Transchem Ltd Management Discussions

ECONOMIC AND INDUSTRY OVERVIEW GLOBAL ECONOMY

The global economy is continuing to grow at a modest pace, according to the OECDs latest Economic Outlook. Global growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, with the 2024 forecast 0.2 percentage point higher than that in the October 2023 World Economic Outlook (WEO) on account of greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China. The forecast for FY 2025 is, however, below the historical (2000-19) average of 3.8 percent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth.

The pace of expansion is low by historical standards, owing to both near-term factors, such as still-high borrowing costs and withdrawal of fiscal support, and longer-term effects from the COVID-19 pandemic and Russias invasion of Ukraine, weak growth in productivity and increasing geo-economics fragmentation.

With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are broadly balanced. On the upside, faster disinflation could lead to further easing of financial conditions. Looser fiscal policy than necessary and then assumed in the projections could imply temporarily higher growth, but at the risk of a more costly adjustment later on. Stronger structural reform momentum could bolster productivity with positive cross-border spillovers. On the downside, new commodity price spikes from geopolitical shocks including continued attacks in the Red Sea and supply disruptions or more persistent underlying inflation could prolong tight monetary conditions. Deepening property sector woes in China or, elsewhere, a disruptive turn to tax hikes and spending cuts could also cause growth disappointments.

Inflation has been falling towards targets, but some pressures persist.

Headline inflation fell rapidly in most economies during 2023, driven down by restrictive monetary policy settings, lower energy prices and continued easing of supply chain pressures. Food price inflation also came down sharply in most countries, as good harvests for key crops such as wheat and corn saw prices fall rapidly from highs reached after the start of the war in Ukraine. Core goods price inflation has generally fallen steadily, but services price inflation has been stickier, remaining well above pre-pandemic averages in most countries.

Significant uncertainty remains. Inflation may stay higher for longer, resulting in slower-than-expected reductions in policy interest rates and leading to further financial vulnerabilities. Growth could disappoint in China, due to the persistent weakness in property markets or smaller-than-anticipated fiscal support over the next two years. High geopolitical tensions remain a significant near-term risk to activity and inflation, particularly if the evolving conflict in the Middle East and attacks in the Red Sea were to widen or escalate. On the upside, demand growth could prove stronger than expected, if households and firms were to draw more fully on the savings accumulated during COVID-19.

Anticipated Inflation: It is projected that the annual average of global headline inflation will decrease from 6.8% in 2023 to 5.8% in 2024 and 4.4% in 2025. The global forecast has been revised downward by 0.2% for 2025 and left unchanged for 2024 when compared to projections from October 2023. While inflation is predicted to decline by just 0.3% to 8.1% in emerging market and developing economies, advanced economies are predicted to experience faster disinflation, with inflation falling by 2.0% to 2.6% in 2024. Because of 31Argentina, where the realignment of relative prices and the removal of legacy price controls, past currency depreciation, and the related pass-through into prices are expected to increase inflation in the near term, the forecast is revised down for both 2024 and 2025 for advanced economies, while it is revised up for emerging market and developing economies in 2024. The reasons behind the decline in inflation vary from nation to nation, but they usually point to reduced core inflation brought about by continued tight monetary policy, a corresponding loosening of labor market conditions, and spillover effects from previous and continuous drops in relative energy prices.

The Rise of Decentralised Growth in the Global Economy

The global economic landscape is undergoing a phase of growth decentralisation, characterised by varying growth prospects across different regions and countries. According to the World Banks Global Economic Prospects report, growth patterns are not uniform, with specific regions and countries exhibiting higher growth potential than others. This trend signifies a shift from traditional growth poles to a more distributed growth scenario, where emerging markets and developing economies (EMDEs) play a significant role.

South Asia (SAR) shows promise with significant growth prospects. The regi?n is anticipated to experience growth rates of 5.6% in 2024 and 5.9% in 2025, with India leading the way as a significant growth driver. East Asia and the Pacific (EAP) also promise growth rates of 4.5% and 4.4% in 2024 and 2025, respectively, with China facing tough competition from Indonesia in terms of percentage growth. Growth in East Asia and Pacific (EAP) is expected to be moderated by slower growth in China, which impacts regional trade dynamics. Nevertheless, certain export-oriented economies within the EAP and Latin America and the Caribbean (LAC) regions may benefit from a modest pickup in global trade in 2024. While Advanced Economies represented by US, EU and Japan are struggling to keep up the pace hovering around 1.5 percent, Sub-Saharan Africa (SSA) is expected to witness a rebound in growth, projected at 3.8% in 2024 and 4.1% in 2025. This improvement is attributed to easing factors that previously hindered growth, such as reduced fiscal support and adjustments in metal-exporting economies to lower prices.

The decentralised nature of global growth highlights the increasing significance of EMDEs in driving the world economy. Factors such as investment trends, commodity prices, and regional economic policies contribute to this diversification of growth prospects. As the global economic landscape evolves, understanding these regional dynamics becomes crucial for grasping the broader trends shaping the world economy.

Indian Economy

The Indian economy is shining as a beacon of hope and emerged as a top performer in FY 2023-24. It is the fifth largest economy in the world and is poised to retain its position as the worlds fastest-growing major economy. Indias growth is expected to remain strong, supported by macroeconomic and financial stability. According to RBI, Domestic economic activity continues to expand at an accelerated pace, supported by fixed investment and improving global environment. The second advance estimates (SAE) placed real GDP growth at 7.6 per cent for 2023-24, the third successive year of 7 per cent or higher growth. This positive growth outlook is anchored primarily by the digital revolution, a facilitating regulatory environment supportive of entrepreneurship, measures targeted at economic upliftment of the most vulnerable sections of the society, developing niche and complex manufacturing sectors while building the supporting physical infrastructure, and efforts directed at diversifying its export basket and moving toward higher value-added products.

The growing strength in both domestic and external demand has sustained the response of the various sectors on the supply side. Astute management of the pandemic, along with IBC and government capex push, has strengthened consumption and investment. Impressive growth in exports, including a rising share in world services exports, backed by specific government measures, have helped external demand induce growth in the Indian economy.

The agricultural sector, which is estimated to constitute 18 per cent of Indias GVA in FY24, is the bedrock of the nations economy. Despite challenges posed by the global health crisis and variability in climate conditions, the sector has demonstrated remarkable tenacity and resilience, contributing significantly to Indias economic recovery and development. The sector grew at a higher average annual rate of 3.7 per cent from FY15 to FY23 compared to 3.4 per cent from FY05 to FY14. For the year FY23, the sector grew at 4.0 per cent as compared to the previous year.

While the agriculture sector has performed well consistently, continuous innovation in farming practices, crop variety improvements, and technology adoption are essential to meet the growing demands for diversified and nutritious food baskets. Further, policy consistency and continuity that expand market and production choices for farmers, which, at the same time, keep the larger environmental and ecological considerations and natural resources availability and demand in the country, will be useful in encouraging farmers to adopt new technologies and practices.

The focus on enhancement in post-harvest infrastructure investment through the Agriculture Infrastructure Fund (AIF) and Pradhan Mantri Kisan Sampada Yojana (PMKSY), adoption of sustainable agriculture practices like the Per Drop More Crop Component of the Pradhan Mantri Krishi Sinchayi Yojana (PMKSY-PDMC) and promotion of Natural Farming to transform agriculture making it more resilient.

In conclusion, India has been showing both resilience as well as progress despite all risks and uncertainties in the global economic landscape. Through timely and effective policy actions aimed at achieving macro stability and repairing the balance sheets of financial and non-financial sectors, as well as by investing significantly in building world-class physical and digital public infrastructure, India has been able to withstand the challenges, both domestic and global, and ensure that the economy continues to progress on a steady path. With the policy reforms that the government has already rolled out and which are on the anvil, there is significant optimism and confidence in the Indian economy and its prospects today. India embarks on her Amrit Kaal with confidence and the attitude that challenges to growth and inclusive development are steppingstones and not obstacles.

OPERATIONAL PERFORMANCE, OPPORTUNITIES, THREATS, RISKS AND CONCERNS

The Company was in the business of Mushroom production and operated a 100% Export Oriented Unit from its manufacturing plant situated at Gat No. 379, Village Bebadohol, Pune. Due to change in international horticultura scenario the mushroom plant of the Company was non-operational since several years. During the financial year 202021, the said manufacturing plant has been monetized by your Company after receiving all applicable legal consents and approvals.

The management of the Company is looking forward for new opportunities to utilize the funds of the Company with a continuous ?mpetus to maximize the value for its shareholders, provide benefits to other stakeholders and to maintain an optimum capital structure with proper care by mitigating the risks. The Company has temporarily invested the funds in short-term treasury operations.

FINANCIAL PERFORMANCE

A brief synopsis on the financial information of the Company for the FY 2023-24 and FY 2022-23 is given below:

Rs. in Lakhs

	FY 2023-24	FY 2022-23
Total Equity	Rs 7,564.60	Rs 6,584.22
Total Revenue	Rs 780.70	Rs 424.45
Earnings Per Share	Rs 3.43	Rs 1.01

INTERNAL CONTROL SYSTEMS

The Company has effectively and efficiently laid down policies, guidelines and procedures keeping in mind the nature, size and complexity of Companys business objectives. The Company maintains proper and adequate system of internal controls with well-defined policies, systems, process guidelines and operating procedures. The Company positively ensures strict adherence to various procedures, laws, rules and statutes. All transactions are recorded and reported in accordance with the applicable Indian Accounting Standards and within the terms of accounting policies.

The Company has also ensured the periodical Internal Audit by an independent auditor, whose report is submitted to the Audit Committee and Board of Directors for consideration. During the Audit Process no material discrepancies have been reported by the Internal Auditor.

The Audit Committee is responsible to ensure the monitoring of Internal Control System and oversees the various financial transactions on a regular basis and deviations, if any, are promptly reported to the Senior Management to ensure normalcy is established at the earliest, though, no such deviations had been reported by the Audit Committee during the financial year 2023-24.

HUMAN RESOURCES

The Company has adequate trained professionals to manage the affairs of the Company in the most efficient and prudent manner.

The Company aims to develop, motivate and retain diverse talent. The Company seeks to maximize the potential of every employee by creating a purpose-driven, inclusive, stimulating, and rewarding work environment.

The Company has been broadening and deepening employees relationships by continually looking for new opportunities and newer areas in the businesses to add value, proactively investing in building newer capabilities and reskilling the workforce.

The Company appreciates the participation and contribution of employees, commitment, effective deployment of knowledge and expertise, integrity and maintenance of confidentiality and looks forward for their continuous participation in years to come.

CAUTIONARY STATEMENT

Statements made in the Management Discussion and Analysis describing the Companys projection, estimates and expectations may be interpreted as "forward looking statements" within the meaning of applicable securities, laws and regulations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent information or events.