Himalaya Food International Ltd Management Discussions

Pursuant to Regulation 34 of the Listing Regulations, the Management Discussion and Analysis Report is presented in a separate section forming part of this Annual Report highlighting the detailed review of operations, performance and future outlook of your Company.

INDUSTRY OVERVIEW AND ECONOMIC ENVIRONMENT

Macroeconomic Context

The financial year 2025-26 was marked by a complex and rapidly evolving global trade environment. The re-escalation of U.S. tariff barriers - with tariffs on Indian imports rising as high as 50% during the year - created significant near-term headwinds for Indian food processing exporters with exposure to North American markets. The Companys Q3 FY26 results reflected the immediate impact of these tariff measures. However, subsequent diplomatic and trade developments during the second half of the year indicated a potential reduction of these tariffs from 50% to approximately 18%, which, if formalised, will substantially improve export economics for Indian frozen food companies.

Indias broader food processing industry continued to exhibit structural growth momentum, with the sector benefiting from rising urbanisation, increasing disposable incomes, and strong demand for convenience and packaged food products across Tier-1, Tier-2, and emerging metro markets. The rapid proliferation of Quick Service Restaurants (QSRs), organised retail chains, and food delivery platforms has created durable demand for high-quality frozen potato-based products and specialty food items.

Global Economy

Global demand for frozen convenience foods - particularly French fries, hash browns, potato wedges, and specialty frozen bakery items such as French toast sticks - continued its long-term growth trajectory in FY2025-26. Premium, all-natural, and clean-label products commanded increasing consumer preference across the UK, European, and Asia-Pacific markets, trends that align well with Himalaya Food Internationals product positioning.

The ongoing India-EU Free Trade Agreement negotiations and the UK-India trade dialogue present meaningful medium-term opportunities for Indian food processors to expand their European and British market access, potentially on improved tariff terms. Himalaya has already moved proactively to capitalise on these emerging opportunities, securing its first-ever UK export consignment during the year.

COMPANY OVERVIEW AND BUSINESS OPERATIONS

2.1 About the Company

Himalaya Food International Limited is a BSE-listed Indian food processing company incorporated in January 1992 and engaged in the growing, processing, and export of premium quality frozen and canned food products. The Company operates under the flagship brands Himalaya Fresh and Chef Ernesto, catering to the QSR segment, organised modern trade, and international institutional buyers.

The Company is guided by its core operational philosophy of Ethical Farming, Wholesome Foods, and Total Recycle - principles embedded across its supply chain, manufacturing, and product development functions.

2.2 Manufacturing Infrastructure

The Company operates two manufacturing facilities:

Primary Plant - Village Shubhkhera, Paonta Sahib, District Sirmour, Himachal Pradesh HP-173025: The flagship plant, strategically located close to prime potato-growing belts in the Himalayan foothills. The plant houses French Fry lines, IQF (Individually Quick Frozen) processing, and specialty frozen food production. Gujarat Plant - 215/A/1 Vadnagar-Redlaxmipura Road, Sultanapura, Vadnagar, Mehsana District, Gujarat 384355: Supports the Companys western India distribution network and export logistics.

2.3 Product Portfolio

The Companys product range spans frozen French fries, hash browns, potato wedges, samosas, Frozen Cinnamon French Toast Sticks, and other all-natural convenience food items. During FY2025-26, the Company successfully launched Frozen Cinnamon French Toast Sticks in the UK- a product that has already demonstrated strong traction with international buyers. The product portfolio spans both the potato-based segment and the specialty frozen bakery segment.

2.4 Management Team

Name	Designation	Role
Mr. Man Mohan Malik	Chairman & Managing Director	Strategic operations
Mrs. Sangita Malik	Whole-time Director	Corporate governance
Mr. Sanjiv Kumar Kakkar	Executive Director	Business development
Mr. Bhushan Kumar Garg	Independent Director	Board oversight
Mr. Surendra Kumar Kaushik	Independent Director	Board oversight
Ms. Neelam Khanna	Independent Director	Board oversight
Mr. Shamsher Ali	Chief Financial Officer	Financial management
Ms. Megha Saini	Company Secretary	Compliance & secretarial

Note: Ms. Komaljeet Kaur served as Company Secretary up to the 34th AGM. Ms. Megha Saini has since been appointed as the new Company Secretary.

3.FINANCIAL PERFORMANCE AND ANALYSIS

3.1 Financial Overview

The Board of Directors approved the Audited Standalone Financial Results for the financial year ended March 31, 2026, at its meeting held on May 30, 2026, with an unmodified (clean) audit opinion issued by M/s Garg Bros & Associates, Chartered Accountants (FRN: 0100SN). The full year FY2025-26 results reflect meaningful improvement in profitability and operational efficiency against the prior year, notwithstanding the near-term revenue impact of U.S. tariff headwinds in Q3 FY26.

For the full year FY2025-26, the Company reported Revenue from Operations of approximately 39.5 Crores and Net Profit of approximately 3.71 Crores, reflecting a significant improvement in profitability from the prior financial year and affirming the managements commitment to sustained quarter-over-quarter earnings growth.

3.2 Quarterly Financial Performance

Particulars (Lakhs)	Q1 (Jun 2025)	Q2 (Sep 2025)	Q3 (Dec 2025)	Q4 (Mar 2026)
Revenue from Operations	1,022.2	1,105	982.8	484
Net Profit	259.2	227	376.9	-239

Note: The Q4 FY26 figures have been derived as balancing amounts based on the audited full-year financial results and are subject to finalisation. The quarterly figures are standalone and unaudited, whereas the full-year figures are audited. The audited full-year financial performance for FY26 comprises revenue from operations of approximately 3,954 lakhs and a net profit of approximately 371 lakhs.

3.3 Year-on-Year Full Year Comparison

3.4 Capital Structure Changes A defining capital markets development of FY2025-26 was the successful completion of the Rights Issue at an offer price of 13.80 per share, with the ex-date and record date of May 23, 2025, in the ratio of 1 new equity share for every 2 existing equity shares held. The Rights Issue was oversubscribed, reflecting strong shareholder confidence, and Co-Promoters alone injected 316.62 Crores through the Rights Issue. As a result, the paid-up equity share capital increased substantially from 5,787.29 lakhs as of December 31, 2024 to 8,479 lakhs as of December 31, 2025.

3.5 OTS Status and Debt Resolution Progress

The One Time Settlement (OTS) with the banking consortium - comprising State Bank of India (Lead Bank), Union Bank of India, Exim Bank, and Bank of Baroda - has progressed materially during FY2025-26. As confirmed in the Chairmans letter dated May 30, 2026, the Company has now paid approximately 78% of the total OTS obligation, with the balance 22% scheduled for settlement in FY2026-27.

The total OTS obligation stands at 43.00 Crores (final settlement amount as approved in the OTS extension secured in April 2026). The OTS extension was sanctioned following the Companys successful alignment with all four consortium banks - SBI, Union Bank, Exim Bank, and Bank of Baroda - a milestone that provides the Company a clear and defined path to becoming debt-free. This development materially de-risks the Companys financial profile.

4. OPERATIONAL HIGHLIGHTS AND CAPACITY EXPANSION

4.1 US Foods Vendor Approval

In February 2026, the Company announced its approval as an official vendor with US Foods - one of the largest foodservice distributors in the United States. This approval is a significant strategic milestone that substantially enhances Himalaya Foods market visibility and access in the U.S. foodservice channel for products including French Fries and other frozen items. The US Foods vendor relationship is expected to be a meaningful revenue driver as the U.S. tariff environment improves.

4.2 UK Market Entry - Frozen French Toast Sticks

On May 8, 2026, Himalaya Food International shipped three Full Container Load (FCL) consignments of Frozen Cinnamon French Toast Sticks to the United Kingdom - its first-ever consignment to the UK market. This milestone follows the successful product launch with the same customer in Australia, and represents the Companys strategic pivot to develop new premium international markets following the disruption to North American export volumes due to U.S. tariff policy.

The UK market entry is part of a broader multi-market expansion strategy:

United Kingdom: Three FCL orders secured; product (Frozen Cinnamon French Toast Sticks) launched with initial positive reception. EU market entry is planned as a natural follow-on, aided by the ongoing India-EU Free Trade Agreement discussions. Australia: FCL export orders secured and being fulfilled. The Company is scaling its Australian volume with its international buyer. Japan: Market entry is in active planning, with management exploring product approvals and buyer relationships. Gulf Cooperation Council (GCC) and South Asia: Continued focus on developing export pipelines in the Middle East and South Asian geographies as part of the diversification-from-U.S. strategy.

4.3 New French Fry Capacity Line

4.4 Asset Optimisation - Non-Core Land SaleAs part of its asset optimisation programme, the Board and shareholders have approved the disposal of non-core land assets, including the Shubhkhera (Paonta Sahib) plant unit, agricultural land in Kotputli, Rajasthan, and industrial plot nos. 87-90 at Paonta Sahib. Sale proceeds are earmarked for OTS completion, operational working capital, and capacity expansion.

4.5 Franchisee and Domestic Retail Expansion

The Company has been progressing its domestic market re-entry strategy through a franchisee-driven distribution model, leveraging distribution hubs, exclusive Himalaya Food Company stores, and quick-service food vans. The BURGERSNFRIES fast food brand, which serves vegetarian, mushroom, and cottage cheese burgers along with specialty fries and healthy soft drinks, forms part of the Companys domestic retail and food service expansion. Management expects meaningful domestic revenue contribution to emerge in FY2026-27 as this network scales.

5. STRATEGY, MARKET DIVERSIFICATION, AND GROWTH OUTLOOK

5.1 Strategic Pivot: From U.S.-Centric to Multi-Market

The Companys strategic response to the structural headwinds from U.S. tariff barriers has been swift and decisive. The management has converted what initially appeared to be a challenge into a catalyst for a more resilient and geographically diversified business model. Key elements of this transformation include:

Securing US Foods vendor approval, which provides a robust institutional channel for U.S. market re-penetration as tariff conditions improve. Simultaneous diversification into the UK, Australia, and Europe, backed by actual secured FCL export orders rather than merely aspirational plans. Active identification of Japan as a next-wave export market. Domestic India market re-entry through retail, franchisee, and QSR channels.

5.2 Brand Strategy

The Himalaya Fresh brand anchors the Companys premium all-natural positioning for health-conscious retail and institutional buyers globally. Chef Ernesto targets the mass-premium foodservice and QSR segments. The newly developed BURGERSNFRIES brand extends Himalayas reach into the organised domestic fast food and quick-service segment, a high-growth opportunity in India.

5.3 Three-Year Roadmap

The management has articulated a targeted three-year strategy focused on:

Full asset optimisation: Disposing non-core assets and concentrating capital into the highest-return manufacturing and branded distribution activities. Maximum capacity utilisation: Achieving rated capacity utilisation on both the French Fry lines and the Frozen Specialty Processing lines at Paonta Sahib and Gujarat. Value-added product growth: Growing the share of higher-margin value-added and specialty products (French Toast Sticks, specialty snacks) in the revenue mix. OTS completion and debt-free status: Completing the remaining 22% OTS balance in FY2026-27, achieving a clean, debt-free balance sheet. Revenue and margin expansion: Translating operational efficiency improvements into robust bottom-line growth and enhanced shareholder returns.

RISK FACTORS AND MITIGATION FRAMEWORK

Risk Category	Description & Impact in FY26	Mitigation Strategy
U.S. Tariff Risk	50% tariffs on Indian imports impacted Q3 FY26 revenues and margins; U.S. exposure concentrations reduced.	Secured US Foods vendor approval; diplomatic tariff reduction to -18% anticipated; UK/Australia/Japan diversification underway.
OTS / Financial Risk	Remaining 22% OTS balance (?9.5 Cr) due in FY26-27; capital requirement ongoing.	78% paid; OTS extension approved by all 4 consortium banks; Rights Issue and potential preferential Issue provide capital levers.
Operational / Capex Risk	Commissioning of 54,000 MTPA French Fry line; risk of delay impacting revenue ramp-up.	Active project monitoring; pre-season commissioning target; experienced in-house engineering team.
Raw Material Agricultural Risk	Potato price and availability risk; weather and crop yield dependency.	Plant proximity to Himalayan potato belts; dual-plant sourcing across HP and Gujarat; advance procurement.
Litigation Risk	Simplest equipment non-return case (?72 Cr arbitration filed); insurance claim appeal pending.	?72 Cr arbitration initiated in April 2026; U.S. Federal Court tort action in progress; strong legal counsel engaged.
Currency / Forex Risk	Multi-currency export receipts expose the Company to INR appreciation risk.	Revenue diversification across USD, GBP, and AUD denominated markets provides natural hedge.
Regulatory Compliance Risk	Evolving SEBI LODR, Companies Act, and food safety regulatory requirements.	Dedicated Company Secretary; statutory compliance calendar; SEBI-compliant governance structure; food safety certifications maintained.

7. LEGAL AND REGULATORY MATTERS

7.1 Simplot Arbitration - 72 Crore Claim Filed

In April 2026, Himalaya Food International initiated a 72 Crore arbitration against Simplot for failure to return machinery as directed by the Singapore International Arbitration Centre (SIAC) Tribunal. This is a significant development that, if resolved favourably, will result in material non-operating income for the Company. Separately, the Delhi High Court proceedings for reciprocal award execution are ongoing, and the Company is exploring a tort action before the U.S. Federal Court for damages and loss of profits arising from Simplots continued non-compliance.

7.2 Insurance Claim - New India Assurance Co.

The Companys appeal against New India Assurance Company Limited, challenging what the Board regards as an arbitrary reduction in the fire insurance claim settlement amount, remains pending. The Company is pursuing full and fair recovery of insured losses incurred as a consequence of the fire at the Paonta Sahib facility.

7.3 OTS - Final Settlement Agreement

In April 2026, the Company secured the final OTS extension approval with the total settled OTS obligation confirmed at 43.00 Crores. This is a landmark regulatory and financial development, bringing clarity and certainty to the Companys debt resolution process. The OTS terms have been sanctioned by all four consortium lenders, and the Company has committed to paying the balance 22% in FY2026-27.

7.4 EGM - Shareholder Approvals At the Extraordinary General Meeting held on May 2, 2026, shareholders approved (with 99.99% approval) three key resolutions: (i) increase in Authorised Share Capital from 90 Crores to 125 Crores, (ii) appointment of M/s Kumar Rupak & Associates as Statutory Auditors, and (iii) enabling fund raising and loan conversion options to provide financial flexibility for the OTS balance payment and capacity expansion.

8.CORPORATE GOVERNANCE AND SUSTAINABILITY

8.1 Board Composition and Independence

The Board comprises a balanced combination of executive, non-executive, and independent directors in compliance with the Companies Act, 2013, and SEBI LODR Regulations. The Independent Directors - Mr. Bhushan Kumar Garg, Mr. Surendra Kumar Kaushik, and Ms. Neelam Khanna - provide independent oversight across audit, nomination, remuneration, and stakeholder relationship functions. The Board updated its Policy of Independent Directors during Q3 FY26 to align with the latest SEBI regulatory requirements.

8.2 ESG and Sustainability Commitments

Himalaya Food Internationals sustainability framework is anchored in its three foundational operating principles:

Ethical Farming: Direct engagement with farming communities in Himachal Pradesh and Gujarat, promoting responsible agronomic practices, fair procurement relationships, and traceability in the potato supply chain. Wholesome Foods: All products manufactured using 100% natural ingredients without artificial preservatives, colours, or additives - a core differentiator in premium retail and international institutional markets. Total Recycle: Commitment to zero-waste and circular economy principles within the Companys manufacturing operations, with ongoing investment in energy efficiency and waste reduction infrastructure.

8.3 Corporate Social Responsibility (CSR)

The Company continues to fulfil its CSR obligations under Section 135 of the Companies Act, 2013, with activities focused on community development, rural education, environmental sustainability, and health and nutrition initiatives in the communities surrounding the Paonta Sahib and Vadnagar manufacturing facilities.

9.FORWARD-LOOKING STATEMENTS AND OUTLOOK

9.1 Management Outlook

The management of Himalaya Food International Limited enters FY2026-27 with structured optimism and a well-defined operational agenda. The following catalysts are expected to drive outperformance in the coming year:

Full commissioning and ramp-up of the 54,000 MTPA French Fry line, which will significantly increase the Companys volume capacity and enable fulfilment of larger institutional and export orders. UK and Australia export volumes scaling materially, with meaningful revenue contributions from these markets expected to begin in FY2026-27, as confirmed by management guidance. US tariff reduction from 50% to 18%, if formalised, will substantially improve the economics of North American exports and support volume recovery in that market. Potential resolution of the Simplot 72 Crore arbitration claim, which represents a significant contingent asset for the Company. Completion of OTS balance (22%), which will free up cash flows currently allocated to debt servicing and enable reinvestment in growth.

Domestic franchise and QSR channel revenue Beginning to contribute as the BURGERSFRIES and Himalaya Food Company retail network matures. Continued improvement in net profit margins through operating leverage from higher capacity utilisation and cost efficiency initiatives.

9.2 Cautionary Statement

Certain statements in this Management Discussion and Analysis Report are forward-looking and based on current expectations, estimates, and assumptions of the management. Actual results could differ materially from those expressed or implied due to risks including, but not limited to, changes in global trade policy, commodity prices, regulatory developments, macroeconomic conditions, and execution risks. Shareholders and investors are advised to exercise independent judgment and not to rely solely on forward-looking statements contained herein.

10. CONCLUSION

Financial Year 2025-26 marks a decisive chapter in Himalaya Food Internationals recovery and reinvention. Despite facing the severest U.S. tariff headwinds in recent memory, the Company delivered profitability growth, expanded into new international geographies, progressed its OTS to 78% completion, strengthened its capital structure through a successful Rights Issue, and secured important commercial milestones including US Foods vendor approval and the landmark UK export debut.

The Companys management team is firmly focused on completing the journey towards a clean, debt-free balance sheet while simultaneously accelerating top-line growth through capacity expansion, multi-market diversification, and new product development. The Board and management extend their sincere gratitude to all shareholders, banking partners, employees, customers, and other stakeholders for their continued trust, partnership, and support.

For and on behalf of the Board of Directors Himalaya Food International Limited

Sd/- Man Mohan Malik Chairman & Managing Director DIN:00696077

Date:27 August 2026 Place: New Delhi

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