vital chemtech ltd share price Management discussions

The Managements views on the Companys Performance and outlook are discussed below:

GLOBAL ECONOMY:

Goods trade slowed in the first half of 2022 as supply chains connued to be affected by the lingering effects of the pandemic, including disrupons in major Asian ports and lockdowns in key cies in China. In addion, Russias invasion of Ukraine and its repercussions have led to severe physical and logisc al dislocaons that have magni ed pre-exisng boleneck s.

Russia and Ukraine account for a small share under 3 percent of global exports. However, many global industries rely on supplies of key commodies produced in the two countries, especially in Russia. Shortages and unprecedented increases in the prices of these inputs have rippled through global value chains (GVCs), leading to producon s tandslls and ele vated producer prices. At the same me, transport costs have increased, including in the wake of the war in Ukraine. Navigaon and trade in the Black Sea have been materially disrupted, negav ely a ecng the transport of food and crude oil. Cargos and shipments held at Russian and Ukrainian ports have been rerouted through longer and more expensive routes.

Services trade has regained its pre-pandemic level, driven by a rebound in non-tourism services. While tourism acvity has started to recover in advanced economies with high vaccinaon levels, it remains generally subdued in EMDEs, especially in tourism-reliant countries and in small states. The invasion is also weighing on tourism acvity in countries that rely on tourists from Russia and Ukraine.

Global trade growth is ancipa ted to slow to 4 percent in 2022 as the war in Ukraine further disrupts global value chains, global acvity gradually shis back toward the less trade intensive services sector, and internaonal mobility moves toward pre-pandemic levels only gradually. This is a substanal downward revision relav e to previous forecasts, largely because of higher transport costs and significant global value chain disrupons associated with the war. Global trade growth is expected to moderate to an average of 4.1 percent in 2023-24 as global demand for tradable goods connues to decelerate

INDIAN ECONOMY:

A er a impending second wave of COVID-19, Indias retrieval is obtaining a push and GDP was ancipa ted to grow at 9.4% in FY 2021-22, before falling to 8.1% in FY2022-23, and 5% in FY 2023-24. However, the IMF was induce to slit Indias GDP projecon in January 2022 to 9% cing reasons of COVID-19 related virus spreads. In aon connues to remain high and is expected to ease as supply chain disrupons are overcome. Financial markets remained strong and capital in flows connued to support the build-up in reserves. Indias last mile vaccinaon drives coupled with its stringent policies helped weather out the third wave of COVID-19 e ecv ely in the first half of 2022.

Indias chemical industry is thriving due to rising demand and favourable government policies.

India boasts an impressive posion as the sixth-largest chemical producer globally and ranks third in the Asian region.

The chemical industry plays a crucial role in Indias economy, contribung a significant 7 percent to its GDP. It provides several building blocks and raw materials for various industries, including texles, paper, paints, soap and detergents, pharmaceuc als, and agrochemicals.

The chemical industry in India is valued at a substanal US$220 billion and experts predict that it could reach an astonishing US$1 trillion by 2040.

By 2025, the demand for chemicals in India is expected to grow by 9 percent per annum, and the chemical industry is ancipa ted to contribute US$383 billion to Indias GDP by 2030. This increase is expected due to the rise in demand in the end-user segments for specialty chemicals and petrochemicals segment.

India will connue to be impacted by the downsides in the global economy, as the financial environment remains volale on account of the war crisis in Europe. The macroeconomic policies remain unstable, as mulple sancons are being levied on Russia by European and Western countries. Indias economic and trade relaons with Russia remain largely unimpacted, but it sll poses a threat for the future, should the war escalate, and India is seen as having chosen sides.

GLOBAL CHEMICAL MARKET:

Global chemical growth moderated in 2022 due to lockdowns in China, supply chain boleneck s, and disrupons caused by the Russian invasion of Ukraine. As a result, global chemical output grew by only 2.0% in 2022. In 2023, producon is expected to expand at 2.9% amid rebound in Western Europe and the Asia-Paci c. The industry is focussing on meeng the growing global demand and enhancing sustainability through carbon reducon projects and advanced recycling and recovery. The biggest risk to the outlook is persistent in aon and connued increase in interest rates that could prolong and deepen the downturn, but other risks may include escalaon of wars, financial instability, and supply chain disrupons.

The US chemical industry had a strong start in 2022, with output growing by 3.9%. However, in 2023, this growth is expected to marginally decline due to deceleraon in end-use markets, a stronger dollar, and lower global growth. Many manufacturers have increased inventories of raw materials and products due to supply chain issues, which resulted in higher-than-normal inventories at the end of the year. US chemicals remain advantaged due to abundant domesc producon of natural gas. Capital spending grew 9.0% to US$ 33.5 billion in 2022 and is expected grow at 3.6% in 2023.

A er declining by 3.2% in 2022, chemical producon in Western Europe is expected to marginally grow at 0.8% in 2023. This is mainly due to an uncertain energy price outlook and depressed economic growth outlook. However, the silver lining is that natural gas prices have dropped to their pre-war levels and are expected to remain below the 2022 levels.

Chinas chemical industry is expected to recover a er the liing of COVID-19 restricons. Sectors such as pharmaceuc als and agricultural chemicals are expected to lead the growth.

INDIAN CHEMICAL INDUSTRY:

The Indian chemical industry is the 6th largest producer of chemicals globally and 3rd in Asia. India ranks 14th in chemical products exports and 8th in imports. The Indian chemical industry stood at US$ 232 billion in 2022, and is expected to reach US$ 304 billion by 2025, registering a CAGR of 9.3%. The cumulav e FDI equity in flow in the chemical industry (excluding ferliser s) was US$ 20.96 billion from April 2000 to December 2022. This constut ed 3.35% of the total FDI in flow across sectors.

India is the 4th largest producer of agrochemicals globally and reached a value of almost US$ 6 billion in the year 2022. The market is further expected to grow at a CAGR of 8.5% between 2023 and 2028, to reach a value of almost US$ 9.82 billion by 2028. Agrochemicals sector exports accounted for US$ 4.84 billion in CY 2022 with Y-o-Y growth of 28.7 %, while imports were US$ 1.69 billion with Y-o-Y growth of (2.39)%. Increased Government inia v es to assist farmers and rapid technological advancements are propelling the growth of the agrochemicals sector.

Speciality chemicals constut e 22% of the total chemicals and petrochemicals market in India. The sector is expected to reach US$ 40 billion by 2025. A significant opportunity for the Indian chemical industry is the increasing demand for specialty chemicals globally. Another opportunity for the industry is the growing demand for green chemicals, which are eco-friendly and sustainable.

For CY 2022, the export value of chemicals and allied products was up by 5% year-on-year, to US$ 63* billion, while imports were up 22% year-on-year, to US$ 95.96* billion.

The Indian chemical and petrochemical sector is expected to ar act an investment worth 8 lakh crore by 2025. The Union Budget 2023 is a growth-oriented, progressive and prudent budget with specific focus on stability, sustainable and inclusive development, announcing various policies which will generate demand for a variety of chemicals including construcon chemicals, emission control catalyst, polyurethanes, TPU (Thermoplasc Polyurethane), bio-pescides, etc. Further changes in BCD (Basic Custom Duty) rates of various goods like crude glycerin, denatured ethyl alcohol, acid grade uorspar, specified chemicals for manufacture of pre-calcined ferrite powder, etc. would provide impetus to the domesc demand for these products. However, the Indian chemical sector, which has all the ingredients to become a global manufacturing hub, connues to await the much expected and an cipated produc on-linked incen ve scheme, which has unfortunately not been announced in Budget 2023.

The Indian chemical industry has numerous opportunies, considering the supply chain disrupon in China and the trade conflict among the US, Europe and China. An-polluon measures in China will also create opportunies for the Indian chemical industry in specific segments. The dedicated integrated manufacturing hubs under Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy is expected to ar act an investment of Rs 20 lakh crore (US$ 276.46 billion) by 2035. Addionally , special incenv es through PCPIRs or SEZs (Special Economic Zones) to encourage downstream units will enhance producon and further boost the industry growth.

INDUSTRY REGULATIONS:

The market regulators, from me to me have introduced new regulaons in order to protect the interest of retail investors. During the last financial year, a number of new regulaons came into effect which will have a far reaching posiv e impact on the market especially from the point of view of retail investors.

Alternav e Risk Management Framework from Mul Commodity Exchange of India Limited (MCX)

Upfront margin for cash segment

Pledge-Repledge

Peak margin for intraday trading

INDUSTRY TREND AND BUSINESS ANALYSIS:

The trend in the stock market remain volale but the retail investors were reluctant to parcipa te in secondary market because the market value of the shares have increased too much that they were avoiding purchase of well performed Companys shares keeping in mind that effect of the government policies are yet to be reflected on ground. Your Company endeavored to mobilize high net worth investors for secondary market and accordingly Company was able to be in pro ts.

Opportuni es:

Over the next three years upto FY 26, ~US $4.2 billion worth of technical are expected to go o - patent, increasing the export potenal of India which has a strong presence in generics.

Government inia v es to provide credit facilies to farmers at low interest rates and other cash incenv es Increase in commodity prices expected to improve the farmers per hectare expenditure and pave way to the industry growth New product launches, younger acv e ingredients and new technologies to boost the industry Climate change has resulted in development of various new crop damaging pest like black thrips Indias capability in low-cost manufacturing, a strong presence in generic crop protecon segment, availability of technically trained manpower, seasonal domesc demand and unulised capacity is expected to drive export growth in next 3 years at a CAGR of 14-15%.

Challenges:

Unfavorable climac condions like errac rainfall can disturb the spraying windows Increased supply of lower-priced agrochemicals from China Stringent government regulaons on product development, registraon, and applicaon

BUSINESS OUTLOOK:

The Company is well prepared with the necessary levers to be a leading parcipan t in the Golden Decade of the Indian chemical industry. It is well poised for robust growth in the future with strong decisive acons to ensure that it remains at the forefront of its chosen chemical skill sets. Envisaging great potenal in ne w chemical value chains, the Company is prepared to leverage its experse to capitalise these emerging opportunies. The Company is set to explore new chemical value chains, add new chemistry like photochlorinaon, oxidaon, etc. and expand its exisng value chain. For this, the Company is looking to collaborate with worlds leading chemical companies, strengthen exis ng partnerships, build new partnerships and explore contract manufacturing/CDMO opportunies.

While the long term growth opportunies remains intact, the sector is witnessing significant headwinds in current financial year ie FY 23-24. Inventory correcons across various global markets for various end use industries has impacted the demand for various products. Further the recessionary trends and other prevailing global concerns has also impacted the demand for products across various discreonar y end use industries. These decline in demands has created a demand supply gap, which would put pressure on margins over a short term period. We expect that these macro concerns to be prevalent over a short term period with its impact being significant in the first half of FY 23-24 and are predicng the impr ovement to be visible gradually and progressively from the second half of FY 23-24. We are closely monitoring the development and taking adequate steps to steer through these unprecented circumstances. We remain con dent on our ability to weather this challenging mes and come out stronger and be er poised to connue on to our long term growth aspiraons.

Vital Chemtech Limited remains con dent in its ability to deliver on its long-term commitment led by its besn-class manufacturing processes, connuous process enhancements, strong R&D focus and an unwavering commitment to innovaon. The Company is invesng on the R&D for products catering to various sunrise sectors with growing focus on sustainable and green soluons, ba ery chemicals, electronics chemicals, new age materials, high end polymers, etc. The roadmap looks encouraging and Vital Chemtech Limited con dent to be able to capitalise the opportunies created through rapid shis in global chemical supply chains. Focus on R&D led product offerings together with incremental gains from exisng v alue chains will enable Vital Chemtech Limited to take advantage of the prevailing long term favourable industry trends and thereby create a stronger value proposion for all the stakeholders over a long term period.

RISK MANAGEMENT:

Risk management is an crucial aspect of Vital Chemtech Limiteds policy and decision-making process. We idenf y assess and mig ate potenal risks that could impact the a ainment of our objecv es. It helps us safeguard our assets, reputaon and financial stability. E ecv e risk management empower Vital Chemtech Limited to make informed and con dent choices, ancipa te potenal challenges and seize growth opportunies. It also ensures compliance with regulaons and enhances our stakeholder faith.

Overview:

In todays turbulent and ever-evolving business environment, it is essenal for an organisaon to emphasize on managing enterprise-wide risks e ec vely to achieve its strategic business objecv es. Vital Chemtech Limited has developed a robust Enterprise Risk Management (ERM) Framework based on the fundamental elements of global risk management standards such as ISO 45001-2018. The framework emphasises a coordinated and an integrated approach to manage enterprise-wide risks and opportunies across Vital Chemtech Limited, which is essenal to establish a culture of proacv e, independent, and systemac risk management. Vital Chemtech Limited has defined clear roles and responsibilies, principles, consistent templates, enablers and training measures for e ecv e and uniform implementaon of ERM framework across the organisa on. The goal of the ERM Framework is to strengthen Vital Chemtech Limiteds commitment to e ec vely manage both exis ng and emerging risks while capitalising on opportunies to achieve our strategic objecv es and safeguard stakeholders value. To facilitate risk-informed decision-making, Vital Chemtech Limited has defined a vigorous risk governance mechanism leveraging our fully integrated ERM Framework.

Objecives:

Integrate risk management processes with other assurance providing funcons

Encourage technology-enabled e ecv e and efficient monitoring of risk pro le across Vital Chemtech Limited Promote and ensure risk-informed decision-making Formulate a resilient and robust methodology to manage and mig ate risks Idenf y the risk appet e of the Company to align the risk response strategy De ne roles and responsibilies, expectaons from key stakeholders, reporng templates and training measures adopted with an objecv e to establish risk-aware culture Idenf y, assess, priorise, treat, monitor and report business risks arising out of internal and external factors that can affect strategic business objecv es

PRODUCTS:

Our company is engaged in manufacturing of Phosphorus based products. We manufacture the products for our customers on purchase order basis.

Following are the products manufactured by our company:

1. Phosphorus Trichloride (PCl3)

Phosphorus Trichloride is colorless or slightly yellow fuming liquid with a pungent and irritang odor resembling that of hydrochloric acid. It is used during electrodeposion of metal on rubber and for making pescides, surfactants, gasoline addiv es, plasciz ers, dyestu s, texle nishing agents, germicides, medicinal products, and other chemicals.

2. Phosphorus Oxychloride (POCl3)

Phosphorus Oxychloride is a colorless fuming liquid with a pungent odor. It is toxic by inhalaon and corrosive to metals and ssue. It is used in gasoline addiv es and hydraulic uids.

3. Phosphorus Pentachloride (PCl5)

Phosphorus Pentachloride is a greenish-yellow crystalline solid with an irritang odor. It is decomposed by water to form hydrochloric and phosphoric acid and heat. This heat may be sufficient to ignite surrounding combusble material. It is corrosive to metals and ssue. It is used to manufacture other chemicals, in aluminum metallurgy, and in the pharmaceuc al industry.

4. Phosphorus Pentoxide (P2O5)

Phosphoric anhydride appears as a white amorphous powder. Corrosive to metals and ssue and moderately toxic. The usage of phosphorus pentoxide varies significantly in the chemical industry due to its applicaons as laboratory reagent, starng or reagent material in synthesis processes, and in heat-insulang glass producon.

5. Poly Phosphoric Acid (PPA)

Polyphosphoric acid is a hygroscopic, clear and viscous liquid. It has been synthesized by reacng phosphoric acid with phosphorus (V) oxide. It is a moderately strong mineral acid with a wide range of applicaons. Polyphosphoric acid can be used in the manufacture of special supported catalysts, e. g. for use in the producon of cumene from benzene. Polyphosphoric acid can be used in the descaling and brightening of metal surfaces. Polyphosphoric acid is suitable for the drying of gas streams.

6. Phosphorus Pentasul de (P2S5)

Phosphorus pentasul de is the inorganic compound with the formula P2S5. It is generally yellow solid in nature. It is used in the producon of safety matches, lube oil addiv es, and

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Internal Control measures and systems are established to ensure the correctness of the transacons and safe guarding of the assets. Thus, internal control is an integral component of risk management. The Internal control checks and internal audit programmers adopted by our Company plays an important role in the risk management feedback loop, in which the informaon generated in the internal control process is reported back to the Board and Management. The internal control systems are modified connuously to meet the dynamic change. Further the Audit Commi ee of the Board of Directors reviews the internal audit reports and the adequacy and e ecv eness of internal controls.

FINANCIAL HIGHLIGHTS:

(Rs. in Lakhs)

	Standalone		Consolidated
Particulars	2022-2023	2021-2022*	2022-2023	2021-2022*
Revenue From Operations	11674.33	5761.46	11674.33	5761.46
Other Income	14.20	25.51	14.20	25.51
Total Income	11688.53	5786.97	11688.53	5786.97
Less: Total Expenses before	10195.95	4609.13	10195.95	4609.13
Depreciation, Finance Cost and Tax
Profit before Depreciation, Finance	1492.58	1177.84	1492.58	1177.84
Cost and Tax
Less: Depreciation	231.75	69.61	231.75	69.61
Less: Finance Cost	112.37	48.41	112.37	48.41
Profit Before Tax	1148.46	1059.82	1148.46	1059.82
Less: Current Tax	300.00	270.00	300.00	270.00
Less: Deferred tax Liability (Asset)	43.33	-	43.33	-
Profit after Tax	805.14	789.82	805.14	789.82

* Figures provided are for the period starng from 25th November, 2021 to 31st March, 2022.

HUMAN RESOURCES:

Equipping the Company with an engaged and producv e workforce is essenal to our success. We look for commitment, skills and innovav e approach in people. In assessing capability, we consider technical skills and knowledge that have been acquired through experience and pracce, along with mental processing ability, social process skills and their applicaon. We connue to invest in developing a pipeline of future talent and nurture them. As part of this process, we provide development and training opportunies to our workforce, which mov ates and encourages them to grow in their work.

As on March 31, 2023, the Company had 46 permanent employees. The Company has been maintaining cordial and healthy Industrial Relaons, which has helped to a great extent in achieving the upper growth.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED   EXPLANATIONS THEREFOR:

Ratio	As at 31st March, 2023	As at 31st March, 2022	% Change from Last Year	Explanation for Change in Ratio (for more than 25% in comparison with last year)
Debt Equity Ratio	0.27	2.48	-2.21	Due to Equity increase During the year.
Return on Equity Ratio	15.45	108.06	-92.61	Return on Equity has decreased on account of Increase in Equity of current year as compared to that of previous year.
Inventory Turnover Ratio	7.61	8.34	-0.73	Inventory Turnover ratio has decreased during the year, due to decrease in company operation during the year.
Trade Receivables turnover Ratio	2.92	2.76	0.16	-
Trade Payables turnover Ratio	4.43	3.04	1.39	Trade Payables turnover ratio has decreased on account of non-payment to creditors by the Company.
Net capital turnover Ratio	2.12	3.13	-1.01	Net Capital Turnover ratio has decreased on account of Increase in Capital of current year as compared to that of previous year.
Net profit Ratio	6.90	13.71	-6.81	Net Profit ratio has decreased on account of Increase in profit and Sales of current year as compared to that of previous year.
Return on Capital Employed	21.52	58.16	-36.64	Return on Capital Employed has been decreased due to increase in paid up capital post IPO.
Return on Investment	14.61	42.86	-28.25	Return on Investment has been decreased due to increase in paid up capital post IPO.

CAUTIONARY NOTE:

Statements in this Report, describing the Companys objecv es, projecons, esma tes and expectaons may constut e forward looking statements within the meaning of applicable laws and regulaons. Forward looking statements are based on certain assumpons and expectaons of future events. These statements are subject to certain risks and uncertaines. The Company cannot guarantee that these assumpons and expectaons are accurate or will be realized. The actual results may be different from those expressed or implied since the Companys operaons are affected by many external and internal factors, which are beyond the control of the management. Hence the Company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments, informaon or events.

Registered o ce:		For and on behalf of Board of Directors
B-406, Mondeal Heights,		VITAL CHEMTECH LIMITED
Opp. Karnava Club,		CIN: L24299GJ2021PLC127538
S. G. Highway, Ahmedabad	380015
Date: 28/08/2023		Vipul Bha_ Jay Bha_
Place: Ahmedabad		Chairman & Managing Director Whole_me Director
		DIN: 06716658 DIN: 09363173