ADF Foods Ltd Management Discussions

25 Markets and Data Research, India Ready-to-Eat Food Market Outlook 2023-2031, marketsandata.com

E-Commerce & Cross-Border Retail Growth

The expansion of global e-commerce platforms such as Amazon and Walmart, along with specialized ethnic E-tailers, has significantly enhanced the accessibility of Indian food brands to consumers worldwide. This digital retail growth enables seamless cross-border distribution, allowing brands to directly engage with a diverse and geographically dispersed customer base.

Changing Lifestyles: Working Women and Nuclear Families

The rise in dual-income households, particularly working women and nuclear family structures, has accelerated the demand for convenient meal solutions. RTE and RTC products offer practical options for time-constrained consumers seeking authentic, home-style meals without the complexity of traditional preparation.

Rising Popularity of Healthy Food

Health-conscious consumers globally are increasingly embracing Indian cuisine for its natural, plant-based ingredients and anti-inflammatory properties. This shift towards healthier eating habits has amplified demand for nutritious, minimally processed Indian food offerings that align with modern wellness trends.

Increased Global Food Certifications

Indian exporters are actively securing international certifications such as Halal, Kosher, USDA Organic, Non-GMO, and FSSAI compliance to meet diverse regulatory and consumer standards. These certifications enhance product credibility and facilitate broader acceptance across key markets including the United States, Middle East, Europe, and ASEAN regions, supporting the global expansion of Indian food brands.

ADF Foods Perspective on Emerging Industry Trends

ADF Foods is capitalizing on the expanding global appetite for ethnic, authentic, and convenient food solutions such as our Truly Indian and Ashoka brands. Leveraging the sustained demand from the strong Indian diaspora, the company continues to strengthen its presence in North America, Europe, the Middle East, and Asia-Pacific. With the rapid growth for Indian RTE and RTC markets, ADF Foods has expanded its packaged meals, catering to time-pressed consumers seeking traditional flavours with modern convenience and driving growth through e-commerce and quick commerce. ADF Foods has introduced a variety of vegan and gluten free products, and no added preservatives options for its consumers, addressing nutritional trends without compromising on authenticity. The usage of olive oil across several recipes under Soul brand also connects to the growing popularity of healthy food, reinforcing our alignment with evolving consumer preferences. Furthermore, by adopting sustainable packaging solutions and securing global food and safety accreditations for its factories and certifications such as USDA Organic, Non-GMO, Halal and Kosher. ADF Foods enhances its market credibility and broadens acceptance across regulatory environments.

Company Overview

ADF Foods Limited is a leading global player in the packaged food industry specialising in the production and export of ethnic and convenience food products across 55 countries. Established in 1932 with a retail outlet in Mumbai as American Dry Fruits, the company has expanded its portfolio and has since transformed as a key exporter and manufacturer of over 400 products, including ready-to-eat meals, frozen foods, pickles, chutneys, sauces, cooking pastes, and organic and plant-based offerings.

The companys brands* include Ashoka, Truly Indian, ADF Soul, Camel and Aeroplane, catering to both traditional Indian tastes and contemporary health-conscious consumers and are widely available via modern and general trade platforms across global supermarkets, ethnic food stores, and online platforms.

In addition to the processed food business, the company has agency distribution for Lipton Tea Company across USA and the United Kingdom.

ADF Foods operates state-of-the-art manufacturing facilities at Nasik in Maharashtra and Nadiad in Gujarat with a total capacity of 28,000 MTPA. The plants are equipped with modern processing technologies that adhere to stringent hygiene and international food safety standards.

Another greenfield project is coming up in Surat in Gujarat and phase 1 is expected to commence operations in the second half of FY 2025-26. The Surat operations is estimated to contribute around Rs 250 crores in revenue on utilization of its full capacity.

The company effectively capitalized on the Government of Indias Production Linked Incentive (PLI) scheme under Category III of the for food processing industries. The economic incentive is anticipated to facilitate global branding and marketing (50% of marketing expenditure or 3% of sales, whichever is less, up to a maximum incentive of RS 61.35 crores during the schemes tenure from FY 2022-23 to FY 2026-27).

*ADF Foods product portfolio

Financial Highlights

Details of significant changes in key financial ratios

Interest Coverage Ratio: The ratio is decreased due to increase in the interest burden from the lease liability as compared to last Financial Year.

Debt-equity ratio: The Company has availed a term loan facility of RS 35 crores for its greenfield project, out of which it has drawn RS 8.75 crores in FY 2024-25. (For FY 2023-24 the Company was debt free)

Risk and Mitigation

1. Foreign Exchange Rate Fluctuation Risk

Risk: Given that over 95% of ADF Foods revenue is derived from exports, the company is significantly exposed to currency fluctuations. An appreciation of the Indian Rupee can adversely affect the companys global competitiveness by making its products more expensive in international markets.

Mitigation: ADF Foods proactively manages this risk by closely monitoring foreign exchange markets and entering into strategic forward contracts to hedge against currency volatility.

2. Raw Material Inflation Risk

Risk: The company is exposed to raw material fluctuations, which can impact production costs and profit margins. Price volatility can arise from factors such as climate change, supply chain disruptions, and geopolitical tensions.

Mitigation: ADF has a strong procurement mechanism, leveraging seasonal purchases to benefit from competitive pricing. Key raw materials and packaging materials are sourced through negotiated contracts.

3. Competition Risk

Risk: The food processing industry is highly competitive, with the presence of both organized and unorganized players. The intensive competition can lead to potential market share erosion and pricing pressures.

Mitigation: ADF Foods leverages its established brand portfolio, including Ashoka, Truly Indian, Camel, Aeroplane, and ADF Soul, to sustain consumer loyalty and market presence. The company invests in research and development to introduce innovative and health-conscious products, catering to evolving consumer preferences. The company also focuses on convenient and attractive packaging to enhance product appeal. The company also conducts 360 degree marketing activities.

4. Logistics and Supply Chain Risk

Risk: Operational complexities and coordination challenges in logistics and supply chain management can lead to delays, increased costs including freight, and customer dissatisfaction.

Mitigation: To address these challenges, ADF Foods has strengthened its distribution by partnering with multiple logistic providers and expanding its distributor network. The company has also established in-house distribution capabilities and acquired additional warehousing space, including facilities in New Jersey and Atlanta, USA, to ensure seamless product supply and efficient handling of its products.

5. International Tariffs

Risk: Uncertain US Tariff Policies on Indian Goods.

Mitigation: While the imposition of tariffs may increase landed costs, the overall impact on end-consumer pricing is expected to be limited, as the impact will be shared amongst the value chain partners.

6. Product Quality and Safety Risk

Risk: As a player in the packaged food industry, ADF Foods faces risks related to product quality and safety. Any deviation from established standards can result in regulatory penalties, loss of consumer trust, and reputational damage.

Mitigation: The company has implemented comprehensive monitoring systems across all business operations to ensure adherence to product quality and safety standards. ADF Foods follows strict guidelines in line with industry standards and applicable statutory norms to guarantee product safety.

Internal Control Systems & Adequacy

The Company has a sound internal control framework integrated with its financial controls and overseen by the management. This system ensures operational proficiency optimal resource allocation and compliance with all applicable laws and regulations. Key controls are reviewed during the year and corrective and preventive measures are taken. Internal audits are organized systematically by designated audit teams. The Audit Committee approves the risk based internal audit plan which also reviews worth and efficacy of the Companys internal financial controls.

Human Resources

ADF Foods recognises that its people are central to driving operational excellence, innovation, and sustainable growth across its global footprint. The company fosters a workplace culture anchored in knowledge enhancement, respect, collaboration, and career development. As of March 31, 2025, ADF Foods permanent workforce stood at 369 employees, forming the backbone of its manufacturing, supply chain, and corporate functions.

In FY 2024-25, ADF Foods undertook targeted hiring at senior levels to strengthen leadership capacity and support its strategic growth agenda²⁶. This leadership enhancement is designed to steer the company through market expansion and operational scaling, while aligning with evolving consumer and industry demands.

Employee well-being remains a key priority, supported by structured welfare initiatives encompassing health and safety programmes, workplace engagement, and policies that promote work-life balance. These efforts contribute to fostering a collaborative, performance-oriented culture aligned with ADF Foods core values of integrity, customer centricity, and continuous improvement.

As ADF Foods advances its domestic and international growth strategies, it remains committed to nurturing talent, encouraging innovation, and building a resilient, future-ready workforce to support its long-term vision.

Opportunities and Outlook

ADF Foods continues to drive its growth strategy through focused investments in capacity expansion, distribution enhancement, brand development, and sustainability initiatives, positioning itself to capitalise on rising global demand for ethnic, convenient, and health-conscious foods.

• Increasing Capacities: The Companys manufacturing footprint at Nadiad and Nasik remains optimised with a combined capacity of 28,000 MTPA. The RS15 crore cold storage upgrade at Nadiad is designed to optimize resource utilization, improve operational planning, and streamline order fulfilment for finished goods. The company has also undertaken brownfield activities at Nasik plant which has enhanced the production of RTE category. The Surat Greenfield expansion is progressing as planned, with Phase I slated for commissioning in H2 FY26, adding incremental capacity for frozen foods and unlocking potential revenues of RS250-275 crore²⁷.

• Operational efficiency and cost: The company acquired the remaining 30% stake in Vibrant Foods New Jersey LLC, thereby attaining full ownership. This transaction positions the Company to create long-term value through more focused operational support, strategic oversight, and enhanced cost efficiencies.

• Strengthening Distribution: ADF Foods is increasing and adding more distributors and customers to increase its penetration in its key markets and has made certain changes in its key markets. The Warehouses in the U.S. further helps in getting better control over its distribution.

• Brand Business: The Companys flagship brand, Ashoka, continued to demonstrate growth momentum, driven by the introduction of new products and deeper market penetration. Additionally, the Companys global mainstream brand, "Truly Indian," expanded its footprint by securing listings in over 1,400 supermarket outlets and on various online platforms across the United States.

• Agency Distribution Business: The Companys agency distribution division, representing marquee brands such as Lipton Yellow Label Tea, Red Label Tea & Lipton Taj Mahal Tea, continues to deliver stable revenues while optimising distribution costs for ADFs own brands²⁸.

• Expanding reach in India: ADF Soul brand advanced its market reach in India according to the companys growth roadmap. During the year, the company expanded its presence in Quick Commerce and Modern Trade channels alongwith strengthening its presence across E-Commerce channels, including its proprietary E-Commerce platform www.soul-foods.in. The company also enhanced its product portfolio by introducing a

range of dips across the trade channels and by adding in February 2025 an exciting range of frozen products in select Modern Trade outlets in select markets. The response received from the customers has been very encouraging. The company continues its investment in team building and brand building initiatives which should start generating momentum over medium to long term.

• Brand Strengthening: Flagship brand Ashoka remains a key growth driver, supported by sustained marketing investments and the benefits from the Governments PLI Scheme. The expansion of Truly Indian into the US market is underway, aiming to replicate its success in Germany by targeting mainstream consumers with premium frozen foods and sauces. The domestic brand ADF Soul continues to scale across e-commerce and modern retail channels, with a focus on "better-for-you" product innovations.

• Sustainability and ESG Focus: ADF Foods has embedded sustainability into its operations, with initiatives such as increasing renewable energy usage, achieving a 21% YoY rise in green energy sourcing, and reducing emission and energy intensity across its plants. The Company enforces ethical sourcing practices, promotes employee welfare, and maintains strong governance through dedicated ESG oversight committee.

Looking ahead, ADF Foods maintains its growth aspiration to reach a topline of RS 1,000 crore by FY27, driven by organic growth, capacity enhancements, innovation-led product expansion, and deeper market penetration. Continuous focus on operational efficiency, brand equity, and responsible business practices will underpin the Companys long-term value creation strategy.

Cautionary statement

Statements in this Management Discussion and Analysis describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, competitive actions, changes in Government regulations, tax regimes, economic developments in India and in countries in which the Company conducts business and other incidental factors.