Hindustan Foods Ltd Management Discussions.

Economic Landscape


The global economy has undergone a major change in the past few years. Trade wars between the US and China, growing nationalism and some major reforms across different geographies have influenced the growth prospects of global economy. In this context, 2020 became one of those years, which witnessed accelerated changes in the consumer behaviour across sectors, catalysed by the nCov global pandemic. The health crisis significantly disrupted supply chains, leaving strategists to address issues, including drops and surges in demand & supply, inventory management & placement challenges and other operational problems. The major manufacturers around the world, had to face supply chain disruptions. This forced them to strategise and develop another manufacturing base out of China which has been echoed through the adoption of the China+1 strategy. These disruptions also paved way for faster adoption of digitised systems to cater the increasing share of e-commerce. While influencing most of the trends, nCov also made Governments realise the need to remain self-sufficient, especially w.r.t. to staples and pharma.

The nCov also induced several other macroeconomic changes including, increase in global unemployment rates, climate change, advent of technology to replace manual interventions and job automations. Additionally, it also instrumented the rise of digital currencies, lower returns on the savings, and rising inequality and debt, among many others. Collectively, all these changes will dictate and shape global growth for the years to come. Besides, certain economic and political activities such as Regional Comprehensive Economic Partnership (RCEP) signed by the 10 ASEAN countries, UK securing its first post-Brexit Free Trade Agreement (FTA) and a change in the US leadership, were among other marquee events that took place for the better.

After witnessing a slump in Q1 of 2020, the global manufacturing landscape moved back into the expansionary territory in July 2020 with the gradual revival of output and new orders. The global landscape was also punctuated by liberal monetary regimes unleashed by central banks led by the US, with other major economies adopting an accommodative monetary policy. This resulted in the most short-lived depression in the history of the world, culminating in an uptake in economic activity. The recovery across different economies has been on different fiscales since then, with advanced economies doing better than developing ones. By the year end, the second nCov wave in several regions, particularly Europe, led to partial lockdowns or countries slowing down their resumptions. In line with this trend, the IMF expects the world Gross Domestic Product (GDP) to decelerate by 3.3% in 2020 from a 2.8% rise in 2019.


(Source: https://www.imf.org/en/Publications/WEO/ Issues/2021/03/23/world-economic-outlook-april-2021)


The pandemic is far from over. The progress of overcoming this crisis is uneven, despite new vaccine rollouts being a constant feature across different countries. Mass inoculation drives, pent-up demands, increased private and public investments are largely expected to drive the consumption of goods and services, going forward. Moreover, sectors which were hardest hit from the social distancing restrictions are expected to show some rebound. Once the pandemic settles down, there are several theories that indicate ‘revenge spending to emerge – a term which is used to indicate the theory of self-indulgence and mass consumerism splurging, which generally follows a major catastrophic event. This term was first used to indicate the splurge in 1920s which happened post the conclusion of the First World War and the Spanish Flu pandemic. This kind of spending could well lead to a roaring decade in 2020s as well, with people likely to indulge in revenge spending, having been virtually ‘locked down in their homes, boosting hard-hit industries like the FMCG segment in the past decade.

The IMF expects the world GDP to grow by 6% in 2021 – stronger than October 2020 estimates. This revision reflects the additional fiscal support from large economies and respective favourable policy measures. Besides, commodity prices clearly demonstrate widespread expectations for a global rebound. Furthermore, the other significant indicators, favouring economic activities, include interest rate increases and the surge in shipping using waterways around the world. However, a cautious approach towards new mutants, new lockdowns and logistical issues must be considered as these have the potential to ruin the favourable outlook. A lot will be required to be done till the pandemic actually recedes.


Between 2012-13 and 2015-16, India grew primarily riding the back of consumption. The period between 2014 and 2017, witnessed growth on account of improving industrial activities, lower crude oil prices, and supportive policies. Thereafter, demonetisation and rollout of the GST slackened growth to some extent, dwindling private investments.

The Indian economy was already in the deceleration phase, even prior to the nCov pandemic. The Reserve Bank of India (RBI), as a mitigating measure, has been cutting rates at different intervals for the past two years, while maintaining an accommodative stance. Despite the Government of Indias fiscal stimulus packages for the economy to sail through the pandemic, in Q1 of 2020-21, the economic activities took the biggest dent. This setback was mainly led by construction, manufacturing (related to discretionary consumption and exports) and transport industry, as activities in these sectors came to a screeching halt. By the end of Q2 of 2020 -21, some of the economic indicators like exports, Purchasing Managers Index for manufacturing, power consumption, and GST collections, signalled an improvement in economic conditions. This recovery was largely a result of pent-up demand. In the midst of all this, the nCov curve started to flatten with recovery rates surpassing new cases. In Q3 of 2020-21, festival-driven consumption remained a key factor in dragging the country out of a technical recession. The pace of recovery moderated in the Q4 of 2020-21 with estimated year-on-year growth remaining close to zero. The wholesale price index increased to 7.39% in March on a year-on-year basis, the highest since October 2012. On the other hand, the cumulative CPI inflation increased to 6.16% in 2020-21 compared to 4.77% in 2019-20. This clearly suggested the rise in the prices across the economy, right from commodities, transport and communication, to goods and services, among others (Source: https://www.business-standard.com/article/news-cm/cpi-inflation-rises-to-5-52-in-march-2021-121041201279_1.html). By the end of March 2021, the second wave of nCov infections induced a bigger scar while further heightening the possibility of additional business disruptions.


According to the RBI, the GDP growth for 2021-22 is estimated at 9.5% (Source: https://www.newindianexpress. com/business/2021/jun/04/indias-dreams-of-being-a-developed-economy-set-back-by-an-unknown-number-of-years-say-experts-2311686.html). However, any surge in infections during this period, would further prevent economic activities from returning to normalcy, leading to delay. On the flipside, the ongoing inoculation drive and social distancing will play a vital role in countrys short-term economic recovery. Besides, a 34.5% increase in the overall capital expenditure to Rs. 5.54 lakhs cr in the recent Union Budget, Production Linked Scheme (PLI), launch of the Aatmanirbhar Bharat Abhiyan, ongoing Make in India programme, tari_ on imported items, farm subsidies and various schemes for consumers augurs well for the countrys economy in medium to long term as well


(Source: https://www.hindustantimes.com/budget/capital-expenditure-hiked-34-5-to-rs-5-54-lakh-cr-in-fy-22-to-push-growth-101612161404320.html).

FMCG Sector

The Fast Moving Consumer Goods (FMCG) sector is the fourth largest in the Indian economy with a market size of USD 110 Bn in 2020 (Source: http://www.businessworld. in/article/Impact-of-Budget-2021-on-the-FMCG-Sector-/17-02-2021-378615/). The companies within the sector responded well to the various challenges, especially, the nCov pandemic in H1 2020-21. Realigning the product portfolio and fast-tracking the adoption of digital medium for distribution were some of strategic priorities that helped the companies in this regard. The industry showed the highest volume and value growth in the Q3 2020-21 on the back of festive season buying (Source: A report published in The Economic Times in 2021). There was a continued growth momentum in the Q4 2020-21 due to out-of-home channels consumption.

Three Main FMCG Segment Constituents (%)

Food and Beverages 19
Healthcare 31
Household and Personal Care 50


(Source: https://www.ibef.org/industry/Fmcg-presentation#:~:text =Fast%20moving%20consumer%20goods%20(FMCG,for%20the %20remaining%2050%25%20share)


As we entered 2021-22, the devastating second wave of nCov pandemic swept across the Indian subcontinent. This quickly escalated to a strong surge in demand for the health and hygiene products, including hand sanitisers, hand washes, disinfectant sprays and germ protection wipes, to name just a few. The previous fiscal demonstrated the FMCG industrys strong resilience backed by its ability to learn, innovate, and rise from disruptions. Here again, rural India is anticipated to play an incremental role in driving the next level of FMCG growth with an increased demand for branded products. Furthermore, the rural Indian FMCG market is expected to grow to USD 220 Bn by 2024-25 from USD 23.6 Bn in 2017-18. (Source: https://www.ibef. org/industry/fmcg.aspx#:~:text=There%20is%20an%20 increased%20demand,US%24%2023.6%20billion%20in%20 FY18).


During 2020-21, the pandemic added many complexities for the FMCG space. But even then, all was not gloomy as the sector witnessed several positive developments, which is expected to drive companies to expand to meet the future demands. Such expansion can only be attained by opting for the Contract Manufacturing route over in-house manufacturing.

Overall, with the growing nationalistic fervour through the Aatmanirbhar Bharat (self-reliant India) campaign, the PLI scheme, China + 1 strategy, growing digitisation of the supply chain, led by the increasing share of e-commerce sales, the FMCG space and its derivative, the Contract Manufacturing space is likely to witness growth, going forward.

Emerging Trends

Change in lifestyle, traditional culture, and the increasing population in urban areas are the primary growth drivers for the FMCG sector. With the emerging trends, people are becoming more aware of their lifestyle choices and are diverging towards premium products leading to an upsurge in demand for FMCG products. Besides, another emerging trend is the demand for FMCG across the rural landscape on the back of aggressive implementation of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), development of rural infrastructure and healthcare facilities. These measures are likely to provide employment opportunities and generate non-farm income. Again, different sources of income could lead to a healthier demand for the FMCG products. To meet such demand, FMCG companies would have to expand capacities by incurring Capex rather quickly. Thus, making companies opt for Contract Manufacturers.

Growing Discretionary FMCG Consumption

Despite the pandemic, FMCG industry remains one of the spaces with constant (if not increasing) demand. A lot of FMCG products were categorised as essentials when the nCov lockdowns began in India. However, the discretionary FMCG products such as Hair Oil and Fairness Cream lagged behind in terms of sales. But again, this demand is expected to pick up with massive inoculations happening in the country. This will further drive the discretionary FMCG consumption, benefiting FMCG companies and Contract Manufacturers associated along.

Modern Trade

Modern trade, which includes large players such as supermarket chains, hypermarkets, mini supermarkets and out-of-store channels, including e-commerce, are helping increase reach and accessibility of the fast-moving consumer goods. It has led to the emergence of higher number of FMCG companies as well as diverse market teams, leading to the growth of premium products. Furthermore, it has influenced consumers to make more repetitive purchases, leading to the growth in demand for these goods. This further has added scope for FMCG players to increase their production volumes and touchpoints. Meeting the rapid rise in demand through greenfield or brownfield expansion can be time consuming and capital intensive. Therefore, making Contract Manufacturing as the most-suitable option here.

India at Advantage

Raw materials, manufacturing skills, and entrepreneurship are the key advantages for India. The natural resources pool and low-cost labour are a boon to the makers of essential products. The different potential market opportunities such as export growth, import localisation, domestic demand, and Contract Manufacturing give India a new level of competitiveness and scale. Moreover, Government initiatives such as 100% FDI in cash-and-carry segment and in single-brand retail and 51% FDI in multi-brand retail and new Consumer Protection Bill and Make in India strike the perfect chord with the boost in the export of FMCG products.

Production-Linked Incentive Scheme

The Government has approved a Production-Linked Incentive (PLI) Scheme under the Make in India programme, for the food processing sector, entailing an outlay of

Rs. 10,900 cr (Source: https://www.hindustantimes.com/ india-news/centre-approves-rs-10-900-crore-pli-scheme-for-food-processing-sector-101617184114670.html). The incentive will enable food processing FMCG players to invest capital towards getting their products contract manufactured. Further, this will allow them to move up the supply chain from domestic to global.

Other Factors

Lower input costs, improved ease of doing business through trimming of import-export-related red tape, and a focused approach to industrial policy helps in catalysing the growth of Indias manufacturing value chains by assisting them in uplifting their productivity, secure knowhow and technology, and gaining access to capital. On the other hand, the Covid-19 pandemic has exposed Indias fragility and the worlds supply chains. It has also led global companies around the globe, pivot their game by setting up more locations, lessening their dependence on fewer geographies, establishing more manufacturing units, and automating processes. In order to cater a larger set of population, as elaborated above, these companies will not be able to do it all by themselves and that presents opportunities for Contract Manufacturers. The Contract Manufacturers will help lower the overall cost of produce, reduce time to market, help deliver the products in right time, and support across the entire value chain.

And hence, large Contract Manufacturers will have an edge with:

Excellent Project Management and execution skills

Quicker turnaround time and delivery of quality products

Ability to drive economies of scale

Strong portfolio of brands and flexible business model approach, having a one-stop shop for all the needs

Adherence to international quality standards

Capacity to timely deliver and decentralised model with facilities at various locations

Strong research and development abilities to develop new products or product lines

FMCG Contract Manufacturing

Between 1950 and 1980, there was a limited investment in the FMCG sector. Back then, people mostly opted for basic products rather than premium ones. This preference was due to unfavourable demographics like large rural populace, lack of proper education, low disposable incomes, and non-awareness about the products. As a result, the sector did experience low growth, leading to existence of only a few FMCG companies who eventually evolved as true market players. Between 1980 and 1990, a shift in consumer behaviour and wants led to rising demand for a variety of products – encouraging FMCG companies to improve products availability. During this period, many food processing companies launched new products. However, post 1991, with globalisation and liberalisation gradually taking the lead, some FMCG MNCs started looking at India with great interest to benefit from the nations varied demographic offerings. Since then, India has shown great prospects. Cut to present, and the industry is home to various players of different scales, which have resulted in increasing competition. With this, even FMCG Contract Manufacturing started gaining popularity to meet the unique requirements of the players. It provided benefits for both, small and large businesses. On one hand, it offered incentives for the smaller businesses to take their products to the next level. And on the other, it helped relatively larger businesses to improve their overall operational efficiencies. Some of the benefits that Contract Manufacturing offered range from controlling costs, managing labour, controlling quality, meeting regulatory requirements, reducing pricing pressures to even accelerating time to market, among others. With these benefits looming, a growing number of FMCG companies started turning to Contract Manufacturers, allowing them to focus on their core business activities. Going forward, FMCG companies can significantly minimise their risks in the areas of operations, supply chain, financial and human management by simply opting for Contract Manufacturing.

Just like FMCG industry, the Contract Manufacturing industry has evolved multi-fold over the years:

Phase I Phase II Phase III Phase IV
(The 1980s) (The 2000s) (Present Times) (The Future)
Small Scale Industry Area-based Reservations GST Global Sourcing Hub like
(SSI) Reservations Direct Tax Exemption One Country - One market Pharma Generics
Tax Exemptions for SSIs Indirect Tax Exemption Changes in Distribution Network E-commerce and Modern Trade leading to Explosion of Small Brands, wanting to Refrain from Manufacturing Facilities Investment Most product categories in India are duopolies or oligopolies unlike in the US/Europe which have several brands under each category


Higher Flexibility

FMCG Contract Manufacturers completely adhere to setting up of plants, ensure effective allocation of resources, logistic and supply chain management, and also address regulatory challenges, among others. All these services ascertain us to dedicatedly focus on business activities such as marketing, developing ground-breaking products and freeing up employees to create more innovative prototypes. There are also some Contract Manufacturing companies offering end-to-end services – like project executions, vendor developments, R&D and QA, and product & packaging development, among others. This opportunity bodes well for Contract Manufactures like us. With three different types of business models, that work for different clients providing on-demand solutions as well as higher flexibility. We can cater to seasonal requirements and unexpected demand overflows with our well-equipped state-of-the-art manufacturing facilities as well as processing, packaging, warehousing and logistic facilities – all under one roof.

Better Technical Insights

Experienced Contract Manufacturers provide businesses with deeper technical insights, right from product development to packaging. This, because they can identify potential risks and flaws within the process at the early stages. This ability can help prevent serious errors in manufacturing that could cost businesses in the long run. Decades of expertise, supported by the skilled management team and backed by the experts in technical analysis of the market and the products, at HFL, we have a winning edge. We are renowned for constant innovation and expertise in product packaging and developing new products. Any new products with an immediate or short-term window have been comfortably handled and nurtured by the team, the key reason behind the long-term relationships with the customers.

Manufacturers Inclination Towards Best Standards

In India, a growing number of Contract Manufacturers are adopting the best industry practices which are on a par with international standards. These practices can enable a company to meet the requirements of clients, globally, in terms of quality standards, product specifications, and timelines. Therefore, asserting a sense of high credibility amongst foreign stakeholders to outsource their products to India. We have to our credit, been bestowed with the various certifications for its strict quality control processes and complying with several external standards. All the processes are reviewed regularly ensuring quality maintenance. We have been known for our commitment to the quality systems and the focus on continuous improvements.

Skilled Labour

The availability of Indian skilled labour at relatively lower cost provides a significant advantage for global FMCG companies to outsource from India. Instead of setting up an entire plant in India, companies can select Contract Manufacturers who can help ensure right labour sourcing and efficient management along with other aspects. The Indian Government has launched various skill development programmes under the umbrella of the National Skill Development Programme (NDMC). Through this, the Government aims at expediting decision-making across sectors and states to achieve skilling at scale with speed and standards. This augurs well for the Contract Manufacturing landscape in India. Skilled labourers are the backbone of HFL. We have always striven to upskill our labour, by providing them necessary training from time to time.

Resource Availability

India, with its rich agricultural commodity and chemical resources, can abundantly provide for the prime ingredients of FMCG products. Sourcing these raw materials locally can help save time and manufacturing cost appreciably. Our ability to procure resources at reasonable prices locally, puts us in good stead. We also have the relevant supplier agreements in place.


Various factors like rising costs, regulatory pressures and aging manufacturing facilities in developed markets can lead global FMCG companies to reduce their internal capacities in product formulation as well as production. In fact, by outsourcing FMCG production from India, the global companies can save up on operational costs while also reaching out to the countrys mass consuming population. With flexible and refined business models available for the customers, we are well equipped to handle wide range of formulations, batch sizes and packaging foods and all kinds of products.

D2C Brands

D2C is a distinctive marketing strategy that uses public-facing brand experience, complete with direct-to-consumer online sales which allows manufacturers control and cultivate relationships with customers. Ever since 2016, over 600 D2C brands have been launched in India. The rise of convenience, growing social networks and connected platforms as well as a switch to health & wellness-driven choices, is paving the way for D2C market in India to grow at a faster pace than expected. The asset-light operations adopted by D2C firms auger well for us, as a Contract Manufacturer. Our legacy of catering to a diverse industry segments, will allow us benefit from this shift in the Indian retail industry.

Rise of Challenger Brands

Challenger brands are the brands with high ambitions, often that outstrip their resources. However, they are cognisant of the need to have a very different take on strategy, positioning and culture in order to compete with the established market leaders. They can eventually even become market leaders, but can have capital constraints that restricts their spending towards promotion, R&D or operations. Leveraging a Contract Manufacturer, not only allows them to hold onto their precious capital, but also reduce the fiscal burden of production and all incremental costs on their bottomline. And hence, they can repurpose their capital to apply it to marketing, sales and customer acquisitions. With the rise of these brands in India recently and to meet with their production needs, the Contract

Manufacturers can give the much-needed flexibility and capacity to scale to market quickly.


Dependence on Government Policies

Policies by the Government play an important factor in shaping up any sector. A lot of FMCG companies set up their warehouses in states where they can enjoy certain benefits and exemptions under current tax regime. If the Government changes the policies, it may hurt the cost dynamics of the Companys products. On the other hand, change in taxation (in some cases which ends up bringing back tax arbitrage for brand owners), price change for specific products will influence the industry dynamics.

Competition – Loss of Key Customers and Market Share

With relaxation of certain governmental norms, theres an increased competition for every sector and Contract Manufacturing is no stranger to it. Many players are expanding into new geographies and categories with modern retail and e-commerce, changing the traditional trading channels. The FMCG industry has been a highly fragmented industry as more companies enter the market. Any new competition in the market poses threat to the existing players in the industry. Thus, with increasing competition everywhere, a Contract Manufacturer always has a risk of losing the contract to a more competitive party.

Why HFL for FMCG Contract Manufacturing?

A country of 1.39 Bn people with the median age of its population being 28 years; we can say that we are witnessing one of the biggest consumption booms unfolding in India. Rapid urbanisation, rising economic afluence, burgeoning reach of internet even in the innermost parts of the country, resulting high life aspirations; and evolving social structure leading to striking changes in consumption pattern are some of the major factors that are propelling Indian FMCG sector to the frontiers of enormous growth. Expanding at CAGR of 14%, the Indian FMCG sector is estimated to touch a market size of USD 220 Bn by 2025. A latest report by Boston Consultancy Group (BCG) pegs the estimated amount of total household consumption expenditure in India at Rs. 290-300 Tn by 2030.


(Source: http://www.businessworld.in/article/Impact-of-Budget-2021-on-the-FMCG-Sector-/17-02-2021-378615/). In fact, the size of the packaged food market alone is projected to be USD 70 Bn by 2025. (Source: https:// www.newindianexpress.com/business/2020/dec/31/ fmcg-firms-ramp-up-innovation-as-consumer-trends-shift-trajectories-2243463.html)

The above-mentioned figures clearly show that FMCG manufacturing sector is poised to become one of the largest sectors in terms of value addition to the economy as well as employment generation. In addition to robust domestic growth opportunities, in the light of current situation of the nCov pandemic, the world is seriously considering India as a potential contender for the status of ‘production powerhouse as a part of its China + 1 strategy.

However, to set up manufacturing facilities in India on a huge scale presents its own set of challenges. An estimate by Reserve Bank of India as cited in a report published by Mckinsey, average capacity utilisation by Indian manufacturers is around 60% to 70%, which is well below its optimum level; caused by various bottlenecks in raw material procurement and sourcing, availability of trained and competent human task force and regulatory issues.

This is where Hindustan Foods Limited (HFL) finds a strategic fit in the Contract Manufacturing space. According to the above-mentioned report by Mckinsey, by the time the Indian GDP reaches the USD 5-Tn mark; Contract Manufacturing would add value worth USD 4 Bn in GDP of India. (Source: https://www.mckinsey.com/industries/ advanced-electronics/our-insights/a-new-growth-formula-for-manufacturing-in-india#). With that, the current internal estimates suggest the industry to be pegged in the range of Rs. 50,000-1,00,000 cr*.

As a pioneer in Indian Contract Manufacturing space, HFL leverages its strengths in terms of highly equipped, state-of-the-art manufacturing facilities and well-integrated backend services such as processing, packaging, warehousing and logistics facilities to provide one-stop-shop solution for all the kinds of manufacturing requirements across a very wide spectrum of products in the FMCG sector.

Our business model operates on 3-pronged approach: Dedicated facility which exclusively caters to all the requirements of the principal company; Shared facility for anchor company with major requirements along with a few other clients with relatively smaller requirements; and

Turnkey private label manufacturing offering the client every service right from product development till the time it reaches market.

With cutting-edge R&D facilities, constant product innovations and flexible and refined business models available for the customers; we are well equipped to handle wide range of formulations, batch sizes and packaging for all kinds of products. We can cater to seasonal requirements and unexpected demand overflows with this model with shorter lead time. Our business model is a right strategic fit not only for the existing renowned players in the FMCG space, but is also equally suitable for challenger brands. We have a long and credible execution history with major FMCG brands, having already manufactured a wide range of products across Home Care and Personal Care, Foods & Beverages, Mosquito Repellent, and Leather among others. Taking this into consideration, we are continuously adding new capacities and product categories to cater the needs of various customers. Our strong execution capabilities, management expertise, state-of-the-art facilities, one-stop solution service offerings and flexible business model, collectively position us well to cater the needs of every client across the various FMCG categories. Besides, we believe that the single-most striking factor that sets us apart from our competitors is our ‘Product-Agnostic and ‘Geography-Agnostic approach. Being deeply entrenched in Contract Manufacturing space, we are prepared to commission manufacturing for any product in the FMCG space, irrespective of location or product category. HFL trumps the equation with its steadily built capacities over a period of more than 3 decades to cater to any kind of manufacturing requirement. Our 11 manufacturing sites spread far and wide across India deploying high-end technology; and highly competent task force of more than 2,400+ people ramping up production for our clients round the clock have clearly established us as the market leader in the Contract Manufacturing space. Some of our latest momentous events include commissioning of home cleaning solutions plant at Silvassa, shoes production facility in Puducherry and significant land acquisition in Hyderabad and Lucknow. These aspects are testimony to our commitment to become a steadfast, strategic partner to the success of established as well as upcoming FMCG brand names in India.


As has been captured in the discussions above, Contract Manufacturing is a derivative of the FMCG segment. And, therefore, no separate growth drivers have been listed here. In that case, the growth drivers for the FMCG sector can double up as the growth drivers for Contract Manufacturing as well.

nCov: Responding to Di_erent Phases

During the initial phase of nCov, we stood by our commitment towards clients and employees time and again. For our clients, we ascertained uninterrupted supply to ensure continual reach to their customers by delivering essential items. This, while taking adequate care of our employees as well. We were driven by our focus on our core values of integrity, innovation and initiative – aimed at creating values for all the stakeholders. We were also able to mitigate inflated prices of raw material through our resilient business model and strong negotiation skills. Now, with the second wave looming since the end of 2020-21 our experience from the last year has prepared us to overcome the recurring challenges.

As the second wave of nCov passes by, the phase of pent-up demands is likely to kick in again. The FMCG sector is learning, innovating and rising from various fluctuations of essential and non-essential items. To further sustain, grow and scale after a certain level, the FMCG companies may be compelled to pass the production to Contract Manufacturers. For this, we have the infrastructure in place and further scope for capex plan to meet requirement of FMCG companies.

Company Overview

We are one of the most diversified and organised Contract Manufacturers of FMCG products. Our facilities are fully integrated and equipped with modern laboratories as well as processing, packaging, warehousing and logistic facilities. Through our 11 manufacturing plants widespread across India, we provide one-stop Contract Manufacturing solutions to domestic as well as overseas clients. Our flexible business model allows us to meet the requirements of any Clients, irrespective of its size or product categories.



Particulars 2019-20 2020-21 Y-o-Y growth
Revenue from Operations 77,190 1,38,635 80%
EBITDA 5,690 8,601 51%
Profit after Tax 2,273 3,647 60%
Basic Earnings per Share (Rs.) 11.97 17.21 44%

2020-21 was another satisfactory year for Hindustan Foods Limited. Revenue from Operations increased to Rs. 1,38,635 lakhs, growing by 80% over 2019-20. EBITDA rose to Rs. 8,601 lakhs, increasing by 51% as compared to 2019-20. Profit after Tax surged to Rs. 3,647 lakhs, increasing by 60% over the previous year. The basic EPS increased by 44%, this overall improvement can be accredited to ramping up of new plant and additional capacities.

*Earnings per Share (EPS) is the portion of a Companys profit allocated to each share. It serves as an indicator of a Companys profitability. It is calculated by dividing profit for the year by weighted average number of shares outstanding during the year.


Types of Ratio Explanation of Ratios 2020-21 2019-20 % Change
Inventory Turnover (Times) Inventory Turnover is the number of times a company sells and replaces its inventory during a period. It is calculated by dividing turnover by average inventory. 9.92 9.67 2.55%
Current Ratio (Times) The Current Ratio is a liquidity ratio that measures a companys ability to pay short- term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities. 1.34 1.29 4.57%
Types of Ratio Explanation of Ratios 2020-21 2019-20 % Change
Debt Equity Ratio (Times) The Debt Equity Ratio is used to evaluate a companys financial leverage. It is a measure of the degree to which a company is financing its operations through debt versus wholly owned funds. It is calculated by dividing a companys total borrowings (i.e. long-term debt, short term debt and current maturities of long-term debt) by its shareholders equity. 0.96 0.87 10.46%
Debtors Turnover (Days)* Debtors Turnover Ratio is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts. 11.50 19.03 -39.56%
Return on Net Worth (%) Return on Net Worth (RoNW) is a measure of profitability of a company expressed in percentage. It is calculated by dividing total comprehensive income for the year by average net worth for the year. 17.73 17.89 -0.92%

* The Debtors Turnover Ratio was reduced by nearly 7 days. This was mainly due to better credit terms. The management expects to be able to sustain this.

Risks and Concerns

As a Contract Manufacturer, we are exposed to a variety of risks inherent to our daily business operations. We manage these risks by reducing the likelihood of occurrence as well as the financial impact of these to an acceptable level. Mitigating risks are a vital part of our managing activities.

Risks Impact Mitigation Risk Level
Economic Risk We are subject to risks emanating from various macroeconomic factors such inflation changes, Government regulations exchange rates, and political instability, among others. With different waves of nCov, demand for non-essentials items can be affected. We carry out Contract Manufacturing for wide variety of essential products. Regardless of any economic downturn, demand for essential consumer items remains less impacted. Our diversified Contract Manufacturing model helps us keep our facilities running. Medium
Liquidity Risk We are exposed to liquidity risk where we may not be able to raise the necessary funds to fulfil a payment obligation in time or at all. Risks resulting from cash flow fluctuations are detected and controlled at an early stage as part of short, medium and long- term liquidity planning. During 2020-21, we did not avail any Reserve Bank of Indias prescribed moratorium. Low
Contract Risk Potential losses can occur due to our inability to meet requirement set by our clients. We have constantly delivered best quality products to all our clients. This has resulted in contract renewal from our existing clients and acquisition of new ones as well. Low
Raw Material Price Risk Fluctuation of raw material risks are primarily driven by fundamental global and regional market data such as availability, demand and inventories. Rise in raw material prices can increase our operating costs. Our business model allows us to pass down the increase in the raw material cost to our principals. Besides, our decades rich industry experience has also helped us build a strong network, ensuring smoother procurement of raw material from suppliers at best prices. Low
Risks Impact Mitigation Risk Level
Personnel Risk Our Company competes intensely with other companies for trained personnel and thus is exposed to the risk of being unable to suitably fill vacancies. Our fair and effective recruitment process helps us attract right talent. Moreover, our human resources management policies are such that it aims encouraging specialists and managers to stay with our Company for the long term. Medium
Quality and Safety Risk Serious safety standard violation for products could damage our reputation and reduce the utilisation level of our production. The quality management system covers all processes, right from the procurement of raw materials through the production process itself, to finally delivery. Low

Human Resource Management

Our diverse team of 2,400+ people are key to our success. We follow a modern approach to talent management by developing people holistically. We strive to establish an engaged workforce with competent people and sound leadership. We track the engagement level of our staff in order to ensure optimisation of their contribution. Our skills development programme forms a cornerstone of our employee attraction and retention strategy. We believe that a trained, informed and skilled workforce will be engaged in our business and also personally be satisfied and therefore retained. We also recognise our responsibility in the employment context. Accordingly, we look into our surrounding communities to recruit people at our facility. Further, we are committed to providing a safe and healthy working environment. Engagement with regulators to increase safety standards at our operations and to ensure that no such incidents occur remain a priority for our business.

Internal Control Systems and their Adequacy

Our Company Board laid down Internal Financial Controls within the meaning of the explanations to Section 134(5) (e) (‘IFC) of the Companies Act, 2013. The Board believes that our Company has sound IFC, which commensurate the nature and size of our business. The industry we operate in, however, is dynamic. Therefore, our IFC cannot be static. It must evolve as the business, technology and fraud environment change in response to competition, industry practices, legislation, regulation, and current economic conditions. With business evolvement, gaps in the IFC are bound to be there. We have a process in place to continuously identify these gaps. We implement newer and/or improved controls when we identify gaps that could potentially have a material effect on our operations.

Caution Regarding Forward-looking Statements

In this annual document, we have disclosed forward-looking information to allow traders to be aware of our potentialities and take informed investment decisions. This document and different statements, written and oral, that we periodically make, comprise forward-looking statements that set out anticipated effects based totally on the managements plans and assumptions. We have tried any place viable to perceive such statements by way of using words such as ‘anticipate, ‘estimate, ‘expect, ‘project, ‘intend, ‘plan, ‘believe and words of comparable substance in connection with any discussion of future performance. We cannot assure that these forward-looking statements will be realised; though we agree that we have been prudent in our assumptions. The achievement of consequences is subject to risks, uncertainties and even inaccurate assumptions. Should regarded or unknown dangers or uncertainties materialise, or should underlying assumptions prove inaccurate, authentic outcomes should range materially from those anticipated, estimated or projected. We undertake no responsibility to publicly replace any forward-looking statements, whether as a result of new information, future activities or otherwise.

Notice is hereby given that the Thirty-Sixth Annual General Meeting of the Members of Hindustan Foods Limited (‘the Company) will be held on Thursday, the September 23, 2021 at 11.30 a.m through Video Conference facility (‘VC) or Other Audio - Visual Means (‘OAVM), to transact the following business. The venue of the Meeting shall be deemed to be the Registered Office of the Company at Office no. 3, Level-2, Centrium, Phoenix Market City, 15, LBS Road, Kurla (West), Mumbai - 400 070.


1. To consider and adopt the Audited Standalone Financial Statements of the Company for the Financial Year ended March 31, 2021 and the Reports of the Board of Directors and Auditors thereon and in this regard to consider and if thought fit, to pass, with or without modification(s), the following resolution as an

Ordinary Resolution:

"RESOLVED THAT the Audited Standalone Financial

Statements of the Company for the Financial Year ended March 31, 2021, including the Audited Balance Sheet as at March 31, 2021, Statement of Profit & Loss and Cash Flow Statements for the year ended on that date and the Reports of the Board of Directors and Auditors thereon be and are hereby considered, approved and adopted."

2. To consider and adopt the Audited Consolidated Financial Statements of the Company for the Financial Year ended March 31, 2021 and together with the Report of Auditors thereon and in this regard to consider and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution: "RESOLVED THAT the Audited Consolidated Financial

Statements of the Company for the Financial Year ended March 31, 2021, including the Audited Balance Sheet as at March 31, 2021, Statement of Profit & Loss and Cash Flow Statements for the year ended on that date and the Reports of the Auditors thereon be and are hereby considered, approved and adopted."

3. To appoint Mr Shrinivas V Dempo(DIN: 00043413), who retires by rotation as a Director and being eligible offers himself for re-appointment and in this regard, to consider and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution:

"RESOLVED THAT pursuant to the provisions of Section

152 and other applicable provisions of the Companies Act, 2013, Mr Shrinivas V Dempo (DIN: 00043413), who retires by rotation at this Meeting be and is hereby re-appointed as a Director of the Company, liable to retire by rotation."


4. Re-appointment of Mr Shashi Kalathil (DIN: 02829333) Independent Director for the 2nd term of five years To consider and if thought fit, to pass with or without modification, the following resolution as a Special Resolution:

"RESOLVED THAT pursuant to the provisions of

Sections 149, 150, 152 read with Schedule IV and other applicable provisions of the Companies Act, 2013 ("the Act") and the Companies (Appointment and Qualification of Directors) Rules, 2014 and the applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (including any statutory modification(s) or re-enactment(s) thereof, for the time being in force), Mr Shashi Kalathil (DIN: 02829333), who was appointed as an Independent Director and who holds office as an Independent Director up to conclusion of this Annual General Meeting and in respect of whom the Company has received a notice in writing under Section 160 of the Act from a Member proposing his candidature for the office of Director, being eligible, be and is hereby reappointed as an Independent Director, not liable to retire by rotation and to hold office for a second term of 5 (five) consecutive years, w.e.f. September 24, 2021 and, up to September 23, 2026; RESOLVED FURTHER THAT the Board of Directors be and is hereby authorised to do all acts and take all such steps as may be necessary, proper or expedient to give effect to this resolution."

5. To ratify the remuneration payable to the Cost Auditor:

To consider and if thought fit, to pass with or without modification, the following resolution as an Ordinary Resolution:

"RESOLVED THAT pursuant to the provisions of

Section 148 of the Companies Act, 2013 (‘the Act) read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014 and other applicable provisions of the Act (including any statutory amendment(s), modification(s), clarification(s), substitution(s) or re-enactment thereof for the time being in force) the remuneration payable to M/s. Poddar & Company, Cost Accountants (Firm Registration No. 101734), appointed by the Board of Directors of the Company in their Meeting held on August 11, 2021, as the Cost Auditors to conduct the audit of the cost records of the Company in relation to its business for the Financial Year ended March 31, 2022, amounting to Rs. 4,00,000 (Rupees Four Lakhs only) plus taxes as applicable, be and is hereby ratified and confirmed; RESOLVED FURTHER THAT any one of the Directors or Company Secretary be and are hereby severally authorised to undertake all actions, deeds, matters, and things as may be necessary or expedient for or in connection with this resolution and to settle any question or difficulty that may arise in this regard in the best interest of the Company."

By Order of the Board of Directors
Date : August 11, 2021 Company Secretary

Registered Office:

Office No.3, Level-2, Centrium,

Phoenix Market City, 15, LBS Road,

Kurla (West), Mumbai 400 070

Website : www.hindustanfoodslimited.com

Email : investorrelations@thevanitycase.com

CIN: L15139MH1984PLC316003