Styrenix Performance Materials Ltd Management Discussions

The Management Discussion and Analysis Report has been prepared in accordance with the provisions of Regulation 34(2) (e) of Listing Regulations, read with Schedule V (B) thereto, with a view to provide an analysis of the business and Financial Statements of the Company for FY 2024-25 and should be read in conjunction with the respective Financial Statements and notes thereon. ?Styrenix Performance Materials Limited is the number one producer of ABS and SAN & growing in Polystyrene, Blends and ASA in India. With 52 years of pioneering experience, Styrenix Performance Materials Limited has been the most preferred supplier to its customers and helps them succeed by offering innovative and sustainable best-in-class solutions, designed to give them a competitive edge in their markets.

GLOBAL ECONOMY:

Global growth forecast has been revised downward by the International Monetary Fund, with output expected to slow to 2.8% in 2025, before edging up to 3.0% in 2026. The global economy exhibited uneven yet steady growth across regions in 2024. This adjustment also brought inflation rates across countries closer to target levels and contributed to lower global inflation. Moreover, despite a sharp and synchronised tightening of monetary policy around the world, the global economy remained unusually resilient throughout the disinflationary process, avoiding a global recession. Heightened uncertainties surrounding tariffs outcomes, following the US election verdict in Nov24, and its repercussion on global trade shroud the prospects of global economy. Economic policy uncertainty has increased sharply, especially on the trade and fiscal fronts and various risks viz; escalation in regional conflicts, monetary policy remaining tight for too long, possible resurgence of financial market volatility and the continued ratcheting up of protectionist policies dominate business sentiments across the globe.

(Source: IMF_WEO_April_2025 (GLOBAL PROSPECTS AND POLICIES))

INDIAN ECONOMY:

India has shown its resilience amid global headwinds with governments sustained focus on infrastructure development, Atmanirbhar Bharat, and job creation. Regulatory reforms are expected to strengthen manufacturing, while the services and agriculture sectors remain robust. New tax incentives for the middle class are also set to drive economic activity.

The Asian Development Bank (ADB) projects Indias GDP to grow by 6.7% in FY26, driven by strong domestic demand, rising rural incomes, a resilient services sector, and moderating inflation, boosting consumer confidence. Growth is expected to rise further to 6.8% in FY27, supported by accommodative monetary and fiscal policies.

Private consumption will remain a key growth engine, backed by higher rural incomes and urban middle-class spending, aided by personal income tax cuts. Inflation is projected to moderate to 4.3% in FY2025 and 4.0% in FY2026, potentially allowing monetary easing.

Urban infrastructure investment is set to rise, supported by a new $1.17 billion government fund. While global uncertainties may temper private investment in the near term, improvements are expected with lower borrowing costs and pro-investment reforms.

Indias economic outlook remains broadly positive despite external headwinds, on the back of strong fundamentals, proactive policies, and a favourable investment climate. While global risks such as rising U.S. tariffs on Indian exports and potential commodity price surges pose challenges, the countrys stable macroeconomic framework and ongoing structural reforms are expected to mitigate their impact and support sustained medium-term growth.

Overall Polymer demand has grown approx. 7~8 % in FY 24-25. Growth in the Automotive Segment is approx. 4%, large appliances have grown approx. 5~7%, and other misc. industry has grown by approx. 8% y-o-y. The growth of industries such as automotive, electronics, and packaging will contribute to the increase in demand for ABS and Polystyrene. Government initiatives promoting manufacturing and infrastructure development can boost the demand for these materials. The governments policy to improve logistics infrastructure, incentives to facilitate industrial production, personal income tax cuts and measures to improve farmers income will support the countrys efforts to grow at a faster pace. Indias ABS and Polystyrene markets continue to be influenced by global market trends and trade dynamics. Changes in international prices, demand from other countries, and geopolitical factors can have effects on the Indian market. Economic growth has benefitted the Company to achieve higher sales volume during the financial year FY 2024-25 and we expect the growth story to continue in financial year FY 2025-26.

(Source: Asian Development Bank_ Outlook Apr 2025)

REVIEW OF OPERATIONS:

Acquisition of INEOS Styrolution Thailand Co. Ltd. The Company had entered a Sales & Purchase Agreement (‘SPA) with INEOS Styrolution Group GmbH on December 9, 2024 for acquiring 100% shareholding of INEOS Styrolution Thailand Co. Ltd. (‘target company) located in Thailand. The acquisition transaction successfully completed on January 17, 2025. The target company is acquired at approx. 21.9Mn USD for 100% shareholding.

The target company is in the business of manufacturing and selling of specialty engineering polymer products. This acquisition is expected to bring manifold advantages to both Companies, including synergy benefits resulting from technology and know-how, capacities, geographical markets, etc. Furthermore, this acquisition will also enable the Company to evaluate options for future expansion, new product development and new market offering.

During the FY 2024-25, the sales volume was 186 KT compared to 165 KT in previous year i.e. increase of 12.8%. We are pleased to report that our capacities for ABS and PS are almost fully utilised, and we are working to enhance capacity via various de-bottlenecking projects and proposed capacity expansion plan. During FY 2024-25, revenue from operations stood at Rs. 2,744.4 Crore vs. Rs. 2,222.2 Crores in FY 2023-2024. EBITDA for FY 24-25 is INR 356 Crore (12.9%)vs. INR 273 Crore (12.2%) in previous year.

PRODUCTS:

The Company provides styrenics applications for many everyday products across a broad range of industries, apart from automotive, electronics, household, construction and healthcare and includes packaging and toys, sports & leisure. With best-in-class production technology, advanced R&D skills, your Company is perfectly equipped to ensure the highest level of quality, efficiency, and innovation. Your Companys product portfolio having trademarks includes ABSOLAC? ABS, ABSOLAN? SAN, STYRENIX? PS, STYROLOY? Blend and ASALAC?

ASA which continue to have a preferred market status amongst user industries such as automotive, construction, healthcare, household and electronics. Research and Development towards new product and grade development and processes is yielding good results and has helped the Company to add differentiated and value added products in its portfolio. The Company has also been augmenting its capacities by de-bottlenecking the process in all its plants and expects to yield results in near future. Your Company continues to focus on innovative solutions to create more value for its customers.

Through relentless research and development efforts, we continually introduce new products, blends and other value added grades, enhancing our portfolio with differentiated and value-added offerings.

RATINGS:

Care Edge Ratings reported "Stable" outlook on Long-term / Short-term bank facilities of the Company (Rs. 650 crores). The "Stable" outlook on the rating of the Company reflects CARE Ratings Limiteds expectation of sustenance of its comfortable financial risk profile on the back of stable operations and healthy demand prospects in the near to medium term. The credit rating as received by the Company from Credit Rating Agency for long term / short term bank facilities, as of March 31, 2025, is CARE A+, STABLE / CARE A1+ [Single A Plus; Outlook:Stable/ A One Plus].

CAPEX:

The Company has completed de-bottlenecking activity at Dahej, increasing the capacity from 66 KT to 100 KT. Additionally, the Company has also completed de-bottlenecking exercise at Nandesari, increasing the capacity from 23KT to 27KT. This will help to increase ABS capacity from 85 KT to 100 KT. The Company is accelerating planned brownfield expansion in ABS and accordingly in phase 1 will add additional 50KT ABS capacity by second half of FY 2026-27. Phase 2 to add the next 50KT of ABS.

INDUSTRY STRUCTURE & DEVELOPMENTS:

In an ever-changing economic and business landscape, characterized by evolving consumer preferences, rapid technological advancements, and globalization, the Company operates across various sectors, including automotive, home appliances, electrical and electronics, construction, packaging, and healthcare. This dynamic environment fosters intense competition, prompting our clients to prioritize cost-effective and innovative solutions. With a steadfast commitment to empowering our customers, we strive to be their trusted partner in achieving success in their respective markets. By offering superior product solutions tailored to their needs, we aim to equip them with the tools necessary to maintain a competitive edge and drive growth.

OPPORTUNITIES:

The current landscape presents significant opportunities for the polymer industry, particularly in India. With a burgeoning population, an expanding middle class and increasing per capita income, the demand is also on the rise. Initiatives like "Make in India" and the "Smart Cities Mission" are driving the need for polymer-based products across various sectors. Moreover, Indias automotive sector, one of the largest globally, is poised for further growth, presenting opportunities for styrenics manufacturers to supply components and materials. The anticipated surge in demand for household appliances like air conditioners and refrigerators further adds to the potential for market participation.

The packaging industry continues to thrive due to urbanization, lifestyle changes, and the surge of e-commerce. Polystyrene manufacturers stand to benefit by offering innovative and sustainable packaging solutions to meet this demand.

Furthermore, the increasing demand for consumer electronics in developing countries, fueled by rising disposable incomes and urbanization, presents another avenue for growth. As digitization activities continue to grow, the consumption of electronics products is expected to rise, contributing to the expansion of the target market. Overall, the combination of evolving consumer preferences, infrastructure development initiatives, and technological advancements presents a promising landscape for the polymer industry to capitalize on various opportunities for growth and innovation.

THREATS:

Polymer manufacturing continues to rely heavily on the availability and prices of key imported raw materials like Styrene and Acrylonitrile which in turn depends on crude oil, natural gas and other backward value chain feedstocks. Therefore, fluctuations in raw material prices can significantly impact the costs and margins. Also, since India imports a significant amount of polymer resins to meet its increasing domestic demand, it creates pressure on domestic manufacturers which may result in lower prices and margins.

Being key player in Polymer segment, one of the major risks is waste management and environmental pollution for which careful attention and proactive measures to mitigate related risks have been taken.

The BRSR report also mentions actions taken by the Company on other ESG matters.

The depletion of fossil-fuel-based raw materials also threatens our sustainability. Fluctuations in raw material prices, particularly crude oil and natural gas, pose challenges for domestic manufacturers, especially in regions heavily reliant on imports. Furthermore, increasing global concerns and regulations around plastic waste compel us to adapt to sustainable alternatives and stricter environmental standards. Therefore, to address these threats effectively, we invest in research and development, explore sustainable options, and maintain a proactive stance to capitalize on opportunities and ensure long-term viability in the face of these challenges.

OUTLOOK:

Your Company continues to monitor changes in general economic situation and is prepared to take measures to safeguard its business operations. Our close association with key OEMs in automotive and household segments has enabled us to drive profitable growth and we expect it to continue in the coming year. Our organizational focus on key industry segments ensures a deep understanding of their needs and will enable new product introductions for the specific industry. Your Company utilizes its R&D capabilities to develop new products for the automotive, household and healthcare segments and maintains a strong intellectual property position. Indian household items penetration in Urban and Rural is growing much faster due to increase in per capita income and spending. Overall, Polymer demand is likely to grow much higher than GDP growth. We expect Automotive segment, both two-wheelers and four wheelers including EV segment, will have average growth for the coming year and grow 4~5 % y-o-y. Large and small appliances continuing higher growth demand in India, likely to grow 7~8 % of polymer demand due to increase in polymer consumption. In FY 2024-25, the ABS market in India has reached to approximately 320 KT and we expect it to grow at a CAGR (Compound Annual Growth Rate) of approx. 8% until the fiscal year 2030.

Indias Polystyrene market demand stood at 300 KT in FY 2024-25 and is projected to grow at a CAGR (Compound Annual Growth Rate) of approx. 5% until the fiscal year 2030.

RISK MANAGEMENT REPORT:

Your Directors wish to state that risk management and control practices have been deployed across all the functions and functional evaluation of rating probability and impact is being constantly monitored under the guidance of the Risk Management Committee. The critical / high ranking risks and mitigating steps and measures applied or to be applied, are discussed internally with functional leaders and then discussed by the Risk Management Committee before being presented to the Board. Company has integrated its risk monitoring procedures in accordance with prudent business practices. The objectives of the Companys risk management framework comprise the following: a. To identify, assess, prioritize and manage existing as well as new risks in a planned and coordinated manner; b. To increase the effectiveness of internal and external reporting structure; and c. To develop a risk culture that encourages employees to identify risks and associated opportunities and respond to them with appropriate actions. The Chairman and the Managing Director carry out the risk assessment on an ongoing basis and take measures and effective steps to mitigate / reduce impact and control the same from time to time. They provide overall directions in controlling / mitigating risks generally and are in complete know of the organizational risks potential. The Company has a proper system to ensure compliance of legal / regulatory requirements that are applicable to the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Companys internal control systems are adequate and commensurate with the size of operations. These controls ensure that transactions are authorized, recorded and reported on time. They ensure that assets are safeguarded and protected against loss or unauthorized disposal. The internal auditors of the Company, M/s. Sharp & Tannan Associates, carried out audits in different areas of your Companys operations. Post-audit reviews were carried out to ensure that audit recommendations were implemented. The audit committee reviews the adequacy and effectiveness of the internal control systems, significant audit observations and monitors the sustainability of remedial measures.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Financial performance and review of operations form part of the Boards report which details the Companys financial and operational performance.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

Our employees are our most important assets. As of March 31, 2025, the Company employed 429 permanent employees, 45 employees on fixed term contracts and 616 employees on contractual basis, through contractors. Our culture and reputation as a global leader in the Styrenics industry enables us to recruit and retain some of the best available talent in India. Our Human Resource (HR) division acts both as a service provider and as a governance unit in the various employee-related fields of work. The scope of activity includes attraction, selection and talent development and rewarding of employees, while also overseeing organizational leadership and culture and ensuring compliance with employment and various applicable labour laws. Companys HR fosters a trusting and open culture by promoting mutual respect and fairness throughout the entire organization. The management has a strong belief that the industrial relations will remain cordial and harmonious and continues to be so in the year ahead. The directors believe that continuous HR interaction has and would lead to a healthy environment and a strong relationship of mutual trust.

STANDALONE KEY FINANCIAL RATIOS:

Sr. No. Particulars	March 31, 2025	March 31, 2024
1 Operating Profit (EBITDA) %	12.9%	12.2%
2 Net Profit Margin %	8.5%	7.8%
3 Return on Net worth %	29.5%	24.1%
4 Debtors Turnover Ratio	10.05	8.52
5 Inventory Turnover Ratio	6.50	7.24
6 Current Ratio	2.07	2.71
7 Long Term Debt Equity Ratio	0.01	0.01
8 Interest Coverage Ratio	90.25	85.89

ACCOUNTING TREATMENT:

The financial statements of the Company for the financial year ended March 31, 2025, were prepared in accordance with IND-AS, which are the prescribed Accounting Standards.

SAFETY, HEALTH & ENVIRONMENT (SHE):

The Company is deeply committed to combining economic success with environmental and social responsibility. Guided by corporate value of "Responsibility" and Companys SHE policy, Company is continually working to meet the highest standards of corporate citizenship by protecting the health and safety of individuals, by safeguarding the environment, and by creating positive impact on the community it does business with.