Dodla Dairy Ltd Management Discussions

GLOBAL ECONOMY

The global economy expanded by 3.2% in 2024, maintaining a steady pace. Looking ahead, global GDP growth is projected to remain stable at 3.3% in both 2025 and 2026, below the historical (2000-19) average of 3.7%. However, this trajectory remains uneven across regions, shaped by shifting monetary policies, geopolitical uncertainties and ongoing trade frictions.

Growth trends among advanced economies show a clear variance. In the US, strong consumer demand, improved finances, and an eased monetary stance are supporting economic activity. Growth is projected to reach 2.7% in 2025, driven by a strong labour market and increasing investment, maintaining the countrys economic momentum. Parallelly, in other advanced economies, growth remains relatively stable due to opposing forces. While rising real incomes are likely to support a recovery in consumer spending, trade uncertainty and policy shifts are expected to weigh on investment.

In the Euro area, growth is expected to advance at a measured pace, though geopolitical tensions continue to weigh on sentiment. A slowdown in late 2024, particularly in manufacturing, combined with political and policy uncertainties, has resulted in a 1% growth projection for 2025. However, conditions are anticipated to improve by 1 2026, with growth projected to rise to 1.4%, supported by

stronger domestic demand, easing financial conditions, improved confidence, and reduced uncertainty.

Emerging markets and developing economies are anticipated to maintain growth levels similar to 2024 in both 2025 and 2026. Chinas growth is expected to reach 4.60% in

2025 and 4.50% in 2026, following 4.80% in 2024. Although a slight moderation is expected, the economy remains on a stable trajectory. Growth in the Middle East and Central Asia is projected at 3.6% in 2025 and 3.9% in 2026. Economic diversification efforts and sustained investments in key sectors will drive this expansion. Latin America and the Caribbean are projected to see overall growth edge up to 2.5% in 2025. This improvement persists despite a slowdown in the largest economies within the region, indicating resilience in smaller markets and sectoral diversification.

Globally, inflation is on a downward trajectory, with headline inflation expected to ease to 4.2% in 2025 and 3.5% in 2026. While some economies are seeing faster disinflation, others are adjusting policies to manage inflationary pressures effectively. The US is experiencing a significant downward revision in inflation forecasts, attributed to effective monetary policies and a cooling labour market. In contrast, some European economies such as Germany and France, continue to deal with persistent inflationary pressures due to energy price volatility and supply chain disruptions. Meanwhile, emerging markets, particularly in Asia, are witnessing faster disinflation, supported by stabilising commodity prices and strengthened currency valuations.

Central banks are adopting a calibrated approach, with some easing monetary policy to support growth, while others remain cautious. Fiscal policies are adjusting to currency fluctuations, which mirror shifting global economic expectations. A stronger US dollar has reshaped capital flows in emerging markets, raising debt costs and adding financial pressures. Yet, many of these economies remain well- positioned to navigate the evolving economic environment.

Real GDP Growth Projections (in %)

For 2024 - Write Estimated (E)

For 2025 and 2026 - Write Projected (P)

(Source: https://www.imf.org/en/Publications/WEQ/lssues/2025/01/17/world-economic-outlook-update-january-2025)

MANAGEMENT DISCUSSION AND ANALYSIS (Contd.) INDIAN ECONOMY

ndias economy continues to expand with the First Advance Estimates (FAE) projecting the real GDP growth at 6.4% for 2024-25. Both private and government consumption expenditure witnessed an uptick, with net exports making a positive contribution to overall growth.

Private Final Consumption Expenditure (PFCE) at Constant Prices grew at 7.3% during 2024-25, increasing from 4.0% in 2023-24. This reflects a revival in rural demand and sustained urban consumption, supported by rising disposable incomes and stable inflation levels.

Government Final Consumption Expenditure (GFCE) at Constant Prices rebounded to a 4.1% growth rate in 2024- 25, up from 2.5% in 2023-24. This increased public sector spending on infrastructure, social welfare programmes, and rural development is expected to further contribute to the overall economic momentum.

(Source: https://pib.aov.in/PressReleasePaae.aspx?PRID= 2090875# :~:text=Government%20Finai% 20 C on sumpti on %20 Expert diture%20(GFCE)%20at%20 Constant.of%707. 5%%70in%70the%70previous%70 Financial%20Year.&text=The%20arowth%20rate%20in%20 Real%20GDP%20durina.6.4%%20as%20compared%20to%20 8.2%%20in%202023%2D24.)

Indias strong performance is further reinforced by the governments focus on reforms and infrastructure development. Plowever, corporate and industrial activity is showing signs of moderation, as slower earnings and subdued growth begin to weigh on business sentiment. Furthermore, private consumption growth has lost some steam, particularly in discretionary spending, as households remain cautious amid global uncertainties and inflationary pressures.

India continues to demonstrate resilience, even as many of the worlds leading economies struggle with decelerating growth. Strong macroeconomic fundamentals and proactive government reforms have been key drivers behind the nations stability. Plowever, the pace of progress has moderated compared to the previous year, reflecting a slowdown in industrial activity, subdued consumption, and external uncertainties.

By enhancing business efficiency and fostering an investment-friendly climate, India continues to attract global interest. Yet, foreign portfolio outflows have been significant in January and February 2025, driven by global risk aversion, shifting monetary policies, and geopolitical uncertainties.

In January and February alone, foreign investors withdrew INR 34,574 crores from Indian equity markets, pushing total outflows to INR 1.12 lakh crores in the first two months of 2025. Despite this, domestic institutional investors (Dlls) and retail investors have provided strong support, helping

cushion the impact of foreign exits and maintain market stability.

(Source: https://www.telearaphindia.com/business/foreign- portfolio-investors-pull-out-rs-34574-crore-from-the-indian- equity-markets-in-february-prnt/cid/2086635)

ndias agricultural sector is set for steady growth, with real Gross Value Added (GVA) in agriculture, forestry, and fishing estimated to rise to 3.80% in 2024-25, up from 1.40% in 2023-24. This improvement is primarily attributed to higher Kharif foodgrain production and robust Rabi sowing, supported by favourable monsoons and improved irrigation facilities. These factors have strengthened rural incomes and mitigated food inflation risks, ensuring economic stability.

The Union Budget for 2025-26 outlined strategic measures aimed to sustain economic momentum amid emerging challenges. Corporate earnings faced headwinds, with rising nput costs and subdued demand impacting profitability. This, in turn, affected hiring and wage growth, potentially weighing on overall consumption levels. Additionally, rura markets exhibited signs of strain, reflecting sluggish income growth and restrained spending patterns.

To counter these pressures, the Union Budget 2025-26 prioritised consumption revival, particularly in rural areas, through increased public expenditure, targeted welfare schemes, and infrastructure investments. It also emphasised revitalising the manufacturing sector under the Make in India initiative, alongside skill development programmes aimed at job creation. These measures aim to counter the slowdown, stimulate domestic demand, and position India for a more sustainable and inclusive economic recovery.

On the external front, Indias exports are expected to grow by 5.90% in 2024-25. This rise is propelled primarily by the steady rise in services exports, particularly in IT, process management, and consulting, which have remained resilient despite global headwinds.

Meanwhile, imports contracted slightly by 1.30%, largely due to lower crude oil imports following softening global prices and reduced domestic demand for capital and consumer goods. This narrowing trade deficit helped improve the nations overall trade balance, with net exports contributing 1.70% points to GDP growth, offering a crucial buffer against domestic economic moderation.

(Source: https.Y/rhidocs. rbi.org in/rdocs/Rulletin/PDFs/ 0BULLETIN17012025618F21033FC94574912BFCF428F8 8AS0.PDF)

THE GLOBAL DAIRY MARKET

The global dairy industry is a highly fragmented yet vital sector of the food and agriculture economy, with millions of farmers, cooperatives, and enterprises involved in milk production, processing, and distribution. In 2024, the industry

MANAGEMENT DISCUSSION AND ANALYSIS (Contd.)

reached a market size of USD 991.50 billion and is projected to reach USD 1,505.80 billion by 2033, clocking in a 4.75% CAGR. This expansion is fuelled by rising global populations, urbanisation, and shifting dietary habits that emphasise dairy as a key source of nutrition. Beyond its economic significance, the industry provides livelihoods to over one billion people worldwide, spanning smallholder farmers, large-scale producers, and dairy processing industries. (Source: h ttps://www. ima regroup, com/globa l-dairv-market)

Liquid milk dominates the global dairy market, maintaining its position as the most widely consumed dairy product. Its versatility extends beyond direct consumption-it is an ngredient in cooking, baking, and dairy-based products ike butter, cheese, and yogurt. With its rich composition of calcium, protein, vitamins, and minerals, it remains a dietary essential across the globe. Increasing awareness of liquid milks health benefits, especially for children and the elderly, further drives demand.

The industrys supply and demand dynamics are shaped by a complex web of factors. Climate conditions, feed availability, regulatory policies, cold storage infrastructure, and transportation networks play pivotal roles in shaping production and distribution. Seasonal milk production cycles in leading dairy-exporting nations-New Zealand, the US, i and the European Union—significantly impact global supply and pricing trends. Moreover, feed and input costs, including the availability of fodder, grains, and water resources, directly impact dairy farm profitability and milk output. While technological advancements such as automated milking systems and precision feeding, are enhancing farm efficiency, the broader structural factors continue to be the primary forces shaping the industrys trajectory.

The European Union, the US, and New Zealand remain dominant forces in global dairy exports, supplying a significant share of cheese, milk powder, and butter to international markets. In parallel, China, Southeast Asia, and the Middle East are emerging as the fastest-growing dairy markets, driven by urbanisation, rising disposable incomes, and increasing per capita dairy consumption. In Africa and Latin America, demand is rising with dairy becoming a more integral part of diets. However, supply-side constraints, including infrastructure limitations and climate variability, continue to pose challenges.

As the dairy industry expands, it faces mounting challenges linked to sustainability, climate impact, and fluctuating raw material costs. Milk production is highly resource-intensive, requiring vast amounts of land, water, and feed, and is also a major contributor to greenhouse gas emissions. Climate variability further affects milk yields, while rising feed and energy costs put pressure on dairy farm profitability. These factors have already influenced global supply chains,

pushing the industry to adopt more resilient and eco-friendly dairy farming practices.

To secure long-term viability, the sector is embracing eco-friendly initiatives, reducing carbon footprints, and enhancing waste management. Looking ahead, continued advancements in dairy processing, supply chain logistics, and product innovation will play a crucial role in making the industry more efficient, sustainable, and accessible to a diverse consumer base.

THE AFRICAN DAIRY MARKET

The African dairy market is poised for steady growth, with revenue projected to reach USD 24.25 billion in 2025, registering a CAGR of 8.65% from 2025 to 2029.

(Source: h ftps:// www. sta tista.com/outlook/cmo/food/da irv- products-eaas/milk/a frica1

This growth is expected to be driven by rapid urbanisation, and a rising middle class with greater disposable income and increasing health awareness. As consumers prioritise nutrition, demand is surging for milk, yogurt, and cheese. Additionally, government support, investments in dairy infrastructure, and advancements in cold storage and supply chain logistics are improving market efficiency. Africas abundant grazing lands and large livestock population further support milk production, positioning the region as a promising dairy market.

Shifting consumer preferences are reshaping the market. Health-conscious choices are driving demand for probiotic drinks, fortified milk, and plant-based dairy alternatives. In urban areas, flavoured milk and yogurt are gaining popularity as healthier substitutes for carbonated beverages, while traditional dairy staples such as fermented milk (Amasi) and camel milk remain culturally significant across regions. Furthermore, investment in modern dairy farming, cold storage infrastructure, and local milk processing units are improving efficiency reducing reliance on imports, and boosting domestic output.

East Africa, with its growing population and increasing demand for dairy is emerging as an attractive market for dairy companies. At the same time, the growing popularity of international and domestic sporting events in Africa is creating new opportunities for functional dairy beverages like probiotic drinks in emerging markets.

Government policies and initiatives in some countries have also contributed to the sectors expansion by creating a supportive business environment. Subsidies, tax incentives, and infrastructure investments have further helped lower entry barriers for new players, while enabling established dairy enterprises to scale their operations efficiently.

With rising consumer awareness, technological advancements, and strong policy support, Africas dairy

market is poised for sustained expansion. This growth presents lucrative opportunities for both local producers and global investors looking to tap into the regions evolving dairy space.

THE INDIAN DAIRY MARKET

As the worlds largest milk producer, Indias dairy market is set for significant progress. On these lines, revenue from the organised dairy sector is projected to reach USD 29.90 billion in 2025 and USD 41.82 billion by 2030, reflecting a CAGR of 6.94%.

(Source: https://www.mordorintelligence.com/industry- reports/india-dairy-market)

In terms of regional and country-wise distribution, India remains the largest producer and consumer of dairy products, accounting for approximately 24% of global milk production. This dominance is supported by strong government initiatives and an extensive rural dairy network. (Source: https://timesofindia.indiatimes.com/india/indias- milk-production-up-nearly-4-whereas-meat-output-rise-by- nearly-5/articleshow/l 7 5707054.cms#:~:text=lndia%20 is%20currentlv%20the%20laraest.%2C%20MP%2C%20 Guiarat%20and%20Maharashtra1

Further, the industry primarily operates through a structured ecosystem comprising co-operative societies, private dairy companies, and smallholder farmers. Dairy co-operatives play a crucial role in ensuring fair pricing, rural livelihoods, and large-scale milk procurement, with organisations like the National Dairy Development Board (NDDB) driving industry development.

Beyond domestic consumption, India is emerging as a key player in dairy exports, particularly for skimmed milk powder (SMP), ghee, and value-added dairy products. These exports cater to growing demand in South Asia, the Middle East, and Africa. Flowever, global price volatility, stringent export regulations, and quality standards compliance remain key considerations.

Indias dairy industry is poised for continued expansion, driven by rising consumer demand, evolving dietary preferences, and increasing government support. With a strong foundation and strategic advancements, the sector is well-positioned for long-term growth.

Milk Consumption in India

Per capita milk consumption in India is on the rise, with fluid milk consumption projected at 91 million metric tonnes (MMT) in 2025, up from 89 MMT in 2024.

(Source: https://www.thedairysite.com/news/indias-milk- consumption-expected-to-rise-in-2025)

There is a distinct urban-rural divide in milk consumption patterns. Urban consumers prefer packaged, branded, and value-added products such as flavoured milk, probiotic drinks, and fortified dairy. In contrast, rural consumers continue to rely on local co-operatives and unorganised raw

milk markets. Institutional demand for milk is also rising, driven by increased consumption in hotels, restaurants, cafes, and the food processing industry, which relies on dairy for various products. Additionally, the governments nutrition programmes and school meal schemes drive demand, particularly for fluid milk and fortified dairy products.

Regional variations further shape consumption trends.

North India leads in per capita milk intake, driven by cultural preferences for dairy. Meanwhile, South and East India see stronger demand for curd, buttermilk, and dairy-based sweets.

Despite this growth, the sector faces challenges such as milk price fluctuations, rising feed costs, and supply chain inefficiencies. Simultaneously, competition from plant-based alternatives continues to reshape consumer preferences. In addition, robust cold storage and chilling centres are crucial to maintaining milk quality and reducing spoilage risks in hotter regions, ensuring the sector remains resilient.

Milk Production in India

ndias total milk production in 2025 is forecasted to rise to 221.30 MMT, maintaining its position as the largest milk- producing nation.

This growth is driven by expanding herd sizes, improved breeding techniques, supportive government policies, and _ stable weather conditions. Strong milk prices have further ¹117^ ncentivised higher production, particularly in states with ~ well-developed dairy infrastructure.

A few key states dominate milk production, with the top 10 contributors accounting for a significant portion of the countrys output. Uttar Pradesh leads, followed by Rajasthan,

Madhya Pradesh, Gujarat, and Andhra Pradesh. Northern and Western states remain at the forefront, benefitting from extensive dairy farming networks, large cattle populations, and better access to dairy cooperatives and private players.

In contrast, Southern and Eastern states are emerging as dairy hubs but continue to lag in production due to smaller herd sizes and lower per capita milk consumption.

Top 10 MILK PRODUCING STATES in India 2024:

1. Uttar Pradesh

2. Rajasthan

3. Madhya Pradesh

4. Gujarat

5. Andhra Pradesh

6. Punjab

7. Maharashtra

8. Haryana

9. Bihar

10. Karnataka

(Source: https://in.edairvnews.com/top-10-milk-producing- states-in-india-2024/)

Annual Milk Production and Consumption Statistics (2023-2025)

The projected rise in milk production from 213.20 MMT in 2023 to 221.30 MMT in 2025 signifies a substantial growth opportunity for the dairy industry. While cow milk production is increasing at a steady pace, buffalo milk production is rising more rapidly, ensuring a larger supply of raw milk for dairy companies.

With fluid milk consumption set to rise from 89.20 MMT in 2023 to 91 MMT in 2025, companies involved in packaged milk, dairy-based beverages, and related products can capitalise on the growing consumer demand. Additionally, butter consumption is expected to increase from 6.90 MMT to 7.10 MMT, indicating a higher preference for dairy fats.

A higher milk supply benefits the industry but also affects pricing and competition. Increased production could stabilise or lower milk prices, benefitting consumers, while potentially pressuring farmers profit margins.

Government Initiatives

OPPORTUNITIES Rising Population

Increasing Health and Nutrition Awareness

COMPANY OVERVIEW

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

HUMAN RESOURCES