Vipul Organics Ltd Management Discussions

GLOBAL ECONOMY

Economic growth stabilised in 2024 as inflation eased and monetary policies turned supportive across key markets. Amid shifting trade dynamics, major economies recalibrated strategies to bolster resilience and promote inclusive development. Commodity prices showed mixed trends, with stable levels in H2 driven by ample supply and muted demand. Oil remained under pressure due to weak global consumption and high inventories. Global trade is projected to grow by 3.3%, led by a 5.0% expansion in emerging markets and 2.1% growth in advanced economies.

Outlook

The global economy remains resilient, with output projected to grow by 2.8% in 2025 and 3.0% in 2026. The US sustains strong momentum, while emerging markets show robust potential. Europes advanced economies are set for moderate expansion. Headline inflation is forecast at 4.3% in 2025, easing to 3.6% in 2026. Advanced economies are expected to reach the target inflation of 2.1% by 2025. Crude prices are likely to decline, while nonfuel commodities may rise 2.5%, boosting resource-led sectors.

** Projected

INDIAN ECONOMY

India, the worlds fastest-growing major economy, is expected to maintain its growth momentum in FY 2024-25, albeit at a moderate pace, due to the high base effect. India recorded a GDP growth of 6.5% in FY25, supported by resilient consumer spending, improving rural demand, expansion in services and a growing contribution of high-value manufacturing to exports.

Inflation and Monetary Policy

Inflation eased to 4.6% in FY25 from 5.4% the previous year, driven by softening commodity prices. In response, the MPC cut the repo rate by 50 bps to 6.0%·its first dual-rate reduction in five years. This accommodative stance improved liquidity, lowered borrowing costs and boosted credit flow to productive sectors.

Agricultural, Manufacturing and Industrial Activity

India posted broad-based growth in FY25: agriculture grew 3.8%, industry 6.2% and services 7.2%. The core sector held steady at 4.6%. Manufacturing surged, with PMI reaching 58.1 in March·its highest since July 2024·on strong orders and output. GST collections rose 9.98% to C 16.75 lakh crore, reflecting robust activity and improved compliance.

External Sector Activity

India posted a current account deficit of US$23.3 billion (0.6% of GDP), moderated by strong net invisible receipts from robust services exports and remittance inflows. Between April and December 2024, services exports surged 11.6%, while overall exports grew 6.0% YoY. Reflecting this resilience, foreign exchange reserves hit a record US$688.13 billion by April 2025.

Outlook

Indias economy is projected to grow at 6.3-6.8% in FY26, moderating from a high base yet remaining among the fastest-growing major economies. External risks, such as global slowdown, geopolitical tensions, U.S. tariffs and trade disruptions, pose headwinds. Domestically, urban demand, food inflation and weak capital formation require close watch. Indias trade landscape is evolving, with 13 active FTAs and ongoing negotiations with the EU, ASEAN and new partners across Africa, Latin America and the Arab Gulf to deepen global integration.

Real GDP Growth Rate Compared to major world economies (FY19-FY25)

(Source: Cushman Wakefield)

(Sources: IMF, World Bank, The Business Standard, India Today, The Mint, PIB, The Economic Times, Trading Economics)

GLOBAL DYES AND PIGMENTS MARKET

Dyes and pigments are essential across paints, plastics, textiles and inks. Dyes offer finer dispersion but lower UV stability, while pigments excel in durability and UV resistance. Driven by population growth, industrial demand and e-commerce, the market is projected to grow from US$44.41 billion in 2024 to US$46.33 billion in 2025, reaching US$87.99 billion by 2037, with a compound annual growth rate (CAGR) of 5.4%. Asia Pacific will lead this expansion.

Contribution Towards Textile and Sustainable Packaging

The global apparel market is expected to reach US$1.84 trillion by 2025, with textiles projected to reach US$2.05 trillion and grow to US$4.91 trillion by 2037, at a compound annual growth rate (CAGR) of 7.4%. This expansion is driving demand for dyes and pigments, particularly eco-friendly, biodegradable variants such as organic pigments, which align with shifting consumer preferences and regulatory norms in developed markets. Manufacturers are investing in greener product

lines, while the sustainable packaging market is expected to grow from US$430.01 billion in 2025 to US$709.23 billion by 2032, driven by efforts from FMCG and e-commerce companies to reduce waste and emissions.

The Rise of The Automotive Sector

Rising automotive sales are driving demand in the dyes and pigments industry, with manufacturers focusing on high-performance, weather-resistant and aesthetically advanced solutions. Global light vehicle sales reached 84 million units in 2024. It is expected to grow further, reinforcing the sectors role in colourant innovation. Asia Pacific, supported by raw material availability and strong end-use industries and Europe, with its focus on technology and sustainability, remain the key growth hubs for the global dyes and pigments market.

(Sources: ResearchNester, Uniform Market, Fortune Business Insight, Grandview Research)

INDIAS SPECIALTY CHEMICALS AND MEMBRANE TECHNOLOGY LANDSCAPE

Specialty Chemicals: Driving Industrial Growth

Specialty chemicals are highly engineered chemical products, also known as performance chemicals or effect chemicals, designed to provide a specific function or unique benefit to a finished product. Unlike commodity chemicals produced in bulk, specialty chemicals are manufactured in smaller quantities to meet specific customer needs, often requiring extensive research and development and proprietary formulations. They are used in a wide range of industries, including food, cosmetics, pharmaceuticals, agriculture and electronics, to enhance product performance and facilitate specific processes.

The Indian Specialty Chemicals sector, valued at US$62.78 billion in 2024, is poised to reach US$95.15 billion by 2030, growing at a CAGR of 8.67%. The specialty chemicals are high-value, low-volume products with applications across agriculture, pharmaceuticals, textiles, automotive and personal care. Indias advantages in process engineering, skilled manpower and cost-competitive manufacturing, combined with the global China+1 strategy, have strengthened its position as a preferred sourcing hub. With rising domestic demand, strong export momentum, and steady R&D investments in sustainable solutions, India is poised to play a pivotal role in reshaping the global specialty chemicals supply chain.

Membrane Technology: Enabling Sustainable Growth

The market for membrane separation technology in India is poised for strong growth, driven by rising awareness around wastewater treatment and the need to meet stringent water quality regulations. Membrane separation technology, a process that utilises semi-permeable membranes to separate substances selectively, is becoming increasingly indispensable in water treatment, industrial filtration, and pharmaceutical applications.

The Indian membranes market size reached US$241.88 million in 2024 and is expected to reach US$521.01 million by 2033, growing at a CAGR of 8.90% from 2025 to 2033.

Growth is further supported by the rapid expansion of the biopharmaceutical industry, Indias position as a major pharmaceutical exporter and the increasing adoption of this technology across various sectors, including food processing, healthcare and industrial applications.

With regulatory frameworks and environmental concerns gaining priority, membrane technology is set to play a crucial role in Indias sustainable industrial and economic development. Under the Swachh Bharat Mission (Urban) 2.0, launched in October 2021, nearly US$1.9 billion has been allocated to States and Union Territories for wastewater management, including new sewage treatment plants (STPs) and faecal sludge treatment plants (FSTPs), further boosting adoption of advanced membrane solutions.

INDIAN DYES AND PIGMENTS MARKET

In 2024, Indias dyes and pigments market showed strong resilience, rebounding from global economic headwinds and supply chain disruptions. As a key global manufacturer and exporter, the industry experienced notable volume growth and a recovery in exports following the decline in the prior year. While margin pressures persisted due to raw material volatility, regulatory constraints and global competition, Indias self-reliance initiatives and shifting global sourcing patterns supported sustained momentum.

The market reached US$1.28 billion in 2024 and is projected to grow at a CAGR of 3.26%, reaching US$1.70 billion by 2033. Growth is driven by robust demand across textiles, plastics, construction and packaging, coupled with the increasing adoption of eco-friendly colourants and supportive government policies that promote domestic manufacturing.

Textile Industry, the core driver

Indias textile industry is the largest consumer of dyes and pigments, driven by its global leadership in garment and fabric production. Demand spans a broad range of colourants·reactive, vat, disperse and acid dyes·serving both cotton and synthetic textiles. However, a 50% US import tariff on Indian exports, particularly textiles and chemicals, has raised costs and weakened competitiveness. This poses risks to export volumes. In contrast, the UK-India FTA presents new growth opportunities. The government is actively addressing challenges through export incentives and market diversification strategies.

Paints Industry

The paints and coatings industry in India is experiencing robust growth, with the market projected to increase from US$9.6 billion in 2024 to US$15.04 billion by 2029, representing a compound annual growth rate (CAGR) of 9.38%. This surge is closely tied to Indias booming real estate sector, driven by rising housing demand, rapid urbanisation and shorter repainting cycles.

Residential sales hit an 11-year high in H1 2024, supported by improved infrastructure and

widespread development beyond tier-1 cities. As more homes and commercial spaces are built and refurbished, the need for vibrant, durable pigments in paints is rapidly increasing, positioning the dyes and pigments industry at the heart of Indias urban transformation.

Plastics and Packaging

Driven by FMCG, pharma and e-commerce, Indias plastics and packaging sector is a fast-growing consumer of pigments. Colourants, such as masterbatches, plastic dyes and high-performance pigments, play a key role in aesthetics, branding and UV protection.

As demand rises for advanced packaging, flexible, multilayer and biodegradable materials, so does the need for specialty pigments compatible with these materials. Regulatory pressures, particularly for food-grade and pharmaceutical-safe applications, are driving the shift to certified, non-toxic solutions.

Indias biodegradable packaging market reached US$3.51 billion in 2024 and is projected to grow to US$5.59 billion by 2033, with a compound annual growth rate (CAGR) of 5.30%, driven by environmental awareness, policy restrictions on single-use plastics and evolving consumer preferences.

Sustainability & Global Collaboration

Demand for eco-friendly dyes and pigments is rising, driven by shifting consumer preferences and regulatory pressures. The natural dye market, valued at US$250 million in 2022, is expected to double, fuelled by investments in green chemistry and biodegradable, non-toxic bio-dyes.

Technological advances and cost-effective methods are accelerating the adoption of biodegradable packaging across the food, e-commerce and personal care sectors, particularly in these areas. In India, sustainability is reshaping the pigment and textile industries. Joint EU-India initiatives across nine states are promoting natural dyes, bamboo crafts, and handlooms, while supporting artisans, MSMEs, and farmers. Aligned with the Sustainable Bharat Mission and the EUs Global Gateway Strategy, these efforts reflect Indias commitment to a greener and more inclusive economy.

Government Initiatives: Indias sustainability agenda is driven by key initiatives, including the National Action Plan on Climate Change (NAPCC), the Green

India Mission and the Swachh Bharat Abhiyan. These programs are driving cleaner production, resource efficiency and environmental stewardship. The NAPCC promotes climate-resilient growth and green technologies. The Green India Mission enhances forest cover and supports the cultivation of natural dyes, including indigo and turmeric. Swachh Bharat Abhiyan strengthens waste management and pollution control, encouraging cleaner industrial practices. Collectively, these efforts are fostering a supportive policy landscape for the organic dyes and pigments market, advancing renewable raw materials, non-toxic colourants and sustainable manufacturing, especially in textiles and allied sectors.

THE COLOUR CHEMISTRY OF DYES AND PIGMENTS

Colour enhances the natural world, adding beauty and meaning through the interaction of light with the human eye. Colourants are materials used to impart or alter hue across various substances. Dyes and pigments are the most common colourants, essential across various industries, including textiles, pharmaceuticals, food, cosmetics, plastics, paints, inks, photography and paper. Dyes are organic compounds that bond chemically with substrates like textiles, paper and plastics, delivering vibrant, long-lasting colour through chromophores. Pigments, by contrast, are insoluble solid particles·organic or inorganic·known for their chemical stability. Available in a range of shades, including black, white and fluorescent, they are widely used to colour paints, inks, plastics, fabrics, cosmetics and food.

ABOUT THE COMPANY

Vipul Organics is a leading player in the specialty chemicals sector, with a strong focus on pigments and dyes. The company manufactures a wide range of products catering to various industries, including paints, plastics, paper, leather and textiles. Renowned for its expertise in pigments, dyestuffs, pigment intermediates, naphthols, fast salts and lake colours, Vipul Organics holds a strong position in the domestic market and has a global footprint spanning over 50 countries.

Headquartered in Maharashtra, the company operates three state-of-the-art manufacturing facilities and a world-class R&D centre dedicated to developing and testing advanced dye and pigment solutions. Backed by a robust domestic and

international distribution network, Vipul Organics ensures efficient market access and timely delivery across diverse geographies.

Vipul Organics is establishing a state-of-the-art membrane R&D and production facility in Sayakha, Gujarat, led by Dr. Vatsal Shah. This initiative will enable the Company to develop and supply advanced membrane solutions for both domestic and international markets. Membrane technology is vital to water treatment, food processing, pharmaceuticals and industrial filtration. The technology is witnessing rising global demand driven by sustainability and the need for clean water.

FINANCIAL PERFORMANCE

Vipul Organics Ltd reported strong financial results for FY25, underscoring its continued growth and operational resilience in the organic pigments and intermediates sector.

• Revenue Growth: Consolidated sales rose to C163 crore, reflecting an 8.67% year-on-year increase driven by strategic market expansion and sustained customer demand.

• Improved Profitability: EBITDA surged 16.7% to C21 crore, with margins improving to 12.88%, highlighting effective cost optimisation and operational efficiency.

• Enhanced Returns: Profit before tax grew 20% to C6 crore, while Earnings Per Share (EPS) climbed 34.7% to C2.60, signalling stronger shareholder value creation.

The Companys balance sheet remains solid, with total assets of C155 crore, equity capital of C13 crore, and reserves of C51 crore·providing a stable foundation for future growth.

Vipul Organics continues to reinforce its market leadership through disciplined financial management, strategic investments, and a commitment to sustainable value creation.

Key Ratios

Standalone

Consolidated

R&D SEGMENT

At Vipul Organics, R&D is the cornerstone of growth and diversification. With a legacy of over five decades in the chemical industry, the Company continues to strengthen its innovation-led approach by developing high-value, performance-oriented solutions tailored for emerging applications.

A recent breakthrough by the in-house R&D team has led to the development of a specialty compound for the automotive industry, used as an intermediate in the production of critical components such as shock absorbers and bumper extensions. This product, perfected over three years of rigorous research, has received approval for final application, underscoring the Companys ability to deliver world-class, industry-ready innovations.

This milestone not only adds a high-value product to the portfolio but also marks Vipul Organics entry into the automotive segment, opening new avenues beyond its established dyes and pigments business. With robust R&D capabilities, the Company remains committed to building a pipeline of novel products across high-growth, performance-critical sectors, positioning itself for sustained value creation.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company believes that Internal Control is one of the key pillars of governance, providing management with the freedom to operate within a framework of appropriate checks and balances. The Company has a robust internal control framework, which has been developed considering the nature, size and risks that could hinder the Company from achieving its objectives. The Company maintains a well-placed, proper and adequate internal control environment commensurate with the size, scale and complexity of its operations.

Internal control systems, comprising policies and procedures, are designed to ensure the reliability of financial reporting, compliance with relevant laws and regulations and adherence to applicable policies and procedures. It ensures that all assets and resources are acquired economically, used efficiently and adequately protected. All the company processes are carried out on the SAP system. The internal auditors and the finance team plan the yearly schedule in consultation with the Chief Financial Officer and Audit Committee. The Audit Committee reviews the major findings of the internal audit. The periodic report prepared by the internal audit team serves as the basis for the certification provided by the Managing Director and Chief Financial Officer for financial reporting.

HUMAN RESOURCE MANAGEMENT

Vipul Organics is driven by a committed and motivated team whose dedication plays a key role in the Companys continued growth. The Company places strong emphasis on fostering meaningful relationships with its employees, recognising that engagement and satisfaction enhance workplace effectiveness.

It values dedication, skill and contributions across all levels of operation. As a performance-oriented and learning-focused organisation, Vipul Organics consistently invests in its people by offering opportunities for knowledge enhancement, skill development and leadership growth.

Competitive compensation packages, best-in-class recruitment practices, comprehensive training programs, motivational initiatives and robust performance evaluations support the Companys ability to attract and retain top talent. These efforts have helped the Company maintain an attrition rate significantly below the industry average.

As of March 31, 2025, the Company employed over 119 staff members.

RISK MANAGEMENT

In todays dynamic business environment, a robust risk management system is essential for sustaining long-term success. Proactive risk management enables organisations to identify, assess and mitigate potential threats and vulnerabilities that could adversely impact performance.

Vipul Organics has implemented a comprehensive Enterprise Risk Management (ERM) framework to manage both risks and opportunities effectively. The Company follows a unified, standardised approach to ensure an integrated and cohesive strategy across all functions.

This framework fosters a risk-aware culture, supported by independent, proactive and systematic risk practices. It clearly defines roles and responsibilities and incorporates well-established principles, standards, tools, methodologies and ongoing training initiatives to strengthen organisational resilience.