Chatha Foods Ltd Management Discussions

GLOBAL OUTLOOK: STABILITY AMID STRUCTU RAL SHIFTS

The global economy in 2025 is charting a cautious yet resilient course, with GDP growth projected at 3.3%, broadly steady compared to the previous year. However, this headline stability masks divergent regional performances.The United States continues its upward momentum, buoyed by tech-driven investment and robust consumer demand, while the Eurozone edges toward recovery following energy price moderation and fiscal recalibration. Meanwhile, China presents a mixed picture — strong in manufacturing and exports but uneven in retail and housing.

Trade policy disruptions and monetary divergence remain central themes. The escalation of tariffs, notably by the US, is forcing a rethink of global supply chains and export dynamics. Inflation, while easing globally to an estimated 4.2%, is stubbornly elevated in food and housing across developing economies. Geopolitical tensions — from Middle East conflicts to strategic competition among major powers — are adding layers of uncertainty to investor sentiment.

Across sectors, Al adoption has emerged as a pivotal investment priority, reshaping strategic planning in technology, financial services, and logistics. Energy markets continue to display firm demand, with OPEC forecasting stable throughput driven by summer travel and industrial momentum.

INDIA: A BEACON OF ECONOMIC RESILIENCE

India continues to stand out as a global growth leader, with FY2025-26 GDP growth revised to 6.3%, underpinned by strong household balance sheets, robust public capital investment, and favorable macroeconomic conditions. Private consumption has gained momentum, buoyed by rising real incomes, tax relief, and steady food inflation.

The fiscal consolidation path appears credible, with the deficit targeted to narrow from 4.8% to 4.4% of GDR On the monetary front, the Reserve Bank of India has initiated rate cuts totaling 50 basis points, signaling confidence in inflation containment and broader economic stability.

Key sectors such as manufacturing and exports have shown notable strength. Defence exports, in particular, have tripled, signaling a maturing industrial base and growing international trust.The labour market is gradually formalizing, with improving participation rates — especially among women — and ongoing reforms in social security and employment codes.

INDUSTRY OVERVIEW — FROZEN READY-TO-EAT (RTE) FOOD SEGMENT

The frozen RTE food segment has emerged as a dynamic component of Indias processed foods industry, reflecting broader consumer and infrastructure shifts. The sectors trajectory is underpinned by evolving lifestyles, growing urbanization, and increasing preference for convenience without compromising nutritional standards.

• GLOBAL PERSPECTIVE

Globally, the frozen RTE market is projected to reach USD 130 billion by 2030, advancing at a CAGR of 6.8%-7.2%. Growth is driven by cold chain modernization, dietary evolution, and innovation in plant-based and dean-label alternatives. Europe retains the largest market share, while the Asia-Pacific region continues to deliverthe fastest growth.

• INDIAN CONTEXT

In India, the RTE segment is expanding rapidly, with market size estimated at USD 1. 10 billion in FY2024,expected to reach USD 3.41 billion by FY2032,growing at a CAGR of 16.4%. Key drivers include expanding e-commerce ecosystems, increasing female workforce participation, and proliferation of smart storage logistics. Tier II and III cities are witnessing rapid adoption, enhancing national penetration beyond urban enclaves.

SWOT Analysis - Frozen Ready-to-Eat (RTE) Food Segment

Strengths	Weaknesses
\u2022 Strong domestic and export demand, aligned with evolving lifestyle trends \u2022 Product innovation in millet-based, regional,and clean-label offerings \u2022 Growing acceptance across demographics, working professionals, millennials,families	\u2022 High dependency on cold chain logistics, with regional infrastructure gaps \u2022 Limited consumer awareness beyond Tier-1 cities m SKU shelf-life challenges vs.fresh food perceptions
Opportunities	Threats
\u2022 Expansion into air-fryer and health- oriented RTE formats \u2022 Tier 2 &Tier 3 market penetration via e-commerce and D2C channels \u2022 Strategic export partnerships in diaspora-heavy markets (US, UAE, UK) \u2022 Brand positioning around sustainability and traceability	m Volatility in input costs (cold chain fuel, packaging materials) \u2022 Stringent FSSAI norms and potential regulatory disruption \u2022 Competition from global and domestic players with deeper distribution networks \u2022 Growing consumer scrutiny of additives and labelling claims

SWOT ANALYSIS

The Frozen Ready-to-Eat (RTE) segment continues to demonstrate high-growth potential, underpinned by evolving consumer preferences, innovation in regional and nutrition-rich offerings, and strong export momentum. While operational dependence on cold chain infrastructure and input cost volatility remain key challenges, strategic penetration into Tier 2/3 markets, digital-first distribution models, and policy-backed incentives — particularly for millet-based formats — offer compelling upside. Management remains focused on balancing product innovation with compliance excellence and positioning the segment as a driver of sustainable, non-linear growth.

STRATEGIC OUTLOOK

CFL stands at an inflection point in its growth journey, anchored by its commitment to delivering globally inspired, hygienically prepared food products to the domestic and international markets. Building on its BRC, FSSC 22000, HACCP, and ISO- certified operations, the company is strategically expanding its capacity through the commissioning of a dedicated 16,000 MT vegetarian facility.The recent joint venture with FrigorificoAllana

marks a significant milestone in CFL s diversification into meat- based RTE/RTC formats, enhancing its capabilities in product innovation and export readiness. As consumer demand continues to favor convenience-led, culturally relevant offerings, CFL s integrated B2B model — serving leading QSRs.CDRs, cafes, and institutional partners — positions the company for scalable, stakeholder-driven growth across domestic and global foodservice ecosystems.

During the year, the Company advanced multiple product-led initiatives aligned with its strategic objectives. It deepened its innovation focus for Quick Service Restaurant (QSR) partners, developing scalable solutions tailored to evolving industry formats. Notably, it introduced bake-friendly fried products that enabled operational flexibility while enhancing consumer experience.The dean-label portfolio was further strengthened to meet growing market demand for ingredient transparency and responsible formulation. Complementing these efforts, pan-India rollouts were successfully commercialized, affirming the Company s execution capabilities and reinforcing its commitment to nationwide reach.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established robust internal control systems commensurate with the size and nature of its operations.These systems are designed to ensure the orderly and efficient conduct of business, safeguard assets, prevent and detect frauds and errors, maintain the accuracy and completeness of accounting records, and facilitate the timely preparation of reliable financial information. Periodic reviews, both internal and external, affirm the adequacy and effectiveness of these controls. The Audit Committee and the Board are regularly apprised of key findings, ensuring continuous oversight and timely corrective actions where necessary.

OPERATIONAL DRIVERS OF FINANCIAL PERFORMANCE

• Capacity, Production & Utilization Trends (FY24 vs FY25):

During FY25, Chatha Foods maintained its installed production capacity at 7,841.1 metric tonnes (MT) per annum, unchanged from FY24. This comprised 5,562.5 MT of non-vegetarian capacity and 2,278.6 MT for plant-based and vegetarian products. Production volumes increased from 4,139.1 MT in FY24 to 4,680.8 MT in FY25, driven primarily by increase in wallet share from the existing customers and introduction of new products in non-vegetarian segment.

Non-vegetarian output rose by 21 % year-on-year to 4,444 MT, primarily driven by increased wallet share from existing customers and new product launches, highlighting strong engagement with QSR partners and efficient supply chain utilization.

Conversely,vegetarian production volumes declined to 236.8 MT from 477.9 MT in FY24, reflecting our current strategic pause on this segment pending the commissioning of our dedicated vegetarian unit, post which new client onboarding will commence.

Overall capacity utilization improved from 52.8% to 59.7%, with non-vegetarian lines achieving a notable rise from 65.8% to 79.9%.

Management Commentary: FY25 marked a strong step-up in production performance, with total output rising !3%YoY to

4,680.8 MT. Non-vegetarian volumes led growth, expanding 21 % on the back of increased wallet share and successful new product introductions across QSR channels — boosting line utilization to 79.9%.Vegetarian output declined due to a strategic pause ahead of capacity expansion; client onboarding to resume post commissioning of the dedicated unit in FY26. The plant-based category remained muted due to negligible market demand, and resource deployment was minimal. Overall utilization improved to 59.7%, reflecting operational efficiency gains and stronger product-market alignment.

• Revenue Mix- Product,Customer,and Region

Total revenue from operations grew 17% year-on-year to ? 15,716.6 lakhs in FY25, driven primarily by strong performance in non-vegetarian categories. Non-vegetarian products contributed ? 15,138.9 lakhs (96.3%), up 26% over FY24, supported by volume growth and higher realization rates (? 341 /kg vs ?329/kg in FY24).

Revenue from vegetarian products declined to ?438.6 lakhs, down from ?977.3 lakhs in FY24, reflecting planned scale-down ahead of unit expansion. Plant-based revenue also dropped to ^ 139.1 lakhs, from ?340.0 lakhs, due to limited demand and reduced commercial focus. Realization in the combined veg and plant-based category fell to?244/kg.

Jubilant FoodWorks continued to lead the customer mix with ?7,329.4 lakhs in revenue, contributing 47% of the total. Notably, Lenexis FoodWorks (Chinese Wok) and Impel Pro Solutions (Taco Bell) scaled significantly, posting ? 1,434.4 lakhs and ? 1,238.1 lakhs respectively. Other accounts such as Burger Singh and Coffee Day Global demonstrated resilient growth, while

early-stage alt-protein clients like BlueTribe and Shaka Harry saw reduced traction, reflecting broader market challenges.

All revenue in FY25 was generated from domestic operations. Export sales are expected to commence post commissioning of new facility.

Management Commentary:

The revenue mix in FY25 reflects our core operational strength in non-vegetarian lines and deep integration with leading QSR partners. Growth in newer accounts like Taco Bell and Wok Chinese signals successful client diversification. Plant-based and vegetarian segments saw muted contributions, in line with strategic realignment. Looking ahead, we aim to enhance product diversity and geographic reach, with export-readiness and facility-led expansion slated to accelerate from FY26 onward.

FINANCIAL RATIO VARIATIONS

Ratio	As on March 31,2025	As on March 31,2024	% Change
Current Ratio	2.44	2.60	-6.10%
Debt-equity ratio	0.14	0.14	1.58%
Debt service coverage ratio	4.77	9.50	-49.78%
Return on equity ratio	7.45	15.51	-51.98%
Inventory turnover ratio	12.33	12.78	-3.52%
Trade receivables turnover ratio	9.22	12.82	-28.05%
Trade payables turnover ratio	10.94	9.13	19.84%
Net Capital Turnover Ratio	4.58	4.18	9.59%
Net Profit Ratio	3.86	4.61	-16.32%
Return on capital employed	10.12	14.30	-29.27%

The notable variations exceeding 25% in key financial ratios are indicative of structural and strategic shifts within the company. The decline in the Debt Service Coverage Ratio is attributable to an increase in short-term debt repayments availed to support expanded working capital requirements, following business growth and onboarding of new clients. The ratio is still healthy. Similarly, the Return on Equity has dropped significantly by 36.32%, primarily due to the issuance of fresh equity share capital deployed for a new plant that is yet to commence operations — temporarily diluting returns. A fall in the Trade Receivable Ratio can be attributed to the onboarding of new clients and extended credit periods, leading to a buildup of receivables. Additionally, the decline in Return on Capital Employed results from an expanded equity base related to the same new plant, whose commercial activity has not begun.These changes collectively reflect transitional investments and operational expansions that may bear fruit in future periods but have temporarily impacted efficiency metrics

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

During the financial year, the Company reaffirmed its dedication

to nurturing a resilient, agile, and performance-oriented workforce. As of March 31, 2025, the total employee strength reached 440, driven by both organic growth and targeted hiring across key business verticals.

In line with its strategic priorities,the Company launched several capability-building initiatives, with a strong emphasis on leadership development, digital upskilling, and crossfunctional agility. These programs aim to future-proof the workforce and foster a culture of continuous learning and innovation.

Industrial relations remained cordial and cooperative, supported by robust engagement channels and proactive dialogue with workforce representatives. The Companys approach focused on transparency, mutual respect, and timely resolution of operational concerns.

Furthering its position as an employer of choice, the Company broadened its wellness portfolio, offering holistic support for employees mental and physical health. Expansion of hybrid work arrangements provided greater flexibility and work-life balance, contributing to improved employee satisfaction and retention.