Vishnu Chemicals Ltd Management Discussions

Economic Overview

Global Economy

The global economy continues to demonstrate endurance amid a complex and evolving environment. The IMFs April 2026 World Economic Outlook projects global growth at 3.1% in 2026 and 3.2% in 2027, remaining steady though below long-term averages. Underlying these projections is the lingering impact of geopolitical tensions in the Middle East and rising geoeconomic fragmentation.

These developments have heightened volatility across commodity markets, particularly energy, alongside tighter global financial conditions. Oil prices are expected to remain elevated through the year before moderating, while non-fuel commodity prices continue to exhibit variability, influencing cost structures across industrial value chains.

Inflation dynamics remain uncertain, with global consumer inflation projected at ~4.4% in 2026 before moderating to 3.7% in 2027. This trajectory reflects the impact of commodity price movements, supply-side disruptions and elevated inflation expectations driven by geopolitical risks. For input-intensive industries, this translates into continued cost volatility, particularly across energy, minerals, and logistics.

Emerging markets are expected to face relatively higher inflationary pressures compared to advanced economies, with inflation projected at 5.5% in 2026.

This could influence consumption patterns, investment cycles and industrial output. This impact is likely to be more pronounced in commodity-importing economies where currency pressures and external vulnerabilities persist.

Rising defence expenditure due to shifting geopolitical alignments is reshaping fiscal priorities across the world. With an increase in public spending and debt levels already high, fiscal pressures are intensifying and financial conditions are tightening. This is reducing policy flexibility, raising borrowing costs, particularly for developing economies and adding to volatility across global financial markets.

Simultaneously, rising trade fragmentation and supply chain realignments are altering global industrial dynamics. Increasing barriers to trade, capital flows, and technology diffusion are expected to weigh on medium-term growth prospects and reduce efficiency across global production networks.

Across industrial manufacturing sectors, these macroeconomic shifts have implications for demand cycles and input costs. Volatility in energy and raw material prices, along with evolving trade flows, continues to influence production economics and procurement strategies. While global trade volumes show signs of recovery, growth momentum remains below pre-pandemic trends, reflecting cautious demand conditions and ongoing supply chain adjustments.

During the year 2025-26, India maintained macroeconomic stability, supported by strong domestic fundamentals despite a challenging global environment. For 2026-27, GDP growth is projected between 6.8%-7.2 %, positioning the country among the fastest-growing major economies. This growth was driven by sustained domestic consumption, continued public investment and steady expansion across the services and manufacturing sectors.

The evolving economic landscape reflects the Indian economys continued resilience and growth momentum amid a dynamic global environment. Sustained domestic demand, infrastructure development and improving manufacturing ecosystem continue to strengthen the countrys economic fundamentals. These factors are helping India maintain its position as one of the faster-growing major economies while supporting long-term and inclusive growth.

Inflation trends during 2025-26 were shaped by a mix of domestic and global influences. Improved supply conditions initially helped ease price pressures; however, this moderation proved uneven as rising energy costs and heightened volatility in global commodity markets reintroduced upside risks. As a result, for material-intensive sectors, including metals and chemicals faced challenges which led to input cost variability and margin sensitivity.

The Reserve Bank of India (RBI) maintained a calibrated and cautious monetary policy stance, balancing price stability with growth support in response to these evolving dynamics. This approach

Domestic demand remained the primary growth engine, supported by stable private consumption, stable rural demand, and improving urban consumption amid inflationary pressures.

This momentum is being further reinforced by significant investments in infrastructure, including the development of freight and industrial corridors, as well as expanded logistics connectivity.

These efforts are expanding demand across core sectors while improving supply chain efficiency. Consequently, industrial throughput is improving, supporting strong demand for material-intensive industries. In parallel, emphasis on R&D and clean energy initiatives is boosting the manufacturing ecosystem for speciality chemicals in India.

Meanwhile, private sector investment is gaining traction, supported by improved capacity utilisation and stronger corporate balance sheets. However, high borrowing costs and global demand uncertainties are keeping businesses cautious about large-scale expansions.

The countrys external sector remained relatively stable despite global uncertainties. Strong services exports and resilient remittance inflows helped sustain the balance of payments. However, crude oil prices and related derivatives are expected to remain volatile amid geopolitical developments, evolving supply dynamics and uncertain global demand conditions. Despite these challenges,

India continues to address these through a combination of prudent fiscal and monetary policies, infrastructure-led growth, manufacturing reforms, and diversification of energy and trade partnerships. This is further reinforced by strong foreign exchange reserves, structural reforms, digitalisation initiatives continued focus on domestic manufacturing and supply chain integration targeted measures aimed at simplifying customs processes, and streamlining export logistics collectively enhancing ease of doing business.

Together with supply chain modernisation and localisation of critical inputs, these trends are expected to support long-term demand across speciality chemicals and industrial processing segments.

The global chemicals industry entered 2026 at an inflection point, shaped by a combination of cyclical pressures and structural shifts. Following nearly three years of subdued demand, destocking, and margin compression, the sector began to show early signs of stabilisation. Global chemical production is expected to grow by ~3.5%. However, recovery remained uneven across regions and product segments.

Ongoing capacity additions, particularly in commodity chemicals are outpacing demand, resulting in lower utilisation levels and margin pressures. This imbalance is further amplified by significant capacity expansion.

Geopolitical developments are further shaping industry dynamics. Ongoing conflicts and trade realignments have led to volatility in energy markets, directly affecting production economics. In parallel, tariff uncertainties, regulatory divergence, and evolving trade policies are altering global supply chains and market access. Collectively, these factors are driving a shift towards more agile and regionally balanced operating models. As these shifts unfold, regional competitiveness continues to diverge.

Within this context, speciality chemicals have exhibited relatively stronger endurance than commodity segments. This performance is underpinned by application-driven demand and lower earnings volatility, even as selective segments begin to experience gradual commoditisation pressures.

Capacity Rationalisation and Cost Discipline: Continued focus on optimising asset footprints and restoring supply-demand balance

Shift towards Speciality and Downstream Segments: Increasing focus on higher-value, application-driven products

Energy and Feedstock Advantage Shaping Competitiveness: Regional cost structures influencing global positioning

Supply Chain Resilience and Regionalisation: Diversification and localisation to mitigate geopolitical risks

Sustainability and Circularity: Gradual transition towards low-carbon technologies, recycling, and resource efficiency

Digital and AI-led Transformation: Increasing adoption of advanced analytics to enhance productivity and innovation

Cleaner Energy Transition: Growing emphasis on cleaner energy transition, sustainability and low-carbon industrial processes

Indias chemicals industry is entering a scale-up phase, supported by strong domestic consumption, rising manufacturing depth, and increasing integration into global supply chains. Companies have developed capabilities across complex chemistries, reliable operations, and cost-efficient production, creating a strong base for future growth. The domestic chemicals market is projected to exceed USD 300 Bn by 2030 as per various reports, driven by rising consumption, premiumisation and expanding industrial applications.

However, the operating environment has become more demanding. Global overcapacity, pricing pressure and trade fragmentation have affected margins across segments. While the industry has delivered strong returns historically, recent performance reflects a divergence, with speciality chemicals performing relatively better than base chemicals. Industry growth has broadly tracked nominal GDP, though profitability has moderated.

India also continues to face structural import dependence across several chemical chains, particularly in feedstock, intermediates and speciality chemicals, resulting in a significant trade deficit for the sector. This presents a significant opportunity for domestic capacity creation, backward integration and import substitution across multiple industrial value chains

Policy support continues to strengthen the sectors growth outlook. The Union Budget 2026-27 emphasises domestic manufacturing, reduced import dependence, supply chain resilience, improved energy transition and sustained public investment.

(Source: https://www.indiabudget.gov.in/)

Indias speciality chemicals industry has evolved into a structurally stable segment, driven by application-led demand across agrochemicals, personal care, coatings, and advanced manufacturing. The segment benefits from higher value addition, customised offerings and stronger customer linkages, leading to relatively more stable demand than commodity chemicals. Over time, Indian companies have built capabilities in complex chemistries, process reliability, regulatory compliance, enabling deeper integration into global supply chains.

As per market research by the CMI Team, the industry is expected to record a CAGR of 4.8% from 2024 to 2033. While near-term pressures from global demand moderation and pricing persist, the long-term growth trajectory remains supported by expanding domestic consumption, supply chain diversification and increasing participation in global value chains.

Indias inorganic chemicals industry is a critical backbone of the industrial ecosystem, supplying essential inputs to sectors such as agriculture, construction, automotive, and manufacturing. As per the market research by CMI Team, the market was valued at ~USD 44.6 Bn in 2024 and is expected to register a CAGR of around 5.8%, reaching nearly USD 74 Bn by 2033.

With increasing urbanisation, infrastructure development, and agricultural productivity requirements, the industry continues to benefit from a steady underlying demand. Simultaneously, improvements in process efficiency and product quality are enhancing competitiveness while also enabling the expansion of application areas across emerging industrial uses.

Vishnu Chemicals Limited (also referred to as ‘Vishnu Chemicals, ‘Our Company, or ‘We) is a leading manufacturer of speciality chemicals, driven by a strong manufacturing focus and disciplined leadership. Over time, we have built competitive strengths through a flexible product mix, process innovation, and multi-site capabilities, that enable efficiency, stability, and market presence.

Our Company places strong emphasis on resource efficiency, and sustainable practices, including waste reduction and recycling, which supports responsible growth. Alongside operational excellence, we remain committed to employee empowerment and community development, while maintaining a consistent track record of financial discipline and dividend payouts.

Our Chairman and Managing Director, Mr. Ch. Krishna Murthy, was honoured by Hurun India for his Outstanding Contribution to the Economy of Andhra Pradesh and Telangana, recognising his leadership and contribution towards industrial growth and economic development.

Our Visakhapatnam manufacturing facility received the prestigious CII National EHS Excellence Award 2025 - Silver and the CII Industrial Safety Leadership Award - Silver in the Chemical and Paper Industries category, recognising our commitment to world-class environmental, health and safety practices.

Vishnu Chemicals Limited adopts a proactive and structured approach to risk management, recognising the need for continuous assessment and timely response to emerging risks in a dynamic environment. The risk management framework is designed to identify, evaluate, and mitigate potential threats, while enabling our Company to capitalise on opportunities arising from market shifts.

Risk oversight is exercised through close coordination between the Audit Committee and Management, ensuring regular review and effective mitigation of key risks. This integrated approach strengthens operational resilience and supports sustained long-term performance.

Vishnu Chemicals has established a strong internal financial control framework, aligned with its scale and operational complexity. Within this framework, a clearly defined delegation of authority governs approval thresholds for both capital and revenue expenditures.

These controls are designed to ensure the accuracy and reliability of financial and operational reporting, compliance with applicable accounting standards and regulatory requirements. In addition, they safeguard assets, ensure proper authorisation of transactions, and adherence to established corporate policies. To enhance operational efficiency and strengthen financial reporting processes, we have implemented SAP. This enables seamless transaction recording and improved data visibility across functions.

The Audit Committee, in coordination with Management, regularly reviews the effectiveness of internal financial controls, including periodic evaluations based on inputs from internal and external auditors. This ensures that the control systems remain strong and responsive to evolving business requirements.

Based on these reviews, the Audit Committee has affirmed the adequacy and effectiveness of the existing control framework and provides regular updates to the Board of Directors. While acknowledging the inherent limitations of any control system, our Company continues to mitigate risks through periodic audits and ongoing process improvements, ensuring a dynamic and effective control environment.

People remain central to our ability to execute business strategy and adapt to an evolving environment. During the year, the focus remained on building a workforce that combines technical expertise with endurance, enabling consistent performance across operations and markets.

We strengthened our people practices with greater emphasis on capability building, engagement, and accountability. Structured learning initiatives and on-the-job development continue to enhance functional depth and decision-making effectiveness.

A strong emphasis on inclusivity and collaboration underpins the work culture, encouraging employees to contribute ideas, take ownership, and participate in driving operational and business outcomes. Recognition as a ‘Great Place to Work for 2024-25 and 2025-26 reflects sustained efforts towards building a transparent, trust-based, and high-performance organisation.

Employee engagement and well-being continued to be key priorities. Regular engagement initiatives include inter-unit cricket tournament, yoga programmes, training programmes, supporting collaboration and a balanced work environment. These efforts contribute to improved morale, stronger retention, and a more cohesive organisational culture.

Continued investment in people capabilities has translated into improved operational efficiency, better cross-functional coordination, and enhanced responsiveness to customer requirements. Going forward, the focus will remain on strengthening talent pipelines, enhancing leadership depth, and aligning workforce capabilities with evolving business priorities.

This report contains forward-looking statements relating to anticipated future events, financial performance, and operational outcomes of the Company. These statements are based on certain assumptions and expectations of future developments and are therefore subject to inherent risks and uncertainties. Actual results may differ materially from those expressed or implied in these statements due to various factors, including changes in economic conditions, market dynamics, regulatory developments, and other risks beyond the Companys control. Readers are advised to exercise caution and not place undue reliance on these forward-looking statements. The Company undertakes no obligation to publicly update or revise any such statements based on subsequent developments. This document should be read in conjunction with the assumptions, qualifications, and risk factors detailed in the Companys Annual Report for 2025-26, including the section on Management Discussion and Analysis.