Tatva Chintan Pharma Chem Ltd Management Discussions

Management Discussion and Analysis

Global economic review

The year 2022-23 was marked by challenges such as the Russia and Ukraine war, turmoil in global banking sector, inflationary pressures, rising interest rate, and resurgence of COVID-19 in China. These factors weighed heavily on the economic growth trajectory in 2022, and is expected to continue doing so in 2023 as well. The global growth in 2022 was estimated to have slowed down to 3.4% compared to 6.2% in 2021. The emerging markets and developing economies were estimated to have grown its gross domestic product (GDP) at an average of 3.9% in 2022 compared to 6.7% in 2021. The biggest contributors to the growth of emerging economies were Saudi Arabia and India, estimated to have grown at 8.7% and 6.8% respectively in 2022. On the other hand, the advanced economies were estimated to have grown at an average of 2.7% in 2022 compared to 5.4% in 2021. The biggest contributors to the growth in advanced economies were Italy, Spain and UK, growing at 3.9%, 5.2% and 4.1% respectively in 2022.

With the escalation of Russia-Ukraine war, there was a supply chain disruption owing to less-than-normal trade at the global level. Further, prices of gas, fuel and food shot up, thereby, resulting in higher-than-anticipated inflation. The global consumer prices in 2022 were estimated to be 8.8% compared to 4.7% in 2021. Of this, the inflation for emerging economies and advanced economies were estimated at 7.3% and 9.9% in 2022, compared 3.1% and 5.9% respectively.

However, with the focus of Governments across the world on controlling global inflation, containing the resurgence of COVID-19, ensuring financial stability and restoring debt instability, the world is expected to stabilize in 2024 with a GDP growth of 3.1%, before dipping slightly in 2023 with a GDP growth rate of 2.9%. The policy initiatives are expected to stabilise the global economy in the long run, and successfully reduce global inflation to 6.6% in 2023 and further to 4.3% in 2024.

Indian economic review

The inflationary pressure across the entire world has impacted the Indian economy as well. As per its 2nd advance estimates, the Government has estimated the Indian economy to have grown at 7.2% in 2022-23 compared to 9.1% in 2021-22. The year saw rising power, fuel and food cost. The Consumer Price Index (CPI) of India was estimated at 6.7% in 2022-23, compared to 5.5% in 2021-22. The target range for inflation was fixed at 4% with an upper tolerance of 6%. However, between April and October 2022, the CPI was outside the target range set by the Centre. To bring inflation under control, RBI increased the policy repo rate under the liquidity adjustment facility (LAF) by 250 basis points from 4% to 6.50% in 2022-23.

With the increasing thrust of Government on infrastructure and capital expansion, the country is poised for a sustained growth in the foreseeable future. The Union Budget 2023-24 speaks about Governments increasing focus on infrastructure, financing new businesses, and making India more self-reliant and self-employed. The GDP growth of the country in 2023-24 is projected at 6.5%.

Global chemical industry

The global chemical sector has been one of the major contributors to the revenue of manufacturing sector in the world. The largest share of chemical production is carved by the Asia Pacific markets, followed by North America in the second place. Interest rates were low across most of the developed countries during the last 2-3 years, which ensured the growth of the chemicals market. Chemical manufacturers were encouraged to take loans owing to the low interest rates, thereby, driving market growth over the past few years.

The global chemicals market is estimated to have grown from US$ 4,241.18 billion in 2021 to US$ 4,654.14 billion in 2022, growing at 9.7% y-o-y. Amidst the challenges arising from the Russia-Ukraine war and the new waves of COVID-19, the global chemical sector has successfully achieved a short-term growth. However, the disruptions from these macro challenges are likely to continue and resulting rising inflation and supply chain disruption, thereby, impacting the global economy further in the long run, and impacting the chemical sector.

Owing to the inflation that has recently hit the world had a negative impact on the growth of the market owing to the rise in cost of fuel cost, materials cost. Increase in raw material prices, resulted in higher manufacturing costs, thereby, decreasing the investments available for research and development of new products. The world also saw a rise in cost of logistics owing to increasing freight costs.

Riding on the back of growing consumer base, increasing demand for plastics, surging consumption in the automotive industry, upswing in cosmetics manufacturing and expansion of oil drilling & refining activities, the global chemicals market is expected to grow to US$ 6,037.33 billion by 2026, growing at a CAGR of 6.7% between 2022 and 2026.

(Source: Research and Markets)

Indian chemical industry

India is leading chemical manufacturer in the world. The Indian chemical industry contributes ~7% of the countrys GDP, and remains an attractive investment and opportunity hub for both domestic and international manufacturers. The Indian chemical industry stands at an estimated US$ 185 billion in 2022. The sector has seen significant

growth over the last decade owing to strong participation from the industry and strong measures undertaken by the Government. Further, supported by the China Plus One Policy, which arose due to the anti-China sentiments across the world, especially post the COVID-19 pandemic, the country is expected to continue on this growth trajectory in the foreseeable future.

The opportunities arising from the China Plus One Policy coupled with the strong tailwinds from the increasing per capita income and strong demand is expected to help the Indian chemical industry grow to US$ 320 billion by 2028. The strong demand in the chemical sector is expected to arise from the incremental demand from pharmaceutical sector, rising investments in infrastructure, ever- increasing housing demand, and rising demand from agrochemical sector, among others. With 100% FDI allowed through the automatic route and tremendous headroom for growth, the Indian chemical sector is well positioned for receiving large FDIs from global MNCs in the next few years. With this strong growth, Indias share in the global chemicals sector could increase significantly over the coming few years.

Growth drivers

• Population and demography: With a population of more than 1.4 billion, India stands tall as the highest populated country in the world, with a median age of 28.4 years. The huge population drives the demand of increasing amount of chemicals across various sectors with different downstream utilisation. Further, the big chunk of young population translates into increasing consumption of chemicals across automotive sector, clothing and fabric, and cosmetics market, among others

• Urbanisation: The urbanisation rate of India stood at ~35% in 2020, driving the demand of chemicals which find downstream utilisation in automotive sector, construction and real estate, among others

• Rising disposable incomes: The per capita net national income in India is estimated to have increased from 1,50,007 in 2021-22 to 1,70,620 in 2022-23, at current prices, thereby, indicating the increasing ability to spend

• Underpenetrated sector: Indias per-capita chemical

consumption lags far behind other developed nations, which has huge headroom for growth in the foreseeable future

• Increasing demand in construction: Despite the rising construction costs and a record hike in the repo rate (250 bps) in 2022-23, the real estate sector has seen a considerable upswing during the year. According to Anarock, the total sales in the top 7 cities in 2022 is expected to exceed 3.6 lakh units in 2022, more than the peak sales of 2014 which was pegged at 3.43 lakh units. This would drive the chemical sector across the country for the foreseeable future.

• Increasing demand in automotive sector: The total production of passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle in 2022 stood at 2,58,51,004 units compared to 2,40,67,787 units in 2021. On the other hand, the total sales in 2022 for passenger vehicles stood at 37,92,356 units; commercial vehicles at 9,33,116 units; three wheelers at 4,18,341 units; and two wheelers at 1,56,07,991 units.

• Increasing adoption in pharmaceutical industry: With the increasing investment in R&D and Indias strong position as the largest generic drug manufacturer in the world, coupled with increasing demand of medicines especially post the COVID- conundrum, Indias pharmaceutical sector is expected to grow US$ 130 billion in terms of value by 2030. This would thereby drive the demand of chemicals which find downstream utilisation in the pharmaceutical sector.

• Rising agrochemical demand: Indian food and grocery market is the 6th largest in the world, and the Indian agriculture sector is expected to reach US$ 24 billion by 2025, thereby, driving the demand of agrochemicals in the country.

(Source: Anarock, Worldometers, RBI, EY FICCI, Inc42, SIAM)

Government measures through Union Budget 2023-24

Roads

• The Ministry of Road Transport and Highways (MoRTH) has set a target of completing 25,000 km road development in the Union Budget 2023-24

• MoRTH has been allocated an outlay of 2.7 lakh crore to ensure completion of its target, a 36% growth over the previous budget

Housing

• The Government has revised its allocation towards PM Awaas Yojana (PMAY) to over 79,000 crore in its Union Budget, a 66% rise over the previous budget

Infrastructure

• An investment of 75,000 crore was announced, including 15,000 crore from private sources, for 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertiliser, and food grains sectors

Capital investment

• The capital expenditure earmarked by the Government saw a substantial growth of 33% to reach 10 lakh crore, forming 3.3% of GDP

• The Effective Capital Expenditure of Centre was announced to be 13.7 lakh crore, forming 4.5% of GDP

Category review

Phase transfer catalysts (PTC) market

PTC are catalysts, being used in a heterogeneous multi-phase system to facilitate the migration of a reactant from one phase into another phase where the reaction takes place. PTCs also help to eliminate the need for costly and unsafe solvents that can dissolve all reactants in one phase, and costly additional raw materials, minimizing the issue of waste. The PTC market in India is expected to grow at a CAGR of ~6% till 2028, supported by increasing demand and adoption of green chemistry in organic synthesis.

Benefits

• Enables faster reactions, resulting in higher productivity

• Minimal by-product generation

• Ensures lesser energy consumption

• On few occasions, eliminates the need for expensive or dangerous solvents

• Minimizes waste generation and saves time

Demand drivers

• Demand for technologically-advanced and environment- friendly catalyst has been gaining traction

• Gradual demand for greener chemistry in organic synthesis

• The non-regenerative nature of this catalyst generates recurring demand

Performance

The Company is one of the leading manufacturers of PTCs, with the largest and the most diversified portfolio in the industry. The PTC produced by the Company finds downstream application as catalysts in the manufacturing of pharmaceutical APIs, Personal care & Disinfectants and agrochemicals, among others. Being used in many organic transitions in the pharmaceutical industry, these catalysts provide enhanced reaction rates and yields, resulting in lower cost of production, energy and waste. During 2022-23, PTC carved a share of 34% of the Companys revenues, and successfully maintained its position as the market leader. The PTC category clocked a y-o-y growth of ~46% during the year under review to reach a revenue of 1,432.06 million.

Structure Directing Agents (SDA) market

SDAs are high purity quaternary salts which are used in the formation of channels and pores during the synthesis of zeolites. These zeolites have diverse applications such as acting as catalysts and adsorbents. Zeolites find use in emission control in automotive sector owing to the fact that these zeolites when promoted with transition metals such as copper and iron, help in selective catalytic reduction, acting as one of the preferred technologies for emission control. Moreover, with increasing investment in R&D, zeolites are finding more diverse and innovative downstream application, thereby, driving the growth of SDA market.

Benefits

• Acts as a crucial ingredient in emission control systems for NOx removal

• Facilitates cracking crude to acquire various desired outputs

• Important part of continuous flow chemistry process

Demand drivers

• With rising awareness about sustainability and emission control across the globe, the Companys deep knowledge about the SDA for zeolites market has been continuously helping to gain the market position

• Stricter emission norms and increasing shift towards green environment has been pushing demand

• The sector being niche has limited global competition for the Company

Performance

The Company is engaged in the manufacturing of SDAs, which facilitate the production of high-precision zeolite. These zeolites find downstream application in automotive emission control, auto chemicals, and continuous flow chemistries, among others. During 2022-23, the SDA segment carved a revenue share of 30%. During the year under review, the Company clocked y-o-y decline of ~43% to reach revenues of 1,276.38 million from SDAs.

During the year, performance of SDA got impacted due to chip shortages, zero COVID policy in China, and geopolitical tension arising from the Russia and Ukraine war, supply challenge is gradually heading towards normalcy, and in the foreseeable future the Company is expected to register a strong demand revival.

Electrolyte salts market

Electrolyte salts find application in manufacturing super capacitor batteries, sodium and zinc batteries which are used in automobile, electronics, energy storage devices and energy grids. Super capacitors or ultra capacitors are energy storage devices that store electrical energy via electrochemical and electrostatic processes. These have an unusually high energy density when compared to common capacitors.

Benefits

• Some of the characteristics of super capacitors are fast charging ability, superior low temperature performance, long service and cycle life, and reliability. These characteristics enable super capacitors to potentially replace traditional batteries across several applications

• Battery runtime and operational life is improved extensively by using super capacitors

Demand drivers

• Solar energy storage - Helps in absorbing high voltage currents at the time of peak energy generation

• Smart grid - Enables absorbing high voltage

• Automobile - Helps the vehicles with the sudden burst of energy required during the start and while accelerating

• Other electronic devices where high burst of energy is required to be discharged or stored also cause incremental demand of electrolyte salts

Performance

The Company manufactures electrolyte salts, which are used in super-capacitor batteries. These super-capacitor batteries find application in automobile, EV vehicles, electronics and for hybrid energy storage devices. During 2021-22, this product category carved a revenue share of 4% of the Companys total revenue. The total revenue from this product category stood at 165.33 million in 2022-23, clocking a robust y-o-y growth of 191%.

The Company has also started manufacturing electrolyte salts for sodium ion batteries and zinc ion batteries. These batteries are finding large downstream application in renewable energy storage systems.

During the year under review, the Company produced new products, which would find downstream application among new customers. The Company has been seeing a steady rise in the variety of applications, owing to commercialisation of applications using supercapacitor batteries and energy storage devices. The application of super-capacitors used in electronic vehicles has been gaining traction in the recent past. Additionally, the application of energy storage devices in renewable energy storage systems has also been rising. On the back of these factors, the Company is poised for growth from this product category in the foreseeable future.

Pharma & Agro and other specialty Chemical intermediates (PASC)

This product vertical consists of various pharmaceutical and agrochemical intermediates, disinfectants, catalysts and solvents, all of w under the broader category of specialty chemicals.

Benefits

• Enhanced Agro commodity output

• Eliminates waste and protects crops

Demand drivers

• India is having largest population in the world, resulting in huge demand for food and pharma products

• The China plus one strategy is in play, and has been on execution stage by several large MNCs, ensuring larger opportunities for India

• A rising per capita income and improving standards of living has been driving demand for pharma and food products

• The relatively low cost of production in India, coupled with the ability to deliver consistent quality products and ensure timely delivery has been driving demand in India

• Large cultivated area, offering increasing opportunities

Performance

We are the leading producer of Glymes in India, and the third- largest in the world. The PASC category carved a share of 32% of the Companys total revenues during the year. In 2022-23, the Companys total revenues from this category stood at 1,335.13 million, registering a y-o-y growth of 31%.

The Company focuses on developing pharmaceutical and agrochemical intermediates involving green chemistry. We have been working on various products using continuous flow chemistry, electrochemistry and PTC technology. On the back of China plus one policy coupled with our capability to offer sustainable solutions, we have seen the rise in the number of new opportunities to work on various potential products for multiple customers.

Company overview

The inception of the journey of Tatva Chintan Pharma Chem Limited (referred hereafter as the Company or Tatva Chintan) can be traced back to 1996. The Company was positioned itself as an integrated specialty chemical manufacturing company over the past decade. The Companys diverse product portfolio comprises structure directing agents (SDAs), phase transfer catalysts (PTCs), electrolyte salts for super capacitor batteries, and pharmaceutical and agrochemical intermediates and other specialty chemicals (PASC). These products find downstream application across an array of sectors such as automotive, Refinery, pharmaceutical, agrochemicals, paints and coatings, dyes and pigments, personal care, and flavors and fragrances. Currently, the Company is not only a leading manufacturer of SDA, but also one of the niche player in the global PTC market.

On the back of strong and longstanding customer relations, overseas distribution network, consistent focus on R&D and efficient operations, and a capable team, the Company has successfully broadbased its presence across more than 25 countries, including the United States (US), China, Germany, Japan, South Africa and the UK. The Company also has two wholly-owned subsidiaries in the US and Netherlands, which serve its international clients.

Manufacturing facilities

The Company is among one of the frontrunners in the integrated specialty chemicals manufacturing, and manufactures specialty chemicals out of its two world-class units located in Ankleshwar and Dahej. Leveraging the superior R&D abilities, operational efficiencies and with a constant focus on growing by leaps and bounds, the Company has been consistently scaling capacities on one hand, and scaling improving capacity utilisation on the other.

Manufacturing	Capacity	2022-23		2021-22		2020-21
Facility		Reactors	Assembly Lines	Reactors	Assembly Lines	Reactors	Assembly Lines
Ankleshwar	Installed	90 KL	3	90 KL	3	90 KL	3
	Utilised	76.58%	65.10%	91.60%	74.13%	84.22%	68.01%
Dahej	Installed	204 KL	24	204 KL	24	190 KL	14
	Utilised	78.06%	24.80%	89.90%	62.90%	61.57%	50.72%
Total	Installed	294 KL	27	294 KL	27	280 KL	17
	Utilised	77.61%	29.28%	90.40%	64.14%	68.85%	54.50%

Strengths

• Leading manufacturer of SDA and PTC

• Significant global presence with a vast customer base

• Diverse and comprehensive product portfolio

• Integrated and fungible manufacturing facility

• Proven track record of promoter

• Inhouse R&D capabilities

Financial Review (Consolidated)

Revenue

The Companys total income stood at 4,293.56 million in 2022-23 from 4,426.64 million in 2021-22, registering a y-o-y decline of 3.01%.

Revenue from operations

Revenue from operations stood at 4,236.12 million in 2022-23 compared to 4,336.47 million in 2021-22, registering a y-o-y decline of 2.31%. Exports contributed 3,042.33 million in 202223 compared to 3,404.66 million in 2021-22. There has been increase in domestic sales from 925.12 million in 2021-22 to 1,187.43 million in 2022-23. During 2021-22 and 2022-23, exports of products accounted for ~79% and ~72% of our revenue from operations, respectively.

The sale of SDAs stood at 1,276.4 million in 2022-23 compared to 2,248.3 million in 2021-22, and sale of PASCs stood at 1,335.1 million in 2022-23 compared to 1,021.5 million in 2021-22. During 2021-22 and 2022-23, the Companys share of revenue from sale of SDAs stood at 52% and 30% respectively. Similarly, during 202122 and 2022-23, the Companys share of revenue from sale of PASC stood at 23.6% and 31.5%, respectively.

The sale of PTC stood at 1,432.1 million in 2022-23 compared to 980.3 million in 2021-22, contributing 33.8% and 22.6% to the sales respectively.

During 2021-22 and 2022-23, the Companys revenue from sale of electrolyte salts for super capacitor batteries stood at 56.8 million and 165.3 million respectively, thereby, carving 1.3% and 3.9% of total revenue from operations, respectively.

Other income

Other income of the Company stood at 57.4 million in 2022-23 compared to 90.2 million in 2021-22, registering a y-o-y decline of 36.3%. This was primarily on account of gain of 39.19 million in

2021- 22 on foreign currency transaction and translation.

Expenses

The total expenses of the Company stood at 3,809.9 million in

2022- 23 compared to 3,385.4 million in 2021-22, registering a y-o-y increase of 12.5%. This increase was primarily on account of an increase in cost of goods sold, employee benefits expense, finance costs.

Cost of materials consumed

The Companys cost of materials consumed stood at 2,158.2 million in 2022-23 compared to 2,544.9 million in 2021-22.

Purchases of stock-in-trade

Purchases of stock-in-trade stood at 45.76 million in 2022-23 compared to 36.79 million in 2021-22.

Changes in inventories of work-in-progress and finished goods

Changes in inventories of work-in-progress and finished goods stood at 57.08 million in 2022-23 compared to (635.34) million in 2021-22.

Employee benefits expense

The Companys employee benefits expense stood at 386.0 million in 2022-23 compared to 308.2 million in 2021-22. This was mainly due to increase in salaries and wages from 280.7 million in 2021-22 to 348.6 million in 2022-23.

Finance costs

The Companys finance costs stood at 84.1 million in 2022-23 compared to 49.5 million in 2021-22. This was due to increase in interest on financial facilities (term loan and working capital limits) from 38.3 million in 2021-22 to 77.8 million in 2022-23. The total borrowings of the Company as on 31 March 2023 and 31 March 2022 were 1,702.6 million and 1,199.4 million, respectively.

Depreciation and amortization expense

The Companys depreciation and amortization expense stood at 95.6 million in 2022-23 compared to 81.8 million in 2021-22. The net assets of the Company as on 31 March 2023 and 31 March 2022 were 4,269.9 million and 2,111.1 million, respectively.

Other expenses

The other expenses of the Company stood at 983.3 million in 2022-23 compared to 999.6 million in 2021-22.

Tax expenses

The total tax expenses of the Company stood at (7.08) million in 2022-23 compared to 82.5 million in 2021-22. This was mainly due to lower profitability in 2022-23 compared to 2021-22.

Profitability Profit before tax

The Companys profit before tax (before exceptional item) stood at 483.7 million in 2022-23 compared to 1,041.2 million in 2021-22.

Profit after tax

The Companys profit after tax stood at 454.9 million in 2022-23 compared to 958.7 million in 2021-22.

Total comprehensive income

The Companys total comprehensive income stood at 461.4 million in 2022-23 compared to 960.3 million in 2021-22.

Key significant ratios

Key Ratios	FY23	FY22	Explanations
Debtors Turnover Ratio	4.99	7.62	Debtors turnover ratio has deteriorated primarily due to higher sale in second half, resulting in higher Debtors at year end.
Inventory Turnover Ratio	1.58	1.79	Inventory turnover ratio has decreased due to increase in Average Inventory in FY23, despite lower Inventory at year end (FY23).
Interest Coverage Ratio	7.21	21.86	Interest Coverage ratio has deteriorated due to decrease in profitability and also due to increase in interest cost.
Current Ratio	1.33	2.54	Current ratio has decreased primarily due to decrease in cash and cash equivalents and bank balances pursuant to utilisation of deposits created out of IPO proceeds.
Debt Equity Ratio	0.33	0.25	Debt equity ratio has deteriorated primarily due to increased utilisation of working capital facilities.
Operating Margin Ratio (%)	12.12%	23.20%	Operating Margin Ratio has decreased due to decrease in profitability pursuant to prevailing geo-political conditions, slow-downs and high inflationary situation across economies.
Net Profit/(Loss) Margin (%)	10.81%	22.23%	Net profit Margin has decreased due to decrease in profitability pursuant to prevailing geo-political conditions, slow-downs and high inflationary situation across economies.
Return on Net Worth (%)	8.84%	20.27%	Return on net worth has decreased due to decrease in profitability pursuant to prevailing geo-political conditions, slow-downs and high inflationary situation across economies.

Research and Development

Research and development play an instrumental role in the chemical sector, and helps the Company reinforce its position as one of the leading players in integrated specialty chemical manufacturers not only in India but also across the world. The Company has a dedicated R&D center located at Vadodara, equipped with modern and latest technology and equipment and spearheaded by a very capable R&D team. Over the years, we have been constantly strengthening our R&D finesse by making proactive investments and constantly

strengthening our R&D teams abilities. Strong R&D has helped us strengthen our process and cost efficiencies on one hand, and develop improved products on the other.

Quality Control and Services

The Company is equipped with world-class QC laboratory with modern equipment to ensure compliance with the most stringent quality standards. The Company is cognizant of the fact that failing to comply with these quality standards may impact their brand

recall, which is synonymous with superior quality. In order to ensure a sharp focus on quality control, the Company has a robust team of 103 members, of which, 35 looks into quality assurance and the rest 68 members aid in quality control. The capable team is not only thorough with its pre-manufacturing checks and balances, but also diligent with in outlining a various strict quality control mechanisms at each stage of the manufacturing process, starting from initial testing of raw material to the packaging of final product. The ISO 9001:2015 certification of Company speaks volumes about the Companys adherence to stringent quality control standards.

Information and Technology

Over the past few years, IT has been playing an increasingly critical role, especially post the COVID-conundrum. Against this backdrop, the Company recognises the importance of having robust IT infrastructure in place. To lay the building blocks of this IT infrastructure, the Company has deployed a wide range of IT solutions and enterprise resource planning (ERP) software across its operations. Technology is effectively utilised throughout all stages of the manufacturing processes, spanning from customer order management and dispatches to production planning, reporting, financial accounting, and scheduling raw material purchases. In line with its constant focus on IT and technology, the Company has been consistently making proactive investment to continually enhance operational efficiency, customer service, and decision-making processes.

Health, Safety and Environment

Operating in the chemical sector, the Company recognised the importance of operating in line with the stringent environmental

norms. The Company undertakes specific measures to ensure emission reduction, optimal energy usage, reduction in waste generation, and promoting sustainability across its operations. The zero liquid discharge (ZLD) status of its Ankleshwar plant speaks volumes of the Company focus on environment-centricity. Further, the ISO 14001:2015 certification validates the Companys compliance to stringent environmental norms. Additionally, the Company in the Together for Sustainability (TfS) initiatives to promote adoption of sustainability across operations among the employees and supply chain partners.

Being a specialty chemical manufacturer, the Company also understands the importance of health and safety of its employees. In achieving so, the Company provides periodic safety trainings, mock drills and on-the-job trainings to the employees.

Human Resources

The Company believes that its employees are its biggest assets, and has a capable human resource team with employee-centric policies for the holistic development of the Company which is aligned with the growth of its employees. In its endeavor to ensure inclusive growth for its employees, the Company has employee friendly policies aimed at recruiting the best talent, training people, engaging with them continuously, and ensuring strong retention. This helps the Company seed the foundation to a robust human capital. Additionally, the Company periodically also conducts programs and initiatives to strengthen talent management, capability development, and performance of its employees. As on 31 March 2023, the Company had a strong team of 608 permanent employees and 279 temporary employees.

Risk	Impact	Mitigation
Regulatory risk	Frequent changes or non-compliance with the statutory norms and regulations may impact the reputation and operations of the Company.	The ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018 certifications of the Company validate the Companys sharp focus and adheres to all stringent compliances and regulations such as quality management, environment management, and employee health and safety, among others.
Supply chain risk	Inadequate supply and fluctuations in the prices of raw materials may affect the business operations and profitability of the Company.	The Company leverages its longstanding relationships with its suppliers to ensure steady supply of raw materials and finished products. The Company also has in place a robust inventory management process to ensure availability of materials as and when needed.
Product risk	Failure to conceptualize and develop new products due to inadequate investments in R&D and delay in obtaining regulatory approvals may hinder the Companys operations.	The Company has been consistently investing in its R&D to strengthen its product pipeline, thereby, ensuring that it is catering to the ever- changing preferences and needs of customers. During the fiscal, the Company invested 109.98 million towards CAPEX and 48.88 million towards OPEX to ensure sustained progress.
Forex risk	Since a significant portion of its revenue is generated from exports, the risk of exchange rate fluctuations may cause financial loss to the Company.	The Company has a system risk by continuous and efficient monitoring of forex exposure and change in currency movements, and de-risks itself by entering into forward contracts.

Outlook

With availability of semiconductor chips gradually heading towards normalcy, and abandoning of Zero COVID policy by China, the Company anticipates increased demand for products under the SDA category during 2023-24. The future demand outlook for products under SDA category continues to remain very exciting due to implementing of Euro 7 standards starting from 2025. For the PTC category, the growth is expected to be steady in the foreseeable future. Electrolyte salts are expected to bring in significant growth, and the next fiscal is expected to be a turning point for this category for the Company. The PASC category has been making consistent progress over the year, and is projected to see stable growth in the coming years.

The global specialty chemicals market is expected to grow at a CAGR of ~7% between 2022 and 2028, on the back of increasing downstream applications across multiple sectors. Further, the China plus one policy is also expected to show a positive impact on demand for products from Indian chemical industries.

The Company is poised for growth on the back of new customers addition, new products moving into commercialisation, and addition of new product categories such as flame retardants, coupled with completion of the expansion of the Dahej SEZ plant. The continuous diversification of the product mix is expected to keep driving the growth trajectory for the Company. The total employee cost for the Company is also expected to increase with the commercialisation of the Dahej plant, and the need to recruit manpower to efficiently use the increase in capacities. With the commercialisation of the Dahej plant, the installed capacity for the Company is also projected to increase from 294 KL to 500 KL, with an increase in number of assembly lines from 27 to 39. With the Companys constant focus on increasing operational efficiencies, Tatva Chintan is expected to achieve a capacity utilisation of 80% (post Dahej commercialisation)

by 2024-25. The Company would continue on its endeavor to emerge as an integrated manufacturer, producing niche specialty chemicals, having leadership position across product categories, and a broad based geographical presence. Further, the Company also strives to continue on its resolute focus on green chemistry by using cutting- edge technology and in-house R&D strength. This would, in turn help reinforce the customers confidence in the Company.

However, prolong geopolitical conflict (such as Russia-Ukraine war), global banking crisis, recession in major overseas market such as Europe, increase in financial costs, and pricing pressure remains a concern for growth.

Internal Control Systems

The Company has a robust internal control system in place to ensure the reliability of financial information through timely and accurate recording of all financial, commercial, and operational transactions, safeguarding of assets from unauthorised use or disposition and stringent adherence to the applicable regulations. Additionally, the Companys Audit Committee conducts periodic reviews to ascertain the adequacy and effectiveness of its internal controls, and reports key findings to the Board for corrective action.

Cautionary Statement

Statements in this report describing the Companys objectives, projections, estimates and expectations may constitute forward looking statements within the meaning of applicable laws and regulations that involve risks and uncertainties. Such statements represent the intention of the management and the efforts being put in place by them to achieve certain goals. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances. Therefore, the investors are requested to make their own independent assessments and judgments by considering all relevant factors before making any investment decision.