Vikas Ecotech Ltd

At Vikas Ecotech, FY 17-18 was a year of both accomplishments and unseen challenges. The organisation saw a slowdown in operations due to an inquiry by a government authority in the last quarter of the year under review.

We weathered it to emerge resilient. I am happy to report that our business performance was stable during the year - delivering continued value across the stakeholder ecosystem. In fact, our commitment towards accelerating growth for our customers, safeguarding stakeholder interests, conducting business responsibly and enhancing the sustainability of our planet became firmer.

I share with you our performance highlights of FY18 and the key trends and initiatives that will be fundamental to our next phase of growth. I am confident that you continue to share our excitement about the future prospects of the company and believe in our potential to optimise opportunities.

Dear Shareowners,

FY18 was a year of paradoxical performance at Vikas Ecotech. our profitability margins reached historic peak levels. we expanded the global reach of our offerings by entering new geographical regions and our industryleading position was strengthened by progressive green innovations.

During the year, we recorded superior performance in the first three quarters. The fourth quarter, however, witnessed a slowdown in operations due to a survey of our trading activities by a government agency. our short-term performance was, hence, affected. with 80 percent of our raw materials being imported and exports constituting 50 percent of our revenues, the company was subject to certain examination. Consequently, our fourth quarter performance decelerated by approximately 70 percent. However, the silver lining was that our annual performance remained stable despite this temporary hurdle.

Performance Review

our net revenues during the year came in at INR 366.16 crore as compared to INR 372.80 crore in FY17. our net profitability levels stood at an all-time high of INR 28.61 crore - recording a growth of over 20 percent over the last year. The robust profitability growth translated into better earnings for our shareholders - the earnings per share (EPS) registered a 12 percent increase during the year.

we delivered a positive performance and improved profitability metrics. It reflects our strong business fundamentals and a resilient governance framework. I am happy to share that our revenues increased by over 160 percent in the first quarter of FY19 in comparison to last quarter of FY18. In addition, we successfully posted healthy profits during the period - undoing the losses registered in the preceding quarter.

our ability to bounce back in the subsequent quarter of the disruption is testimony to our vigour and conviction. With the trials behind us, we are upbeat and optimistic about the future. Today, we are better poised than before to capitalise on the opportunities offered by India's emerging position as the global hub for specialty chemicals.

The Eye of the Tiger

During the last fiscal, the global supply chain of specialty chemicals witnessed severe constraints owing to environmental compliance-related clamp down on Chinese production units. The trade war between China and the USA added to the supply stress. In this context, India is in a ripe position to benefit from the situation and emerge as the global hub for specialty chemicals. Its popularity is underpinned by increased consumption in domestic end-

user industries, which in turn are benefiting from India's consumer story and a responsive green-oriented policy framework. Further, the country's skilled manpower and enhanced production capacity for specialty chemicals afforded by economies of scale are attracting large-scale domestic and foreign investments.

Beyond these inherent factors, India's specialty chemicals sector also benefits from the eco-friendly industry charter, innovative competencies and ability to deliver international quality of products. Further, our country's governance framework, especially regulations related to taxes and IPR protection, make it the preferred destination for R&D- intensive, early technology lifecycle production. In 2017, India's specialty chemicals industry market size was pegged at USD 52.1 billion . The industry is set to double its current market size by 2025 - growing at 10 to 15 percent annually.

As India's leading homegrown specialty chemicals company with an eco-friendly focus, Vikas Ecotech is a front-runner in benefiting from the country's emergence as a manufacturing hotspot. Over the last five years, we have acquired export customers that are some of the best players in the world. Last year, we added Mexichem, the Latin-American global leader in PVC pipes manufacturing, to our clientele. During FY18, we started exporting our flagship Organotin PVC heat stabilizers to the USA. The country is the world's largest market for Organotin - with its market size being approximately 10 times that of India.

Harnessing Opportunities for Success

What are the factors that determine the success of a company?

According to warren Buffett, Chairman and CEO of Berkshire Hathaway, successful businesses are "economic castles with unbreachable moats around them". Economic moats are competitive advantages of a company that protect its long-term profits and market share from competing firms. As the global economy unfolds its next phase of growth, the rules of success are fast-changing. I believe that Vikas Ecotech has four economic moats that will enable it to thrive in the context of an economy led by disruption and public policy-led environmental friendly regulations.

The Sustainability Moat

With sustainability becoming mainstream, increasing environmental consciousness in the stakeholder value chain is imperative to a successful business. A recent survey by a leading consumer firm estimates the global market for sustainable goods to be around USD 2.65 trillion. Accordingly, the need for organisations to prove their social and environmental commitment is more pronounced in emerging markets. The report also states that effectively marketed sustainable goods could represent a USD 1 trillion opportunity. India's specialty chemicals opportunity holds great potential owing to its inherent compliance-driven sustainability thrust. Unlike China, our policies are rooted in the green promise and long-term view.

At Vikas Ecotech, sustainability is a key pillar of our growth. We are steering the future of India's specialty chemicals industry through green leadership. The company is among the world eight and India's only manufacturer of methyl tin mercaptide (MTM) stabilizers. Also know as Organotins, these are non-toxic, safe alternatives to lead-based stabilizers. They are used in the manufacture of products made from polyvinyl chloride (PVC) -mainly pipes and films.

During the last fiscal, we launched our new range of Calcium-Zinc (CaZn) heat stabilizers for PVC, which are the eco-friendly alternative to toxic metal-based stabilizers. With this offering, our competencies to leverage the opportunities offered by India's changing policy landscape are further fortified.

The Innovation Moat

The specialty chemicals industry thrives on innovation.

For instance, Germany's Merck KGaA invented liquid crystals more than a century ago; when they had no real- world application. However, the technology brought in unprecedented results following the advent of flat screens. Today, the business boasts of operating margins at well over 40 percent .

The specialty chemicals industry has many such anecdotes. However, breakthrough innovations often take years to show commercial potential. Surviving the contemporary hypercompetitive milieu requires organisations to garner greater productivity from their R&D spend. Consequently, specialty chemical manufacturers have reined their focus on smaller innovations that make a big, immediate impact.

At Vikas Ecotech, we follow a dual R&D strategy. Firstly, our team focuses on leveraging immediate opportunities through a robust pipeline of small innovations. During the last fiscal year, for instance, we innovated the vulcanised rubber gaskets used for PVC pipes fittings. The small tweak in the traditional product offers customers the benefits of both flexible and rigid properties. our offering solves the challenges faced during fitment and joining of PVC pipes. It has become popular in end-user applications in a short span since its launch. Alongside, our team also works on blockbuster innovations that can change the growth trajectory of the organisation in the IPR-led global specialty chemicals industry.

The Responsiveness Moat

In my letter last year, I had mentioned how organizations are rendered helpless in the face of geopolitical and economic vagaries. Little has changed since then; although the global economic performance is gradually returning to pre-crisis levels, the larger landscape continues to be marked with increasing uncertainties. For instance, the clamp down on Chinese chemical production houses affected the global supply chain during the last fiscal year.

The sudden curb had an undermining effect on Vikas Ecotech. we source 2-Ethylhexyl Thioglycolate (2-EHTG), a solvent chemical and a key material in the production of organotin, from China. while our operations were not hit badly, we needed to ensure uninterrupted supply of the raw material in view of the anticipated domestic and global demand for organotins.

Today, we are in the process of setting up India's first 2-EHTG manufacturing plant at our new production facility in Dahej, Gujarat. our nimble-footedness and the ability to respond to changing business needs in an agile manner gives us an edge over larger players

The Culture Moat

Lastly, I would like to reiterate the focus on integrity and governance at Vikas Ecotech. It is our commitment to doing the right thing that has driven our success. our ability to withstand challenges reflects our resilience, integrity and perseverance. our efforts are supported by a culture of cohesiveness that drives us to be united amid trying circumstances. The wisdom of the members of our Board and the Advisory panel goes a long way in enabling us to drive 'win-win' solutions during such times.

Together, we are steering towards a better future. We are steadily picking up pace to transform our positioning as leaders of India's sustainable specialty chemicals segment. Since our inception, we have consciously strived to deliver solutions across the stakeholder ecosystem and be responsible towards our planet. In the long run, we believe that the prosperity of the stakeholder value chain will translate into profitable returns for our shareholders.

I would like to thank our employees for their efforts, our customers for their trust, our vendors for their cooperation, our regulators for their oversight and our investors for their confidence in our abilities. These are the pillars that will drive our success as we set out to become a better, greener and stronger organisation.

Thank you.

Yours sincerely,