Manali Petrochemicals Ltd

#MDStart#

Management Discussion & Analysis Report to the Shareholders

The Directors present their 38^th Annual Report on the business and operations of your Company and the Audited Financial Statements for the year ended 31^st March 2024.

Financial Results

The highlights of the financial results for the year are given below:

( in crore)

Operational Highlights

The total income for the year under review was 822 crore, approximately 22% lower than the 1,056 crore recorded in previous year (FY 2022-23). Unlike the previous year, market conditions both international and domestic were unfavourable throughout the review period. Your Company's sales volumes and values dropped significantly, on account of increase in cheaper imports flooding the market during second half of the year. During the year, Chennai and other parts have been affected significantly on account of Cyclone Michaung and this has disrupted the operations of the Company during December 2023 and January 2024. Your company's proactive mitigation measures helped us to resume our operations with the available resources, despite the fact that there were product shortages and limited access to the plant premises by road on account of flooding. Your employees and other stakeholders have supported well in ensuring resumption of activities. Your Company lodged claim with insurance company as part of business and operation loss and they are in final stages of completing their assessment. In this connection, your company had received an ad hoc amount of 3 crore and following up with insurance company to expedite their assessment and other process in this regard.

During the year, Propylene Glycol sales volume remained consistent in line with the previous year, but there was a decrease in Slabstock sales volume and values have descreased on account of certain market factors, which impacted revenue.

During the year, total additions to fixed assets amounted to 31.17 crore, primarily for plant and equipment. The construction of PG expansion project is in progress and the first phase of 32,000 TPA have started during the year, post receipt of statutory approvals. Many of the equipment's have been ordered, and fabrication are in progress and the PG expansion project is expected to be commissioned in the second quarter of FY 2025-26. As part of company's cost optimisation and sustainable plan, the power consumption through conventional mode from state utility have significantly reduced during the year as compared to earlier years. Your Company have also signed agreements under captive generation scheme under Electricity Act, 2003 to procure Hybrid Power from Renewable Developers and also started receiving part of supply by end of the year and expected to receive more quantum in the FY 2024-25, which will help the company to achieve its sustainable goals and reduce costs in the long run.

Your company is also exploring various other strategies including tie up /collaboration with other energy solution providers /developers to optimize energy consumption and costs in the production / operational systems wherever possible.

Your Company is also evaluating appropriate business plan for setting up of an additional manufacturing facility at Western Part of India in line with the long term sustainable strategy.

In connection with the supply of R-LNG to Plant 2, IOCL have commenced the infrastructural work during the year under review after receipt of necessary permission and orders from Hon'ble High Court to lay their pipeline in the private property adjacent to Company's Plant 2 premises. In addition to supply of R-LNG to Plant 1, IOCL is expected to commence its supply to Plant 2 premises on or before March 2025, subject to obtaining PESO approval for the same.

Financial Review

During the Financial Year 2023-24, the Finance cost has reduced from 8.45 crore in FY 2022-23 to 8.03 crore. The finance cost on lease increased from 6.48 crore in FY 2022-23 to 6.89 crore. The actual interest and related payout for the year was only 1.15 crore against 1.97 crore in previous year.

The capital expenditure for projects including for the PG expansion Project are being/will be met from internal sources/borrowing from banks. As at 31^st March 2024, there are no long term debt.

Credit Rating

During November 2023, Care Ratings Limited re-affirmed the ratings for banking facilities aggregating to 100 crore. For long term bank flexible facilities of 50 crore, the rating has been reaffirmed at CARE A+; Stable (Single A Plus; Outlook: Stable) and CARE A1+ (A One Plus) for short-termflexible bank facilities of 50 crore.

Dividend

Your Company has a consistent dividend track record of 18 years till the last year and follows a consistent dividend policy to ensure that dividend payments are sustained even when the earnings are relatively lower. In this regard, parameters for distribution of dividend have been outlined in the Dividend Distribution Policy approved by the Board, pursuant to Regulation 43A of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, as amended ("the Regulations"). The policy can be accessed on the website of the Company in the link: https://www.manalipetro.com/ investors/policies/ As regards the distribution for the year under review, to determine the amount that could be paid out to the shareholders as dividend, the Directors have followed the guidelines enumerated in the said policy and also considered other relevant factors, such as profitability of the relevant financial year, plans for long term deployment of the funds - including projects under implementation, drastic changes in the domestic and global market scenario. - throwing up questions on the sustenance of the sales, pricing and higher margins and similar facts.

Considering all these developments, your Directors are happy to recommend a dividend of 15% i.e., seventy-five paise per equity share of 5/- each fully paid-up, for the year 2023-24, aggregating to 12.90 crore, subject to applicable withholding tax.

Industry Structure and Development

Your company operates in the Polyurethanes (PU) industry. Chemically, PU is a polymer characterized by carbamate or urethane linkages, created through the reaction of isocyanates with polyols. It consists of various compounds, including urethane, urea, isocyanates, and allophanates.

PU can be customized in various combinations and structures, making it suitable for a wide range of products aimed at improving energy efficiency and enhancing physical and chemical properties. It is a versatile plastic polymer available in multiple forms, from rigid and foams to robust elastomers. Due to its diverse properties and forms, PU finds applications in rigid and films, foams, fibres, composites, elastomers coatings, and adhesives. It serves a broad range of industries, including automotive, appliances, building and construction, energy, defence, paints and coatings, and soft furniture.

PU is used across numerous consumer and industrial applications, including thermal insulation in buildings, refrigerators, household furniture, footwear, and packaging materials. It offers unique properties such as abrasion and wear resistance, elongation, resilience, flexibility, scratch resistance, mechanical strength, adhesion, and both thermal and electrical insulation. These properties enable PU to be moulded into various shapes, enhancing its industrial applications by providing comfort, style, and functionality.

PU's growing popularity in construction and infrastructure is attributed to its durability, low thermal conductivity, and ability to withstand external impacts. Additionally, the increasing demand for high-performance, lightweight interior components and cushion foams in automotive parts for energy savings further drives the expansion of the polyurethane market. flavors,

Products of MPL

Your Company specializes in the manufacture of Propylene Glycol, Polyether Polyol, and related substances. It is the sole domestic producer of Propylene Glycol and the first and largest Indian manufacturer of Propylene Oxide, a key input for these derivative products.

Polyols are produced in four grades: Flexible Slabstock, Flexible Cold Cure, Rigid and Elastomers. They are utilized across various industries including automotive, refrigeration and temperature control, adhesives, sealants, coatings, furniture, and textiles. The use of Polyols is also expanding in footwear and roofing applications in India.

Propylene Glycol (PG) is a colourless, clear, nearly odourless, viscous liquid with a faintly sweet taste, produced by reacting propylene oxide with water. It is chemically neutral, which prevents it from reacting with other substances. PG forms a homogeneous mixture when combined with water, chloroform, or acetone, and absorbs moisture from the air. It maintains the properties of the substances it interacts with, making it useful for mixing diverse elements and as a solvent in various applications. PG is commonly used as a drug solubilizer in topical, oral, and injectable medications,flexible a stabilizer for vitamins, and as a water-miscible co-solvent. The Food and Drug Administration (FDA) has approved PG as a safe additive for human consumption, particularly in pharmaceuticals and food formulations. Additionally, PG is used as a moisturizer in cosmetics and as a dispersant in fragrances. It also finds industrial applications in manufacturing resins and other products.

PG is widely utilized in pharmaceuticals, food & flavouring, fragrance industries, and in the production of polyester resins, carbonless paper, and automotive consumables like brake fluid and anti-freeze. Major applications include medicines, canned food, body sprays, perfumes, cosmetics, soaps, and detergents. Industrial demand for PG is generally low due to the availability of cheaper alternatives.

Your Company supplies primarily food and pharmaceutical-grade PG to the Indian market, which, like the Polyols sector, is dominated by imports. In addition to PG, by-products such as DPG are purchased by smaller players for use in food, and related applications, mainly as preservatives.

Other products from your Company include Propylene Glycol Mono Methyl Ether (PGMME), an environmentally friendly solvent used in paints, coatings and the electronics industry.

To reduce reliance on Propylene Oxide, the Company has invested 22 crore in a new plant to produce polyester polyol, which does not require Propylene Oxide as a feedstock. This plant was commissioned in January 2024, and the polyester polyol produced is used for the Company's own System plant needs. The second phase of this investment is currently under technical discussion and is expected to be commissioned by the end of the current fiscal year.

Your Company has also developed and launched a new fire-resistant product (PIR) that is gaining popularity in both continuous and discontinuous panel segments. Additionally, your Company has successfully created an alternative to the phased-out blowing agent, maintaining its market share in the Thermoware segments.

Indian Market Scenario

The Indian PU industry has been experiencing steady growth, driven by rapid urbanization, rising disposable incomes, and fina ncing options. Refrigerators, mattresses, and similar lifestyle products have become essentials in today's market. Additionally, the energy-efficient continuous and discontinuous panel segments are expanding rapidly.

Polyurethane (PU) is a preferred material in the coatings segment due to its superior qualities and advantages over comparable products, leading to significant growth in demand. However, the Indian market for PU has been predominantly controlled by imports.

Similarly, the Indian Propylene Glycol (PG) market has largely been dominated by imports. Throughout the review year, the demand for Polyols and PG fluctuated, with imports continuing to flow freely.

Anticipating the imposition of Anti-Dumping Duties (ADD) on Slabstock products, imports surged in the second half of the fiscal year, compounded by steadily rising feedstock prices, which have eroded product margins.

Opportunities and Threats

Polyurethane materials are highly effective in applications subjected to dynamic stress due to their versatility. They offer numerous benefits, including resilience, high tear resistance, and minimal heat buildup. Polyurethane is suitable for a wide range of applications, such as building insulation, refrigeration, furniture, footwear, automotive components, coatings, adhesives, and sealants. The development of polyurethane materials is ongoing, with new applications emerging regularly. As a polymer that supports innovative design and efficiency, polyurethane has seen increasing popularity and presents limitless opportunities. The growing demand for lightweight and durable products in the automotive, construction, and electronics industries, along with the use of polyurethane (PU) for insulation in various end-use sectors, are key drivers of the PU market's growth. The phase-out of major blowing agents posed a significant challenge, but your Company's R&D team has timely developed a new, environmentally friendly blowing agent, positioning the Company well in the market.

The R&D team is continuously collaborating with customers to refine their processes to accommodate the new blowing agent, ensuring it meets stringent storage and stability tests.

The alignment of Notedome, UK and PennWhite, UK (Company's WOS) green tech product focus, along with Company's commitment to Environmental, Social and Governance (ESG) goals, offers synergistic potential for shared strategy and global achievement.

Technology and Knowledge transfer from the acquisition of subsidiaries could unlock the growth potential in burgeoning markets in the Eastern world. This strategy has already been implemented with the production of Notedome's Polyurethane in Chennai, India, enabling access to South-East Asian markets. The global polyurethane market was estimated at USD 78.07 billion in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 4.5% from 2024 to 2030. Market growth is being driven by increased use of polyurethane in refrigeration and the resurgence of the bedding segment. Additionally, the diverse applications of flexible foam such as in upholstered furniture, rigid foam for wall and roof insulation, TPU for medical devices and footwear, as well as coatings, adhesives, sealants, and elastomers used in flooring and automotive interiors are contributing to market expansion.

The Asia Pacific region holds the largest revenue share over 68% in 2023. The market is driven by the growth of major end-use industries such as automotive, electronics, appliances, packaging, furniture, interiors, and construction. The construction application segment leads the global market, accounting for over 26% of global revenue as of 2023.

In India, the polyurethane (PU) market remains largely influenced by the automotive sector, along with significant contributions from the white goods, furniture, and insulation segments. The automotive industry drives demand due to the need for lightweight materials and innovative adhesives that enhance vehicle performance and fuel efficiency.

While there is potential for growth in other areas such as footwear and building sectors, these segments have not yet fully matured. Therefore, the Indian PU market continues to rely heavily on traditional sectors, particularly automotive and construction, for its growth trajectory.

A major challenge for your Company has been reduced margins due to imports. To address this issue, the Company has been exploring various measures under Anti-Dumping Duties on imports from certain countries. However, this has provided limited relief, as suppliers are able to absorb the additional costs. The Company is actively pursuing cost reduction strategies, including the use of renewable energy, implementing energy conservation measures through new-generation technologies in utilities, and focusing on product development differentiation. Despite these efforts, there are inherent limitations, and it may take time to realize the full benefits.

The complex geopolitical landscape has created challenges for manufacturers globally in securing raw materials for production. These uncertainties could affect operational efficiency and potentially impact expected returns. Acquiring subsidiaries presents a range of strengths and opportunities, including leadership in innovation, and alignment with sustainability goals. However, these benefits must be navigated amidst heightened competition and geopolitical uncertainties, necessitating careful strategic planning and adaptability.

Risk Management Policy and Process

The Company has established a structured framework for addressing business risk management issues. A risk management plan has been framed, implemented and monitored by the Board through the Risk Management Committee of Directors (RMC).

The Company has two employee-level Committees viz., a sub-committee and an Apex Committee, headed by the Wholetime Director to review and assess the risks that could affect the Company's business. The Sub-Committee brings out the matters that could affect the operations and the Apex Committee determines the issues that could become business risks. The mitigation actions are also suggested by the Committees and the report of the Head of the Apex Committee is submitted to the RMC. The RMC meets periodically, reviews the reports, recommends and monitors actions to be taken in this regard. During the year based on market capitalization as on 31^st March 2023, it became mandatory for the Company to have a Risk Management Committee under the Regulation. The RMC constituted by the Board already fulfils the requirements and so there was no need for changing the composition of then existing Committee.

The details of the composition of the Committee, meetings and other relevant information are furnished in the Corporate Governance Report (CGR) annexed to this Report. As per the amended Regulations, a Risk Management Policy has been framed and the roles and responsibilities of the Committee are as prescribed under the Regulations. As required under Section 177 of the Act, the Audit Committee also reviews the risk management process periodically.

Risks and Concerns

India relies heavily on imports of polyols to manufacture polyurethane foams. Your Company supplies nearly 10% of the market share, meeting the needs of the Indian PU industry. Many global suppliers to India have established large storage facilities at Indian ports, significantly impacting the market with their heavy imports. The rapid price fluctuations have significantly impacted larger foam manufacturers, who purchase bulk quantities and consequently face substantial inventory losses due to the volatile prices.

The imposition of anti-dumping duties has been largely ineffective, as multinational corporations either source materials from regions not covered by the duties or absorb the additional costs to continue their practices. The global PU industry is concentrated, with a small number of producers controlling a significant portion of the market. Top manufacturers account for over 60% of global

PU production, giving them substantial over pricing and other strategies. These major multinationals form strategic alliances across countries to maintain dominance in specific regions, which adversely affects smaller domestic players with limited facilities. Domestic are considering partnerships with MNCs to enter the polyol segment. If these plans move forward, product availability will increase, potentially putting more pressure on margins unless demand rises and imports are reduced.

In addition to market threats, the chemical and petrochemical sectors face challenges from unwarranted actions by self-proclaimed environmental protectors. These individuals, often lacking an understanding of the economic contributions of these industries to national growth, release sensational reports that gain traction through social media. Some even oppose industry applications for statutory clearances without valid reasons. This opposition delays the approval process, as companies are forced to address and disprove baseless claims.

Unfeasible proposals, such as Zero Liquid Discharge (ZLD) processes, are being suggested, which could jeopardize industries due to and impractical capital expenditures and operational costs. Consequently, your Company is unable to expand its feedstock capacity for derivative plants, potentially leading to stagnation in production capacity and increased reliance on imports. This situation could impact your Company's pricing power in the medium to long term. To address this, your Company explored alternative methods for polyol production, including a polyester polyol project and a collaboration with Econic, UK, to investigate the use of CO2 in polyol production. Your Company requested Econic, UK to provide pilot samples for application chemistry testing at the customer's site to evaluate performance.

The new and improved effluent treatment process developed by the Company continues to comply with the prescribed norms for marine discharge. Although the process is biologically based, which could pose long-term sustainability challenges, the Company is actively monitoring advancements in

As directed by the National Green Tribunal

(NGT), the Company is working closely with CSIR-NEERI to explore the feasibility of implementing a Zero Liquid Discharge (ZLD) process, either partially or fully, depending on economic viability. Additionally, as regulatory standards are periodically updated with stricter conditions, the Company will need to stay vigilant and may need to allocate additional resources to address these evolving requirements.

Following some unverified news reports regarding stack emission violations by industries in the Ennore-Manali area, the National Green Tribunal – Southern Zone (NGT-SZB) initiated a Suo Moto application against several industries, including the Company. The Company submitted a statement to refute the allegations and requested dismissal of the case based on factual evidence. An independent agency report commissioned by the Bench also confirmed that the Company complies with emission norms. In July 2023, the NGT-Southern Zone, Chennai, issued its judgment on the Suo Moto case involving industries at the Manali location (including the Company) concerning environmental issues from April 2019 to December 2020. The judgment included several directives and recommendations for the industries in Manali, the Tamil Nadu Pollution Control Board, and the Central Pollution Control Board. These include the collection of environmental compensation and the establishment of a corpus fund for improving environmental standards in the Manali Industrial area.

The Company was not required to pay environmental compensation, as it was following the prescribed environmental norms. Concerning the NGT's recommendation for the creation of a corpus fund, the Company filed an affidavit to obtain a stay on the

1% corpus fund levy based on turnover. The Madras High Court reviewed the case in March 2024 and ruled in favor of the industries, overturning the imposition of the corpus fund.

To comply with the revised stack emission norms, the Company has installed Low NOx burners in its Plant-1 boilers, which use RLNG as fuel, to meet the standards set by the CPCB. Additionally, the Company has signed an agreement with IOCL for the supply of RLNG to Plant-2, where the fuel will be switched from low sulfur furnace oil. This transition is expected to be completed during the current fiscal year, with the installation of Low NOx burners. .

Your company was granted a Consent to Operate (CTO) for three years, valid until March 2027, based on various initiatives undertaken to improve environmental performance.

The company will continue to comply and adhere to the environmental obligations as required under the law.

During the year 2017, the period of lease relating to Plant 2 expired. Though the Company filed its request for extension well in advance with the Government of Tamilnadu, the same is yet to be renewed. Pending renewal, lease rent has been paid till 30^th June 2025.

Outlook

The update to World Economic Outlook (WEO) realised in July 2024 by IMF stated that the "Global Economy in a sticky spot". The global growth is projected to stabilize at 3.2% in 2024 and 3.3% in 2025. This reflects a slight improvement from earlier forecasts, driven by resilient private consumption in major economies, despite ongoing challenges such as persistent inflation in services and geopolitical tensions.

Headline inflation is expected to decline from 6.8% in 2023 to 5.9% in 2024, with core inflation remaining sticky due to services price pressures. The IMF emphasizes that while the global economy is expected to grow steadily, risks such as trade tensions and geopolitical uncertainties could lead to higher interest rates, which may impact economic stability and growth prospects.

Indian Economic Outlook

For India, the outlook is notably more optimistic. The IMF has revised its growth forecast for India's GDP to 7.0% for FY 2024-25, up from earlier estimates, citing strong private consumption and robust public investment as key drivers. The RBI also aligns with this optimistic view, projecting a 7.0% growth rate for the same period.

The resilience of the Indian economy is attributed to Strong domestic demand, particularly in rural areas, which is crucial for sustaining growth and the government's commitment to infrastructure and capital expenditure is expected to bolster economic activity.

Risks and Challenges

Despite the positive outlook, several risks could impact both global and Indian economies:

Geopolitical tensions: Ongoing conflicts and trade disputes may disrupt supply chains and affect investor confidence.

Inflationary pressures: Persistently high inflation in services could complicate monetary policy, leading to prolonged periods of elevated interest rates.

External demand: A slowdown in major economies could dampen India's export growth, particularly in sectors like pharmaceuticals and chemicals.

The expectation of Anti-Dumping Duties (ADD) caused a significant increase in imports into the

Indian market, leading to ongoing price declines and affecting sales volumes. Your company filed application before the Directorate General of Trade Remedies (DGTR) to impose Anti-Dumping Duties (ADD) on slabstock due to excessive dumping at low prices. As a result of your Company's efforts, the DGTR announced ADD on slabstock products on March 28, 2024, pending approval by the Finance Ministry. This announcement disrupted the slabstock market, leading importers to aggressively import products to capitalize on the situation, causing an oversupply in the market.

Subsidiaries

As on 31^st March 2024, the Company has two Wholly Owned Subsidiaries (WOS) and 4 (Four)

Step Down Subsidiaries (SDS). The of all these subsidiaries have been consolidated as applicable and the and other information have been furnished in the Consolidated Financial Statement(CFS) attached to this Report.

AMCHEM, Singapore

AMCHEM Speciality Chemicals Private Limited, Singapore, set-up by the Company in 2015-16, to expand its global footprint, holds the foreign assets of the Company. Your Company had invested in 2015-16 US$ 16.32 million (equivalent to 110.32 crore) in the WOS to part fund the acquisition of Notedome Limited, UK and also for further exploratory work. During the year 2016-17 the WOS set up AMCHEM Speciality Chemicals UK Limited (AMCHEM, UK) as its WOS which acquired an operating unit namely Notedome Limited, UK.

During 2022-23, as part of group restructuring,

AMCHEM UK was liquidated and final approval for liquidation was received from statutory authorities in UK. Your Company made further investment of US$ 35 million (equivalent to about 288 crore) during November 2022. With this, the aggregate investment in the subsidiary is US$ 51.42 million (equivalent to about 398 crore). As at 31^st March 2024, AMCHEM, Singapore is a material subsidiary of your Company.

For FY 2023-24, the total income of AMCHEM, Singapore was US$ 10.44 million (equivalent to 86.47 crore) and the profit for the year was US$ 8.66 million (equivalent to 71.73 crore). AMCHEM, Singapore continues to explore further opportunities for acquisition of overseas facilities for enhancing MPL's global presence, and also has interests in trading, transaction facilitations, business and project consultancy. The details of each of the investment made in step down subsidiaries have been covered separately.

AMCHEM, UK

During FY 2022-23, as part of group re-organisation, necessary filings and formalities for liquidation have been made with Statutory Authorities in UK by AMCHEM Speciality Chemicals UK Limited (AMCHEM, UK). Consequent to this, the entire shares (3916) of Notedome Limited, UK held by AMCHEM, UK had been transferred to AMCHEM, Singapore. With this AMCHEM Singapore has become direct holding Company of Notedome Limited, UK with effect from 19^th January 2023.

During FY 2023-24, the final liquidation approval has been obtained from statutory authorities in UK and AMCHEM UK liquidated on 19^th September 2023.

NOTEDOME LIMITED, UK

Notedome, established in 1979, is a System House with more than 30 years' experience, manufacturing Neuthane Polyurethane Cast Elastomers catering to customers across 45 countries. Neuthane polyurethanes are used in diverse range of industries and applications, in the automotive sector for anti-roll bar, suspension and shock bushes for buses, trucks and other high-performance vehicles, limit or bump stops, material handling etc. and in the agriculture sector for Rollers, financials Harvester components and idler wheels on track laying tractors.

The total revenue of Notedome for the year under review was ? 8.95 million (equivalent to 93.07 crore), profit ? 1.06 million (equivalent to 11.00 crore) and achieved its highest EBITDA on record. This milestone was reached by improving gross margins through strong pricing strategies, leveraging the specialty product offerings, global sourcing initiatives, and effective management of operating expenses. Notedome started new products and exploring new markets including focus on developing bio-based solutions, as part of its business plan. The overall demand for the products is sluggish due to fewer new projects, a result of high inflation and interest rates. In order to maintain productrange and competitiveness, Notedome continue to focus on technology & innovations through R&D efforts and are in the process of strengthening its resources and infrastructure to the growing demand. As part of group sustainable strategic objectives, Notedome will pursue with energy optimization strategies to drive cost savings and promote the use of renewable green energy, to the extent possible.

PENN GLOBE LIMITED, UK

Your Company, through its WOS AMCHEM, SG acquired Penn Globe Limited, UK (PGL) on 30^th November 2022 by acquiring its entire stake (100%) for a consideration of GBP 24.98 million. With this acquisition by AMCHEM, SG, PGL along with its two subsidiaries in UK viz., Penn-White Limited (PWL) and Pennwhite Print Solutions Limited (PPSL) have become wholly owned step-down subsidiaries of the Company. PWL, UK is a leading manufacturer of antifoam chemistry under the FoamDoctor? brand which is sold in more than 50 countries. A wide range of other speciality chemicals are also manufactured to service the needs of long-term customers in a wide range of applications, like food and food processing, wastewater treatment, upstream and downstream oil, and increasingly in the coatings and adhesives industry.

PWL achieved its highest EBITDA in the year 2023-24 and its first year of full were adopted by the Company after its acquisition. Maintenance of high margins, RM softening, financial and corporate structuring are key factors for rise in EBITDA. To strengthen the management team, a new CEO and other senior technical members have been recruited during the year under review. As part of product development, PWL is focusing more on its core business in bringing new markets and innovative products through its R&D initiatives so as to be more competitive in certain sectors and applications. Considering the growing demand for food and wastewater treatment, the overall demand for the products is promising and there is a growing emphasis on sustainability. During the end of FY 2023-24, PWL has formed an Indian Wholly Owned Subsidiary viz., PennWhite India Private Limited to be engaged in speciality business. This formation helps PWL to make its footprint in Asian markets in the years to come. The revenue for PennWhite Limited, UK for the reporting period was ? 13.71 million (equivalent to 142.61 crore) and profit ? 2.14 million (equivalent to 22.22 crore). During FY 2022-23, the trade, assets and liabilities of PPSL as at 31^st March 2023 were transferred to PWL and there were no debtors or creditors as at 31^st March 2023 for PPSL.

In continuation to the previous year reporting, as part of Group's restructuring plan, necessary filings and formalities for voluntary liquidation have been made with Statutory Authorities in UK by PPSL during FY 2023-24 and after due process, liquidation approval received from statutory authorities in UK and PPSL was liquidated on 3^rd October 2023. During FY 2023-24, as part of group restructuring, PGL transferred the entire shares of PWL to AMCHEM, SG and applied for voluntary liquidation with statutory authorities in UK. Based on the and after due process, PGL was liquidated on 23^rd April 2024. With this, PWL has become direct subsidiary of AMCHEM, SG.

Other Subsidiaries

During June 2023, your Company had incorporated a wholly owned subsidiary in India viz., Manali Speciality Private Limited, primarily engaged in the business of Speciality Chemicals.

During July 2023, Notedome, UK had incorporated a wholly owned subsidiary in Germany viz., Notedome Europe GmbH, primarily engaged in the business of Chemicals including Polyurethane Casting Elastomer systems and related products and services. During February 2024, PWL, UK in order to expand its footprint in India, has formed an Indian subsidiary viz., PennWhite India Private Limited, primarily engaged in speciality products. Notedome Europe GmbH and PennWhite India Private Limited have become the step down subsidiaries of your Company. All the above three entities are in the process of setting up its business and are yet to commence their business operations.

Environment and Safety

Your Company has established clear policies for quality, environmental responsibility, and safety, with dedicated teams and committees to ensure adherence to these standards. Regular in-house reviews and audits, along with surveillance audits for ISO 9001:2015 and ISO 14001:2015, help maintain compliance with quality, environmental, and safety requirements. To further enhance safety standards, your Company is on the verge of implementing ISO 45001:2018, which will enforce stringent safety controls. This initiative will advance the Company towards achieving world-class safety and environmental commitment.

Additionally, through the Manali Industries Association (MIA), World Environment Day was celebrated with participation from member industries in and around the Manali Industrial Belt. This collaboration has fostered synergy among industries, promoting a sustainable future from both environmental and industrial perspectives. Your Company has planted nearly 15000 saplings of various tree species, as prescribed by the Ministry of Environment and Forest & Climate Control, covering 40% of the land as prescribed under law with green belt development in Manali Industrial belt area Additional land was sourced through Greater Chennai Corporation (GCC) to implement this initiative.

The Company prioritizes the safety of personnel and assets, conducting various competitions during Safety Week to promote awareness of safe manufacturingpractices.Employeesreceivetraining in safety-related matters, including first aid and participation in mock drills, to ensure preparedness for any emergencies. Safety experts from various chemical industries were invited to conduct training programs, sharing their experiences and best practices to enhance safety awareness among employees. A Pep Talk program was introduced for contract workers to raise awareness about the importance of using personal protective equipment (PPE) and lifeline safety equipment as part of their daily routines.

Beyond complying with prescribed safety standards, the Company has proactively modernized its hydrant system and safety protocols to handle hazardous chemicals such as propylene, propylene oxide, Ethylene Oxide, Styrene and chlorine. Your Company has implemented a robust three-tier protocol to ensure safety at all time. To mitigate safety hazards of quick lime during transit, especially in the rainy season, the Company constructed a warehouse within the premises at cost of 3.50 crore. This facility, designed to store a quantity of 2,000 MT of quicklime, enhances safety measures to world-class standards.

Audit Committee

The details about the Committee are furnished in the Corporate Governance Report (CGR). All the recommendations of the Committee were accepted by the Board.

Vigil Mechanism

As required under Section 177 of the Act and Regulation 22 of the SEBI Listing Regulations 2015, the Company has established a vigil mechanism for directors and employees to report their genuine concerns through the Whistle Blower Policy as available in the website of the Company. As prescribed under the Act and the SEBI Listing Regulations 2015, provision has been made for direct access to the Chairperson of the Audit Committee in appropriate/exceptional cases.

Human Resources

Your company recognizes that continuous succession planning is crucial for thriving in a highly competitive business environment. To this end, it has made significant efforts to enhance diversity, equity, and inclusion across all business functions by employing capable young female professionals with relevant expertise and integrating them into core technical roles.

The top young female professionals were identified and assigned specific tasks in Projects and Technical Services to enhance retention rates. They have been involved in machinery inspections and technical evaluations of project proposals. Your company has ensured that all fundamental safety and welfare needs of this young workforce are met. On the leadership front, a robust talent development program has been established to prepare the next generation of leaders to assume various functions within the organization.

Additionally, your company has implemented initiatives aimed at preparing the workforce through cultural and behavioural interventions, fostering an inclusive decision-making culture.

Industrial relations have generally been positive, with the exception of a long-standing wage dispute dating back to 2001. This dispute, initially contested in the Supreme Court and now in the Madras High Court, has seen most workmen accept the management's offer following successful dialogue. However, a small group of workers continues to pursue the case, which remains pending in the Madras High Court. To enhance employee health and safety, the company has offered various health awareness sessions fitness and programs to promote a healthy lifestyle. As of March 31, 2024, the company employed 383 individuals across various locations, including Executive Directors, Senior Management Personnel, Engineers, Technicians, and Trainees.

Related Party Transactions

During the year under review, there were no transactions not at arms' length within the meaning of Section 188 of the Act. The policy on related party transaction is available on the website of the Company viz., https://www.manalipetro.com/wp-content/uploads/2022/02/RPT-Policy-2022.pdf

As required under Regulation 23(2) of the SEBI Listing Regulations 2015, approval of the Members was obtained for transactions with Tamilnadu Petroproducts Limited during the year 2023-24 at the 37^th Annual General Meeting. Based on professional advice and for administrative convenience, it has been proposed that such prior approvals could be for 12 months from October to September and hence a fresh proposal seeking prior approval of the Members for the same is being placed for consideration of the Members at the ensuing AGM.

Board of Directors and related disclosures

As on date of the Report, the Board comprises of twelve directors including three woman directors. There are seven Independent Directors, and all of them have furnished necessary declaration under Section 149(7) of the Act and under Regulation 25(8) of the Regulations. As per the said declarations, they meet the criteria of independence as provided in Section 149(6) of the Act and the SEBI Listing

Regulations 2015. All of them have confirmed that they have registered themselves with the Indian Institute of Corporate Affairs under Rule 6 of the Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended and all of them have been exempted from or passed the proficiency test.

The Board met five times during the year under review and the relevant details are furnished in the CGR. The Board has approved a Remuneration Policy as recommended by the Nomination and Remuneration Committee (NRC), which inter alia contains the criteria for determining the positive attributes and independence of a director as formulated by the NRC. The policy on remuneration to directors is disclosed in the CGR annexed to this Report.

The following changes took place in the composition of the Board and KMPs since the last AGM held on 25^th September 2023 until the date of this report: a. Mr. C S Shankar (DIN: 08397818) and Mr. N Sundaradevan (DIN: 00223399) were re-appointed as Independent Directors of the Company for a period of five years from 20^th May 2024 and 12^th June 2024 respectively. b. Mr. R Chandrasekar (DIN: 06374821) was elevated as Managing Director of the Company w.e.f. 13^th May 2024 for a period of 3 years. c. Mr. G R Sridhar was appointed as Wholetime Director (Operations) of the Company w.e.f. 13^th May 2024 for a period of 3 years. d. Ms. K Lalitha was appointed as Chief Financial Officer of the Company w.e.f. 13^th May 2024. e. Mr. G Chellakrishna (DIN: 01036398) and Ms. Sashikala Srikanth (DIN: 01678374) will retire as Independent Directors of the Company effective closing hours of 12^th August 2024 consequent to completion of their second term of five years. f. Ms. Latha Ramanathan (DIN: 07099052) has been appointed as an Additional Director under Independent Category w.e.f., 05^th August 2024 for a period of five years subject to members approval at this ensuing AGM.

Annual Evaluation of the Board, Committees and Directors

The formal evaluation of the Board was done taking into account the various parameters such as the structure, meetings, functions, risk evaluation, management of conflict of interests, stakeholder value & responsibility, corporate culture & value, facilitation to the Independent Directors to function impartially and other matters. The evaluation of the Committees was done based on the mandate, composition, effectiveness, structure and meetings, independence and contribution to the decisions of the Board.

The evaluation of the individual directors, including the independent directors was done taking into account their qualification, experience, competency, knowledge, understanding of their respective roles (as a Director, Independent Director and as a Member of the Committees of which they are Members/Chairpersons), adherence to Codes and ethics, conduct, attendance and participation in the meetings, etc. In compliance with the requirements of Schedule IV to the Act and the Regulations, a separate meeting of the Independent Directors was held during the year under review.

Directors' Responsibility Statement

Pursuant to the requirement of sub-sections 3(c) and 5 of Section 134 of the Act it is hereby confirmed that:

a. in the preparation of the annual accounts for the financial year ended 31^st March 2024, the applicable Accounting Standards had been followed along with proper explanation relating to material departures.

b. the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review.

c. the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d. the Directors had prepared the accounts for the financial year ended 31^st March 2024 on a "going concern" basis.

e. the Directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively and

f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Details of Unclaimed Share Certificates

In accordance with the requirements of Clause 5A of the erstwhile Listing Agreement, during the year 2012-13 shares remaining unclaimed even after 3 reminders have been transferred and held in a separate demat account. As per the information provided by the Registrars and Share Transfer Agent, out of the 72,524 shares, which remained unclaimed by 302 shareholders at the beginning of the FY, 900 shares were released to 4 shareholders during the year. Further, 7,800 shares relating to 37 shareholders were transferred to the Investor Education and Protection Fund in compliance with the requirements of Section 126(6) of the Act. As at the end of the FY, 63,824 shares remained unclaimed by 261 shareholders. As specified under the Regulations, the voting right on the above shares remain frozen. A separate suspense escrow demat account has been opened for moving the shares, if any, required to be transferred beyond 120 days from issuing of Letter of Confirmation by the Company as stipulated under SEBI Circular dated 30^th December, 2022. As at 31^st March, 2024, no shares have been transferred to the said account.

Auditors

Brahmayya & Co., Chartered Accountants, Chennai were Re-appointed as the Auditors of the Company for the second term at the 36^th Annual General Meeting held on 28^th September 2022 for a period of five years, viz. till the conclusion of 41^st AGM.

Maintenance of Cost Records & Cost Audit

The Company is required to maintain cost records as specified by the Central Government under Section 148(1) of the Act and is also covered under Cost Audit, which are duly complied with. M Krishnaswamy & Associates, Cost Accountants, Chennai were appointed as the Cost Auditors of financial the Company for the year 2023-24 on a remuneration of 3.00 lakh plus applicable taxes and reimbursement of out-of-pocket expenses which was ratified by the Members at the AGM held on 25^th September 2023. Based on the recommendation of the Audit Committee, Board has reappointed the said Firm as the Cost Auditors for the year 2024-25 to hold office till 30^th September 2025 or submission of the report for the year 2024-25, whichever is earlier. The remuneration will be 3.00 lakh, plus applicable taxes and reimbursement of out of pocket expenses subject to ratification of the Members at the ensuing AGM.

Adequacy of Internal Financial Controls

Your Company has in place adequate internal financial control systems combined with delegation of powers and periodical review of the process. The control system is also supported by Internal Audit and management review with documented policies and procedures. In the past the system was also reviewed by an external agency, and no major weaknesses were reported. To ensure effective operation of the system, periodical reviews are made by the Internal Auditors and their findings discussed by the Audit Committee and with the Statutory Auditors. The Statutory Auditors of the Company have also furnished certificates in this regard, which are attached to their Reports.

Corporate Governance

Your Company has complied with the requirements of Corporate Governance stipulated under the Regulations. A Report on Corporate Governance is given in Annexure A. Declaration of the Managing Director on compliance with the Code of Conduct of the Board and Senior Management and compliance certificate from Practicing Company Secretary regarding compliance of conditions of Corporate Governance are given in Annexure B. Secretarial Audit Report as required under Section 204 of the Act, was issued by Ms. B Chandra, Company Secretary in Practice is annexed to this Report as Annexure C.

Disclosures under Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

a. The ratio of remuneration of Wholetime Director to the median remuneration of other employees of the Company was 22.20%

b. The increase in remuneration of Wholetime Director & CFO and Company Secretary – Not comparable as both WTD& CFO and CS have joined during part of the year 2023.

c. The increase in the median remuneration of the employees was 4.12%

d. As at the year end, there were 375 permanent employees, including WTD & CFO and excluding trainees.

e. During the year, the average increase in the salaries other than managerial remuneration was 10.73% and the increase in managerial remuneration was 9.38%. Considering the performance of the Company and respective individuals during the year under review, the increase in managerial and other remuneration are deemed reasonable which have been determined based on the appraisal process adopted by the Company.

f. Information stipulated under Rule 5(2) are given in Annexure D to this Report.

g. The remuneration paid to the employees are as per the remuneration policy of the Company.

Note: Wages to workmen covered under the wage settlements have not been considered for (c) and (e) above.

Other disclosures

a. Information on conservation of energy, technology absorption, foreign exchange earnings and outgo prescribed under Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, to the extent applicable are given in Annexure E.

b. Pursuant to Section 92(3) of the Act, the Annual Return filed during the year under review has been uploaded on the website of the Company under the link https://www.manalipetro.com/investors/annual-return/

c. The Company has not accepted any deposits from the public during the year under report.

d. The information under Section 186 of the Act relating to investments, loans, etc. as at the year end has been furnished in Notes to the Financial Statements.

e. The annual report on CSR is given in Annexure F.

f. The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. No cases were filed under the said Act.

g. The Company has complied with the requirements of all the applicable Secretarial Standards. h. Significant changes in key financial ratios:

During the year under review, net margin and the operating margin decreased by 123% and 99% respectively. The current ratio and inventory turnover ratio decreased by about 21% and 26% respectively. The Return on Net worth decreased from 5% in 2022-23 to (0.95)%. All these were because of reduction in price realizations during the year.

The complete details of Ratios along with Variance are provided in Note 50, clause xii of Standalone Financial Statements.

Acknowledgement

Your Directors express their sincere gratitude to the Government of India, the Government of Tamilnadu, the Promoters and the Banks for the assistance, co-operation and support extended to the Company. The Directors thank the Shareholders for their continued support. The Directors also place on record their appreciation of the consistent good work put in by all cadres of employees and especially for raising up to the occasion and ensuring sustained operations during the year, in spite of the challenges during the Cyclone Michaung/ pandemic periods.

Disclaimer

The Management Discussion and Analysis contained herein is based on the information available to the Company and assumptions based on experience in regard to domestic and global economy, on which the Company's performance is dependent. It may be materially influenced by changes in economy, government policies, environment and the like, on which the Company may not have any control, which could impact the views perceived or expressed herein.