Diligent Industries Ltd Management Discussions

1. Industry Structure and Developments

The Indian edible oils industry forms an important part of the countrys food and nutritional security. Demand for edible oils continues to be supported by population growth, increasing urbanisation, changing dietary preferences, rising household consumption and the expanding food processing, hospitality and organised retail sectors.

India continues to have a significant structural dependence on imported edible oils. According to the Economic Survey 2025-26, more than 50% of domestic edible oil consumption continues to be met through imports, making domestic edible oil prices sensitive to international commodity prices, exchange rate movements, freight costs and changes in trade and import duty policies. The Economic Survey also notes that the Governments policy interventions have contributed to an increase in domestic oilseed production and a gradual reduction in import dependence.

The Government of India has continued to focus on strengthening domestic oilseed production and reducing import dependence through initiatives including the National Mission on Edible Oils – Oilseeds (NMEO-OS) and National Mission on Edible Oils – Oil Palm (NMEO-OP). The Government has set a target of increasing oilseed production substantially by 2030-31 and strengthening the domestic edible oil ecosystem.

The industry nevertheless remains exposed to fluctuations in agricultural production, availability of oilseeds and other raw materials, global edible oil prices, weather conditions, logistics costs, exchange rates and Government policies relating to imports, duties and food regulation.

Companys Business

Diligent Industries Limited ("the Company") is primarily engaged in the manufacture of Edible Rice Bran Oil. The Companys manufacturing facility is situated at Denduluru, Andhra Pradesh. The Company also undertakes activities relating to processing and trading of agricultural commodities and allied products, including products and by-products associated with the edible oil and extraction process.

The Companys operations are supported by its manufacturing and processing infrastructure and its presence in the edible oil and allied agricultural products value chain. De-oiled cakes and other allied products generated from the processing operations have applications in the cattle feed, poultry feed and aqua feed industries.

The Companys financial statements classify its operations as a single reporting business segment, being the manufacture of Edible Rice Bran Oil, in accordance with Ind AS 108. There are no material individual markets outside India requiring separate geographical segment disclosure.

During FY 2025-26, the Company recorded revenue from operations of Rs15,295.18 lakh, compared with Rs14,355.70 lakh in FY 2024-25, representing an increase of approximately 6.54%.

2. Opportunities

The Indian edible oil industry presents long-term opportunities arising from the essential nature of edible oils, growing domestic consumption and continued development of Indias food processing and agricultural value chains.

The Governments continued focus on increasing domestic oilseed production and reducing import dependence provides an opportunity for domestic processors and manufacturers to strengthen sourcing and processing capabilities. The Government has reported significant growth in oilseed area, production and productivity during the period 2014-15 to 2024-25 and continues to pursue measures aimed at increasing domestic availability of edible oils.

For the Company, opportunities include:

- strengthening procurement and sourcing of oilseeds and other raw materials;

- improving capacity utilisation and operational efficiency;

- enhancing processing and refining efficiencies;

- strengthening relationships with institutional and industrial customers;

- improving working capital management and inventory planning;

- leveraging demand for edible oils and allied agricultural products; and

- improving value realisation from by-products such as de-oiled cakes.

The Company will continue to focus on operational efficiency, prudent procurement, working capital discipline and strengthening its position in the edible oil value chain.

3. Segment-wise / Product-wise Performance

The Company operates primarily in a single business segment, namely manufacture of Edible Rice Bran Oil, as determined under Ind AS 108.

The Companys operations include processing and manufacture of edible oil and allied products. The principal operating activities are influenced by the availability and cost of raw materials, prevailing edible oil prices, processing yields, capacity utilisation, realisations, power and fuel costs, logistics costs and market demand.

During FY 2025-26, revenue from operations increased to Rs15,295.18 lakh from Rs14,355.70 lakh in FY 2024-25. The increase in revenue reflects continued business operations and sales during the year.

The Company will continue to focus on improving operating efficiency, optimising procurement and production processes, strengthening customer relationships and improving contribution margins through disciplined management of input costs and working capital.

4. Outlook

The long-term outlook for Indias edible oil sector remains supported by structural domestic demand and the essential nature of edible oils in household consumption and food processing.

At the same time, the industry is expected to remain sensitive to international edible oil prices, domestic oilseed production, import dependence, exchange rates, freight costs, Government trade policies and changes in customs duties. The Economic Survey 2025-26 specifically recognises the sensitivity of Indias edible oil prices to global price movements, exchange rate fluctuations and trade policy changes.

The Governments initiatives aimed at increasing domestic oilseed production and reducing import dependence are expected to support the development of the domestic edible oil ecosystem over the medium to long term. The Company remains focused on consolidating its existing operations, improving manufacturing efficiencies, managing raw material and working capital requirements and maintaining a disciplined approach towards costs and financial resources.

5. Risks and Concerns

The Companys business is subject to various operational, financial, market and regulatory risks. The principal risks identified by the Company are as follows:

5.1 Commodity Price Risk

The Companys profitability is exposed to fluctuations in the prices of oilseeds, edible oils and other agricultural commodities. Changes in international commodity prices, domestic supply-demand conditions, import duties and market conditions may affect raw material costs and product realisations.

The Company monitors commodity prices, procurement conditions and market trends and seeks to manage procurement and inventory levels in accordance with prevailing business conditions.

5.2 Raw Material Availability Risk

Agricultural commodities are affected by climatic conditions, crop yields, seasonal factors and regional availability. Any significant reduction in the availability of oilseeds or increase in procurement costs may affect production volumes and operating margins. The Company seeks to mitigate this risk through continuous monitoring of market conditions, procurement planning and maintaining relationships with suppliers.

5.3 Market and Business Risk

The edible oil business is competitive and subject to changes in customer demand, product prices, market conditions and competitive intensity. Changes in consumer preferences, pricing pressure and changes in demand may impact sales and margins. The Company seeks to address these risks through operational efficiency, customer relationships, cost management and maintaining product quality.

5.4 Credit Risk

Credit risk arises principally from trade receivables. As at 31 March 2026, trade receivables stood at Rs2,981.19 lakh, compared with Rs839.41 lakh as at 31 March 2025. The increase in receivables requires continued monitoring of customer credit exposure, collection cycles and working capital. The Company monitors receivable ageing and collection performance as part of its credit risk management process.

The Companys receivable ageing as at 31 March 2026 comprised Rs2,525.11 lakh outstanding for less than six months, Rs355.65 lakh for six months to one year and the balance in older ageing categories.

5.5 Liquidity and Working Capital Risk

The Companys operations require adequate working capital for procurement, inventory holding and day-to-day operating requirements. Changes in inventory levels, receivables and supplier payment cycles can have a significant impact on liquidity.

The Company continues to monitor working capital requirements and available banking facilities. As at 31 March 2026, the Company had current assets of Rs9,063.72 lakh against current liabilities of Rs4,320.43 lakh.

5.6 Regulatory and Compliance Risk

The Company operates in a regulated industry and is subject to applicable laws relating to food products, taxation, environmental matters, labour, corporate law and other statutory requirements. Changes in regulations, taxation, import duties or food-related standards may impact the Companys operations and cost structure. The Company continues to monitor applicable statutory and regulatory requirements and seeks to maintain appropriate compliance systems.

5.7 Energy and Operating Cost Risk

Power, fuel, transportation, labour and maintenance costs constitute important components of the Companys operating cost structure. During FY 2025-26, power and fuel expenses increased to Rs256.92 lakh from Rs226.58 lakh, while labour work expenses increased to Rs114.18 lakh from Rs37.70 lakh. The Company continues to focus on operational efficiency, cost optimisation and appropriate utilisation of resources.

6. Risk Management

The Company has implemented a risk management framework for identification, assessment, monitoring and mitigation of key business, operational, financial and compliance risks. The objective of the framework is to enable the Company to identify material risks on a timely basis, assess their potential impact, establish appropriate mitigation measures and monitor the effectiveness of such measures.

The Companys risk management approach covers, inter alia:

- commodity and raw material price risks;

- credit and receivable risks;

- liquidity and working capital risks;

- operational and manufacturing risks;

- regulatory and compliance risks;

- financial and interest rate risks; and

- business and market risks.

The Companys financial statements also identify credit risk as a principal financial risk and state that the carrying amount of trade receivables and other financial assets represents the Companys exposure to credit risk. The Company will continue to review and strengthen its risk management processes in line with changes in its business environment.

7. Internal Control Systems and their Adequacy

The Company has established internal control systems commensurate with the size, nature and complexity of its operations. The internal control framework is designed to ensure orderly and efficient conduct of business, safeguarding of assets, accuracy and reliability of financial reporting, proper recording and classification of transactions, compliance with applicable laws and regulations and adherence to established policies and procedures.

The Companys internal controls cover key areas including procurement, production, inventory management, sales, receivables, payments, accounting, finance, statutory compliance and financial reporting. The Company has an Audit Committee constituted in accordance with the applicable provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Audit Committee periodically reviews the adequacy and effectiveness of internal financial controls and financial reporting processes.

The statutory auditors, as part of their audit procedures, have also examined relevant internal controls and records. The auditors reported that physical verification of property, plant and equipment and inventory was conducted by management at reasonable intervals and that the procedures followed were appropriate. The management considers the internal control systems to be adequate and commensurate with the Companys requirements.

8. Financial Performance with respect to Operational Performance

The financial performance of the Company during FY 2025-26 is summarised below:

Particulars	FY 2025-26	FY 2024-25
Revenue from Operations (Rs lakh)	15,295.18	14,355.70
Total Income (Rs lakh)	15,297.37	14,358.09
Profit Before Tax (Rs lakh)	337.60	348.70
Profit for the Year (Rs lakh)	251.49	252.33
Basic EPS (Rs)	0.11	0.17

The Companys revenue from operations increased by approximately 6.54%, from Rs14,355.70 lakh in FY 2024-25 to Rs15,295.18 lakh in FY 2025-26.

Profit before tax decreased to Rs337.60 lakh from Rs348.70 lakh in the previous year. Profit for the year remained broadly stable at Rs251.49 lakh as compared with Rs252.33 lakh in FY 2024-25. The financial performance during the year was influenced by the movement in raw material costs, inventory levels, employee costs, finance costs and other operating expenses.

Cost of materials consumed during the year was Rs14,542.80 lakh as compared with Rs14,572.06 lakh in the previous year. Employee benefit expenses increased to Rs85.50 lakh from Rs51.55 lakh, while finance costs reduced to Rs236.52 lakh from Rs260.97 lakh.

Other expenses increased to Rs596.86 lakh from Rs408.38 lakh. Significant movements included increases in labour work expenses, power and fuel expenses, repairs and maintenance and transportation expenses. The Company continued to focus on working capital management and operational efficiencies during the year.

Cash Flow

The Company generated net cash from operating activities of Rs187.87 lakh during FY 2025-26, compared with net cash used in operating activities of Rs1,689.26 lakh in FY 2024-25. This represents an improvement in operating cash generation during the year. The improvement was primarily attributable to changes in working capital and operating assets and liabilities during the year.

9. Human Resources and Industrial Relations

Human resources continue to be an important component of the Companys operations. The Company seeks to maintain a work environment that encourages employee development, productivity, safety and compliance with applicable labour and employment requirements.

The Company provides applicable employee benefits including provident fund, ESI and gratuity benefits. During FY 2025-26, the Company recognised gratuity obligations based on an actuarial valuation in accordance with Ind AS 19.

The Company continues to focus on employee welfare, skill development, workplace safety and maintaining harmonious industrial relations. Number of employees as at 31 March 2026: 18.

10. Key Financial Ratios and Return on Net Worth

The key financial ratios of the Company for FY 2025-26 and FY 2024-25 are set out below:

Particulars	FY 2025-26	FY 2024-25	Change	Explanation
Current Ratio	2.10	2.12	-1%	No significant change
Debt-Equity Ratio	0.59	0.56	4%	No significant change
Interest Coverage Ratio*	2.43	2.34	4%	No significant change
Inventory Turnover Ratio	3.56	4.59	-22%	Below 25% threshold
Trade Receivables Turnover Ratio	8.01	5.16	55%	Improvement in turnover during the year
Trade Payables Turnover Ratio	176.83	127.77	38%	Primarily due to reduction in average trade payables
Net Capital Turnover Ratio	3.22	2.96	9%	No significant change
Net Profit Ratio	1.65%	1.75%	-6%	No significant change
Return on Capital Employed	5.43%	6.07%	-11%	No significant change
Return on Net Worth / Return on Equity	3.84%	6.10%	-37%	Reduction primarily due to increase in shareholders equity following the rights issue completed in FY 2024-25

The Companys audited financial statements disclose the Current Ratio, Debt-Equity Ratio, Debt Service Coverage Ratio, Return on Equity, Inventory Turnover, Trade Receivables Turnover, Trade Payables Turnover, Net Capital Turnover, Net Profit Ratio, Return on Capital Employed and Return on Investment.

The Companys Return on Equity / Return on Net Worth declined from 6.10% to 3.84%, principally due to the increase in shareholders equity following the rights issue completed during FY 2024-25, while profitability remained broadly stable.

The Trade Receivables Turnover Ratio increased from 5.16 to 8.01, representing a 55% movement. The audited financial statements attribute the relevant movement to changes in trade receivables.

The Trade Payables Turnover Ratio increased from 127.77 to 176.83, representing a 38% movement, primarily attributable to the reduction in trade payables during the year.

11. Capital Structure and Rights Issue

The Company completed a rights issue during FY 2024-25 involving 12,40,70,766 equity shares of Rs1 each at an issue price of Rs3.60 per share, aggregating to Rs4,466.55 lakh. The proceeds were utilised towards adjustment of promoter unsecured loans, working capital requirements, general corporate purposes and issue-related expenses. The increase in the Companys equity base arising from the rights issue has an impact on certain capital-based ratios, particularly Return on Equity / Return on Net Worth.

As at 31 March 2026, the Companys total equity stood at approximately Rs6,703.15 lakh, while total debt for ratio purposes stood at approximately Rs3,636.97 lakh.

12. Technology and Operational Efficiency

The Company continues to focus on maintaining and improving its manufacturing and processing infrastructure and on adopting appropriate technology and operational practices for improving efficiency, quality and resource utilisation.

The Companys manufacturing operations involve processing and manufacture of edible oil and allied products. The Company continues to review opportunities for process improvement, optimisation of energy consumption, maintenance of plant and machinery and improvement in production efficiency. During FY 2025-26, expenditure towards repairs and maintenance of plant and machinery increased compared with the previous year, reflecting continued attention to operational infrastructure.

13. Internal Financial and Operational Focus

During FY 2025-26, management continued to focus on:

- efficient procurement and utilisation of raw materials;

- optimisation of manufacturing capacity and production processes;

- monitoring of inventory levels;

- strengthening collection of trade receivables;

- prudent management of working capital;

- control of finance costs;

- optimisation of power, fuel and transportation costs;

- maintenance of plant and machinery; and

- compliance with applicable statutory and regulatory requirements.

The Company will continue to evaluate operating performance and financial resources on an ongoing basis with a view to improving sustainable profitability and strengthening its financial position.

14. Cautionary Statement

This Management Discussion and Analysis contain statements describing the Companys objectives, expectations, estimates, projections and business plans which may constitute forward-looking statements within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events and are subject to various risks and uncertainties.

Actual results could differ materially from those expressed or implied due to factors including changes in economic conditions, demand and supply conditions, commodity prices, availability and cost of raw materials, Government policies, import duties, taxation, interest rates, foreign exchange movements, regulatory changes, competition, weather conditions and other factors beyond the Companys control.

The Company assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Sources / References

1. Press Information Bureau / Ministry of Finance, Government of India – Economic Survey 2025-26.

2. Press Information Bureau – National Mission on Edible Oils.

By order of the Board of Directors

For DILIGENT INDUSTRIES LIMITED

Place: Denduluru

Date: 07.09.2026

Sd/-

Phani Anupama Vankineni

Director, DIN: 00935032

Sd/-

Bhanu Prakash Vankineni

Managing Director, DIN: 00919910