Sreechem Resins Ltd Management Discussions

1. GLOBAL ECONOMIC OVERVIEW:

During the year, geopolitical tensions and the conflict between the United States and Iran led to a substantial increase in crude oil prices and other crude-based products, resulting in higher production costs across various industries. Consequently, our Company was also impacted by the significant rise in the cost of raw materials. Although a temporary ceasefire brought some stability to the market, the resurgence of tensions and near full-scale conflict has again driven up crude oil prices and related product costs. This continued volatility in energy markets has adversely affected input costs for businesses globally.

Interest rates remained relatively stable during the year compared to the previous year.

2. INDIAN ECONOMIC OVERVIEW:

The Reserve Bank of India reduced interest rates during the year. However, the Company tried to reduce the interest costs by keeping inventory under control. Due to lower production and sales, interest costs were also down.

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers globally over the next 3-5 years, backed by strong growth of the economy.

3. INDUSTRY STRUCTURE & DEVELOPMENT:

The Company manufactures Phenol based resins and other Allied Products and specialty Chemicals during the year. Demand for resins remained depressed. The Companys Resin products are used by refractory units & steel plants. There was dumping of imported refractories by China. As such local industries suffered and there was tremendous competition between resins manufacturers resulting in lower production and sales.

The price of Phenol - basic raw material for Resins and Chemicals - increased substantially during February & March 2026 due to War as it is a Crude based Product. The Company also increased the prices of Finished Products and passed on the increased cost to the customers to the extent possible.

RESIN INDUSTRY IN INDIA: There are five - six established manufacturers of Phenolic Resins in India. The industry is dependent on growth of Refractory Industry in the country. But due to imports of Refractories from China, Indian Industry is starved of orders, resulting in huge competitions between the Resin manufacturers. Also, one new producer of Resin has commenced production in the last two years resulting in further competition.

4. OPPORTUNITIES & THREATS:

The Basic Raw-material - Phenol is manufactured in India by a Government Undertaking and two Private Sector Units and is also imported. Normally there is no problem in procuring the same. But in the last few years H.O.C.L Unit remained closed intermittently and supplies remained erratic during the year. The Company regularly supplies Phenolic Resins to various Refractory manufacturers and to Steel Plants. During the last few years there has been huge competition from other Resin manufacturers resulting in lower net realizations. Due to US Iran War prices of Phenol and other Chemicals used as raw materials by the company shot up substantially and also the availability was affected.

5. OUTLOOK

Going forward, the Company remains focused on strengthening its order pipeline through deeper customer engagement, faster stabilization of its newer product lines, and continued investment in R&D-led innovation, and the Management of the Company remains confident that the company shall return to a stronger growth trajectory in the coming year.

RAW MATERIALS PRICE RISK: There are three manufacturers of our basic raw materials- phenol. Shut down of HOCL Plant intermittently poses a risk of getting supplies as well as price fluctuations from time to time. Besides that, there is fluctuation in the prices of Phenol (basic raw material) as it is a crude oil base product, which is majorly imported in India. The Company tries to insulate from any fluctuations in price of basic raw-materials to the extent possible by passing on the increase / decrease in the prices of Raw-materials to the customers.

OTHER BUSINESS RISKS: There is a risk of imports of Refractories from low-cost Chinese Refractories manufacturers as well as resins dumped by China resulting in lower capacity utilization by the Refractory Units consequently the demand for resins was depressed. However, Company has long association with the Refractory Manufacturers, who are satisfied with the quality of the products of the Company. As such, the Company does not see much risk in marketing the Resin products of the Company. The depreciation of the rupee is a big challenge affecting the cost of input.

Any event like war, changes in prices of Coal and availability of inferior quality of Coal at customers end and policy changes with the customer directly affect our production and sales. Thus, profitability may be affected due to said developments.

6. RISK MANAGEMENT & INTERNAL CONTROL SYSTEM:

The Company has a robust Risk Management framework to identify and evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Companys competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business segments. The Company has identified various risks and also has mitigation plans for each risk identified. The Risk Management Policy of the Company is available on our website: http://www.sreechem.in/policy.php

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

The Company is dependent on few customers for sale of new products. Thus, the management is trying to increase the customer base.

7. DISCUSSION ON FINANCIAL PERFORMANCE:

During the year under review, the Company has made Net Loss of Rs. 22.92 lacs as compared to Loss of Rs. 36.90 lacs in previous year. The Company has been able to reduce it losses as compared to previous years, however the Company sales has also reduced from Rs. 3550.25 lacs in the previous year to 2975.33 lacs in the current year. In spite of efforts by the Management, the orders for new products were not received resulting in lower production and sales during the financial year. The Management is taking every step to procure orders for the new products, improve the sales by Online marketing and through Dealers, with the intent to improve the financial position of the Company.

KEY FINANCIAL RATIOS:

8. HUMAN RESOURCE:

The Company firmly believes that human resources is an important instrument to provide proper communication of the Companys growth story to its stake holders and plays vital role in the overall prospects of the Company. The Company takes every possible step for the welfare of its manpower. The employee relationship was cordial throughout the year. The Company as on March 31, 2026 had 71 permanent employees on its rolls.