Supreme Petrochem Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMIC REVIEW

Indian economy grew at about 7.4% in 2025-26 continuing to be one of the worlds fastest growing major economies. The growth was driven by domestic demand, sustained government led infrastructure expenditure and policy initiatives such as direct tax relief and GST rationalization.

The Production Linked Incentive (PLI) schemes have mobilized large investments with electronics, mobile phone and air conditioner production scaling up rapidly. Rationalization of GST rates in the appliance segment particularly for air conditioners improved the affordability and in turn the demand for appliances in second half of the year 2025-26. Expansion of higher value manufacturing exports and diversification of export destinations have helped sustain exports, despite the impact of high tariffs from USA.

As per Reserve Bank of India, Indias GDP growth is expected to be 6.9% during 2026-27. However, the economic growth may face headwinds due to ongoing West Asia war. Given the global uncertainty associated with the geopolitical crisis, especially in West Asia, there are supply chain risks on account of dependencies on Middle East for energy resources, petrochemicals and fertilizers etc.

Crude oil prices are currently ruling at above US$ 100 per barrel and a sustained increase would not only lead to large import bill impacting rupee parity but also cause increased inflation. Government of India directed supply of LPG and LNG to priority sector including domestic consumers and has maintained retail price of petrol and diesel. However, if crude oil price pressures persist, the risks of retail inflation are inevitable, leading to softening of demand.

IMD has forecast a below normal South - West monsoon during June to September. A weak monsoon could weigh on agricultural output, dent rural demand and stoke inflation.

Global growth is projected by IMF at 3.3% in 2026, same as in 2025. Geopolitical tensions in particular from the war in West Asia, are causing uncertainty and impact on financial markets, supply chains and commodity prices. The bright spot is large investments continued to be made in the field of technology and Artificial Intelligence (AI) which brings in strong productivity gains and increased entrepreneurial activity.

REVIEW OF OPERATIONS

Companys revenue was Rs.5,381.69 crores (Net of GST) for the year 2025-26 as compared to Rs.6096.54 crores in the previous year. Company earned a net profit (after tax) of Rs.327.31 crores during the year 2025-26 as against Rs.390.52 crores in the previous year.

Companys sales volume of manufactured products, including exports saw a nominal increase of 2% during the year to 363201 MT. Domestic volumes increased by 1.6% whereas exports increased by 5.4% during the year. Volume growth was low during the year, due to unseasonal rains and milder summer resulting in weak demand for cooling appliances, viz. airconditioners and refrigerators. Volume growth was also impacted due to increased imports during the year as compared to previous year and negligible exports in March 2026 due to ongoing West Asia war.

The capacity utilization for the Company as a whole covering all products was over 80% of the available effective capacity during the year.

Though the sales volumes increased by 2%, the sales revenue was lower as compared to previous year since the annual average price of Styrene Monomer, the main raw material, was lower by about 17% as compared to the previous year.

STYRENE MONOMER (SM)

SM prices remained largely stable in the range of +/- 10% during the year except in March 2026 when West Asia war pushed up the prices significantly. Styrene availability was reasonably stable during the year except after start of West Asia war and blockage of Strait of Hormuz. Global demand remained mute due to uncertainty caused by very high trade tariffs imposed by USA on China and India.

Post blockage of Strait of Hormuz, all SM shipment from Saudi Arabia and Kuwait were stalled. Prices of Crude oil shot through the roof and all petrochemical building blocks and polymers became scarce. With the blockage of strait of Hormuz, China looks to be the only country with some availability of Petrochemicals and Polymers to cater to global demand. Company has been able to source its requirements of SM from various international markets thus avoiding any major constraints in supplying to domestic customers. With proactively sourcing of SM from China and other sources Company expects normal business in 2nd half of the current financial year.

Damage caused to the Middle East petrochemical assets are likely to take a minimum of 4 to 6 months to come back to normal post end of war. Also it will take 3 to 4 months for the regular availability of ships and shipping space.

POLYSTYRENE (PS)

Domestic demand was subdued with growth rate of about 3% over the previous year. Due to extended rains and cold weather, demand for cooling devices such as air conditioners and Refrigerators was weak. OEM demand was significantly low for air conditioners. Companys domestic sale volume of PS was lower by 3.4% compared to previous year.

Increased imports at cheaper rates from Thailand, Taiwan, Iran and China dented the market share of local manufacturers. This is a consequence of change in tradeflow due to China becoming self sufficient in manufacture of Polystyrene and Asian players, who were earlier exporting to China, now looking at India as an alternate market putting price pressure in the domestic market. Company has been able to restrict the imports to some extent by introduction of competitive grades and keeping prices in line with international prices for market grades.

PS market is expected to grow marginally by 2.5% in 2026-27. OEMs are expected to grow at about 5%. New investments by customers in appliance business have been completed, the effect of which will also emerge in 2nd half of the current year. Commissioning of two large scale air conditioner units in South India, aimed at export market also augers well for PS business in India. Demand for stationery articles continue to grow in domestic market as well as export market.

The non OEM sector may see nil or negative growth in demand in the current year due to current high prices of product and also reduced or non availability of gas required for processing of polymers. Further, with spike in prices of PS as a consequence of increase in SM prices, additional working capital requirement is impacting the demand for product from non OEM processors. It will take about 2-3 months for normal operations to commence post end of war.

Government of India reduced import duty to zero on import of majority of building blocks and polymers for a period upto June 30, 2026 to cushion the impact of increase in prices of petrochemicals in the international markets. In the event this reduction in import duties is extended it will not only increase imports of polymers to the detriment of local industry but also act as a deterrent to the new capital investment in this sector.

EXPANDABLE POLYSTYRENE (EPS)

EPS market showed a nominal growth of 4% for the year under review. Companys EPS business also grew by 4%. Company brought new customers into its fold and expanded its reach in North India market. Company could retain market share despite severe competition due to excellent quality, customer service and addition of new customers.

Indian market is expected to grow at about 4% in 2026-27. Company is continuing its efforts to expand the pie by bringing in industry experts from overseas and organizing customer meets to expose our customers to opportunities in EPS processing business and to help them grow. Seminars were orgainsed in Mumbai, Delhi, Chennai and Vijaywada to promote EPS in construction.

In addition Company participated in prestigious exhibitions like Plast India, K-Show, REFCOLD cold chain, IGBC event, BMTPC conference etc. to promote new applications and processing technologies based on EPS. Compound wall using 3D EPS panel made with Companys EPS for an industrial plot in Gwalior measuring 1.7 km was successfully done. Company is actively working to promote EPS in insulation and construction on pan India basis.

ACRYLONITRILE BUTADIENE STYRENE (ABS)

The 70,000 MTA brown-field mABS project with technology from Versalis, Italy was successfully commissioned in September 2025 at its Amdoshi Complex in Maharashtra. Simultaneously, a 20,000 tpa compounding unit comprising of two lines was also commissioned to produce a variety of ABS compounds including custom coloured grades. Injection molding grades were introduced as a first step in mABS plant which are well accepted by customers in certain segments.

Unfortunately, the plant had to be shut down in December, 2025 due to malfunctioning of a critical production equipment. Technical experts from Italy evaluated the situation and advised corrective actions to re-start the plant with reduced capacity until such time the malfunctioning equipment is restored fully.

The plant is operating at 65% of installed capacity and producing on-spec grades not only of injection molding grades but also certain extrusion grades. Company hopes to achieve around 75-80% of curtailed capacity during the current financial year.

SPECIALITY POLYMER COMPOUNDS (SPC)

SPC business grew by 25% during the year 2025-26. Post commissioning of ABS project in October, 2025 ABS compounds pushed the compounding volumes. In addition, PP compounds for appliance industry as well as battery segments aided in growth of compounds business. Master Batches business showed marginal de-growth due to availability of competitively priced Black PE compound for pipes industry from Middle East suppliers, reducing demand for Black MBs. Company expects to grow SPC business by 30% in current year.

Together with introduction of ABS compounds and alloys and development of new grades of engineering plastics at XMold Polymers, (subsidiary Company) SPC business of the Company is poised for healthy growth in coming years.

EXTRUDED POLYSTYRENE INSULATION BOARDS (XPS)

Building insulation segment remained flat with no major project taking off during the year under review. Demand from temperature sensitive packaging segment grew steadily. BIS standards for XPS building insulation could not be completed during the year under review and is likely to be in place in the current year. Market for XPS is expected to grow at 20% in F.Y 2026-27.

EXPORTS

Export of Polystyrene and EPS did not grow as expected due to change in trade flows consequent to levy of reciprocal tariffs by USA and suppressed margins. With the start of West Asia war in the month of March, Company declared force majeure for export customers consequent to declaration of force majeure by our Middle East based SM suppliers.

Exports will resume after war ends and SM supplies become regular. The excellent customer relations with large number of small and medium sized customers across all geographical areas is intact despite short term availability issues.

XMOLD POLYMERS PVT LTD (XMOLD)

XMold Polymers Pvt. Ltd. located in SIPCOT, Gummidipoondi near Chennai was acquired in April 2025 with the objective of meeting demand from customers for compounds in automotive sector and appliances particularly from manufacturers located in Sri City where leading AC makers of India, have built new world class facilities for catering to not only the growing Indian demand but also for exports under the PLI scheme of Government of India.

Post acquisition, operations of XMold were streamlined and upgraded including implementation of SAP to bring its operations at par with SPL operations. Grade rationalization of engineering compounds between SPL range and XMold range is completed. IAFT 16949:2016 standard applicable to automotive industry was upgraded to include product design as per chapter 8.3 in addition to manufacturing of polymer compounds. This makes XMold Polymers a full fledged polymer compounding company to meet all requirements of automotive industry.

SAN + Glass Filled grades suitable to AC industry were developed, received approval from some of major AC makers in Sri City and commercial supplies started to two customers. In the current year more such customers will be brought into fold of XMold. Sales and marketing team has been strengthened for taking the Company to its full potential.

SUSTAINABILITY INITIATIVES

Company continues its efforts in developing a circular economy framework around post consumer plastic waste particularly EPS and PS. Company is engaged in educating general public on the need for collection and recycling of post consumer plastic waste through a combination of education, community partnerships and recycling infrastructure development with the help of NGOs and ICPE.

Company continues with initiatives such as Recycling Day in schools to inculcate waste segregation habits early on. "My Village my Responsibility" aimed to establish zero waste villages by promoting waste segregation at the household level, "Ab Thermocol Recycle Karega Bharat" aimed at raising public awareness on the recycling of thermocol, and Plastics Recycling Premier League (PRPL) a cricket based campaign targeting under 14 school children in the Mumbai region. The 2nd edition of PRPL was a resounding success.

Participation in several prestigious exhibitions focused on circular economy held in Delhi and Mumbai established the Company as a responsible player in the industry for sustainable development of business.

Company is complying with all directions of CPCB in respect of Extended Producer Responsibility (EPR). All requisite data regarding sale of products is being furnished as per norms.

PROJECT STATUS AND CAPITAL EXPENDITURE

First phase of ABS project commenced commercial production in September 2025. Simultaneously two compounding lines for 20,000 MT were also commissioned to produce variety of ABS compounds. EPS phase 2 with capacity of 30,000 MT is completed and commissioned in April, 2026. Work on second line of XPS of 1,50,000 M³ with flexibility to produce wide width boards has started and it is likely to be completed by end of 2026-27.

Land acquisition for Companys Munak site in Haryana is almost complete barring some pockets which are under negotiation. Pre-project environment impact assessment study is completed. Work is underway for seeking environment clearance. Basic infrastructure development including site grading, will be taken up during the current year.

Company incurred a total capital expenditure of Rs.210 crores during F.Y 2025-26 on projects related to ABS Phase I, EPS Phase II and ABS compounding lines. All capital expenditure was financed from internal accruals.

Company estimates to incur a capital expenditure of about Rs.250 crores in the current year towards ABS Phase II, XPS Phase II, Compounding lines, infrastructure augmentation etc. The said capital expenditure shall be met from internal accruals.

FINANCE

Company continues to remain debt free and carries investible surplus in its books. Available surplus funds are deployed in various debt 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.210 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 stable (from positive) while reaffirmed 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 stable (from Positive) while reaffirmed long term rating at IND AA- and short rating to IND A1+ for Companys working capital facilities from banks.

Changes in Kev Financial Ratios :

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 given as hereunder :

Sr. No.	Ratio		Year Ended
			31/3/2026	31/3/2025
1	Debtors Turnover Ratio	Times	11.87	15.23
2	Inventory Turnover	Times	6.79	8.79
3	Current Ratio	Times	2.02	1.91
4	Debt Equity Ratio *	Times	0.05	0.06
5	Operating Profit Margin	%	10.37	9.94
6	Interest Coverage Ratio *	Times	40.00	49.00
7	Net Profit Margin	%	6.08	6.41
8	Return on Average Net Worth	%	14.23	18.38
9	Return on average capital employed	%	19.45	24.86

* 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.

RISK MANAGEMENT

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 colocated 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), Privilege Access Management (PAM) are being used. Patches are updated regularly on all the critical equipment and endpoints for protection against any security threats.

Firewall is in place to provide protection to the network, servers and endpoints, against threats through internet and internal traffic. SOC (Security Operations Center), NOC (Network Operations Center) services from third party service providers are used to monitor threats. 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.

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 (except war risk) 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.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

The internal control systems for safeguarding and protecting assets of the Company against loss from unauthorized use or disposition are 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) are periodically audited by the statutory auditors.

HSE MANAGEMENT, AWARDS & RECOGNITION Health Safety and Environment :

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 9295 accident-free days as on March 31, 2026. At Manali plant Company has completed 6869 accident free days as on March 31, 2026.

All requirements under applicable laws and regulations are fully complied with by the Company.

Awards and Recognition

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

Amdoshi - Maharashtra Unit:

• NSCI Safety Awards - 2025 - Shreshtha Suraksha Puraskar under the manufacturing sector Group B.

• Winner-Maharashtra Safety Award Competition-2024 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-2024 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)

• 23rd "Greentech Workplace Fire & Security Awards 2025 - Safety Excellence Gold Award. ^•

• Safe-Tech Awards 2025 for Best Fire and Safety Champion

Manali, Chennai - Tamil Nadu Unit:

• "Certificate of Appreciation" from National Safety Council of India (NSCI) under National Safety Awards 2025 at the national level.

• Winner - Environment Protection Award 2025 from Greentech Foundation, New Delhi.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis 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.