Kothari Fermentation & Biochem Ltd Management Discussions

The Management of Kothari Fermentation and Biochem Limited is pleased to present its 23rd 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 and other market factors, the global yeast market reached a value of approximately USD 7.8 billion in 2024 and is projected to grow at a Compound Annual Growth Rate (CAGR) of 6.6% between 2025 and 2033. This steady growth is being driven by multiple factors, including rising consumption of baked goods and processed foods, increasing preference for clean-label ingredients, and technological advancements in yeast strain development and fermentation techniques.

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. 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.

The key factors driving the market are Increasing Demand from the Food and Beverage Industry, Growing Awareness of Health Benefits, Technological Advancements in Yeast Production, Rising Demand for Biofuels, Expansion of Industrial Applications and Geographical Expansion, and Increasing Investments. North America, Europe, Asia Pacific, the Middle East & Africa, and South & Central America are major consumer markets of Yeast and its variants. (source: https://www.imarcgroup.com/yeast-market)

Indian Market

The Food & Beverages (F&B) industry contributes approximately 3% to Indias GDP, accounts for nearly 2/3rd of the countrys total retail market, and directly employs over 7.3 million people (Source:linkedin.comContentful+12BDB India Private Limited+12industrialoutlook.in+12).

The Indian F&B market, valued at USD 332 billion in 2023, is projected to expand to USD 691 billion by 2030, growing at a CAGR of about 11.05% (Source: whatech.com+4resources.probe42.in+4OpenPR+4).

Meanwhile, the food processing sector alone is expected to reach USD 535 billion by FY 2025-26, up from its previous CAGR of around 11.18% (Source: BDB India Private Limited+1linkedin.com+1).

Such scale and growth underpin F&Bs role as Indias largest employer, while also serving as a driving force behind transportation, retail, hospitality, and agriculture.

Indias yeast manufacturing industry stands on a robust foundation of rising domestic 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.

Outlook

Indias economy continues to demonstrate strong resilience amid global uncertainties, driven by a supportive domestic policy framework and the Governments unwavering commitment to structural reforms. Key economic factors such as stabilizing inflation, a narrowing current account deficit, and improving consumer confidence are fostering an environment conducive to industrial growth, including the yeast manufacturing sector.

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. Policies encouraging the use of renewable resources and bio-ethanol production, while posing some challenges, also open avenues for innovation in yeast derivatives and bio-processing applications. Complementing these structural measures, rising disposable incomes, increasing urbanization, and a growing preference for processed and convenience foods are boosting demand for yeast products across the bakery, distillery, pharmaceutical, animal feed, and nutraceutical sectors. 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 summary, 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.

OPPORTUNITIES AND THREATS

Opportunities

The yeast market in India presents significant expansion opportunities, driven by the countrys rising consumption of processed and packaged foods. With rapid urbanization, increasing disposable incomes, and evolving consumer preferences, the demand for convenience foods such as bakery items, ready-to-eat meals, alcoholic beverages, and nutritional supplements has been growing steadily. This trend is expected to continue, providing a strong foundation for sustained growth in yeast consumption.

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 feed industries.

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. The shift towards industrial-scale food production and fermentation-based industries also strengthens the case for robust yeast supply chains.

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, has risen significantly due to its increasing use in ethanol production for fuel blending (as per government mandates). Agro-climatic conditions such as rainfall patterns, droughts, or crop yields directly impact molasses pricing.

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

Entry of new domestic and international players is intensifying competition in price-sensitive segments through various promotional-based schemes like selling the product at a low price at the initial stage.

However, many new entrants lack the technical expertise and product consistency, offering an advantage to established players.

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.

The company is expanding its horizon by entering into business collaborations with foreign partners to produce Yeast Based Protein titled as ProteVin. A new manufacturing facility has been set up at its Sikandrabad Plant for the production of ProteVin. The Company is expecting to benefit from this collaboration in the long run by enhancing our presence in the domestic and as well as in international market.

OUTLOOK

The outlook for the yeast manufacturing industry remains positive, supported by ongoing innovation and increasing consumer awareness regarding health and nutrition. Over the past year, the industry has seen encouraging growth trends, driven by rising demand across various sectors including distilleries, pharmaceuticals, animal nutrition, and health foods. 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 and improving operational efficiency. This strategic approach has yielded positive results?the Company has returned to profitability in the current financial year, reversing the losses recorded in the previous year.

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 network 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 has 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.

As per Section 177 of the Companies Act 2013 and Regulation 18 of SEBI Regulations, 2015, the Audit Committee has concluded that as at March 31,2025, the internal financial controls were adequate and operating effectively. Compliance of secretarial functions is ensured by way of secretarial audit conducted by an independent practicing Company Secretary firm.

FINANCIAL PERFORMANCE vis-a-vis OPERATIONAL PERFORMANCE

The production of the Company was marginally reduced in comparison to the previous year from 15654 MT to 15280 MT, but the revenue of the Company is increased from 10888.09 Lakhs to 11423.10 Lakhs resulting in a net profit before tax of 193.86 Lakhs during the year 2024-25 against the net loss of 392.53 Lakhs during the year 2023-24.

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

Particulars	2024-25 ( In lakhs)	2023-24 ( In lakhs)
	Manufacturing of Yeast
a) Production (MT)	15280	15654
b) Revenue
-Net sales	11423.10	10888.09
c) Result
-Before Depreciation, Tax & Finance cost	1196.51	519.13
Less:
i) Finance cost.	358.62	349.59
ii) Depreciation	644.03	562.07
Net Profit/Loss before Tax.	193.86	(392.53)
d) Net worth	5657.14	5590.68
e) PBT/NW (%)	3.43	(7.02)

The company recorded a capacity utilization of 72.76% of its operative production facilities during the year. The company has an installed capacity of 25000 MT and an operative capacity of 21000 MT per annum.

KEY FINANCIAL RATIOS

Sr. No.	1 particulars	FY 25	FY 24	Explanation
1.	Operating Profit Margin	4.77%	(0.45)%	Increase in profits due to higher revenues
2.	Net Profit (PAT) Margin	0.71%	(4.51)%	Change is due to increase in sales & PBT
3.	Return (PAT) on Net Worth	1.44%	(8.41)%	Increase on account of operating profit and revenues.

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. There were 204 persons directly employed by the Company during the previous financial year as on 31.03.2025.

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.

	For and on behalf of the Board
	Sd/-
Place: New Delhi	Pramod Kumar Kothari
Date: 13.08.2025	Chairman & Managing Director