BKV Industries Ltd Management Discussions

A. INDUSTRY, STRUCTURE, DEVELOPMENT AND OUTLOOK

Indias seafood industry is one of the largest contributors to agricultural export earnings, with shrimp forming the backbone of the sector. The industry structure is a combination of capture fisheries, aquaculture farming, hatcheries, feed manufacturers, processing plants, exporters, and cold chain logistics providers. Shrimp aquaculture, particularly Litopenaeus vannamei, has become the dominant production segment due to its high productivity, global acceptance, and strong export demand. Black Tiger shrimp continues to occupy a premium niche, especially in Japan, Korea, and certain EU markets.

Exporters rely heavily on the US, China, EU, Japan, and ASEAN markets, with China emerging as the largest volume market and the US remaining the highest-value market. The industry has increasingly shifted towards value-added products, including ready-to- cook and ready-to-eat shrimp, marinated items, and retail packs designed for supermarkets.

FY 2025-26 marked a historic milestone for the industry. India exported 19,72,018 metric tonnes of seafood valued at USD 8.46 billion, the highest export value ever recorded. Frozen shrimp alone contributed 7,92,647 metric tonnes valued at USD 5.62 billion, accounting for 66.52 percent of total marine export earnings. This performance was supported by strong demand in China, stable demand in the EU, and continued dominance in the US market despite price corrections.

Industry developments during the year included increased adoption of farm-level technology such as automated feeders, IoT- based water quality sensors, and Al-driven farm monitoring systems. Hatchery capacity expanded, and several states strengthened biosecurity protocols to reduce disease incidence.

The outlook for FY 2026-27 is one of stabilization and strategic consolidation. Production is expected to grow by 5 to 7 percent, supported by improved farm practices and technology adoption. Export value is projected to stabilize between USD 8.5 and 9 billion. China, the Middle East, and Korea are expected to drive volume growth, while the US market is likely to recover gradually as retail inventories normalize. Value-added shrimp products will continue to expand, and sustainability compliance will become a critical differentiator in premium markets. The domestic market is expected to grow steadily, driven by rising incomes, organized retail expansion, and increased consumer preference for seafood as a healthy protein source.

B. OPPORTUNITIES AND THREATS

The seafood and shrimp industry presents several opportunities for growth. The first major opportunity lies in value-added processing. As global consumers increasingly prefer convenience foods, Indian exporters can significantly enhance per-kg realization by shifting from raw frozen shrimp to processed, marinated, breaded, and ready-to-eat formats. The second opportunity is market diversification. With the US market experiencing periodic price corrections, China, the Middle East, Korea, and ASEAN countries offer strong alternative demand channels. The third opportunity is Farms and processors that adopt ASC, BAP, and traceability systems will gain access to premium buyers in the EU and US, improving margins and long-term competitiveness.

Technology adoption represents another major opportunity. AI-based farm monitoring, IoT-enabled water quality systems, and automated feeding can reduce disease incidence, improve yields, and stabilize farm-gate prices. Domestic consumption also presents a significant opportunity, with seafood demand growing at 10 to 12 percent annually due to rising urban incomes and increased availability of packaged seafood products.

However, the industry also faces several threats. Disease outbreaks remain the most significant threats. Global price volatility, driven by oversupply from Ecuador and fluctuating demand in the US, poses a threat to farm-gate prices and export margins. Regulatory tightening in the US and EU, particularly related to antibiotic residues and sustainability norms, increases compliance costs and operational complexity.

Competition from Ecuador and Vietnam is another major threat. Ecuadors low-cost shrimp production and Vietnams strong value- added product portfolio challenge Indias market share. Logistics disruptions and freight rate volatility, often caused by geopolitical tensions, also threaten export stability.

C. RISKS AND CONCERNS:

The seafood and shrimp industry faces several structural and operational risks that require careful management. Disease risk remains the most critical concern. Shrimp farming is highly vulnerable to viral and bacterial infections, and outbreaks can lead to significant crop losses, reduced productivity, and financial stress for farmers. Biosecurity lapses, poor seed quality, and inadequate farm management practices exacerbate this risk.

Regulatory risk is another major concern. The US and EU continue to tighten norms related to antibiotic residues, sustainability, and traceability. Non-compliance can lead to shipment rejections, financial losses, and reputational damage. Exporters must invest in certifications, testing infrastructure, and compliance systems to mitigate this risk.

Market risk is also significant. Oversupply from competing countries such as Ecuador can depress global shrimp prices, affecting Indias export margins. Price corrections in the US market, which accounts for a large share of Indias shrimp exports, can reduce demand and impact profitability. Currency fluctuations, particularly movements in the USD-INR exchange rate, add further uncertainty to export earnings.

Operational risks include logistics disruptions, freight rate volatility, and cold chain gaps in rural aquaculture zones. These issues can affect product quality, increase costs, and disrupt export schedules.

Finally, structural concerns such as dependence on a few major markets, limited domestic value-addition capacity, and uneven adoption of technology across farming clusters continue to affect the industrys resilience. Addressing these concerns will require coordinated efforts across government agencies, industry bodies, exporters, and farmers.

Pursuant to SEBI Listing Regulations, the Company had since constituted a Risk Management Committee. The details of the Committee, its terms of reference are given in the corporate governance report. The methodology for risk management primarily involves mapping of risks with strategy, assessing the risks on its importance, identifying de- risking measures, and assigning it to risk owners and continuously monitoring the status of the risks. The risks were categorized into strategy and planning, operations and compliance and the risks associated with each risk category was further classified and identified as critical, major and moderate. The company does not foresee any critical / major risk in the next 12 months as it had given its farm on long term lease by another seven years from July 2020. The lessee had been meeting their commitments as per the lease agreement. The maintenance and compliance expenses of the company are taken care through the lease income; hence, the company does not foresee any major risk for its operations in the short and medium term, except in the event of costs for additional regulatory measures.

The management periodically reviews the risk management framework to identify the major business risks as applicable to the Company and works out their mitigation strategy.

D. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Given the operations, the Company has well-established processes and defined the roles and responsibilities for people at various levels. The control mechanism also involves well documented policies, authorization guidelines commensurate with the level of responsibility specific to the respective businesses. Adherence to these processes is ensured through frequent internal audits. The internal audits conducted are reviewed by the Audit Committee and requisite guidelines and procedures augment the internal con- trolls. The internal control system is designed to ensure that financial and other records are reliable for preparing financial statements and other information which ensures that all transactions are properly reported and classified in the financial records. The Company had given its farm on seven years long term lease and did not carry any other business operations during the financial year 2025-26.

E. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The financial statements are prepared in compliance with the requirements of the Companies Act, 2013 and Generally Accepted Accounting Principles in India including Ind AS. The management accepts the responsibility of integrity and objectivity of the financial statements and the basis for various estimates and the judgments used in preparing the financial statements.

The company extended the lease agreement of its Farm for a period of 84 months with effect from July, 2020, as the promoters have decided to meet with lease income, the fixed expenses and statutory compliance costs. Lessee is paying the lease amount in advance every year and hence the company could meet its fixed and compliance costs.

Despite with various financial measures, the company ended up with a net loss from operations Rs.21.18 Lakhs after providing the depreciation for Rs.0.47 Lakhs, including loss on re-measurement of employee benefits of Rs.12.65 lakhs during the year ended 31st March 2026.

Material Developments in human resources / industrial relations, including number of people employed:

The company gave its farm on long term lease and except the lease income, the company has not been carrying any other commercial operations. It had employed only five employees during the year, which includes the Managing Director. During the year ended 31st March 2026, the relations with Lessee and Employees are cordial.

A. DEVELOPMENTS IN HUMAN RESOURCES:

In a challenging and competitive environment, the Company believes that people are the key to success and continues to focus on people capabilities. During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

B. FORWARD LOOKING STATEMENT:

The management discussion and analysis report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied in the statement. As the company had given its farm assets on long term lease and that being the only source of income for the company only the changes in the government regulations, compliance framework, tax laws and other factors, may affect the future earnings of the company.

C. DISCLOSURE OF ACCOUNTING TREATMENT:

Financial Statements during the year have been prepared, based on the prescriptions in accounting standards issued by the Government from time to time.