Kothari Industrial Corporation Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS REPORT </dhhead>

Your Directors have pleasure in presenting the management discussion and analysis report for the year ended on March 31, 2025.

1. INDUSTRY STRUCTURE, DEVELOPMENT : Kothari Industrial Corporation Limited operates across a diverse set of sectors: fertilizers, footwear, food services, and publishing. The Indian fertilizer industry continues to be heavily influenced by government subsidies, monsoon patterns, and input costs. While urea remains price-controlled, the shift towards specialty fertilizers presents new opportunities. In terms of usage, nitrogen is the most consumed nutrient in agriculture by Indian farmers. 80% of consumption of nitrogen for agricultural purposes is through urea. The price of urea is regulated by the Government of India, which gives subsidy to the farmers via price subvention mechanism on the urea sold for agriculture use. The use of urea, is widespread due to low nitrogen content in Indian soil, and rapid due to its affordability, ease of application and proven visible results. This is borne out by international experience too. Urea is now a vital fertiliser and widely accepted for farm productivity. The past five-year’s (2020 - 2025) growth figures (on CAGR basis) of urea sales show an increase of ~2.6 % p.a., which is primarily due to increase in gross irrigated area, gross cropped area and higher usage/acre. The global footwear market was valued at approximately $423 billion in 2024 and is projected to reach $618 billion by 2033, growing at a CAGR of 4.3%. Meanwhile,

India’s Footwear Industry was valued at approximately $18.7 billion in 2024 and is projected to reach $46.02 billion by 2033, growing at a CAGR of 10.1%. India is positioning itself as a leader in Industry 4.0 by setting an ambitious goal to become a major global hub for drones by 2030. This move is projected to boost the country’s GDP by 1 1.5% and create at least 500,000 jobs in the coming years. The drone manufacturing industry in India has seen significant growth, with annual sales turnover expected to increase from approximately Rs. 60 crore in 2020-21 to around Rs. 900 crore by 2024-25, according to Minister of State of Civil Aviation Gen. VK Singh (Retd.). India’s Food & Beverage service industry stands as a dynamic and evolving market. Key growth is capitalising advancements on urban lifestyle changes, digital delivery platforms, and organised business formats, while grappling with inflationary pressures and profit-margin constraints. The overall food service industry is projected to grow at a CAGR of about 11% during 2023 26. It is estimated that the organised segment of the food service market will surpass the unorganised segment by FY 2025 26.

2. OPPORTUNITIES & THREATS : Government schemes and subsidies promote fertiliser usage.

Expansion of rural infrastructure and irrigation facilities, growing awareness of micronutrients & speciality fertilisers and rising adoption of digital platforms for agri-input delivery, are going to be the key driver for growth in fertiliser consumption in years to come. The geographical expansion of marketing territory and deeper penetration in existing territory, offer an opportunity to grow the business of marketed products. The new territories have sizeable demand of NPK fertilisers, crop protection chemicals and speciality plant nutrients, which gives opportunity to the Company to grow. The Company’s continued focus on product quality and high level of customer satisfaction is likely to deliver positive results in the future. In fertilizers, increasing awareness of soil health and sustainable agriculture offers scope for innovation in bio-fertilizers and micronutrients. Government incentives for balanced fertilization further strengthen demand. While India is the second largest footwear producer, contributing approximate 11.6% to the global footwear production, it consumes just 12.4% of global production even with its large population base representing an immense untapped domestic market with substantial headroom for growth. Further, almost 65% of the country’s population resides in the rural areas, where the footwear market penetration is low and hence, presents a huge opportunity. The rural opportunity is complementedbysignificantpotential in underserved women & kids footwear segments. Further, almost 65% of the country’s population resides in the rural areas, where the footwear market penetration is low and hence, presents a huge opportunity. The rural opportunity is complementedbysignificantpotential in underserved women & kids footwear segments. India’s diverse landscape and growing economy present fertile ground for the drone industry. In agriculture, drones offer throughsignificant precision farming. By enabling efficient crop monitoring, precise pesticide application, and detailed soil analysis, drones can help farmers optimize resources and increase yields. Similarly, the expanding infrastructure sector can benefit from drones in surveying, mapping, and monitoring construction sites, enhancing efficiency and safety. The logistics and delivery sector also stands to gain from drone technology. Drones can revolutionize last-mile delivery, especially in remote or congested urban areas, while also providing crucial services in medical supply delivery and disaster relief.

Security applications for drones are equally promising, from border surveillance and industrial monitoring to supporting law enforcement and public safety efforts. On the other side, Drone companies in India face several risks and concerns that could hinder their growth and sustainability. A significant challenge is the regulatory landscape, which, despite improvements, remains complex and sometimes restrictive. Compliance with evolving regulations can be burdensome and costly, especially for smaller firms. Additionally, illegal imports of drones, often sold at lower prices without adhering to safety and quality standards, create unfair competition for legitimate businesses. This not only undermines market stability but also raises safety concerns, as these unregulated drones can pose significant risks to public safety and security. The expanding middle class and increasing urbanization across India and abroad are driving higher spending on dining out and premium food experiences, creating strong demand for both casual and fine dining formats. Consumers are increasingly open to exploring regional Indian and global cuisines, offering an opportunity for Speciality Restaurants to innovate and introduce niche or themed dining concepts across growth, driven by its brand portfolio. Partnering with malls, airports, hotels, and corporate institutions can enhance visibility and open new high-traffic channels for growth. The Company’s future prospects are influenced by a range of economic, operational, and market-driven factors. Key considerations include shifting consumer preferences, rising food costs driven by inflation, and evolving regulatory requirements that may impact business operations and compliance. Additionally, challenges such as market saturation, increasing competition, and high real estate costs—particularly in prime locations—can affect economic viability and expansion strategies. Operational factors such as attracting and retaining skilled manpower, ensuring supply chain efficiency, integ rating new technologies, and adhering to health, safety, and environmental sustainability standards are also critical to the Company’s sustained performance. Successfully navigating these complexities will be essential for maintaining growth momentum and ensuring long-term resilience in a dynamic and competitive business environment.

3. SEGMENT-WISE PERFORMANCE : Segment wise performance report is available in financial statements.

4. OUTLOOK : The outlook for the fertilizer division remains positive, supported by favorable government policies, stable demand, and opportunities in organic and specialty fertilizers. The Company is exploring backward integration and agro-input diversification.

The footwear business is expected to gain from retail expansion and digital brand building. While in FY 2024-25, the overall consumer demand remained modest due to high inflation, discretionary spending & challenging macro environment; however, the Indian economy is expected to see a gradual recovery in FY 2025-26. This cautiously optimistic outlook is supported by ongoing government initiatives and a steady rise in disposable incomes among consumers.

Our Company is well positioned to tap into these emerging opportunities, supported diversifiedbrand by our portfolio, adaptive market strategies, planned launch of the premium footwear range and a wide distribution network. By continuing to focus on innovation, premium products, and customer-centric practices, we aim to further strengthen our position in the Indian footwear market. The drone industry in India is set to experience significant opportunities across various sectors.

One of the most promising areas is agriculture, where drones are revolutionizing traditional farming practices. By enabling precision farming, drones allow for efficient crop monitoring, soil analysis, and pest management, which can lead to optimized resource use, reduced costs, and improved yields. With India’s vast agricultural landscapes, the adoption of this technology is crucial for addressing challenges related to food security and sustainability. Government initiatives and technological advancements are making drones more accessible to farmers, further accelerating this trend.

Drones are also proving to be vital in crisis and disaster relief efforts, offering support for search and rescue operations, damage assessments, and the delivery of essential supplies. The Indian government’s focus on enhancing drone capabilities for these applications opens up new opportunities for improving disaster response and recovery efforts. By advancing drone technology, India can enhance its preparedness and response to emergencies, ultimately benefiting affected communities. The outlook for the restaurant industry in India remains positive, underpinned by evolving consumer preferences, rapid technological advancements, and continued market expansion.

However, the industry must also navigate key challenges, including regulatory compliance, economic volatility, and intensifying competition from both domestic and international players. To achieve sustainable success in this dynamic environment, restaurants must remain agile by adapting to emerging trends, embracing digital transformation, and prioritizing exceptional customer experiences. Operators who can innovate while maintaining operational efficiency and quality will be best positioned to lead and grow in the evolving food service landscape. Your Company is strategically positioned to capitalize on these domestic growth opportunities. With a portfolio of well-established and trusted brands, the Company is well-equipped to cater to evolving consumer tastes and deliver value across multiple dining formats. This positions the Company to sustain momentum and further strengthen its presence in the competitive and dynamic food service sector. Company is planning to open various restaurant in coming years.

5. RISK & CONCERNS : The fertiliser industry is dependent on the extant policies of the Government of India. The volatility in the price of marketed fertilisers, coupled with regulation of prices of the products by the Government of India may also adversely impact the Company in the short run.The fertilizer business is sensitive to subsidy disbursements, raw material imports, and monsoon variability. The Indian footwear industry is heavily labour-intensive, relying on manual processes for cutting, stitching, and assembly. While employment,this creates particularly significant in rural areas, it also presents challenges. A major issue is the shortage of skilled workers, especially in advanced design and mechanised operations, which affects productivity and product quality. Additionally, dependence on manual labour makes scaling up difficult and limits consistency in output. Rising labour costs and a lack of formal training infrastructure further compound the problem, making it harder for the industry to modernise and compete with more automated global manufacturing hubs. To mitigate risks, your Company proactively monitors its major concerns and takes appropriate steps in consultation with the Board of Directors of the Company. Your

Company has a strong foundation to overcome any obstacle. Your Company is committed to deliver high-quality products and services to customers while maintaining a safe and fair work environment for its employees. Drone companies in India face several risks and concerns that could hinder their growth and sustainability.Asignificant is the regulatory landscape, which, despite improvements, remains complex and sometimes restrictive. Compliance with evolving regulations can be burdensome and costly, especially for smaller firms. Additionally, illegal imports of drones, often sold at lower prices without adhering to safety and quality standards, create unfair competition for legitimate businesses. This not only undermines market stability but also raises safety concerns, as these unregulated drones significantrisks pose to public safety and security. Increasing competition, both domestic and international, also poses a threat to

Indian drone companies. International firms, equipped with advanced technology and substantial financial resources, can outcompete local startups, making it difficult for them to establish a foothold in the market.

This competitive pressure necessitates continuous investment in research and development to keep up with technological advancements, which can strain the financial resources of smaller companies. Furthermore, cybersecurity risks are a major concern, as drones are vulnerable to hacking and data breaches, potentially compromising sensitive information and operational integrity. Addressing these issues requires a concerted effort from the industry and regulatory bodies to ensure a fair, safe, and competitive market environment. Key risks facing in the restaurant business include:

Persistently high inflation, leading to increased input and operating costs, Geopolitical tensions, particularly with neighboring countries, which may disrupt international operations or supply chains, Sudden or unanticipated regulatory changes impacting food safety, taxation, labor laws.

6. INTERNAL CONTROL SYSTEMS & THEIR ADEQUEACY : The Company has instituted robust internal control systems commensurate with its diversified business operations. These systems ensure reliable financial reporting, compliance with applicable laws and regulations, and efficient operations.

Periodic audits are conducted across all divisions by internal and external teams. The Audit Committee of the Board regularly reviews the internal audit findings and implementation of recommendations. Continuous improvements in control systems are undertaken to align with emerging risks and digital workflows. Mr. Venkateswara Rao, a qualified and experienced Chartered Accountant has been appointed as the Internal Auditor for taking care of the Internal controls and accuracy.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE : During FY 2024 25, the Company achieved a total income of 8,760.23 lakhs, with revenue from operations at 8,663.59 lakhs. The Leather segment continued to be the largest contributor at 6,010.29 lakhs, followed by Food (1,336.29 lakhs) and Fertilizers 1,121.62 lakhs. Despite healthy revenue growth, the Company recorded a loss before tax of 1,616.82 lakhs, primarily on account of higher operating expenses, segmental losses in Leather, Food, and Others, and finance costs of 189.99 lakhs.

The Fertilizer segment, however, registered a positive contribution of 100.82 lakhs, reflecting its potential as a stable revenue driver. Operationally, the Company undertook significant strategic initiatives during the year to strengthen its long-term growth prospects. Acquisition of Parveen Roadways to enhance logistics capabilities, and expansion of the Kickers retail brand through exclusive showrooms and multi-channel presence. The management believes that the strategic diversification and branded retail, alongside the established trading businesses, will enhance operational efficiencyand lead to improved financial performance in the coming years. The details of financial performance and operational performance is available in financial statements.

8. HUMAN RESOURCE DEVELOPMENT : KICL continues to place strong emphasis on human capital development across business units. During the year, the Company undertook skill enhancement programs for frontline retail and restaurant staff and initiated leadership training modules in manufacturing and editorial functions. The industrial relations environment remained stable across all units. The Company has adopted a hybrid work model for the publishing division and strengthened its HR digital systems to enhance employee engagement and performance tracking.

Total number of employees as on 31^st March 2025 was 189.

9. KEY FINANCIAL RATIOS:

Description	U/M	2024-25	2023-24	Remarks
Debtors Turnover	Days	8.99	38.9	Due to Increase in Revenue from operation, ratio has been decreased as compared to previous year
Inventory Turnover	Days	20.03	41.04	Due to increase in sales and purchases, COGS has been increased and as a effect ratio is decreased
Interest coverage ratio	Times	-7.51	12.7	Due to loss in CY, ratio becomes negative
Current ratio	Times	27.31	0.27	Due to decrease in liabilities
Debt Equity ratio	-	0.20	7.02	Decrease in D/E ratio is due to increase in other payables in current liabilities and decrease in share capital
Margin OperatingProfit	%	17	33	Due to Increase in Revenue from operation, ratio has been decreased as compared to previous year
Net Profit Margin %	%	-20	232	Due to loss in CY, ratio becomes negative
Return on Net worth	%	-35	508	Due to loss in CY, ratio becomes negative

	By Order of the Board of Directors
	For KOTHARI INDUSTRIAL CORPORATION LIMITED
	J RAFIQ AHMED
	Executive Chairman &
Place : Chennai	Managing Director
Date : 26.08.2025	DIN : 02861341