The past year has been a period of great disruption. Global economic
pressures, threats of US tariff, and weak demand in several key markets —
particularly in China, Far East and Europe — created an unstable and challenging
environment. The market weakness in China and Far East and Europe were compounded by the
huge capacity build-up by Chinese producers far in excess of their domestic demand.
This resulted in a squeeze of margins in the Far East which also
affected other markets and including Indian market. In this context, your Company reacted
swiftly, just as we did during the pandemic period, to protect volumes and operations and
hold our position firmly in the face of market turmoil.
The tariff-driven collapse in Q1 of FY 2025-26 triggered a sharp
compression in margins and a turbulent start to the year. While Indian margins were
affected for us and many other commodity industries, our underlying demand and growth
remain healthy driven by construction, housing, automobile and consumer products.
We took this opportunity to initiate long-pending refurbishments,
catalyst changes and driving costs and working capital optimisation programmes. We believe
this will enable us to move into the rest of FY 2025-26 strongly.
Our Dahej investment through subsidiary is the largest single train
unit in India and one of the largest in the world. It also includes the latest
technologies and improvements globally. Like all new investments, this needed significant
work on completion and post start up inspections and tuning. This has been completed in Q1
of FY 2025-26 permitting a steady ramp up. While our new capacity has created the surplus
in the domestic market, we expect that with present market growth, we will be able to sell
out our capacities within the next 18 months. This will enable us to get the high
efficiencies in cost that the plant is designed for.
As you are aware we are located right next to most of our major
customers and close to our major domestic raw material supplier.
Our US investment for Maleic Anhydride and food ingredients has
progressed well. This plant is built modularly in India with equipment supplies from
global leaders. The plant is highly energy efficient, operates within the largest markets
in the world for these food ingredients and is aimed to replace imports into the US. The
margins in the US remain strong despite severe global disruptions. The plant is expected
to be completed within the next few months and then move to startup operations. With good
demand in the US, the feedstock and locational advantages and the efficient technology and
design, we expect the unit to begin contributing revenues and cash flows during 2026.
Even during difficult times, we refused to compromise on the quality,
safety, and compliance values that define us. We have upheld customer trust by ensuring
consistent product delivery and reliability across all units. Our continuous improvement
programmes and robust operational performance in process reliability, product quality, and
environmental controls reinforce our position among the most efficient and trusted
producers globally. This discipline is critical, especially as market pressures encourage
shortcuts elsewhere, something we have deliberately avoided, even at a cost.
We were able to generate reasonable cash flows during this year despite
margins pressures. As shareholders know, until two years ago, we had zero debt on all
accounts and were able to fund a good part of our new investments from our reserves and
internal cash flows. Over the last two years, we have taken borrowings for these projects.
However, we are confident that once these investments become operational, the resulting
cash generation will help with early repayment of the debt taken during this cycle of
investments and reduce our finance costs also.
We have continued to deepen our commitment to sustainability. Over 90%
of our plant energy usage is now sourced from internally captured process heat, helping us
reduce both emissions and cost dependence. In parallel, we continue to maintain Zero
Liquid Discharge (ZLD) at our main complex in Ranipet, and our water consumption has been
significantly reduced.
Following years of strong cash generation and zero borrowings, your
Company entered a new investment phase. While the initial funding came from cash reserves
and internal cash flows, as expected, we began borrowing during FY 2023-24 and FY 2024-25.
This has resulted in higher interest costs and an impact our ratios. Such changes are
natural in any growth cycle.
Our firm grip on operations and now being located in two places will
make us profitable in upcoming years. Our financial discipline, cash flow strength, and
working capital management continue to be strong. These investments are expected to start
generating returns progressively from H2 of FY 2025-26 in India and from late 2026 in the
US. Your Company is well-positioned to recover and grow profitably in the next phase.
Our operations in Malaysia faced significant headwinds, largely due to
the extended slowdown in China, which had a cascading impact on our subsidiary there. In
light of this, your Directors are actively reviewing all strategic options related to this
investment, as outlined.
In closing, I extend my heartfelt appreciation to our dedicated
employees in India and overseas, our valued customers, and trusted partners for their
support. After many decades, we have also accessed capital markets, which is essential
given the asset base of your Company. I am happy to share that the market has responded
positively.
Mr. R. Parthasarathy
Chairman