evaluating potential locations for a new site to accommodate expanding operations and a broader product portfolio. This manufacturing enlargement is intended to serve emerging markets, with continued emphasis on export-led growth. The Companys growth strategy remains anchored in margin enhancement through economies of scale, an improved product mix, operational efficiencies and intensified integration.

Oversight of risk management and internal control rests firmly with the Board. It establishes risk appetite, monitors material risks and scrutinises evaluations presented by the internal audit function. In a rapidly changing regulatory context, the Company remains committed to the proactive mitigation of risks through effective governance structures and strategic decision-making to ensure long-term sustainability.

Company continues to focus on acquiring, recruiting, retaining talent and provides a positive work environment. Regular training programs, capability upgradation initiatives, new process know-how, technical trainings, and behavioral programs keep employees motivated. Employee engagement programs like Sports Week, participation in the Companys CSR initiatives, mentorship programs, and regular interaction with senior leadership has kept employee attrition at the industry lower levels. Regular review of policies in line with market trends and changing employee expectations makes employees feels part of the success story. Inputs from employees in various plant improvements and improved work conditions ensure worker productivity and safety.

Total workforce as on March 31, 2026 as compared to 1230 as on March 31, 2025.

Company operates ZLD units and is making regular investments in upgradation of facilities, waste reduction, and efficiency improvement. This helps reduce the "carbon footprint" of the company on a continuous basis. This continues to be a focus area and regular investment will continue. Company also works aggressively on safety assessment and improvement projects. Process Safety Management Principles are being implemented and regular evaluation of process hazards, new measures to improve process controls and automation to improve safety. Company is moving more and more toward closed operations, investing in asset renewal and upgradation. During the year, two production blocks were revamped and resettled for safer and better operations. Contractor Safety Management has been launched as a key initiative now and we expect to strengthen this further. All our employees undergo regular medical check-up and counseling for people with abnormalities. Awareness and follow-up sessions, sessions with external medical facilities are conducted regularly to ensure that employees remain fit and lead a healthy life.

The Company has in place an improved internal control system aimed at controlling business processes, ensuring efficiency in business operations, accurate financial information and regulatory compliance. To ascertain the validity of these internal control systems, an external organisation has been involved in the design and support of the system.

The oversight function is performed by the Audit Committee, which meets periodically to review internal audit reports and observe how action plans for key issues are being implemented. Aside from monitoring corrective measures and assessing improvement suggestions, the committee works with external auditors to review the control environment. The results of which are normally shared with the Board of Directors.

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.