Supreme Petrochem Ltd Management Discussions

ECONOMIC REVIEW

In 2024-25, Indian economy is estimated to have grown by 6.5%, thus maintaining its position as one of the worlds fastest growing major economies. Indian consumption in 2024-25 was driven by rural demand consequent to stronger agricultural growth. Thriving services sector, revived manufacturing base and Government spending on infrastructure development helped Indian economy grow in 2024-25.

Strong domestic demand, low inflation and increased Government spending in F.Y.2025-26 may help Indian economy maintain growth despite global economic headwinds stemming from changes in trade and tariff policies affecting business sentiment and exports. Overall, Indias economy is well positioned for growth, but uncertainties in global markets, financial volatility and trade disruptions remain key risks. IMF has lowered Indias growth for 2025-26 to 6.2% due to global uncertainty and trade tensions.

Global economy is estimated to have grown by 3.2% in 2024 with wide variance across countries. Growth continued to be subdued in Euro area. The global economy entered 2025 with strong momentum but is now slowing due to increased protectionism and trade restrictions. The real impact of tariff war will be known once the reciprocal tariffs announced by U.S.A. become effective in July 2025. Levy of reciprocal tariffs by U.S.A. may shift global trade flows and supply chains as players with large export volumes will seek alternative export outlets with possible dumping while overall demand remains tepid amid growing fears of a global recession. As per IMFs revised estimates global economy is expected to grow at 2.8% in 2025.

The reciprocal tariffs announced by U.S.A. have escalated a global trade war with several countries retaliating with their own tariffs on trade with U.S.A. The trade disruption and economic uncertainty have sent global financial markets into a tailspin. Impact on financial markets consequent to imposition of tariffs by economies would have a spill over effect on market sentiment and consumption.

Indias exports to U.S.A. totalled US$ 86.5 billion in 2024-25. As per a report by Global Trade Research Initiative (GTRI) Indias merchandise exports to the U.S.A. are projected to decline by US$ 5.76 billion this year primarily due to the rise in tariffs imposed by U.S.A.

However, proposed reciprocal tariff of 26% on Indian exports being substantially lower than Chinas 145%, Taiwans 32% and Vietnams 46% translates to lower landed costs for Indian goods compared to these countries. This could help India boost its exports offsetting the decline projected by GTRI. Indias proactive initiatives towards bilateral trade arrangement with tariff cuts should also help in boosting exports to U.S.A. resulting in modest impact on Indias overall exports.

With changing trade flows and supply chains Indian manufacturing sector will have to be very competitive in terms of cost and technological advancements for which India will not only have to continuously improve infrastructure and upgrade manufacturing facilities but also upskill workforce. To make workforce future ready and to create a robust pipeline of high quality talent Indian Government and Industry must increase the upskilling initiatives to address skill gaps especially in technology and industry relevant areas.

Companys revenue was Rs 6096.54 crores (net of GST) for the F.Y. 2024-25 as compared to Rs 5,321.49 crores in the previous fiscal. Company earned a net profit (after tax) of Rs 390.52 crores during the F.Y. 2024-25 as against Rs 346.49 crores in the previous fiscal.

Companys total sales volumes of its manufactured products including exports increased during the year by 9.4% to 3,55,967 MT. Capacity utilisation for the Company as a whole was 79% during the year. Export volumes were down as compared to previous year due to subdued demand from Eurozone and high freight costs caused by Red Sea crisis. With shipping freight rates easing down since last quarter of F.Y. 2025, Company hopes to increase exports during the current year.

SM prices remained largely stable in the range of + / - 10% throughout the year. Availability also was reasonably stable with only one major un-scheduled shutdown of one of our suppliers from Middle East in the 4th quarter of the year. However, your Company was able to bridge the gap by sourcing from other suppliers with only minor disturbances. Firm Benzene prices ensured stable SM prices, despite continued poor demand for derivatives of Styrene in China due to slow down over there.

India is well supplied by all major Styrene producers in Middle East, South East and East Asia due to Chinas self sufficiency in also reduced the usual swing in SM prices which was the order of the day when China was the largest importer of SM globally few years back.

China continues to dominate global petrochemicals business due to its large capacities built in recent times. Unviable small capacities are progressively being shut across the world. Middle East producers are considering India as a key partner. Company is therefore well placed with support from all SM suppliers in Asia. Shore tank infrastructure has been continuously increased in various locations to cater to the increased needs of Company as well as its SM customers.

Domestic Polystyrene market grew by over 8% during year 2024-25. Growth in appliances demand particularly

Refrigerators & Air Conditioners; pens & stationery, rigid sheets and dairy packaging are the main catalyst for this growth in F.Y. 2024-25. Both OEM and non-OEM segments witnessed appreciable growth in the year under review. Companys total sales volume of Polystyrene including exports increased by 11.5% during the year 2024-25. Polystyrene business in Asia has changed drastically due to Chinese self-sufficiency drive. Asian players of Polystyrene with large export volumes seeking alternative export outlets continue to look at Indian markets putting price pressure.

To thwart the competition from imports, Company not only continues with its high-quality product offers but also introduced new grades to counter imports. Price pressure of imports for specific by keeping prices in line with international prices for certain market grades. As a result of all these actions, imports could be contained during the year under review.

New investment by customers in appliance business are likely to fructify in the current year which will help increasing demand for Polystyrene going forward. Company is in dialogue with international appliance players in India to replace their imports with Companys products. International

Energy Agency (IEA) in its report of 2024 has predicted that energy requirement for cooling will more than double by 2030 from 2024 levels, which translates to at least 15% CAGR for air conditioning industry until 2030. This will help Company grow its sales to this segment in the coming years.

Stationery & pen market continues to grow in domestic as well as export markets. Rigid sheet market is also witnessing growing demand thus replacing some imports. First plant in India for Light Guide Plates (LGP) for display for advertising has started production replacing imports from China. Domestic PS demand is expected to grow about 5% in 2025-26.

EPS market in India grew by 6.4% in 2024-25. EPS demand growth was slow since lifting by the processors for a major application i.e. fish packing box slowed down with reduced fish cultivation. With new entrants in EPS commissioning their plants during the year, Companys EPS business could grow only by 5%.

Company expects market to grow by 4-5% based on projected growth in various applications. As mentioned in previous report two new units of EPS have started production in 2024-25 and this may cause some loss of business of EPS to the Company in 2025-26. However, Company is making all out efforts to expand the pie by bringing in experts from the industry from around the world and organising customer meets to expose our customers to opportunities in EPS processing business and to help them grow. Company is hopeful to retain its volumes on account of its quality as well as pan India presence. With Companys EPS grades having been approved by key customers in export market, Company hopes to substantially grow EPS exports to GCC region as well as Europe in 2025-26.

Building Materials and Technology Promotion Council (BMTPC) has approved several new technologies, viz. 3D panels, Cement Sandwich Panel, Insulated Concrete Forms (ICF), all based on EPS as one of the key materials. Several entrepreneurs have established facilities across India using these technologies. Company is promoting these products in various forums which augurs well for growth of EPS consumption in years to come.

SPC business grew by 5% primarily driven by growth in compounds business from appliance industry, battery, electrical and electronic sectors. BIS certification and UL certification of FR compounds helped meet the stringent requirements of customers in these segments.

Development of compounds for PP silent pipes is successfully completed and necessary capacity to supply the same is established. Compounds for bathroom taps were developed successfully. More engineering plastics will be developed in the current year. SPC business of the Company is expected to grow by 20% in F.Y. 2025-26. ABS compound volumes shall be over and above this growth.

Building insulation segment showed steady growth and Company achieved sales growth of 25%. One of the main contributors was the large scale construction of factory buildings in and around Bangalore and Chennai for mobile phones manufacturing which require temperature controlled/ dust-free atmosphere. Company expects construction of many such facilities in future as our country moves up the value chain in electronics manufacture with PLI schemes in place. These factories require well insulated building envelopes with high levels of fire rating. Company is able to meet these stringent specifications for XPS boards.

Demand from temperature sensitive packaging segment is also growing steadily with reputed players entering this business. Tolerances for thickness are very tight compared to boards used for building insulation which Company is able to meet finalisation of BIS standards for XPS building insulation is progressing satisfactorily and it is expected to be completed during the year. With demand from projects increasing, XPS market is expected to grow by about 10% during 2025-26.

ABS project work is progressing satisfactorily, and pre-commissioning activities will start from May ‘25 onwards. Company expects commercial sales of natural and compounded grades to start from 2nd quarter of F.Y. 2025-26. A dedicated sales and marketing team is being assembled and will be in place before commissioning of the project. Company is currently marketing ABS compounds based on imported ABS which have been well accepted by the market. With inhouse ABS available from 2nd quarter onwards, Company is gearing up to increase substantially volumes of ABS compounds.

Exports of Polystyrene, EPS and SPC products have come to normal levels with ocean freight rates easing. During Red Sea crisis very high ocean freight rates made exports unviable to many destinations. Companys exports were impacted for this reason in the first three quarters of the year under review. Companys exports were lower by 11% compared to the previous year.

Company is fully prepared to face changes in the global trade flows and supply chains due to levy of reciprocal tariffs by U.S.A. and retaliation by many countries resulting in players with large export volumes seeking alternative export markets. Excellent customer relations built over the years with large number of small and medium sized customers across all geographical areas is expected to mitigate the risk of one country or region with others. With likely increase in export volumes of EPS in F.Y. 2025-26, Company hopes to export about 50% more volumes than 2024-25.

Company is of the opinion that to create long term value for its stakeholders, continuous emphasis on environment sustainability is essential. To this end, Company is focussed on developing a circular economy framework around post consumer plastic waste particularly EPS. Company continues to engage with individuals through a combination of education, community partnerships and recycling infrastructure development with the help of NGOs and ICPE. One of the most impactful campaigns of the year was "Ab Thermocol Recycle Karega Bharat" aimed at raising public awareness on the recyclability of thermocol. A key innovation was the launch of Indias first mobile EPS recycling unit, which enabled doorstep collection and awareness in hard-to-reach areas. SPL also collaborated with over 50 institutions, including schools, hospitals and spiritual centres, and introduced the concept of "Recycling Day" in schools to install waste segregation habits early on. In rural areas "My Village, My responsibility" initiative aimed to establish zero-waste villages by promoting waste segregation at the household level. To connect with younger audiences, SPL introduced the Plastics Recycling Premier League (PRPL), a cricket based campaign, targeting under 14 school children in the Mumbai region from those schools which participated in plastic recycling project.

To reduce freshwater intake for Companys manufacturing processes and to significantly lower effluent discharge, Company has installed Zero Liquid Discharge System (ZLD) at both its manufacturing locations in Maharashtra and Tamil Nadu.

Towards its commitment to environment sustainability Company had entered into a JV for setting up solar power generation facility for 12.5 MW which became operational from October 2024. Since October 2024, Company used 46% of its energy requirements at its Amdoshi complex through solar power. For its Manali Plant in Tamil Nadu,

Company used 77.6% of its power requirement through renewable energy sourced from third party producers. Company is complying with all directives of CPCB in respect of Extended Producer Responsibility (EPR), as applicable to the Company. Company has attached separately with its annual report Business Responsibility and Sustainability Report (BRSR) which includes measurable quantitative data to facilitate better benchmarking.

First phase of ABS project construction work is nearing mechanical completion and is now expected to be over by May 2025. Late arrival of some proprietary equipment and shortage of skilled construction workers resulted in this delay. Pre-commissioning and commissioning activities will be taken up subsequently. Commercial production is likely to commence from 2nd quarter of F.Y. 2025-26.

Second phase of EPS capacity expansion project and new compounding lines for ABS project will be mechanically completed by June 2025. Commercial production is expected to commence in 2nd quarter of F.Y. 2025-26.

Pre-project activities including actions for environmental clearance for its Munak, Haryana site are under way. Various projects are under evaluation for arriving at a suitable product mix.

The Company incurred a total capital expenditure of Rs 378 crores during the F.Y. 2024-25 for projects related to ABS, EPS, compounding lines, hardware replacement at Amdoshi and Manali locations and on additional land and pre-project activities for Munak project.

Capital expenditure proposed to be incurred in the current financial year towards balance work of ABS, EPS and compounding projects and hardware replacement at Amdoshi and Manali locations is estimated at Rs 200 crores.

Company entered into a Share Purchase Agreement (SPA) with the promoters/ shareholders of Xmold Polymers Pvt. Ltd. (Xmold) on April 10, 2025 for acquiring 100% stake in Xmold for a total compensation of Rs 39.27 crores payable in two tranches with effective date of transaction being April 01, 2025.

Xmold is engaged in the business of manufacture of engineering polymer compounds with an installed capacity of 15000 TPA with a good R & D facility for compounds. Xmold is an approved Tier 2 supplier to many automobile manufacturers and also to appliance manufacturers which will immediately support the Company in its new ABS business. Xmold is located at about 45 kms from Chennai city and 35 kms from Sricity. Chennai is automotive corridor for commercial vehicles, passenger cars and auto components in India. Sricity is consumer electronics, appliances and Air Conditioner hub.

Company acquired 80% equity shares of Xmold on April 17, 2025 for a consideration of Rs 31.42 crores and the remaining 20% equity shares shall be acquired by Company within a period of 2 years i.e. by March 2027. Consequent upon above acquisition, Xmold has become subsidiary of Company w.e.f. April 17, 2025.

Company remains debt free. Company enjoys working capital facilities from its bankers mainly in the form of non-fund based limits.

Available surplus funds are deployed in various schemes of reputed mutual funds, bank fixed deposits and sovereign bonds so as to optimise returns with minimum risk to the principal amounts invested.

Capital expenditure of Rs 378 crores incurred during the year was met from internal accruals. All capital expenditure planned as on date is proposed to be funded from Companys own funds.

CRISIL Ratings Ltd. has revised Companys outlook to Positive (from stable) while reaffirming long term rating at CRISIL AA- and short term rating at CRISIL A1+ for Companys working capital facilities from banks. lndia Ratings and Research (lnd-Ra) has revised Companys outlook to Positive (from stable) while reaffirming long term rating at IND AA- and short rating to IND A1+ for Companys working capital facilities from banks.

Pursuant to the provisions of Regulation 34(3) of SEBI (LODR) Regulation 2015 read with Schedule V part B(1), details of changes in Key Financial Ratios are stated as hereunder:

* The Company is Debt free. For purpose of calculation of this ratio, amortised value of right to use assets taken on lease is considered as debt.

Company continuously monitors the risks associated with its business and operations including timely identification of new risks, if any, and plans to mitigate risks so as to avoid any adverse impact on the Companys operations, Company has in place a risk management policy which is periodically reviewed under the guidance of Risk Management Committee and Board. Committee met twice during the year to review the risk to the business(es) of the Company and mitigation plan thereof.

Security of data and uptime of system is essential for our business. Company has instituted the best practices adopted across the industry to achieve the same. Company has co-located all its servers (Primary and Disaster Recovery) in the best-in-class Tier IV Data Centres located at different seismic Zones. Tools like antivirus, antimalware, EDR (Endpoint Detection & Response), Priviledge Access Management (PAM) are installed and are regularly updated on all the endpoints for protection against any security threats.

Firewall is in place to provide protection to the endpoints as well as to all the application servers, against threats through internet traffic, LAN or WAN. Company ensures the usage of licensed software products only on the Company-provided devices. Apart from this, Company gets IT Security infrastructure audited by the 3rd party service providers periodically by using ethical hacking tools. Issues found in the audit are reviewed and mitigated as per the recommendation, followed by re-audit for effective mitigation. DR drill is carried out to ensure business continuity. IT policy and controls are reviewed periodically.

International pricing and demand / supply risk are inherent in the import of Styrene Monomer (SM), the main raw material. Company enters into annual procurement contracts for imports of SM. A part of SM requirement is also sourced on spot basis. On the sales side, some part of Companys sale is on annual contract(s) basis tied into monthly SM pricing which allows for equitable sharing of the volatility in SM pricing. Department of Chemicals and Petrochemicals has mandated BIS standards on imports of SM w.e.f. 24/10/2025. This could be a cause of concern particularly for supplies from manufacturer suppliers in U.S.A., China, Europe and supplies through trading houses.

To overcome risks of cost and pricing due to foreign exchange volatility, Company hedges part of open foreign exchange exposure. Company also has a natural hedge to the extent of its exports and pricing its products locally on import parity basis. Foreign currency exchange rates being dynamic, Company constantly monitors FX movements to decide on proper response measure.

Company has adequately insured its assets against all risks and on reinstatement basis with adequate loss of profit insurance policy. Company has also insured itself against cyber and other crimes. The management periodically reviews the adequacy of the insurance cover.

The Company continues to foster a workplace culture that prioritizes employee well being, professional growth, and a positive work environment. Recognising that our employees are the cornerstone of our success, they were encouraged to actively participate in various conferences, seminars, skill-development/enhancement programmes and training sessions, enabling them to enhance their exposure expertise and contribute more effectively to the organizations long success.

Career development opportunities were extended across all levels and functions, ensuring equitable growth pathways for every employee. Focus on leadership development and upskilling initiatives has further reinforced a culture of excellence and high performance. Company has further strengthened its efforts to provide a supportive and inclusive work environment that nurtures talent, encourages innovation and maximizes individual potentials.

Industrial relations remained harmonious and constructive throughout the year, reflecting Companys commitment to maintaining a collaborative and respectful work environment. Company remains dedicated to its employees holistic development for ensuring a motivated and high performing team that drives sustained business success.

The internal control systems for safeguarding and protecting assets of the Company against loss from unauthorized use or disposition are well in place.

Regular internal audits, documented policies, guidelines and procedures and review by management supplement the internal controls which are designed to ensure that financial and other records are reliable for preparing financial information and other data and for maintaining accountability of assets. Audit of lnternal Financial Controls (lFC) and Risk Control Matrix (RCM) was carried out by the statutory auditors and their suggestions have been accepted.

Company places paramount importance on the health and safety of its workforce and is part of its core values. All requirements under applicable laws and regulations are fully complied with by the Company. Considering the significance of Health Safety and Environment to any petrochemical operations, the Company has established a robust HSE system at both its plants situated at Amdoshi, Maharashtra and Manali, Tamil Nadu. Both the Environmental Management System and Occupational Health and Safety Management System continued to be maintained by the Company as per the ISO 14001:2015 Standard and ISO 45001:2018 Standard respectively. Additionally Quality

Management System (QMS) continued to be maintained by the Company as per ISO 9001:2015 standard. Company continues to implement the HSE Management Systems under the Guiding Principles of declared integrated Management System (IMS) Policy (Occupational Health and Safety Policy and ‘Environmental Policy).

HSE Performance index for the period under review stood to be in "Excellent" Range. Companys plant at Amdoshi completed 8930 accident-free days as on March 31, 2025. At Manali plant, Company has completed 6504 accident free days as on March 31, 2025. term

Company has achieved the following recognitions and awards in the field of HSE during the period under review :

NSCI Safety Awards 2024 -Shreshtha Suraksha Puraskar (Silver Trophy and Certificate) in Group B under the manufacturing sector.

Winner - Maharashtra Safety Award Competition-2023 organized by National Safety Council Maharashtra Chapter for Lowest Accident Frequency Rate (for the Factories working more than Six Lakh up to Ten Lakh man-hours in a year)

Winner - Maharashtra Safety Award Competition-2023 organized by National Safety Council Maharashtra Chapter for Longest Accident-Free Period. (for the Factories working more than Six Lakh up to Ten Lakh man-hours in a year)

Greentech Pollution Control, Waste Management & Recycling Award 2024

Winner - "Greentech Global EHS Award 2024" in award category of EHS Innovative Excellence Award

Winner - "Greentech Global EHS Award 2024" in award category of EHS Best Practices

Safe-Tech Awards 2024 for Decade of Safety Excellence

"Certificate of Appreciation" from National Safety Council of India (NSCI) under National Safety Awards 2024 at the national level.

Statements in the Management Discussion and Analysis

Report describing Companys objectives, estimates, expectations, or projections may constitute "forward looking statements", within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied in the statements.

Important factors that could make a difference to Companys operations include economic conditions affecting demand/ supply and price conditions in the domestic and international markets, changes in the Government regulations, tax laws / other statutes, geopolitical issues and other incidental factors.