India Gelatine & Chemicals Ltd Management Discussions

MANAGEMENT DISCUSSION & ANALYSIS REPORT

1. Global Scenario:

The global gelatine demand in FY 2024-25 continued on a steady upward trajectory, supported by strong demand from the pharmaceutical, nutraceutical, food & beverage, and cosmetics industries. Rising health awareness and the shift toward functional and protein-enriched foods are expanding the global gelatine footprint, with consumption estimated to have grown at a CAGR of 6-7% during the period.

Europe maintained its dominance as a leading producer, benefitting from abundant porcine and bovine hides, while North America saw demand rise in nutraceutical and gummy supplement categories. Asia-Pacific, led by China and India, emerged as a high-growth market, backed by expanding consumer health awareness and strong domestic manufacturing bases.

2. Domestic (India) Scenario:

Indias gelatine sector continues to be strategically important, supported by its robust pharmaceutical industry and rising demand in confectionery, dairy, and nutraceuticals. The domestic industry, however, faces challenges related to raw material consistency and pricing volatility, which have affected production economics across manufacturers. Despite these headwinds, Indian gelatine has retained a strong reputation globally for its quality and competitive pricing, ensuring continued relevance in international markets.

3. Company Context:

While the global and domestic gelatine markets reflected growth during FY 2024-25, the Company experienced a decline in revenues due to reduced export orders and pricing pressures in both gelatine and ossein segments. This variance underscores the broader industry challenge Due to surplus production of Gelatine in South America and Turkey.

4. Outlook:

Despite the revenue contraction in FY 2024-25, the Company remains confident of aligning its growth with the broader industry trend. With a focus on premium product positioning, cost optimization, sustainable operations, the Company is well-placed to capture the benefits of expected market expansion in FY 2025-26.

5. Gelatine Market Size and Growth:

The global gelatine market was valued at around USD 4.8 billion in 2024 and is projected to grow at a CAGR of 6-7% over the next five years, driven by robust demand from the food & beverage, pharmaceutical, nutraceutical, and cosmetics sectors. Increasing health awareness, rising protein consumption, and innovations in biomedical applications are further fueling this upward trend.

In India, the gelatine market is steadily expanding, supported by strong domestic consumption in food and pharma, and the countrys role as a strategic supplier to global markets. Despite temporary headwinds in FY 2024-25, long-term growth prospects remain positive with opportunities in value-added products such as collagen peptides and marine-based gelatine.

Applications of Gelatine

Gelatine continues to play a vital role across industries. In food & beverages, it is widely used for gelling, stabilizing, and thickening in confectionery, dairy, and meat products. In pharmaceuticals, its biocompatibility supports use in capsules, binders, and wound care. The cosmetics sector values its moisture-retention and film-forming properties, while emerging technologies such as 3D printing and tissue engineering are opening new avenues for growth.

Regional Dynamics

Europe remains the largest gelatine market, supported by strong pharma and nutraceutical demand. North America is growing with health and wellness trends, while Asia-Pacific—led by India and China—is the fastest- growing region driven by food, pharma, and rising exports. Latin America shows steady growth, and the Middle East & Africa are emerging markets with rising demand for halal-certified products.

6. Sustainability and Alternative Sources of Gelatine:

• Energy & Emissions: Companies are increasingly adopting renewable energy, efficient boilers, and waste- heat recovery to lower carbon footprints in gelatine production.

• Raw Material Optimization: Greater focus on responsible sourcing of raw materials, with improved traceability and waste utilization.

• Alternative Sources: Marine-derived gelatine (from fish skin and scales) is gaining traction, especially for halal/kosher markets and premium nutraceuticals.

• Plant-Based Substitutes: Though not identical to gelatine, alternatives such as agar, pectin, and carrageenan are being explored to meet vegan/vegetarian demand.

Looking forward, sustainability initiatives and diversification into marine and alternative sources are expected to strengthen long-term resilience of the gelatine industry.

7. Regulatory Environment and Technological Advancements:

• Regulatory Landscape: The gelatine industry is guided by stringent global standards (FDA, FSSAI, EU regulations) ensuring food safety, traceability, and quality compliance. Growing demand for halal and kosher certification is also shaping sourcing and production practices.

• Technological Progress: Advances in extraction methods, enzyme technology, and membrane filtration are improving yield, purity, and efficiency. Automation, digitization, quality monitoring are further enhancing operational reliability.

• Future Outlook: With tightening global regulations and rapid adoption of modern technologies, the industry is poised to deliver safer, more sustainable, and higher-quality products.

8. Opportunities and Threats: Gelatine Industry:

Opportunities

• Rising demand from pharmaceutical, nutraceutical, and functional food sectors.

• Asia-Pacific growth (India, China) offering strong export potential.

• Expanding markets for marine gelatine and halal/kosher-certified products.

• Technological innovations improving efficiency and quality.

• Growing health & wellness trends driving collagen-based products.

Threats:

• Raw material supply volatility (availability, quality, and pricing).

• Stringent regulatory compliance and certification requirements.

• Competition from plant-based substitutes (agar, pectin, carrageenan).

• Currency fluctuations impacting export realizations.

• Environmental concerns and sustainability pressures on operations.

Looking ahead, the gelatine industry holds strong growth prospects, but companies must strategically navigate supply challenges and regulatory demands to maintain competitiveness and profitability.

9. Segment-wise and Product-wise Performance:

Capsule Manufacturing and Regulated Market Penetration:

Indian capsule manufacturers have successfully leveraged rigorous compliance standards, strategic partnerships, and a focus on specialized products to establish a solid presence in regulated pharmaceutical and nutraceutical markets. These strategies, combined with competitive pricing and agility in responding to market dynamics, have enabled Indian manufacturers to strengthen their foothold and create a foundation for sustained growth in global markets.

Poultry Sector & DCP Performance:

The fluctuation in poultry prices during April-August, largely due to festivals, had a direct impact on demand for Di-Calcium Phosphate (DCP):

• Sluggish demand: DCP demand was subdued, compared to last year.

• Increased competition: Imports and substitutes such as Monocalcium Phosphate (MCP), rock phosphate, and fishmeal further pressured DCP sales.

Gelatine Segment:

Despite challenges in domestic markets, gelatine exports remained robust, driven by a strong and loyal international customer base. Overseas markets continue to deliver higher realizations, reinforcing the Companys strategic emphasis on exports. The Company remains committed to expanding its global footprint, capturing emerging opportunities, and enhancing product positioning in premium markets.

Forward-looking Outlook:

• Poultry & DCP: With poultry prices rebounding and bird population expected to stabilize, demand for DCP is likely to recover gradually. Continued monitoring of weather patterns, feed costs, and consumer affordability will remain critical to growth.

• Gelatine Exports: The Company is well-positioned to capitalize on sustained international demand, premium realizations, and long-term partnerships in global markets. Strategic focus on quality and compliance ensures that exports will continue to be a key driver of growth in FY 2025-26.

• In response to the suboptimal quality of locally available raw materials, the Company has strategically diversified its sourcing. During the year, trials with imported gel bones from new regions readily available from international suppliers—were successfully conducted. These initiatives are designed to reduce dependence on domestic raw materials, improve consistency, and enhance both yield and product quality.

• While the yield improvement during the year under review was marginal, these sourcing strategies lay a strong foundation for sustained operational efficiency and superior product quality in FY 2025-26 and beyond.

10. Risks and Concerns:

• The Companys strong reliance on exports continues to expose it to geopolitical uncertainties, which may disrupt operations, impact global trade flows, and create volatility in international markets. Additionally, health- related concerns, may influence consumer sentiment and reduce confidence in animal-derived products such as gelatine. These factors remain important considerations for sustaining demand and ensuring long-term market stability.

• Mitigation Measures:

To address these risks, the Company is actively pursuing diversified sourcing strategies, strengthening its presence in both domestic and export markets, and maintaining the highest standards of regulatory compliance and traceability. Furthermore, continued investments in sustainable and high-quality raw materials ensure resilience against supply chain disruptions while reinforcing customer trust in our products.

11. Internal Control Systems and Their Adequacy:

The Company has established robust and adequate internal control systems designed to safeguard assets, prevent unauthorized use or disposition, and ensure that all transactions are duly authorized, recorded, and reported with accuracy.

These systems are reinforced through a comprehensive internal audit programme, periodic management reviews, and well-documented policies, guidelines, and procedures. Such measures provide strong assurance that financial

and operational records are reliable for the preparation of financial statements and for maintaining accountability of assets.

The management remains committed to continuous improvement of these controls, ensuring alignment with evolving regulatory requirements and industry best practices. Regular reviews and timely corrective actions help maintain a high standard of governance and risk management.

CAUTIONARY STATEMENTS:

Statements in the Managements Discussion and Analysis describing the Companys projections, estimates, expectations or predictions may be "forward looking predictions" within the meaning of applicable securities laws and regulations. Actual results may differ from such estimates, projections, etc., whether expressed or implied. Factors, which would make a significant difference to the Companys operations, include achievement of better quality and good market price in domestic and overseas market, changes in Government regulations and tax laws, economic conditions affecting demand/ supplies and other environmental factors over which the Company does not have any control.