B & A Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

Global Tea Market Landscape

The global tea market is on a robust growth trajectory, anticipated to reach USD 24.61 billion by 2030, with a projected compound annual growth rate (CAGR) of 6% from 2025 to 2030. This expansion is primarily driven by increasing consumer focus on health and growing preference for specialty and functional teas.

Key Industry Trends

• Health-Driven Consumption: Teas reputation as a healthy beverage-owing to its antiinflammatory, relaxing, and antioxidant properties-continues to attract health-conscious consumers globally.

• Shift toward Premiumization: There is escalating demand for premium, organic and herbal teas, especially those offering functional benefits such as detoxification and immunity support.

• Sustainability Focus: Consumers are increasingly favoring brands that prioritize sustainable and ethical sourcing, prompting a shift in industry practices towards environmentally friendly and socially responsible operations.

• Growth of E-Commerce and DTC Channels: The digital transformation of retail, fueled by the rise of e-commerce and direct-to-consumer models, is significantly enhancing market access and penetration, particularly in urban and emerging regions.

• Product Innovation: Innovations such as ready- to-drink teas, artisanal loose-leaf options, and culturally distinctive blends are enriching the consumer experience and driving market differentiation.

• Cultural Exploration: Global curiosity about regional and heritage teas is contributing to the popularity of indigenous and specialty tea varieties.

OPPORTUNITIES AND THREATS Indian Tea Market: Opportunities

• Health-Conscious Consumer Shift: In India, growing awareness of health and wellness is accelerating demand for green, herbal, and functional teas. This trend supports the adoption of traditional and medicinal tea variants.

• Expanding Export Horizons: As a top global tea producer, India enjoys natural advantages in diverse cultivation, which enhances its export potential to cater to sophisticated global tastes.

• Emergence of Organic and Specialty Segments: The shift toward organic and high-quality teas offers Indian producers a strong growth avenue. Capitalizing on this can yield higher margins and brand differentiation.

• Digital Retail Growth: E-commerce platforms present a strategic growth channel, enabling Indian tea brands to reach new customer segments efficiently through digital campaigns and marketplace partnerships.

Threats and Challenges

• Sustainability and Quality Constraints: Indian producers face challenges related to soil health, pest control and climatic variability. Compliance with environmental and labor standards, while essential, adds to operational costs.

• Rise of Alternative Beverages : Competition from coffee, energy drinks, and health-based alternatives is intensifying, particularly among younger demographics. This shift in preference necessitates innovation and strategic repositioning by tea brands.

PERFORMANCE OF YOUR COMPANY

During the financial year 2024-25, the Tea Division of B&A Limited operated in a challenging environment characterized by volatile weather patterns, subdued export demand, and increased input costs. Despite

these headwinds, the Company remained steadfast in its commitment to producing high-quality teas.

Production from own leaf increased by 2.62 lakh kg compared to the previous year, largely due to prolonged dry spells, erratic rainfall, and pest-related challenges across key Assam gardens. The Company during the year discontinued production out of bought leaf temporarily due to quality issues. The combined production, therefore, witnessed a decline of 14.12 lakh kg over the previous fiscal.

Sales volumes mirrored the production trends. While the sale of tea from own leaf increased by 1.44 lakh kg, there was a decrease of 19.10 lakh kg in the sale of tea manufactured from bought leaf. Overall, the total sales volume declined by 15.67 lakh kg.

The pricing environment showed a mixed trend. The average sale price for tea produced from own leaf declined slightly to Rs. 410.66 per kg, over the prior year, reflecting the Companys continued focus on quality and brand positioning. The average price fetched by your Companys teas in the Auction was higher than the Auction average. In contrast, the average price for tea from bought leaf declined by Rs. 3.45 per kg, settling at Rs. 189.84 per kg due to subdued market.

Notably, Gatoonga, Mokrung, Moheema and Salkathoni Tea Estates continued their excellent performance in terms of auction realizations. Gatoonga ranked 1st, Mokrung ranked 3rd and Salkathoni 6th in all-India rankings for CTC auction prices, with Gatoonga achieving exceptional bids touching Rs. 645/kg in select invoices at Kolkata auctions.

However, the disparity in pricing due to market dynamics and reduced volumes of production in own leaf and bought leaf sales volume affected overall revenue growth. The profitability came under pressure due to a sharp increase in wage and increased borrowing due to shortage of Working Capital Financial and Repayment of Term Loan.

Going forward, your Company will continue its focus on quality enhancement, sustainable cultivation practices, and retail expansion, with an eye on

building resilience against climatic and market uncertainties.

BUSINESS OUTLOOK

Highlights of CY 2024

The calendar year 2024 was marked by considerable challenges and significant developments of the tea industry, with Assam continuing to play a pivotal role despite adverse conditions.

Assams total tea production in 2024 declined to 649.84 million kilograms, down from 688.33 million kilograms in 2023 - reflecting a reduction of approximately 38 million kilograms. This shortfall was primarily attributed to extreme weather events, including prolonged heat waves and heavy floods during the crucial harvesting months. In, key producing districts such as Jorhat and Golaghat, where majority of the gardens of your Company are situated. Adding to this was government-imposed ban on 20 pesticides, which while aimed at long-term sustainability, led to immediate disruptions in estate-level crop protection measures.

Food safety standards were stringently monitored to ensure adherence to permissible residue levels, reinforcing consumer confidence and regulatory discipline.

Indias total tea production fell by 7.8%, from 1394 million kilograms in 2023 to 1285 million kilograms in 2024. World crop at 2289 million kilograms was lower by 77 million kilograms. Despite the lower output, the industry witnessed a remarkable resurgence in exports. India exported 255 million kilograms of tea-its highest in over a decade. The total export value rose by 15%, reaching Rs. 7,111.43 crore.

On the pricing front, average auction prices increased by 18%, supported by tight supplies and stable demand. The North Indian CTC tea markets opened strongly, with premium Assam teas fetching higher than 2023 in the initial months.

From October onwards, a declining trend emerged and prices of premium and better medium Assam teas were down, compared to the previous year.

It is worth highlighting that Gatoonga Tea Estate continued to remain as the top-ranking CTC garden in all over India for the year 2024, consistently

delivering high-quality teas and achieving exceptional auction averages. Auction Average of top 20 Assam Tea Estate was Rs. 370/- per kg, while average price fetched by Gatoonga Tea Estate producing CTC was Rs. 427.41 per kg. The combined average for all the Gardens of your Company was Rs. 371.49 per kg. Performance of the Gardens during the year under review, set a new quality benchmark within the industry. Mokrong and Salkathoni ranked 3rd and 6th in the batting order in terms of area price realisation in the action.

The year 2024 was one of resilience, regulatory evolution, and renewed global competitiveness. While production challenges remain, the tea industrys robust export performance and continued quality benchmarks reflect the underlying strength of the sector. Moving forward, it is imperative that quality safeguards, blending integrity, and climatic risk mitigation remain local areas to ensure sustainable growth and market leadership.

Future Outlook:

The tea industry continues to navigate a complex and evolving landscape marked by both challenges and opportunities. Rising input costs, particularly due to escalating wages and the impact of climate change, have significantly affected cost structures across the industry. Incidences of crop loss due to pest attacks, fungal infestations, and erratic weather patterns have further strained profitability, especially in traditional tea-growing regions. Additionally, while domestic consumption remains stable, tea prices have not risen in proportion to input costs, putting pressure on margins for many producers.

Despite these headwinds, the long-term outlook for the tea industry remains cautiously optimistic. There is growing demand for quality, specialty, and wellness- oriented teas-such as green, organic, and herbal infusions-both in domestic and international markets. Export potential, particularly to markets like the UK, Europe, and the Middle East, is expected to improve with sustained focus on quality, certification, and branding. Increasing penetration of organized retail and e-commerce platforms is also opening new avenues for market expansion.

To remain competitive, tea producers are increasingly focusing on brand-building, mechanization, quality

enhancement, and cost optimization. Strategic collaborations with institutions like the Tea Research Association (TRA) and adoption of sustainable agricultural practices will be crucial in ensuring long-term viability. With continued emphasis on quality, product innovation, and market outreach, the tea industry is well-positioned to adapt to changing consumer preferences and global dynamics.

Issues such as the non-availability of bought leaf suppliers in Assam to provide pest-free leaves have led to a reduction in bought leaf intake, potentially affecting future profitability unless addressed promptly. Demand for quality CTC teas remain firm in North Indian Auctions, with premium estate teas expected to command higher prices compared to those made from bought leaves.

RISK AND CONCERNS

Climate Vulnerability

Climate change remains a critical risk to tea cultivation. Unpredictable weather patterns and rising temperatures can diminish crop yields and quality, impacting both availability and pricing of raw tea.

Market Volatility

The tea industry is susceptible to price volatility, influenced by fluctuating weather, labor challenges, and rising logistics costs. Such instability can lead to reduced margins and economic stress for producers and exporters.

Supply Chain Disruptions

Political uncertainties, international trade barriers, and logistic inefficiencies continue to pose risks to the global tea supply chain. These disruptions can result in stock shortages, shipment delays, and elevated costs.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

Your Company has established a robust and well- structured internal control system, meticulously tailored to its size, operational complexity, and industry requirements. These controls are designed to provide reasonable assurance regarding the reliability of financial reporting, safeguarding of assets, compliance with applicable laws and regulations, and the efficient conduct of operations. The internal

financial controls are implemented through clearly defined policies, documented procedures, and well- established practices that promote accountability and transparency across all levels of the organization. Key elements of the control framework include authorization and approval mechanisms, segregation of duties, periodic reconciliations, and adherence to statutory requirements.

The internal audit function, conducted by an independent firm of Chartered Accountants and operating under the direct oversight of the Audit Committee, evaluates the design and operational effectiveness of these controls while identifying areas for improvement. The Audit Committee regularly reviews audit findings and monitors the implementation of corrective actions to ensure continuous enhancement of the control environment. During the year under review, the Audit Committee assessed the internal financial controls framework in accordance with the Guidance Note issued by the Institute of Chartered Accountants of India (ICAI), and the statutory auditors, in their independent evaluation, expressed an unqualified opinion on the adequacy and operating effectiveness of the

Companys internal financial controls over financial reporting as of 31st March, 2025.

FINANCIAL PERFORMANCE

The details of financial performance of the Company are appearing in the Balance Sheet and statement of Profit & Loss for the financial year 2024-25.

HUMAN RESOURCE

Human Resources have remained a cornerstone of your Companys success, playing a vital role in fostering a supportive and resilient work environment, especially during a period marked by unexpected disruptions. The HR team had not only ensured seamless business continuity but had also prioritized the implementation of robust workplace safety measures.

Your Company is committed to continuously strengthening its talent pool by recruiting individuals with critical and future-ready skill sets to drive sustainable growth. The leadership firmly believes that its people are the most valuable asset and remains deeply invested in their health, safety, and overall well-being.