Sonal Adhesives Ltd Management Discussions

(a) Industry Structure and Outlook

The global pressure-sensitive adhesive tapes market continues to demonstrate steady growth, supported by increasing demand from the packaging, logistics, e-commerce, automotive, construction and healthcare sectors. Within this market, Biaxially Oriented Polypropylene (BOPP) self-adhesive tapes remain one of the most widely used packaging solutions due to their high tensile strength, durability, cost-effectiveness and suitability for automated packaging applications. Growing international trade, expanding manufacturing activity and increasing emphasis on efficient packaging solutions continue to support long-term demand for BOPP tapes across developed and emerging economies.

India has emerged as one of the fastest-growing packaging markets globally, driven by rising consumer demand, rapid urbanisation,expansionoforganisedretail,andsignificantgrowth in e-commerce and third-party logistics. Government initiatives aimed at strengthening domestic manufacturing, infrastructure development and industrial growth have further enhanced the demand for packaging materials. The packaging industry continues to witness increasing adoption of high-quality adhesive solutions that improve product protection, operational efficiency and brand visibility.

The domestic BOPP self-adhesive tape industry remains highly competitive, comprising organised manufacturers alongside numerous regional and unorganised players. However, customers are increasingly shifting towards established manufacturers offering consistent product quality, customised solutions, reliable supply chains and technical support.

Demand for specialised products such as printed tapes, coloured tapes, low-noise tapes, heavy-duty packaging tapes and application-specific adhesive solutions continues to increase across industrial and commercial segments. Sustainability has also become an important consideration, encouraging manufacturers to optimise material consumption, improve recyclability and adopt environmentally responsible manufacturing practices.

During FY 2025-26, demand for packaging tapes remained broadly stable, supported by sustained growth in FMCG, pharmaceuticals, consumer durables, electronics, food processing, logistics and export-oriented industries. The continued expansion of e-commerce and warehousing infrastructure has further strengthened demand for reliable carton sealing solutions. At the same time, the industry experienced fluctuations in the prices of key raw materials such as BOPP films and adhesive chemicals, largely influenced by movements in crude oil prices and global supply-demand dynamics. Manufacturers continued to focusonoperationalefficiency, cost optimisation and value-added product offerings to maintain competitiveness.

Looking ahead, the long-term outlook for the Indian BOPP self-adhesive tape industry remains positive. Rising industrial production, increasing organised retail penetration, expanding export opportunities, growth in warehousing and logistics infrastructure, and continuous advancement in packaging technologies are expected to support sustained demand. Companies that focus on product innovation, manufacturing excellence, quality consistency, customer-centric solutions and prudent cost management will be well positioned to capitaliseonemergingopportunitieswhileeffectivelymanaging challenges arising from raw material price volatility and evolving market dynamics.

The Company operates in an industry that continues to benefit from the sustained growth of the packaging sector, driven by increasing demand from e-commerce, FMCG, pharmaceuticals, food processing, logistics and organised retail. Rising industrial activity, growing exports and increasing preference for branded and customised packaging solutions are expected to support the demand for BOPP self-adhesive tapes. In addition, the industrys gradual transition towards recyclable packaging materials, improved printing technologies and value-added adhesive products presents opportunities for manufacturers to enhance their product portfolio and strengthen customer relationships.

Notwithstanding the favourable demand outlook, the industry continues to face several challenges. Prices of key raw materials, including BOPP films, polypropylene resins, adhesives and other petrochemical derivatives, remain vulnerable to fluctuations in crude oil prices, global supply-demand imbalances and geopolitical developments. The business is also exposed to foreign exchange fluctuations affecting imported inputs and export realisations. Further, increasing environmental regulations relating to plastic waste management and Extended Producer Responsibility (EPR), rising energy and logistics costs, and intense competition from organised as well as unorganised manufacturers may exert pressure on operating margins. Continued capacity additions in the BOPP film industry may also influence pricing dynamics across the value chain.

The Company continues to focus on mitigating these risks through strategic sourcing of raw materials, efficient inventory management, continuous improvement in manufacturing processes, disciplined cost control and product diversification. Emphasis on quality, customer-centric solutions, operational efficiency and value-added products enables the Company to enhanceitscompetitivepositionandrespondeffectivelyto changing market conditions while pursuing sustainable long-term growth.

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During the year under review, the BOPP Self-Adhesive Tapes business continued to be a major contributor to the Companys operations. Demand for packaging tapes was supported by consumption across e-commerce, quick commerce, logistics, FMCG, food processing, pharmaceuticals, consumer goods and other packaging-intensive industries. The continued expansion of organised retail, warehousing and distribution networks also supported the requirement for reliable carton-sealing and industrial packaging solutions.

The operating environment, however, remained competitive during FY 2025 26. The BOPP films industry witnessed fluctuations in demand and product realisations, influenced by capacity additions, availability of competing supplies and cautious inventory management by converters and end users. Prices of BOPP film, adhesives and other petrochemical-based inputs also remained susceptible to movements in polypropylene, crude oil, energy and transportation costs.

Against this backdrop, the Company continued to focus on maintaining product quality, improving manufacturing efficiency, optimising material consumption and exercising disciplined cost control.

The Companyalsocontinueditseffortsto cater to evolving customer requirements through printed, customised and application-specific adhesive tapes. Growing emphasis on packaging efficiency, tamper evidence, brand identification and compatibility with automated packaging systems is expected to support the demand for value-added tape products over the medium to long term.

The Specialty Adhesives & Emulsions business continued to cater to applications in paper, paperboard, packaging and other industrial sectors. The Companys products marketed under the SONAL and ADICRYL brands continued to serve the requirements of domestic and international customers. During the year, the Company remained focused on product consistency, application-specific performance, customer service and efficient utilisation of manufacturing resources.

The outlook for both product categories remains linked to the growth of the packaging, FMCG, logistics, e-commerce and industrial sectors. The Company will continue to pursue sustainable growth through operational efficiency, prudent working-capital management, product development, customer diversification and expansion of its presence in domestic and export markets.

The Company has established an internal financial control framework commensurate with the nature, size and complexity of its operations. The internal controls and operating procedures are designed to ensure the orderly and efficient conduct of business, optimum utilisation of resources, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information. The Company has defined authority levels, approval mechanisms and operating procedures for key business functions, including procurement, production, inventory management, sales, finance are periodically reviewed to address changes in business processes, operating conditions and applicable regulatory requirements.

The Internal Auditors carry out audits of identifiedbusiness processes in accordance with the approved internal audit plan.

The observations and recommendations arising from such audits are reviewed by the Management and placed before the Audit Committee. Corrective measures are initiated, wherever necessary, and their implementation is appropriately monitored.

The Audit Committee periodically reviews the adequacy and effectiveness of the Companys internal control systems and risk-management processes. Based on the reviews conducted during the year, no material weakness was observed in the internal financial controls, and the Company considers such controls to be adequate and operating effectively.

The Company continues to maintain a prudent financial risk management framework as an integral part of its overall business strategy. The framework focuses on identifying, assessing and mitigating key financial risks, including market risk, credit risk and liquidity risk. The Board of Directors periodically reviews the Companys risk management policies to ensure that appropriate systems and controls remain in place for effective risk mitigation.

During the year under review, the Company recorded a Total Turnover of 12,644.41 lakhs as against 11,033.25 lakhs in the previous year, registering a growth of 14.60%. The increase in turnover was supported by sustained demand from the packaging industry and the Companys continued focus on strengthening its presence across domestic and export markets.

The operating environment during FY 2025 26, however, remained challenging due to fluctuations in the prices of key raw materials, including BOPP films and other petrochemical-based inputs, coupled with higher finance costs and increased administrative expenses. Consequently, the Company reported a Net Profit of 137.17 lakhs as compared to 176.49 lakhs in the previous year.

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Despite these industry-wide cost pressures, the Company remained focused on operational efficiencies, disciplined cost management and prudent financial practices to preserve profitability and strengthen its long-term competitive position. The Company has commenced FY 2026 27 on a positive note, with the first quarter reflecting continued business momentum. A comparative summary of the Companys quarterly turnover is provided below.

(Amt in Lakhs)

The Company firmly believes that its employees are its most valuable asset and continues to focus on creating a work environment that promotes collaboration, innovation, learning and professional growth. The Human Resource function remains committed to attracting, developing and retaining competent talent while fostering a culture of integrity, accountability, teamwork and continuous improvement. Regular training and skill development initiatives are undertaken to enhance employee capabilities and align them with the Companys operational and business objectives.

The Company also strives to maintain a safe, healthy and inclusive workplace, ensuring compliance with all applicable labour laws and statutory requirements. Industrial relations remained cordial and harmonious throughout the year under review, with continued cooperation and mutual understanding between the Management and employees, resulting in uninterrupted business operations.

As on 31 March 2026, the Company had a total workforce of 26 employees, comprising both staff and workmen

Pursuant to Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements)

Regulations, 2015, the Companyisrequiredtodisclosedetailsofsignificantchanges in key financial ratios, where such change is 25% or more as compared to the immediately preceding financial year, together with an explanation for the variation.

Accordingly, the key financial ratios of the Company for the financial corresponding figures for the previous financial year and explanations for significant variations, are provided below. The Company has identified following ratios as key financial ratios:

The financial statements of the Company have been prepared in accordance with the applicable provisions of the

Companies Act, 2013, the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time, and other accounting principles generally accepted in India. The Company has consistently applied the applicable accounting policies in the preparation of its financial statements, and there has been no material deviation from the prescribed Indian Accounting Standards (Ind AS).