Sumitomo Chemical India Ltd Management Discussions

1. ECONOMY AND CROP PROTECTION INDUSTRY STRUCTURE & DEVELOPMENTS:

The global economy during FY 2025–26 continued to face headwinds arising from inflationary pressures, geopolitical uncertainties, and supply chain disruptions. These factors contributed to a cautious business environment across sectors, including agriculture. Despite these challenges, the Indian economy demonstrated resilience, maintaining its growth momentum and reinforcing its position as one of the fastest-growing major economies globally.

Agr iculture remains a critical pillar of the Indian economy, supporting nearly half of the population and contributing significantly to national GDP. The performance of the crop protection industry is closely linked to agricultural output, monsoon patterns, and farmer income levels. During the year, the industry experienced mixed trends due to climatic variability, impacting both crop productivity and input consumption.

Industry Overview

The Indian crop protection industry continues to be highly diversified, comprising a mix of domestic manufacturers, multinational corporations, and formulation players. The industry includes entities engaged in manufacturing technical grade pesticides, formulations, and intermediates, along with a growing segment focused on biological and sustainable solutions.

India remains one of the leading global producers of agrochemicals, supported by cost competitiveness, strong manufacturing capabilities, and a skilled workforce. The sector continues to attract global interest due to its export potential and increasing domestic demand for advanced crop protection solutions.

Mark et Drivers

The growth of the agrochemical industry is underpinned by several structural drivers. Increasing population and rising food demand continue to necessitate higher agricultural productivity, particularly in the context of shrinking arable land due to urbanization. The growing preference for high-quality and nutritious food has led to increased adoption of crop protection products to enhance yield and quality.

India s vast cultivated area and dependence on monsoon-driven agriculture further influence demand for agrochemicals. However, fragmented landholdings and limited mechanization continue to present challenges in achieving optimal productivity, thereby reinforcing the importance of effective crop protection practices.

R&D and Industry Strategies

The development of new crop protection molecules requires significant investment in research and development.

Industry players are increasingly focusing on innovation, new product launches, and strategic collaborations to strengthen their portfolios. The expiry of global patents continues to create opportunities for domestic manufacturers to expand their presence in both domestic and export markets.

Com panies are also investing in capacity expansion, backward integration, and partnerships to enhance operational efficiency and reduce dependency on imports. There is a growing emphasis on developing sustainable and environment-friendly solutions, including biologicals and integrated crop management practices.

Government Initiatives

The Government of India continues to play a pivotal role in supporting the agriculture sector through various policy initiatives. Measures such as increased Minimum Support Prices (MSPs), direct benefit transfers under schemes like

PM-KISAN, and investments in irrigation, soil health, and crop insurance have contributed to improving farmer income and resilience.

Dig ital platforms such as eNAM and continued emphasis on food security and rural development have strengthened the agricultural ecosystem. Government support for technology adoption, including drones and digital advisory systems, is expected to further enhance efficiency and productivity in the sector.

A notable recent policy development is the Government of Indias "Bharat-VISTAAR" initiative, which aims to expand Indias agricultural trade footprint and strengthen its integration with global agri-value chains. The initiative focuses on improving export infrastructure, enhancing supply chain efficiencies, and enabling Indian agricultural produce to access new international markets, thereby supporting higher value realization for farmers.

This initiative is expected to positively influence the crop protection industry by driving demand for quality-oriented and export-compliant agricultural practices. As farmers increasingly align with global standards, there will be greater adoption of advanced crop protection solutions, particularly in high-value crops such as fruits and vegetables.

Additionally, increased emphasis on traceability and quality compliance is likely to enhance awareness and usage of scientifically validated agrochemical products, creating long-term growth opportunities for the industry.

Industry Trends

The crop protection industry is witnessing a gradual shift towards sustainable and balanced agricultural practices. There is increasing adoption of environment-friendly products, including biologicals and bio-rationals, although regulatory clarity remains a key requirement for accelerated growth in this segment.

Dig ital transformation is emerging as a key enabler, with companies leveraging technology for farmer engagement, product promotion, and demand generation. The use of data analytics, precision farming tools, and digital platforms is gaining traction across the value chain.

Add itionally, global supply chain realignments and the "China +1" strategy are creating new opportunities for Indian manufacturers to expand their export footprint.

Agricultural Scenario in India in 2025-26

The agricultural season during FY 2025–26 presented a mixed outlook. While crop acreage remained largely stable across most regions, the season was significantly impacted by adverse weather conditions and regulatory challenges to biostimulant products. Excess and prolonged rainfall during the period from July to September, extending into October in certain regions, led to crop damage and yield losses in key crops such as soybean, cotton, and groundnut across multiple geographies.

Alth ough agrochemical prices remained relatively stable, continuous rainfall during the peak application window adversely affected consumption patterns. Reduced spray opportunities led to lower-than-expected demand during critical phases of the season.

Des pite these challenges, the sector demonstrated resilience, supported by stable sowing patterns and continued farmer reliance on crop protection solutions.

Sumitomo Chemical India Limited

Dur ing FY 2025–26, the Company delivered a strong performance despite challenging external conditions, driven by effective execution and a focused strategic approach.

The Company successfully launched key products, including Excalia ? (Paddy Fungicide) and Lentigo (Herbicide),Max apart from few other products, achieving significant market acceptance and farmer adoption. These launches reinforced the Companys positioning as a provider of innovative and high-quality crop protection solutions.

The Companys flagship product, Sumi Max, along with its legacy product, Excel Mera 71, recorded exceptional growth during the year, reflecting strong brand equity and farmer trust.

The Company also strengthened its demand generation capabilities through its flagship campaign, "Every Day Farmers Day (EDFD)", which was reimagined into high-intensity, short-duration engagement sprints. This approach resulted in heightened engagement across stakeholders especially during the Most Innovative Activity Campaign during the Rabi season, creating strong momentum at all levels of the organization.

2. RIS KS, THREATS AND CONCERNS:

The outlook for FY 2026–27 indicates a continuation of uncertainties, driven by both climatic and macroeconomic factors. One of the key risks is the anticipated impact of El Ni?o conditions, which are typically associated with below-normal and erratic monsoon rainfall in India. Such conditions could adversely affect sowing patterns, crop yields, and overall agricultural output, thereby influencing demand for crop protection products.

In addition to climatic risks, geopolitical tensions and ongoing global conflicts are expected to impact supply chains, leading to volatility in raw material availability and pricing. Dependence on imports for critical intermediates continues to remain an area of concern.

The industry is also expected to face cost pressures arising from a depreciating Indian Rupee, coupled with increases in the cost of raw materials, packaging materials, solvents, and transportation. These factors are likely to result in higher cost of goods sold and necessitate price adjustments across product categories.

Reg ulatory challenges, including evolving policies on crop protection products, continue to pose hurdles for the industry. Additionally, factors such as counterfeit products, fragmented landholdings, and limited technology adoption among farmers remain ongoing concerns.

3. OPPORTUNITIES AND INDUSTRY OUTLOOK:

The Indian crop protection industry continues to offer significant long-term growth opportunities, supported by low per hectare consumption compared to global benchmarks and the increasing need to enhance agricultural productivity.

Howe ver, the near-term outlook for FY 2026 27 is expected to remain challenging. Coming out of a difficult year impacted by adverse weather conditions, the industry is likely to face continued uncertainty due to unpredictable climatic patterns, including the potential effects of El Ni?o apart from on-going geopolitical situation.

A t the same time, macroeconomic factors such as a depreciating currency and rising input costs are expected to exert pressure on margins. Escalation in the cost of raw materials, packaging materials, solvents, and logistics is likely to lead to an overall increase in cost structures, resulting in higher product prices across the industry.

Des pite these challenges, structural growth drivers remain intact. Increasing demand for high-quality food, growing awareness of crop protection practices, and the adoption of advanced technologies are expected to support long-term industry growth. Segments such as fungicides, plant growth regulators, and specialty products are likely to witness sustained demand.

The Company, with its strong product portfolio, robust pipeline, and focus on innovation and farmer engagement, is well-positioned to navigate the evolving landscape. Continued emphasis on demand generation, digital integration, and strategic execution will enable the Company to capitalize on emerging opportunities while effectively managing risks in a dynamic environment.

4. SEG MENT-WISE PERFORMANCE:

The Companys domestic sale increased 23,841.91 million in 2024-25 tofrom 24,847.32 million in 2025-26. Exports decreased marginally from 6,766.41 million in 2024-25 to 6,707.32 million in 2025-26.

The Company continues to focus on promoting the branded business in order to increase the customer interface.

5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has proper and adequate system of internal audit and controls which ensure that all the assets are safeguarded against loss from unauthorised use or disposition and that all transactions are authorised, recorded and reported correctly.

The Company continuously strives to improve upon/evolve and implement best practices with a view to strengthen the internal control systems.

The Company has assigned internal audit function to a leading firm of Chartered Accountants. Regular internal audit and checks are carried out to ensure that the responsibilities are discharged effectively. All major findings and suggestions arising out of internal audit are reported and reviewed by the Audit Committee. The Management ensures implementation of these suggestions and reviews them periodically.

6. FIN ANCIAL PERFORMANCE & ANALYSIS AND MAJOR CHANGES IN RATIOS:

The sales for the year under review increased 30,608.32 million in 2024-25 tofrom 31,563.35 million in 2025-26.

The profit before exceptional items and tax for the year under review increased from 6,739.89 million in 2024-25 to 7418.35 million in 2025-26. The profit after exceptional items and tax stands increased to 5,431.39 million in 2025-26 as against 5,019.48 million in 2024-25. FY 2024-25 had no exceptional items.

The Return on net worth decreased from 18.81% in 2024-25 to 17.30% in 2025-26. The reason for the decrease is significant increase in retained profits in comparison to increase in profits.

7. HUM AN RESOURCE DEVELOPMENT/INDUSTRIAL RELATIONS:

The Company continues to view human capital as a key driver for sustainable growth. It remains committed for providing a safe, inclusive, and engaging workplace supported by people-centric policies, with a strong focus on health, safety, and employee well-being.

Gui ded by its core values of performance, collaboration, and continuous improvement, the Company focuses on attracting, developing and retaining talent aligned with business needs. Robust HR systems and performance management processes ensure alignment of individual and organizational goals, while ongoing learning initiatives strengthen employee capabilities.

The Company has maintained cordial and harmonious industrial relations across its locations, with continued support from employees and unions in driving improvements in safety, quality, productivity, and cost efficiency.

The Company also promotes diversity and inclusion, leveraging diverse talent to enhance overall organizational effectiveness.

As on 31 March 2026, the total employee strength of the Company stood at 1622.

8. CA UTIONARY STATEMENT:

Statements in this report on Management Discussion and Analysis relating to the Companys objectives, projections, estimates, expectations or prediction may be forward – looking within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results might differ materially from those expressed or implied depending upon factors such as climatic conditions, global and domestic demand-supply conditions, raw materials cost, availability and prices of finished goods, foreign exchange market movements, changes in government regulations, tax structure, economic and political developments within India and the countries where the Company conducts its business and other factors such as litigation and industrial relations.

The Company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.