Aelea Commodities Ltd Management Discussions

• INDUSTRY OVERVIEW

The global cashew industry continues to witness a positive growth trajectory, supported by rising health consciousness, demand for plant-based proteins, and the growing appeal of nuts in everyday consumption. Cashews, in particular, have carved a niche across the culinary, snacking, and confectionery industries due to their nutritional benefits and versatility. Leading cashew-producing nations, including Vietnam, India, and countries in Africa, are increasingly focused on enhancing value through integrated processing, quality control, and supply chain innovations. In this context, India holds a significant position as both a major processor and consumer of cashews. However, domestic raw cashew nut (RCN) production remains insufficient to meet rising demand, compelling Indian processors to depend heavily on imports, primarily from African nations such as Benin, Tanzania, C?te dIvoire, Burkina Faso, and Senegal. This dependency creates a dynamic and complex cross-border trade ecosystem that underscores the importance of supply chain agility and procurement discipline for players in the industry.

• COMPANY OVERVIEW

Aelea Commodities Limited has positioned itself strategically within this evolving landscape by building a vertically integrated business model anchored in cashew processing and select commodity trading. The companys core operations focus on the end-to-end processing of RCN into high-quality cashew kernels, supplemented by limited trading activities in sugar and agro-based by-products. FY25 marked a transformational year for Aelea, with the commissioning of its enhanced processing facility at Surat. Spread across 1,09,000 square feet, the upgraded unit now boasts an installed capacity of 140 metric tonnes per day (TPD), a significant scale-up from previous levels. This milestone was further complemented by the companys successful listing on the BSE SME platform in July 2024, which not only enhanced corporate visibility and governance but also unlocked access to capital for long-term strategic investments. During the year, Aelea also acquired a 4,12,000+ square feet land parcel in Vasravi, Surat, which will house its upcoming Unit III. This land will support the companys clean energy and further processing ambitions, including a planned 4 MW renewable energy setup.

• OPERATIONAL PERFORMANCE

Operationally, FY25 saw the completion of Phase I of Aeleas multi-stage expansion roadmap. The newly commissioned Unit II was fully operational by May 2025 and is on track to reach full utilization in the first quarter of FY26. The company anticipates approximately 240 working days annually, translating into a processing volume potential of nearly 27,000 metric tonnes per annum. Raw cashew procurement continues to be a critical activity, with the company leveraging its relationships with suppliers in Africa and employing a diversified procurement model that includes pre-shipment purchases, port-level buys, and spot purchases from intermediaries. While RCN prices saw volatility in the latter half of FY25, Aelea adopted a disciplined replacement model, ensuring that raw material procurement remained closely aligned with downstream sales. Processing efficiencies are expected to improve significantly with the adoption of automation and integrated operations, while the company has also begun investing in value-added innovations such as flavored cashews, vegan alternatives, and non-dairy indulgence products tailored to health-conscious consumers.

• FINANCIAL PERFORMANCE

Financially, Aelea reported consolidated revenue of Rs182.14 crores for FY25, with an EBITDA of Rs183.84 crores and a net profit of Rs1.16 crore. EBITDA margins were impacted during the year due to a combination of elevated raw material costs, underutilization of capacity during the commissioning phase, and bad debts to the tune of Rs2 crores written off as precautionary measure. However, it is important to note that this amount is recoverable, as the court order favours our company. Despite these temporary headwinds, the company remains confident in its ability to restore margins to the 12–13% range as full operational capacity is achieved. Cashew processing contributed approximately 90% of total revenues, while the trading business, which includes sugar, accounted for the balance. The company has consciously phased out non-core commodities such as rice and other agro-products to concentrate on high-margin processing activities.

The matter relating to the long-outstanding receivable was deliberated in the meeting of the Board of Directors held on 31 March 2025, subject to concurrence from the Statutory Auditors. Based on the auditors review during the course of the audit and taking into consideration the time elapsed in recovery despite a favourable court order, the Board, in its meeting dated 29-05-2025, agreed to recognise the amount as not presently recoverable and give effect to the same in the financial statements for the year ended 31 March 2025. This accounting treatment has been made as a measure of prudence, without prejudice to the Companys legal rights to recover the amount in future

• MARKETING AND DISTRIBUTION

On the distribution front, Aelea maintains a strong presence across both domestic and international markets. The company has established robust B2B relationships with reputed brands such as Haldiram, Amul, Bikanervala, Reliance Retail, Farmley, and many more. Exports remain an important strategic priority, with growing penetration in Southeast Asia and the Middle East. Aelea operates a hybrid distribution model, encompassing traditional wholesale, modern trade, and institutional buyers. The company is also exploring private-label tie-ups and plans to introduce its own branded line of value-added cashew products in FY26, focused on premium retail consumption.

• RISK FACTORS AND MITIGATION

The nature of the agri-processing business presents several risks, which the company actively monitors and mitigates through robust internal systems. Key risks include RCN price volatility, which is addressed through real-time procurement alignment and working capital management; foreign exchange fluctuations, which are partly hedged through natural exposure alignment; and supply chain disruptions, particularly in cross-border logistics. Regulatory and environmental compliance continues to be a cornerstone of Aeleas operations, and the company is progressively adopting sustainable processing practices, with future plans to leverage by-products like cashew shells for biofuels and charcoal production.

• COMPETITIVE LANDSCAPE

In terms of competitive positioning, Aelea remains a small yet rapidly growing player in a fragmented domestic industry that includes over 2,500 processors. While Vietnam continues to lead in automation and cost efficiencies, and African processors gain traction due to local raw material availability, Aeleas focus on vertical integration, quality control, and downstream product innovation sets it apart. The companys investments in biofuel production, value-added food products, and clean energy capacity are expected to create a differentiated value proposition in the years ahead.

• CAPITAL EXPENDITURE AND INVESTMENTS

During FY 25, the Company incurred capital expenditure (capex) of approximately Rs42 crore to support the expansion of its production capabilities. This capex—primarily funded through IPO proceeds—was strategically directed towards strengthening infrastructure, enabling backward integration, and laying the groundwork for long-term scalability. Key deployments during the year included the commissioning of Unit II, acquisition of land for Unit III, and the initiation of procurement for plant and machinery to facilitate Cashew Nut Shell Liquid-based oil production.

Looking ahead, the Company plans to incur additional capex of approximately Rs12 crore in FY26 to complete Phase II of its ongoing expansion. This phase will involve the commissioning of Cashew Nut Shell Liquid oil extraction and processing facilities, which are expected to enhance operational efficiency, drive margin expansion, and improve supply chain integration.

• OUTLOOK FOR FY 2025–26

Looking ahead to FY 26, the outlook for the cashew industry remains constructive, with increasing demand across health-conscious, vegan, and convenience-focused food categories. The festive and snacking demand in India is expected to remain strong, while global buyers continue to seek reliable, quality-focused supply partners. While short-term headwinds around RCN pricing and forex remain, Aelea is well placed to navigate these through disciplined execution and operational agility. Strategic priorities for the coming year include achieving full utilization at Unit II, completing Cashew Nut Shell Liquid-based biofuel operations under Phase II, and initiating development for Phase III focused on value-added biofuel, charcoal and cardanol. The company also aims to launch its branded cashew-based vegan product range, explore international private label opportunities, and deepen its presence in modern retail formats. All of these efforts are expected to consolidate Aeleas position as a value-accretive, innovation-led player in the global cashew ecosystem.