Chandrima Mercantiles Ltd Management Discussions

<dhhead-MANAGEMENT DISCUSSION AND ANALYSIS REPORT</dhhead-

A. Overview of the Indian Economy:

The Indian economy continued to demonstrate strong resilience and sustained growth momentum during Financial Year 2025-26 despite a challenging global environment marked by geopolitical tensions, trade disruptions, volatility in commodity prices and uncertainty in international markets.

As per the Economic Survey 2025-26, the Indian economy maintained strong growth momentum during FY 2025-26, with real GDP growth estimated at 7.4%, supported primarily by domestic demand. Private consumption and capital formation remained important drivers of economic activity, while the services sector continued to make a significant contribution to overall growth. Manufacturing activity also strengthened and agriculture provided stability to the economy.

Domestic economic conditions remained broadly supportive, with improving consumer demand, infrastructure investment and continued policy support. The monetary policy environment also remained relatively accommodative. The Reserve Bank of Indias policy repo rate stood at 5.25% as of July 2026, providing a supportive environment for credit and investment while maintaining focus on price and financial stability.

Inflation conditions remained substantially better than in the earlier period of elevated food and commodity price pressures. The moderation in inflation, together with improving domestic demand, has provided a favourable macroeconomic backdrop for businesses. Nevertheless, food prices, commodity prices, global trade developments and geopolitical conditions remain important factors requiring continued monitoring.

Overall, Indias medium-term economic outlook remains positive, supported by strong domestic consumption, public and private investment, infrastructure development, digitalisation, manufacturing growth and continued policy initiatives. The resilience of domestic demand and the increasing formalisation of the economy are expected to provide opportunities for sustained economic expansion.

B. Global Economic Outlook:

The global economy remained resilient during FY 2025-26, although the international economic environment continued to be influenced by geopolitical tensions, trade policy changes, elevated uncertainty and divergent growth trends across major economies.

According to the International Monetary Funds July 2026 World Economic Outlook Update, global growth is projected at approximately 3.0% in 2026 and 3.4% in 2027. The global economy has demonstrated resilience despite the energy shock and geopolitical developments, supported by technology-driven investment, private-sector adaptability and relatively supportive financial conditions. However, risks remain from geopolitical tensions, higher energy prices, trade disruptions and renewed inflationary pressures.

Advanced economies continue to face structural challenges, including subdued productivity growth, demographic pressures, elevated public debt and the lingering effects of monetary tightening. Emerging market and developing economies are expected to remain important contributors to global growth, although their performance may vary depending upon commodity prices, capital flows, trade conditions and domestic policy environments.

For India, the relatively strong domestic demand base, diversified economic structure and increasing integration with global value chains provide a degree of resilience against external shocks. Nevertheless, developments in global trade, international commodity prices, exchange rates and geopolitical conditions may have an impact on the operating environment.

C. Industry structure and development:

Agriculture continues to remain a critical sector of the Indian economy, providing livelihood support to a significant proportion of the population and playing an important role in food security, rural incomes and overall economic stability.

During FY 2025-26, the agriculture sector remained an important source of resilience for the Indian economy. The Government continued to focus on improving agricultural productivity, strengthening supply chains, enhancing irrigation and promoting technology-led and sustainable farming practices. The increasing adoption of improved agricultural inputs, mechanisation, digital agriculture and precision farming is creating opportunities for higher productivity and better farm-level outcomes.

The Indian food processing industry also continues to offer substantial growth potential. According to the Economic Survey 2025-26, Indias agri-food exports, including processed foods, amounted to approximately USD 49.43 billion in FY 2024-25, while the share of processed food exports has increased over the years. Food processing therefore remains an important avenue for value addition, employment generation and strengthening Indias position in global agricultural trade.

The seed industry forms an important part of the agricultural input ecosystem. Rising awareness among farmers, demand for improved productivity, changing climatic conditions and the need for crop varieties with better yield, quality and resistance characteristics are expected to support long-term demand for quality seeds and other agricultural inputs.

The sector is also witnessing increasing participation from agri-tech enterprises, digital platforms and technology-enabled service providers. These developments are contributing to improved access to information, modern farming practices and efficient agricultural supply chains.

D. Opportunities and Threats:

Opportunities:

- Rising population, increasing food consumption and changing dietary preferences are expected to sustain long-term demand for agricultural products and quality agricultural inputs.

- Growing awareness among farmers regarding productivity, crop quality and climate resilience is expected to increase demand for improved varieties of seeds and other agricultural inputs.

- Changing climatic conditions and evolving requirements of the food processing and modern retail sectors are creating opportunities for the development and adoption of improved crop varieties having better yield, quality, shelf life and adaptability.

- Government initiatives relating to agricultural productivity, irrigation, rural infrastructure, food processing, farmer income and technology adoption may create a favourable environment for the agricultural and allied sectors.

- Increasing adoption of precision farming, farm mechanisation, digital agriculture and agri-tech solutions is improving awareness regarding the importance of quality seeds, bio-fertilisers, crop protection products and other farm inputs.

- Growth in food processing, organised retail and agricultural exports provides opportunities for higher value addition and increased demand for quality agricultural produce.

- Continued infrastructure development, rural connectivity and logistics improvement are expected to support the agricultural supply chain and market accessibility.

Threats:

- Agriculture remains significantly dependent on weather conditions, including rainfall, temperature and the timing and distribution of monsoon. Adverse climatic conditions may affect crop yields and consequently the demand for agricultural inputs.

- Climate change, water availability, soil degradation and extreme weather events may adversely affect crop patterns and agricultural productivity.

- The agricultural input industry is competitive, with the presence of several domestic and international players. Increased competition may place pressure on pricing, margins and market share.

- Changes in government policies, regulations, subsidies, import/ export policies, taxation and other statutory requirements may affect the agricultural industry.

- Volatility in raw material prices, logistics costs and other input costs may affect operating margins.

- Changes in cropping patterns, farmer purchasing power and rural economic conditions may influence demand for agricultural products.

E. Segment-wise or Product-wise performance:

The Company is primarily engaged in the business of Agriculture Products and accordingly operates predominantly in a single business segment.

During the Financial Year 2025-26, the Company recorded a turnover of Rs. 7,753.63 Lakhs as compared with Rs. 2,919.30 Lakhs during the Financial Year 2024-25.

The performance of the Company during the year was influenced by prevailing market conditions, demand for agricultural products, crop conditions, input costs, competitive pressures and other economic factors.

The detailed financial performance of the Company is provided in the Financial Statements and the Directors Report forming part of the Annual Report.

F. Future Outlook:

The Company remains cautiously optimistic about the outlook for the agricultural sector and its business operations.

The continued focus on agricultural productivity, food security, rural infrastructure, modern farming techniques and food processing is expected to support the long-term demand for agricultural products and inputs. Increasing farmer awareness and the adoption of technology-enabled agricultural practices are also expected to provide opportunities for the Company.

G. Internal control systems and their adequacy:

The Company has established internal control systems commensurate with the nature, size and complexity of its operations.

The internal control framework is designed to provide reasonable assurance regarding the achievement of operational efficiencies, safeguarding of assets, reliability of financial reporting and compliance with applicable laws, regulations and internal policies.

The Companys internal control systems are reviewed periodically by the management and are subject to review by the Statutory Auditors and Internal Auditors, wherever applicable. The Audit Committee of the Board reviews the adequacy and effectiveness of internal controls and considers the observations and recommendations arising from internal and statutory audit processes.

The Company believes that adequate checks and balances are in place to identify deviations, mitigate operational and financial risks and initiate corrective measures wherever required.

H. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2025-26 is described in the Directors Report of the Company.

I. Material developments in Human Resources / Industrial Relations front including number of people employed:

The cordial employer - employee relationship also continued during the year under the review. The Company has continued to give special attention to human resources.

J. Material Financial and Commercial Transactions:

During the year there were no material financial or commercial transactions.

K. Key Financial Ratios:

In accordance with the SEBI (Listing Obligations and Disclosures Requirements) Regulations 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in Key sector-specific financial ratios. In this regard, the Company has no significant changes in any key sector-specific financial ratios to report.

L. Human Resources:

These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company operations include global and domestic demand supply conditions, Government regulations, tax regimes, economic developments and other factors such as litigation and business relations.

M. Caution Statement:

Statements made in the Management Discussion and Analysis describing the various parts may be "forward looking statement" within the meaning of applicable securities laws and regulations. The actual results may differ from those expectations depending upon the economic conditions, changes in Government. Regulations and amendments in tax laws and other internal and external factors.