L T Foods Ltd Management Discussions.

Global Economic Overview

The global upswing in economic activity is strengthening. Global growth, which in 2016 was the weakest since the global financial crisis at 2.4%, is projected to rise to 3.7% in 2017 and to 3.9% in 2018, as per the International Monetary Fund (IMF).

With much of this incremental growth coming in from more than half of the worlds economies, this globally inclusive cyclical recovery is a result of a secular rebound in investment, manufacturing activity, and trade. In particular, the recovery in global investment growth was supported by historically low

financing costs, rising profits, and improved business sentiments, universally across advanced economies, emerging markets, and developing economies.

India will continue to be the fastest growing large economy in the world. Growth in China and other parts of emerging Asia remains strong, and the still-difficult conditions faced by several commodity exporters in Latin America, the Commonwealth of Independent States and the sub-Saharan Africa show some signs of improvement. In advanced economies, the notable 2017 growth pickup is broad-based, with stronger activity in the United States and Canada, the Euro area, and Japan.

Indian Economy Overview

The Indian economy continues to be the flag-bearer for economic expansion in the global landscape. By 2020, it is likely to overtake Germany to become the fourth largest economy, trailing only the United States, China and Japan, the World Bank stated. Moreover, India is also considered to be the most dynamic emerging economy amongst the largest countries in the world. It is expected to continue on its pace of rapid growth, fuelled by an expansion in private consumption; the mouldbreaking changes in taxation; infrastructure investment; and privatisation.

The Central Statistics Office (CSO) has estimated that the overall economic growth will resume to 6.5% in FY2018, while the IMF estimates the growth potential to be 6.7% for the same period. Inflation, both CPI and WPI remained under control for entire FY2018. Average CPI stood at 3.6% in FY2018 compared to 4.5% in FY2017, while the corresponding figures for WPI are 2.9% and 1.8%, respectively. Assuming a normal monsoon and no major policy reforms, CPI is estimated to remain stable. Plowever, key risks to the inflation outlook are rising crude oil and other commodity prices.

Indias economy temporarily decelerated in the first half of FY2018, as the rest of the world accelerated. This interim deceleration was primarily caused by residual impact of demonetisation and disruption to processes following implementation of of the Goods and Services Tax (GST). Nevertheless, it remained the second-best performer amongst major countries, with strong macroeconomic fundamentals. In the second half, the scenario improved meaningfully, and India jumped 30 spots on the World Banks Ease of Doing Business rankings. In addition, actions to liberalise the foreign direct investment (FDI) regime helped increase flows by 20%.

The Government has progressed well on its agenda to implement important economic reforms, which should support a strong and sustainable growth rate going forward. In particular, the implementation of the GST, which has been in the making for over a decade, should help raise Indias medium-term growth by enhancing the efficiency of production and movement of goods and services across Indian states. Furthermore, the long-festering "Twin Balance Sheet" problem was decisively addressed by sending the major stressed companies for resolution under the new Indian Bankruptcy Code, and implementing a major recapitalisation package to strengthen the public sector banks. As a result of these measures, the economy is set to progress on a sound fiscal foundation.

Looking ahead, Indias economic growth is expected to gather momentum in FY2019, benefiting from a conducive domestic and global environment. The factors that are expected to aid the economy in achieving stronger growth are effective implementation of GST; improved credit offtake; large resource mobilisation from the primary market strengthening investment activity; and an acceleration of global trade growth. In addition, the thrust on rural and infrastructure sectors in the Union Budget FY2019 are expected to rejuvenate rural demand. In line with this positive economic development outlook, the IMF has projected Indias growth to be 7.4% in FY2019.

Rice Industry Overview

The worlds largest producers of rice are China and India, growing 145 m tonnes and 110 m tonnes respectively in 2017. While this accounts for 52.5% of global production, India accounts for 23%.The top-five rice-growing nations include India, China, Indonesia, Bangladesh and Vietnam.

China and India are also the two greatest consumers of rice, with 144 m tonnes and 97 m tonnes respectively in 2017, accounting for 50.7% of global consumption. The top-five rice consuming countries account for 70.8% of global rice consumption.

Among the various rice varieties, Basmati is the most premium, with superior product characteristics. Basmati is largely cultivated in India and Pakistan, which makes these countries the only suppliers in the world. The basmati rice is grown only once a year, in the kharif cropping cycle, sown in May-Juneand harvested in September-November. In India, the major Basmati rice-producing states are Punjab, Plaryana and Uttar Pradesh, which together account for over 95% of the countrys total Basmati rice production. Jammu and Kashmir and Uttarakhand also contribute to Indias production of Basmati rice.

While a majority of the non-Basmati rice produced is consumed domestically (around 90%), a majority of Basmati is exported (around 75%). Overseas markets for Basmati include regions with concentrations of South Asian diaspora -including the Middle East, the U.S., the U.K. and parts of EU. India has always been a larger Basmati exporter than Pakistan, and the gap has only widened over the years. This has been driven by efforts towards the development of suitable varieties (hybrid varieties with better yield and low inputs reguirement), the adoption of modern technology for rice processing, and the liberalisation of trade policy and licensing procedures and investments have been done for guality produce of Basmati. The Basmati Exports grew by over 11.13% in value terms during FY2018 over the previous year. (Source: APEDA)

However, in recent years, rising disposable incomes and a shift towards premium products have increased the domestic demand for Basmati.This, coupled with the increased penetration of modern retail format stores and a greater marketing push by the companies, have aided the growth of basmati rice consumption in the domestic market.

The outlook for the Indian Basmati rice industry is favourable, supported by demand improvement from the international market and potential upside from branded demand/ premiumisation domestically.

Food Sector Overview

As per a report from Boston Consulting Group, India has a strong growth potential. Indias nominal year-over-year expenditure growth of 12% is more than double of the anticipated global rate of 5%; and it will make India the third-largest consumer market by 2025.

Rising affluence and urbanisation are the biggest driver of increasing consumption. Therefore, consumer behaviour and spending patterns are shifting with evolving Indian society and rising income. Convenience food and health food are the two emerging trends arising out of the changing demographics of the country. Indian convenience food market is estimated at Rs. 1,580 bn by end of FY2017.

It includes a range of processed foods that have longer shelf life and are easy to use. The major attributes that consumers look for in convenience foods are ease of use, packaging, nutritional value, safety, variety and product appeal. Additionally, Health and wellness foods is a Rs. 10,352 crore market in India. With a growth rate of over 10%, it remains a promising seg ment.

The demand for convenience and health foods is growing at a faster pace due to changes in social and economic patterns, as well as increase in urbanisation, buying power and awareness about health foods, changes in meal pattern and existing food habits and the desire to taste new products.

Furthermore, the consumers are increasingly becoming aware of the food safety issues and environmental issues because of their increased concern about health, the environments health and its global implications. Organic food now has become a viable alternative for an increasing number of consumers, who are worried about the presence of chemicals residue and the negative conseguences on the environment caused by intensive production methods. Organic packaged food and beverages is an emerging niche market in India and its primary consumers are high-income urbanites. According to the latest reports from Zion Market Research, the global organic food and beverages market is expected to reach $323.09 billion by 2024.The report, which was carried out by Zion Market Research, estimated the organic market to be worth $124.76 billion in 2017.

Indian Consumption Growth Driving the Food Sector

Growing Urbanisation:The urban population currently accounts for only 33% of Indias population. Urbanisation is expected to rise sharply over the coming years. This shift will lead to higher middle-class population and higher disposable income.

Strong Demographic Distribution: India is expected to add over 100 mn people to its working age population in the next ten years as per the Global Demographics Report. It will then accountfor over 20% of worlds working age population.

Policies: Reforms such as GST and infrastructure building process will strengthen economic growth and consumption in the medium to longer term. GST is also positively catalysing growth of the organised sector.

Poverty Alleviation Programs: According to the government, 22% of Indias population is still below the poverty line. Higher allocation schemes such as MNREGA is expected to lead to a significant recovery in the rural economy.

Rural Demand: Two consecutive good monsoons augurs well for farm income. In addition, the government has increased MSP (Food subsidy) to farmers over the previous year and increased rural development spending to help increase rural income.

About the Company

LT Foods is a leading consumer-friendly, food company offering prominent brands aimed at a global customer for Basmati and other specialty rice, Organic Foods and rice based convenience products.The Companys integrated operations cover a global footprint with procurement, milling and processing for Basmati rice centred in India whereas further value addition and marketing - distribution are available worldwide. Key markets for FT Foodsbrands besides India cover the U.S., the U.K., Europe and the Middle East. The rice portfolio comprises brown, white, steamed, parboiled, organic, guick cooking brown rice, value added and flavoured rice. In rice The Companys brands include Daawat, Royal, Heritage, Gold Seal Indus Valley and 817 Elephant. The organic food product range includes rice, pulses, oil seeds, cereal grains, spices, nuts and fruits and vegetables.

Brands and Market Leadership

LT Foods offers a wide range of brands, with an offering for every occasion and every recipe, enabling it to cater to various customer segments, across income groups.

The Companys flagship brand Daawat, enjoys 28% market share in the branded rice market of India. LT Foods has increased its market share in the modern trade and rural segment. The Company also enjoys highest market share in the rural segment at 42%. The Companys multitier brand structure is geared towards hastening the transition of the market to branded Basmati. Outside India, the Company has a strong market share of 45% in North America under the brand nameRoyal. The Company further has strong presence in other territories as well such as Israel, Far East. This is a result of the Companys focused approach to improve its brand visibility through strategic marketing initiatives and distribution expansion.

In a bid to develop a broader basmati portfolio, the Company has been offering specific products aligned to occasions of cooking and at varied pricing tiers. This includes the specialty range (DaawatTraditional, Biryani, and Daawat Quick Brown Rice), mid value range (Rozana and Fleritage brands) and value segment range (Daawat Rozana).There are in place customised plans to grow respective segments to their full potential.Through its initiatives, the Company is taking a holistic approach towards increasing the affinity for its brands and in the long-term, driving the broader business performance through their growth.

Looking beyond Basmati LT Foods is developing a platform for wholesome foods.

It is also consistently tracking the evolution in customer preferences and is working on adding new products to its portfolio to cater to emergent trends such as the need for greater convenience, need for healthier more nutritious options, etc. Our recently introduced Daawat Quick Cooking Brown rice is growing at a CAGR of more than 50%. The Company is leveraging its strong brand eguity across and its extensive industry experience to further enhance its brand, state of art infrastructure and its wide distribution network.

The Company also strengthened its presence in the food service business to cater to the HORECA segment through its specialised products under the brand Daawat Chefs Secretz.

Over the years, it has added value added products such as convenience sauces, fast cooking brown rice, staples and organic products. Furthermore, in association with Japanese Snack Food Company KAMEDA SIEKA, LT Foods launched healthy rice based snacks in India under the brand name"Kari Kari". It has also introduced Daawat Rozana Gold Plus, which is a blend of nutritious brown rice and aromatic white basmati rice.

The Company is introducing a range of organic "ready to heat" products for the overseas market with a facility in the United States that was inaugurated in October, 2017.

Strong Global Footprint

The Company has a global footprint and sells its flagship basmati rice brands - Royal and Daawat, into 65 countries.The Company has established its ground presence in the US, Europe and Middle Eastto unlock the full potential of these territories. In addition, its other product brands such as ecoLife and Devaaya are also being strongly appreciated globally.

Over the years, LT Foods has also strengthened its global presence inorganically and fortified its brand portfolio through acguisitions.

The Company acguired HULs branded rice businesses-Gold Seal Indus ValleyandRozana! These acguisitions have strengthened the Companys position within the Middle-Eastern markets. It marks LT Foodsentry into the specific markets of Qatar, Oman, and Bahrain; and reinforces the Companys existing presence in Saudi Arabia, UAE, and Kuwait.

The Company in the previous fiscal also acguired the rice brand 817 Elephantfrom the Company Deva Singh Sham Singh (DSSS). This acguisition is helping in strengthening the Companys presence in Canada, USA, Australia, and Israel.These acguired brands have a positive synergistic effect on the overall business of the Company and gaining market share with consistent marketing initiatives

Integrated Manufacturing Process

LT Foodsbasmati base draws major strength from its back-end infrastructure. Over the past few decades, the Company has built and cultivated five processing plants in India, each with its own commodity specific specialisation. The Company also has facilities in Rotterdam and in the US. The combined capacity of the Company stands at 101 tonnes per hour as of 31 st March, 2018.

During the year, LT Foods has established a rice processing plant of 60,000 MTin Europe. Strategically located at Rotterdam, this unit will provide LT foods with easy access to European and UK markets.The products from this facility will be sold under the brand of Daawat.This move is aimed at making Daawat a household rice brand, even in Europe. White basmati rice, when imported into European Union attracts a very high import duty. So, Brown basmati rice, on which there is no import duty will be exported from India and processed at the facility. The Company also inaugurated its Ready to Heat (RTH) facility in Houston, US to manufacture 2 min. retort rice and other products.This unit will take a lead in this growing segment while diversifying its product portfolio.

LT Foods follows an integrated approach to business, where procurement and processing are centred in India whereas the product is offered through a global branded platform across focus segments. At the heart of the business model are the strong relationships built with farmers and traders/mandis, streamlining the flow of Basmati from farm to fork. The Companys integrated operations provide it with several competitive advantages: the ability to purchase large guantities of paddy at competitive prices; and the ability to effectively plan, schedule and implement production, storage and dispatch processes. This also enables the Company to exercise greater control over the guality of its products, and ensure effective inventory and resource management.

Manufacturing Facilities in India

Sonepat

(Bahalgarh)

Sonepat

(Kamaspur)

Bhopal Amritsar Varpal
Rice Capacity (TPH) 43 5 (Organic) 35 6 12
Key Products Raw rice Organic rice, Snack Rice, plain chips, chips seasoning, rice/wheat flour, brown rice Rice,

par-boiled

Rice

Rice (golden, creamy, boiled, parboiled and raw)
Accreditation ISO, SQF, BRC, SA,Kosher, OU, Halal ISO, NOP, NPOP, EEC and Kosher FSSC, Halal, Kosher and BRC ISO FSSC and BRC
USP First to have complete storage in 1 MTbags 100% organic facility with cold and C02 treatment First to get FSSC 22000 certification Fully integrated and automated facility

Balancing Capital Investments

The Company is increasingly outsourcing the manufacturing of low value items, and utilising its facility for manufacturing value added or high margin products.This will help the Company to grow its sales volume without any significant expenditure on capacity expansion in the medium to longterm.This business model will also help reduce operational costs and thereby enhance margins.

As a step in this direction, the Company recently entered into a JV with the Future Group for Sona Masoori Rice, which allows LT Foods to expand its product portfolio. While Future Group makes all the reguired capex investments, LT Foods will take care of the manufacturing operations and will provide its expertise in the procurement function.

LT Foods, in pursuit of increasing its market base, launched DaawatSona Masoori rice in South India.This advancement in regional rice varieties has helped the Company increase and diversify its brand portfolio. This new venture also aims to fill the void of insufficient presence of Sona Masoori in the market to expatriates belonging to the south Indian ethnicity globally. Taking benefit of this opportunity, and using its deep-rooted established network, LT Foods is providing the taste of regional rice globally.

India and Global Business Overview

LT Foods is one of the leading basmati rice players in India having a strong foothold both in International and the Indian market.

The India market remains a key growth driver for branded basmati rice, as the Indian consumers move towards branded foods on the back of rising affluence and evolving culinary preferences. A shift from unbranded basmati to branded is expected due to better product offerings. LT Foods is one of the key beneficiaries of this changing industry dynamic, owing to its strong brand positioning, diverse product portfolio catering to varied price points, and wide distribution network across channels. The Companys branded revenue in India stood at Rs. 892 crore, registering a growth of 13% over the previous year. Furthermore, the consumer pack business has grown by 18%, but there has been a slight de-growth in the bulk pack business since last year due to a GST causing a dip in our HORECA business. The Company has been working extensively with its distributors to make this a smooth transition.

The Companys newly set up plants in the US and Europe will pave the way for healthy revenue growth and stronger market share.

The acguisition of brands including Rozana,

Gold Seal Indus Valley, and 817 Elephant will strengthen its footprint in the overseas market. The Company is witnessing healthy demand growth across regions on account of a strong brand recall in the US market; a leadership position and a new plant commercialisation in Europe; and the entry in new territories through a brand acguisition in the Middle East.

The Companys overseas branded revenue stood at Rs. 1,238 crore, registering a growth of 23% over the previous year. Our US branded business contributed 41% of our total branded revenue and grew by 21% our Middle East business contributed 11 % of ourtotal branded revenue and grew by 19% with the growing consumption of Daawat and newly acguired brands. Our Far East and Africa business contributed 4% of our total branded revenue and improved by 37%.

Quality

At LT Foods, the Company aims for guality and safety in every grain. In pursuing this relentless commitment to guality, the Company focuses on the continuous innovation of processes and systems to enhance its competitiveness and the efficiency of its business process. By way of stringent guality assurance norms, and state-of-the-art technology, with a high degree of automation, the Company ensures robust guality control.

Critical tests are performed at each stage of manufacturing, which is supplemented by rigorous guality control programmes, to ensure a consistent high guality final product. The Companys unwavering focus on guality and innovation, backed by deep consumer insights, world-class R&D, and an efficient and responsive supply chain, will further strengthen its leadership position.

During the year, LT Foods continued its focus on driving the guality culture and total productivity management across all its facilities with improvement in capacities and technology. All facilities at LT Foods are certified by internationally acclaimed third-party certification and accreditation bodies, with FIACCP and FIARPC principles and standards.

Its superior products are a testimony to the Companys relentless focus on guality and delivering world-class products to consumers worldwide.

LT Foods undergoes regular audits by certification bodies, ensuring adherence and compliance to these standards. Certification bodies such as SGS, Intertek, Eurofins and BV regularly audit the Company. This ensures that the Companys adherence to compliances are of the highest standard and maintained atall times. Additionally, the Company complies with all major importing country standards such as the FDA, CFIA, EU, GCC, SASO and others.

LT Foodscommitment to the health and safety of its consumers is paramount, and it ensures strict adherence to food safety and hygiene in the production processes, as well as in the delivery to the client. The Company runs a robust in-process guality programme. Samples are collected at regular intervals during the course of production to ensure brand specifications, also ensuring that the physical and cooking standards are strictly adhered to. Any deviations are corrected on a real time basis.

The Company also has a well-established and robust internal audit programmes that monitors the effectiveness of its processes and systems, covering the following activities:

• Inspecting premises and processes for compliance with hygienic and other reguirements as per international standards and domestic regulations.

• Evaluating FIACCP and other certification standards, plans and their implementation.

• Sampling and testing products prior and during harvest, procurement, processing, storage, transport, or sales to establish compliance.

• Carrying out inspection, sampling and certification of food for import/export inspection purposes.

Furthermore, the Company adopts globally accepted and permitted farming methods for the cultivation of Basmati. The Companys Integrated Pest Management Program works to prevent and control any pest problems. In order to mitigate any food safety risks, critical control points are established not just at the farm level, but across multiple stages until the product is dispatched from the factory.

The Companys state-of-the-art accredited laboratories are an essential component of its food control system.The establishment of laboratories has been done in a manner considering reguirements both in India and international markets.The laboratories have adeguate facilities for physical, microbiological, mycotoxins and chemical analysis. In addition to routine analysis, the laboratories are eguipped with latest eguipments that determine the accuracyand reliability of analytical results.

The analytical guality assurance programmes, along with the Companys responsiveness helps in addressing customer gueries on a real time basis.

Business Pillars (Strengths)

Procurement

In order to augment the availability of paddy supplies from traditional sources, the Company has initiated contract farming since 2006. Under the contact farming mechanism, the Company sells superior guality seeds to the farmers and also provides them with the technical knowhow of rice farming. The Company has a 100 member strong team to handle the paddy procurement process in key procurement centres.

The Company has one of the largest and best entrenched networks of farmers. This helps it to enjoys high credibility at grain markets or mandis. As a result, its association with 270 agents who are linked with 234 mandis, gives LT Foods early and easy access to key rice varieties. Including the organic business, the Company is associated with over 80,000 farmers. While the specifications for pesticides and other parameters to export Basmati rice to markets such as the US and the EU are stringent and demanding, the Companys focus on guality and testing helps in ensuring that these standards are met throughout the value chain.

However, apart from contract farming, the Company also purchases paddy from open markets. To ascertain the guality of the paddy procured, the Company has developed a tool to strengthen its paddy procurement process by mapping on-ground information of the mandi which helps in devising the buying strategy accordingly fora particular day. The Company nurtures best practices in basmati cultivation and has associated with leading crop science companies. Dedicated engagements for organic farming have also been undertaken to move towards an environmentally sustainable agrimodel. Further, the Companys experience of more than 30 years in the industry has helped in delivery of guality product.

LT Foods has entered into a Memorandum of Understanding (MoU) with Wageningen Food and Biobased Research (WFBR), Netherlands, to promote the development of co-operation in the field of research and education. The collaboration with LT Foods is primarily, aimed at strengthening the paddy procurement processes of the compa-ny. The agreement will enable LT Foods and WFBR to encourage and establish ex-change of collaborative scientific research.

Branding

The Companys branding differentiates its offerings by providing customers with guality assurance, facilitating product recognition, and brand recall.This helps to attract newcustomers while retaining its existing customer base.The Company has invested in customised plan to grow in each category of its business, supported by online and offline initiatives. It also engages with target consumer through activation strategies.

The Companys association with Sanjeev Kapoor, the renowned chef has reinforced Daawat as the Finest, Royal as No. 1 Brand in US, Devaaya as Tested Safe, Heritage as Trusted Basmati and Ecolifeas 100% Organic. The Company is leveraging this association to promote its presence in the food service business across the HORECA segment.To be the preferred brand amongst budding chefs, Daawat sponsored a TV show, conceptualized by the brand ambassador chef Sanjeev Kapoor, which was a Cook-Off amongst Young Chefs from top catering colleges in India.The sponsorship showcased the brand to all the budding chefs and enhanced brand visibility. The Company has also extended its presence in Hotel Management Institutes to share knowledge on basmati rice and introduce students to innovative rice-based recipes. This initiative is expected to create a strong brand recall for LT Foods.

During the year, the Company launched Daawat Rozana Gold Plus.The product is a unigue blend of flavoursome white basmati and fibre rich Brown Rice. Rozana Gold plus offers the same great taste of aromatic and flavoursome basmati rice, with the added goodness of healthy fibre, in one pack. With the growing heath consciousness among consumers, this product leverages the innovative concept of introducing a high fiber blendinto the basmati rice category.The product promotions were conducted across TV, digital media, news-papers and radio channels. Rozana Gold Plus has reached 35,000 stores, including 1,000 modern retail stores across India.The product is also spreading its markon e-commerce platforms such as Big Basket.

As one of the first Initiatives of the JV with KAIV1EDA SEIKA, the Company launched the rice- based snacks Kari-Kariin India during the year. After detailed research, the product has been unveiled in four exciting flavours - Chilli Garlic, Salt Pepper, Spice Mania and Wasabi.The product is presently available in selected modern retail outlets in Mumbai, Delhi and Bangalore; and the initial sales response has been very encouraging. The Company plans to penetrate in other select regions over the next fiscal year. The Company also plans to set up a manufacturing facility for manufacturing rice based snacks in India. The construction of the same will commence in the third guarter of FY2019.

Additionally, during the year, the Company engaged with internet celebrity Chef-Chef Mirvaan (Master Chef finalist) - to create informative videos on Daawat Brown Rice for digital channels. This has helped the Company to build its innovative and health brand eguity, targeted at the health-conscious audience. At the trade level, LT Foods has constantly invested in building relationships with its business partners through various loyalty programmes.

Globally, the Company has a well-entrenched sales network in USA, Europe, Middle East and Far East. The Company has a dedicated team, working on strengthening the Companys presence in Africa, to unlock the full potential of the market.

Distribution

LT FoodsGT business has access to 150,000 traditional retail outlets and 36,000 wholesalers, reaching 93% oftowns in India, with over 2 lakh in population.The Company also has access to 2,500 modern trade stores, including 121 hypermarkets, 298 supermarkets and 1,462 mini markets. It is also the first company to place Quick Cooking Brown Basmati Rice in Medical Chains. Furthermore, the Company is a leading supplier of products to premium hotels and restaurants, and has access to 6,200 foodservice outlets throughDaawat Chefs Secretz.The Companys HORECA business added 200 new customers during the year and reported a revenue growth of 24% over the previous year. Furthermore, LT Foods has a dedicated network for expanding its global reach. In the US, we are present across all channels, be it Ethnic stores or mainstream.The Company also has 40 international distributors to cater to the global markets.

Product Innovation

The Company aims at increasing its research and development efforts on new product development to make healthier, nutritious, and more convenience enhancing products.This will allow LT Foods to better serve increasing demand from consumers for more efficient, healthier, and higher guality food. LT Foods research and development efforts have resulted in some popular products, including the 15 minute Daawat Quick-Cooking Brown Rice range, which is growing at a 5 year CAGR of 52% and has become the No.l product in its category. Another extension to this segment is the combination of white basmati rice and brown rice under theRozana Gold Plusbrand. Sauces that can be conveniently mixed with rice for added flavour. The Company also entered in a JV arrangement for the development of baked rice snack products - Kari Kari - in flavours that cater to the Indian.

The Company has two product innovation centres, one in Gurugram, India and one in California, USA, with a team of dedicated research personnel. The Company works in consultation with culinary testing experts and chefs to support its product innovation initiatives. LT Foods is in the process of developing additional products to expand its range of convenience foods and develop a healthy snack segment. Products under development include90 second ready-to- heatpouched rice, fortified rice and5 minute meal-in-a-cup.

Financial Transformation

LT Foods has been delivering sustainable growth over the years. This growth is expected to be further strengthened on the back of robust growth momentum in basmati sales in India; strong traction from the new processing facility in Europe; increasing sales of organic business; and higher revenue generation from the acguired brands.The Company is also gearing towards improving its cost efficiencies, working capital cycle and productivity.

Furthermore, the Company raised Rs. 400 crore through Qualified Institutional Placement with an aim to strengthen its balance sheet by repaying debt and utilising the balance funds for its working capital reguirements.This has reduced our short - term debt to the extent of Rs. 200 crore.

Business Verticals and Performance

Consumer Business

LT Foods has an overall growth ambition to reach a billion dollar of revenues by 2022. The Company aims at deriving two-thirds of this from its consumer business.

The Company has been building its strength within this segment by introducing products based on need gap analysis; and enhancing global presence in those countries only where demand is growing. This facilitates assured and sustainable business growth.The Company is also repositioning its brand Daawat for the I Indian market to sharpen its brand visibility and stimulate further growth. The new avatar of Daawat has been launched in Europe. Royal is I also maintaining its leadership position and the Company has redesigned its brand strategy of I newly acguired brands to strengthen its share in the market.

The Companys revenue from the branded business stood at Rs. 2,130 crore in FY2018 and it contributed 69% to the overall basmati revenue. This business has been growing at a 5-year CAGR of 16%

Brand Royal (No. 1 in US)

I The "Royal" brand of basmati rice, is an established brand in the basmati rice segment in the United States. It holds the No. 1 position in the premium segment.The brands product portfolio consists of Basmati rice, Jasmine rice, Arborio rice, wheat flour, and flavoured rice.

LT Foods has systematically been leveraging the brands eguityand distribution network, to expand its product portfolio in the US market. Further, the Company also introduced Royal Staples under the international line brand Royal Ethnic for the South Asian markets.The products include Besan, Sooji, Poha, Maida, and Daliya. It maintains more than 45% market share of the US basmati rice segment and more that 39% share of the branded segment.

Brand Daawat (The Finest)

This flagship brand, with a legacy of over 30 years offers premium guality basmati rice. It is the leading brand within India and accounts for 28% of overall market share, and over 35% share in the premium segment. It is the first rice brand to enjoy high visibility with help of celebrity endorsements across India. Further, Daawat is also guickly gaining market share in the overseas markets including Europe, the Middle East, and Australia. Within India, LT Foods enjoys 28% market share on overall bases and holds the No.l position across the. Urban, Metro, and Modern Trade categories in India. The Company also holds the No.l position in the Far East and Israeli markets.

Acquired Brand Portfolio

Over the last few years, LT Foods has acquired premium Basmati rice brands to strengthen its existing presence in countries such as US, Canada, and in the Middle East These include Hindustan Unilevers branded rice business brands-Gold Seal Indus ValleyandRozana; anc premium rice brand 817 Elephant.

The Gulf Cooperation Council Consumer rice market has been stagnant for the last 5 years, this is due to low overall population growth clubbed with weak economic performance of the Middle East economies owing to record low, oil prices and political unrest is many countries. This long period of tight economic conditions has seen a shift of consumer buying behaviour to Mid-price segment and the emergence of Value shopping in the Premium segment. With the mid-price space in most markets, being dominated by local players, there is a strong opportunity for a fully integrated company as like LT Foods to build long term, sustainable brands in the Gulf markets.

With The Brand positioning of the acquired brands Rozana and Indus Valley within the L.T Foods portfolio being clearly established, the company plans to concentrate on establishing the same in the market to effectively use the strength of the Full portfolio of its Brands to rapidly build market share in the Middle East especially the lower gulf countries.

FY2017-18 was a milestone year in which significant integration of the brands Indus Valley and Rozana was accomplished into the LT Foods portfolio and overall Consumer and Trade strategy. There was a complete revamp of the Route to Market strategy for the both the brands so that they could add value to the existing portfolio of LT Foods brands. This included price corrections, distributor and SKU rationalisation and targeted channel level strategies.

Institutional Business

Contributing 32% to the overall revenues, this business vertical deals with large institutional customers. Within this vertical, the Company has long standing relationships with customers of repute including Mars, Muhaideeb etc. This segment also helps the Company to strengthen its operational processes in line with the stringent requirements from leading corporate customers. During the year, the Company has added additional long-term partnerships across geographies in this segment.

Organic Business

Over the last decade, LT Foodswholly owned subsidiary - Nature Bio-Foods Limited, has emerged as a trustworthy and innovative global leader in providing authentic organic products to the global consumers by creating a holistic, integrated and sustainable business model that inspires, promote and supports thousands of farming families.

With the strong worldwide presence and vast bouquet of quality organic product offerings, Nature Bio-Foods Limited (NBFL) is setting the highest standard in the organic food industry. NBFL has been engaged in the organic foods and ingredients business since 1997.Twenty one years later, the passionate journey continues with deep involvement in the lives of more than 80,000 farming families, bringing radical social, economical and environmental development of the communities across 15 states in India. NBFL is one of a handful of Indian companies to be both organic and fairtrade certified, and has also now become the first organic company in the country to have been conferred with the coveted Cll Food Safety Award in December 2017.

NBFL has witnessed significant growth in India over the last two decades. The subsidiarys impressive growth continues for 2017-18, where NBFL clocked total revenues of Rs. 361 crorein 2018, representing a compound annual growth rate (CAGR) of 44% between 2013 and 2018.

The organic business has been contributing to the Companys success story by creating one of the worlds largest and the most integrated and sustainable organic food supply chains right from the farm to fork.

With 90% of its business coming from export sales, NBFL has already been catering widely to both the US and European markets. The Company has now formed local subsidiaries in Netherlands and USA to cater more intensively to its customers—a move aligned with the companys mission to achieve 100% sales for its farmers for whom, creation of new markets is critical. Having local presence in USA and the Netherlands will inspire greater confidence in NBFL customers and allows for a deeper sense of involvement. It will also help the Company to expand its product portfolio and grow the business through a stock and sell model.

The Company already has a diverse organic food portfolio, comprising of cereal grains, flour, Pulses, Oil and Oil Seeds, Nuts, Spices, Herbs, Millets and Sweeteners. To further explore the business opportunities in branded sales, Nature Bio-Foods Ltd has recently upgraded and modernised its existing organic facility to support EcoLife to gain a greater market share in India as well as in international markets while exploring opportunities in the value added space to expand its sales and margin profile.

Value Added Products

LT Foods successfully capitalised on its existing brand eguity and global distribution network to offer value added products to consumers.

The Company is expanding its product portfolio based on the changing consumer trends and reguirements.

This segment caters to the evolving consumer demand derived from changing lifestyle trends. In this direction, backed by robust backend and Research and Development infrastructure, the Company is developing innovative products for health conscious and convenience-seeking consumers.

Health and Convenience Products

Under the innovative brand of Daawat, the Company offers a line of seven flavourful Daawat Rice Saute Sauces, Daawat Fast Cooking Brown Basmati Rice and Daawat Rozana Gold Plus.

Daawat Rice Saute Sauces:

The sauces are available in seven flavours including Tamarind, Lemon Rice, Hot Garlic, Manchurian, Sweet Saffron Pista, Cranberry, and Methi. These products are currently available at modern retail stores across Mumbai and Bangalore.The Company has plans to launch new products across India, in addition to adding new flavours to its portfolio, during the next financial year on the basis of feed back from its consumers.

Daawat Fast Cooking Brown Basmati Rice:

This product continues to receive positive response from the Indian market place and is growing at a CAGR of 52% over the last five years.

Daawat Rozana Gold Plus:

This product was introduced during the year and it offers a unigue blend of 80% Rozana basmati rice and 20% Daawat brown basmati rice to serve taste and health together. Rozana

Gold Plus was launched in April 2017 and is presently available in over 35,000 outlets across Delhi, Mumbai and Bangalore.The positive response from these markets has prepared the Company gradually scale this product across Tier I and Tier II metros.

Furthermore, during the year, the Company launched a rice based snack in association with KAMEDASEIKA, a Japanese food major with a revenue of US$ 900 million. Launched in four exciting flavours, the product is presently available in selected modern retail outlets in Mumbai and Bangalore.The product is performing exceedingly well and the Company plans to take this initiative to the next level by setting up the facility in North India in the next financial year.

International Trading Business

Aligned with the strategic intent to create a sustainable and predictable business model, LT Foods has reduced the share of International Trading in its overall pie and is now limited to only 16 crore in financial year 2017-18.This is in keeping the Companys strategy to move to more value added business.

Medium to Long Term Strategy

LT Foods has devised a well-defined medium and long term strategy that entails working towards increasing the Companys share of core branded business, while reducing the share of trading business. This will increase the share of business that is more profitable and predictable. In the medium and long term, we aim to have 30% of our business accounted for by value- added rice adjacencies.

The Company also has a structured stage gate process for any new business endeavours. Each new business opportunity is evaluated based on the intensity of working capital reguired to see it though. Only the ones that are relatively less working capital intensive, in addition to being a high margin and ROIC business are taken on board.

As an integral component of its ongoing strategy, the Company will continue to expand its product portfolio and presence across geographies by leveraging its brand eguity, distribution network and infrastructure.

Financial Overview

For FY2018, the total revenues stood at Rs. 3,650 crore, higher by 11% year-on-year mainly driven by higher contribution from branded sales.The gross profit improved by 11% to Rs. 979 crore. EBITDA came in at Rs. 414 crore, an increase of 2% translating to an EBITDA margin of 11.3%.The normalised EBITDA margin after taking into account investment towards expansion of international operations in Europe and US as well as currency fluctuation stood at 12.6%.

Profit before tax increased by 12% to Rs. 218 crore owing to lower interest cost and deprecia-tion. Profit after tax came in at Rs. 144 crore as compared to Rs. 129 crore in FY2017, repre-senting a growth of 12%.This resulted in 9% improvement in EPS to Rs. 4.80 per share. EPS is based on fully diluted basis adjusted for stock split from Rs. 10 per share to Rs. 1 per share.

Branded India sales stood at Rs. 892 crore, higher by 13% year-on-year while the International branded sales came in at Rs. 1,238 crore, a growth of 23%. Consumer business on an overall basis is growing at 21% YoY.

The average realization for India increased to Rs. 51 per kg, up by 18%, while the average reali-zation for international markets stood at Rs. . 96 per kg, higher by 5%.

Opportunities and Threats

Given the rising population and increasing income levels, the opportunity landscape of guality food segment continues to grow. The Companys strategic alignment with aspirational aspects of consumers such as brand, convenience, health and organic, etc further strengthen its opportunities.

Any deceleration in key economies of conseguence, unfavourable weather conditions in basmati cultivating geographies, sudden fluctuation in exchange rates, any adverse changes regulations, etc may pose a threat to Companys business profitability.

Information Technology

The Company is enhancing the use of Information Technology tools and applications in its business processes to become more competitive, efficient and effective. Its robust IT infrastructure acts as a growth enabler and helps achieve cost leadership, process orientation and higher productivity.

LT Foods is increasingly using IT as part of its strategic planning process and tactical execution of their business strategies. Its goal is to use Information Technology to create the most efficient and effective link between suppliers and consumers.

Better IT applications are helping reach target market segments more cost effectively, track data, improve productivity levels and maximise the Companys returns on investment.

The Company has made investments towards various modules of SAP software, in line with the changing scenario. These modules are being implemented across the organisation. One of the key initiative undertaken during the year was Sales Force Automation.

This technology is being used to automate the business tasks such as inventory control system, account management, process management, contact management, customer sales tracking, sales funnel management, sales forecasting analysis, product knowledge, sales lead tracking system, and sales team performance evaluation, among others.

LT Foods started the implementation of Sales Force Automation with a focus on developing a tool which is customised as per the Companys business needs, suiting all business verticals which will help in increasing sales productivity and customer satisfaction, efficient utilization of scarce resources, competitive advantage in terms of cost, revenue and market share, comprehensive reports, time efficient and proper records maintenance.

Human Resource Management

The prime objectives of the human resource function at LT Foods is to build new talent and to groom existing talent. To achieve success and profitability, the Company relies on its greatest assets - its intellectual capital. LT Foods values its employees and invests towards capability building with a long-term orientation. The Company has been building its skill-sets by adding new competences through hiring, grooming of internal talent and functional capability building.

Recruitment and lnduction:The Company hired guality manpower, focusing on their functional experience and expertise. As a growing global branded specialty food company, LT Foods focused on hiring fresh talents matching the evolving dynamics of the organisation.

The Company conducts a corporate induction called Anusthapna.This three-day programme offers the new entrant with the overall corporate and functional overview.

Performance Management System: The

Companys approach has transitioned from traditional manufacturing set-up, to an empowering and enriching work environment. In order to bring role clarity and cascade organisation goals at all levels, the Company introduced Intranet driven performance management system called PRIDE (Performance Review and Individual development Enabler). This helps in capturing individual development needs and setting KRAs for employees. Under the programme, 21 competencies have been defined.The PRIDE is a transparent system that also offers a platform self-rating, supervisor rating and recruiter rating. To create a sense of empowerment, it also provides the employees with opportunities to explore career mobility options within the organisation.

Learning and Development: As a part of its long-term vision, the Company consistently invested in competency-based employee training, to enhance the teams learning. Pertaining to the individual and functional needs, and assessment through PRIDE, competency gap analysis is undertaken for each employees. This helps the employees undergo skill-based, function-based and behavioural learning interventions to suit business reguirements.The Companys learning and development initiatives are also geared towards building leadership pipeline and to enhance organisational proficiency to compete in the market place.

Engagement: At LT Foods, employees are encouraged to have Fun at Work. A number of employee engagement events are conducted to promote collaborative and conducive work environment. All major festivals are celebrated with enthusiasm across plants and offices, to bring people together.

LT Foods at group level has more than 1600 employees and on standalone basis has 896 employees.

Key Risks & Concerns

A corporate is exposed to multiple risks owing to various business transactions it undertakes.The risks are classified broadly into two categories - external and internal risks. External risks can be attributed to the various macroeconomic risks faced by the Company, such as the slowdown of economic activity, unfavourable exchange rate fluctuations, a change in the regulatory framework, as well as climatic risks.The internal risks comprise of operational risks, raw mate-rial uncertainty, human capital risks, and financial risks.The Company has a strong risk management model in place, which identifies the key external and internal risks associated with the Company. After assessing their impact on LT Foods, mitigation measures are evaluated and suitable changes are made, keeping the evolving business scenarios in mind.

Risk 1: Our business is dependent upon the availability, guality, guantity and cost of basmati paddy. The availability, guality, guantity and cost of basmati paddy are subject to numerous risks, including the unavailability of sufficient rainfall/ water, untimely and excess rainfall, insect and pest manifestation, inadeguate irrigational facilities, change in soil guality, unfavourable climatic conditions, change in crop patterns and other market factors, all of which are beyond our control.

Mitigation: We typically purchase most of our paddy reguirements during the harvesting season as the best guality of paddy is available during such period, off-season purchases from stockists of aged rice are made to supplement the needs of customers, or where we believe that prices will decline. We depend on licensed third-party procurement repre-sentatives and agents, for procurement of basmati paddy.

These agents are authorised to purchase basmati paddy in the organised agricultural produce markets, or mandis. Our procurement network exceeds 210 procurement agents, across 200 mandis, in addition to our internal procurement personnel. Our senior management team, including our di-rectors, interface regularly with the procurement team enabling guick decision-making in the buying process. Prior to the harvesting season, our procurement team conducts surveys to ascertain the total estimated crop-area under basma-ti paddy cultivation and the guality and availability of paddy. Our procurement teams undertake pre-harvest surveys before procurement season to assess the quality and availability of paddy. We also typically enter into non-binding oral agreements with such procurement agents for the procurement process, which is based on good faith and we have managed to build such network and relationship over the years by making timely payments and procuring basmati paddy in large quantities. To handle the same stringently, we have strengthen our team as well on ground to assure right quality at right price.

Risk 2. A significant portion of our income is derived from our export of basmati rice, which may be dependent on the policies passed by the governments of the countries where we export and any unfavourable change in such policies may adversely affect our business. Mitigation: We primarily sell a variety of basmati head grain rice to countries in North America, certain European countries and the Middle East. As part of our growth strategy, we intend to increase our exports and distribution net-work in the coming years in several countries and regions, where our overall concentration with one particular country or region is limited. From the strategic perspective, we have kept our focus on growing economical stable countries. Risk 3. We are exposed to foreign currency exchange rate fluctuations and exchange control risks, which may ad-versely affect our results of operations. Our operating expenses are denominated substantially in Indian Rupees, however, more than half of our total income is denominated in other currencies, including the U.S. Dollar, U.A.E. Dir-ham, and Euros. A significant fluctuation in the Indian Rupee and U.S. Dollar and other foreign currency exchange rates could therefore have a significant impact on our results of operations.

Mitigation: Although we enter into forward foreign exchange contracts to hedge against our foreign exchange rate risks in connection with our export sales, a weakening U.S. Dollar would decrease the relative value of our income de-nominated in or tied to the U.S. Dollar against our Indian Rupee denominated costs, thus decreasing our profitability.The exchange rates between the Indian Rupee and these currencies, primarily the U.S. Dollar, has fluctuated in the past and any appreciation or depreciation of the Indian Rupee against these currencies can impact our profitability and results of operations. We have well defined hedging policy wherein we hedge 50% of our foreign exchange exposure.

Risk 3. Improper storage, processing and handling of basmati paddy and basmati rice may cause damage to our in-ventory leading to adverse effect on our business and results of operations.

Mitigation: Our inventory primarily consists of basmati paddy and rice. We typically store the basmati paddy on plinths in open as well as in covered warehouses and protected silos, and basmati rice is stored only in covered and pro-tected warehouses and silos. As part of our operations, we are reguired to maintain the reguisite standard for storage of paddy and rice that we use in our processing activities. We achieve this through various means, including by ensuring that our storage facilities adhere to specific storage reguirements as reguired under our supply and distribution ar-rangements and in accordance with regulatory reguirements.

Internal Audit Control System

The Company has a well-established system of internal controls and procedures, which are commensurate with the size and nature of its operations. A regular Internal Audit of operations, establishments and stockyards are conducted by leading Internal Audit Firms, in order to ensure that the set processes are properly adhered to.

The Audit Committee reviews the reports of the Internal Auditors and monitors the effectiveness and operational efficiency of these internal control systems. The Audit Committee gives valuable suggestions for the improvement of the Companys business processes, systems, and internal controls.The annual internal audit plans are prepared by Internal Auditors in consultation with the Audit Committee.The Company also implemented the worlds leading ERP system - SAP - throughout the organisation, which focuses the approach towards automating the internal control environment.

Cautionary Statement

This document contains statements about expected future events, as well as the financial and operating results of LT Foods Limited, which are forward looking. By their nature, forward- looking statements reguire the Company to make assumptions and are subject to inherent risks and uncertainties. They face the risk that the assumptions, predictions, and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause the assumptions and actual future results or events to differ from those expressed. Accordingly, this document is subject to the disclaimer and gualifjed in its entirely by the assumptions, gualifjcatlons and risk factors referred to in the managements discussion and analysis of LT Foods Limiteds Annual Report, 2017-18.