Dear Shareholders,

JourneyAtul completed 70 years of operations on March 17, 2022. It all began in 1947, when Kasturbhai Lalbhai, its legendary Founder, arrived at the banks of river Par in Valsad district of Gujarat state and decided to buy the surrounding 1,000 plus acres of land within 90 seconds, saying to his son, Siddharth Kasturbhai, that the land was beckoning him. His foresight, depth in thinking and attention to details continue to inspire us and the Values he steadfastly adhered to – integrity, perseverance, discipline, trusteeship in business and larger purpose – are at the core of our Company and will remain so in the times ahead.

World economy2021-22 may forever be remembered as one of the most uncertain fiscals because of initially the pandemic and subsequently the geopolitical conflict, both of which have caused immense suffering. Still, it is essential to find reasons to be hopeful. The World GDP at US$ 95 tn grew by 5.90% and that of India at US$ 2.95 tn grew by 9.50%. GDP of the USA, China, Japan, Germany and the UK remained ahead of India and grew between 2.40% and 8.10%. The three key lessons of 2021-22 – work with compassion, invest in people and be strong in local markets – are applicable to countries and companies alike, and our Company is imbibing them.

Chemicals and Pharmaceuticals¹ World Chemical industry and Pharmaceutical industry are sized at US$ 5 tn and US$ 1.45 tn and they grew by 25% (mainly because of lower base) and 11% respectively in 2021. Indian Chemical industry and Pharmaceutical industry are sized at US$ 175 bn and US$ 45 bn and they grew by 29% and 8% respectively in 2021-22. The two industries account for 7% of the world GDP and provide an excellent potential to its constituents to improve, innovate and grow. Our Company has been a part of these industries and will review, rationalise and renew its product portfolio of 900 products and 400 formulations.

SustainabilityThe concept of sustainability with its four pillars – environmental (protecting air, land and water), economic (maintaining high and stable growth), human (investing in health and education) and social (acknowledging interdependence and interconnectedness) – can be used to guide decisions at different levels. Our Company, in its own small way, has evolved, nurtured and promoted the concept in its operations since its inception and will strengthen it further. Transformation to climate neutrality is a central test of our time, and team Atul aims to see that such transformation and competitiveness are not mutually exclusive.

2021-22Our Company achieved its highest (standalone) sales of ₹ 4,929 cr, but a lower profit before tax at ₹ 804 cr mainly due to lower dividend income from investee companies. The performance indicators such as, EBIDTA and RoCE were down to 19% and 24% compared to 26%² and 28%², the earlier best achieved in 2020-21 and 2019-20, respectively. Our Company successfully completed its second buyback of own shares, this time of ₹ 70 cr (as against ₹ 50 cr the first time in 2020-21). The Directors recommended 250% dividend against 200% in 2020-21; the pay-out was 12%.

Investment and growth Our Company completed investment of ₹ 374 cr during 2021- 22. The investment under implementation in the Company and its 100% subsidiary entity, Atul Products and 98% subsidiary entity, DPD was ₹ 1,600 cr. The above investment of ₹ 1,974 cr has the potential to add sales of ₹ 2,300 cr. The two retail businesses grew in volume by 17% and have a huge potential – we are confident to steadily and substantially expand their market reach in and outside India. 2021-22 and 2022-23 are two fiscals with the highest investment (so far) – our Company will continue to be prudent in its investment so as to remain resilient.

Subsidiary, joint venture and associate entitiesCombined sales of Atul Bioscience (100%), Osia Infrastructure (100%), DPD (98%), Atul Rajasthan Date Palms (74%) Rudolf Atul Chemicals (50%), Anaven (50%) and Amal (49.85%)reached their highest (from ₹ 309 cr) to ₹ 518 cr. Profit before tax, however, increased from ₹ 42 cr to only ₹ 47 cr because of i) poor performance of Atul Bioscience, ii) continuing stabilisation of Atul Rajasthan Date Palms, iii) teething trouble in Anaven, iv) higher input cost in Amal and v) higher interest and depreciation in general. These entities will invest ₹ 100 cr in 2022-23. Their best days are still ahead.

MandatesWe continue to focus on the five enduring mandates. One, drive efficiency in manufacturing and other processes; two, pervade ‘R&D’ and ‘information technology’ in every function; three, become world-class in people productivity and remain lean in fixed costs; four, conserve cash even while growing and evolving the future and five, engage with customers on ideas with large potential. We implemented the learnings from the fire in one of the plants at Atul site on April 20, 2022. The assets and loss of profit were adequately insured. A new plant will be built, and meanwhile other actions are underway to gradually regain lost sales.

Atul FoundationTeam Atul Foundation further expanded in terms of scope and size to serve communities, the extent of which remains unlimited. In 2021-22, the Foundation strengthened its Education and Empowerment programs: Kalyani School, Atul Vidyalaya, Atul Vidyamandir (PPP³ project), Atul Institute of Vocational Excellence (PPP³ project), four Industrial Training Institutes (PPP³ project), Atul Adhyapika and other projects which in all impacted 22,400 students. Conservation, Health, Infrastructure and Relief programs impacted 68,000 people. You may like to go through the Annual Report 2021-22 and the website of the Foundation.

People and organisationOperations, growth and people are three focus areas for our Company. The success in operations and growth, particularly in an environment described by acronyms such as VUCA (Volatile, Uncertain, Complex and Ambiguous) and BANI (Brittle, Anxious, Nonlinear and Incomprehensible) will depend on the competence and motivation of team Atul. It is therefore essential to put people in leadership positions who are self-aware and purpose-led in addition to other qualifications. We strengthened procurement, sales, marketing and business development structure to enhance accountability and customer centricity.

Acknowledgements2021-22 was an unpredictable fiscal, continuing a trend from 2020-21 – I value the incredible commitment of every member of team Atul whose perseverance is delivering products and services and in turn supporting in success of the 4,000 plus customers and our Company. I thank the customers for helping us to continuously improve and grow. I am grateful to the distinguished Non-executive Directors on the Board who are guiding the Management with their experience and wisdom. I appreciate your trust – it puts even more onus on the Management to perform and make our Company grow.

Way aheadAlthough it may be difficult to imagine in these times of hardship and uncertainty, there are boundless opportunities ahead, and I am encouraged because of all those who have continued to work hard even in face of many constraints. I am certain that we will collectively achieve much more together. Although our Company (and our country) will complete 75 years on September 05 (and August 15) this year, it is still early days for us – we will persevere for decisively improving the businesses we are in, launching sensibly related businesses and evolving ideas we have yet to imagine. In essence, we continue to be young at 75.

Sincerely,

Sunil Siddharth Lalbhai Chairman and Managing Director