Sonal Adhesives Ltd Management Discussions

(a) Industry Structure and Outlook

The Indian adhesives market was valued between USD 2.4–3.1 billion in 2024, depending on the source, and is projected to grow at a CAGR of approximately 6–7% over the next 5–10 years. This growth is being fueled by rising demand in packaging, construction, automotive, and consumer goods. Within this market, self-adhesive products such as BOPP tapes have emerged as a high-demand segment, owing to their cost efficiency, reliability, and wide applicability in everyday packaging needs.

The Indian packaging industry, though highly fragmented, is undergoing rapid transformation, driven by robust demand from e-commerce, FMCG, pharmaceuticals, and retail sectors. The sector comprises both organized players and numerous unorganized units, but there is a noticeable shift toward consolidation, premium quality, and sustainable packaging solutions. As part of this trend, BOPP self-adhesive tapes continue to witness increasing consumption due to their versatility, ability to support branding through printing, and eco-friendly advancements.

For FY 2024 25, the demand for BOPP tapes remained resilient and encouraging, supported by the growing penetration of online retail, logistics, and last-mile delivery. The industry is also witnessing a move towards value-added offerings such as eco-friendly, printed, and customized tapes, aligned with the packaging sectors focus on sustainability and efficiency. Export opportunities are also expanding, with Indian manufacturers gaining competitive advantage through cost optimization and reliable supply capabilities in global markets.

Looking ahead, the medium to long-term outlook for BOPP self-adhesive tapes remains positive and sustainable. Growth will continue to be driven by rising consumption, adoption of recyclable and green materials, and automation in packaging processes. However, challenges persist in the form of raw material price volatility and global supply chain disruptions, particularly in crude-based polymers. Companies that emphasize innovation, technology absorption, and strong customer relationships will be best positioned to capitalize on the opportunities in both domestic and export markets.

The Company operates in a sector with strong long-term growth prospects, driven by rising demand from packaging-intensive industries such as e-commerce, FMCG, retail, and pharmaceuticals. Growing awareness of sustainable packaging, increasing automation in logistics, and expanding export opportunities provide a favorable environment for BOPP self-adhesive tapes. The Company is well-placed to leverage these opportunities through technology upgrades, product innovation, and cost-efficient operations.

At the same time, the business remains exposed to challenges such as volatility in crude oil and polymer prices, which significantly affect raw material costs, as well as foreign exchange fluctuations on imports and exports. Competitive pressures from both organized and unorganized players, rising compliance requirements, and global supply chain uncertainties also pose risks. While these factors may impact margins in the short term, the Company continues to mitigate them through prudent financial management, operational efficiency, and a focus on value-added solutions.

During the year under review, the Companys BOPP Self-Adhesive Tapes segment continued to be the primary revenue driver, supported by strong demand from the packaging sector, especially e-commerce, FMCG, and retail. The Company reported steady growth significantincrease in export turnover, reflecting its growing domesticmarketswhileachieving acceptance in international markets. Continuous efforts in product quality improvement and operational efficiency have helped the Company maintain its competitive position despite fluctuations in input costs.

The Specialty Adhesives and Emulsions segment also performed well, with demand driven by the growth in paper, board, and packaging applications across multiple industries. Products marketed under the brand names SONAL and ADICRYL retained strong market recognition and customer confidence. Exports to regions such as Spain, Nigeria, Germany, the

Middle East, and Africa further strengthened the segments global footprint. With a robust product portfolio and increasing preference for acrylic-based adhesives, the Company remains confident of sustaining profitable growth across both segments in the coming years.

The Companys operating and business control procedures have been framed in order that they ensure efficientuse of resources and comply with the procedures and regulatory requirements. The Company has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that transaction is authorized, recorded and reported correctly. The Board has also appointed Internal Auditors to more strengthen the internal control system.

The Companys financial risk management remains a critical part of its overall business strategy, focusing on identifying, assessing, and mitigating potential risks. The key financial risks faced include market risk, credit risk, and liquidity risk.

The Board of Directors regularly reviews and approves policies to ensure an effective framework for managing these risks.

During the year under review, the Company reported a Total Turnover of 11,033.25 lakhs, compared to 10,065.11 lakhs in the previous year, reflectinga growth of 9.62%. However, due to higher input costs, finance charges, and administrative expenses, the Net Profit stood at 176.49 lakhs , marginally lower than 185.44 lakhs earned in the previous year. The Company has also recorded a satisfactory performance in the first quarter of FY 2025 26, with turnover growth indicating a positive outlook. A quarter-wise comparison of performance is presented below for reference.

(Amt in Lakhs)

The Company places the utmost importance on the well-being of its employees and is proud to have many long-serving team members who have built their careers with Sonal Adhesives. We strongly believe in fostering long-term relationships and providing employees with ample opportunities for professional and personal growth. Our Human Resource practices are closely aligned with the Companys strategic objectives, supporting our mission to maximize the potential of our greatest assets—our people. By embracing change and the opportunities it presents, we continue to nurture a culture of commitment, quality service, and customer-centricity. We remain dedicated to recruiting, developing, rewarding, and retaining talent that drives our success.

As on 31^st March 2025, the total number of personnel employed (staff and workers) stood at 33.

In line with the amended SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company is

(i.e., change of 25% or more requiredtodisclosedetailsofsignificant compared to the immediately preceding financial year) in key financial ratios, along with explanations for such changes.

The Company has identified the following as its key financial ratios:

The Company has complied with all the Accounting Standards and applicable provisions of law in the preparation of its financial statements. There have been no deviations from the prescribed accounting treatments, and all applicable standards have been consistently applied.