Chemplast Sanmar Ltd

Desk

We have laid the foundation to capitalise on the long-term prospects of each of our businesses by building new capacities and are confident of delivering a stronger performance in the coming years.

Dear Stakeholders,

I am pleased to present the Annual Report for Chemplast Sanmar Limited for the financial year 2023-24. While numerous challenges posed by global economic turbulence affected the financial performance this year, the Company has displayed resilience in meeting these challenges and is resolutely preparing for the expected turnaround in economic conditions in the years ahead.

This turbulent period was marked by recessionary pressures and exacerbated by events like significant inflation in the European Union, muted recovery in the Chinese economy post the Covid-19 pandemic, geopolitical tensions across various regions, and the Red Sea crisis, among others. The impact of the aftermath of the global pandemic on the economies of various countries resonated in the Indian context also. By strategically navigating these complexities, we have demonstrated our resilience and ability to prepare and seize opportunities, even in the worst of conditions, which will serve the Company well in the years ahead.

During this difficult period, we have been resilient and focused on setting up capacities and capabilities which will serve the Company well with expected improvement in market conditions. We Commissioned the 41,000 tonne Specaility Paste PVC expansion project during Q4 of 2023-24. This will further cement our position as the leading producer in India, taking up our capacity to around 107,000 tonnes per annum. This capacity is aimed at fulfilling domestic demand through import substitution.

The domestic demand for Speciality Paste PVC remains robust, with a strong demand from the end-user segments spanning footwear, automobile and furniture sectors. The regulatory authorities have taken note of the dumping of Speciality Paste PVC into India and have already announced anti-dumping measures to address this. Collectively, these factors bode well for the Speciality Paste PVC business and we are confident that we would see a turnaround in the performance of this business in 2024-25.

In our Custom Manufactured Chemicals Division, we commissioned phase one of the CMCD expansion project during the year; the construction of phase two is underway and is expected to get completed in 2024-25. Further, the product pipeline continues to be very healthy. We commercialised three new products this year, and a number of products are under various stages of development. Recently, the CMCD has signed another LoI with an agrochemical innovator for an advanced intermediate for a new active ingredient. This will be manufactured in the new capacity that we will be commissioning in 2024-25. The Company is thus progressing as planned on its charted path of growth and we are confident that the Custom Manufactured Chemicals Division will register significant growth in the years ahead.

The Suspension PVC demand in India continues to grow at a rapid clip and has crossed 4 million mtpa in 2023-24. With the domestic supply only are constantly looking for growth in this business by exploring newer project opportunities.

While the short-term challenges persist, we have laid the foundation to capitalise on the long-term prospects of each of our businesses by building new capacities and are confident of delivering a stronger performance in the coming years. We have built the ability to handle complex chemistries and chemicals, aided by our process technology, process improvement, and product development capabilities. We also have world-class research and development capabilities combined with a broad range of chemical technologies at production scale.

We commissioned the 41,000 tonne Speciality Paste PVC expansion project during Q4 of 2023-24. This will further cement our position as the leading paste PVC producer in India, taking up our capacity to around 107,000 tonnes per annum.

around 1.5 million mtpa, this meant that imports of Suspension PVC into India are now at around 2.5 million mtpa. While the demand has been strong, the profitability of this business has been affected during 2023-24 due to rampant dumping of this product from China and other countries at very low prices. The industry has represented this problem to the regulatory authorities and we are confident that this will be addressed in the current year. Recent trends indicate that the period of strife for the PVC industry is coming to an end and we expect to turn the corner with a better performance from 2024-25.

The value-added chemicals business also faced challenges during the year due to excess capacity in the country caused by commissioning of new plants during 2023-24, resulting in a drop in prices and therefore margins. This impact on prices and margins is expected to continue for a few more quarters till the supply-demand balance is restored with demand catching up in the country. During the year under review, we completed the restoration of Caustic Soda capacity at Karaikal which increased product availability by around 20,000 mtpa. We

Our commitment to sustainability, environmental, and safety stewardship is well known, and we take pride in our highly qualified engineers and chemists. Our strong focus on sustainability includes a zero liquid discharge policy, desalination plants at coastal facilities to avoid usage of groundwater, rainwater harvesting and groundwater recharging capacities. All this, coupled with the new capacities being built and the improving market conditions, provide a good platform for growth for the Company in the years ahead.

In conclusion, we are grateful for the trust and support shown by our stakeholders. Despite the challenges, we have made significant strides in positioning ourselves for future growth and success. We are confident in our ability to navigate the complexities of the global market and deliver sustainable, long-term value.

Thank you.