advanced enzyme technologies ltd share price Management discussions

global

BM ECONOMY

The global economy made a significant recovery in 2022, boosted by the pent-up demand from the previous year. This resurgence was further supported by the alleviation of both the COVID-19 pandemic and the cooling down of uncertainties in the international market, signalling a positive turn of events. However, the year 2022 had its share of challenges as well. Geopolitical tensions due to the Russia-Ukraine war, banking policy, rising fuel and input costs, interest rate hikes, and supply-side shocks all together are contributing to growing inflation. Considering various circumstances impacting economic performance, the IMF World Economic Outlook has projected a decline in the growth rate of the global economy from an estimated 3.4% in 2022 to 2.9% in 2023.

According to IMF projections, the growth rate of advanced economies was 2.7% in 2022 but is expected

to decrease significantly to 1.2% in 2023. In contrast, emerging markets and developing economies are predicted to maintain a relatively stable growth rate of 4.0% in 2023, compared to 3.9% in 2022.

The year 2022 has been a witness to an increase in interest rates by the major banks. This has resulted in tighter financial conditions and lower demand in various sectors, including housing. As the inflation rate in the U.S. remains high, the Federal Reserve is expected to increase interest rates to a peak of 5.75% to control it. Additionally, emerging market currencies experienced volatility and depreciation in 2022. This was due to the Russia-Ukraine conflict,the COVID-19 pandemic resurgence in China, changes in commodity prices, and measures taken by the central banks to tackle inflation.

OUTLOOK

The outlook for the global economy will remain unstable as the year has seen both headwinds and opportunities. The positivity stems from the strong monetary policy, which will reduce inflation. Moreover, though the rapid spread of COVID-19 pandemic in China dampened growth in 2022, the recent re-opening has paved the way for a faster-than- expected recovery. However, tightened global financial conditions could trigger emerging markets debt distress. Hence, the economys focus is on restoring price stability and alleviating cost-of-living pressures. This multi-lateral approach will further fast-track the economy.

Source: IMF

Statutory

OUTLOOK

The Indian economy has shown significant growth over the past decade, and the Government has implemented policies to further improve it. However, challenges from global impediments and inflationary pressures need to be monitored closely. The Government should also continue to focus on increasing infrastructure spending and implementing policies to boost economic growth.

According to the forecast of the International Monetary Fund (IMF), the Indian economy will contribute 15% of global growth in 2023. This makes the country a relative ‘bright spot in the global economy. However, despite this, Indias growth is expected to decline from 6.8% in 2022 to 6.1% in 2023, before again picking up and reaching 6.8% in 2024. Moreover, the RBI, after increasing the

Reports

key benchmark policy rate for six consecutive times, has finally paused in April 2023, while effectively bringing the interest rate to 6.5% as the benchmark. These measures were implemented to provide greater comfort and flexibility, and to soothe market sentiment amid the challenging global backdrop.

Various Government initiatives are further fuelling the growth of the Indian economy. These initiatives include PLI schemes and enhanced budget allocation for the Ministry of Agriculture and Farmers Welfare with Agricultural education and research receiving about Rs. 1.25 lakh crore. Further, capital investment in infrastructure has increased by 33.4% to Rs. 10 lakh crore. Taken together, these factors are anticipated to steer the Indian economy towards an upward growth trajectory.

INDIAN

ECONOMY

INTRODUCTION

The Indian economy has been witnessing substantial growth over the past decade, emerging as one of the worlds leading economies. Despite facing inflationary pressures in the current year, India has implemented various fiscal policies to improve the economy, such as the reduction of excise duty on petrol and diesel, rationalisation of tariffs, and stock limits on edible oils and oil seeds. Additionally, the Reserve Bank of Indias Monetary Policy Committee has increased the policy repo rate. The decline in global commodity prices has brought down retail inflation to below the RBIs upper tolerance target.

GLOBAL IMPEDIMENTS

India has also faced challenges from global impediments, such as the Russia-Ukraine conflict, the depreciation of currencies against the USD, the US-China trade war, and ‘China + 1 strategy, adopted by the world. However, despite these challenges, India has been able to leverage existing opportunities, which is evident from the fact that the proportion of crude oil imports from Russia has significantly risen. It now comprises 40% of Indias total crude oil imports, leading to lower costs.

INFRASTRUCTURE SPENDING

Increasing infrastructure spending has been central to the Governments strategy, with a focus on road transport

and highways, railways, and defence. The Government has increased capital expenditure in its Union Budget from Rs. 7.28 lakh crore in FY 2022-23 to Rs. 10 lakh crore for FY 2023-24. Despite some technical challenges at the state level, infrastructural programmes have been successfully implemented across the country.

DIGITAL PLATFORMS AND POLICY INITIATIVES

The expansion of public digital platforms and game-changing policies, such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive Scheme to boost manufacturing output, will provide additional support for economic growth. Additionally, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been playing a crucial role in providing direct employment opportunities in rural areas. The scheme is also indirectly aiding rural households in diversifying their income sources. The implementation of initiatives such as PM- Kisan and PM Garib Kalyan Yojana has been instrumental in ensuring food security across the country. Their efficacy has been recognised by the United Nations Development Programme (UNDP).

Source: Economic Times

GLOBAL INDUSTRIAL

ENZYME MARKET

Enzymes act as biocatalysts, modifying the rate of chemical reactions in metabolic processes. Due to their diverse capabilities, enzymes are high-in-demand across various industries worldwide. These industries include pharmaceutical & biotechnology, human healthcare, nutritional food, dairy processing, fruit & vegetable processing, grain processing, biofuels, and biomass processing, among others. The Global Industrial Enzymes

Global Industrial Enzymes Market, By Source, 2021 & 2030 (USD million)

Plant Animal Micro-organisms

Source: Enzymes Technology Association, WHO, The Association of Manufacturers and Formulators of Enzyme Products, Japan Enzyme Association, Annual Reports, Research Journals, White Papers, MRFR Analysis

market is expected to register a 6.27% CAGR during the forecast period of 2022-2030, and is predicted to reach USD 10,807.10 million in 2030.

Developments in genetic and protein engineering have led to improvements in the stability, economic viability, specificity, and overall application potential of industrial enzymes. The market for enzymes as functional food has witnessed significant growth in recent years, driven by increasing health awareness among consumers. Propelled by the increasing population of elderly individuals, the market is projected to experience additional growth. Also, the growing demand for enzymes - due to increasing environmental norms and regulations regarding the use of chemicals - is likely to boost the market growth of industrial enzymes. This surge will further result in an increase in the demand for bioethanol, growing environmental awareness, advancements in green chemistry, genetically engineered enzymes, and the necessity for cost-effective and resource-efficient manufacturing processes. Furthermore, new product innovations and expansions of application bases are anticipated to provide numerous opportunities for this optimism.

HUMAN HEALTHCARE

ENZYME MARKET

Human nutrition is concerned with providing the necessary nutrients in food for sustaining human life and promoting wellness. Digestive enzymes play a crucial role in this regard, and are used to enhance human health and the overall quality of life. Digestive enzymes, secreted by the digestive organs, are responsible for breaking down complex molecules into their constituent parts for better absorption by the body.

These enzymes are widely used in pharmaceutical, biotechnology, and diagnostics industries, among others. The digestive enzymes market is experiencing growth due to an increase in the occurrence of gastrointestinal disorders across all age groups. The other drivers include a rapid surge in the elderly population and middle-class population, growing instances of diseases, changing

lifestyles, and the enhanced use of pharmaceutical products after the COVID-19 pandemic.

Food and feed are still the largest industrial sectors for enzyme demand. However, enzymes are also becoming increasingly popular in a variety of applications for personal care and cosmetic products. These include hair dyes, skin care, oral care, and, more recently, sun care products. Enzymes have proven to be a very useful tool for skin treatment therapies, treating many of the skin conditions related to ageing, acne, congestion, and pigmentation. This trend can be partially attributed to the move towards organic compounds, replacing petrochemical-based ingredients. The shift has further been highlighted by one of the sectors fastest growth trends, namely natural and organic products.

Personal Care: Market Estimates & Forecast, By Region, 2019-2030 (USD million)

Region	2019	2020	2021	2022	2023	2024	2025	2030	cagr % (2022-2030)
North America	141.45	145.76	151.71	158.15	164.87	172.07	179.85	228.07	4.68%
Europe	63.57	66.20	69.63	73.33	77.30	81.57	86.19	115.39	5.83%
Asia-Pacific	91.00	95.46	101.16	107.32	113.93	121.08	128.86	178.69	6.58%
Rest of the World	34.43	36.10	38.22	40.45	42.97	45.68	48.61	66.98	6.51%
Total	330.45	343.52	360.73	379.25	399.06	420.40	443.52	589.14	5.66%

Source: Industry Experts, Secondary Research, and MRFR Analysis

Pharmaceutical companies are increasing the use of industrial enzymes as active ingredients in their drugs and nutraceuticals for the treatment of various diseases.

In nutraceuticals, which are primarily US-focussed, the companies use these enzymes in dietary supplements and functional foods, such as breakfast cereals and sports drinks, among others. A decline in the cost of DNA manipulation and sequencing is projected to drive demand and increase usage of enzymes in research, biotechnology,

and pharmaceutical applications. An increase in the geriatric population in developed countries is also anticipated to propel the demand for healthcare specialty enzymes. Research and biotechnology applications of enzymes are estimated to increase at a rapid pace. This is due to advances in diagnostic tests, which have led to a decline in DNA sequencing costs. As a result, there is likely to be an increase in testing for agricultural, food, and medical applications.

Pharmaceuticals And Nutraceuticals: market estimates & forecast, By region, 2019-2030 (UsD million)

Region	2019	2020	2021	2022	2023	2024	2025	2030	CAGR % (2022-2030)
North America	55.15	57.59	60.75	64.17	67.80	71.72	75.98	102.97	6.09%
Europe	25.60	26.91	28.57	30.36	32.30	34.40	36.69	51.43	6.81%
Asia-Pacific	35.40	37.43	39.97	42.73	45.71	48.96	52.51	75.70	7.41%
Rest of the World	14.43	15.26	16.30	17.40	18.64	19.99	21.46	30.88	7.44%
Total	130.58	137.19	145.58	154.66	164.46	175.07	186.64	260.99	6.76%

FEED

ENZYME MARKET

As of 2022, the global market size for feed enzymes exceeded USD 783.93 million and is projected to increase at a CAGR of 6.13%. By 2030, the estimated market value will reach USD 1,261.95 million, indicating a steady and sustained demand for feed enzymes in various industries. The expected surge is backed by cost-efficiency, and the significant need to maintain livestock performance and protein-rich meat diet.

The feed enzymes demonstrate multiple benefits. They aid not only in the digestive process of livestock animals by enhancing and increasing the animals immunity, but also improve the nutrient content of the feed. They have the ability to sustain themselves under acidic pH conditions as well as pelleting temperatures during feed processing operations. This results in improved energy and nutrient utilisation. Additionally, by enhancing animal gut health, feed enzymes help reduce environmental pollution by reducing waste generation and feed management costs.

These factors have contributed to the steady growth of the global feed enzyme market.

The rising demand is also attributed to the changing food consumption pattern, as people are now choosing more naturally nutritious and healthy products to maintain a healthy lifestyle. As a result, the market demand for protein- based products, such as dairy, eggs, and meat, is increasing. This, in turn, pushes up the demand for feed enzymes for animal feed, further boosting the growth of the feed enzymes market. This addresses the farmers growing concern about the welfare of their livestock, as feed enzymes aid in the digestion of feed and the efficient utilisation of nutrients from feed. Providing enzyme supplements to the livestock helps produce more meat per animal at a very low cost. It also improves the overall health of the livestock over the long-term, which increases the profit margin of the poultry farmer or owner.

Animal Feed: Market Estimates & Forecast, By Region, 2019-2030 (USD million)

Region	2019	2020	2021	2022	2023	2024	2025	2030	cagr % (2022-2030)
North America	291.05	301.93	316.38	331.93	348.47	366.25	385.48	505.80	5.41%
Europe	127.80	133.50	140.86	148.79	157.33	166.56	176.57	240.24	6.17%
Asia-Pacific	182.81	192.34	204.40	217.49	231.56	246.83	263.47	370.91	6.90%
Rest of the World	72.42	76.11	80.80	85.72	91.30	97.30	103.81	145.00	6.79%
Total	674.09	703.88	742.44	783.93	828.66	876.94	929.34	1,261.95	6.13%

SPECIALTY

ENZYME MARKET

The global specialty enzymes market was valued at USD 816.79 million in 2022, and is projected to register a CAGR of 9.7%, reaching USD 1,423.42 million by 2028. Functioning as biocatalysts in pharmaceutical and diagnostic reactions, specialty enzymes increase the rate of reactions to produce the desired results, making them a critical component in many industries. The growing pharmaceutical industry is driving demand for specialty enzymes. This can be attributed to increased investments in the development of pharmaceutical production facilities, with the goal of increasing the production of drugs to fight chronic diseases. As a result, there is a healthy demand for specialty enzymes to produce specialty drugs and disease- specific medicines. The anticipated increase in the elderly

population and surging cases of cardiovascular & lysosomal diseases, seasonal allergies, and asthma, among others, are expected to drive demand for specialty enzymes over the forecast period. Furthermore, the rapid transition from artificial or chemical catalysts to specialty enzymes as biocatalysts is boosting the segments growth. This, in turn, is further augmenting the overall prospect of the global specialty enzymes market.

Source: Market Watch

OTHERS

Other applications include the textile industry, leather processing, and pulp & paper industries. Enzymes are being increasingly recognised for their non-toxic and environmentally friendly properties in the textile chemical processing industry worldwide. This is due to the growing requirements for textile enterprises to reduce pollution

in textile production. In addition, the use of enzymes is proven to reduce processing time, save energy and water, and improve product quality and potential process integration. Enzymes are also being increasingly used in leather processing, which is one of the most polluting industrial activities.

others: market estimates & forecast, By region, 2019-2030 (UsD million)

Region	2019	2020	2021	2022	2023	2024	2025	2030	CAGR % (2022-2030)
North America	317.38	332.16	351.12	371.52	393.50	417.21	442.93	606.07	5.41%
Europe	146.74	154.86	165.08	176.12	188.14	201.19	215.43	307.53	6.17%
Asia-Pacific	188.92	200.61	215.17	231.04	248.24	267.01	287.58	423.11	6.90%
Rest of the World	71.05	75.43	80.89	86.68	93.24	100.36	108.12	158.35	6.79%
Total	724.09	763.07	812.26	865.37	923.13	985.77	1,054.06	1,495.07	7.07%

GLOBAL

PROBIOTIC MARKET

Probiotics are micro-organisms that benefit humans and animals by maintaining intestinal microbial balance. Probiotic ingredients stimulate natural digestive juices and enzymes in the body to ensure proper functioning of the digestive system. They are beneficial in the treatment of diseases in both humans and animals, such as intestinal inflammation and urogenital infections. End-users are benefitted from their multi-functional usage.

The probiotics market on a global scale has shown significant growth, with a valuation of roughly USD 6,914.78 million in 2021. It is anticipated that this market will continue to prosper, reaching a value of approximately USD 8,926.37 million in 2027. The factors driving the growth include a shift in consumer behaviour towards health and well-being, increased consumer awareness

about the benefits of probiotics, and higher demand for probiotic-infused premium products.

The rising awareness of consumers about the health benefits of consuming probiotic supplements, ranging from digestive health, oral care, and immune boosters, among others, has proliferated the demand for probiotic supplements globally. Additionally, probiotic manufacturers across the world are increasingly developing supplements with multiple strains to offer consumers high-quality supplements with added immunity benefits. Moreover, the inclination of probiotic manufacturers towards the launch of health lectures for the elderly adult population is expected to make a significant contribution and fuel the demand for probiotic supplements across the world in the forthcoming years.

Global Probiotic Supplements Market Revenues (USD million), By Form, 2017, 2021 & 2027F

	2019	2021	2027F
Tablets	581.80	705.31	849.00
Capsule	1,525.71	1,976.74	2,637.59
Gummies	833.25	1,049.05	1,337.52
Powder	1,343.44	1,751.34	2,330.08
Chewable	688.30	864.12	1,083.44
Others	473.89	568.32	6,888.89

applications

Iki	Dairy Products		Infant Formulas		Non-Dairy Beverages	?JS)	Dietary Supplements
	Functional Food & Beverages	A	Powders	ifli	Tablets	s	Liquids
CD ?S>8	Capsules	<#,	Soft Gels		Cereals	:c=^	Animal Feeds

global pet probiotic market

The increasing awareness among pet parents for natural, safe, and effective solutions for their pets has shown a positive impact on the growth of pet probiotic ingredients during the historical period. The demand for probiotics increased due to the health benefits associated with their consumption. It helps to improve the immune system of pets by maintaining the microbial flora in their intestinal tracts. According to an industry player, approximately 24% of pet parents have adopted probiotics to improve their pets digestive health, immunity, and overall well-being. Further, the availability of liquid and solid forms allows

for convenient and efficient integration into animal feed, ensuring that animals receive the necessary health benefits provided by these beneficial micro-organisms.

In addition to their numerous health benefits, probiotics used in animal nutrition have been shown to have a significant impact on the absorption of nutrients from feed, in addition to aiding total body weight gain in various animals. Moreover, the use of probiotic micro-organisms in animals results in enhanced quality of milk, meat, and eggs. Additionally, the administration of probiotics in animal feed has proven to boost gut immunity, minimise bacterial shedding, facilitate diagnosis, and enhance resistance to disease and overall well-being.

impact on human probiotics market

Growing awareness among consumers is one of the key factors in the growth of the rising market for probiotic supplements as they improve gut health, and boost the immune system, among others.

For a significant period of time, consumers have primarily sought health benefits and immune system support through vitamin and mineral-based supplements. However, this trend has undergone a shift in recent years. Probiotic supplements are increasingly being consumed as a preventive measure to avoid health-related issues. The

F: Forecast E: Estimate

probiotics support the treatment of gastrointestinal issues, conditions in infants, dental disorders, allergic attacks, and acne, among others. Moreover, one of the major reasons for the increase in demand for probiotic supplements was the global COVID-19 pandemic in 2020. During the pandemic, the demand for probiotics promulgated drastically as consumers became increasingly aware of their food habits and supplements, which help boost immunity. The fitness community, which has traditionally relied on health supplements to enhance physical attributes like endurance, has also seen a rise in awareness. Therefore, sportspersons have been shifting towards probiotic supplements, as a means to enhance immunity.

INDIAN

Rs. ENZYME MARKET

The Indian enzyme market was estimated to be worth USD 370.35 million in 2022. It is projected to accelerate and reach USD 669.76 million by 2030 at a 7.69% CAGR during the forecast period (2023-30). This increase can be attributed to the significant growth of the healthcare, food & beverage, and chemical sectors. Rapid population growth and rising consumer expenditure are also driving market growth across various industries. These include human health care and nutrition, animal nutrition, baking, fruit & vegetable processing, brewing & malting, grain processing, protein modification, dairy processing, specialty applications, textile processing, leather processing, paper & pulp processing, biofuels, biomass processing, and biocatalysis. As a result, there is an expansion in enzyme demand. In addition, as people become more aware of the significance of digestive health, the demand for enzyme supplements has increased. These supplements facilitate digestion and support gut health, which is becoming a crucial concern for many individuals.

Advances in food technology, coupled with an escalating consciousness among consumers towards superior-quality products that utilise enzymes, are among the many factors driving the growth of enzymes in India. The Indian industrial food enzyme market is concentrated on bakery, confectionery, dairy, frozen desserts, meat, poultry, seafood products, and beverages, among others. Further, the adoption of western diets are set to influence the growing demand for these products. It is noteworthy that the bakery sector uses the highest quantity of enzymes across the nation. Thus, the rise in demand for processed foods, including bakery items, has consistently contributed to the rise in demand for enzyme applications due to the expansion and convenience of food retail chains. To add to these trends, the rising demand for convenience and processed foods, such as ready-to-eat foods, ready- to-drink beverages, snacks, and frozen meals, among others, are some of the major factors driving the growth of the food additives market. Thus, leading to increased utilisation of enzymes in the market.

The presence of the largest enzyme companies, rising sales of yeast enzymes, and increasing demand for enzymes in textile processing are further driving market expansion. The increasing industrial developments in India have also contributed to the growing adoption of enzymes for the production process. Additionally, companies are developing new enzymes, and production processes to meet the ever-increasing market requirements.

GROWTH DRIVERS

• Growing demand from food & beverage applications:

Food processing industries, such as the baking industry, brewing industry, and fruit juice industry, are currently the largest users of food enzymes. This is the fastest- growing application segment, mainly supported by the ever-growing global population and its increasing purchasing power. Moreover, greater health awareness is also playing a significant role in growing demand for food quality, safer production processing, and improved nutritional value. The increasing demand for high-quality foods in terms of natural flavour and taste has become a common trend among present-day consumers. This trend has triggered the need for the development of flavourful and tasty processed foods, using industrial enzyme applications.

• Making industries more environmentally friendly:

Enzymes can often replace chemicals or processes that present safety or environmental issues. For example, enzymes can replace acids in the starch processing industry, and alkalis or oxidising agents in the fabric industry. This can reduce the amount of hazardous industrial waste produced and in process, protect the environment. This is in sync with the current scenario, as the need for non-renewable sources has increased during the last few decades. Hence, the search for sustainable and renewable alternative sources has gained growing traction across the world.

India: Industrial enzymes market, By Application, 2019-2030 (UsD million)

Application	2019	2020	2021	2022	2023	2024	2025	2030	cagr % (2022-2030)
Food & Beverages	126.85	134.32	143.65	153.84	164.81	176.76	189.84	275.61	7.56
Bakery & Confectionary	47.13	49.78	53.10	56.72	60.60	64.82	69.43	99.47	7.27
Dairy & Frozen Desserts	34.54	36.66	39.29	42.18	45.29	48.69	52.42	76.98	7.81
Breweries & Distilleries	22.59	23.91	25.56	27.37	29.31	31.43	33.74	48.92	7.53
Sweet & Savory Snacks	11.24	11.88	12.68	13.55	14.49	15.51	16.62	23.90	7.35
Others	11.35	12.09	13.01	14.02	15.11	16.31	17.62	26.35	8.20
Animal Feed	36.15	38.25	40.87	43.74	46.82	50.17	53.84	77.83	7.47
Detergent & cleaners	82.00	86.70	92.59	99.02	105.93	113.45	121.67	175.34	7.40
Personal care	17.74	18.74	20.00	21.37	22.84	24.44	26.19	37.57	7.31
Pharmaceuticals & Nutraceuticals	6.94	7.39	7.94	8.55	9.21	9.94	10.73	16.01	8.15
others	34.62	37.19	40.35	43.83	47.61	51.77	56.37	87.40	9.01
total	304.29	322.58	345.41	370.35	397.22	426.52	458.62	669.76	7.69

Source: Enzymes Technology Association, WHO, The Association of Manufacturers and Formulators of Enzyme Products, Japan Enzyme Association, Annual Reports, Research Journals. White Papers. MRFR Analysis

INDIAN

NUTRACEUTICAL MARKET

The Food Safety and Standards Authority of India (FSSAI) defines ‘nutraceutical as a type of food product that offers physiological benefits and supports overall health. As a result of its perceived health benefits, the demand for nutraceuticals is on the rise, leading to the emergence of numerous companies producing these products. However, in order to ensure their safety and effectiveness in the Indian market, FSSAI has established regulatory guidelines for the approval of nutraceuticals.

The Indian neutraceutical market was valued at USD 5,408.18 million in 2022, and is expected to register a CAGR of 11.77% during 2023-30. The rising demand for functional food, which have certain health and medical benefits, is driving growth in the Indian market for plant- based nutraceuticals. This can be attributed to the growing

consumer preference for healthy diets in recent years. The growing demand for natural and safe health supplements, coupled with increasing awareness about the benefits of nutraceuticals for overall health and wellness has contributed to the growth of the market. The demand for high-quality nutraceutical products in India has been further boosted by a segment of Indian consumers who are increasingly prioritising product quality and effectiveness over pricing. Furthermore, rising veganism and an increasing vegetarian population in the country are driving the adoption of plant-based products. This trend is being observed in a variety of industries, including nutraceuticals. The buoyant prospects of the Indian market have attracted the attention of global nutraceutical companies as well, leading to an increased focus on the country.

DEMAND DRIVERS FOR INDIAN NUTRACEUTICAL MARKET

• Shifting mindset toward proactive/preventative healthcare Post-CovID-19 pandemic: Indian consumers are increasingly adopting a proactive approach to healthcare post-COVID-19 pandemic, with the preventive healthcare sector expected to reach USD 197 billion by 2025 at a CAGR of 22%. Nutrition is a vital element of this change, as consumers want clean, healthy foods that support their overall well-being.

• Moving away from a one-size-fits-all approach:

Nutraceuticals are becoming essential for managing health issues and overall wellness, with better access through digital technology and e-commerce channels. Nutraceuticals are being used to address specific lifestyle requirements, such as sleep, bone, heart, brain, and eye health, and are considered a daily nutritional intake rather than medicine.

• need for cleaner alternatives for nutrition: Consumers demand clean, transparent, and scientifically backed nutraceutical products. The industry is investing in R&D and innovation to provide alternative supplements, such as fish oil, ultra-refined black seed oil, and calcium tablets, that target specific health issues and overall wellness.

• Ingredients backed by research and application:

Advancements in chemical engineering enable the effective harnessing of difficult-to-harness and unstable natural extracts used in supplements, expanding the availability of new compounds for natural health. Scientific research and evidence support the selection and level of ingredients used in supplements.

• An increase in the prevalence of chronic and noncommunicable diseases: Poor nutrition due to globalisation and urbanisation in developing countries, including India, is driving the global demand for nutraceuticals, with the aim of preventing chronic diseases and non-communicable diseases.

• escalating healthcare expenses: Consumers are seeking nutraceuticals for health benefits and looking at fortified food & beverage as alternatives to prescription drugs and over-the-counter medications.

• Increasing desire for convenience: Growing need for convenient nutraceutical options among consumers has led to the emergence of gummies and effervescent tablets as alternatives to traditional pills, while snack bars are evolving as a popular choice for those leading busy lives.

• Lack of faith on traditional medicine: The rising concern over the side effects of pharmaceutical drugs, including COVID-19 pandemic vaccines and treatments is potentially driving the consumption of nutraceuticals.

• the desire for baby boomers to relish their retirement years: Baby boomers, with greater disposable income are contributing to the rising demand for nutraceuticals, driven by the desire to maintain a healthy lifestyle throughout retirement. Millennials are incurring expenditure to boost healthy choices as well.

• Growing popularity of dietary supplements: The

popularity of supplements as a form of preventive care is increasing, fuelled by those struggling with lifestyle illnesses and ageing issues. People are preferring supplements to improve their health with the rise of healthcare costs.

• Surging interest in fitness nutrition: Sports nutrition products are promoting wellness for non-athletes.

In addition, intensive marketing and endorsements have created a sporty image of supplements. This has made sports nutrition products popular among regular exercisers and hobbyists, increasing the market size.

For example, demand for protein powder is rising exponentially even among people not frequently visiting gyms.

Source: Techsciresearch

Statutory Reports

INDIAN

? PROBIOTIC MARKET

The probiotic market in India was valued at USD 211.75 million in 2021, and is projected to reach USD 304.62 million by 2027, with an expected value of USD 219.65 million in 2022. The market is being driven by the younger populations increasing focus on wellness and nutrition due to their busy lives and fast-paced lifestyles. The conventional Indian diet, which is high in oils, spices, refined sugar, tea, and coffee, has led to a rise in digestive issues, thereby increasing the demand for functional food & beverages, such as probiotic yogurt and cereals.

Furthermore, the increasing recognition of the advantages of probiotics in enhancing gut health and immunity, the rising elderly population, and the shift towards functional foods are all driving the growth of the market. The increasing number of working women and the focus on womens health, along with the popularity of ready-to-eat products, are driving demand for specialised probiotics with portable and flexible packaging. The availability of dairy-free, allergen-free, and sugar-free formulations is also positively impacting the probiotic market in India.

India Probiotic Supplement Market Revenue (USD million), 2022-2027F

COMPANY

OVERVIEW

Advanced Enzyme Technologies Limited (referred to as ‘AETL or ‘Your Company) is a research-driven company that boasts a prominent global standing in the production of enzymes and probiotics. With over three decades of experience, your Company stands as Indias largest enzyme company, providing an impressive range of over 400 proprietary products, manufactured using around 68 indigenous enzymes and probiotics. AETL has a presence across America, Europe, India, and ~ 3% in rest of the world. It has recently launched Wellfa, a B2C brand that focusses on providing health and wellness products to consumers, with the ultimate goal of improving their quality of life.

Your Company is committed to provide ecologically sustainable solutions to a wide range of industries, including human healthcare & nutrition, animal nutrition, baking, fruit & vegetable processing, brewing & malting grain processing, protein modification, dairy processing,

specialty applications, textile processing, leather processing, paper & pulp processing, biofuels & biomass processing, and biocatalysis, among others. AETL aims to help consumers in gaining access to healthcare without any side-effects, aid farmers in improving animal nutrition, and facilitate industries to replace traditional thermal- chemical-mechanism processes with enzyme-based processes.

Your Company offers hundreds of enzyme & probiotic products, and is equipped with cutting-edge manufacturing facilities, with research & development centres in India, Germany, and the U.S. AETL takes pride in being one of the few manufacturers in the world with extensive experience and knowledge in the production of fermented enzymes.

Your Company is well-positioned to drive business growth across geographies due to its manufacturing capabilities, global footprint, diverse product portfolio, and industry expertise.

SUBSIDIARIES

AETL comprises twelve subsidiaries i.e. four wholly-owned direct subsidiaries, four direct subsidiaries, and four step-down wholly-owned subsidiaries.

ADVANCED ENZYMES USA (AEU)

Advanced Enzymes USA Inc. (‘AEU) is a body corporate and a direct wholly-owned subsidiary of Advanced Enzyme Technologies Limited. It specialises in researching, developing, and marketing best-in-class, allnatural, highly effective, and innovative enzyme solutions. AEUs primary focus is on catering to the markets of North America and Latin America. AEU has a stake in the following corporations. In FY 2022-23, AEU recorded a consolidated revenue of Rs. 1,933 million and a profit after tax (PAT) of Rs. 583 million.

Advanced Supplementary Technologies Corporation (AST)

Advanced Supplementary Technologies Corporation (‘AST) is a wholly-owned subsidiary of Advanced Enzymes USA, and was incorporated on December 30, 2010, with its registered address in Chino, California. Advanced Enzymes USA acquired AST on October 31, 2012. It continues to be a leading manufacturer of professional-grade, enzyme- based strength supplements. These supplements are formulated to support a host of health concerns, including cardiovascular issues, inflammation, joint pain, digestive disorders, and colon-related problems. AST uses only nongenetically modified natural ingredients that are tested by a team of leading scientists and industry experts to ensure the highest quality, activity, purity, and safety. ASTs enzyme supplements are manufactured in-house, assuring customers of the highest quality.

Dynamic Enzymes, Inc. (DEI) [merged into AST]

Dynamic Enzymes, Inc. (‘DEI) was a California-based wholly-owned subsidiary of Advanced Enzymes USA, that was incorporated on February 24, 2015. DEI offers high-quality systemic and digestive enzyme supplements through retail channels. During the year, the Boards of respective wholly-owned subsidiaries i.e. DEI and Advanced Supplementary Technologies Corporation,

USA (‘AST) approved the proposed merger of DEI and AST. Post-merger, DEI merged with and into AST and consequently DEI ceases to exist.

Cal-India Foods International (Doing Business as Specialty Enzymes and Biotechnologies)

Specialty Enzymes and Biotechnologies (‘SEB), also known as Cal-India, is a leading producer of enzymes in the Western Hemisphere. With over 35 years of experience, SEB, a wholly-owned subsidiary of Advanced Enzymes USA - offers a complete range of enzyme solutions for healthcare and nutrition, primarily to North American and Latin American markets.

SEB specialises in creating custom enzyme blends from conception to finished products, and also offers highly effective and established enzyme products. SEBs expertise in the field of enzymes has made it a trusted partner for the healthcare and nutrition industries.

Enzyme Innovation (EI)

Enzyme Innovation (‘EI) is a wholly-owned subsidiary of Specialty Enzymes and Biotechnologies, USA, that offers customised enzyme solutions for various industries in the US. EI caters to industries, such as baking & milling, brewing & malting, craft brewing & distilling, fruit & vegetable processing, animal feed, protein modification, grain alcohol, paper & pulp, waste management, wine, and detergents & cleaning aids. EIs extensive expertise in the field of industrial enzymes has cemented its position as a highly reliable and trusted partner for these industries.

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ADVANCED BIO AGRO TECH LIMITED (ABTL)

Advanced Bio Agro Tech Limited (‘ABTL) is a public limited company and a subsidiary (60%) of Advanced Enzyme Technologies Limited. It was established in 2004 and has grown to be an important player in feed enzymes and the animal nutrition industry. ABTL is engaged in the business of promoting, developing, marketing, and selling products of your Company in the animal health & nutrition segment. It also explores new markets for crop protection solutions and composting.

ABTL has established itself as a leader in poultry enzyme solutions within the Indian sub-continent, and offers solutions to the large Southeast Asian markets of Vietnam, Thailand, Malaysia, and the Philippines. It manufactures and markets enzyme- based solutions for industries, such as poultry and cattle.

In terms of financial performance, during FY 202223, ABTL generated a revenue of Rs. 472 million and a PAT of Rs. 60 million.

ADVANCED ENZYTECH SOLUTIONS LIMITED (AESL)

Advanced EnzyTech Solutions Limited (‘AESL) is a wholly-owned subsidiary of your Company, and was incorporated on September 01, 2008, as a public limited company. AESL is a leading provider of ecosafe enzyme solutions for a wide range of industries, including textiles, leather, paper, detergents, and cleaning aids.

AESL is engaged in the business of promoting, developing, marketing, and selling products in the bioprocessing non-food segment, including providing enzymatic and other solutions to process industries. Its aim is to replace traditional harsh chemical processes in these industries with innovative, eco-friendly, cost-effective solutions, which use enzymes, micro-organisms, and biodegradable chemicals.

In addition to providing solutions for various industries, AESL also focusses on addressing pollution-related problems faced by process industries. Its dedicated R&D facility supports the development of innovative solutions that offer better environmental outcomes.

In FY 2022-23, AESLs revenue increased from Rs.

119 million to Rs. 134 million, and its PAT decreased from Rs. 18.20 million to Rs. 18.03 million.

JC BIOTECH PRIVATE LIMITED (JC BIOTECH)

JC Biotech Private Limited (‘JC Biotech) was established in 1991 with the aim of manufacturing nutraceuticals, biopharmaceuticals, and biochemicals. Your Company acquired stake in JC Biotech during FY 2016-17. In FY 202122, JC Biotech reported revenues of Rs. 503 million and a PAT of Rs. 72 million, respectively. In FY 2022-23, its revenue and loss stood at Rs. 502 million and Rs. (18) million, respectively. JC Biotech is well-focussed on developing and manufacturing biopharmaceutical molecules, and has plans to produce algae DHA in the near future. Your Company increased its stake in JC Biotech by 4.83% during the year under review (i.e. 89.83% in total as part of the integration).

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scitech specialities private limited (SCITECH)

SciTech Specialities Private Limited (‘SciTech) is a technology-based manufacturing company established in 2007, specialising in the manufacturing of effervescent granules and tablets, focussed on animal health, pharma, and nutraceuticals. Your Company acquired 51% stake in SciTech during January 2021.

SciTech was created by Pharma Technocrats, who has over 20 years of cumulative working experience in India and abroad. SciTech manufactures effervescent products with aqueous granulation technology, and supplies its Efferceutical and Solugran products to major markets in India, Southeast Asia, the Middle East, North Africa, Eastern Europe, USA, Canada, and Australia. In terms of financial performance, SciTechs revenue in FY 2021-22 stood at Rs. 473 million, while its PAT was Rs. 37 million, respectively. For FY 2022-23, SciTechs revenue and loss clocked Rs. 353 million and Rs. (62) million, respectively.

saiganesh enzytech solutions private limited

Saiganesh Enzytech Solutions Private Limited (‘Saiganesh Enzytech) was incorporated on November 01, 2022 (by way of conversion from erstwhile partnership firm with the name M/s. Shree Sai Agros to the said private company). It is located in Burhanpur, Madhya Pradesh. Saiganesh Enzytech is primarily focussed on extracting latex from papaya, purifying it, and providing finished papain enzyme in liquid form for use in agricultural extraction of papain enzyme. Papain is one of the most important digestive enzymes used in formulated solutions for human health & nutrition, as well as in the food industry. During the year FY 202223, your Company invested Rs. 60 million in Saiganesh Enzytech (50% stake). In addition to this, the said Saiganesh Enzytechs Board approved the purchase of the entire business undertaking of Shri Ganesh Industrial Enzymes through a slump sale on a going concern basis for an amount of Rs. 9 million. In terms of financial performance, Saiganesh Enzytechs revenue for FY 2022-23 (effective January 03, 2023) is Rs. 26 million, and its PAT for the same period is Rs. 2 million.

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ADVANCED ENZYMES EUROPE B.V., AMSTERDAM (NETHERLANDS) (AEE BV)

Advanced Enzymes Europe B.V. (‘AEE BV) is a wholly- owned subsidiary of your Company, incorporated on July 11, 2017, with an issued share capital of € 2 million.

On April 07, 2023, consequent to conversion of the loan granted earlier by the Company to AEE, AEE issued 2,276,837 Equity shares of a par value of EUR 1 each at a share premium of € 0.63 each to your Company, against outstanding loan amount including interest aggregating to € 3.71 million. AEE continues to be the wholly-owned subsidiary of your Company and there was no change in the Percentage shareholding (100%) of your Company in AEE post-conversion of the said loan. It is registered with the Chamber of Commerce, and serves as a special purpose vehicle for the European market, holding 100% equity in evoxx technologies GmbH.

In FY 2022-23, on consolidated basis, AEE BVs revenue stood at Rs. 240 million as compared to Rs. 220 million in FY 2021-22, whereas loss for the current year was Rs. (39) million, demonstrating an upward growth trend compared to the previous years reported loss of Rs. (103) million.

evoxx technologies GmbH (evoxx)

In August 2017, your Company acquired evoxx technologies GmbH (‘evoxx), an industrial biotech company that produces enzymes and oligosaccharides, used in food applications. The acquisition contributed Rs. 18 million to the bottom line. In FY 2022-23, evoxx generated a revenue of Rs. 240 million. evoxx has two sites in Germany and a team of around 40 scientists and technicians. They continue to focus on developing best-in-class ingredients that offer consumer health benefits.

ADVANCED ENZYMES (MALAYSIA) SDN. BHD (AEM)

AEM is a wholly owned subsidiary of your Company. During FY 2019-20, the Board of Directors of your Company approved the discontinuation of operations and closure of AEM and initiated the process of closure thereto as AEM was not giving desired results. The closure and voluntary strike- off of AEM are in process.

RESEARCH AND

DEVELOPMENTS (R&D)

Your Company boasts DSIR-approved R&D centres, which are exclusively focussed on the development, evaluation, validation, and scaling of cutting-edge technologies for commercial production. Furthermore, these centres are also dedicated to the development of novel enzyme formulations that cater to both industrial processing and human welfare needs. These R&D centres specialise in cloning and expressing industrial enzymes in safe microbial hosts, including strains expressing thermostable enzymes and other enzymes.

In addition to the DSIR-approved R&D centres, your Company also has several labs, focussed on specific areas, including the Process Development Lab, Applied Microbiology Lab, Life Sciences Application Lab, Food Applications Development Lab and Industrial Applications Development Lab.

Furthermore, AETL has successfully developed technology for the production of EPA and DHA, using immobilised lipase, and scaled it up for commercialisation. The R&D centre at Sinnar carries out research & development on improving enzyme production through conventional mutation techniques, optimisation and improvement in fermentation technologies, and scaling up enzyme production. Your Company benefits from the fact that probiotic research has emerged stronger in recent years, resulting in the advancement of strains and technologies for producing crucial probiotics belonging to the Bacillus and Lactobacillus genera.

AETL has also developed a proprietary technology for high- density cultivation of the spore-forming bacterium Bacillus coagulants. Furthermore, it has created a regulatory element screening kit for identifying the clone with an improved process. The acquisition of evoxx has enabled your Company to enhance its R&D capabilities as this has boosted AETLs product portfolio and offerings for the Pharma Biocatalysis and food bioprocessing industries, while bringing in specialised nutritional carbohydrases.

AETL is committed to producing healthy products that promote well-being. To achieve this goal, your Company prioritises the manufacture of products that improve digestion and blood circulation to facilitate healthy ageing. In addition, it also modifies proteins for better processing. Additionally, AETL strives to enhance the industrial properties of juice, beverage, and guar gum processing. Your Company is also expanding enzyme and probiotic libraries, and emphasising on the creation of probiotic- postbiotic-prebiotic products to meet market demand. These efforts are powered by intellectual property protection, customisation, application development, process scale-up, and microbial engineering.

For FY 2022-23, your Companys consolidated research and development expenditure stands at Rs. 223 million (4% of net sales).

MANUFACTURING

FACILITIES

AETL operates nine state-of-the-art manufacturing facilities I

globally, including four in India, one in the US, and four I

located in different geographical regions. These facilities are Un

equipped with large fermentation, recovery, purification, and formulation capabilities. They cater to a range of industries, including animal nutrition, nutraceuticals, pharmaceuticals, V

poultry products, cosmetics, and other specialty products.

The facilities are certified with ISO and WHO cGMP, with the US-based facilities focussing on the blending and mixing of enzymes and probiotics.

o(p_o BUSINESS VERTICAL

DISCUSSION

AETL is dedicated to serving a diverse range of industries and verticals, such as human nutrition, animal nutrition, and bioprocessing. Your Companys primary objective is to enhance nutrition for both humans and animals. Additionally, it is actively advocating in favour of enzyme-based processes as a sustainable and eco-friendly alternative to conventional thermal, mechanical, and chemical methods.

For FY 2022-23, the human nutrition vertical, which provides active ingredients for nutraceuticals and pharmaceuticals, was the largest revenue contributor at 66%, followed by bioprocessing and animal nutrition at 15% and 13%, respectively and contract manufacturing (SciTech) contributed 6%.

YOUR COMPANY OFFERS A DIVERSE ARRAY OF PRODUCTS AS MENTIONED BELOW:

HUMAN NUTRITION

AETL offers a broad range of enzyme products and customised solutions to pharmaceutical and nutraceutical companies worldwide, which they use as active ingredients in their formulations. Buoyed by its product profile, your Companys human nutrition sales shrunk by 1%, amounting to ? 3,556 million in FY 2022-23. AETLs top-selling antiinflammatory enzyme, serratiopeptidase, contributed 24% of its total revenue, with sales of ? 1,290 million in FY 2022-23. Your Companys B2C business in the human nutrition division also contributed to ? 383 million in FY 2022-23.

Overall, AETL provides a diverse range of nutritional products that cater to global consumers, including those in India, North America, Asia (excluding India), and Europe.

Enzymes

Your Company offers exclusive enzyme products and

personalised enzyme solutions to different pharmaceutical and nutraceutical companies globally. Its range of products and solutions are designed to serve various markets, such as India, North America, Asia (excluding India), Europe, and other countries.

Probiotics

Probiotics are living micro-organisms that provide advantageous effects on the health of humans and animals as long as they are administered in sufficient quantities. As per the current trend, probiotics are commonly included in various treatments for digestive disorders. Furthermore, continued research is taking place to explore their potential for treating a range of other diseases.

Biocatalysts

Enzymes that catalyse the transformation of non-natural compounds are known as biocatalysts. These enzymes are rapidly gaining popularity in chemical manufacturing processes because of their exceptional ability to catalyse almost all types of chemical reactions. This characteristic makes them a promising alternative to traditional catalysts, which are limited in their effectiveness. Biocatalysts are particularly valuable in the production of specialty

chemicals, such as pharmaceutical actives, cosmeceuticals, and oleo chemicals because of their high-value and low- volume usage.

AETL has made remarkable progress in biocatalyst development for API manufacturers. Your Company offers customised enzymatic solutions that are tailored to specific

targets. These solutions not only save time, but also reduce energy and chemical costs, resulting in significant cost savings for API manufacturers. In addition to supplying the necessary enzymes, AETL also provides guidance to API manufacturers in the process of developing their APIs through the enzymes.

ANIMAL NUTRITION

The animal nutrition vertical has been a standout performer, delivering strong growth of 27% to register revenue of Rs. 709 million in FY 2022-23, compared to Rs. 560 million in FY 2021-22. The remarkable growth that your Company has achieved underscores the significance of its animal nutrition segment as a key driver of overall growth. In future, this segment is well- positioned to continue its upward growth trajectory.

Enzymes

Enzymes play a crucial role in improving the digestibility of animal feeds, leading to better feed- to-gain ratios for both ruminants and monogastric animals. For instance, enzymes, such as cellulase and hemicellulose, are effective in enhancing the nutritional content of silage, corn, and soy-based feeds. Likewise, certain enzymes like alpha-galactosidase are known to boost the nutritional value of Non-Starch Polysaccharides (NSP). Enzymes not only improve the digestibility of pet foods for dogs and cats, but also promote a stronger immune system. Your Companys enzyme products consistently deliver high-quality and effective results, while maintaining affordability.

Probiotics

Probiotics are live micro-organisms that provide health benefits, and are primarily known for their ability to promote a healthy gut microbiome. They are also gaining widespread adoption in animal healthcare as an antibiotic alternative and growth promoter. Companies have developed and tested probiotic formulations to improve nutrient absorption, boost immunity, and reduce infection risks, making them an essential tool for animal well-being.

BIOPROCESSING

The bioprocessing business vertical exhibited mixed performance in FY 2022-23 with revenue of Rs. 794 million and Rs. 669 million in FY 2021-22.

The bioprocessing vertical improved its contribution to revenue in FY 2022-23 from 13% to 15% YoY and grew by Rs. 125 million. The food business grew 15% to attain Rs. 596 million, while the non-food business registered a growth of 31% to reach Rs. 198 million YoY (Year-on-Year).

Food Processing

In todays world, enzymes play a crucial role in the creation of appealing and nutritious food & beverages. They offer several advantages that go beyond traditional methods. Your Company provides exclusive enzyme products and tailored enzyme solutions for various food processing industries, including baking, dairy & cheese processing, fruit & vegetable processing, cereal extraction, brewing, grain processing,

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protein processing, and oil & fat processing. These specialised enzyme products help AETLs customers enhance their product quality, minimise waste, optimise resources, increase yields, lower costs and reduce environmental pollution.

Non-Food Processing

By utilising enzymes as potent biocatalysts, your Company provides eco-friendly solutions to multiple industries. These solutions are used for the manufacturing of a wide range of products used in the textile, leather, detergent, and pulp & paper industries. These biological solutions improve the effectiveness of industrial processes as they result in significant savings in energy, water, and other resources. They also contribute to a reduction in waste and effluent loads. Adopting sustainable solutions can help companies meet pollution regulations and save on production costs.

DEVELOPMENTS

DURING FY 2022-23

ACQUISITION OF 50% STAKE

in saiganesh enzytech solutions private limited

During the year under review, your Company invested ? 60 million for a 50% stake in Saiganesh Enzytech Solutions Private Limited (‘Saiganesh Enzytech) and the Board of Saiganesh Enzytech approved the purchase of the entire business undertaking of Shri Ganesh Industrial Enzymes (‘SGIE), a partnership firm based in Burhanpur, Madhya Pradesh, through a slump sale on a going concern basis for ? 9 million. This investment is set to provide your Company with a consistent supply of one of the

most important digestive enzymes. Saiganesh Enzytech and SGIE are primarily into extracting Latex from papaya, purifying and providing finished papain enzyme in liquid form (agriculture extraction of papain enzyme). Thus, helping your Company to provide better and regular offerings in relation to the formulated solution for human health, nutrition, and the food industry.

ADDITIONAL 4.83% ACQUIsITION Of JC BIOTECH private LIMITED

During the year under review, your Company acquired an

additional 4.83% stake in its existing subsidiary, JC Biotech Private Limited (‘JCB). This has been accomplished through the purchase of 1,000,000 equity shares from one of the existing shareholders of JCB for a total consideration of ? 68 million. Following the completion of this transaction, your Companys shareholding has increased from 85% to 89.83% of the paid-up share capital of JCB. AETL believes that this acquisition will further strengthen its position in the biotech industry. This will also enhance its ability to provide innovative solutions to its valued customers.

Your Company is committed to continuing its strategic growth and expansion plans, while exploring further opportunities to achieve its objectives. Your Company remains focussed on providing exceptional value to its stakeholders and consolidating its position as a leading player in the biotech industry.

MERGER OF TWO STEP- DOWN WHOLLY-OWNED SUBSIDIARIES

A step towards simplification of organisation structure, improving operational efficiency was taken wherein after consideration of the challenges associated with maintaining two separate entities with a similar product line but different distribution models, it was decided, during the year under review, to merge two entities, Dynamic Enzymes, Inc. US, and Advanced Supplementary Technologies Corporation,

US. The State of California (US) has granted approval for the merger of Dynamic Enzymes, Inc. USA into Advanced Supplementary Technologies Corporation, USA, (and consequently DE ceases to exist).

LAUNCH OF B2CBRAND

Wellfa

Your Company has introduced Wellfa B2C, a consumer brand that aims to enhance the quality of life for individuals, through health and wellness products. Wellfa provides a range of resources and tools, which are personalised to meet the diverse needs and preferences of consumers. By offering products, such as immune support, skin care, gut health, metabolism boosters, detox solutions, weight management aids, stress relief, and respiratory health products, Wellfa has a positive impact on consumer health and lifestyle.

Cal-India Foods International USA doing business as Specialty Enzymes & Biotechnologies (SEB)

SEB has over 35 years of experience as a top probiotic and enzyme manufacturer. The diverse selection of more than 25 probiotic strains caters to various applications in the nutraceutical, food & beverage industries, with a recent foray into pet supplements. The brands objective is to provide natural and effective enzymes & probiotics to fulfil its customers requirements. The company boasts a comprehensive range of quality certifications from esteemed organisations, such as NSF International, Organic, the Non-GMO Project, ANAB, OK Kosher, and ISA Halal, which reflects its commitment to quality and customer satisfaction.

ProbioSEB CSC3™ PET and ImmunoSEB™ (PET)

SEB, a leading manufacturer and supplier of enzymes and probiotics, has recently launched a range of new supplement blends. Specifically designed for dogs and cats, these blends - ProbioSEB CSC3™ PET and ImmunoSEB™ PET - aim to promote gut and immune health. SEP is dedicated to utilising natural, research- backed probiotics and enzymes to address these two fundamental aspects of animal health, and takes great pride in doing so.

MAJOR CHALLENGES

DURING FY 2022-23

higher input cost

Due to inflationary factors, input prices have experienced a notable increase during the reviewed year. Raw material prices, including those of soya, edible oil, and solvents like glycerine, phosphorus salts, and lithium have risen between 3x-4x, mainly due to supply chain disruption and increased logistic costs. These factors have also affected procurement costs in domestic markets. In addition, fuel prices including that of coal, have also surged by 2x-3x, adding to the rise in manufacturing costs.

supply chain and logistics

Global trade has suffered due to supply chain disruptions and a shortage of truckers in the US, UK, and Europe. Containerised freight rates have increased drastically. Businesses are facing delays in goods procurement and clearance. The surge in fuel and freight costs has also impacted the overall costs for companies, leading to a shortterm impact on margins.

SLUGGISH Consumption

The global market for enzymes has been facing challenges due to sluggish consumption in several industries. AETL finds applications in various industries, including food and beverages, textiles, animal feed, and biofuels. However,

the COVID-19 pandemic has significantly impacted the demand for these enzymes, as several industries were forced to shut down or operate at reduced capacity. Moreover, supply chain disruptions and transportation restrictions have also affected the availability of raw materials and finished products. Despite these challenges, the increasing demand for sustainable and eco-friendly products is expected to drive the growth of the enzymes market in the long-run.

inflation

Global inflation in the past year has risen more than anticipated in major economies like the US and Europe, causing a tightening of financial conditions. With this, there has been a notable shift in consumer preference towards prioritising basic survival needs over purchasing supplements, particularly in developed countries. Further Chinas economy has been hit harder than expected by COVID-19 pandemic outbreaks, while negative spillovers from the war in Ukraine have further impacted the situation. The US is expected to see a decline in growth due to reduced household purchasing power and tighter monetary policy. While overall global inflation has decreased due to a sharp reversal in energy and food prices, core inflation (excluding energy and food components) is yet to peak in many countries, with a projected decline to 5.1% this year.

FINANCIAL ANALYSIS ON

CONSOLIDATED BASIS

revenue from operations

AETLs revenue from operations on a consolidated basis increased to ? 5,406 million in FY 2022-23 from ? 5,294 million in FY 2021-22, marking an increase of 2%.

The total revenue includes international sales of ? 2,850 million (FY 2021-22 - ? 2,951 million), decrease of 4%, and domestic sales of ? 2,557 million (including export incentives of ? 3 million) (FY 2021-22 - ? 2,342 million),(including export incentives of ? 5 million), an increase of 9%. During FY 2022-23, domestic sales accounted for about 47% of your Companys revenue, up from 44% in FY 2021-22. In FY 2022-23, international sales accounted for 53% of revenue from operations versus 56% in FY 2021-22.

FINANCIAL COSTS

Financial costs increased to ? 24 million in FY 2022-23 from ? 18 million in FY 2021-22, an increase of approximately 33%.

PROFIT

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation excluding other income) for FY 2022-23 is marked at ? 1,564 million (29%) as compared to ? 2,014 million (38%) for FY 2021-22, registering a decrease of 22%. During FY 2022-23, profit before tax registered a decline of 18 % to ? 1,404 million (26%) from ? 1,711 million (32%) the previous year. AETLs profit after tax declined by 16 % to ? 1,039 million in FY 2022-23 from ? 1,238 million in FY 2021-22.

OTHER INCOME

Other income for FY 2022-23 was ? 255 million in comparison to ? 64 million in FY 2021-22.

DEPRECIATION AND AMORTISATION

Depreciation and amortisation for FY 2022-23 increased by ? 1 million to ? 350 million as compared to ? 349 million in FY 2021-22.

NET WORTH AND RETURNS

As of March 31, 2023, the net worth of the shareholders was ? 12,351 million compared to ? 10,886 million the previous year. Return on Equity (ROE) for FY 2022-23 is 9% as compared to 12% for the previous year. (Return ratio is calculated based on average shareholders funds).

CASH AND CASH EQUIVALENTS

Cash and cash equivalents in FY 2022-23 stood at ? 1,233 million as opposed to ? 2,736 million in FY 2021-22.

Details of significant changes (i.e. change of 25% or more as compared to the immediately preceding financial year) in key financial ratios, along with detailed explanations include the following:

Ratio	FY 2022-23	FY 2021-22	Variance	Reason for Variance
Interest Coverage Ratio	50.16 times	90.29 times	44%	Reduced due to lower earnings before interest and tax (EBIT)

Note: There has been no significant change in the Current ratio, Debt/Equity Ratio, Debtors turnover ratio, Inventory turnover ratio, Operating profit margin and Net Profit margin, as compared to FY 2021-22. Due increases in raw material costs and operating costs, EBITDA margin decreased from 38% to 29% ,resulting in a decline in margins.

OUTLOOK

Your Company is committed to enhancing and fortifying its business model in all three divisions, including Human Nutrition, Animal Nutrition and Bio-Processing. Your Companys specific focus is to expand its enzymes and probiotics business through the development and launch of new products in its target markets. To achieve this, your Company is actively developing new molecules in the areas of enzymes, probiotics and biocatalysts. AETL expresses a high level of confidence in its present capabilities and capital investments to effectively support its growth endeavours.

human NUTRITION

Your Company is leveraging its successful B2C business model in the U.S. to drive growth in India. Your Company is focussing on expanding its B2C business in the human nutrition segment with the introduction of new immunityboosting products like ImmunoSeb and Biome Ultra, that have been effective in alleviating Post-COVID-19 pandemic symptoms. As part of its strategy to drive growth, it has entered into a B2C brand - Wellfa - an online platform that caters specifically to the Indian market. The platform has products that will help consumers check this supplement nutrients, enzymes, and probiotics as per their body requirements. AETLs diverse range of products, available through Wellfa, cover immune support, skin care, gut health, metabolism boosters, detox aids, weight management solutions, stress relief, and respiratory health support.

This move is expected to be a significant growth driver for AETL. It is also exploring other online avenues for selling its products, highlighting its commitment to staying ahead of the curve in the fast-paced digital marketplace.

ANIMAL NUTRITION

In the field of animal nutrition, your Company is committed to enhancing the efficiency of animal feeds by creating high-quality nutritional products. To achieve this goal, AETL is continuously conducting trials and studies in its pursuit of excellence. Additionally, it is working on introducing and registering more products in both domestic and international markets. Furthermore, to expand market reach, it is targeting the U.S., MENA and Asian markets. It is also planning to appoint more distributors to achieve this goal. In order to fortify its distribution network, your Company is expanding its sales and marketing team.

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PROBIOTICS

Your Company is focussed on introducing a range of probiotic products for both human and animal nutrition.

In human nutrition, AETL is working towards introducing probiotic products that promote immunity development, improve gut health and support nutraceutical applications. Whereas, in animal nutrition, it is determined to launch products that boost immunity, enhance digestion, and increase the nutritional value of animal feed. With the expansion of its product offerings in both sectors, your Company strives to offer effective solutions for enhancing overall health and well-being.

BIO CATALYSIS

By developing bio catalases for API manufacturers, your Company has made substantial progress towards offering enzymatic solutions. These are tailored to specific targets, thereby reducing energy consumption, time and the use of chemicals. A few of these products are currently undergoing advanced trials at the plant level, highlighting this area as a key opportunity for AETL to persist in its efforts and focus.

BAKING

AETL has a line of enzymes, specifically tailored for the food processing sector. It has submitted 12 product dossiers for review by the European Food Safety

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Authority (EFSA). Of these dossiers, four have received positive feedback. Your Companys product line performs equally well with its existing market offerings. Even in the face of challenges posed by the COVID-19 pandemic, AETL has managed to stimulate growth in this segment. Your Company is confident about its ability to expand in the European, and North & South American baking industries, and it aims to leverage available and emerging opportunities in these regions.

RESEARCH & DEvELOPMENT

Your Company is making substantial investments in state-of-the-art R&D centres. It is planning to lead in the formulation of new applications, with a particular emphasis on expanding its portfolio across various industries. To achieve this goal, AETL intends to expand and strengthen its R&D team.

INORGANIC ExPANSION

Over the past five years, your Company has demonstrated a track record of successful inorganic growth through three internal accrual-based acquisitions, while maintaining its status as a zero-debt company. AETL is committed to continuing this trend by seeking out strategic acquisitions. This is aimed at further strengthening its front-end marketing capabilities, expanding its geographic reach, broadening its product portfolio and enhancing its B2C business.

RISKS &

MITIGATION

SUPPLY CHAIN DISRUPTIONS

The enzyme and probiotic industry depend on a global supply chain for raw materials. The industry is at risk of disruptions due to various factors, including geopolitical tension, climate change and increasing demand for natural and sustainable ingredients. These disruptions have the potential to impact production and availability of raw materials. Hence, the companies may need to diversify their sourcing, invest in technology and collaborate with suppliers to manage supply chain risks. Your Company is constantly improving its supply chain management, by maintaining good relations with its suppliers. This, in turn, is ensuring regular supply, alongside reducing the dependency on a particular supplier, thus, allowing flexibility.

REGULATORY CHANGES

The enzyme and probiotic industry is subject to specific regulations in many countries. These regulations include

requirements for safety, quality and labelling. In some markets, there may be changes in regulations related to the use of enzymes and probiotics, which could impact the ability of companies to sell their products in those markets. For example, new regulations on dietary supplements and food additives could impact the use of these solutions in food & beverage items. Your Company steadfastly follows all the regulatory norms that make it industry compliant.

COMPETITION

The enzyme and probiotic industry is witnessing growing competition, with numerous new companies entering the market and established players expanding their product offerings. This could lead to increased competition and pricing pressure, which could impact profitability for some companies. Furthermore, some companies may encounter difficulties in distinguishing their products from those of their competitors, which could potentially hinder their ability to acquire a significant market share. To mitigate this risk,

your Company is constantly focussing on innovation and aligning itself to the market trend, enabling it to stay one step ahead of its competitors.

CONSUMER DEMAND

Consumer demand for enzymes and probiotics have been growing in recent years, driven by increased interest in health and wellness. However, consumer preferences may shift in response to changing trends or unforeseen events, such as the COVID-19 pandemic. For example, consumers may shift their spending priorities away from dietary supplements and towards other health and wellness products, such as fitness equipment or healthy foods. To keep pace with this ever-evolving consumer preference, your Company is constantly focussing on its R&D capabilities. It dedicatedly strives to innovate and improve products, but still may face obstacles in the form of insufficient funding, stricter regulations, and technology bottleneck. To overcome these challenges, your Company can collaborate with external partners, invest in new technologies and explore new funding sources. It understands that innovation is essential for growth, and it must continue to improve the quality of its products through robust R&D to suit consumer preference.

PRODUCT QUALITY AND SAFETY

Enzyme and probiotic companies must maintain excellent product quality and safety standard, to ensure risk-free consumption by humans and animals. Any issues with quality or safety could result in product recalls, legal

liabilities or damage to a companys reputation. Your Company is constantly improving products that undergoes multiple stages of R&D, resulting in globally accepted highest standards.

INTELLECTUAL PROPERTY

Enzyme and probiotic companies invest significant resources in developing new products and processes. Protecting these investments requires a strong intellectual property portfolio, including patents, trademarks and trade secrets. These companies may face challenges in protecting their intellectual property from competitors or in enforcing their rights in cases of infringement. To mitigate this risk, your Company is filing for patents in a timely manner that protect AETL from competitions. While its experienced R&D team enables your Company to conduct thorough research and align its products with market demand.

FOREX RISK

Foreign exchange (forex) risk can impact enzyme and probiotic companies due to their reliance on global supply chains, international sales and foreign investments. Currency market volatility during the year has increased the effect of this risk. To manage this risk, companies may need to implement strategies, including hedging, diversification and monitoring market developments. Your Company is taking all the necessary steps to counter forex risk and mitigate currency volatility.

OPPORTUNITIES

Enzymes and probiotics are essential for maintaining a healthy gut microbiome, which has been linked to various health benefits, such as improved skin health and weight loss. The worlds growing population has led to an increased demand for enzymes and probiotics to address digestive issues and promote better overall health. As more people become aware of the benefits of these natural supplements, there is a surge in demand for high-quality products that meet their needs. This trend is particularly noticeable in countries, such as the US and India, where healthcare spending is increasing. As more people adopt vegan and vegetarian diets, the demand for plant-based enzymes and probiotics is also increasing. To cater to this demand, the supplement market is expanding its offerings, providing consumers with a range of natural digestive health solutions to choose from.

As per Healthcare Analytics Market Report published in December 2022, the global healthcare industry is expected to experience substantial revenue growth, increasing from USD 27.4 billion in 2022 to USD 85.9 billion by 2027, with a CAGR of 25.7% between 2022 and 2027.

According to National Health Expenditure Projections

2021- 30, published in Health Affairs report, it is projected that healthcare spending in the US will continue to rise. With an estimated annual growth rate of 4.9% from

2022- 24 and 5.3% per year after that, it will register a total spending of USD 6.8 trillion in 2030.

Statutor

The growing global awareness of the health benefits associated with enzymes and probiotics has resulted in a significant increase in demand. According to industry reports, the global enzyme market is projected to reach USD 14.7 billion by 2028, with the food & beverage sector being the largest end-user. Similarly, the global probiotic market is projected to reach USD 94.4 billion by 2028 due to increased awareness of their ability to enhance gut health, immunity and reduce the risk of chronic diseases. The growth of both enzymes and probiotics is being fuelled by several factors, including increased consumer awareness of their health benefits, demand for natural and sustainable products, and their growing use in various industries. As a result, the demand for these products is expected to continue increasing in the coming years.

Growing awareness of the health benefits of enzymes and probiotics has led to a surge in demand for these products in India. The use of enzyme has seen an uptick in various industries, including food & beverage, pharmaceuticals and

textiles. Similarly, the demand for probiotics has increased due to the rising awareness about gut health and lifestyle diseases. The growing disposable income and changing dietary patterns of Indian consumers are expected to fuel the demand for functional foods and dietary supplements that contain enzymes and probiotics in the coming years. Therefore, the Indian market for enzymes and probiotics is expected to experience substantial growth in the foreseeable future.

Further, advancements in biotechnology and genetic engineering are also creating new opportunities to develop innovative solutions that meet current and future needs.

Companies that are at the forefront of these developments may have a competitive advantage in the market.

Source: Advisory Board

Markets and Markets

THREATS

The enzyme and probiotic industry is facing a number of challenges that could impact its profitability and growth. One of the biggest challenges is the intense competition from newer entrants, as they are more innovative and have lower cost structures. This could lead to a reduction in market share and profitability for established companies.

Regulatory challenges are also a major concern for companies in this industry. Compliance with strict regulations and guidelines, both domestically and internationally, can result in significant costs, while non-compliance can lead to fines and penalties that can harm a companys financial health and reputation. Obtaining regulatory approval for products can also be time-consuming and expensive, which can delay time- to-market and increase costs. Supply chain disruptions are another potential threat to the enzyme and probiotic market. Natural disasters, political instability, and other factors can disrupt the supply chain, making it difficult for companies to manufacture and distribute their products. The COVID-19 pandemic has highlighted the vulnerability

of global supply chains, and their potential impact on product availability and sales.

Intellectual property infringement is also a potential challenge for companies in this market. Competitors who infringe on a companys intellectual property rights can lead to costly legal battles and a decline in market share. Lastly, evolving consumer preferences could impact the enzyme and probiotic market. Shifts in consumer trends, such as a preference for plant-based diets or a focus on sustainability, could affect the demand for enzyme and probiotic products. Companies that are unable to adapt to these changes could lose market share to more innovative and adaptable competitors.

In todays highly competitive industry, it is imperative for companies to keep up with the latest technological advancements to thrive and succeed. Failing to do so, could put companies at a disadvantage and hinder their growth prospects.

In summary, the enzyme and probiotic market face several potential threats, and your Company is navigating these challenges to thrive in this sector.

INTERNAL CONTROL AND

RISK MANAGEMENT SYSTEM

There is an internal control system in place at your Company to ensure the efficiency and effectiveness of its

operations. The internal control system is essential to the risk identification and mitigation process. It contributes to

compliance with legal requirements. Within your Company, a proper communication channel from top-to-bottom and vice-versa safeguards the internal control system by considering both internal and external factors in an appropriate and timely manner.

AETLs risk assessment and management policy is based on the concept that a robust risk management system ensures commensurate controls and monitoring mechanisms, for smooth and efficient management of the business. Various risks are identified, measured, evaluated, monitored, and mitigated in the policy. A review of the risk management framework of your Company has been conducted by the internal auditors. Risk registers are prepared by the concerned departments. They contain information

about the respective risks as well as their current control activities and mitigation plans, if any. Thereafter, the registers are reviewed.

On a continuous basis, IT systems are improved on a preventive basis as well as in response to hacking challenges. Evaluation of an internal control system is done by setting targets on a continuous basis, with corrective actions taken in case of any deficiency by comparing them to the actual results. According to its size and nature of operations, your Company maintains an appropriate internal control system and internal financial controls. Internal auditors and statutory auditors of your Company test and certify the internal control systems.

MATERIAL DEVELOPMENTS IN HUMAN

RESOURCES/INDUSTRIAL RELATIONS

Your Company acknowledges the significance of its human resources. AETL is dedicated to investing in its people and their processes to enrich the organisations human capital, and create value for its stakeholders. With the growth and execution of new projects, there has been an emphasis on recruitment. As a result, your Company has successfully attracted professional talent to fill gaps at various levels. The Management endeavours to create a supportive work environment through various employee engagement programmes to help employees excel. Currently, your Company has more than 320 employees with diverse backgrounds.

To enhance employee performance, your Company provides better tools, technology, and techniques at the workplace. It takes measures to ensure occupational safety and health at workplaces and manufacturing sites.

The HR department organises training and development programmes to sharpen skills and update concepts. Furthermore, external technical training is provided to certain critical functional heads to prepare them for new projects. Your Company aims to create a culture of learning, sharing, and helping others succeed, while emphasising on the importance of having a ‘growth- oriented mindset.Rs. Additionally, AETL places importance on de-stressing techniques, as it believes that a happy individual performs better.

Throughout the year, your Company has maintained cordial industrial relation as the HR department constantly strives to maintain a constructive work environment. AETLs focus on personnel development has enabled it to attract and retain talented employees, ensuring continued growth and success.

CAUTIONARY

STATEMENT

In this Management Discussion and Analysis Report, certain forward-looking statements may be made based on various assumptions about the Companys present and future business strategies, the environment in which it operates, and other factors. Risks and uncertainties can cause actual results and information to differ materially from those stated or implied. Among these risks and uncertainties are the effects of economic and political conditions in India and abroad, volatility in interest rates and the securities market, new Government regulations and policies that may impact

your Companys businesses, and its ability to implement its strategies. The information contained herein, is as of the date referenced, and your Company has no obligation to update it. Market data and other information have been obtained from sources deemed trustworthy by your Company or it has been estimated internally, but the accuracy or completeness cant be guaranteed.