Vivid Global Industries Ltd Management Discussions

A. Industry Structure and Development

The Company is engaged in the business of production of dye intermediates particularly in N-Methyl J. Acid, derivatives of J. Acid, Tobias Acid, Tobias Acid purified Grade & Sulpho Tobias Acid. Further the Company undertakes job work of various dye industries. The main raw material J. Acid is imported from China.

B. Opportunities and Threats

The ongoing geopolitical tensions between the US and Iran, coupled with the potential disruption or closure of the Strait of Hormuz, have resulted in significant volatility in global commodity markets. Crude oil prices have increased substantially, with an estimated rise of approximately Rs. 60-85 per barrel. In parallel, prices of key industrial inputs such as sulphur, methanol and ammonia gas have surged by nearly 300%.

These developments have had a significant impact on the availability and cost of raw materials. The basic cost of all our raw materials have increased by approximately 80%, while the market is also experiencing a severe shortage and disruption in the supply chain.

In addition, China is facing considerable economic and supply-chain pressure due to the prevailing geopolitical situation. As a result, the price of one of our key imported raw material, J-Acid, has increased by approximately 50%. This increase has directly impacted our manufacturing costs and further intensified the pressure on margins.

The combined effect of higher energy and raw material costs, restricted availability, supply-chain disruptions and geopolitical uncertainty has created a highly constrained market environment for chemicals. The resulting supply- demand imbalance has led to substantial increases in market prices and created opportunities for suppliers with reliable sourcing capabilities.

In view of these circumstances, Management is actively exploring new avenues, alternative sources and strategic opportunities to mitigate raw material price volatility and supply disruptions. The Company is also evaluating opportunities to diversify its sourcing base, identify substitute raw materials where technically feasible, and optimise its product portfolio.

Given the prevailing market conditions, constrained availability and substantially higher input costs, the Company is in a stronger position to seek appropriate price increases from customers. Management believes that timely pricing actions, coupled with focused procurement and supply-chain strategies, will help protect margins and strengthen the Companys overall business position during this period of market volatility.

C. Segment-wise Performance

The Company has only one business segment viz dye intermediates and dyes and hence product-wise performance is not provided.

D. Outlook

The F.Y. 2025-2026 is one of the challenging years for dye and dye intermediate industry. This scenario and is going to continue for the following reasons.

1. The ongoing geopolitical tensions between the US and Iran, coupled with the potential disruption or closure of the Strait of Hormuz, have resulted in significant volatility in global commodity markets. Crude oil prices have increased substantially, with an estimated rise of approximately Rs. 60-85 per barrel. In parallel, prices of key industrial inputs such as sulphur, methanol and ammonia gas have surged by nearly 300%.

2. The War in US continues to be a challenge for us due to rise in prices Oil and Gas prices by 40% which in turn raises the basic chemical raw materials prices to the tune of 60% to 80%.

3. Due to high levels of inflation and energy crises in USA, Europe and Far east countries, the consumers spending power has decreased. The rise of food prices has in turn made people spend on their needs more than their wants.

4. As our industry is known to be cyclical and being in the period of the cyclical phase , inflation and recessionary pressures also hit us making us bear more losses and face a very big slump in demand.

5. At the moment there are many dye and dye intermediates plants shut down due to a slump in demand and increase in the raw material prices which has come into effect and in most cases all the plants are running to the tune of 30% to 40% capacity only.

In view of these circumstances, Management is actively exploring new avenues, alternative sources and strategic opportunities to mitigate raw material price volatility and supply disruptions. The Company is also evaluating opportunities to diversify its sourcing base, identify substitute raw materials where technically feasible, and optimise its product portfolio.

E. Risk and Concerns

Since the price of our main raw material namely J. Acid is increasing tremendously in the local & International market, the Company has no other option to purchase the material at higher cost.

F. Internal Control Systems and their Adequacy

The Company has satisfactory internal control system, the adequacy of which has been mentioned in the Auditors Report.

G. Human Resources

In the field of Human Resources, the Company has developed speedily water/air/land pollution control departments and hired qualified people for the same