Valiant Organics Ltd Management Discussions

<dhhead>Management Discussion and Analysis</dhhead>

Global Economy

During 2024, the global economy demonstrated stability despite various economic, international relations, and governmental challenges. Data from the World Economic Outlook (IMF) report indicated a consistent global Gross Domestic Product (GDP) growth rate of 3.3%. Economic expansion rates varied significantly across regions. Growth in developed nations experienced a decline, whereas developing economies, particularly those in Asia, maintained steady growth.

The 2024 global economic landscape was marked by persistent difficulties, including geopolitical tensions and Red Sea disruptions. Additionally, international supply chain complications and trade disputes between major economies continued to pose challenges. Policy adjustments related to climate change also influenced investment patterns across multiple sectors.

Global inflation showed an improving trend, with the rate of 5.7% for 2024, a decrease from 6.7% in the previous year. Developed economies are anticipated to achieve their inflation targets sooner, averaging 2.6% in 2024. Emerging markets are expected to experience a slower reduction in price increases.

In response to prevailing economic conditions, leading central banks implemented notable interest rate reductions to stimulate economic activity. December 2024 saw the most significant coordinated series of interest rate cuts among G10 central banks since the pandemic, with total reductions for the year amounting to 825 basis points. This period marked a substantial easing of monetary policy not observed since 2009. (Source: World Economic Outlook, IMF, Reuters)

Outlook

The global economy is currently predicted to sustain a steady expansion path, with projected growth rates of 2.8% for 2025 and 3.0% for 2026. This positive outlook is underpinned by robust economic performance observed in the United States and significant progress within key emerging markets.

In the United States, growth is forecast at 1.8% in 2025 and 1.7% in 2026. This projection accounts for anticipated adjustments in the labour market and a potential moderation in consumer expenditure. For the Eurozone, a recovery is predicted, with growth projected to reach 0.8% in 2025 and improve to 1.2% in 2026. This expected improvement is primarily linked to an increase in consumer spending and a continued reduction in inflation rates.

While the general trend indicates a deceleration in global price increases, certain regions continue to experience stagnant conditions due to persistently high inflation levels. Global inflation is projected to decline to 4.3% in 2025 and further to 3.6% in 2026. Developed economies are anticipated to achieve their respective inflation targets more rapidly than other regions. Monetary policies are expected to diverge across different geographies, reflecting the varied economic circumstances prevalent in each.

(Source: World Economic Outlook, IMF)

Indian Economy

India’s economy demonstrated a consistent pattern of expansion and stability throughout FY 2024-25, confirming its position as a major global economy showing strong growth. As per the Second Advanced Estimate (SAE), India’s real GDP expanded by 6.5% in FY 2024-25, moderating from the 9.2% growth reported in the First Revised Estimates for FY 2023-24. This sustained upward trend highlights the nation’s solid economic foundation, effective government policies, a dynamic services sector, and considerable domestic spending, all contributing to a favourable view of India’s potential for long-term economic progress.

9.7% 7.6% 9.2% 6.5% 6.2%

2022 2023 2024 2025(E) 2026(P)

India’s economic stature continues its upward climb, with the nation now holding the position of the world’s fourth-largest economy by nominal Gross Domestic Product (GDP) and the third-largest when assessed by purchasing power parity (PPP). Ambitious national targets have been set to achieve a $5 trillion economy by FY 2027-28 and a $30 trillion economy by 2047. These aims are to be accomplished through substantial infrastructure investments, ongoing governmental reforms, and the widespread adoption of technological advancements. Reflecting this commitment, the capital Expenditure budget for the upcoming FY 2025-26 has increased to 11.21 lakh crores, representing 3.1% of GDP.

Integral to this accelerated growth trajectory and increasing economic self-sufficiency have been significant governmental reforms and considerable capital allocated towards both physical and digital infrastructure. Government initiatives such as ‘Make in India’ and the Production-Linked Incentive (PLI) scheme have also played a crucial role.

Outlook

India’s economy is expected to grow at a rate of 6.2% in FY 2025-26. Projections indicate that by 2030, India will likely become the world’s third-largest economy, driven by investment in infrastructure, greater private sector capital expenditure, and the expansion of financial services. Ongoing reforms are anticipated to support this long-term economic advancement.

Several factors underpin this positive outlook, including India’s favourable demographics, increasing capital investment, proactive government schemes, and strong consumer demand. Improved spending in rural areas, helped by moderating inflation, further reinforces this growth trajectory. The government’s focus on capital expenditure, prudent fiscal management, and measures to boost business and consumer confidence are creating a supportive environment for both investment and consumption.

Programmes such as Make in India 2.0, reforms designed to improve the ease of doing business, and the Production-Linked Incentive (PLI) scheme are intended to strengthen infrastructure, manufacturing, and exports, positioning India as a significant player in global manufacturing. With inflation expected to be on target by the end of this year (2025), a more accommodating monetary policy is likely. Infrastructure development and supportive government policies will facilitate capital formation, while rural demand will receive a boost from initiatives like the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).

The Union Budget 2025-26 presents a growth-oriented financial strategy that addresses immediate and long-term economic needs. By increasing disposable income, prioritising infrastructure, and promoting domestic manufacturing, the budget aims to foster sustained economic growth while ensuring fiscal responsibility.

A key feature is the increased income tax exemption limit of 12.75 lakh per annum, which will enhance disposable income for middle-class households, stimulating consumer spending. Significant investments in infrastructure, including roads and railways, will improve connectivity and create jobs. Additionally, the budget strengthens the Production Linked Incentive (PLI) scheme for sectors like electronics and textiles, while supporting the “Make in India” initiative to establish India as a global manufacturing hub. The transformation of India Post into a catalyst for the rural economy will further enhance logistics and financial inclusion.

(Source: Press Information Bureau, World Economic Outlook, IMF)

Speciality Chemicals Industry Overview

India’s speciality chemicals sector market value reached $64.5 billion, and is expected to reach $92.6 billion by 2033, growing at a CAGR of 3.80%. This places India among the top global players, ranking sixth worldwide and third in Asia, a remarkable position driven by its cost-efficient manufacturing, skilled workforce, and expanding R&D capabilities. The segment comprises tailored chemical products, such as agrochemicals, surfactants, polymer additives, and construction-chemical formulations, serving diverse industries including pharmaceuticals, agriculture, textiles, consumer goods, electronics, automotives, and water treatment. (Source: IMARC)

An estimated investment of 8 lakh crore ($107.38 billion) is projected for the Indian chemicals and petrochemicals sector by 2025. Speciality chemicals constitute 20% of the global chemicals industry’s $4 trillion market.

Globally, India holds the position of the fourth-largest producer of agrochemicals, following the United States, Japan, and China. The country accounts for 16-18% of the world’s production of dyestuffs and dye intermediates, with the Indian colourants industry securing a global market share of approximately 15%. The chemicals industry in India operates under a de-licensed framework, with exceptions for a limited number of hazardous chemicals. Furthermore, India has historically been a global leader in generics and biosimilars, and a major vaccine manufacturer, contributing over 50% of the global vaccine supply.

The development of various segments within India’s speciality chemicals market is being propelled by a rising demand from end-user industries, notably food processing, personal care, and home care. Furthermore, India has observed an increasing demand for a wide range of cosmetic chemicals, healthcare products, and hygiene products that utilise speciality chemicals, polymers, and oleo chemicals. This segment is anticipated to outperform other areas. In response to this escalating demand from both domestic and overseas markets, Indian speciality chemical companies are actively expanding their production capacities and accelerating their capital expenditure plans, driven by strong growth visibility and emerging opportunities.

The broader Indian chemical and petrochemical industry is projected to reach $304 billion by 2025, growing at a CAGR of 9.3%. The overall Indian chemical industry is expected to grow further with a CAGR of 11-12% by 2027. This growth trajectory is also influenced by global supply chain dynamics.

For instance, environmental concerns in China led to the cessation of activities for many chemical companies in 2018, consequently increasing speciality chemical manufacturing in the Indian market to ensure uninterrupted supply.

Indian speciality chemical companies are actively pursuing import substitution strategies whilst concurrently exploring export opportunities to accelerate their business expansion. This strategic positioning is expected to see India’s market share in the global speciality chemicals market increase to 4% by 2027 from 3%, and grow faster than China, potentially reaching 6% by 2026 from 3-4% in FY 2021. (Source: IMARC, IBEF)

Growth Drivers ⁿ India ’s speciality chemicals sector is expected to grow at a CAGR of 11-12% by 2027, increasing its share in the global market from 3% to 4%. This is being driven by rising global demand and China’s reduced capacity due to environmental restrictions.

ⁿ Indian companies are increasing their capex in anticipation of future demand from key sectors like paints and coatings, textiles, construction, home and personal care, and agrochemicals.

ⁿ The paint and coatings segment is growing due to rising urbanisation and higher housing replacement demand, while textiles and personal care segments benefit from export growth and changing consumer preferences.

ⁿ Go vernment initiatives such as the proposed PLI scheme for agrochemicals and the development of PCPIRs are expected to strengthen manufacturing and reduce dependence on imports.

ⁿ PCPIR regions like Dahej, Paradeep, Cuddalore, and

Vishakhapatnam have attracted over 2.1 lakh crore ($28 billion) in investments, offering large-scale, integrated infrastructure for speciality chemical manufacturing.

ⁿ The push for green chemistry and sustainable production is leading to more investment in R&D and value-added product lines, helping Indian companies move up the value chain.

Government Initiatives ⁿ Che micals and Petrochemicals Vision The2034: government has outlined a long-term vision to make India a global manufacturing hub for chemicals and petrochemicals. The strategy focuses on infrastructure, self-sufficiency, domestic value addition, and reduced import dependence.

ⁿ Pr oposed PLI Scheme for Agrochemicals: A Production-Linked Incentive (PLI) scheme is being considered for the agrochemicals segment, offering output-based incentives of 10-20% and cluster-based development to create a globally competitive ecosystem.

ⁿ P etroleum, Chemicals, and Petrochemicals

Regions (PCPIRs): Four PCPIRs have been developed in Dahej, Paradeep, Cuddalore-Nagapattinam, and Vishakhapatnam. These regions have attracted investments of over 2.1 lakh crore ($28 billion), supporting infrastructure, single-window clearance, and large-scale employment.

ⁿ 100 % FDI under Automatic Route: The Indian government permits 100% foreign direct investment under the automatic route in the chemical sector, with the exception of certain hazardous chemicals, making it easier for global players to enter the Indian market.

ⁿ Rem oval of Industrial Licensing: Most chemicals, except hazardous ones, no longer require industrial licensing, helping streamline approvals and encouraging faster project execution.

ⁿ Cust om Duty Rationalisation: Basic customs duties have been reduced on several raw materials and intermediates to promote cost efficiency and support domestic manufacturing in downstream sectors.

ⁿ Sup port for R&D and Innovation: The government is encouraging innovation by supporting R&D infrastructure, including fiscal support and university–industry linkages to improve competitiveness.

ⁿ National Medical Devices Policy 2023: Though not directly under chemicals, this policy benefits the speciality chemical industry by boosting demand for medical-grade intermediates and materials used in diagnostic and therapeutic equipment.

ⁿ Mak e in India and Ease of Doing Business: National campaigns like ‘Make in India’ continue to promote the chemical sector, while ease-of-doing-business reforms support investment facilitation and faster clearances.

Opportunities and Threats

Opportunities ⁿ Str ong export demand: Specialty chemical companies in India are accelerating their capex plans due to rising international demand. India’s share in the global specialty chemicals market is expected to rise from 3% to 4% by 2027.

ⁿ China+1 strategy: Environmental restrictions and shutdowns of chemical units in China since 2018 have shifted global buyers to India, creating opportunities to increase global market share.

ⁿ End-user industry growth: Growth in the speciality chemicals sector is significantly driven by expansion across key end-user industries. The paints and coatings segment benefits from rising urbanisation and increased replacement demand. Construction chemicals remain underpenetrated compared to markets like China and the US. Textile chemicals are boosted by growing exports and domestic consumption, whilst home care and cosmetics are supported by rising income levels and heightened hygiene awareness.

ⁿ Go vernment support through PCPIRs: Investment regions such as Dahej, Paradeep, Cuddalore, and

Vishakhapatnam have attracted over 2.1 lakh crore ($28 billion) in combined investments.

ⁿ FDI inflows and investment pipeline: Between April 2000 and Sept 2024, the chemical sector received 1.39 lakh crore ($22.8 billion) in FDI. An additional 8 lakh crore

($107.4 billion) investment is estimated in chemicals and petrochemicals by 2025.

ⁿ Glo bal footprint expansion: Companies like Aarti Industries and UPL are generating more than 30-40% of revenues from overseas markets, expanding India’s presence in value-added segments.

Threats ⁿ Regulatory tightening: In February 2025, the government introduced Quality Control Orders (QCOs) covering over 150 product categories to raise safety and performance standards. This will increase compliance costs for chemical manufacturers.

ⁿ Exp osure to raw material imports: A significant portion of input materials is still imported, exposing manufacturers to global price volatility and supply chain risks, especially during geopolitical disruptions or currency fluctuations.

ⁿ Low R&D spending: Indian chemical companies invest only around 1% of their revenue on R&D, limiting innovation and global competitiveness in high-tech segments.

ⁿ Envir onmental and sustainability pressures: Companies are under increasing pressure to invest in green chemistry, waste treatment, and energy-efficient processes, adding to capex and operational costs.

ⁿ Exp ort dependency Whilerisks: export potential is strong, dependency on external demand makes the industry vulnerable to global recessions, tariffs, and trade policy changes.

Company Overview

Valiant Organics Ltd. (referred to as ‘Valiant’ or ‘the Company’) is a well-established Indian speciality chemical manufacturing company, tracing its origins back to Valiant Chemical Corporation in 1984 before its incorporation as a private limited entity in 2005 and subsequent conversion to a public limited company in 2015. Headquartered in Mumbai, Maharashtra, the Company specialises in the production and marketing of a diverse range of speciality chemicals and pharmaceutical intermediates. It is recognised as a significant manufacturer of compounds such as chlorophenol derivatives, benzene derivatives, Para Nitro Aniline (PNA), Para Amino Phenol (PAP), Ortho Anisidine, and Para Anisidine.

The Company’s operations are supported by multiple integrated manufacturing units, strategically positioned across Western India in locations including Sarigam, Tarapur, Vapi, Jhagadia, and Ahmedabad. These facilities benefit from their close proximity to major ports, enabling efficient management of both raw material imports and finished product exports. This integrated manufacturing capability facilitates optimal capacity utilisation and contributes to competitive production.

Valiant extensive product portfolio serves a broad spectrum of industries, including agrochemicals, pharmaceuticals, dyes, pigments, cosmetics, rubber, polymers, and veterinary drugs. These chemicals are produced through sophisticated process chemistries such as Chlorination, Ammonolysis, Hydrogenation, Acetylation, Sulphonation, and Methoxylation, ensuring a wide array of high-quality offerings.

The Company is distinguished by its robust in-house technological capabilities, including a state-of-the-art laboratory staffed by qualified chemists, which ensures adherence to international quality standards and supports continuous process technology development. Valiant Organics Ltd. has pursued strategic growth, notably through the successful integration of entities like Abhilasha Tex-Chem Limited and Amarjyot Chemicals Limited, thereby broadening its product basket and diversifying its chemical expertise. This comprehensive approach, combined with an established presence in export markets across Asia, Europe, and the USA, reinforces Valiant Organics Ltd.’s position as a reliable and evolving player in the speciality chemical industry.

Manufacturing Capacity

Valiant Organics Limited manufactures high-quality speciality chemicals in six integrated plants across five locations in Gujarat and Maharashtra. As of June 2025, the Company’s total production capacity was 70,000 tonnes per annum (TPA). The facilities are carefully constructed to accommodate various processes, as listed below:

Manufacturing facilities	Process
Sarigam	Chlorination
Tarapur	Ammonolysis
Vapi	Ammonolysis
Jhagadia (Units 1 & 2)	Hydrogenation, Methoxylation
Ahmedabad	Sulphonation and Acetylation

Revenue Break-Up

Regional growth (%)	FY 2024-25	FY 2023-24
Domestic	94%	94%
Exports	6%	6%

Operational Diversity

Valiant Organics Limited is part of the Aarti Group, which comprises prominent enterprises like Aarti Surfactants, Aarti Industries, and Aarti Drugs. The company specialised in a variety of chemical processes, such as acetylation, hydrogenation, ammonolysis, chlorination, and methoxylation. This comprehensive expertise enables Valiant Organics to provide high-quality products while meeting an extensive spectrum of chemical needs.

The Company’s primary product range includes important chemicals, including Para Chlorophenol, Ortho Chlorophenol, 2,4 Dichlorophenol, Para Nitro Aniline, Ortho Anisidine, Para Anisidine, and Para Amino Phenol. These items constitute the foundation of the Company’s portfolio, catering to a variety of industrial demands. The company is one of the world’s largest makers of chlorophenol derivatives, as well as a major local producer of Para Nitro Aniline (PNA). The company is also a major producer of benzene derivatives and one of the few commercial participants in the manufacturing of ortho-anisidine and para-anisidine. In addition, the company was one of the first to produce Para Amino Phenol (PAP) domestically. The Company’s success is due to its highly skilled and experienced team.

Financial Overview

Financial Performance FY 2024-25

( in millions)

Particulars	FY 2024-25	FY 2023-24	YoY (%)
Revenue from Operations	7,188	6,772	6.1%
EBITDA	618.09	423	46.1%
Profit After Tax (PAT)	(30)	(30)	-
Basic/Diluted EPS (INR)	ign=right style=margin-top:3.0pt;margin-right:0cm; margin-bottom:3.0pt;margin-left:0cm;text-align:right;mso-pagination:none; mso-layout-grid-align:none;text-autospace:none>(1.09)	(1.09)	-

 

Key Financial Ratios Particulars	FY 2024-25	FY 2023-24	YOY (% Change)	Explanations
Current ratio	0.99	0.97	200 bps	The Current Ratio improved marginally from 0.97 in FY 2023-24 to 0.99
				in FY 2024-25, reflecting a stable liquidity position. The improvement was
				supported by better working capital management, timely collection from
				customers, and disciplined utilization of current assets. Additionally, the
				Company honored its commitments by making significant payments towards
				trade payables during the year, which, while reducing current liabilities,
				demonstrates prudent financial discipline and stronger vendor relationships.
Net debt-to-	0.31	0.32	-	The Net Debt-to-Equity ratio declined from 0.32 in FY 2023-24 to 0.31 in FY
equity				2024-25, indicating a marginal reduction in leverage. The improvement was
				primarily on account of repayment of borrowings, along with better working
				capital management. Notably, the Company reduced outstanding trade
				payables through higher settlements, which was funded through internal
				accruals and operational cash flows, further strengthening the balance sheet
				position.
Return on	(0.45%)	(0.46%)	-	Return on Equity remained negative at (0.45%) in FY 2024-25, broadly in line
equity				with FY 2023-24 levels. The negative return reflects the continued net losses
				during the year, driven by margin pressures and higher finance costs, which
				offset the benefits of a stable equity base.
Net profit ratio	(0.42%)	(0.45%)	3 bps	This indicates a marginal improvement in net profit, although the ratio
				remains negative, suggesting the company continues to incur net losses
				primarily due to increases in finance costs, depreciation, other expenses, and
				raw material prices.

Strategical Outlook

- Valiant Organics is working towards: ⁿ Incr easing its share in the chemical market sales. ⁿ Inno vating by improving both supply and processes ⁿ K eeping costs low and working more efficiently

 With a strong business setup, trusted customers, and careful planning, the company is ready to grow and take on new global opportunities.

 Looking ahead, the company plans to focus on: ⁿ T echnology and Digital Tools: Using smart to predict equipment issues, track inventory and production in real time, and manage everything through digital platform (SAP).

 ⁿ P eople and Governance: Training future based on skills and improving rules to better handle risks.

 ⁿ Financial Strength: Keeping finances healthy, using debt wisely, and making sure profits stay steady to support both new projects and possible business purchases.

Risk Management

The Company’s reliance on knowledge-intensive operations may lead to adverse consequences from a lack of innovation. Furthermore, annual risks include fluctuations in oil prices as well as foreign exchange rates. China’s strong presence in the chemical manufacturing industry remains a constant danger, potentially increasing the inundation of cheaper imports.

Environmental, Social and Governance

The Company is dedicated to integrating health, safety, environmental, social, and governance principles into its business operations. Valiant Organics Limited acknowledges the potential for sustainable growth and value creation through ethical practices and robust governance. The Company places importance on people-centricity by aligning its environmental, health, and safety standards with international norms. Proactive measures are implemented for the well-being of both employees and contractual workers, fostering a positive work environment through initiatives focused on employee satisfaction, human rights, talent management, skills development, and engagement.

The Company is actively involved in Corporate Social Responsibility (CSR) projects that support communities in its operational areas, demonstrating its commitment to andemployee welfare and community development. In addition to prioritising health and safety, the Company endeavours delivery to create a positive environment for its workforce and align its practices with international standards. Environmental sustainability remains a primary focus, with efforts directed at reducing hazardous waste, conserving water, improving energy efficiency, and optimising natural resource use to minimise its carbon footprint. The Company has implemented Zero Liquid Discharge units across most manufacturing facilities to ensure effective waste management. Furthermore, through a captive renewable energy plant, the Company aims to both moderate costs and reduce its environmental impact.

The Company values strong governance and transparency as fundamental for sustainable growth and success. Its governance structure emphasises accountability and responsibility, supported by policies designed to protect the interests of all stakeholders.

Internal Control System

The Company has established a robust internal control framework, including governance, compliance, audit, control, and reporting aspects. These internal controls play a crucial role in ensuring regulatory compliance, fraud prevention, financial safeguarding, and the reliability of financial reporting. The internal audit team regularly evaluates the effectiveness of these controls and reports its findings to management. Based on these audits, prompt corrective actions are taken to improve the accuracy and efficiency of the internal controls.

Cautionary Statement

The narrative within this Management Discussion and Analysis includes ‘forward-looking statements’ relating to, among other things, the execution of strategic plans, future business developments, and economic performance. While these statements reflect the Company’s assessment and expectations for the future direction of its business, numerous risks, uncertainties, and other unforeseen factors could cause actual outcomes to differ significantly from these expectations. These factors include, but are not limited to, general market, macroeconomic, governmental, and regulatory trends, fluctuations in currency exchange and interest rates, competitive pressures, technological advancements, changes in the financial standing of third parties engaged with the Company, legislative changes, and other significant factors that could influence the Company’s business and financial results.