Annapurna Swadisht Ltd Management Discussions

Indian Economy

INDIAS ECONOMIC RESILIENCE

India cemented its position as the fastest-growing major economy in FY2024- 25, with GDP growth estimated at 6.3%, outpacing global peers. As per the IMF report, the economy is set to surpass Japan to become the worlds fourth-largest in 2025, driven by strong domestic demand, manufacturing revival and sustained reforms.

Key Growth Drivers

• Private Consumption Rebound: Urban and rural demand surged, driven by moderating inflation, a normal monsoon and improved agricultural incomes.

• Manufacturing & Services Growth: Production-linked incentive (PLI) schemes and global supply chain diversification fuelled manufacturing growth (Index of Industrial Production - 4%). Industrial output grew by 5%, exceeding the expectation by 40 basis points.

• Robust Tax Collections: The annual GST collections consistently crossed C16.75 lakh crore, a 9.98% increase Y-o-Y, reflecting formalisation and consumption strength.

• RBIs Supportive Stance: Two consecutive repo rate cuts in quick succession eased borrowing costs, spurring investment and housing demand.

INFLATION & DEMAND

Although inflation declined to 4.6% for the full year—its lowest level in six years and well within the RBIs tolerance band—no significant change was observed in the employment rate. However, strong rural demand (due to higher MSPs and welfare spending) and rising exports offset global headwinds.

OUTLOOK FOR FY2025_26

Growth in India is projected to remain stable in FY2026, aided by:

• Infrastructure push (rail, roads and renewables)

• Private capex revival in many sunrise sectors

• Digital & green economy investments

With macro stability, demographic dividends and policy continuity, India will likely remain a global bright spot, though geopolitical risks and commodity price fluctuations warrant vigilance. The focus on manufacturing self-reliance ("Make in India") and export competitiveness will be pivotal in maintaining momentum. In short, the financial year 2025-26 could further solidify Indias rise as a growth powerhouse.

Industrial Overview

THE FMCG SECTOR

TRENDS

Driven by a large and youthful demographic, India is witnessing a growing preference for convenience-oriented products, emphasising a_ordability, accessibility and alignment with global food trends.

The urban segment was the largest contributor to the sectors total turnover in India. However, in recent years, the market in rural India has grown faster than in urban areas. Rural areas now account for about half of total consumer goods spending.

PERFORMANCE IN FY25

The industry faced inflationary pressures during the first two quarters. The input prices went up and as a result, the first half of the financial year saw a significant price hike. The price increase has also led to pressure on volumes, but the quantum of price hikes remains firm. The third quarter was not very different either. Rural areas were more resilient than urban areas. Prices remained high, yet the companies had to face margin contraction. Even festive times couldnt offer much relief. Except for major corporates in the sector, all others reported minimal growth.

With retail and food inflation decreasing to a more manageable level, the situation improved in the fourth quarter and for the entire year. The sector experienced overall volume growth due to a stable demand trajectory for the full fiscal year. Urban consumption has also begun to rise.

The sector reported an 11% year-on-year value growth for the March quarter (the final three months of 2024-25), driven by a 5.1% volume increase and a 5.6% price hike. The sector regained momentum as input costs stabilised and companies adjusted pricing strategies.

FAVOURABLE OUTLOOK

A combination of favourable monsoon rains, government investment in rural infrastructure and minimum support prices for crops should positively impact rural demand, which is expected to remain stable. A slight expected increase in urban demand may drive this years overall volume growth to exceed last years performance. Despite easing inflation, elevated edible oil prices continue to drive up staple food costs, contributing to market growth. Meanwhile, several consumer goods companies report a delayed recovery in urban demand. The Union governments income tax cuts and recent welfare programs should also yield positive outcomes. Most price hikes have already occurred, with inflation consistently trending downward and crude oil prices remaining stable. However, inflation is expected to rise in the first half of the year due to the base effect. In the latter half of FY25, copra and edible oil prices saw significant increases. Thus, the first half of this year may be inflationary, but copra prices should ease in the second quarter.

Macro-economic Factors Impacting FMCG Consumption

• More spending power to the customer: Declining inflation puts more money in peoples pockets.

• Tech-driven shopping: AI plays a bigger role, with a significant percentage of consumers using AI to shop.

• Side hustles & savings focus: A large percentage of people are looking for extra income to maintain their spending habits.

Strategies of the FMCG Industry Going Forward

1. Enhancing Local Manufacturing: FMCG companies are increasing local production while reducing reliance on imports in response to supply chain issues. Government programs such as ‘Make in India and PLI schemes promote domestic manufacturing, strengthening supply chain resilience.

2. Omnichannel Expansion: With consumers shopping across online and offine platforms, FMCG brands ensure they lead the market by seamlessly integrating both channels. Key strategies such as hyperlocal deliveries, quick commerce (10-minute delivery) and AI-driven customer insights are emerging to enhance shopping experiences and increase customer retention.

3. Mergers and Acquisitions: Major FMCG players seek strategic partnerships and acquisitions to drive growth. Emerging D2C brands are attractive targets as global FMCG leaders aim to enhance their digital footprint and enter new markets more swiftly.

RURAL CONSUMPTION OUTPERFORMS URBAN

Consumption in rural India has significantly surpassed urban areas for some time. Rural FMCG sales grew by 9.9%, almost double the 5% growth in urban regions, driven by a robust Kharif harvest and favourable Rabi sowing outlooks. Additionally, the effects of the Union Budget 2025 tax reliefs are evident in consumer sentiment, with the CMIE Index of Consumer Sentiments (ICS) climbing 1.1% in January 2025, recovering from a 1.6% decline in December 2024, as illustrated in the chart below. The "Index of Consumer Sentiments" is an economic indicator gauges consumer attitudes regarding the present and future economic landscape. A score exceeding 100 reflects optimistic consumer confidence about future economic prospects, while a score below 100 signifies pessimistic sentiments among consumers.

Despite a generally positive trend since January, the rural Index of Consumer Sentiments (ICS) dropped by 1.9 per cent in April 2025. This decline interrupts the steady rise in rural sentiments observed earlier this year. But, it is mainly linked to a notable reduction in rural households future expectations rather than the current economic situation.

The Underlying Dynamics

Over 65% of Indias population resides in rural areas, yet they account for only ~35% of FMCG consumption. While urban areas have historically led FMCG growth, rural areas are experiencing rapid growth and their influence on the sector is becoming increasingly important.

In 2023-24, the disparity in consumption between rural and urban residents in India decreased further, with non-food items still representing the majority of average monthly expenditures nationwide, according to a Household Consumption Expenditure Survey (HCES) in January 2025.

The average Monthly Per Capita Consumption Expenditure (MPCE) in rural India increased by 9.2% compared to the prior year. Meanwhile, in urban regions, this figure climbed by 8.3%. It is worth mentioning that these amounts do not include the monetary value of goods provided at no cost to qualifying beneficiary households through various social welfare programmes.

The urban-rural gap in MPCE decreased to 69.7% in 2023-24, down from 71.2% in 2022-23 and 83.9% in 2011-12, indicating continued consumption growth in rural regions. In rural India, the dynamics and attitudes have transformed significantly in the last decades. The knowledge gap that once separated urban and rural areas has nearly disappeared. Nowadays, thanks to affordable and easily available internet and data, the rural consumer can access the same information as their urban counterparts. Furthermore, market access has improved, fuelling aspirations for entrepreneurship. It is essential to unleash those entrepreneurial spirits in rural India.

The fast-declining rate of poverty is likely behind the improvement in rural consumption. Poverty in rural areas declined to less than 5% for the first time. It outpaced the reduction in urban areas, driven by higher consumption growth among the bottom 0-5% decile, supported by government initiatives, according to a recent analysis by SBI Research.

Rural poverty decreased to 4.86% in 2023-24, down from 7.2% in 2022-23 and 25.7% in 2011-12. Meanwhile, urban poverty declined to 4.09% in 2023-24, compared to 4.6% in the prior year and 13.7% in 2011-12. Implementing government programs such as direct benefit transfers (DBT), significant investments in rural infrastructure and focused initiatives to boost farmers income creates a more empowered rural consumer base. As farmers and rural communities experience increased financial stability, their purchasing power rises, benefiting the FMCG sector. This shift not only opens up a potentially vast new market for FMCG companies but also encourages them to innovate and adapt their products to meet the evolving needs of these consumers.

In Indian markets, snack culture thrives. Street vendors attract crowds with crispy phuchka, jhal muri, vada pav and bhel puri. Local shops offer affordable namkeen, enhancing tea-time conversations. Supermarkets feature fusion chips and protein bars for health-conscious youth. Festivals boost demand for sweets like laddoos, while the monsoon season spikes pakora sales. Small vendors introduce spicy variations to compete against brands. E-commerce delivers exotic snack mixes to consumers, merging tradition with convenience.

Indias snack market presents diverse _avours and textures to satisfy every taste bud. From timeless traditional treats to contemporary innovations, Indian snacks cater to all preferences. The snack market _ourishes from rural areas to cities, driven by _avours, cultural heritage and communal enjoyment.

In 2024, the size of the Indian snacks market reached INR 46,571.3 Crore. The market is projected to grow to INR 1,01,811.2 Crore by 2033, reflecting a compound annual growth rate (CAGR) of 8.63% from 2025 to 2033.

GROWTH DRIVERS

This growth is fuelled by rising urbanisation, increasing disposable incomes, shifting lifestyles, increasing retail channels and innovation in packaging. Moreover, the growing young population and embracing Western eating habits enhance the demand for convenient, ready-to-eat snack choices among various demographics.

Trends

• Increasing demand for processed foods and convenient on-the-go products.

• Rapid urbanisation results in busy work schedules and more sedentary lifestyles, leading to increased snack consumption over traditional meals.

• Snacks featuring ethnic _avours, such as banana chips, murukku, papad and samosas, are gaining immense popularity among teenagers, hostel residents and bachelors.

• The blend of traditional Indian _avours with global influences is emerging. Producers are exploring new horizons, incorporating unique ingredients and tastes worldwide into regional snacks.

• Growing health consciousness has prompted consumers to seek natural, organic, vegan, low-calorie and gluten-free snack choices. As a result, manufacturers are introducing value-added products with diverse _avours, textures and seasonings to appeal to a broader consumer audience and improve their product range.

THE SAVOURY INDIAN SNACK & SWEET MARKET

The Snack Market

For generations, Indian families have depended on savoury snacks. Festivals such as Diwali and Holi heighten the craving for traditional treats, strengthening regional snacking customs. Every state boasts unique savoury snacks, shaping consumer preferences in India.

Packaged savoury snacks have emerged as the preferred option for busy consumers. The organised savoury snacks market is expected to experience rapid growth, showcasing its rising prominence. The Indian savoury snacks market ranks among the fastest-growing segments in the food industry.

As packaged snacks in India experience rapid growth, the upcoming decade offers promising opportunities for brands, retailers and entrepreneurs. They will be leaders in this _ourishing market by embracing innovation, focusing on quality and addressing changing consumer needs.

THE SWEET MARKET

In Indian households, sweets hold a deep-rooted and cherished cultural significance. These traditional confections are essential during religious and festive events and family gatherings nationwide.

Traditional Indian sweets, made from fruits, dairy, pulses, cereals, or various ingredient combinations, feature an astonishing variety. This diversity is enhanced because most sweets have been cherished and developed over centuries across different regions of the country, highlighting regional specialities and _avours.

The Indian sweets market is largely unorganised. But in recent years, there has been an increasing demand for packaged sweets primarily owing to cleanliness and hygiene. Moreover, rising input prices may lead to adulteration. Also, packaged sweets have a longer shelf life. Attractive packaging that lists all ingredients on the label for packaged sweets fosters consumer trust. Regulatory bodies like FSSAI are also reinforcing food labelling and safety regulations.

The size of the packaged sweets market in India reached INR 7,268.0 Crore in 2024. The market is projected to grow to INR 27,647.5 Crore by 2033, with a CAGR of 16% from 2025 to 2033. Key factors fuelling this market growth include an increasing working population, changing consumer preferences toward ready-to-serve options and the easy accessibility of packaged sweets through online and offine distribution channels.

Company Overview

Established in 2015 as Annapurna Agro Industries, the Kolkata-based fast-moving consumer goods (FMCG) enterprise has evolved into a publicly traded Company, consistently delivering affordable and _avourful snacks to Indias heartland.

Under the leadership of visionary chairman Shreeram Bagla, the Company has recognised the significant potential in Tier III and IV towns, where the demand for branded products is increasing. With six manufacturing facilities located in different parts of India, Annapurna produces over 107 stock-keeping units (SKUs) — including noodles, biscuits, candies, sweet & savoury products, potato chips and much more — all competitively priced to meet the needs of budget-conscious consumers.

Rural women, empowered through Annapurnas initiative, are integral to the supply chain, infusing artisanal pride into the products. The Company is, supported by 1100 distributors, ensures that packs reach even the most remote villages through Uttar Pradesh, Bihar, Jharkhand, West Bengal, Assam, Odisha and all over India, bridging the urban-rural divide.

BRAND ACQUISITION

As part of its national expansion strategy, in the 2024-25 financial year, the Company acquired Madhur Confectioners Private Limited (MCPL), a well-known producer of various confectionery items, such as _avoured candies, lollipops, toy chocolates and others. The Company has planned a fundraising effort of C83.36 crore through warrants to facilitate expansion.

Other Strategic Initiatives

Manufacturing Expansion: The Company operationalised new plants in Gurap and Dhulagarh, West Bengal, to increase production capacity for its portfolio, including namkeens, fryums, noodles and biscuits. Backward integration through a _our mill improved cost efficiency and supply chain control. The Company also plans to set up a new plant in Tezpur, Assam.

Product Diversification: Annapurna expands its product basket regularly, capturing a broader market. The acquisition of Madhur Confectioners in January 2025 added sweets and confectionery, targeting festive demand and baby segments.

Rural Market Penetration: With a network of over 1100 distributors, the Company further deepens its reach in Tier III and IV towns, offering affordable, low-unit packs tailored to rural consumers preferences and rising incomes. E-commerce and D2C Push: The D2C platform and partnerships with e-commerce channels scaled online sales, enhancing accessibility and brand visibility in urban and rural markets.

Fundraising for Growth: A C83.36-crore preferential issue of 23.75 lakh warrants in May 2025 supported capacity expansion, marketing and debt reduction, aligning with its C1,000-crore revenue target.

OPPORTUNITIES IN 2025

1. Rural Demand Surge: Favourable monsoons and schemes like PM-KISAN boost rural incomes, enabling Annapurna to expand affordable snacks and noodles in Tier III and IV towns using its distributor network.

2. Brand Value in Rural Areas: Annapurnas trusted brand, known for tasty, budget-friendly snacks, can deepen rural loyalty through localised marketing and community engagement, tapping into rising aspirations.

3. A_ordability of Products: With easing inflation, Annapurna can easily maintain low-unit packs (e.g., C5-10) to cater to price-sensitive rural consumers, driving higher purchase frequency.

4. Availability and Accessibility: Expanding its distributor network and leveraging e-commerce and rural kirana stores ensures Annapurnas snacks are widely available and accessible, even in remote villages.

5. Policy Support: PLI schemes and rural infrastructure focus in the 2025-26 Union Budget enhance manufacturing efficiency and rural purchasing power, supporting Annapurnas production scale-up and market penetration.

6. Acquisition Synergies: The Madhur Confectioners acquisition strengthens distribution and product offerings, enabling organic growth and deeper market penetration.

THREATS IN 2025

1. Competitive Pressure: Large FMCG players and local brands challenge margins with aggressive pricing and branding, especially in low-unit-pack segments.

2. Rising Input Costs: Volatility in raw material prices, like palm oil and spices, strains profitability despite benign crude-linked derivatives.

FINANCIAL PERFORMANCE

Total revenue for FY2025 stood at _40,871.36 Lakhs, compared to _ 26,574.26 Lakhs in FY2024, representing a robust 54% YoY growth on the back of healthy demand from across the market and deeper penetration.

EBITDA for FY2025 saw a substantial increase, rising from _2,813.51 Lakhs in FY2024 to _ 4,788.44 Lakhs in FY2025. This represents a growth of over 70 % year-on-year, highlighting the Companys improved operational efficiency and effective cost management.

The margin increased from 10.62% in FY2024 to 11.74% in FY2025, reflecting better control over operating expenses relative to revenue growth. The notable improvement in EBITDA and EBITDA margin is primarily attributed to the Companys ability to scale operations while maintaining cost efficiencies.

Net Profit for FY2025 was _ 2,151.30 Lakhs, a notable increase from _1,313.23 Lakhs in FY2024 on the back of EBITDA growth.

The Companys total debt increased from _6,326.84 Lakhs in FY2024 to _ 11478.10 Lakhs in FY2025. This increase reflects the Companys expanded borrowing to meet immediate operational and working capital needs.

The Net Worth saw a substantial increase/decrease from _11,459.20 Lakhs in FY2024 to _ 29,987.85 Lakhs in FY2025. This growth represents a nearly threefold increase in equity, highlighting the Companys strong financial performance and successful capital-raising activities during the year. Significant changes (i.e., change of 25% or more as compared to the immediately previous financial years) in Key Financial Ratios, along with explanation, are as follows:

Key Financial Ratios	2024-25	2023-24	Reason
Operating Profit Margin (%)	11.74	10.62	mentioned in the note above
Return on Capital Employed (%)	11.50	13.60
Net Profit Margin (%)	5.26	4.96
Debt Service Coverage Ratio	4.27	4.54
Creditors Turnover Ratio	8.60	8.22
Current Ratio	1.46	1.14
Debt-Equity Ratio	0.33	0.55
Debtors Turnover Ratio	9.31	10.77
Return on Equity (%)	10.38	15.06
Inventory Turnover Ratio	4.06	3.89

INTERNAL CONTROL SYSTEM & ITS ADEQUACY

The Company maintained a robust internal audit structure to oversee and ensure proper internal controls, providing reasonable assurance to the Audit Committee and the Board of Directors that the processes are free from fraud and misstatements. This internal control framework also guarantees the adequacy and effectiveness of the organisations risk management. It also monitors business processes, operations, financial reporting and compliance, as required by its nature, size, scale and complexity. Regular internal audits and management reviews are conducted across key value chain areas, including procurement, manufacturing, information technology, supply chain, sales, marketing and finance. The management periodically reviews the internal auditors reports and corrective and remedial measures are implemented to reinforce the controls and improve the effectiveness of the current systems. Summaries of the reports and actions taken are submitted to the Audit Committee of the Board.

HUMAN RESOURCE

Annapurna prioritises investing in its personnel, fostering an exceptional work environment that provides numerous learning and professional development opportunities. This approach not only attracts young talent but also enhances the competencies of their seasoned employees, culminating in a dynamic and versatile team.

The Companys employee-centric approach cultivated a collaborative culture that nurtures individual growth while promoting high satisfaction and retention levels. Annapurnas varied team is a treasure, consistently driving the Companys strategic goals in a fast-paced and evolving business landscape.

Annapurna employs strong talent management strategies, development programmes, productivity measures and competitive incentives to achieve its operational and financial goals. The Company prepares its employees with essential skills to address future industry challenges by providing ongoing learning opportunities. Furthermore, Annapurna emphasises employee well-being through extensive health and safety programs that create a safe and supportive workplace.

The Company warmly welcomed new talent to support its growing business over the past year.

RISK MANAGEMENT

Annapurna Swadisht Limited recognises that effective risk management is essential for sustainable growth in the fast-moving consumer goods (FMCG) sector. The Company operates in a dynamic market environment shaped by evolving consumer preferences, regulatory frameworks and supply chain complexities. Annapurna acknowledges the inherent link between risk and opportunity and adopts a data-driven approach to balance both.

The Companys risk management framework is structured to proactively identify, assess and mitigate risks across all areas of operation. The risk management policies reviewed by the Board from time to time and suitable changes are done as may be required.

Annapurna strengthened its risk approach by integrating root cause analysis into its operational processes. This enables the timely identification of existing risks and the development of mitigation strategies to reduce the likelihood of recurrence. At the same time, the Company remains vigilant of the external ecosystem, scanning for emerging risks with potential short- and long-term impacts.

Annapurna uses analytics and industry benchmarks to identify high-potential product categories and process improvements that align with market standards while managing associated risks. This balance of precaution and innovation allows the Company to respond swiftly to disruptions while pursuing growth opportunities.