💰 Financial Performance

Revenue Growth by Segment

Total Operating Income grew 3.6% YoY to INR 584.59 Cr in FY25 from INR 564.19 Cr. Manufacturing business is expected to grow at 12-15% CAGR, while the trading segment revenue decreased 16.3% from INR 42.95 Cr to INR 35.96 Cr as the company intentionally reduced focus on low-margin trading. Volume-wise, Speciality Emulsions contribute 48%, Construction Chemicals 23%, Consumer & Contract Manufacturing 19%, Industrial Adhesives 9%, and Exports/RDP 2%.

Geographic Revenue Split

The company has a PAN India presence supported by 22 warehouses and 5 manufacturing plants. Exports currently contribute a small portion, with 1% of total sales volume going to international markets including Nepal, Taiwan, Bangladesh, Sri Lanka, Philippines, and Kenya.

Profitability Margins

Gross and operating profitability improved due to a shift toward value-added products. PAT margin increased from 2.35% in FY24 to 2.88% in FY25. Operating margins reached 6.4% in FY25 and further improved to 6.78% in Q1 FY26, driven by a 90 basis point expansion in EBITDA margins.

EBITDA Margin

EBITDA margin stood at 6.34% in FY25, up from 5.45% in FY24 (an 89 bps increase). EBITDA grew 20.4% YoY to INR 37.05 Cr. The company aims for a further 50-100 basis point expansion in the next fiscal year through product mix optimization and operational efficiency.

Capital Expenditure

The company recently commissioned and stabilized RDP capacity at Dahej and implemented automation at Tumkur and Dahej plants. While specific future INR Cr figures for capex are not disclosed, the company stated there is no major debt-funded capex planned for the medium term, focusing instead on capacity utilization.

Credit Rating & Borrowing

Crisil revised the outlook to 'Positive' from 'Stable' and reaffirmed 'Crisil BBB' for long-term facilities and 'Crisil A3+' for short-term. Conversely, Infomerics downgraded NAL to 'IVR B/Negative' under the 'Issuer Not Cooperating' category due to lack of information. Interest coverage ratio improved to 4.56x in FY25 from 4.42x in FY24.

⚙️ Operational Drivers

Raw Materials

Key raw materials include chemicals linked to crude oil derivatives (used in emulsions and adhesives), which represent a significant portion of the cost structure. Specific chemical names like VAM (Vinyl Acetate Monomer) are implied by the production of RDP and emulsions.

Import Sources

Raw materials are sourced globally and domestically. The company is specifically focusing on 'Make in India' initiatives to produce 100% import substitutes like Mahacol RDP to reduce dependency on foreign supplies.

Key Suppliers

The company maintains strategic partnerships and sourcing relationships with global chemical leaders including DOW and BASF.

Capacity Expansion

Current annual manufacturing capacity is 135,000 tons across 5 plants (Dahanu, Silvassa, Dahej, and Bangalore). The company is focusing on increasing capacity utilization and has recently stabilized the new RDP capacity at the Dahej plant.

Raw Material Costs

Raw material costs are highly sensitive to crude oil price fluctuations and international market volatility. The company's strategy to mitigate this includes shifting to high-value-added products and import substitution (RDP) to stabilize margins.

Manufacturing Efficiency

Efficiency improved through the automation of the Dahej and Tumkur plants, contributing to a 90 bps EBITDA margin expansion. The company uses SAP to streamline processes and increase productivity across departments.

Logistics & Distribution

Distribution is handled through a PAN India network of distributors. The company is expanding its retail footprint and influencer engagement (carpenters/contractors) to drive volume in the B2C segment.

📈 Strategic Growth

Expected Growth Rate

12-15%

Growth Strategy

Growth will be achieved by focusing on the manufacturing business (targeted 12-15% growth) while reducing low-margin trading. Key pillars include the launch of 36 new construction chemical products under the 'Mahafix' brand, scaling the 'Mahacol RDP' (an import substitute), and expanding the B2C distribution network. The company also plans to set up a new R&D center for Wood Adhesives to drive innovation.

Products & Services

Specialty adhesives, industrial emulsions, wood adhesives (Mahacol), construction chemicals (Mahafix), textile binders (Emditex), paint emulsions (Emdilith, Emdicryl), and Re-dispersible Polymer (Mahacol RDP).

Brand Portfolio

Mahacol (Wood Adhesives), Mahafix (Construction Chemicals), Emdilith, Emdicryl, Emditex, Emdibind.

New Products/Services

Launched 36 new products in the construction chemicals segment (Mahafix) and a 100% import substitute product, Mahacol RDP, which currently contributes 1% of volume but is expected to grow significantly.

Market Expansion

Expanding into untapped packaging adhesives and construction solutions. Target regions for export expansion include South-East Asia, the Middle East, and Africa.

Market Share & Ranking

NAL is the largest manufacturer of 100% import substitute RDP (Mahacol RDP) in India. It is a leading player in the specialty chemicals and industrial emulsions space with 40+ years of presence.

Strategic Alliances

The company performs contract manufacturing for Asian Paints Ltd and has partnerships with other major corporates like Berger, Akzo Nobel, JK Cement, and JSW.

🌍 External Factors

Industry Trends

The Indian adhesives market is projected to grow at 7% CAGR to USD 3.9 billion by 2028. Trends include a shift toward organized players, premiumization in consumer segments, and a strong push for 'Make in India' import substitution in specialty chemicals.

Competitive Landscape

Competes with established peers in the adhesives and construction chemicals space. While NAL has strong B2B ties, its consumer brand awareness is still developing compared to market leaders.

Competitive Moat

Moat is built on 40+ years of promoter experience, deep-rooted relationships with major paint companies (Asian Paints), and technical expertise in RDP manufacturing (import substitution). Sustainability is driven by R&D and a diversified product portfolio across 5 segments.

Macro Economic Sensitivity

Highly sensitive to the construction and infrastructure sectors, which drive demand for adhesives and paint emulsions. The construction chemical market is expected to grow at a 7% CAGR to USD 5.5 billion by 2030.

Consumer Behavior

Increasing demand for home improvement and premium construction chemicals is driving the shift toward branded products like Mahacol and Mahafix.

Geopolitical Risks

Fluctuations in international chemical markets and crude oil prices due to geopolitical tensions directly impact input costs. Trade barriers or changes in import duties on chemicals could affect the competitiveness of their import-substitute products.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to environmental and pollution control norms for chemical manufacturing, as well as quality standards for construction chemicals and import/export regulations for raw materials.

Environmental Compliance

The company maintains R&D focus on sustainable products. Specific ESG compliance costs were not disclosed in INR.

Taxation Policy Impact

The effective tax rate is approximately 24.8% (based on PBT of INR 22.42 Cr and PAT of INR 16.86 Cr in FY25).

Legal Contingencies

The company reported no pending applications or proceedings under the Insolvency and Bankruptcy Code, 2016. No instances of one-time settlements with banks were reported for the financial year.

⚠️ Risk Analysis

Key Uncertainties

Raw material price volatility (linked to crude oil) and currency fluctuations are the primary risks. High competition in the consumer adhesive segment could limit the success of brand-building efforts.

Geographic Concentration Risk

Revenue is primarily domestic (99% of volume), with manufacturing spread across 4 states (Maharashtra, Gujarat, Karnataka, and Dadra Nagar Haveli), providing some regional diversification.

Third Party Dependencies

Dependency on global chemical suppliers for raw materials is being mitigated by the development of in-house import substitutes like RDP.

Technology Obsolescence Risk

The company is mitigating technology risks by upgrading its R&D center in Navi Mumbai and implementing SAP and plant automation to stay competitive.

Credit & Counterparty Risk

The company deals with large, reputable corporates like Asian Paints and Berger, which mitigates credit risk in the B2B segment. The 'Positive' outlook from Crisil reflects a stable credit profile.