Ceeta Industries Ltd Management Discussions

GLOBAL ECONOMY

The global economic landscape in 2023 exhibited a growth rate of 3.2%, a trend anticipated to persist in 2024 and 2025. Despite this positive momentum, growth remains subdued compared to historical norms due to various factors. Immediate concerns such as high borrowing costs, reduced fiscal support, and geopolitical tensions have impacted consumer sentiments leading to this subdued growth outlook. Global headline inflation is projected to decrease from an average of 6.8% in 2023 to 5.9% in 2024 and further to 4.5% in 2025. Advanced economies are expected to recover more swiftly than emerging markets and developing economies. Looking ahead, the global growth forecast of 3.1% over the next five years indicates cautious optimism, albeit at a slower pace compared to previous decades. The global economic landscape reflects a complex interplay of factors, including slower growth rates, concerns about sustainability, and rising economic disparities. Structural frictions hindering efficient capital and labour allocation contribute to a relatively tepid medium-term growth outlook. (Source: IMF-World Economic Outlook - April 2024)

INDIAN ECONOMY

The Indian economy is expected to achieve a growth rate of over 7% for FY24, with some forecasts suggesting another year of 7% real growth in FY25. Should the prognosis for FY25 materialise, it would mark the fourth consecutive year post-pandemic that the Indian economy has achieved growth at or exceeding 7%. The global economy continues to grapple with challenges such as supply chain disruptions, which has resurfaced in 2024. Should these disruptions persist, they are likely to affect trade flows, transportation costs, economic output, and inflation on a global scale. While India will not be immune to these challenges, having already navigated the challenges posed by COVID-19 and the shocks in energy and commodity prices in 2022, there exists a quiet confidence in Indias ability to weather the emerging disturbances.

(Source: The Indian Economy: A Review by Department of Economic Affairs - Feb 2024)

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Fast-Moving Consumer Goods (FMCG) industry is the fourth-largest sector and a significant contributor to the Indian economy. The growth in the FMCG industry is principally driven by rise in income, Change in consumer way of life, a transition to an organised market, increasing rural consumption and urban consumption, increase in e-commerce and digitalization, improved distribution of the FMCG portfolio and a rise in consumer awareness. Moreover, sustainable products influence the purchasing behaviour of consumers and impact of social media influencers is also a factor. While the urban sector contributes the largest share, the semi-urban and rural sectors experienced substantial growth over the past decade.

Indian Snacks Industry

The India snacks market size reached INR 42,694.9 Crore in 2023. The market is expected to reach INR 95,521.8 Crore by 2032, exhibiting a growth rate (CAGR) of 9.08% during 2024-2032. Increasing urbanization along with rising disposable incomes and changing lifestyles are driving the growth of India snacks market. In line with this, the growing young population and the influence of western eating habits are boosting the demand for convenient ready to eat snack options across various demographics is driving India snacks market growth. (Source: IMARC Group).

In India, snacking remains crucial to food consumption. The category is impulsive and highly competitive, with established national as well as regional players. Further, constant innovation in formats, recipes , flavors, textures and price points drives the growth in this category. The Indian snack market in FY 2023-2024 exhibited resilience and adaptability, responding to changing consumer preferences while embracing both tradition and innovation. As the market continues to evolve, stakeholders are poised to capitalize on opportunities by catering to diverse tastes ensuring sustained growth in the years ahead.

FUTURE OUTLOOK

The foreseeable future of the Indian snack industry looks promising with strong growth forecasts and an expectation of leading the next phase of growth. Your Companys growth will fundamentally depend on increase in sales volume, innovation in flavours of products, effective cost optimization and increasing its reach of product to more and more consumers by marketing. Your Company will remain committed to sustainable growth strategies that balance profitability with social and environmental impact. By continuing to innovate, streamline operations, and respond adeptly to market dynamics, we are poised to achieve sustained growth in both profit and turnover, creating lasting value for our stakeholders and driving our company towards new heights of success.

OPPORTUNITIES AND THREATS

Competition is intense in the snacks market, both at national and regional levels, with market leaders investing continuously in awareness campaigns, trade discounts and consumer promotions to maintain their market share. Further, online premium snacking is driven by innovation and awareness building which is largely dominated by new-age brands and start-ups. Your Company remains committed to drive growth by leveraging distribution in mass segments and innovating its product portfolio by adding varieties of flavours. Furthermore, the Company also address threats such as uncertain global economic conditions; changes in fiscal, economic or political conditions and the currency risks; changing technologies and regulatory changes in the industry the company operates in.

RISKS AND CONCERNS

Risks and concerns are inherent to any business environment and may have a substantial impact on the Companys performance and future prospects. Risk management is an integral part of the Companys long-term business strategy. The Company has implemented a comprehensive risk management system to identify and manage the risks associated with its business activities. The risk management policy is designed to aid in decision making processes that will help the Company achieve its objectives by minimizing possible losses and maximizing prospects. It is designed to anticipate, evaluate and mitigate risks that could materially impact the business objectives. It identifies and assesses the major key risk areas in the field of market, liquidity (finance), pricing, credit, competition, etc. All inherent risks are measured, monitored and regulated. The Company has adequate mitigation plans based on the probability of their occurrence, potential impact and volatility and the management oversees the same on a regular basis. In accordance with Regulation 15(2) of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, the compliance of Regulations 21 of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 for constitution of risk management committee is not applicable on the company as the paid up equity share capital is not exceeding rupees ten crores and net worth is not exceeding rupees twenty-five crore, as on March 31, 2024 .

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The internal control system defines a set of rules, procedures and organisational structures that identify, measure, manage and monitor the main risks, allowing sound and fair operation of the Company in line with pre-established objectives and all the short-term and long term operational goals of the Company. As such this process is aimed at pursuing the values of both procedural and substantial fairness, transparency and accountability, which are key factors for managing the business. Adequate internal financial controls are in place to manage the business affairs of the Company. Proper procedures are adopted ensuring the orderly and efficient conduct of business, including safeguarding of its assets, prevention and detection of errors and frauds, accuracy and completeness of the accounting records and timely preparation of reliable financial information and the same is reviewed at regular intervals depending upon situation of business of Company and in particular the Internal Auditors ensure that the company as in all material aspects, laid down Internal Financial Controls including operational controls and that such controls are adequate and operating efficiently.

Quarterly internal audits and management evaluations are conducted in areas including procurement, production, information technology, supply chain, sales, marketing and finance. The management team routinely reviews internal auditor reports before putting corrective and remedial measures in place to strengthen controls and improve the effectiveness of current systems. The Audit Committee receives executive summaries of the internal audit reports and action plans for its review and update.

HUMAN RESOURCES DEVELOPMENT/INDUSTRIAL REALTIONS

Employees are the most valuable and indispensable asset for a Company. A Companys success depends on the ability to attract, develop and retain the best talent at every level. The Companys overarching goal is to attract and retain competent employees while also providing a fulfilling workplace that is safe, welcoming, and supportive of career progress. The Company focused to improve current HR systems and procedures, as well as to create new tools to improve the employee experience. Your company has a sufficient pool of talents in various operational fields. The Human Resource environment has been very smooth throughout the year under review. The total number of employees on the rolls of the Company at various locations as on 31st March, 2024 was 59 as compared to 61 of previous year as on 31st March, 2023.

Industrial relations during the year FY 2023-24 remained cordial.

QUALITY AND SAFETY

Quality and safety are paramount in the food industry, ensuring that consumers receive products that meet rigorous standards of hygiene, nutritional content, and overall safety. In FY 2023-2024, the focus on quality and safety in the food industry was underscored by stringent regulatory frameworks, technological advancements, and proactive industry practices. The Company continued to maintain high standards of quality and safety in its product for safeguarding public health, building consumer trust and regulatory compliance. It prioritizes sustainability and ethical practices. This includes responsibly sourcing ingredients, reducing environmental impact, and promoting fair trade practices throughout the supply chain. As the industry evolves, continuous improvements in technology, regulations, and consumer education will remain essential to ensure that food products are safe, nutritious, and of the highest quality for consumers.

SUSTAINABILITY

The Company prioritizes sustainability by adopting socially responsible practices and implementing ecologically sound processes to protect the environment and conserve energy and natural resources. Committed to creating sustainable practices, they aim to improve the environment by minimising wastage and use of eco-friendly equipment as much as possible.

RELATED PARTY DISCLOSURE

Related party transactions have been disclosed in the notes forming part of the financial statements

(Refer Note no.40)

FINANCIAL PERFORMANCE

Summary of financial performance for the year is given herein below: ( in Thousands)

Particulars	2023-24	2022-23
Total Income	131428.09	54304.03
Profit before Interest & Depreciation	(3758.31)	(1383.68)
Interest	13888.93	433.50
Depreciation	9800.18	4882.93
Profit before taxation	(27447.42)	(10602.11)
Provision for Tax (Including Deferred tax &
IT of Earlier Years)	(11460.74)	2215.17
Profit after tax	(15986.68)	(12817.28)
Other Comprehensive Income
(I) Items that will reclassified to
Profit and Loss (Net of Tax)	274.49	504.69
Total Comprehensive Income for the period	(15712.19)	(12312.59)

During the Financial year 2023-2024, the revenue from operations stood at 1174.22 lakh as compared to 401.83 lakh of previous financial year. The Company generated 529.99 lakh from sales of Skitos snacks which is Companys own brand manufacturing as compared to 136.06 lakh of previous financial year. The job work manufacturing of snacks increased to 620.36 lakh as compared to 254.90 lakh of previous financial year. However , due to higher cost of raw materials, production and administrative expenses, the Company reported a loss of 159.87 lakh as compared to 128.17 lakh of previous financial year . The quarterly results of every quarter for financial year under review is available at the website of the Company at https://ceeta.com/quarterly-report .

SEGMENT WISE PERFORMANCE

The Company has two reportable segments such as Packaged Food Products and Other

Operations.

Summary of operating segments for the year is given herein below: ( in Thousands)

Particulars	Packaged Food Products	Other Operations	Total
Segmental Revenue	118707.33	12720.76	131428.09
TOTAL REVENUE	118707.33	12720.76	131428.09
Segment Result (before interest and tax)	(16753.44)	(151.66)	(16905.10)
Unallocated Corporate Expenses
(net of un-allocable income)		-	8744.74
Operating Profit/(Loss)		-	(25649.84)
Interest Income		-	12091.37
Less: Interest Expenses		-	13888.93
Net Profit / (Loss) before Tax		-	(27447.40)
OTHER INFORMATION
CAPITAL EMPLOYED
Segment Assets	222439.00	1009.00	223448.40
Segment Liabilities	144788.00	79.00	144867.00
Unallocated Assets		-	167737.00
Unallocated Liabilities			938.00
Net Capital Employed		-	245380.40
Capital Expenditure	4129.80	256.38	4386.18
Depreciation	9054.59	745.59	9800.18

The segment reporting of every quarter for financial year under review is available at the website of the Company at https://ceeta.com/quarterly-report.

KEY FINANCIAL RATIOS

As stipulated in the Regulation 34(3) of SEBI (LODR) Regulations, 2015, the Company reports key financial ratios as follows: a) Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios or sector specific ratios, along with detailed explanations therefor:

Sl. Key Financial Ratios	2023-2024	2022-2023	Variance (in %)
(i) Trade Receivable Turnover Ratio (in times)	52.17	20.38	155.98
(ii) Trade Payable Turnover Ratio (in times)	6.16	3.45	78.50
(iii) Inventory Turnover Ratio (in times)	4.85	2.02	140.02
(iv) Current Ratio (in times)	0.96	1.75	(44.94)
(v) Debt Equity Ratio (in times)	0.55	0.44	23.00
(vi) Debt Service Coverage Ratio (in times)	4.44	(0.27)	(1,744.22)
(vii) Net Capital Turnover Ratio (in times)	5.97	0.62	863.45
(viii) Operating Profit Margin (%)	(10.32)	(11.54)	(10.60)
(ix) Net Profit Margin (%)	(13.61)	(31.90)	(57.32)
(x) Return on Capital employed (in %)	(4.86)	(1.90)	156.07
(xi) Return on Investment (in %)	0.49	0.39	24.85

Notes on significant changes in financial ratios where change is > 25%:

Trade Receivable Turnover Ratio: Increased due to increase in revenue from operation and decrease in trade receivable in current year.

Trade Payable Turnover Ratio: Increased because increase in purchase during the current period and decrease in trade payable in current year.

Inventory Turnover Ratio: Increased during the current financial year mainly due to increase in turnover of the company.

Current Ratio: Decreased during the current year mainly due to increase in current borrowings.

Debt Service Coverage Ratio: Decreased during the current financial year as the company borrowed additional fund during the year and loss has also increased.

Net Capital Turnover Ratio: Increased mainly due to increase in revenue from operation by approx 3 times from previous year and decrease in working capital.

Net profit Margin (%): Decreased during the current financial year mainly due to provision for deferred tax assets.

Return on Capital Employed: Increased during the current year due to increase in loss even after increase in turnover during the year. b) Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof

Key Financial Ratios	2023-2024	2022-2023	Variance (in %)	Explanations
Return on Net Worth (%)	(6.52)	(4.91)	32.72	Increased during the current year due to increase in loss even after increase in turnover during the year.

CAUTIONARY STATEMENT

Statements detailing the Companys objectives, projections, estimates, expectations or predictions are "forward-looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Significant factors that could make a difference to the Companys operations include demand-supply conditions, finished goods prices, stock availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, political or economic developments and other internal factors. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.