Sicagen India Ltd Management Discussions

2025-26

Economic Scenario

India remained one of the worlds fastest-growing major economies, with real GDP growth estimated at around 7.4% in FY 2025-26, driven mainly by strong domestic demand, stable macroeconomic fundamentals, improving financial support, expanding infrastructure development and increasing digitalization. Private consumption strengthened and reached 61.5% of GDP, the highest level in over a decade, supported by lower inflation, stable employment and improved rural demand. Inflation remained relatively low compared to previous years, helping improve household purchasing power and supporting economic stability. The Government at centre continued reducing the fiscal deficit while maintaining high capital expenditure on infrastructure, balancing growth with fiscal discipline. Significant investments continued in roads, railways, ports, logistics and digital infrastructure to improve connectivity and boost long-term productivity. Indias growth outlook remains structurally strong over the medium to long term, supported by domestic demand, continued structural reforms and a stable macroeconomic environment. Over the medium term, resilient domestic growth drivers are likely to sustain economic momentum even amid evolving global demand conditions.

Government initiatives such as the Production Linked Incentive (PLI) Scheme, the Make in India initiative, the Digital India programme, and policy support for semiconductor manufacturing have strengthened industrial growth and encouraged fresh investments across key sectors. Despite strong growth, external risks remained from global geopolitical tensions, trade disruptions, volatile oil prices and uncertainty in the global economy. The policy makers continued to monitor the above external risks while pursuing the long-term vision of Viksit Bharat 2047. During the FY 2025-26, Manufacturing and construction sector in India recorded growth of around 7%. Investment momentum remained robust, with gross fixed capital formation rising by 7.8% in FY 2025-26 and consistently accounting for around 30% of GDP over the past three years.

During the year, India received sovereign credit rating upgrades from major international rating agencies, including S&P Global Ratings, Morningstar DBRS and Rating & Investment Information (R&I), reflecting confidence in the countrys strong macroeconomic fundamentals and fiscal management. Fiscal policy is expected to play a pivotal role in advancing the vision of Viksit Bharat. This may involve an increase in the share of capital expenditure by the government, with a strategic reorientation towards advanced technology sectors such as artificial intelligence, semiconductors, space, robotics, digital infrastructure and defense. Such expansion is likely to be supported through improved tax compliance and revenue buoyancy rather than through major structural tax reforms.

The outlook for building materials division is highly positive due to rapid urbanization, infrastructure development, growth in residential and commercial construction, technological advancements and expansion of industrial and logistics facilities. Large-scale investments in roads, railways, bridges, metros and airports are increasing the demand for construction materials. Rising demand for affordable housing, smart cities, industrial corridors and transportation projects continues to create significant opportunities for traders and distributors. Government initiatives such as PM Gati Shakti, Pradhan Mantri Awas Yojana, Smart Cities Mission and continued investment in highways, railways, airports, and renewable energy projects are expected to sustain demand for construction materials over the coming years. Our focus on efficient supply chain management, customer service and sustainable products will be well positioned to capitalize on the expanding construction market. Overall economic growth, availability of liquidity and sustained efforts to improve our performance and efficiency has resulted in volume growth of construction materials in particular.

Industries such as manufacturing, pharmaceuticals, food processing, automotive, and chemicals are adopting automated control systems to improve productivity and efficiency. The future of the power and control systems industry in India is highly promising. Demand for the supply and servicing of mechanical governors and actuators continues across heavy engineering industries, Indian railways, boiler plants etc. Growth in industrial automation, renewable energy, smart infrastructure and digital manufacturing is expected to drive sustained demand for control systems. Companies that focus on innovation, energy-efficient solutions, quality standards and digital technologies are well-positioned to capitalize on the expanding market.

The outlook for industrial packaging materials such as mild steel and HDPE barrels remains positive, mainly supported by growth in chemicals, oil & lubricants, pharmaceuticals, fruit pulps, petroleum products and exports. Manufacturers that focus on quality, cost efficiency, and compliance with industry standards can benefit from the increasing demand for durable industrial packaging products. This sector offers promising opportunities for both small and medium enterprises as well as large scale manufacturers. India is becoming a major producer of chemicals, creating a strong market for MS barrels used in storage and transportation.

India has strong potential to become a global hub for specialty chemicals production due to a combination of economic, industrial, and policy factors. Production of both organic and inorganic chemicals in India continues to grow, supported by strong domestic demand and expanding manufacturing capacity. Rapid growth in industries such as pharmaceuticals, agrochemicals, textiles, construction, food & breweries and personal care is driving demand for specialty chemicals. India is already a significant exporter of dyes, pigments, agrochemicals and pharmaceutical intermediates, with increasing demand from various countries. The specialty chemicals sector has significant growth potential due to rising domestic demand, export opportunities, favourable government policies and global supply chain diversification. With continued investment in technology, sustainability, and infrastructure, India is well placed to become one of the worlds leading producers and exporters of specialty chemicals.

During the year 2025-26, the Company has achieved operating and financial results with a turnover of Rs. 52,822 Lakhs and a Profit before tax of Rs. 1,738 Lakhs when compared to Rs. 54,603 Lakhs and Rs. 2,002 Lakhs respectively in 2024-25. The declined in PBT by 15% is due to increase in raw material cost, rate and taxes and other administrative expenditure. The Management takes various cost control measures to reduce the expenditure wherever possible.

Building Materials division has posted a total revenue of Rs. 39,928 Lakhs and a profit before tax of Rs. 271 Lakhs in the FY 2025-26 as against Rs. 43,744 Lakhs and Rs. 202 Lakhs respectively in previous FY 2024-25. Even though the revenue declined during the year, the profitability was increased by 34% due to various cost control measures and initiatives to improve operational efficiency. During Q4, steel prices increased due to the West Asia conflict, resulting in an improvement in contribution margins.

The performance of Power & Control Systems division was remarkable with an achievement in increase of turnover by 6% to Rs. 5,126 Lakhs in FY 2025-26 as compared to Rs. 4,835 Lakhs in the previous FY 2024-25. The profit before tax was increased by 5% to Rs. 1,012 Lakhs in FY 2025-26 when compared to Rs. 956 Lakhs in the previous FY 2024-25.

The performance of the Industrial Packaging Division was impacted during the year due to an increase in raw material costs and other operational expenses. Consequently, the Profit Before Tax (PBT) from the drums business declined by approximately 7% compared to the previous year. The Division also faced challenges during the last quarter owing to volatility in the procurement prices of mild steel (MS) plates. However, the management took timely and appropriate measures to mitigate these challenges and maintain operational stability. The division posted total revenue of Rs. 4,125 Lakhs this year as compared to Rs. 3,986 Lakhs in 2024-25. The profit before tax of this division for the FY 2025-26 was Rs. 608 Lakhs as compared to Rs. 655 Lakhs in previous FY 2024-25.

Industrial packaging division has started setting up of new industrial unit adjacent to existing plant producing 210 litres HDPE barrels with an initial installed capacity of 2.10 Lakhs barrels per annum at revised capex of Rs.14.50 Crores investment to capture the plastic barrels market. The division is expected to commence the commercial production of HDPE barrels in FY 2026-27.

During the year, the operational performance of Speciality Chemicals division was also impressive by posting a total revenue of Rs. 1,531 Lakhs and profit before tax of Rs. 350 Lakhs in FY 2025-26 as compared to Rs. 1,105 Lakhs and Rs. 300 Lakhs respectively in previous FY 2024-25. The revenue was increased by 38% and PBT by 16% due to increase in volume of sales. This division is also looking at various options to improve the business and generate more revenue.

The Company has also recorded a turnover of Rs. 1,455 lakhs with a profit before tax of Rs. 35 Lakhs from other trading activities in FY 2025-26.

Details of significant changes in key financial ratios (Change in 25% or more) as compared to the immediately previous financial years.

During the year under review, the Company, together with its two wholly owned subsidiaries, recorded consolidated revenue from operations of Rs. 98,215 Lakhs for the FY 202526, as against Rs. 89,994 Lakhs in the previous FY 202425. Profit Before Tax (PBT) stood at Rs. 2,414 Lakhs, compared with Rs. 2,418 Lakhs in the FY 2024-25.

The Company remains committed to effectively managing its workforce to enhance employee satisfaction, improve operational efficiency and achieve sustainable growth and long-term success. Guided by a vision of safety, inclusivity, empowerment and continuous learning, the Company focuses on nurturing technically competent, digitally proficient and ethically driven professionals who are aligned with its long-term strategic objectives.

During the year, the Human Resources team, in line with the new Labour Codes, revised and introduced the HR Rules and Policy Manual 2025-26 to strengthen the Companys people practices and ensure employee wellbeing, safety, health, capability development, quality of work life and equitable benefits across all employee categories.

With a diverse workforce across its operations and leadership, the Companys employees continue to drive technical excellence, operational resilience and long-term sustainable growth. As on 31st March 2026, the Company had 276 permanent employees, including 29 women employees, across various functions and levels.

The Companys internal control systems are commensurate with the nature of its business. Existence of adequate internal control systems designed to provide reasonable assurance on the effectiveness and efficiency of operations, reliable financial controls and strict compliance with all applicable laws, rules and regulations and ensuring adherence to corporate policies. Periodical audit is being conducted by the Internal Auditors and their reports are placed before the Audit Committee of the Board. Audit involves performing procedures to obtain audit evidence about the adequacy of the internal control systems. The Audit Committee reviews internal audit reports, operational, financial systems and processes and risk management policies etc., followed by the Company and advise appropriate decisions.

As part of our corporate governance practices and in line with the managements policy, the Board of Directors of the Company decided to periodically rotate internal audit assignments so as to ensure the continued independence and fresh perspectives. Accordingly, the appointment of new Internal Auditors was taken place at the Board meeting held on 13th May 2026. M/s. Venkatesh & Co., Chartered Accountants, Chennai were appointed as new Internal Auditors of the Company for the financial year 2026-27.

Despite strong growth prospects, the company faces several challenges such as fluctuating prices of steel, and other raw materials, increase in transportation and logistics costs, intense market competition, supply chain disruptions and credit risk from customers. The Company has delegated the responsibility to operational heads to oversee the risk management process, risk identification, effective analysis of the risk implementation of mitigation and monitoring plan and risk reporting to the management. The general nature of trading business is highly competitive with thin margin of profits. The Company is facing the risk of optimum utilization of resources, which otherwise will result in accumulation of unutilized stocks affecting the performance and fund flow.

Statements in the Management Discussion and Analysis Report describing the Companys structure, challenges, outlook, financials and HR policies may be "forward looking statements" within the meaning of applicable securities law and regulations. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand and supply and price situations in the domestic and overseas market in which the company operates, changes in the Government, laws, rules, regulations and other statutes and other incidental factors.