SPEB Adhesives Ltd Management Discussions

RESULTS OF OPERATIONS

The following discussion is intended to convey managements perspective on our financial condition and results of operations for the financial year ended on March 31, 2025, March 31, 2024, and March 31, 2023 and period ended on September 30, 2025. You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in the Red Herring Prospectus. You should also read the section entitled "Risk Factors" beginning on page 32 of this Red Herring Prospectus, which discusses several factors, risks and contingencies that could affect our financial condition and results of operations. The following discussion relates to our Company and is based on our restated financial statements, which have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI Regulations. Portions of the following discussion are also based on internally prepared statistical information and on other sources. Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year (" Fiscal Year ") are to the twelve-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to Speb Adhesives Limited, our Company. Unless otherwise indicated, financial information included herein are based on our "Restated Financial Statements" for Financial Year ended on March 31, 2023, March 31, 2024, and March 31, 2025 and the period ended September 30, 2025, included in this Red Herring Prospectus beginning on page 233.

BUSINESS OVERVIEW

Our company is engaged in the business of manufacturing solvent-based synthetic rubber adhesives. Within the synthetic rubber-based adhesive, we offer both - solvent-based and water-based adhesives. We primarily focus on in-house manufacturing of solvent-based adhesives, with water-based adhesives being produced on a contractual manufacturing basis. Within the solvent-based category, we primarily specialize in polychloroprene-based and SBS (styrene-butadiene-styrene)-based adhesives, known for their high bonding strength, durability, and wide application range. Our product portfolio includes various products customized for industrial and retail applications, such as multi-purpose adhesives, spray-grade adhesives, premium bonding adhesives, Ducting and Insulation adhesives, woodworking adhesives, footwear-grade adhesives, and adhesives used in Generator Set. We follow a B2B business model, and our products are used in Hardware, Foam and Furnishing, Ducting and Insulation, Woodworking, Footwear, and Generator Set industries. To serve a diverse customer base, we operate through four major business channels, viz. Dealer-Distribution Network, Industrial Sales, Exports, and Government Supply Contracts.

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL YEAR:

In the opinion of the Board of Directors of our Company, there have not arisen, since the date of September 30, 2025 as disclosed in this Red Herring Prospectus, any significant developments or any circumstance that materially or adversely affect or are likely to affect the profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months.

KEY FACTORS AFFECTING THE RESULTS OF OPERATION:

Our Companys future results of operations could be affected potentially by the following factors:

General economic conditions in India, changes in laws and regulations.

Changes in revenue mix, including geographic mix of our revenues.

Changes in Fiscal, Economic or Political conditions in India.

Increased market fragmentation.

Competition with existing and new entrants

Technology System and Infrastructure Risks

OUR SIGNIFICANT ACCOUNTING POLICIES

For Significant accounting policies please refer Significant Accounting Policies, " Note No. 1-2: Significant Accounting Policies & Other Notes " beginning under Chapter titled "Financial Information" beginning on page 233 of the Red Herring Prospectus.

RESULTS OF KEY OPERATIONS

The following table sets forth select financial data from our restated financial statement of profit and loss for the period ended September 30, 2025 and for the financial years ended March 31, 2025, 2024, and 2023 the components of which are also expressed as a percentage of total revenue for such period and financial years.

(?‚? in lakhs)

operation

Finished

Amortisation

Expenses Expenses Tax

for the Year

Review of Restated Financials

Revenue from Operations: Revenue from operations consists of sale of products.

Other Income: Other income mainly includes Interest income on FDR, Dividend received, Foreign exchange fluctuation gain, sale of Rodtep scripts and other non- operating income.

Total Income: Our total income comprises revenue from operations and other income.

Total Expenses : Companys total expenses consist of Cost of material consumed, Changes in inventories of Finished goods, Employee benefits expenses, Finance cost, Depreciation and Amortization expense, and other expenses.

Changes in inventories of Stock in Trade and Finished goods : Changes in inventories consists of costs attributable to an increase or decrease in inventory levels during the relevant financial period in Stock in Trade and Finished goods.

Employee Benefits Expense: Employee benefit expense includes Salaries and Wages, Contributions to provident and other funds, Ex- gratia payment, Actuarial loss and Directors remuneration.

Finance Cost: Finance cost includes bank interest payment on CC and Interest on unsecured loans.

Other expenses : Other expenses mainly consist of Production Expenses, Administrative Expenses, Repairs & maintenance Expenses, Professional Fees, Transportation Expenses, Selling Expenses and other expenses.

REVIEW OF OPERATION FOR THE PERIOD ENDED SEPTEMBER 30, 2025:

Revenue from Operations

The Companys revenue from operations for the period ended September 30, 2025, is ?‚? 2,474.65 lakhs. This is represented wholly by sale of products.

Other Income

Other Income for the period ended September 30, 2025, amounted to ?‚? 28.97 lakhs representing 1.16% of

total income. This is represented by ?‚? 26.44 lakhs of Interest on FDR, Duty drawback against Exports of ?‚?

2.21 lakhs, Foreign exchange fluctuation gain of ?‚? 0.33 lakhs.

Cost of Material consumed

Cost of material consumed for the period ended September 30, 2025, amounted to ?‚? 1,544.82 lakhs constituting 61.70% of total income.

Changes in inventories of Stock in Trade and Finished goods

There was a increase of ?‚? 42.53 lakhs for period ended September 30, 2025 as compared to an increase of

?‚? 14.16 lakhs for Fiscal 2025, primarily attributable to a lower inventory of Finished goods at the end of period on September 30, 2025.

Employee Benefits Expenses

Employee benefit expenses for the period ended September 30, 2025 were ?‚? 190.84 lakhs representing 7.62% of total income for that period. Employee benefit expenses consisted of Directors remuneration of

?‚? 108.00 lakhs, Salaries and wages of ?‚? 71.33 lakhs, Ex- gratia payment of ?‚? 6.95 lakhs, Employers contribution to provident fund and other fund of ?‚? 4.48 lakhs, contribution to group gratuity of ?‚? 0.42 lakhs and Actuarial loss of ?‚? 0.33 lakhs.

Finance Costs

Finance Costs for the period ended September 30,2025 were NIL.

Depreciation and amortization expenses

Depreciation and amortization for the period ended September 30, 2025 were ?‚? 25.98 lakhs representing 1.04% of total income for that period. Depreciation was calculated on Property plant and equipment.

Other Expenses

Other expenses for the period ended September 30, 2025, were ?‚? 208.79 lakhs representing 8.34% of total income for that period. Other expenses consisted of Production Expenses of ?‚? 22.69 lakhs, Administrative Expenses of ?‚? 73.44 lakhs, Repairs & maintenance Expenses of ?‚? 9.05 lakhs, Professional Expenses of ?‚?

22.16 lakhs, Transportation Expenses of ?‚? 54.18 lakhs, Selling Expenses of ?‚? 14.34 lakhs, Office and Other

Expenses of ?‚? 5.13 lakhs which majorly includes Roc Expenses of ?‚? 3.19 lakhs.

Tax Expenses

Tax expenses for the period ended September 30, 2025 were ?‚? 125.47 lakhs.

Profit after Tax (PAT)

Due to the aforementioned factors, the profit for the period ended September 30, 2025 was ?‚? 365.19 lakhs representing 14.59% of total income.

COMPARISON OF F.Y. 2025 WITH F.Y. 2024:

Revenue from Operations

The Companys revenue from operations in the financial year 2024-25 is ?‚? 4,479.32 lakhs. This represents

?‚? 217.69 lakhs or 5.11% increase compared to the previous financial years revenue from operations of ?‚?

4,261.64 lakhs.

Other Income

Other Income in the financial year 2024-25 increased by ?‚? 15.05 lakhs or 25.24%, reaching ?‚? 74.65 lakhs in comparison to the ?‚? 59.60 lakhs incurred in the financial year 2023-24. This increase was primarily due to interest on FDR of ?‚? 35.46 lakhs.

Cost of Material Consumed

Material consumption expenses for the financial year 2024-25 amounted to ?‚? 3,093.43 lakhs constituting 67.93% of total income.

Changes in inventories of Stock in Trade and Finished goods

There was an increase of ?‚? 14.16 lakhs for Fiscal 2025 as compared to an increase of ?‚? 3.01 lakhs for Fiscal 2024, primarily attributable to a lower inventory of Finished goods at the end of Fiscal 2025.

Employee Benefits Expenses

Employee benefit expenses in the financial year 2024-25 increased by 13,96%, reaching ?‚? 324.29 lakhs in comparison to the ?‚? 284.56 lakhs incurred in the financial year 2023-24. This Decrease in employee expenses primarily stemmed from increases in directors remuneration by ?‚?21.00 lakhs.

Finance Costs

Finance Costs in the financial year 2024-25 and 2023-24 were NIL.

Depreciation and amortization expenses

Depreciation and amortization in the financial year 2024-25 decreased by 8.53%, reaching ?‚? 43.95 lakhs in comparison to the ?‚? 48.05 lakhs incurred in the financial year 2023-24. The decrease in depreciation was primarily due to selling in assets.

Other Expenses

Other expenses in the financial year 2024-25 increased by 24.02%, reaching ?‚? 264.90 lakhs in comparison to the ?‚? 213.59 lakhs incurred in the financial year 2023-24. This increase in other expenses was primarily attributed to increase in Selling expenses such as advertisement of ?‚? 13.19 lakhs and Repairs & maintenance Expenses of Plant and Machinery of ?‚? 6.53 lakhs.

Tax Expenses

Tax expenses increased by 31.09%, reaching a total of ?‚? 223.78 lakhs in the financial year 2024-25, in

contrast to the ?‚? 170.70 lakhs in the financial year 2023- 24.

Profit after Tax (PAT)

The Profit After Tax (PAT) for the financial year 2024-25 reached ?‚? 589.46 lakhs, marking an increase from

?‚? 493.88 lakhs in the financial year 2023-24. In the financial year 2024-25, PAT constituted 12.94% of the total revenue, in contrast to 11.43% in the financial year 2023-24.

Rationale for increase in Profit After Tax (PAT) compared to total income.

In FY 2024-25, a favourable shift in industry and supply chain conditions led to normalization in input costs. Prices of Synthetic Rubber declined to ?‚? 407 per unit, while Toluene dropped to ?‚? 77, easing the pressure on RMC significantly. Importantly, directors remuneration was rationalized in this period, with no additional incentives drawn, aligning with the companys focus on cost efficiency and long-term value creation.

These structural cost improvements, coupled with continued demand for adhesive products across core segments such as packaging, construction, and automotive, resulted in both revenue and PAT growth in FY 2024-25. Operational efficiencies, improved margins, and prudent governance practices contributed to a stronger financial position compared to the previous year.

COMPARISON OF F.Y. 2024 WITH F.Y. 2023:

Revenue from Operations

The Companys revenue from operations in the financial year 2023-24 is ?‚? 4,261.64 lakhs. This represents

?‚? 424.48 lakhs or 11.06% increase compared to the previous financial years revenue from operations of ?‚?

3,837.16 lakhs.

Other Income

Other Income in the financial year 2023-24 increased by ?‚? 17.90 lakhs or 42.72%, reaching ?‚? 59.80 lakhs in comparison to the ?‚? 41.90 lakhs incurred in the financial year 2022-23. This increase was primarily due to interest on FDR of ?‚? 21.49 lakhs and Profit on sale of car of ?‚? 3.84 lakhs.

Cost of Material Consumed

Material consumption expenses for the financial year 2023-24 amounted to ?‚? 3,107.65 lakhs constituting

71.91% of total income.

Changes in inventories of Stock in Trade and Finished goods

There was an increase of ?‚? 3.01 lakhs for Fiscal 2024 as compared to an decrease of ?‚? 43.85 lakhs for Fiscal

2023, primarily attributable to a lower inventory of Finished goods at the end of Fiscal 2024.

Employee Benefits Expenses

Employee benefit expenses in the financial year 2023-24 Decreased by 23.47%, reaching ?‚? 284.56 lakhs in comparison to the ?‚? 371.82 lakhs incurred in the financial year 2022-23. This Decrease in employee expenses primarily stemmed from decreases in directors remuneration by ?‚?93.94 lakhs.

Finance Costs

Finance Costs in the financial year 2023-24 were NIL.

Depreciation and amortization expenses

Depreciation and amortization in the financial year 2023-24 increased by 48.43%, reaching ?‚? 48.05 lakhs in comparison to the ?‚? 32.37 lakhs incurred in the financial year 2022-23. The increase in depreciation was primarily due to addition in assets.

Other Expenses

Other expenses in the financial year 2023-24 increased by 11.51%, reaching ?‚? 213.59 lakhs in comparison to the ?‚? 191.54 lakhs incurred in the financial year 2022-23. This increase in other expenses was primarily attributed to increase in Selling expenses such as Commission on sales of ?‚? 9.37 lakhs, discount allowed of

?‚? 4.41 lakhs and Repairs & maintenance Expenses of Building of ?‚? 6.48 lakhs.

Tax Expenses

Tax expenses increased by 147.54%, reaching a total of ?‚? 170.70 lakhs in the financial year 2023-24, in

contrast to the ?‚? 68.96 lakhs in the financial year 2022- 23.

Profit after Tax (PAT)

The Profit After Tax (PAT) for the financial year 2023-24 reached ?‚? 493.88 lakhs, marking a notable increase from ?‚? 183.13 lakhs in the financial year 2022-23. In the financial year 2023-24, PAT constituted 11.43% of the total revenue, in contrast to 4.72% in the financial year 2022-23.

Rationale for increase in Profit After Tax (PAT) compared to total income.

In FY 2023-24, a favourable shift in industry and supply chain conditions led to normalization in input costs. Prices of Synthetic Rubber declined to ?‚? 407 per unit, while Toluene dropped to ?‚? 77, easing the pressure on RMC significantly. Importantly, directors remuneration was rationalized in this period, with no additional incentives drawn, aligning with the companys focus on cost efficiency and long-term value creation.

These structural cost improvements, coupled with continued demand for adhesive products across core segments such as packaging, construction, and automotive, resulted in both revenue and PAT growth in FY 2023-24. Operational efficiencies, improved margins, and prudent governance practices contributed to a stronger financial position compared to the previous year.

Cash Flow

The table below summaries our cash flows from our Restated Financial Information for the period ended September 30, 2025 and for the financial years ended on 2025, 2024, and 2023:

(?‚? in lakhs)

Particulars	Period ended September 30, 2025	FY 2025	FY 2024	FY 2023
Net cash (used in)/ Generated from operating activities	(14.29)	(92.61)	390.74	36.51
Net cash (used in)/ Generated from investing activities	(152.95)	31.12	231.00	41.65
Net cash (used in)/ Generated from finance activities	16.00	51.84	(492.81)	0.00
Net increase/ (decrease) in cash and cash equivalents	(152.24)	(9.66)	128.93	78.16
Cash and Cash Equivalents at the beginning of the period	263.86	273.52	144.59	66.43
Cash and Cash Equivalents at the end of period	112.62	263.86	273.52	144.59

Cash Flow from/(used in) Operating Activities

Net cash generated from operating activities for the period ended September 30, 2025 was ?‚? (14.29) lakhs and our profit before tax that period was ?‚? 490.66 lakhs. The difference was majorly attributable to change in working capital of ?‚? (414.56), depreciation and amortisation of ?‚? 25.98 lakhs, Interest on Fixed deposits of ?‚? 26.44, resulting in gross cash generated from operations at ?‚? 80.23 lakhs. We have income tax paid of ?‚? 94.52 lakhs.

Net cash generated from operating activities in the Fiscal 2025 was ?‚? (92.61) lakhs and our profit before tax that period was ?‚? 813.24 lakhs. The difference was majorly attributable to change in working capital of ?‚? (702.93), depreciation and amortisation of ?‚? 43.95 lakhs, Interest on Fixed deposits of ?‚? 66.78 and loss on sale of car of ?‚? 17.02 lakhs, resulting in gross cash generated from operations at ?‚? 104.73 lakhs. We have income tax paid of ?‚? 197.34 lakhs.

Net cash generated from operating activities in the Fiscal 2024 was ?‚? 390.74 lakhs and our profit before tax that period was ?‚? 664.38 lakhs. The difference was majorly attributable to change in working capital of ?‚? (113.90), depreciation and amortisation of ?‚? 48.05 lakhs, Interest on Fixed deposits of ?‚? (31.32) lakhs and Dividend received of ?‚? (14.30) lakhs, resulting in gross cash generated from operations at ?‚? 555.55 lakhs. We have income tax paid of ?‚? (164.81) lakhs.

Net cash generated from operating activities in the Fiscal 2023 was ?‚? 36.51 lakhs and our profit before tax that period was ?‚? 252.09 lakhs. The difference was majorly attributable to change in working capital of ?‚? (152.27), depreciation and amortisation of ?‚? 32.37 lakhs, Interest on Fixed deposits of ?‚? (9.83) and Dividend received of ?‚? (18.01) lakhs, resulting in gross cash generated from operations at ?‚? 103.57 lakhs. We have income tax paid of ?‚? 67.07 lakhs.

Cash Flow from/(used in) Investing Activities

For the period ended September 30, 2025, our net used in investing activities was ?‚? (152.95) lakhs, which was primarily for purchase of PPE of ?‚? 179.39 lakhs.

In the Fiscal 2025, our net used in investing activities was ?‚? 31.12 lakhs, which was primarily due to

purchase of PPE of ?‚? 85.66 lakhs , Sale of fixed asset of ?‚? 50.00 lakhs and interest of fixed deposit of ?‚?

66.78 lakhs.

In the Fiscal 2024, our net used in investing activities was ?‚? 231.00 lakhs, which was primarily due to sale of non-current investments of ?‚? 312.69 lakhs, for Payments for acquisition of property, plant and equipment of ?‚? (142.01) lakhs, Sale of fixed assets of ?‚? 12.97 lakhs, Interest on fixed deposits with banks of ?‚? 31.32 lakhs and dividend received of ?‚? 14.30 lakhs.

In the Fiscal 2023, our net used in investing activities was ?‚? 41.65 lakhs, which was primarily due to Dividend received of ?‚? 18.01 lakhs, sale of non-current assets of ?‚?13.81 lakhs and interest income of fixed deposits of ?‚? 9.83 lakhs.

Cash Flow from/(used in) Financing Activities

For the period ended September 30, 2025, our net cash generated from financing activities was 16.00 lakhs.

In the Fiscal 2025, our net cash generated from financing activities was ?‚? 51.84 lakhs.

In the Fiscal 2024, our net cash generated from financing activities was ?‚? (492.81) lakhs. This was primarily due to buyback of shares of ?‚? (400.00) lakhs and taxation on buy back ?‚? (92.81) lakhs.

In the Fiscal 2023, our net cash used in financing activities was NIL.

Information required as per Item 11 (II) (C) (iv) of Part A of Schedule VI to the SEBI Regulations :

Unusual or infrequent events or transactions

To our knowledge there have been no unusual or infrequent events or transactions that have taken place during the last three years other than shut down of business due to COVID-19.

Significant economic changes that materially affected or are likely to affect income from continuing operations.

Our business has been subject, and we expect it to continue to be subject to significant economic changes arising from the trends identified above in Factors Affecting our Results of Operations and the uncertainties described in the section entitled " Risk Factors" beginning on page 32 of this Red Herring Prospectus. To our knowledge, except as we have described in this Red Herring Prospectus, there are no known factors which we expect to bring about significant economic changes.

Income and Sales on account of major product/main activities

Income and sales of our Company mainly consists of sale of Synthetic Rubber Adhesives.

Whether the company has followed any unorthodox procedure for recording sales and revenues

Our Company has not followed any unorthodox procedure for recording sales and revenues.

Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Apart from the risks as disclosed under Section titled " Risk Factors " beginning on page 32 in this Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.

Increases in revenues are by and large linked to increases in volume of business.

Total turnover of each major industry services in which the issuer company operated.

The Company is in the business of, the relevant industry data, as available, has been included in the chapter titled "Industry Overview" beginning on page 136 of this Red Herring Prospectus.

Status of any publicly announced new products or business services.

Our Company has not announced any new services or business services.

The extent to which business is seasonal.

Our Companys business is not seasonal.

Any significant dependence on a single or few suppliers or customers.

The % of contribution of our Companys suppliers vis-? -vis the total revenue from operations respectively for the period ended September 30, 2025 and for Fiscal 2025, 2024, and 2023 is as follows:

Particulars Top Suppliers as a percentage (%) of total purchases
	For period September 2025	ended 30,	Fiscal 2025	Fiscal 2024	Fiscal 2023
Top 5	49.97%		47.44%	54.93%	64.38%
Top 10	69.27%		67.13%	71.40%	84.28%

The % of contribution of our Companys customers vis-? -vis the total revenue from operations respectively for the period ended September 30, 2025 and for the Fiscal 2025, 2024, and 2023 is as follows:

Particulars	Top Custom For period 2025	er as a ended	percentage ( September	%) o 30,	f total purch Fiscal 2025	ases Fiscal 2024	Fiscal 2023
Top 5	25.16%				23.71%	22.20%	25.64%
Top 10	39.39%				38.14%	36.61%	40.22%

Competitive conditions.

Competitive conditions are as described under the Chapters titled "Industry Overview" and "Our Business"

beginning on pages 136 and 157, respectively of this Red Herring Prospectus.