Aarti Industries Ltd

During the 40 years of my remarkable association with AIL, I have witnessed the incredible synergy between our management, investors, customers, suppliers and employees. Together, we have forged a path to become a leading manufacturer of speciality chemicals with a significant global footprint.

As I present our Annual Report for FY 2023-24,1 would like to emphasise that the performance of AIL stands as a testament to our resilience and adaptability, even in the face of an uncertain and challenging macro environment.

This unwavering resilience is a beacon, guiding us towards a future filled with promise and potential.

The fiscal year 2023-24 remained challenging amid geopolitical conflicts, inflation, inventory corrections, demand challenges, and supply chain disruptions, yet growth across a few end applications provided some relief.

We are an Indian company envisioning global market share expansion and are fortunate to function in an organisation as resilient as ours. Our resilience, driven by our values of care, integrity, and excellence, enabled us to push forward, execute our business, and remain unmoved by disruptions. Our financial results are a testament to this.

We witnessed revenue of Rs.7,012 Crore, EBITDA reaching Rs.984 Crore and a PAT of Rs.416 Crore. Quarter after quarter, we have been able to achieve sustained growth driven by volume increases, the strategic ramp-up of long- term contracts, and a resurgence in discretionary portfolio volumes. Our balanced domestic-to-export mix, at 48:52, has showcased our local and international presence and our ability to supply across all geographies. We have been able to navigate imbalances such as softness in non-discretionary portfolios like agrochemicals and pharmaceuticals and witnessed progressively encouraging demand recovery in discretionary applications like dyes, pigments, energy applications, speciality polymers, additives, etc. further bolstering our performance.

Our parameters for success don't stop at numbers, and our endeavours on the ESG front reflect the same. To enhance safety across and beyond the walls of AIL, we reinforced our safety control measures with initiatives like BESAFE+, which integrates advanced safety protocols and regular training sessions with over 2,640 man-hours invested to ensure that every employee is well-versed with the latest safety practices.

Employees form the core of our organisation, and their well-being is paramount to us. Through various engaging interventions, this financial year, we delved deep into the five most vital dimensions of well-being for an individual - career, physical, financial, social, and community well-being. Our Employee Engagement Survey achieved a remarkable 100% participation rate within six days and the positive impact of these efforts is evident in the engagement score of 4.42/5.

At AIL, we firmly believe that we are as good as the community we live in, and the Aarti Foundation, our CSR arm established to enhance community welfare, partnered with several NGOs to create positive change for education, healthcare, rural development, women's empowerment, skill development, environmental conservation, etc.

India is one of the fastest-growing economy and is expected to grow from 6.5% to 7% in the coming years. The chemical sector holds immense potential and government initiatives such as the production-linked incentive (PLI) scheme across various downstream sectors such as Pharmaceuticals, Electronics, etc. will further boost the demand.

During the year FY24, we commercialised our scale up projects such as NCB Expansion, acid phase I revamp cum expansion, etc., while the balance scale up projects such as NT expansion, ethylation expansion and expansion of few speciality chemicals are expected to be completed in FY25. With these projects being completed, we shall have benefits of volume ramp-up, as demand for these are expected to progressively normalise and grow from FY25. Further during the year FY24, we secured large contracts like the four-year supply contract valued at Rs.6,000 crore and another significant contract amounting to Rs.3,000 crore - both from our esteemed clients. These contracts will instill greater stability, enhance our plant utilisation, strengthen our leverage, and substantially boost our earnings going ahead. Thus with our expectation of sustained recovery in discretionary segments, emerging signs of revival in the non-discretionary portfolio, ramp-up of capacities, higher operating leverages, margin normalisation, higher volumes from contracts, etc. will drive substantial growth in FY25 and lay the foundation for a longterm multi-year growth.

Furthermore, we are expanding our portfolio with over 40 new chemistries and value-added products through an integrated value chain, including a 42,000 TPA Chloro Toluene base capacity, with an EBITDA margin of 25%- 30%. We plan to invest Rs.2,500-3,000 Crore in these chemicals.

With our endeavor to add on newer products and technologies, we set up a state of art R&D centre at Navi Mumbai in 2020. The Chloro Toluene chain of products, being added on by us, has entirely been developed indigenously by our team. As we move forward, our R&D teams are engaged into developing products having high growth applications such as sustainable/circular chemistries, renewables, battery chemicals, electronic chemicals, high end polymers, and such other new sunrise sectors. We expect to see significant breakthrough in these areas in next few years, which will lead to the growth of our business in the coming decade.

We took a promising leap by entering into a 50-50 Joint Venture with UPL.

This JV is a first of its kind and pathbreaking development that builds on the synergies and competencies of two leading Indian chemical companies to support the manufacturing of critical chemical products in India. We have a very long-standing relationship with UPL, and this JV enables us to combine our individual strengths to create globally competitive businesses. We believe that such unique collaborations between Indian chemical players will contribute to the growth of Indian chemical ecosystem.

In a further endeavour to make AIL a world-class organisation, I am pleased to welcome Suyog Kotecha as AIL's Chief Executive Officer and Executive Director. Suyog joined us on June 17th and has extensive experience in strategy, innovation, and business transformation, coupled with his deep understanding of the chemicals industry and global connects, making him the ideal leader directing the way forward. We look forward to his valued contribution to enhance our strategic vision and to drive growth and innovation.

I sincerely express my gratitude to our stakeholders, including shareholders, for their unwavering support. Our employees have played a vital role in achieving our objectives, while the guidance of our esteemed Board Members has been invaluable. We thank everyone for being part of our prosperous journey. We are confident we can seize the abundant opportunities and accelerate our growth trajectory while pursuing sustained value creation.

I look forward to your continued support as we grow together

Chairman and Managing Director