Kothari Fermentation & Biochem Ltd Management Discussions

The Management of Kothari Fermentation and Biochem Limited is pleased to present its 24th Management Discussion and Analysis Report covering its overall performance and outlook.

Your Company is one of the largest manufacturers of Yeast and its derivatives in India. We manufacture various types of Yeast, e.g., Bakers Yeast (Instant Dry Yeast), Nutritional Yeast (Inactive Dry Yeast), Feed Yeast (Live Yeast & MOS), Seasoning Yeast (Yeast Extract Powder), and Distiller Yeast (Ethanol & Potable Alcohol Yeast). Yeast is used in various end-use applications in the food, Distillery, Feed, Pharmaceuticals, and other Biotechnology sectors.

INDUSTRY STRUCTURE AND DEVELOPMENT Global Market

According to IMARC Group, the global yeast market size reached approximately USD 8.3 billion in 2025 and is expected to reach USD 14.4 billion by 2034, exhibiting a CAGR of 6.10% during 2026-2034. The growing demand for bioethanol as a cleaner energy source, rising consumption of baked goods and convenience food products, and innovations and advancements in plant-based food solutions are some of the factors propelling the market growth.

The food and beverage (F&B) industry remains the largest consumer of yeast, with significant demand from bakery, alcoholic beverages, dairy, and nutritional food segments.The prepared food sector also relies on yeast for flavor enhancement and nutritional benefits, often incorporating yeast extracts in seasonings, sauces, and ready-to-eat (RTE) meals. As global eating habits shift towards convenience foods and fortified nutrition, the role of functional yeast products, such as nutritional yeast and yeast extracts, has expanded considerably.

Europe, North America, Asia Pacific, the Middle East & Africa, and Latin America are major consumer markets of Yeast and its variants.

Indian Market

Indian Yeast Market size was USD 287.51 Million in 2025 and is projected to reach USD 392.14 Million by 2034, representing a compound annual growth rate (CAGR) of approximately 3.49% between 2026 and 2034, driven by the bakers yeast segment, which emerged as the largest type of yeast in terms of market size in 2025. Nutritional Yeast is anticipated to remain the most attractive type segment, recording the fastest growth during the forecast period. Indian yeast market is primarily driven by demand from bakery products, alcoholic beverages, fermented foods, and various industrial food-processing applications.

The Food & Beverages (F&B) industry contributes approximately 3% to Indias GDP and is projected to grow at 8.7% CAGR from 2024-2030.

Indias yeast manufacturing industry stands on a robust foundation of rising domestic as well as overseas demand, favorable Government policies, and growing industrial applications. With strategic investment in innovation and infrastructure, companies in this sector are well placed to drive growth and capture emerging opportunities both domestically and internationally.

OPPORTUNITIES AND THREATS Opportunities

The Indian yeast market presents significant growth opportunities, driven by the countrys expansion of ethanol production under its fuel-blending programme, alongside increasing consumption of processed and packaged foods. India has achieved the 20% ethanol blending level under the Ethanol Blended Petrol Programme during the year 2025-26. This structural development, together with continued growth in bakery, food processing, industrial fermentation and other specialty applications, creates opportunities for capacity expansion and value-added product development.

Indias burgeoning food and beverage industry, supported by government initiatives like "Make in India" and PLI schemes for food processing, further enhances the prospects for yeast manufacturers. In addition, the growing popularity of functional foods, health supplements, and other related products has opened new avenues for specialty yeasts such as nutritional yeast and yeast derivatives used in pharmaceutical, nutraceutical, and animal nutrition sectors.The growing animal feed market also provides opportunities for value-added products such as live yeast, yeast culture, MOS and beta-glucans, supporting animal health, immunity and feed efficiency. Moreover, the increasing awareness about food quality and shelf-life is boosting demand for high-performance and instant yeast varieties, particularly among commercial bakeries, distilleries, and food processors.

Recognizing these opportunities, the Company is actively working to expand its presence across existing and emerging product categories. We are continuously investing in technology upgrades, process improvements, and product innovation to meet the evolving needs of the market. Our vision is to become a leading player in the Indian yeast industry, driven by quality, reliability, and responsiveness to market trends.

Threats

The price of cane molasses, a key raw material for yeast production, remains subject to volatility due to its increasing use in ethanol production and demand from downstream industries. Agro-climatic conditions such as rainfall patterns, droughts, or crop yields may also impact molasses availability and pricing.

Further, growing awareness of dietary restrictions (e.g., gluten-free, allergen-free diets) poses a limitation for certain traditional yeast applications.There is also rising demand for clean-label, organic, or non-GMO yeast, necessitating product development and certification.

Management continuously evaluates these factors and takes appropriate measures to mitigate their potential impact on the Companys operations.

PRODUCT-WISE PERFORMANCE

The Company operates in a single business segment, focusing exclusively on the manufacture of yeast and related products. Over the years, it has established a strong presence in the domestic market under its well-recognized brand names, including "SUNRISE" "KF", "SUPER FAST INSTANT YEAST" "ALCOMAX DISTILLERS INSTANT YEAST", and "FOUR SEASONS". In addition to its own brands, the Company also supplies instant yeast products to prominent import houses across India, which are marketed under their respective private labels.This reflects the Companys reputation as a trusted and quality-driven supplier within the industry.

OUTLOOK

Indias economy continues to demonstrate strong resilience amid global uncertainties, driven by a supportive domestic policy framework and the Governments commitment to structural reforms. Furthermore, the governments focus on sustainable agriculture and bio-based industries aligns well with the yeast sector, which relies on agro-based raw materials like molasses.

With inflationary pressures easing and credit availability improving, consumer demand and industrial investment are expected to strengthen further. The yeast manufacturing industry is well poised to leverage these favorable conditions by investing in technology upgrades, product innovation, and enhanced supply chain efficiencies. In short, the synergy between government initiatives and evolving market dynamics presents a compelling growth opportunity for the yeast industry, positioning it for sustainable and profitable expansion in the coming years.

The outlook for the yeast manufacturing industry remains positive, supported by ongoing innovation and increasing consumer awareness regarding health and nutrition. India continues to offer significant competitive advantages in terms of technical expertise, skilled workforce, and cost efficiency, further strengthening the industrys growth potential.

In line with these trends, the Company has been actively reviewing and refining its operational structure, with a focus on cost control, improving operational efficiency and optimizing resource utilization. During the current financial year, the Company continued to focus on operational efficiencies and cost optimization amid challenges relating to raw material costs and market conditions.

A notable shift has occurred in the Companys product mix, with sales gradually moving from fresh yeast, primarily used in the bakery sector, to instant dried yeast and other high-demand variants serving the distillery, pharma, animal feed, and nutritional segments. This transition reflects the growing market preference for more versatile and shelf-stable yeast products.

Looking ahead, the Company remains focused on optimizing resource utilization and pursuing strategic opportunities to drive sustainable growth and long-term profitability.

RISKS AND CONCERNS

The Company has adopted a comprehensive Risk Management Policy designed to systematically identify, categorize, and assess various business risks, and to implement appropriate mitigation measures wherever feasible. This policy also includes a structured framework for the ongoing monitoring and management of risks, ensuring resilience and operational continuity.

The Board of Directors, along with the Audit Committee, periodically reviews the Risk Management Policy to ensure its continued relevance and effectiveness. This oversight enables the management team to operate within a clearly defined risk management framework and take timely, informed decisions.

The Company may face raw material cost risks, quality risks, and competition-related pressures. These risks are managed through continuous monitoring, preventive measures, and corrective actions as necessary.

Consistent with its philosophy of proactive governance, the Company has always adopted a system-based approach to business risk management, embedding risk awareness into its strategic and operational decision-making processes.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has well-established internal control systems for operations of the Company. All the departments of the Company, including the accounts & finance department, have experienced and trained staff capable of implementing and monitoring internal control systems. The internal control system of the Company is adequate to safeguard the Companys assets and to ensure that the transactions are properly recorded. Further, the internal control system ensures that proper records are being kept and all statutory and other laws, rules and regulations are being complied with. The Company has appointed an independent firm of chartered accountants to monitor the internal audit of its activities, based on an internal audit plan, which is reviewed each year in consultation with the statutory auditors and approved by the Audit Committee.

The Audit Committee periodically reviews the adequacy and effectiveness of the Companys internal financial controls and the systems established for financial reporting and compliance. As at March 31,2026, the internal financial controls were adequate and operating effectively. Compliance of secretarial functions is ensured by way of a secretarial audit conducted by an independent practicing Company Secretary firm.

FINANCIAL PERFORMANCE VIS-A-VIS OPERATIONAL PERFORMANCE

The production of the Company increased in comparison to the previous year from 15,280 MT to 16,102 MT, but the revenue of the Company decreased from Rs. 11,423.10 Lakhs to Rs. 11,213.19 Lakhs, resulting in a net loss before tax of Rs. 346.23 Lakhs during the year 2025-26 as against a net profit before tax of f 193.86 Lakhs during the year 2024-25.

The comparison of financial data with the previous years data is provided as under:

Particulars	2025-26	2024-25
a) Production (MT)	16,102	15,280
b) Revenue
- Net sales	11,213.19	11,423.10
c) Result
- Before Depreciation,Tax & Finance Cost	723.94	1,196.51
Less:
i) RnanceCost	369.93	358.62
ii) Depreciation	700.24	644.03
Net Profit/(Loss) Before Tax	(346.23)	193.86
d) Net Worth	5,394.91	5,657.14
e) PBT/NW (%)	(6.42)	3.43

The Company recorded a capacity utilization of 76.68% of its operative production facilities during the year. The Company has an installed capacity of 25,000 MT and an operative capacity of 21,000 MT perannum.

KEY FINANCIAL RATIOS

Particulars	FY 26	FY 25	Explanation
1. Operating Profit Margin	0.21%	4.77%	The decline in the operating profit margin was primarily due to higher raw material costs and lower operating profitability during the year.
2. Net Profit (PAT) Margin	(2.67%)	0.71%	The net profit margin turned negative due to a decline in sales and a decrease in profit before tax during the year.
3. Return (PAT) on Net Worth	(5.41%)	1.44%	The return on net worth declined due to lower profitability and reduced revenue during the year.
4* Current Ratio	1.91	1.08	The increase in the current ratio was primarily due to a reduction in current liabilities during the year.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES

The Company firmly believes that the competence, commitment, and engagement of its workforce are fundamental to driving sustainable organizational growth. A collaborative and respectful working environment continues to be a key strength, with strong and harmonious relations maintained across all levels of the organization. Managers play a proactive role in supporting employee development by helping individuals identify challenges and by providing structured training, mentoring, and coaching programs. These initiatives are designed to cultivate leadership capabilities and enhance overall performance. The Company remains responsive to the legitimate concerns and grievances of its employees, fostering a culture of openness and mutual respect. This approach not only enhances job satisfaction but also empowers employees to contribute meaningfully to both the organization and their personal growth. As at March 31,2026, there were 208 persons directly employed by the Company.

FORWARD-LOOKING & CAUTIONARY STATEMENT

This Management Discussion and Analysis contains certain statements that may be construed as ‘forward-looking statements" under applicable securities laws and regulations. These statements reflect the Companys current expectations, estimates, objectives, and projections regarding future events and performance. They are, however, inherently subject to uncertainties and assumptions concerning future economic conditions, market trends, regulatory developments, and other factors.

Actual results may vary materially from those anticipated in such statements due to a range of influences, including but not limited to global and domestic demand-supply dynamics, fluctuations in prices of finished goods and raw materials, availability and cost of inputs, changes in governmental policies, tax structures, macroeconomic conditions in India, and other business risks such as litigation or industrial relations.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. Investors and stakeholders are advised to consider these factors while interpreting such forward-looking statements.