Snehaa Organics Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

(MDAR)

Company Overview

Snehaa Organics Limited is engaged in the distillation and recovery of industrial solvents, contract manufacturing (job work), and trading of pharmaceutical and specialty chemicals. The Company has established itself as a reliable supplier to pharmaceutical and chemical companies by focusing on product quality, operational efficiency and adherence to stringent quality standards. During FY 202526, a significant milestone was achieved with the successful listing of the Companys equity shares on the NSE Emerge Platform on 5 September 2025. The listing strengthened the Companys capital base, enhanced its financial position and provided a platform to pursue its future growth and expansion plans.

Business Overview

During FY 2025-26, the Company remained focused on expanding its business operations, strengthening customer relationships and enhancing its manufacturing and operational capabilities through optimisation of its existing business processes. A key strategic development during the year was the transition of a significant portion of the Companys operations from the predominantly Contract Manufacturing (Job Work) model to a Purchase & Sale (Principal-to-Principal) business model. The transition was implemented by leveraging the Companys existing manufacturing infrastructure, established customer relationships and operational capabilities, without any significant expansion in production capacity. The strategic shift is aimed at increasing business volumes, broadening and diversifying the customer base, improving supply chain integration and operational efficiency, strengthening long-term customer relationships, enhancing market presence and competitiveness, and generating higher absolute revenues to support sustainable business growth. The transition has also resulted in changes in the presentation of the Companys revenue and margins, as discussed in the Financial Performance section of this report. The strategic shift forms part of the Companys long-term growth strategy and was envisaged and disclosed in the Companys IPO documents.

Initial Public Offering (IPO)

FY 2025-26 marked a landmark year for the Company with the successful completion and listing of its Initial Public Offering. The Company raised approximately INR 32.68 Crores through the IPO, which significantly strengthened its capital structure and liquidity position. The proceeds of the IPO are being utilised towards meeting working capital requirements, repayment of borrowings, general corporate purposes and IPO-related expenses, in accordance with the objects specified in the Prospectus. As at 31 March 2026, the unutilised IPO proceeds continue to be invested in fixed deposits and maintained in designated bank accounts pending utilisation in accordance with the stated objects of the Issue.

Global Economic Overview

The global economy demonstrated resilience during FY 2025-26 despite persistent geopolitical uncertainties, inflationary pressures and evolving trade dynamics. Central banks across major economies continued to balance inflation control with economic growth, while supply chain conditions gradually improved compared to previous years. However, volatility in crude oil prices, freight costs and foreign exchange rates continued to influence manufacturing businesses worldwide.

The specialty chemicals and pharmaceutical sectors remained comparatively resilient, supported by increasing healthcare expenditure, expansion of pharmaceutical manufacturing capacities and growing emphasis on supply chain diversification. Global customers continued to adopt the "China+1" sourcing strategy, creating significant opportunities for Indian manufacturers possessing strong technical capabilities, quality standards and reliable manufacturing infrastructure.

The solvent recovery and pharmaceutical chemicals industry also witnessed increasing emphasis on sustainability, resource optimisation and circular economy practices, resulting in higher demand for solvent recycling and recovery solutions.

Indian Economic Overview

India continued to remain one of the fastest-growing major economies during FY 2025-26, supported by robust domestic demand, strong government capital expenditure, healthy manufacturing activity and continued policy reforms.

Government initiatives such as "Make in India", Production Linked Incentive (PLI) Schemes, infrastructure development and ease of doing business continued to improve Indias competitiveness as a global manufacturing destination.

The Indian pharmaceutical industry continued its strong growth trajectory supported by:

• Growing domestic healthcare demand

• Increasing pharmaceutical exports

• Expansion of generic drug manufacturing

• Rising investments in research and development

• Increasing contract manufacturing opportunities

• Growing demand for pharmaceutical intermediates and specialty chemicals

These developments continue to create significant long-term opportunities for manufacturers engaged in specialty chemicals and pharmaceutical intermediates.

a) Industry Structure and Developments

Indias chemical industry is among the largest contributors to the countrys manufacturing sector and plays a critical role in supporting pharmaceuticals, agrochemicals, paints, textiles, automotive and several other downstream industries.

The pharmaceutical intermediates and specialty chemicals segment continue to benefit from:

• Increasing global outsourcing

• Diversification of global supply chains

• Import substitution initiatives

• Environmental regulations encouraging solvent recovery

• Higher investments in pharmaceutical manufacturing

• Rising exports of specialty chemicals

The solvent recovery industry is also witnessing significant growth as customers increasingly focus on reducing manufacturing costs while meeting environmental compliance requirements. Recovery and reuse of solvents provide both economic and environmental benefits, making solvent recycling an attractive long-term business opportunity.

Snehaa Organics Limited continues to strengthen its position in this industry through its diversified operations comprising solvent recovery, pharmaceutical chemicals manufacturing, job work processing and trading of chemical products.

b) Opportunities and Threats.

Strengths

• Experienced promoter group with extensive industry knowledge.

• Established customer relationships within the pharmaceutical and chemical industries.

• Integrated manufacturing and solvent recovery capabilities.

• Diversified product portfolio.

• Strong quality assurance systems.

• Successful listing on NSE Emerge enhancing credibility and financial flexibility.

• Healthy profitability and improved net worth.

• Strategic shift towards a scalable Purchase & Sale business model.

Weaknesses

• Exposure to fluctuations in raw material prices.

• Working capital-intensive business.

• Dependence on the performance of the pharmaceutical and chemical sectors.

• Customer concentration in certain business segments.

Opportunities

• Expansion of the Indian pharmaceutical industry.

• Growing demand for solvent recycling and sustainable manufacturing.

• Import substitution opportunities.

• Capacity expansion supported by IPO proceeds.

Threats

• Volatility in crude oil and chemical prices.

• Changes in environmental regulations.

• Global economic uncertainties.

• Supply chain disruptions.

• Changes in government policies affecting the chemical industry.

Opportunities and Growth Strategy

The Company believes that the long-term outlook for the specialty chemicals and pharmaceutical intermediates industry remains highly favourable.

Key strategic priorities include:

Business Expansion

The Company intends to further strengthen its market position by expanding its customer base and increasing business volumes through enhanced procurement capabilities and efficient supply chain management.

Product Diversification

Management intends to expand its product portfolio by introducing specialty chemical products that cater to evolving customer requirements.

Operational Excellence

Continuous improvement initiatives aimed at enhancing productivity, reducing costs and optimising manufacturing processes will remain a key strategic priority.

c) Segment-wise or product-wise performance.

The Company is principally engaged in the manufacturing, processing and trading of pharmaceutical chemicals, along with solvent recovery and distillation activities. During FY 2025-26, the Company continued to optimise its existing business processes and leverage its manufacturing capabilities to enhance operational efficiency and support sustainable business growth.

The Companys principal revenue streams comprise:

• Solvent recovery and distillation.

• Purchase and sale of chemical products.

• Contract manufacturing (Job Work).

• Trading activities.

During FY 2025-26, the Company successfully transitioned a significant portion of its operations from the Contract Manufacturing (Job Work) model to the Purchase & Sale (Principal-to-Principal) model. This strategic shift resulted in substantial growth in the Purchase & Sale business, significantly contributing to the increase in overall revenue while broadening the Companys customer base and product portfolio.

By optimising its existing manufacturing infrastructure, supply chain and customer relationships, the Company was able to execute this transition without any significant expansion in production capacity. The diversification of revenue streams and optimisation of the business model have strengthened the Companys market presence, enhanced operational scalability and positioned it for sustainable longterm growth.

d) Outlook

The outlook for the Indian specialty chemicals and pharmaceutical industry continues to remain positive.

Increasing pharmaceutical manufacturing, global supply chain diversification, import substitution initiatives and growing demand for sustainable chemical solutions are expected to provide long-term growth opportunities.

The Company is well positioned to capitalize on these opportunities owing to:

• Established customer relationships.

• Strong industry experience.

• Diversified business model.

• Healthy balance sheet.

• Improved liquidity post IPO.

• Manufacturing capabilities.

• Solvent recovery expertise.

• Focus on quality and customer satisfaction.

Going forward, the Company intends to continue focusing on:

• Expansion of business volumes.

• New customer acquisition.

• Product diversification.

• Capacity enhancement.

• Export opportunities.

• Operational excellence.

• Cost optimisation.

• Sustainable manufacturing practices.

Management remains confident that these strategic initiatives will support sustainable long-term growth while enhancing shareholder value

e) Risks and concerns.

Like any manufacturing enterprise, the Company is exposed to various business and operational risks arising from market conditions, regulatory changes and industry dynamics. The Management continuously monitors these risks and has implemented appropriate risk mitigation measures, supported by robust internal controls and periodic reviews, to minimise their potential impact on the Companys operations and financial performance.

Raw Material Price Risk

The prices of solvents, pharmaceutical chemicals and other key raw materials are influenced by crude oil prices, global supply-demand dynamics, geopolitical developments and currency fluctuations. Significant volatility in raw material prices may impact the Companys margins. The Company mitigates this risk through prudent procurement planning, diversified sourcing, effective inventory management and timely pricing strategies.

Regulatory and Compliance Risk

The Company operates in a highly regulated industry and is required to comply with various environmental, health, safety and pharmaceutical regulations. Any changes in the regulatory framework or non-compliance could affect operations. The Company maintains robust compliance systems, periodic internal reviews and continuous monitoring to ensure adherence to all applicable laws and regulatory requirements.

Working Capital Risk

The Companys operations require substantial working capital to support inventory levels and customer credit terms. Delays in collections or increases in inventory could impact liquidity. The Company continuously monitors receivables, inventory and cash flows, while optimising working capital utilisation through effective credit management and supply chain planning.

Competition Risk

The specialty chemicals industry is highly competitive, with competition from both organised and unorganised market participants. The Company mitigates this risk by focusing on product quality, process optimisation, timely deliveries, strong customer relationships, operational efficiency and value- added services.

Business Model Transition

During FY 2025-26, the Company strategically transitioned a significant portion of its business from the Contract Manufacturing (Job Work) model to the Purchase & Sale (Principal-to-Principal) model by optimising its existing business processes and leveraging its established manufacturing infrastructure and customer relationships. As a result of this transition, EBITDA and PAT margins, expressed as a percentage of revenue, moderated due to the accounting presentation of the full value of sales and the corresponding cost of goods sold under the Purchase & Sale model.

The Management believes that this strategic transition strengthens the Companys long-term business fundamentals by increasing business volumes, expanding the customer base, improving supply chain integration, strengthening customer relationships and enhancing market presence. Accordingly, while the change has affected reported margin percentages, it has supported growth in absolute revenue and profitability and is expected to contribute to sustainable long-term growth.

Risk Management Framework

Risk management forms an integral part of the Companys strategic planning and operational decisionmaking process.

The Company has established appropriate systems for identification, assessment, monitoring and mitigation of key business risks.

The Board of Directors and the Audit Committee periodically review the Companys risk profile to ensure that emerging risks are adequately addressed.

The Companys risk management framework encompasses:

• Strategic risks.

• Financial risks.

• Operational risks.

• Regulatory risks.

• Credit risks.

• Liquidity risks.

• Information technology risks.

• Environmental and safety risks.

The Company believes that proactive risk management enhances business resilience and supports sustainable value creation.

f) Internal control systems and their adequacy.

The Company has established robust internal financial controls that are commensurate with the size, nature and complexity of its operations.

The internal control framework covers:

• Financial reporting.

• Procurement controls.

• Inventory management.

• Manufacturing controls.

• Sales and receivables monitoring.

• Treasury management.

• Fixed asset management.

• Statutory compliance.

• Delegation of authority.

• Information technology controls.

• Risk management.

The Audit Committee periodically reviews the adequacy and effectiveness of the internal control systems and recommends improvements wherever necessary.

The Statutory Auditors have expressed an unmodified opinion on the adequacy and operating effectiveness of the Companys Internal Financial Controls Over Financial Reporting

g) Discussion on financial performance with respect to operational performance.

i. Financial Performance

The Company reported:

Particulars	FY 2025-26	FY 2024-25
Revenue from Operations	INR 4,936.53 Lakhs	INR 2,622.33 Lakhs
Total Income	INR 5,124.39 Lakhs	INR 2,629.45 Lakhs
EBITDA	INR 1,167.84 Lakhs	INR 1,141.24 Lakhs
EBITDA Margin	23.66%	43.52%
Profit Before Tax	INR 1,092.34 Lakhs	INR 981.29 Lakhs
Profit After Tax	INR 805.95 Lakhs	INR 733.82 Lakhs
PAT Margin	16.33%	27.98%

Revenue

The Company reported Revenue from Operations of INR 4,936.53 Lakhs during FY 2025-26 as against INR 2,622.33 Lakhs in the previous year, registering a healthy growth of approximately 88.25%.

The increase in revenue was primarily driven by:

• Expansion of business volumes.

• Increase in purchase and sale transactions.

• Growth in pharmaceutical chemical business.

• Better market penetration.

• Improved customer engagement.

The Company also reported Total Income of INR 5,124.39 Lakhs, compared to INR 2,629.45 Lakhs during FY 2024-25.

The Company achieved healthy growth in its absolute profitability during FY 2025-26 by optimising its existing business processes and successfully executing its strategic transition in the business model. EBITDA Margin contracted by approximately 19.86 percentage points (from 43.52% to 23.66%) and PAT Margin by approximately 11.65 percentage points (from 27.98% to 16.33%), while absolute EBITDA grew to INR 1,167.84 Lakhs and PAT to INR 805.95 Lakhs, demonstrating sustained operational strength and improved earnings despite the change in the revenue model.

Explanation for Reduction in EBITDA Margin and PAT Margin

During FY 2025-26, the Company strategically transitioned a significant portion of its operations from the Contract Manufacturing (Job Work) model to the Purchase & Sale (Principal-to-Principal) model. This transition was implemented by optimising the existing business processes and leveraging the Companys established manufacturing infrastructure, customer relationships and operational capabilities, without any significant expansion in production capacity.

Under the Contract Manufacturing model, the Company recognised only the processing or job work charges as revenue, resulting in comparatively higher EBITDA and PAT margins as a percentage of revenue.

Under the Purchase & Sale model, the Company recognises the full value of goods sold as revenue, with the corresponding procurement cost recognised as the cost of goods sold. Consequently, while the Company recorded a substantial increase in revenue and higher absolute profits, the cost of materials also increased proportionately, resulting in comparatively lower EBITDA and PAT margins on a percentage basis.

Accordingly, the moderation in EBITDA and PAT margins during FY 2025-26 is primarily a result of the change in the Companys business model and revenue composition, and should not be construed as a decline in operational efficiency, profitability or business performance. On the contrary, the Company recorded healthy growth in absolute EBITDA and PAT during the year, reflecting the successful execution of its strategic initiatives.

The Company believes that the Purchase & Sale model will support sustainable long-term growth by increasing business volumes, expanding its customer base, improving supply chain integration, strengthening long-term customer relationships, enhancing market presence and generating higher absolute revenues. This strategic transition formed part of the Companys long-term growth strategy and was envisaged and appropriately disclosed in the Companys IPO documents.

Balance Sheet Analysis

The Companys financial position strengthened significantly during FY 2025-26, supported by the successful IPO, improved profitability and prudent financial management.

Shareholders Funds

Shareholders Funds increased substantially following the fresh equity raised through the Initial Public Offering together with retained earnings generated during the year, thereby strengthening the Companys net worth and financial flexibility.

Property, Plant and Equipment

The Company continued investing in manufacturing infrastructure and production facilities to support future growth and improve operational efficiency. Capital expenditure remains aligned with the Companys long-term expansion strategy.

Working Capital

The successful IPO significantly enhanced the Companys working capital position. Higher liquidity will enable the Company to support increased business volumes, strengthen procurement capabilities and meet the growing requirements of customers while maintaining operational flexibility.

Borrowings

The Company utilised a portion of the IPO proceeds for repayment of borrowings, resulting in an improved capital structure and reduced dependence on debt financing.

Cash Flow Analysis

The Companys cash flow position remained healthy during FY 2025-26, supported by improved profitability and successful capital raising through the Initial Public Offering.

Cash generated during the year was primarily utilised for:

• Working capital requirements.

• Expansion of business operations.

• Repayment of borrowings.

• Capital expenditure.

• Investment in manufacturing infrastructure.

The IPO proceeds have significantly strengthened the Companys liquidity position, enabling it to support higher business volumes and fund future growth initiatives while maintaining adequate financial flexibility.

The Company continues to adopt prudent treasury management practices to ensure efficient deployment of surplus funds and timely availability of resources for operational requirements.

ii. Operational Performance:

FY 2025-26 was a significant year for Snehaa Organics Limited as the Company continued to execute its long-term growth strategy by optimising its existing business processes, expanding business volumes, strengthening customer relationships and enhancing its manufacturing capabilities.

The Companys operational focus during the year was centred on:

• Strengthening procurement and supply chain management.

• Enhancing manufacturing efficiencies through process optimisation.

• Improving customer service levels and responsiveness.

• Optimising working capital utilisation.

• Maintaining high standards of product quality, regulatory compliance and operational excellence.

A key strategic initiative undertaken during the year was the successful transition of a significant portion of the Companys operations from the Contract Manufacturing (Job Work) model to the Purchase & Sale (Principal-to-Principal) model. This transition was implemented by leveraging the Companys existing manufacturing infrastructure, operational capabilities and customer relationships, without any significant expansion in production capacity. The strategic shift has enabled the Company to increase business volumes, expand its customer base and product portfolio, improve supply chain integration, strengthen long-term customer relationships and enhance its market presence.

The Company remains committed to continuously improving operational efficiency through business process optimisation, technology-driven manufacturing improvements, quality enhancement and prudent cost management. Going forward, the Company believes that these strategic initiatives will support sustainable long-term growth, strengthen profitability and create lasting value for all stakeholders.

h) Material developments in Human Resources / Industrial Relations front, including number of people employed.

The Company firmly believes that its employees are its most valuable asset and a key driver of sustainable growth.

The Companys human resource philosophy focuses on:

• Merit-based performance.

• Continuous learning and development.

• Employee engagement.

• Safe working environment.

• Equal opportunity.

• Employee welfare.

• Leadership development.

Regular training programmes are conducted to enhance technical, operational and behavioural competencies of employees.

The Company continues to maintain cordial industrial relations across all its operations, and there were no significant industrial disputes during the year.

i) details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor

Particulars	FY 202526	FY 2024-25	Change (%)	Significant Change >25%?	Remarks
Revenue Growth	88.25%	10.56%	735.89%	Yes	Significant increase in business volumes following the strategic transition in the business model.
EBITDA Margin	23.66%	43.52%	-45.68%	Yes	Moderated due to the change in revenue composition under the Purchase & Sale business model.
Net Profit Margin	16.33%	27.98%	-41.64%	Yes	Moderated due to the change in revenue composition under the Purchase & Sale business model.
Interest Coverage Ratio	22.03	26.03	-15.37%	No	Continued to remain at a comfortable level, reflecting strong debt servicing capacity.
Return on Net Worth	15.57%	49.66%	-68.66%	Yes	Moderated primarily due to the substantial increase in shareholders equity following the IPO.
Debt- Equity Ratio	0.07	0.61	-88.52%	Yes	Strengthened capital structure following the successful Initial Public Offering.
Current Ratio	4.12	1.61	155.90%	Yes	Improved working capital position and enhanced liquidity.
Debtors Turnover Ratio	1.99	2.78	-28.42%	Yes	Moderated primarily due to changes in the business model and revenue composition
Inventory Turnover Ratio	6.93	4.49	54.34%	Yes	Significant increase in business volumes following the strategic transition in the business model.
Debt Service Coverage Ratio	3.23	1.26	156.35%	Yes	Continued to reflect strong debt repayment capability.

Explanation for Significant Changes in Financial Ratios

During FY 2025-26, the Company recorded robust growth in Revenue from Operations, which increased by approximately 88.25% over the previous financial year. The growth was driven by the successful execution of the Companys growth strategy, including the optimisation of existing business processes and the strategic transition of a significant portion of its operations from the Contract Manufacturing (Job Work) model to the Purchase & Sale (Principal-to-Principal) model.

Under the earlier Contract Manufacturing model, the Company recognised only the processing or conversion charges as revenue, resulting in comparatively higher EBITDA and Net Profit Margins as a percentage of revenue.

Under the Purchase & Sale model, the Company recognises the gross value of goods sold as revenue, while the corresponding procurement cost is recognised as the cost of goods sold. Consequently, although both revenue and material costs increased significantly, the Company achieved higher absolute revenue, EBITDA and Profit After Tax, while EBITDA and Net Profit Margins moderated on a percentage basis due to the changed revenue composition.

Accordingly, the reduction in EBITDA Margin and Net Profit Margin during FY 2025-26 should not be interpreted as a decline in operational efficiency or profitability. Rather, it primarily reflects the accounting impact of the Companys revised business model, which is expected to support sustainable long-term growth through higher business volumes, broader customer reach, stronger supply chain integration and enhanced market presence. This strategic transition was envisaged as part of the Companys long-term growth strategy and was appropriately disclosed in the Companys IPO documents.

The Return on Net Worth (RoNW) moderated during the year primarily due to the substantial increase in shareholders funds following the successful Initial Public Offering. While the equity base expanded significantly, the Company continued to record healthy growth in its absolute profitability. Accordingly, the temporary moderation in RoNW reflects the enlarged capital base rather than any deterioration in the Companys earnings or operational performance.

Further, the improvement in the Debt-Equity Ratio and Current Ratio reflects the strengthening of the Companys capital structure and liquidity position following the IPO. The Company also maintained a healthy Interest Coverage Ratio and Debt Service Coverage Ratio, demonstrating its strong financial position and debt servicing capability.

Disclosure of Accounting Treatment:

No treatment different from that prescribed under the applicable Accounting Standards has been followed in the preparation of the financial statements of the Company. Accordingly, no disclosure is required in this regard.

Other Matters:

Environment, Health and Safety (EHS)

The Company is committed to conducting its operations in an environmentally responsible and sustainable manner while ensuring the highest standards of occupational health and safety.

Key initiatives include:

Environment

• Compliance with applicable environmental regulations.

• Efficient solvent recovery and recycling.

• Responsible waste management.

• Pollution prevention measures.

• Resource conservation.

• Energy-efficient manufacturing practices.

Health

• Safe handling of chemicals.

• Occupational health awareness programmes.

• Emergency preparedness.

Safety

• Regular safety audits.

• Fire and emergency response systems.

• Employee safety training.

• Personal Protective Equipment (PPE) compliance.

• Incident reporting and preventive measures.

The Company remains committed to continuously improving its EHS standards through investments in infrastructure, employee awareness and adoption of industry best practices.

Material Developments During the Year:

The following were the key developments during FY 2025-26:

• Successful listing of the Companys Equity Shares on NSE Emerge.

• Strengthening of capital structure through the Initial Public Offering.

• Strategic transition from Contract Manufacturing to Purchase & Sale business model.

• Significant growth in business volumes and revenue.

• Improvement in working capital position.

• Expansion of manufacturing and business operations.

• Continued investment in operational capabilities and customer relationships.

Future Strategy

The Companys long-term strategic priorities include:

• Expanding the Purchase & Sale business to leverage higher revenue opportunities.

• Strengthening manufacturing capabilities.

• Developing new products and customer segments.

• Enhancing export presence.

• Improving operational efficiencies through technology and automation.

• Maintaining financial discipline.

• Delivering sustainable returns to shareholders.

Management remains committed to building a professionally managed, growth-oriented organization capable of generating long-term value for all stakeholders.

Cautionary Statement

Statements made in this Management Discussion and Analysis describing the Companys objectives, expectations, estimates, projections, outlook or predictions may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations.

Actual results may differ materially from those expressed or implied due to various factors including changes in economic conditions, government policies, regulatory developments, demand and supply dynamics, raw material prices, foreign exchange fluctuations, competitive pressures and other factors beyond the Companys control.

The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required under applicable laws.