Indian Emulsifiers Ltd Management Discussions

OPERATIONS

The following discussion and analysis of our financial condition and results of operations for the period ended on December 31, 2023 and for the Fiscal Years 2023, 2022, and 2021 is based on, and should be read in conjunction with, our Restated Financial Statements, including the schedules, notes and significant accounting policies thereto, included in the chapter titled “Restated Financial Statements” beginning on page no. 165 of this Draft Red Herring Prospectus. Our Restated Financial Statements have been derived from our audited financial statements and restated in accordance with the SEBI ICDR Regulations and the ICAI Guidance Note. Our financial statements are prepared in accordance with IND- AS.

You should read the following discussion of our financial condition and results of operations together with our restated financial statements included in this Draft Red Herring Prospectus. You should also read the section titled “Risk Factors” beginning on page no. 25 of this Draft Red Herring Prospectus, which discusses a number of factors, risks and contingencies that could affect our financial condition and results of operations. Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the twelve-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to “we”, “us” or “our” refers to Indian Emulsifier Limited, our Company. Unless otherwise indicated, financial information included herein are based on our “Restated Financial Statements” for the period ended on December 31, 2023 and for the Financial Years 2023, 2022, and 2021 included in this Draft Red Herring Prospectus beginning on page no. 165 of this Draft Red Herring Prospectus.

Note: Statement in the Management Discussion and Analysis Report describing our objectives, outlook, estimates, expectations or prediction may be “Forward Looking Statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to our operations include, among others, economic conditions affecting demand/supply and price conditions in domestic and overseas market in which we operate, changes in Government Regulations, Tax Laws and other Statutes and incidental factors.

BUSINESS OVERVIEW

Our Company was originally incorporated as Private Limited, under the Companies Act, 2013 (“Companies Act”) in the name and style of “Indian Emulsifier Private Limited” on December 05, 2020 under the provisions of the Companies Act, 2013 vide Certificate of Incorporation issued by the Registrar of Companies, Mumbai, Maharashtra. Later on, company was converted into public limited company, the name of our Company was changed to “Indian Emulsifier Limited” and fresh Certificate of Incorporation dated January 05, 2024 was issued by the Registrar of Companies, Mumbai, Maharashtra.

Our Promoter Yash Tikekar laid down the foundation of our company in the year 2020 as a Private Limited in the name of “Indian Emulsifier Private Limited” with a vision to become a pioneer specialty chemicals manufacturer with a focus on tailor-made solutions to meet customers diverse requirements, as we believe that Chemistry Drives Performance.

The Company was incorporated with the objective of Manufacturing and Supplying of Specialty Chemicals i.e., Esters, Amphoterics, Phosphate Esters, Imidazolines, Wax Emulsions, SMO & PIBSA Emulsifiers. The Company has its manufacturing plant at Plot No. E-10 MIDC, Lote Parshuram, Tal. Khed, Ratnagiri 415 722, Maharashtra, India since inception. The facility has a production capacity of 4,800 metric tons per annum as on March 31, 2023 and 3,600 MT per annum for the period ended December 31, 2023*, equipped with process control, innovative R&D centre, Quality Control and Application Laboratories. and its Registered office at Shop 206, Floor 2, Sumer Kendra, Shivram Seth, Amrutwar Road Near Doordarshan Kendra, Off Pandurang Budhwar Marg, Worli, Mumbai 400 018, Maharashtra, India. The Company was formed with a vision to become a pioneer specialty chemicals manufacturer.

The Company got ISO Certified in the year 2021 as ISO 9001:2015. We are manufacturing the Specialty chemicals industry, with a focus on Esters, Phosphate Esters, Imidazolines, Succinimides, Sulfosuccinates, Specialty Emulsifiers and formulated products. Our Company serve specialty chemicals to wide range of industries such as Mining, Textile, Cleaning Industry, PVC (Poly Vinyl Chloride)/ Rubber, Personal Care, Food and Other Industries.

The manufacturing facility has a production capacity of 4,800 metric tons per annum the capacity has been increased from 2400 MT per annum to 4,800 MT per annum due to additional Reactors installed, equipped with process control, innovative R&D centre, Quality Control and Application Laboratories. Operations at the facility are managed by an able and motivated team of highly qualified technical personnel, having expertise in their individual fields. Multipurpose facility designed to have a high degree of flexibility to meet customer needs. Multiple high-pressure stainless-steel reactors equipped to deliver yields from 100 Kg to 8,000 kg per batch providing high level of flexibility. The facility can carry out reactions at temperatures ranging from 10 C to 250 C and pressure 5 kg to 8kg/cm, the reactors are equipped with condenser, vacuum arrangement and receiver and high speed stirred reactor.

For more details, please see the chapter titled, “Our Management ” and “Our Promoters and Promoter Group” beginning on page no. 142 and 157 of this Draft Red Herring Prospectus.

KEY PERFORMANCE INDICATORS OF OUR COMPANY* As per Restated Financial Statements

(t in Lakhs)

Key Financial Performance	December 31, 2023	March 31, 2023	March 31, 2022	March 31, 2021
Revenue from Operations (1)	4,867.36	4,117.97	1,768.31	-
EBITDA (2)	1119.22	786.19	79.49	(0.37)
EBITDA Margin (%) (3)	22.99%	19.09%	4.50%	-
PAT	675.01	389.44	4.31	(0.37)
PAT Margin (%) (4)	13.87%	9.46%	0.24%	-
Return on equity (%) (5)	25.61%	32.33%	0.53%	(58.65%)
Return on capital employed (%) (6)	38.03%	55.50%	7.19%	(58.65%)
Debt-Equity Ratio (times) (7)	0.51	0.97	0.94	-
Net fixed asset turnover ratio (times) (8)	3.46	3.24	1.81	-
Current Ratio (times) (9)	2.11	2.19	2.92	1.01
Net profit ratio (%) (10)	13.87%	9.46%	0.24%	-

*As certified by M/s Dave & Dave, Chartered Accountants, by way of their certificate dated February 09, 2024.

Notes

1. Revenue from Operations is used by our management to track the revenue profile of the business and in turn helps to assess the overall financial performance of our Company and volume of our business.

2. EBITDA provides information regarding the operational efficiency of the business.

3. EBITDA Margin (%) is an indicator of the operational profitability and financial performance of our business.

4. PAT Margin (%) is an indicator of the overall profitability and financial performance of the business.

5. Return on equity (ROE) is a measure of financial performance.

6. Return on capital employed is a financial ratio that measures our companys profitability in terms of all of its capital.

7. Debt / Equity Ratio is used to measure the financial leverage of the Company and provides comparison benchmark against peers.

8. Net fixed asset turnover ratio is indicator of the efficiency with which our company is able to leverage its assets to generate revenue from operations.

9. The current ratio is a liquidity ratio that measures our companys ability to pay short-term obligations or those due within one year.

10. Net Profit Margin (also known as “Profit Margin” or “Net Profit Margin Ratio ”) is a financial ratio used to calculate the percentage ofprofit our company produces from its total revenue.

SIGNIFICANT DEVELOPMENTS AFTER DECEMBER 31, 2023

Except as mentioned below, In the opinion of the Board of Directors of our Company, since December 31, 2023, there have not arisen any circumstance that materially or adversely affect or are likely to affect the profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months.

1. The Board of the Company has approved to raise funds through Initial Public Offering in their meeting held on January 06, 2024.

2. The Board of the Company has approved the appointment of M/s Dave and Dave, Chartered Accountants as the Peer Reviewed Statutory Auditor of the Company in their meeting held on January 06, 2024.

3. The members of the Company approved proposal of Board of Directors to raise funds through initial public offering in the EGM held on January 09, 2024.

4. The members of the Company approved the appointment of M/s Dave and Dave, Chartered Accountants as the Peer Reviewed Statutory Auditor of the Company in the EGM held on January 09, 2024.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our financial performance and results of operations are influenced by a number of important factors, some of which are beyond our control, including without limitation, intense global and domestic competition, general economic conditions, changes in conditions in the regional markets in which we operate, changes in costs of raw materials and supplies, COVID-

19-related effects on global and domestic economic conditions, and evolving government regulations and policies. Some of the more important factors are discussed below, as well as in the section titled "Risk Factors" beginning on page no. 25 of this Draft Red Herring Prospectus.

Our Companys future results of operations could be affected potentially by the following factors:

1. Brand image and changing consumer preference;

2. Our failure to keep pace with rapid changes in technology;

3. Our ability to meet our further capital expenditure requirements;

4. Fluctuations in operating costs;

5. Our ability to successfully execute our growth strategies;

6. Competition and price cutting from existing and new entrants;

7. General economic and market conditions; and

8. Change in laws, government policies and regulations that apply to the industry in which our Company operate;

9. Inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

10. Companys ability to successfully implement its growth strategy and expansion plans;

11. Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

12. Inability to successfully obtain registrations in a timely manner or at all;

13. Occurrence of Environmental Problems & Uninsured Losses;

14. Conflicts of interest with affiliated companies, the promoter group and other related parties.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

For details in respect of Statement of Significant Accounting Policies, please refer to Annexure IV of “Restated Financial Statements beginning on page no. 165 of this Draft Red Herring Prospectus.

DISCUSSION ON RESULT OF OPERATIONS

The following discussion on results of operations should be read in conjunction with the Restated Financial Statements for the period December 31, 2023 and for the financial years ended on March 31, 2023, 2022 and 2021.

(^ in Lakhs)

Particulars	December 31, 2023	% of Total	March 31, 2023	% of Total	March 31, 2022	% of Total	March 31, 2021	% of Total
Income
Revenue from operations	4,867.36	99.94%	4,117.97	99.99%	1,768.31	100.00%
Other income	2.81	0.06%	0.38	0.01%	-	0.00%	-	-
Total Revenue (A)	4,870.16	100.00%	4,118.35	100.00%	1,768.31	100.00%	_	-
Expenditure
Cost of Material Consumed	3,555.99	73.02%	3,239.89	78.67%	1,450.21	82.01%
Change in Inventory of Finished Goods & Work In Progress	(137.52)	(2.82%)	(225.72)	(5.48%)	(87.56)	(4.95%)
Employee Benefit Expense	40.53	0.83%	51.40	1.25%	97.30	5.50%	0.13
Finance Cost	188.66	3.87%	204.63	4.97%	46.60	2.64%	-	-
Depreciation and amortization expense	119.50	2.45%	118.21	2.87%	20.85	1.18%
Other Expenses	289.12	5.94%	266.22	6.46%	228.87	12.94%	0.24	-
Total Expenses (B)	4,056.30	83.29%	3,654.63	88.74%	1,756.28	99.32%	0.37	-
Profit Before Tax	813.87	16.71%	463.73	11.26%	12.04	0.68 %	(0.37)	-
Tax expense:
Current tax	139.59	2.87%	74.80	1.82%	-	0.00%	-	-
Deferred tax	(0.73)	(0.02%)	(0.52)	(0.01%)	7.73	0.44%	-	-
Particulars	December 31, 2023	% of Total	March 31, 2023	% of Total	March 31, 2022	% of Total	March 31, 2021	% of Total
Net Tax Expense /(Benefit)	138.85	2.85%	74.29	1.80%	7.73	0.44%	-	-
Profit For the Year	675.01	13.87 %	389.44	9.46%	4.31	0.24%	(0.37)

Revenue from operations:

Revenue from operations mainly consists of revenue from sale of manufactured and sale of speciality chemicals.

Other Income:

Other income primarily comprises of interest on FDR and income tax return Total Expenses:

Total expenses consist of operating cost like Cost of Material consumed, Change in inventories of finished goods, work in progress and stock in trade, Employee benefits expense, Finance costs, Depreciation and amortization expenses and other expenses

Cost of Material consumed

Cost of Material consumed expenses primarily comprises of Purchase of raw material, and change in stock of raw material. Change in inventories of finished goods, work in progress and stock in trade

Change in inventories of finished goods, work in progress and stock in trade comprises of increase/ (decrease) in stock of finished goods.

Employee benefits expense:

Employee benefits expense primarily comprises of Salaries, wages & bonus expenses, Staff welfare expenses, labour welfare fund and Employers Contribution to PF and Gratuity.

Finance Costs:

Our finance cost includes Interest expenses and Bank charges.

Depreciation and Amortization Expenses:

Depreciation includes depreciation on land, building, plant & machinery, furniture and fixtures and office equipment

Other Expenses:

Other Expenses consists of manufacturing expenses, factory expenses, fees and other charges, insurance expenses, IT expenses, legal and professional expenses, license fees, rent, printing and stationary, travelling expenses, repair and maintenance, selling and distribution expense, auditor fees and miscellaneous expenditure

FINANCIAL PERFORMANCE HIGHLIGHTS FOR THE PERIOD ENDED DECEMBER 31, 2023

Total Income:

Total income for the period ended December 31, 2023 stood at Rs.4870.16 Lakhs. The total income consists of revenue from operations and other income.

Revenue from Operations

During the period ended December 31, 2023 the net revenue from operation of our Company was Rs.4867.36 Lakhs from sale of manufactured speciality chemicals.

Other Income:

During the period ended December 31, 2023 the other income of our Company stood at Rs.2.81 Lakhs. The main components of the other income are from interest on FDR and income tax return

Total Expenses

Total expenses consist of cost like cost of material consumed, change in inventories of finished goods, work in progress and stock in trade, employee benefits expense, finance costs, depreciation and amortization expenses and other expenses. During the period ended December 31, 2023 the total expenses of our Company stood at Rs.4056.30 Lakhs.

Cost of Material consumed

During the period ended December 31, 2023 the Cost of Material consumed expenses of our Company stood at Rs.3555.99 Lakhs. Our Cost of Material consumed expenses primarily comprises of Purchase of material and other attributable costs related to purchase of raw material.

Change in inventories of finished goods and work in progress

During the period ended December 31, 2023 Change in inventories of finished goods, work in progress and stock in trade of our Company stood at Rs.(137.52) Lakhs. Our Change in inventories of finished goods, work in progress and stock in trade comprises of increase/(decrease) in finished goods.

Employee benefits expense:

During the period ended December 31, 2023 the employee benefit expenses of our Company stood at Rs.40.53 Lakhs. The main components of Salaries, wages & bonus expenses, Staff welfare expenses, labour welfare fund and Employers Contribution to PF and Gratuity.

Finance Costs:

During the period ended December 31, 2023 the finance cost expenses of our Company stood at Rs.188.66 Lakhs. Our finance cost includes Interest expenses and Bank charges

Depreciation and Amortization Expenses:

During the period ended December 31, 2023 the Depreciation and amortization charges of our Company stood at Rs.119.50 Lakhs, during the period the company has capitalized the fixed assets amounting to Rs.249.71 lakhs including Land, plant and machinery.

Other Expenses:

During the period ended December 31, 2023, the Other Expenses of our Company stood at Rs.289.12 Lakhs Other Expenses consists of manufacturing expenses, factory expenses, fees and other charges, insurance expenses, IT expenses, legal and professional expenses, license fees, rent, printing and stationery, travelling expenses, repair and maintenance, selling and distribution expense, auditor fees and miscellaneous expenditure.

Restated Profit before tax:

The Company reported Restated profit before tax for period ending December 31, 2023 of Rs.813.87 Lakhs.

Restated profit after tax:

The Company reported Restated profit after tax for period ending December 31, 2023 of Rs.675.01 Lakhs.

FINANCIAL YEAR 2023 COMPARED TO FINANCIAL YEAR 2022 Total Income:

Total income for the financial year 2022-23 stood at Rs.4,118.35 Lakhs whereas in Financial Year 2021-22 the same stood at ^1768.31 Lakhs representing an increase of 132.90%. The main reason of increase was increase in the volume of business operation of the company.

Revenue from Operations

During the financial year 2022-23 the net revenue from operation of our Company increased to Rs.4117.97 Lakhs as against Rs.1768.31 Lakhs in the Financial Year 2021-22 representing an increase of 132.88%.

Other Income:

During the financial year 2022-23 the other income of our Company was to Rs.37,949 as against NIL in the Financial Year 2021-22 representing an increase of 100% which was due to impact of interest on FDR and interest on IT refund.

Total Expenses:

The total expense for the financial year 2022-23 increased to Rs.3,654.63 Lakhs from Rs.1,756.28 lakhs in the Financial Year 2021-22 representing an increase of 108.09%. Such increase was due to increase in business operations of the Company.

Cost of material consumed:

The Cost of material consumed for the financial year 2022-23 increased to Rs.3,239.88 lakhs from Rs.1,450.21 lakhs in the Financial Year 2021-22 representing an increase of 123.41%. Such increase was due to increase in business operations of the Company.

Change in inventories of finished goods and work in progress:

The closing inventories of finished goods and work in progress for the financial year 2022-23 was Rs.(225.72) lakhs as compared to Rs.(87.56) lakhs in the Financial Year 2021-22 representing a increase in change in inventories of 157.79%.

Employee benefits expense:

Our Company has incurred Rs.51.40 Lakhs as Employee benefits expense during the financial year 2022-23 as compared to Rs.97.30 Lakhs in the financial year 2021-22. The decrease of 47.17% was due to decrease in (i) Salary to Staff from Rs.94.26 lakhs to Rs.48.88 lakhs; and (ii) Staff Welfare from Rs.2.10 lakhs in financial year 2021-22 as compared to Rs.1.29 lakhs in the financial year 2022-23.

Finance Cost:

Our Company has incurred Rs.204.63 Lakhs as finance cost during the financial year 2022-23 as compared to Rs.46.60 Lakhs in the financial year 2021-22. The increase of 339.16% was due to increase in borrowings during the latter half of FY 2022.

Depreciation and Amortization Expenses:

Depreciation for the financial year 2022-23 stood at Rs.118.21 Lakhs as against Rs.20.85 Lakhs during the financial year 202122. The increase in depreciation was around 466.83% which was due to purchase of Building, Plant & Machinery, Office Equipments and Furniture & Fixtures.

Other Expenses:

Our Company has incurred Rs.266.22 Lakhs during the Financial Year 2022-23 on other expenses as against Rs.228.87 Lakhs during the financial year 2021-22. There was an increase of 16.32% mainly due (i) increase in manufacturing expense by 59.57% from Rs.96.70 lakhs in financial year 2021-22 to Rs.154.30 lakhs in financial year 2022-23, (ii) increase in insurance expense by 70.55% from Rs.3.25 lakhs in financial year 2021-22 to Rs.5.54 lakhs in financial year 2022-23, (iii) increase in Miscellaneous expenses from Rs.0.08 lakhs in financial year 2021-22 to Rs.6.36 lakhs in financial year 2022-23.

Restated profit before tax:

Net profit before tax for the financial year 2022-23 increased to Rs.463.73 Lakhs as compared to Rs.12.04 Lakhs in the financial year 2021-22. The increase of 3752.34% was majorly due to factors as mentioned above.

Restated profit for the year:

As a result of the foregoing factors, our profit after tax for the year increase by 8932.43% from net profit of Rs.4.31 Lakhs in in financial year 2021-22 to net profit Rs.389.44 lakhs in financial year 2022-23.

RELATED PARTY TRANSACTIONS

Related party transactions with certain of our promoter, directors and their entities and relatives primarily relate to remuneration, salary, commission and issue of Equity Shares. For further details of related parties kindly refer chapter titled “Restated Financial Statements" beginning on page no. 165 of this Draft Red Herring Prospectus.

OFF-BALANCE SHEET ITEMS

We do not have any other off-balance sheet arrangements, derivative instruments or other relationships with any entity that have been established for the purposes of facilitating off-balance sheet arrangements.

QUALIFICATIONS OF THE STATUTORY AUDITORS WHICH HAVE NOT BEEN GIVEN EFFECT TO IN THE RESTATED FINANCIAL STATEMENTS

There are no qualifications in the audit report that require adjustments in the Restated Financial Statements. QUALITATIVE DISCLOSURE ABOUT MARKET RISK Financial Market Risks

Market risk is the risk of loss related to adverse changes in market prices, including interest rate risk. We are exposed to interest rate risk, inflation and credit risk in the normal course of our business.

Interest Rate Risk

Our financial results are subject to changes in interest rates, which may affect our debt service obligations in future and our access to funds.

Effect of Inflation

We are affected by inflation as it has an impact on the salary, wages, etc. In line with changing inflation rates, we rework our margins so as to absorb the inflationary impact.

Credit Risk

We are exposed to credit risk on monies owed to us by our customers. If our customers do not pay us promptly, or at all, we may have to make provisions for or write-off such amounts.

OTHER MATTERS

Details of Default, if any, Including Therein the Amount Involved, Duration of Default and Present Status, in Repayment of Statutory Dues or Repayment of Debentures or Repayment of Deposits or Repayment of Loans from any Bank or Financial Institution.

Except as disclosed in chapter titled “Restated Financial Statements" beginning on page no. 165 of this Draft Red Herring Prospectus, there have been no defaults in payment of statutory dues or repayment of debentures and interest thereon or repayment of deposits and interest thereon or repayment of loans from any bank or financial institution and interest thereon by the Company.

Material Frauds

There are no material frauds, as reported by our statutory auditor, committed against our Company, in the last three Fiscals.

Unusual or infrequent events or transactions

Except as described in this Draft Red Herring Prospectus, during the period/ years under review there have been no transactions or events, which in our best judgment, would be considered “unusual” or “infrequent”.

Significant Economic Changes that Materially Affected or are Likely to Affect Income from Continuing Operations

Indian rules and regulations as well as the overall growth of the Indian economy have a significant bearing on our operations. Major changes in these factors can significantly impact income from continuing operations. There are no significant economic changes that materially affected our Companys operations or are likely to affect income from

continuing operations except as described in chapter titled “Risk Factors” beginning on page no. 25 of this Draft Red Herring Prospectus.

Known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations

Other than as described in the section titled “Risk Factors” and chapter titled “Managements Discussion and Analysis of Financial Conditions and Results of Operations”, beginning on page no. 25 and 204 of this Draft Red Herring Prospectus respectively to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our company from continuing operations.

Future relationship between Costs and Income

Other than as described in the section titled “Risk Factors” beginning on page no. 25 of this Draft Red Herring Prospectus, to our knowledge there are no factors, which will affect the future relationship between costs and income or which are expected to have a material adverse impact on our operations and finances.

The extent to which material increases in revenue or income from operations are due to increased volume, introduction of new products or services or increased prices

Changes in revenue in the last three financial years are as explained in the part “Financial Year 2022-23 compared with financial year 2021-22” above.

SIGNIFICANT DEPENDENCE ON A SINGLE OR FEW CUSTOMERS

Significant proportion of our total revenue have historically been derived from a limited number of Customers. The % of Contribution of our Customers vis a vis the total revenue for the period ended December 31, 2023 and for the financial year ended March 31, 2023, 2022 and 2021 are as follows:

Particulars	Customers
	31.12.2023	31.03.2023	31.03.2022	31.03.2021*
Top 5%	82.06%	78.70%	76.28%	NIL

*Our Company was incorporated as on December 05, 2020 and did not have any revenue from operations for the financial year ending March 31, 2021.

Status of any publicly announced new products or business segments

Please refer to the chapter titled “Business Overview” beginning on page no. 110 of this Draft Red Herring Prospectus for new products or business segments.

The extent to which the business is seasonal

Our business is not seasonal in nature.

Competitive Conditions

We operate in a competitive atmosphere. Some of our competitors may have greater resources than those available to us. While product quality, brand value, distribution network, etc are key factors in client decisions among competitors, however, reliability and competitive pricing is the deciding factor in most cases. We face fair competition from both organized and unorganized players in the market.

We believe that our experience, and reliability record with our customers will be key to overcome competition posed by such organized and unorganized players. Although, a competitive market, there are not enough number of competitors offering services similar to us. We believe that we are able to compete effectively in the market with our quality of services and our reputation. We believe that the principal factors affecting competition in our business include client relationships, reputation, and the relative quality and price of the services.