Sicagen India Ltd Management Discussions

INDIAN ECONOMY

India is one of the fastest-growing major economy and has shown remarkable resilience and dynamism in recent years. It demonstrated a growth rate of 6.5% in FY2024-25. Despite global headwinds, Indias growth is expected to remain rangebound, 6% - 6.5%, in the next couple of years. The economy is expected to be driven by strong domestic consumption, government capital expenditure and robust expansion in the services and manufacturing sectors. Inflation is projected to moderate and be rangebound, 4.0 4.5% in the near term, supported by favourable food price trends. Core inflation across goods and services has remained stable, while fuel prices have declined. The moderation in inflation has enabled the Reserve Bank of India to adopt a more accommodative stance, with interest rate cuts anticipated to stimulate consumer spending and credit growth. This growth is driven by convergence factors, including robust domestic demand, strategic government initiatives, technological advancements and a favourable global economic environment.

The Government of India remains focused on fiscal consolidation, employment generation and boosting capital investment. The share of capital expenditure in central government spending has continued to rise, playing a critical role in industrial and infrastructure development. The PLI scheme has successfully attracted investments and stimulated production across various industries. The Government is exploring further sectoral expansion to enhance domestic manufacturing and develop labour-intensive industries. Despite Indias strong economic momentum, certain downside risks persist. Towards the end of 2024, economic activity moderated due to weaker private and foreign investment flows, impacting industrial output. The rupees depreciation, coupled with uncertainties surrounding cross border conflicts, global trade policies and supply chain disruptions, could pose a few challenges. Overall, Indias economic outlook remains strong, driven by robust domestic demand, policy support, and sectoral resilience. Improving trade relations with the developed economies will provide the requisite impetus to the economy. By leveraging its domestic strengths and implementing strategic reforms, India is well-positioned to navigate global challenges and maintain its trajectory as a leading global economic powerhouse.

INDUSTRIES OUTLOOK AND OPPORTUNITIES

The Union Budget for FY 2025-26 has allocated huge funds for capital expenditure and the budget prioritizes infrastructure investment to fuel economic growth, stimulate demand and enhance productivity across key sectors. It also encourages public-private partnerships to improve execution and increase private sector involvement in infrastructure development. Launch of numerous ambitious construction schemes in the recent past by the government including creation of industrial parks, national corridors, smart cities, Housing Schemes etc., are strong contributing agents to the growth of the construction industry. On the sectoral front, the services sector has demonstrated resilience, with financial services, real estate, professional services, public administration and defense driving growth. Construction activities and utility services have supported industrial growth and creates demand for supply of steel, cement, electrical switch gears, wires etc. The desire for homeownership is driving the growth of Indias housing sector across both urban and rural areas. As the largest consumer of cement and steel, the housing sector currently accounts for around 65 to 75% of the countrys cement demand. This expanding sector will continue to be a key driver of future demand, playing a vital role in the industrys growth and shaping Indias infrastructure landscape. Rapid urbanization, coupled with government initiatives such as the Smart Cities Mission, PMAY and AMRUT, is driving demand for residential, commercial and infrastructure projects, thereby boosting steel and cement consumption.

Manufacturing of MS barrels is witnessed significant growth owing to the rise in industrial usage demand in chemical as well as oil solvent industries. The oil and lubricant segments are estimated to have promising potential in the development of steel drums market and hence the outlook for the domestic steel drums market is expected to witness significant growth. It is expected that growing demand for cost efficient packaging solution and increase usage of steel drums by oil and chemical industries in India will create new opportunities for the steel drum market in the next five years and projected to expand the market. Since there is a huge market potential for HDPE (High Density Polyethylene) barrels, the Company has proposed to set up a manufacturing unit for supply of HDPE barrels to various industries apart from production of MS barrels. The total capex for setting up of a HDPE manufacturing unit was estimated at Rs.12 Crores with annual production capacity of around 2,00,000 barrels of 210 Liters capacity. The time duration for completion of setting up of the said manufacturing unit with installation of machines was estimated within 7 to 8 months. It is expected that growing demand for cost efficient packaging solution and increase usage of Steel and HDPE barrels by various industries such as chemical, oil & lubricant, fruit pulps and paint industries in India will create new opportunities for the steel drum market in the next five years.

The revenues of water treatment chemicals market are expected to grow due to rapid industrialization and urbanization, the increasing demand for water treatment chemicals from industries for boilers, cooling towers and effluents, continues to be driving force for increasing consumption of water treatment chemicals. The industrial segment is also projected to be the largest end-use industry segment of the water treatment chemicals market during the forecast period. The demand for water treatment in the industrial sector is increased due to rapid industrialization and substantial growth in several key markets. Every industry consumes water for a variety of applications which include metal & mining, chemical processing, oil & gas, paper and power generation that require water treatment chemicals to treat the usage of essential water.

The demand for instrumentation products, actuators and other controlling equipment has also been increased tremendously due to rapid industrialization. Hence the outlook for governor sales and services is also expected to witness significant growth.

Government-backed projects focusing on rural roads, educational institutions, healthcare and sanitation have spurred demand for cement, steel, chemicals etc., in rural areas, opening up new market opportunities.

OPERATIONAL AND FINANCIAL PERFORMANCE Standalone Performance

During the year 2024-25, the total revenue of the Company was Rs.54,603 Lakhs as compared to Rs.48,304 Lakhs for the previous year 2023-24. Profit before tax for the year 2024-25 was Rs.2,002 Lakhs as against Rs.1,215 Lakhs in the previous year.

Building Materials division has posted a total revenue of Rs.43,744 Lakhs and a profit before tax of Rs.202 Lakhs in the FY 2024-25 as against Rs.39,294 Lakhs and Rs.233 Lakhs respectively in previous FY 2023-24.

Power & Control Systems division has posted a total revenue of Rs.4,835 Lakhs FY 2024-25 as compared to Rs.3,443 Lakhs in the previous FY. The profit before tax was Rs. 956 Lakhs in FY 2024-25 when compared to Rs.620 Lakhs in the previous FY 2023-24. Industrial Packaging division has posted total revenue of Rs.3,986 Lakhs this year as compared to Rs.4,027 Lakhs in 2023-24. The profit before tax of this division for the FY 2024-25 was Rs.655 Lakhs as compared to Rs. 599 lakhs previous FY 2023-24. Speciality Chemicals division has posted a total revenue of Rs.1,105 Lakhs and profit before tax of Rs.300 Lakhs in FY 2024-25 as compared to Rs.975

Lakhs and Rs.222 Lakhs respectively in previous FY 2023-24.

KEY FINANCIAL RATIOS

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

Consolidated Performance

During the year under review, the revenue from operations of the Company on a consolidated basis for the year 2024-25 amounted to Rs.89,994 Lakhs as against Rs. 80,255 Lakhs in the previous year. Profit before tax was Rs.2,418 Lakhs as against Rs.1,384 Lakhs in the previous financial year.

The total revenue of wholly owned subsidiary South India House Estates & Properties Ltd for the year 2024-25 was Rs.57 Lakhs as against the total revenue of Rs.61 Lakhs for the previous year. Profit before tax for the year was Rs.4 Lakhs as against Rs.6 Lakhs in the previous year. The total revenue of wholly owned subsidiary Wilson Cables Private Ltd for the year 2024-25 was Rs.35,334 Lakhs as against the total revenue of Rs. 31,889 Lakhs for the previous year and the profit before tax was Rs.413 Lakhs as against Rs. 162 Lakhs in the previous financial year.

HUMAN RESOURCE DEVELOPMENT

Employee development is considered as key focus area and the Company takes every care of its employees and provides them with extensive opportunities to prove their talent and efficiency and grow with the Company. The Company focusses employees development and growth by creating a good work environment and our work culture and HR policies always ensure safety, health, development of capabilities, quality of life and overall well-being of our employees. Long term relationship with the employees is maintained by providing ample opportunities for them to prove their talents and efficiency and grow along with the Company and a proper performance appraisal is in place and this helps create better accountability and responsibility at levels. Periodical meet with the employees of all branches is conducted focusing on aspects relating to employee productivity, talent management, capability development to enhance employee morale.

During the year, the management has recognised employees with long-service awards, ranging from 5 to 30 years for their dedication and contribution. As on 31st March 2025, 288 permanent employees including 33 women employees are in roll.

INTERNAL CONTROL SYSTEM

The Company maintains an adequate internal control system designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the reliability of financial controls and compliance with all applicable laws, rules and regulations. The Company has a defined organizational structure with proper delegation of responsibility, authority and functions which ensure proper compliances with internal policies and proper checks and balances. Periodical audit is being conducted by the Internal Auditors and their reports are placed before the Audit Committee of the Board for its review. The Audit Committee reviews internal audit reports, operational, financial and risk management system and reports to the Board. Review of control mechanism through ERP is carried out to improve the control process and develop better systems to strengthen the quality of internal control measures and to ensure effective accounting and financial data.

RISK AND CONCERNS

The major risks and concerns affecting the Companys business mainly originate from several external environmental factors. Changes in industrial trade and credit policies, imbalanced liquidity position and extreme fluctuation in demand and supply conditions due to glut in the market caused by extensive steel imports disturbed the domestic steel market. Extreme competition from the unorganized sector in the market and import of steel at lower prices creates more pressure on selling price and reduces the Companys margin and profitability. The Company, being a major service provider for trading of building materials with high level of efficiency, is continuously watching all key risk factors which may impact the profit margins and takes all possible steps to maintain and enhance the competitive edge. Inventory management processes are being monitored to handle the risk of price changes in the volatile market. Efforts are also being made by the Management to increase the sales and profitability and improve the customer service across the branches.

CAUTIONARY STATEMENT

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.