Vinati Organics Ltd Management Discussions

GLOBAL OVERVIEW

In CY 2024, the global economy entered a phase of measured recovery and realignment, as nations adapted to the lingering effects of previous disruptions while positioning themselves for new growth drivers. With global GDP growth at 2.8% for CY 2025, the economic landscape was varied—advanced economies showed only modest growth due to the long-lasting effects of monetary tightening, while emerging markets thrived, buoyed by infrastructure investments, digital advancements, and strong domestic demand. As we progress through CY 2025, however, a substantial shift is underway globally, driven by nations adjusting their policy priorities in response to escalating geopolitical tensions and mounting economic challenges. The United States has implemented new tariffs, triggering swift retaliatory actions from key trading partners, culminating in the imposition of near-universal tariffs on April 2025.. This has resulted in tari_ rates climbing to levels not seen in over a century, creating a severe shock to global growth. Simultaneously, opportunities are emerging through supply chain diversification, climate-conscious investments, and technological advancements. In this complex environment, businesses and economies alike must balance short-term risks with long-term structural opportunities.

(Source: IMF Report on World Economic Outlook, April 2025)

Inflation trends showed improvement, with headline inflation dropping to 5.7%. However, core inflation, particularly in services, remained persistent in several regions. The expected reduction in interest rates by major central banks, such as the U.S. Federal Reserve and the European Central Bank, is likely to drive liquidity, support credit growth, and enhance investor sentiment. Despite these developments, uncertainties remain, requiring businesses and policymakers to stay agile and responsive to evolving economic conditions.

(Source: IMF Report on World Economic Outlook, April 2025)

GDP Growth Projections (in %)

	CY 2024 E	CY 2025 P	CY 2026 P
Global Economy	3.3	2.8	3.0
Advanced Economies	1.8	1.4	1.5
USA	2.8	1.8	1.7
Euro Area	0.9	0.8	1.2
Germany	(0.2)	0.0	0.9
Japan	0.1	0.6	0.6
The UK	1.1	1.1	1.6
Canada	1.5	1.4	1.6
	CY 2024 E	CY 2025 P	CY 2026 P
Emerging Markets and Developing	4.3	3.7	3.9
Economies
China	5.0	4.0	4.0
India	6.5	6.5	6.5

(Source: IMF Report on World Economic Outlook, April 2025)

Outlook

The global economic outlook for CY 2025 and the subsequent years appears stable, with growth projected at 2.8%. This tempered optimism is supported by a decline in inflation, improving financial conditions, and strong domestic demand in major markets. As central banks, including the U.S. Federal Reserve and the European Central Bank, pivot towards monetary easing, liquidity is expected to increase, facilitating better credit access and encouraging investment. Emerging markets, particularly India, are poised to drive global growth, while advanced economies will likely experience a slow but steady recovery as they undergo structural adjustments. Despite this positive trend, geopolitical tensions, rising tariffs, and divergent policy approaches still present significant risks. In this dynamic environment, supply chain diversification, green investments, and digital transformation will be essential for maintaining long-term stability and balanced global growth.

(Source: IMF Report on World Economic Outlook, April 2025)

INDIAN ECONOMY

Indias economy remains resilient despite the challenges posed by the global market. For 2024-25, GDP growth is projected to be between 6.4% and 6.7%, ensuring that the nation stays among the fastest-growing major economies. This growth is driven by strong domestic consumption, controlled inflation hovering around 4.0%, and healthy levels of investment. Significantly, the services sector continues to play a dominant role, with IT, financial services, and consulting expected to contribute over 55.2% to Gross Value Added (GVA) in 2024-25.

The recent imposition of a 26% tari_ on Indian imports by the United States marks a significant shift in global trade dynamics. While this move presents near-term challenges for Indian exporters, it also highlights a broader trend towards rising protectionism and a recalibration of international trade relationships. However, this shift could present a strategic opportunity for India.

As the government continues to implement structural reforms aimed at scaling up domestic production, enhancing value addition, and improving global competitiveness, the country is well-positioned to turn these tariffs into a catalyst for long-term growth. With the right policy support and industry alignment, Indian manufacturers have the potential to strengthen their position within global supply chains and tap into emerging markets that are seeking alternatives to traditional trade partners.

Simultaneously, the manufacturing sector is undergoing a strategic revival due to the governments Production Linked Incentive (PLI) schemes and a renewed focus on industrialisation. Building on this momentum, the Union Budget for 2025–26 allocates Rs 11.21 lakh crore for public capital expenditure. In addition, specific measures for MSMEs include revised investment and turnover thresholds for micro andsmallenterprises,anexpandedCreditGuaranteeScheme, and the rollout of credit cards for micro-entrepreneurs, all aimed at further boosting the sectors growth.

(Source: https://www.pib.gov.in/PressReleaseIframePage. aspx?PRID=2098353)

The Indian agriculture sector is projected to experience solid growth, with an anticipated 3.8% increase in 2024-25. This growth is supported by favourable conditions such as a strong monsoon, healthy Rabi sowing, and the potential La Nina effect. Agricultural exports under the Agricultural and Processed Food Products Export Development Authority (APEDA) saw a 12.69% increase, totalling US$ 25.14 billion, largely driven by higher exports of rice, sugar, spices, and processed food.

Government initiatives, including PM-KISAN and the Agri Infrastructure Fund, have contributed to enhanced farm productivity and improved access to capital. Alongside these efforts, the rise of digital adoption, a young and dynamic workforce, and policy-driven momentum across sectors position India to become a key player in global economic growth. Over the coming decade, the country is set to not only drive economic expansion but also emerge as a hub for innovation, sustainability, and inclusive development.

(Source: https://eng.ruralvoice.in/national/indias-agricultural-exports-rise-by-12.69-pc-amid-global-uncertainty-rice-exports-up-by-19.73-pc.html#:~:text=Exports%20of%20agricultural%20products%20 under,12.69%25%20to%20reach%20%2425.14%20billion.)

Outlook

India finds itself at a crucial juncture in its economic journey, propelled by strong domestic fundamentals and emerging global opportunities. As one of the fastest-growing major economies, the countrys momentum is driven by factors like rising consumer demand, an increasing middle class, digital transformation, and sustained infrastructure investments. Despite facing geopolitical tensions and global trade realignments—such as the imposition of tariffs by major economies like the U.S.—India has showcased strength and adaptability. While these tariffs present short-term challenges, they also serve as a catalyst for much-needed structural reforms. With manufacturing contributing 17% to GDP, India now faces the task of intensifying efforts in innovation, sustainability, and adherence to global quality standards. The governments push for ‘China-plus-one strategies, along with stronger compliance frameworks, will be pivotal in upholding Indias position within global value chains. As the trade landscape continues to evolve, Indias ability to transform challenges into opportunities will be the defining factor in shaping its economic trajectory over the next decade.

(Source: https://www.cnbctv18.com/economy/us-tari_s-the-ripple-e_ect-india-economy-trade-deficit-steel-textiles-msme-currency-19584315.htm)

GLOBAL CHEMICAL INDUSTRY

The global chemical industry enters 2025 with a more optimistic outlook, following a period of volatility in 2023. That year was marked by unstable energy prices, elevated feedstock costs, and ongoing geopolitical tensions, such as the Russia-Ukraine conflict, all of which hindered production growth. However, 2024 saw the first signs of recovery, as energy costs stabilised and demand surged from key end-user industries like automotive and semiconductors.

Globally, chemical production is expected to expand by 1.9% in 2025. As the industry continues to adapt to a rapidly changing global environment, several structural and strategic trends are likely to define its development over the coming year.

(Source: https://www.americanchemistry.com/chemistry-in-america/ news-trends/blog-post/2025/looking-for-stability-amid-an-uncertain-economic-landscape).

Key Trends for 2025

• Supply Chain Resilience: Ongoing geopolitical shifts and the imposition of tariffs are pushing chemical companies to rethink their supply chains. To manage risks and maintain market access, companies are diversifying their sourcing strategies, shortening supply chains, and adopting more agile production methods.

• Asia-Pacific Dominance: China and India, as key players in the Asia-Pacific region, are expected to remain dominant in global chemical output. Their leadership is supported by competitive cost structures, government-driven initiatives, and a surge in domestic demand.

• Shift to Specialty Chemicals: There is a growing emphasis on high-margin, application-specific chemicals, particularly those used in industries like pharmaceuticals, electronics, and personal care. As companies seek to differentiate themselves, this focus allows them to target premium markets and capture greater value.

• Sustainability & Innovation: Increasing regulatory pressures and growing consumer demand are driving a shift towards green chemistry, bio-based feedstocks, and low-carbon solutions. As a result, sustainability has become a crucial pillar for gaining a competitive edge in the market.

• Digital Transformation: Companies are progressively incorporating AI, machine learning, and predictive analytics into their operations. These technologies help optimise processes, minimise waste, and enable the design of more sustainable products with enhanced efficiency.

• Customer-Centric Solutions: As end-users increasingly seek customised, high-performance formulations, chemical companies are ramping up their investments in R&D. By collaborating closely with customers, they are co-developing solutions that are tailored to meet specific application needs.

(Source: https://www.marketsandmarkets.com/PressReleases/ global-chemical-industry-outlook.asp)

INDIAN CHEMICAL INDUSTRY

Indias chemical industry is a fundamental driver of the nations economic growth, contributing over 9% to manufacturings Gross Value Added (GVA) and making up about 7% of total exports. As Asia strengthens its leadership in the global chemical industry, India is positioning itself as a key player, known for its large-scale production, product diversity, and cost advantages. Ranked sixth worldwide in chemical production and 14^th in exports, India offers an expansive portfolio of over 80,000 products. Furthermore, the country shines in specific areas, ranking second globally for dye production and exports, 3^rd in polymer consumption, and 4^th in agrochemical manufacturing. This stronghold in various sectors supports industries as diverse as agriculture, textiles, construction, and consumer goods.

The global trade landscape is shifting as U.S. President recently announced a 26% reciprocal tari_ on Indian imports, excluding pharmaceuticals. This is a big change from the previous average U.S. import duties of 1.06–3.5%, and it creates immediate challenges for Indian exporters, particularly since the U.S. is a key market for Indian chemical products. However, amidst this disruption, theres potential for growth. When compared to the significantly higher tariffs placed on countries like China (54%), Vietnam (46%), and Bangladesh (37%), Indian goods are still in a more favourable position. If Indian chemical companies can adjust their pricing and supply chain strategies, they have the chance to capitalise on this situation and increase their share of the global market.

Indian Chemical	2025	2030	CAGR
Industry Size Projections	US$ 300 billion	US$ 383 billion	5.01%

(Source: https://www.ey.com/en_in/insights/chemicals/catalyzing-growth-india-s-chemicals-and-petrochemicals-drive-growth)

GROWTH DRIVERS

• Surging Domestic Demand

Indias chemical sector meets the needs of a wide array of critical industries, including agriculture, pharmaceuticals, automotive, construction, and electronics, with almost 70% of its production consumed right here at home. Looking ahead, India is set to contribute 20% of the worlds increased chemical consumption by 2040, with the domestic demand forecasted to reach a staggering US$ 850–1,000 billion.

• Favourable Market Value Trajectory

Valued at US$ 220 billion in 2024, the Indian chemical sector is projected to hit US$ 300 billion by 2028. This growth is being driven by an uptick in local demand and initiatives to foster self-sufficiency, solidifying its place as a foundational driver of Indias economic future.

• Changing Consumer Preferences

As global consumers increasingly prioritise sustainability and eco-conscious products, India is perfectly set to thrive as a key supplier of green and specialty chemicals, catering to both domestic needs and international markets.

• Resilient & Evolving Supply Chains

Geopolitical instability is pushing manufacturers worldwide to reassess and diversify their supply chains. India, with its strong production base and reliable ecosystem, is emerging as a trusted alternative for global sourcing strategies.

• Strong Policy Support

Government initiatives like Remission of Duties and Taxes on Exported Products (RoDTEP), (Production-Linked Incentive) PLI schemes, and infrastructure projects such as Petroleum, Chemicals and Petrochemicals Investment Region (PCPIRs) and Plastic Parks are boosting the competitiveness of the sector, drawing in investments, and fostering world-class manufacturing capabilities.

• Cost & Capability Advantages

With its low production costs, skilled workforce, and plentiful natural resources, India has an inherent advantage. This, coupled with a heightened focus on sustainability and compliance, boosts its position in the global chemical market.

• Robust Long-term Growth Outlook

According to McKinsey, the sector is expected to grow at 11–12% (2021–27) and 7–10% (2027–2040), potentially tripling its global market share by 2040—afirming Indias emergence as a chemical manufacturing powerhouse. Although the broader tari_ actions impact a variety of Indian exports, the overall consequences are manageable, owing to Indias well-rounded trade network, expanding ties with new markets, and sustained efforts to improve domestic competitiveness.

GLOBAL SPECIALTY CHEMICALS

The global specialty chemicals market continues to chart a steady growth trajectory, reflecting the sectors pivotal role in enabling innovation across diverse industries. The market is projected to grow to $ 803.61 billion in 2025 at a CAGR of 4.4%, and further surge to $ 1,001.79 billion by 2029 with a higher CAGR of 5.7%. This sustained growth is being driven by the sectors agility, increasing demand for tailored and high-performance chemical solutions, and an accelerated shift towards sustainability and digitalisation.

Global Specialty	2025	2029	CAGR
Chemical Industry Size Projections	US$ 803.61 billion	US$ 1001.79 billion	5.7%

(Source: https://www.thebusinessresearchcompany.com/report/ speciality-chemicals-global-market-report)

Key Trends Shaping the Future of Specialty Chemicals

• Sustainability Focus

Increasing regulatory demands and shifting consumer preferences are compelling manufacturers to explore eco-friendly formulations, bio-based feedstocks, and low-carbon chemical alternatives.

• Smart Manufacturing & Industry 4.0

The integration of AI, IoT, and automation is transforming production processes, improving efficiency, accuracy, and customisation, enabling companies to quickly adapt to market changes.

• Customisation & Performance

The growing need for application-specific chemicals in industries such as automotive, electronics, and personal care is driving innovation, resulting in higher-value, premium products.

• Advanced Water & Environmental Solutions

Rising environmental concerns are accelerating advancements in water treatment, waste management, and pollution control technologies.

• Global Market Expansion

Companies are expanding their presence in emerging markets and diversifying their product offerings to meet the increasing global demand, bolstered by a flexible and resilient supply chain.

• Packaging and Adhesive Innovations

The boom in e-commerce, food delivery, and sustainable packaging is creating strong demand for high-performance adhesives, coatings, and barrier materials.

(Source: https://blog.tbrc.info/2025/01/specialty-chemicals-market-growth-analysis/)

INDIAN SPECIALTY CHEMICALS

Indias specialty chemicals sector is becoming a key player in the global chemical industry. Growing at 12.2% a year between CY 2019 and CY 2024, it is projected to hit US$ 64 billion by CY 2025, driven by growing domestic consumption, rising exports, and greater import substitution. Important categories like agrochemicals, dyes & pigments, and flavours & fragrances are central to this growth. Over half of Indias chemical exports consist of specialty chemicals, showing the countrys increasing importance on the world stage. Backed by government programmes such as the National Logistics Policy, Gati Shakti, and Sagarmala, and a push to reduce reliance on imports, India is becoming a top choice for manufacturing value-added, specialised chemical products.

(Source: Yamada Report, December 2024)

GROWTH DRIVERS

• Rising Export Demand

India is capitalising on the diversification of global supply chains, driving increasing exports to the US, Europe, and Southeast Asia, especially in agrochemicals.

• Growing Domestic Consumption

A rising middle class, urbanisation, and higher living standards are boosting demand for specialty chemicals in personal care, home care, and infrastructure sectors.

• Government Support & Policy Push

Government initiatives like Make in India, Atmanirbhar Bharat, and the proposed PLI scheme are encouraging local manufacturing and reducing import dependency.

• Increased Investments & Capacity Expansion

Indian specialty chemical companies are ramping up capacity and R&D, supported by strong FDI inflows and strategic global partnerships.

• Emphasis on Sustainability & Green Chemistry

There is a growing industry focus on eco-friendly and sustainable chemical production to meet global environmental standards and consumer expectations. (Source: https://www.fibre2fashion.com/industry-article/10198/ the-rise-of-the-indian-specialty-chemicals-industry-an-overview-of-the-last-five-years)

COMPANY OVERVIEW

Vinati Organics Limited (referred to as ‘Vinati or ‘the Company) emerged early in speciality chemicals industry by blending innovation with advanced chemistry to create value-added products. Since 1989, the Company has grown from a single-product operation to a key player in the specialty chemicals and organic intermediates, now offering over 30 products. With a presence in over 40 countries, Vinati supplies major industrial and chemical companies across the US, Europe, and Asia.

The Companys four state-of-the-art manufacturing plants in Mahad and Lote enable it to deliver a broad, specialised portfolio to niche markets worldwide. With offerings ranging from organic to niche specialty chemicals, Vinati meets diverse global needs. Backed by strong R&D, the Company delivers reliable, cost-e_cient solutions. Its commitment to innovation ensures continued leadership in high-value segments, thereby connecting the worlds through chemistry.

FINANCIAL HIGHLIGHTS _STANDALONE_

(In Rs Cr)

Metrics	2024-25	2023-24	YoY Change (%)
Total Income	2,292.39	1,938.78	18.24
EBITDA	629.50	508.89	23.70
PAT	415.23	323.39	28.40
Net Worth	2,806.71	2,464.40	13.89

For the financial year 2024-25, the total income stood at

Rs 2,292.39 Cr, compared to Rs 1,938.78 Cr in the previous financial year, reflecting an 18.24% increase. EBITDA also rose by 23.70% to Rs 629.50 crores from Rs 508.89 crores. As a result, profit after tax also increased by 28.40%, climbing from Rs 323.39 crores to Rs 415.23 crores. Furthermore, the EBITDA margin improved from about 26.25% to 27.46% for the financial year 2024-25.

KEY FINANCIAL RATIOS _STANDALONE_

Ratios	2024-25	2023-24
Net Debt-Equity Ratio (%)	0.02	0.00
Current Ratio (x)	3.28	4.73
Interest Coverage Ratio (x)	1055.29	120.10
Receivables Turnover Ratio (x)	4.00	3.82
Inventory Turnover Ratio (x)	7.75	6.37
Operating Profit Margin (%)	23.94	22.49
Net Profit Margin (%)	18.11	16.68

OPERATIONAL HIGHLIGHTS

• The ATBS segment achieved 30% growth in 2024-25 driven by volume expansion. Demand remains strong, and we expect continued growth in 2025-26. The Companys global market share in ATBS remains steady at over 60%, reinforcing its leadership position in the industry.

• The Butyl Phenols segment maintained its consistent growth trajectory.

• The AO business posted an impressive revenue jump in 2024-25, despite prevailing market challenges. IB also achieved strong growth in 2024-25.

• In 2024-25, Vinati allocated Rs 391 crore towards capital expenditure, including investments in VOPL. These investments focus on capacity enhancements, adding new products, and scaling operations.

Outlook

Our 2024-25 results underscore the strength of our business model—resilient, agile, and strategically positioned for sustained value creation. We delivered strong financial results, drove operational excellence, and made strategic advancements, ensuring we remain well-positioned to capitalise on future opportunities.

As we step into 2025-26 we will continue leveraging our leadership position and expanding our market footprint. We will maintain a sharp focus on operational efficiencies to optimise margins and enhance profitability through disciplined cost management. Over the next three years, we expect strong revenue growth, supported by our leadership in ATBS, steady performance in Butyl Phenols, and expansion in Antioxidants.

We expect to complete Phase 1 of our ATBS capacity expansion in Q2, significantly strengthening our ability to meet rising demand. Under VOPL, we are set to introduce several new products across Q2 and Q3 2025-26, aimed at applications in polymerisation inhibitors, oilfield resins, flavours, fragrances, personal care, and pharmaceuticals. Our R&D team is developing three to four new products, which, upon successful trials, could prompt us to announce the next phase of capex in the coming quarters. Looking ahead, we have earmarked Rs 350-400 crore for Capex in 2025-26 to continue investing in expansion, innovation, and operational efficiency.

Our disciplined execution and innovation-driven approach will continue to drive our success.

RISK MANAGEMENT

The Company embeds risk management into its strategic thinking and operational planning. Vinati recognises that proactively identifying, assessing, and mitigating risks sustains long-term growth and creates value. Our risk framework addresses a broad spectrum of potential challenges, from customer satisfaction, and environmental and sustainability concerns to people-related issues, supply chain vulnerabilities, and geopolitical uncertainties.

For more details, refer to Page 91.

HUMAN RESOURCES

Vinati regards its people as its greatest strength. The Company fully commits to building a culture that puts people first, embraces diversity and fosters inclusion. The Company creates a workplace where everyone feels a strong sense of belonging, and Vinati invests heavily in training and growth. This approach yields some of the lowest attrition figures in the industry. Additionally, the Companys ongoing efforts to support and develop talent attract skilled individuals and prepare them to take on leadership roles.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis (MD&A) section relating to the Companys future outlook are forward-looking in nature. These involve known and unknown risks and uncertainties—both identified and unforeseen—that may cause actual results to differ materially from those expressed or implied. Factors such as macroeconomic shifts, global events like pandemics (e.g., COVID-19), and evolving business environments may significantly impact outcomes. These statements are based on assumptions derived from internal and external information available at the time of writing. As these assumptions are subject to change, so are the estimates based on them. Forward-looking statements reflect the Companys current views, beliefs, and intentions as of the date of publication. The Company undertakes no obligation to update or revise any such statements in light of future developments.