Hoac Foods India Ltd Management Discussions

1. INDUSTRY STRUCTURE AND DEVELOPMENTS:

Over view of the Food Industry The fast-moving consumer goods (FMCG) sector is Indias fourth-largest sector and has been expanding at a healthy rate over the years as a result of rising disposable income, a rising youth population, and rising brand awareness among consumers. With household and personal care accounting for 50% of FMCG sales in India, the industry is an important contributor to Indias GDP. India is a country that no FMCG player can afford to ignore due to its middle-class population which is larger than the total population of the USA. The Indian FMCG market continues to rise as more people start to move up the economic ladder and the benefits of economic progress become accessible to the general public. More crucially, with a median age of just 27, Indias population is becoming more consumerist due to rising ambitions. This has been further aided by government initiatives to increase financial inclusion and establish social safety nets. Growing awareness, easier access, and changing lifestyles have been the key growth drivers for the sector. The urban segment (which accounts for a revenue share of around 55%) is the largest contributor to the overall revenue generated by the FMCG sector in India. However, in the last few years, the FMCG market has grown at a faster pace in rural India compared to urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50% of the total rural spending.

Business over view

OurCompany was originally incorporated as a private limited company on March 13, 2018 under the Companies Act, 2013 in the name and style of “HOAC MP Atta Spices Manufacture Private Limited” bearing Corporate Identification Number L15120DL2018PTC330739 issued by the Registrar of Companies, Delhi. Further, the companys name was changed to “HOAC Foods India Private Limited” vide Fresh Certificate of Incorporation dated November 03, 2021 issued by Registrar of Companies, Delhi. Subsequently, our Company was converted into public limited company pursuant to a shareholders resolution passed at an Extra-Ordinary General Meeting held on October 13, 2023, and name of our Company was changed to “HOAC Foods India Limited” and a fresh Certificate of Incorporation dated October 30, 2023 was issued by Registrar of Companies, Delhi Our Company is engaged in the manufacturing of flour (chakki atta), herbs & spices, unpolished pulses, grains, and yellow mustard oil in our product range and markets & sell it in and around Delhi-NCR under the brand name “HARIOM” through offline and online. We handpick our raw materials from various parts of the country and process our products with utmost care without using artificial preservatives or chemicals, thereby creating a product portfolio of organic spices and flour, which carry the freshness and goodness of each ingredient. Our unique model has helped us penetrate the niche segment of our market and establish a customer base in and around Delhi-NCR. Since our inception, our objective has been to produce high-quality natural spices and food products without artificial preservatives or synthetic substances. To achieve this, we have developed a unique business model in which we manufacture and package our products in quantities that can sustain a customer until the shelf life of the product, reducing waste and providing a diverse range of products with freshness and goodness.

Our Company was founded in 2018 by our Promoters, Mr. Rambabu Thakur, Mrs. Gaytri Thakur, and Mr. Yashwant Thakur, who laid the foundation and started this journey with the sole objective of manufacturing flour, spice, and other food products. With the focus on providing quality food products, cost-effectiveness, and improved accessibility through Exclusive Brand Outlets (Both company-owned and Franchisee-owned), and our mobile application and as we deal with the end-user consumer which makes us a B2C company. Their next generation, Mr. Yashwant Thakur continued the legacy and developed extensive experience and expertise in the industry. In addition to our leadership team, we have a qualified senior management team with experienced team in the field of production and sales of consumer goods, procurement of Agri-Commodities and franchisee relations management and development, which we believe positions us well to take advantage of future growth opportunities and drive our continued success.

Presently most of our sales are derived from Delhi-NCR region. Our extensive franchisee network comprised of 5 company-owned outlets and 10 franchisee-owned outlets, totaling 15 Exclusive Brand Outlets which sells and markets only our brands products, complemented by our sales and marketing team comprising of 15 employees, as of August 10, 2024. We also rely on D2C platform through our in-house built Mobile Application both on Google Play Store and Apples App Store and Company website which is available for sale of our products. We have also placed our products on Amazon an online marketplace in India. We have implemented a franchisee management system that helps us coordinate with our franchise owners, store managers and provides the visibility on our inventory levels and franchisee and store sales, enabling us to optimize our distribution network and reduce the time between the food product manufactured in our facility to consumers kitchen which is around within same day to maximum 1 day. This strong approach towards good supply-chain management across different business processes enable us to preserve the freshness, taste and nutritional value of our products.

Our range of flour includes MP Sharbati Atta, MP Lok One Atta, Multi-grain Atta along with different healthy flours. Over the years, we have leveraged our experience and understanding of the preferences and tastes of our consumers, and target markets to develop a wide range of products, which has strengthened our foothold in the Delhi-NCR region specifically in Indian Flour, Spice and Foods category. As of the date of this Prospectus, our product portfolio comprised of 4 categories which include products such as, Spices & Herbs, Oil, Wheat Flour (Chakki Atta) & Healthy Flour, Pulses, Rice & Grain and other food products with 153 product SKUs, thereby addressing a wide variety of tastes and preference.

Here are the key differences between MP Sharbatiwheat and regular wheat:

Protein content: Sharbati wheat possesses a slightly higher protein content compared to regular wheat, making it an excellent choice for bread-making purposes.

Flavor: Sharbati wheat offers a unique nuttier and sweeter flavor profile, making it a popular preference for creating chapatis or rotis, traditional Indian breads.

Gluten content: Sharbati wheat containsa lower gluten content than regular wheat, which makes it less suitable for producing pastries or cakes that require more gluten for proper texture and structure.

Yield: Sharbati wheat has a lower yield than regular wheat, leading to higher production costs and limited availability in comparison. As a result,it is considered relatively more expensive and less commonly found.

Nutritional value: Sharbati wheat boasts a higher nutritional value, serving as a good source of essential vitamins and minerals like iron, calcium,and potassium. This aspect contributes to its reputation as a healthier alternative

to regular w heat.

In summary, Sharbati wheat represents a specific varietyof wheat with distinct characteristics. Its higher protein content, sweeter flavor, lower gluten content, and enhanced nutritional value make it an ideal choicefor making traditional Indian breads such as chapatisor rotis. However, its lower yield and relatively highercost limit its widespread availability. Since incorporation, it has been our Companys vision and focus to manufacture and supply superior quality products to our customers, which has enabled us to expand our business operations and receive certifications for our products and efficient processing techniques. We have a quality control and assurance division (“Quality Division”) in all our manufacturing units which carriesout the requiredtests on the materials received including raw materials which are used in the manufacturing process and also on the final products. Our Quality Division also carries out tests on all the stages of our manufacturing processes to ensure that the quality is built through the process. We ensure adherence to the regulatory standards laid down for our products.

We operate from our manufacturing facility Village- Bhondsi, Near Geeta Nand Ashram tehsil, Sohna, Gurugram- 122012. Our manufacturing facility is equipped with plant & machinery to facilitate efficient and effective production process of cleaning, drying, grading, grinding and packaging. All spices, flour and other product are manufactured at our unit with utmost care and by way of natural process and scientific methods so as to retain the natural properties of the food like color, odor and nutritional value with time. Systematic procurement of raw spices, flour and herbs in their respected seasons help us to provide linear quality flour, spices and other food products for the whole year. We also sell tea masala and other grocery products like mustard oil, sambhar masala Channa masala, chaat masala and various other grains and rice exclusively through our brand retail outlets and D2C mobile application and website which are frequently used in the kitchen All our products are manufactured at our own manufacturing facility and packaged under our brand name of “HARIOM”. Along with this, the unit also have an in-house laboratory for testing the quality of products.

Our revenues from operations for the financial year ended on Fiscals 2025, 2024, 2023, and 2022 were f2664.07 lakhs, Rs 1592.94 lakhs, Rs 1,220.64 lakhs, and Rs 1,087.05 lakhs respectively. Our PBT for the financial year ended on Fiscals 2025, 2024, 2023, and 2022 was f348.50 lakhs, f136.28 Lakhs, Rs 78.80 Lakhs, and Rs 37.14 Lakhs,

rcspccm ely.

2.OPPORTUNITIES, THREATS & CHALLENGES:

A. Opportunities: Rising consumption levels in rural markets is expected to drive demand for FMCG products. The India market has a huge untapped rural market that is continuously offering opportunities for growthin the FMCG sector. Risingincome levels and efforts by marketers to tap the consumer base at the bottom of the pyramidare paying off to create opportunities in rural India.

B. Threats & Challenges: The FMCG sector has been facing a number of issues. Regulatory environment, substantial procedural delays with regard to land acquisition, land use, product launches, rising cost of construction, policy changes and regulatory bottlenecks may impact profitability and affect the attractiveness of the sector and companies operatingwithin the sector.Higher rates of statutory fees and other taxes inflate the cost of manufacturing.

3.RISKS AND CONCERNS:

Business Risk:Running a successful business involves navigating a range of risks and uncertainties. Your company is exposed to a number of risks such as economic, regulatory, taxation and environments risks as well as sectoral investment outlook. Some risks that may arise in the normal course of business that could impact its ability to address the future development comprise credit risk, liquidity risk, counterparty risk, regulatory risk, commodity inflation risk and market risk

Market Risk: Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changesin market prices. Market risk comprises two types of risk: interest rate risk and other price risk, such as equity price risk and commodity/ real estate risk. Financial instruments affected by market risk include loans and borrowings and refundable deposits.

Credit Risk: Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including refundable joint development deposits, security deposits, loans to employees and other financial instruments.

Liquidity Risk: The Companys objectiveis to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans. The company aims to understand measure and monitor the variousrisks to which itis exposed and to ensure that it adheres, as far as reasonably and practically possible, to the policies and procedures established by it to mitigate these risks.

Market price fluctuation: The performance of your Company may be affected by the sales realizations from its projects. These prices are driven by prevailing market conditions, the nature and location of the projects, and other factors such as brand and reputation and the design of the projects. Your Company d tries to ensure steady cash flow even during adverse pricing scenario.

Industrial cyclicality: The real estate market is inherently a cyclical market and is affected by macro-economic conditions, changes in applicable governmental schemes, changes in supply and demand for projects, availability of consumer financing and liquidity. Your company is attempting to hedge these risks by adopting models comprising joint ventures, residential platforms. However,any further significant down turn in the industry and the overall investment climate may adversely affect the business.

Statutory approvals: This sector is heavily regulated by the central, state and local governments. Real estate developers are required to comply with a numberof laws and regulations. Delaysin approvals cause delay in project completion timelines, leading to capital blockage and high interest burden to the developers.

4.INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Hoac Foods India Limited and its Management have established robust Internal Control systems to ensure the accuracy of financial reporting and protect against potential losses or unauthorised use of assets. These controls help in the optimal utilisation of the Companys resources while also ensuring that transactions are properly authorised, recorded, and reported to the Management. The Company continually improves and tests its internal controls to ensure the effectiveness of Management and operating procedures. It adheres to accounting standards and guidelines for maintaining books of accounts and financial statement reporting. To assess the effectiveness of internal controls, independent internal auditors are appointed to conduct risk-based audits throughout the year. The Audit Committee of the Board of Directors receives a summary of the auditors observations, and thereon, the necessary corrective measures are undertaken on a prompt basis. Internal control systems are designed to keep a check on operational efficiencies, adherence to applicable laws and regulations, and the reliability of financial reporting.

5.FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Revenue / loss from Operations:

REVENUE BREAK-UP

Following is our detailed revenue breakup of the preceding three fiscals.

(Rs In lakhs)

S. No.	Fiscal 2025	Fiscal 2024	Fiscal 2023	Fiscal 2022
l.Revenue from Operations	2447.66	1562.94	1210.09	1080.38
2.Other Income	16.41	0	10.55	6.67
Total	2664.07	1562.94	1220.64	1087.05

EBIDTA: EBIDTA stood at Rs. 427.07 Lakhs during the year as against Rs. 181.72 Lakhs during the previous year with a slight increase of Rs. 245.36 Lakhs compared to previous financial year.

Prolits & ratios:

The company has incurred a profit of Rs. 250.16 Lakhs during the financial year as against a profit of Rs. 102.35 Lakhs for the corresponding previous year. The Companys Basic Earnings Per Share stood at Rs 6.79 during the current financial year as against f3.88 in the previous financial year

Shareholders funds:

Issued, Subscribed & Paid-up share Capital of the Company as at closure of financial year 2024-25, was INR 384.32 Lakhs divided into 38,43,210 Equity Shares of INR 1 each.

Issued, Subscribed & Paid-up share Capital was increased from INR 2,68,82,100 divided into 26,88,210 equity shares of INR 10/- each to INR 3,84,32,100 divided into 38,43,210 equity shares of INR 10/- each. In conjunction with the listing, the Company has successfully issued 11,55,000 new equity shares at a face value of Rs 10 each. These shares were issued at a premium of f38 per share, resulting in an effective issue price of f48 per share. The public response to this offering was overwhelmingly positive, with the issue being subscribed by 1994 times.

The Company has achieved a significant milestone by listing its shares on the NSE SME Emerge platform. This strategic move marks the companys entry into the public capital markets, enhancing its visibility, credibility, and accessibility to a broader range of investors. The listing on NSE SME Emerge is expected to facilitate future growth, provide greater liquidity to shareholders, and support the companys long-term strategic objectives. The proceeds from the new share issuance are intended to be used as per the objects mentioned in the offer documents.

Qualified Institutions Placement (QIP)

During the year 2025-26, the Company successfully completed a Qualified Institutions Placement (QIP) as per the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, SEBI (LODR) Regulations, 2015 and Sections 42 & 62 of the Companies Act, 2013. We issued and allotted 4,97,250 equity shares of face value f10 each to eligible Qualified Institutional Buyers at an issue price of f201.00 per Equity Share (including a premium of Rs 191 per Equity Share), [and reflects a discount of Rs. 9.64 (i.e. 4.58%) on the Floor Price of Rs.210.64] aggregating to a significant f9,99,47,250. The proceeds from this QIP have substantially strengthened our financial position, providing the necessary flexibility to pursue our ambitious growth plans. Loan Funds: The company continues to get the support from its bankers and financial institutions. The secured loans availed by the company stood at Rs. 447.48 Lakhs at the end of the financial year.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS:

Ratio	Current Period	Previous Period	Variance in %	Reason for variance by more
Current Ratio	1.98	1.85	7.01%	N/A
Debt-Equity Ratio	0.39	0.67	-71.39%	The ratio has improved due to the enhanced performance of the Company during the current year and proceeds from initial public offering during the current year.
Debt service coverage ratio	-2.21	137.66	6340.11%	The ratio has improved due to the improvement in the performance of the Company during the current year.
Return in equity ratio	0.22%	0.31%	-28.10%	The ratio has improved due to the improvement in the performance of the Company during the current year.
Inventory turnover ratio	4.77	3.41	39.83%	The ratio has improved due to the improvement in the performance of the Company during the current year.
Trade receivable turnover ratio	1.21	3.94	-69.28%	The ratio has decreased due to an increase in credit sales and the extended credit period given to customers.
Trade payables turnover ratio	7.13	8.65	-17.55%	N/A
Net capital turnover ratio	3.29	4.86	-32.79%	The ratio has decreased due to an increase in net working capital pursuant to the IPO during the current year.
Net profit ratio	0.09	0.07	44.30%	The ratio has improved due to the improvement in the performance of the Company during the current year
Return on capital employed	0.35	0.42	-16.78%	N/A
Return on investment	0.06	NA	100%	The ratio has increased since there was no income from investments during the previous financial year.

7. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

The Company firmly believes that motivated and empowered employees are the cornerstone of competitive advantage. The companys employee value proposition is based on strong focus on employee development, providing a satisfying work environment, performance appraisal and counseling and appropriate empowerment. The company continues to maintain and enjoy a cordial relationship with its employees, providing a positive environment to improve efficiency with regular investments in upgrading the knowledge skills of the employees.

The number permanent employees on the roles of the Company as on 31st March 2025 is 81 employees.

8. OUTLOOK:

The outlook for Indian FMCG industry looks moderate amid higher income levels and the expansion of the model retail format. FMCG sector has a great opportunity for growth in the country, with the rising disposable incomes, increasing rural consumption, the growing population, education, urbanization, rising modern retail, and a consumption-driven society.

9. CAUTIONARY STATEMENT:

The above management discussion and analysis contains certain forward looking statements within the meaning of applicable security laws and regulations. These pertain to the companys future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals time cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulations etc.