L T Foods Ltd Management Discussions.

Global Economy

The world faced an unprecedented health and economic crisis in the form of the COVID-19 pandemic in 2020. During the year, the global economy contracted by 3.5%1. This was one of the biggest economic downturns in seven decades since World War II.

As most countries across the globe closed their borders and were forced to curtail economic activity, to control the spread of the virus, it deeply affected people as well as businesses. The economically weaker sections of society, people employed in the informal sector and the youth population were severely impacted. The pandemic led to massive pay-cuts and job-losses across the globe. It is estimated to have caused an effective loss of 2552 million full-time jobs worldwide. Governments and central banks across the world resorted to favourable fiscal policies and offered monetary stimulus to prevent economic meltdown.

Among the developed economies, the United Kingdom (UK) was the hardest hit and registered a contraction of 10%. Easing of government restrictions and fiscal aid gradually led to a recovery and allowed economic activity to resume. European economies too declined by 7.2% during the year, as lockdowns continued for the first-two quarters of the fiscal year. Although, activity resumed by the third quarter of the fiscal, partial lockdowns in the fourth quarter, due to growing cases of corona-virus infection curtailed a possible recovery. In the United

States, economic growth slowed by 3.4%, owing to better-than-expected fiscal relief packages. The Middle East too faced a particularly difficult year due to a steep fall in oil and petroleum trade and prices. The emerging and developing economies also contracted by 2.4%, with China being one of the few countries to sustain a positive growth of 2.3%.

Outlook

Although new strains of Coronavirus continue to pose a threat in some parts of the world, vaccine approvals across the world bring a ray of hope for most countries. Resting on stronger than expected momentum in the second half of 2020, the global economy is anticipated to grow at 5.5% in 2021 and 4.2% in 2022. However, the momentum is expected to sustain only if vaccination drives are successful, further outbreaks are controlled in advanced and middle-income countries, inflation and sovereign debts are efficiently managed. Successful vaccination drives and additional policy support in large economies are expected to outweigh the risk of rising infection. Going forward, the economic growth prospects appear to be particularly promising for advanced economies like United States and Japan.

Indian Economy

The GDP of India contracted by -7.3% during the fiscal 2020-21 due to covid 19 pandemic and the consequent economic crisis that followed thereafter4. By the end of March 2020, a countrywide lockdown was imposed to control the spread of the virus. Thereafter, a slew of fiscal measures that were announced to keep the economy afloat. It mostly aimed to ease supply constraints and inject liquidity into the economy. With restrictions across the country severely limiting movement, income and consumption patterns were significantly hampered. But, towards the second half of the year, lockdowns were lifted in phases and pent-up demand added the much-needed impetus to the economy. The festive season in second half of 2020 further revived the demand, helping the economy to bounce back.

Outlook

Despite the severe demand contraction in the economy during the recessionary trend in the first half of the current fiscal year, the economic recovery towards the later-half of 2020 was particularly impressive. The successful implementation of vaccination drive in India is expected to further lead the recovery in 2021. As a result of the negative impact of the second wave; the real, inflation-adjusted GDP growth forecast has been lowered down to 9.3% from 13.7% for FY2022.5 This wave is projected to slow down near-term economic recovery and could also hamper longer-term growth efforts. The budget for FY 22 also focuses on stimulating demand with an emphasis on public investment. As the country slowly resumes economic activity, manufacturing output is likely to improve and demand is expected to pick up, both in the Indian and

Industry Overview

Consumer Food

In 2020, ‘Health is Wealth became the philosophy for survival. As the COVID-19 pandemic wreaked havoc around the world, people turned towards healthier food and a sustainable lifestyle. Food consumption patterns were also modified, with the growing preference for healthy food and snacks that was perceived to boost immunity or mental health.

The global health and convenience food industry is expected to grow further by the end of 2021. It is anticipated to record a steady CAGR of ~6%, from 2020-27, to ~$1 trillion. US is the largest market, with a 29%6 share of the global market, at an estimated market size of $221.2 billion. Europe, Canada and China continue to expand its foray in this segment and are expected to have a major share by 2027.

Indians are adopting a preventive approach to health and convenience to keep the elderly and children safe, the most vulnerable groups to be affected by the pandemic. The shift in consumer behaviour has led to an increased demand for healthy food. By 2030, annual household consumption is set to treble7 in India, making it a favourable market for Indias food consumption story.

Rice & Specialty Rice Segment

Rice is one of the most important consumer foods and is a staple food for half of the worlds population8. An average person is expected to have consumed around 549 kg of rice in 2020-21, marginally up from the previous year. While the global rice market is projected to grow at a CAGR of 1.2%10 between 2021-26, the India rice market is expected to grow at a faster rate of 2.7%11 during the same period.

India, the second largest producer of rice after China12, is the biggest exporter of rice in the world. Export of rice from India increased 9.5 million MT in 2019-20 to 11.59 million MT by December 2020.

In the Specialty Rice segment, Basmati Rice holds leading share. Total Basmati market stands at 9 million metric tonne (MT) out of which India produces c.8 million MT and Pakistan produces c.1 million MT.

Consumption in both India and International markets continue to grow. India Basmati market stood at 2.5 million MT and is growing at c. 8% as consumers are shifting from Regional Rice to Basmati Rice. Exports of Basmati rice reaching 4.63 million MT during the year 2020-21.14.11 With the Middle East being one of the worlds biggest Basmati markets and accounting for three-fourths of rice exports, followed by US and UK.

Further, in the International market we have witnessed a shift among different ethnicities other than Persians, Iranians and South Asians, wherein Indian cuisine specially Basmati Rice recipes are gaining traction. Hence there lies a big opportunity for Basmati Rice category to expand further across geographies

Organic Food Industry

Organic food is produced naturally, with limited or no use of pesticides, preservatives or any other harmful chemical additives. As a result, it is considered a healthier option and its preference continues to grow in the global as well as India markets. Besides, its environmental impact is minimal and plays a vital role in conserving the ecological balance. Due to the COVID-19 pandemic, demand grew phenomenally as consumers become more health conscious. Combined with growing consumer health awareness, the global organic food market reached 106 billion euros in 2019, growing at a 5 Year CAGR of 9%. The United States is the leading market (44.7 billion euros), followed by Germany (12.0 billion euros) and France (11.3 billion euros). In 2019, many major markets continued to show strong growth rates; for example, the French market increased more than 13 percent. Danish and Swiss consumers spent the most on organic food (344 and 338 euros per capita, respectively). Denmark had the highest organic market share, with 12.1 percent of its total food market.17

India ranks first in terms of the number of organic farmers18 and it is home to nearly one-third19 of organic producers in the world. India accounts for 2.1%20 of global export of organic products, mainly to the EU, USA and UK, with _ax seeds, sesame, soybean, tea, medicinal plants, rice, and pulses comprising major export items. The Indian organic food sector is expected to reach US $10.7521 billion by 2025. A burgeoning middle class, rapid urbanisation, increased health and food safety concerns, easy availability and the development of a niche consumer base is expected to contribute towards the growth of this sector.

Retail sale of organic packaged food is projected to grow at a faster rate due to increased awareness about healthy food, mostly triggered by the recent pandemic. Speciality organic stores at strategic locations, especially curated menus at hotels and restaurants and easy availability of organic food on major e-commerce websites is likely to fuel demand for organic food in the days ahead in India as well as globally.

 13 https://agriexchange.apeda.gov.in/IndExp/PortNew.aspx

 14 APEDA

 15 https://krishijagran.com/agriculture-world/India-may-get-gi-tag-for-basmati-rice-from-eu/ https://www.consilium.europa.eu/media/49523/eu-India-leaders-meeting-joint-statement-080521.pdf 16 https://www.thebusinessresearchCompany.com/report/organic-food-global-market-report 17 https://www.organic-world.net/fileadmin/images_organicworld/yearbook/2021/Infographics/willer-et-al-2021-MASTER-2021-02-04_19.pdf 18 https://www.ibef.org/news/India-ranks-first-in-number-of-organic-farmers-and-ninth-in-terms-of-area-under-organic-farming-major-organic-exports-from-India-are-_ax-seeds-sesame-soybean-tea-medicinal-plants-rice-and-pulses 19 https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Indian%20Organic%20Foods%20Market%20Report_New%20 Delhi_India_06-08-2020 20 https://www.pureecoIndia.in/indian-organic-market-2020-new-trends-focus-areas-rutaksha-rawat/ 21 https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Indian%20Organic%20Foods%20Market%20Report_New%20 Delhi_India_06-08-2020

Organic Products Consumption in India (USD million)

Category 2015 2016 2017 2018 2019 2020* CAGR (2017-2020)
Health & wellness products consumption 10,678 12,279 14,200 15,526 16,848 18,158 8.50%
Organic packaged food and beverages consumption 38.6 46.3 54.6 61.6 69.0 77.0 12%
Organic packaged food consumption 6.7 7.8 9.2 10.2 11.1 11.8 9%
Organic beverages consumption 32.0 38.5 45.3 51.4 57.9 65.1 13%

Note - Estimates for 2020 : Source: Global Organic Trade

Health and Convenience Segment

The segment consists of processed food such as ready-to-eat/heat foods, shelf-stable products, culinary aids and prepared mixes. It aims to merge health and convenience alternatives to home cooked food to consumers. The global food market is witnessing a rapid shift towards this segment, mainly on account of the huge variety of tasty food available in this segment and its ability to make food readily available.

The global processed food industry is estimated at Euro 2.5 trillion with US, Europe and Japan occupying 60% of the market. The demand for healthy and convenient food has increased post Covid. According to a survey based report, 26% of consumers in Europe expressed their willingness to have sustainable and healthy products, while 30% intended to spend more on healthy eating in 2021-22. A similar finding was also observed in Asia, where in-store safety, healthy offerings and locally sourced products are driving food sales.23

Owing to rapid urbanisation, nuclear families continue to grow and the evolving gender roles are propagating the need to find easier and healthier alternatives to home cooked food. The Indian Processed food market is expected to double from USD 263 billion in FY20 to USD 535 billion by 2025, driven by an abundance of raw material, enabling policies and supportive infrastructure. Besides, opportunities for export also continue to grow. While urbanisation and changes in lifestyle are prime reasons for the demand for processed food in urban areas, its preference continues to grow in semi urban and rural areas as well.24 Furthermore, the pandemic has increased the preference for healthy food, thereby providing significant opportunities for the growth of nutritious and healthy food.

Megatrends in Food industry

Some of the major trends witnessed in the India and International markets are as follows:

1. Higher spending capacity:

According to a research by the India Brand Equity Foundation, the spending capacity of the Indian middle class is expected to double by 2025. With the rise of disposable income and access to credit, the Indian middle class is anticipated to spend more on convenience and branded food products

2. Growing health awareness:

The global health crisis has increased awareness about healthy diets and people are not only conscious about their consumption patterns but, are also cognizant about the nutrient content of their food. Preference for branded, convenient, healthy and safely packaged food also continues to rise. Besides, 60% of global consumers are looking for immunity boosting food and beverages due to growing consciousness.

3. Focus on Sustainability: Environmental concerns continue to influence people to choose organic and sustainably sourced food globally. Moreover, a growing trend to reduce wastage and utilise unused fruits and vegetables for soups, sauces and other food items is auguring sustainable practices across the value chain.

4. Transparency: Customers are aware of their food choices and are keen to get a better understanding about the processes involved in food sourcing, production and packaging. This has compelled the consumer food industry to transparently disclose information about the food supplied and produced by them in India and International markets.

5. Urbanisation: The National Commission on Population in India predicts that 38.6 percent of Indians will live in urban areas by 2036. The UN too highlights that Indias urban population will nearly double between 2018 and 2050, from 461 to 877 million.25 With rapid urbanisation, lifestyle changes are expected to be prominent and demand for convenience and ready-to-cook meals are expected to increase.

6. Reliance on e-commerce platforms: As the demand for packaged, healthy and convenient food continues to grow along with ready-to-cook food, consumers are relying on e-commerce platforms to purchase food online. The COVID-19 outbreak has also accelerated the growth of Indias e-commerce market, which is projected to grow at a CAGR of 19.6% between 2019 and 2023 to reach H 7 trillion by 2023. At the global level also the traction for e-commerce platform has increased.

7. Increasing Internet penetration: Greater internet penetration has allowed people to gather knowledge about the benefits of superior quality food. It also provides information about different types of food, empowering them to choose healthy and convenient alternatives to traditional food.

8. Government Support: The Government of India has undertaken several steps to improve the food supply and consumption patterns in the country. The Paramparagat Krishi Vikas Yojana (PKVY) was introduced in 2015 to promote organic farming in the country. Additionally, Food Standards and Safety Authority of India (FSSAI), a statutory body, has mandated NPOP or PGS-India certification for all types of organic food27, thereby improving confidence in Indian organic food in the international markets. The Government has also identified the need to fortify food with essential nutrients to address malnutrition in India.

Company Overview

Business Segments

Basmati Rice and Specialty Rice

The Basmati & Other Specialty Rice segment forms the core of the business of LT Foods that comprises of Consumer as well as Strategic Private Label business. This segment contributes 83% to the overall revenue and has been growing at a 3-year CAGR Revenue growth of 8% backed by our flagship brands "Daawat" and "Royal" and other brands such as Gold Seal Indus Valley, 817 Elephant, Heritage, Devaaya, Rozana, etc. Our flagship brands Daawat and Royal command leadership position in India and US markets with market share of 20%+ and 50%+ respectively and our brands also hold leadership position in other geographies as well, i.e., Israel, Reunion Island, Mauritius, etc. The Companys Global Supply Chain Network and Wide Distribution Network of 900+ distributors helps to reach its consumers across 60+ countries and 1,37,000+ retail outlets in India. The Company has presence across all price points and at all channels be it General Trade, Modern Trade, HORECA, E-Commerce, etc. that has aided it to reach its loyal consumers without any disruption in challenging times of Covid. The increase in home consumption led to an increase in the Consumer pack contribution from 84% to 86% and overall small pack business up by 8% versus last year.

LT Foods is also relentlessly working in expanding its product basket to meet the needs of its consumers and ventured in the regional rice segment by launching Daawat Sona Masoori and Daawat Kolam.

Consumer Pack Business Share of Basmati & Other Specialty Rice during the year

Our portfolio of Basmati & Other Speciality Rice brands caters to a growing consumer base across all price points. We are one of the leading player in this space reaching out to our consumers in India and Globally with vast range of offerings across all the channels.

Organic Food & Ingredients

Consumers are increasingly making a shift towards higher consumption of organic foods in their daily food routine as they look more closely at personal health, convenience and nutrition. While a shift towards healthier food by consumers in US during the pandemic sparked huge sales, the European markets are driven by the highly conscious consumers who look for the personal, environmental and social impact of food they eat. The India business is driven by Companys ability to provide the finest and consistent experience to consumers who have become more health and hygiene conscious through increased awareness.

LT Foods has been at the forefront of fulfilling consumer demands by closely monitoring the evolving preferences of its consumers in this segment as well. In the organic food and ingredients business, the Company mostly supplies ingredients to reputed organic food manufacturers along with marketing finished goods products in India and from its subsidiary companies in US and Europe.

Nature Bio Foods Limited (NBF), the organic subsidiary of LT Foods started in 1999, has emerged as a trusted partner, over the years, offering authentic organic ingredients to consumers in US and Europe. It offers a range of organic products including rice, pulses, beans and ancient grains sourced from Asia. The Company also exports organic soya meal and meal, a nutritious protein supplement, sourced from farms in India and African countries in Togo and Uganda. With over two decades of existence and experience, NBF now partners with over 64,000 farmer families and over 94,000 hectares of organic villages across India in addition to farms in Africa and Thailand to secure quality organic products.

The Company has established a strong foothold in various countries including Germany, the Netherlands, Italy, Austria, the US, Canada, Australia, New Zealand, the UAE and Israel. The Company consistently maintains safety across its operations that has enabled it to achieve a rare feat of being the first Company in India to be conferred with the coveted CII Food Safety Award.

51%

Growth in exports from Nature Bio Foods India year on year basis

During the year, the segment grew by 51% in revenues, and is contributing 12% to the overall revenue. The Company has incorporated two subsidiaries in US and Europe to strengthen its position in these geographies via the stock and sell model. Investment at the backend, strong supply chain and expansion in product portfolio has helped the Company gain market share across its product portfolio across geographies. During the year, the Company has also launched its product in India across the online platforms.

Amazon.in

Ecolife presence on Indian e-commerce platform.

9.2%

Share of NBF in all Indian exports globally in category catered to by NBF

Noon in UAE, Jamoona in Germany

Ecolife brand presence on ecommerce platform in International markets

Health and Convenience Food

Convenience food enable the consumers to save time and effort in meal preparation, cooking, consumption and post meal activities which appeals to the individual preference of broad consumer base. The recent trends of increasing working women in families, shift towards nuclear families and even individual preferences within a joint family have started to create demand for health and convenience-driven products. Across the globe, consumer preferences are transitioning towards healthier and safe food products, and the shift has accelerated in the aftermath of the pandemic.

Aligning with these trends in the consumer space, LT Foods has defined 3 strategic pillars for Health & Convenience segment - Finest (Authentic, Superior Quality, Taste), Health and Convenience (Easy to use and addressing the consumer need) and Innovate to differentiate (Reason for consumer to switch or evolve) and would be riding on the brand equity of its brands and distribution network to market these products.

The Company has launched Daawat Sehat, a fortified rice on the Health platform and Royal Ready to Heat, Daawat Saut Sauces, Daawat Cuppa Rice and Kari Kari on the convenience platform that currently contributes c.2% to the overall revenue amounting to H 69 crore during the year and expected to give a higher contribution in terms of revenue and margins going forward.

Business Performance by Geography

India Business

Our India business contributes 30% to our overall revenue and saw a 10% increase in its small pack business in this financial year aided by strong brands, distribution expansion, product portfolio expansion and implementation of new Go To Market Strategies.

The basmati and other speciality rice business in India is led by "Daawat" and other regional brands such as Heritage, Devaaya, Chef Secretz, Rozana, etc. catering to a diverse customer portfolio, ranging from value to premium consumers.

‘Daawat which is the Companys flagship brand continued to command strong position. The brand was also very highly penetrated across all channels, as per Kantars home panel data. The Basmati rice consumption per household is estimated to have increased by 3 kilograms during the lockdown, and our brand Daawat was successful in garnering the maximum benefits from this transition. The temporary shortfall in demand from the HORECA segment was offset, to a large extent, by uptake in consumer business led by increase in home consumption.

The Company is present across all channels such as General Trade, Modern Trade, HORECA, E-commerce and has been expanding its distribution network year on year. The Company has a strong foothold in urban and rural markets in India and consistently expanding its distribution network across Tier-II and Tier-III markets, resulting in increased business. The investments made over the past few years on the distribution front have helped the Company to reach its consumers during these challenging times with agility. In this financial year, the retail outlet reach increased to 1,37,000+ with 800+ distributors.

Another channel that gained huge traction during the year under review is the e-commerce platform that witnessed a growth of 70% and contributed between 3% to 5% of the total category business.

The Company has also expanded its product portfolio by expanding offerings in the Regional Rice segment through Daawat Sona Masoori and Daawat Kolam.

During the year, the Company identified and nimbly executed a slew of innovative Go To Market approaches which yielded positive results for the Company. In line with our Go to Market (GTM) strategy to increase distribution, we focussed on engaging with our consumers, by creating digital campaigns to celebrate occasions and launching new products to cater to their preferences.

800+

Distributors in India spread across multiple cities

In the Organic food and ingredients segment, the Company launched organic brand "Eco Life" across e-commerce platforms to cater to a rising consumer demand for chemical free and environmentally safe food products amongst the consumers. The Ecolife business in India saw a 26% growth in this financial year.

In India, the Company also expanded its product portfolio on the Health and Convenience platform to fulfil shifting trends in Indian consumerism towards healthy, personalised and easy to cook rice-based/rice allied food, i.e., Daawat Cuppa Rice, Daawat Saut Sauces and Kari kari.

Daawat Sehat

A one of its kind in the current offerings, Daawat Sehat is a fortified everyday rice, fortified with iron, folic acid and vitamins B1, B3, B6 and B12. The rice is made with a special process which helps retain the nutritional content even at the final stage of consumption, thereby providing twin benefits from improved nutrition and immunity. The brand carries +F logo and also features on FSSI website. Launched in early FY21 and following the success of a digital campaign which garnered over a million eyeballs, the Company recently launched a 30 second commercial (TVC) to reach a wider consumer base. The product, which is now popularly known as ‘Poshan Wala Chawal, is another endeavour by the Company to help reach the Governments mission of malnutrition free India through food fortification. The strong brand equity of

Daawat and a widespread distribution channel facilitated the availability of Daawat Sehat across the country at major retail outlets in modern trade, general trade and e-commerce.

Daawat Saut sauces

During the pandemic, culinary aids witnessed a rapid acceleration and Daawat Saute Sauces were launched to cater the emerging needs of consumer demand for culinary aids. The Saut Sauces have expanded rapidly across major distribution channels, particularly in e-commerce. Currently available pan India, the product is available in 5 variants and has received significant traction by consumers.

Daawat Cuppa Rice

Daawat Cuppa rice, which provides tasty and home style food instantly, was launched during the year in India. These are ready to eat meals packed in dehydrated state, and reconstitutes in 10 minutes after pouring hot water. The easy to prepare functionality and presence of all-natural ingredients without any preservatives and artificial _avours make it a healthy and convenient choice for on-the-go consumption.

They are available in 5 variants and have already generated significant traction among consumers.

Kari Kari

Kari Kari is an innovative premium rice-based snack launched in January

2020 in the H 800 crores snack market in India. Primarily driven by demand in Metro cities and driven by e-commerce distribution channel, Kari Kari continued on its growth momentum and recorded a growth of 239% during the year. The product has been successful in gaining acceptability from the consumer. The distribution channel comprises of several modern trade chains, and standalone outlets in addition to significant presence in e-commerce. The product is currently available in 10+ states in India.

International business

Our International business, comprising nearly 70% of the revenues, is driven by the strong brand equity of our flagship brands such as Royal and Daawat along with a robust global supply chain that facilitates distribution of our products across geographies. A long-lasting relationship with leading supermarket chains across regions, presence across all channels and an increased demand of aromatic rice and rice products from different ethnicities in global markets continues to drive our business growth.

North America

The US Basmati Rice market stood at c. $351 million in during the year under review, up by 4% on year on year basis. LT Foodss one of the flagship brand "Royal" with 50%+ market share continues to be the market leader in the US. This business is growing at a 3 Year CAGR of 9%.

The US business delivered another strong year in terms of growth, margin expansion and strengthening of financial metrics. Overall, the consumer business continued the growth momentum and grew by 7% during the fiscal 2020-21 on year-on-year basis. The revenue growth was primarily driven by growth in our flagship brand "Royal". In North America our brands are available to all consumer groups through distribution across Indian & Middle Eastern ethnic stores, the club stores and main stream stores. Our business has grown across all channels and therefore across all ethnicities. To further enhance our consumer business, the Company has increased availability through new listings on the E-commerce platforms during the year.

LT Foods had also worked proactively to ensure availability of its key products and was able to expand its consumer home penetration.

With its strong strategies in place and its offerings in Royal brand not only in rice but also in organic and Ready to Heat (RTH) segment, the business grew by 7%.

Royal RTH is an authentic 90-second meal, specialty grains convenient food product which aims to cater to changing consumer trends in the US with preference for quick cooking meal components and more authentic _avours. The shift has been driven by an increasing number of women in the workforce, a young and more diverse consumer base and a fast-growing South Asian ethnic group in the country. Since its launch in 2019, Royal RTH has posted consistently remarkable growth rates and recorded an impressive growth rate of 97% in year under review over the previous year, indicative of the consumer trust on the brand. In addition to the strong brand equity and an efficient distribution network of ‘Royal brand in the US markets, the dramatic rise in sales of RTH came along with the increased demand from ‘easy to cook in-house cooking during the pandemic. The growth was also driven by the multitiered campaigns undertaken to generate awareness, consideration and trial of RTH, in addition to expansion in new distribution channels and aggressive marketing. While the Company continues to increase RTHs broad appeal across consumer ethnicities with launch of new _avours and trial and consume campaigns, RTH continues to gain new listings in retail chains and add new distribution in the existing chains to capitalise on the huge demand potential and brand equity of Royal in these markets.

~50%

Market Share of Royal

97%

Growth rate of Royal Ready to Heat (RTH) segment

Europe

The European Basmati Rice market stood at 4.6 lakh Metric tonne and grew by 18% in year under review. LT Foods present with its flagship brand "Daawat" and strategic private label business have strengthened its presence there and it has gained approximately 15% market share. The European business is growing at a 3 Year CAGR of 48%.

The European business incorporated in 2017 has been growing year on year coupled by margin expansion and strengthening of financial metrics. The growth momentum of the Companys business in Europe continued its trend and recorded a remarkable growth of 58% during the fiscal 2020-21, along with significant improvement in the return ratios. The business adopted the strategies during the year for distribution expansion, product portfolio expansion and consumer expansion.

20%

Revenue Share

58%

Growth in Business

‘Boil in a Bag

Daawats latest product launch in the Region

The Company has started its own distribution network in UK for supplies sent from India facility to serve and build long lasting partnership with the customers in the UK market

The Company followed a strategy of customer expansion through new listings with mainstream customers and with well-known supermarket chains like Jumbo, Auchan, etc. The marketing efforts were also aimed to increase traction of the Daawat brand amongst the UKs ethnic market.

Middle East

The middle east market consists of countries adjoining the Persian Gulf which are Oman, UAE, Qatar, Bahrain and Kuwait, along with Saudi Arabia, Iraq and Yemen. The region witnessed contraction in retail sales which could be partially attributed to job losses, decreased household income and reverse migration of expatriates in some countries in the aftermath of the pandemic. Nevertheless, the Company focussed on widening the brands reach through innovative marketing campaigns, strategic partnerships with major ecommerce players in the region and leveraging on key branded products in the portfolio. The launch of Daawat Basmati Brown Rice was successful in catering to the shift in consumer demand towards a healthy and branded product.

8%

Revenue Share

6%

Growth in Consumer Business during the year

While the business declined in the Middle East due to Covid 19 pandemic, the Company registered an improved margin profile on account of reduction in expenses, amongst others. The Companys continued focus on expanding its distribution network and delivering a superior consumer experience led to solid positioning of the brands. Leveraging on strong brands in the product portfolio, the Company aims to follow a growth strategy by focusing more on Consumer pack segment across channels including Horeca & E-Commerce and charter a profitable journey.

Rest of World

Our Rest of World segment contributes 6% to the overall revenue and adopted the strategies to expand its business in this region. The Company was quite aggressive in entering into new geographies, making investments on brand and simultaneously expanding the product portfolio to fill up the gaps in consumer space that led to an increase in the business by 25% during the year. We have strengthened our market share across geographies including Singapore, Australia, New Zealand, Reunion Island, Japan, Mauritius, etc.

During the year new geographies such as Philippines, Indonesia, Congo, Ukraine, etc. were added to increase the brand availability. To increase the brand preference amongst the consumers, the Company undertook several marketing initiatives. The distribution expansion was done by appointing new distributors, listing of our products across various platforms such as modern trade stores, grocery stores, e-commerce, etc.

In this region also the Company has expanded its product portfolio in the Basmati & Other Specialty category as well as the Health & Convenience range. Kari Kari snacks were launched in Australia and have been very well accepted by the consumers.

Operations review

Integrated Farm to Fork Model

The Company is present across all aspects of the value chain and has an integrated "Farm to Fork" model. The Company has made investments across the value chain be it – Sustainable Farming, Procurement, Manufacturing Facilities & Supply Chain, Distribution, Sales & Marketing, Poeple, Processes, Digitalisation etc. to create an integrated business model and to stay relevant to consumers. The investments have helped the Company to pave through these challenging times without any disruption and was able to tap the share of increased demand with agility and continued to deliver superior consumer experience.

Sustainable Farming

At the outset, the Companys integrated Farm to Fork model collaborates with the farmers to integrate knowledge and practices from the Sustainable Rice Platform (SRP) to procure sustainably cultivated rice. Sustainable Rice Platform (SRP) is a global multi-stakeholder alliance, originally convened by International Rice Research Institute (IRRI), the United Nations Environment Programme (UNEP) and GIZ, a German Development Agency working in the field of International cooperation for sustainable development. With over 100 institutional members in its current format, the SRP aims to transform the rice sector by improving small landholder livelihood, reducing the social, environmental climate footprint of rice production and assuring a supply of sustainably produced rice in the global market. The platform promotes resource use efficiency and climate change resilience in rice system, both on farm and throughout the value chain, while pursuing voluntary market transformation initiatives.

Over 4,400+ farmers are associated with LT Foods, through its SRP program, to grow paddy in compliance with the SRP standards in over 18,000 hectares of land. The farming is further strengthened by the application of advanced technologies such as satellite based remote sensing to monitor crop health, water usage GHG emissions, & drone sprays for efficient pest management. Use of water saving technologies such as laser levelling, micro irrigation, alternate wetting and drying (AWD) and direct sowing have led to reduction in water and fertilizer consumption. The Company also deploy a team of qualified graduates as field officers to work within an allocated farming community in knowledge dissemination, adoption of technology, in-situ data collection and overall monitoring of compliance with the SRP norms. Furthermore, the Daawat Farmers app has been provided to the farmers associated with the program for two-way communication and digital connectivity to resources such as training and education and input services.

Over the years, the Companys effort has resulted in increased farmers income through improved productivity, optimized utilization of inputs and timely procurement / payments. The Company has also become the first Company globally to be successfully audited at the L3 level allowing for our brands to carry the coveted SRP Logo.

L3

LT Foods successfully audited to the highest level of certification by SRP, the

first Company globally to achieve this distinction.

18,000 hectares

Hectares of land under cultivation through SRP program

4,400+

Total farmers associated with the Companys SRP programme in India for Basmati.

Effective Procurement

The Company procures paddy from the mandis (procurement centres) in Northern and Central India through an extensive network of agents during the season. The Company has deployed a Procurement Planning Tool driven through structured framework that helps to procure the right paddy at competitive prices.

The procurement process is based on scientific principles and is broadly divided into pre- and post-harvest phases.

The pre-harvest phase involves a deep survey-based analysis of the supply demand dynamics, ahead of the harvesting season, with relevant stakeholders in field and mandis. The Company also leverages on remote sensing technology to capture imagery data from the fields which enriches the quality of data with minimal time lag. The quantitative data so obtained is further analysed for estimating supply and the demand through the lens of International trade policies. Regular stakeholder interaction is organised in person as well as virtual wherein the demand and supply analysis is communicated to them to help them to procure the targeted quantity at best prices in their respective areas.

A detailed monitoring at the beginning of the harvest season is backed by scientific methods. Data is collected on paddy varieties produced within the framework of a 5-tier structured system that involves initial survey, mid-season survey, yield and disease survey, extremity survey and Market Committee Report.

The Company leverages its network of farmers, commission agents and stakeholders spread across 235 Government recognised mandis to monitor quality and procures paddy at competitive rates. Companys procurement is based on web based platform that ensure two way communication between our team and commission agents from mandi to further strengthen the end to end buying process and guarantees a smooth buying process.

The Company also has a dedicated procurement team for its organic produce that ensures consistent quality, hygiene and safety at all times. The Company has a farmer base of 64,000 farmers and organic land bank of 94,000 hectares.

258+

Commission agents and Market Yards in the Companys procurement network, across Haryana, Uttar Pradesh, Punjab, Madhya Pradesh

Global Supply Chain

Over the years, the Company has built a global supply chain network spanning across continents to ensure an uninterrupted supply of our food food products and strengthened trust of its consumers.

In India, our supply chain efforts have been towards automation and reducing reducing time to delivery which helped the Company during the COVID crisis. Moreover, the Company shifted towards palletization process which further reduced our dependency on manual labour. A world class distribution centre has been set up adjacent to the mother plant to enable quick deployment of shipments using VNA (Very Narrow Aisle Trucks) and forklifts. The initiatives helped the Company to maintain its focus on delivering its products to consumers on time in the India as well as in International markets.

In the International markets, the strategic investments in automation and digitalisation of facilities helped the Company address the Covid-19 associated challenges of distribution. An integrated ERP system across the organisation provided end-to-end supply chain visibility which improved the flow of information across all functions.

There are five state of the art manufacturing facilities in India, three state-of-the-art facilities in the US; and one in Europe. All facilities also act as distribution centers to service a vast range of customers/consumers across geographies.

During the year, the Company took several initiatives to reduce lead time, improve productivity, better inventory management with digital intervention to reduce cost and add efficiencies at plant level.

Well-Entrenched Distribution Network

The consistent efforts on strengthening distribution network across geographies has aided the Company to make its products available and expand its reach to more than 60 countries with over 900 distributors across the globe and more than 137,000+ outlets in India.

Over the years, the Company has evolved its distribution framework, that includes several network routes, with a set of optimized logistic services that suit diverse distributors and dealer network. During the year under review, it embarked upon alternate channels for reaching to the consumer during the pandemic, such as tele ordering and partnership with delivery partners, that helped expand its product reach to a wider consumer base.

800+

Distributors in India

1,37,000+

Outlets in India

Amazon, Big Basket, Grofers, Paytm, Flipkart, Zomato

Daawat is the market leader in most of the ecommerce platforms in India

100 +

Distributors across the globe

Sales and marketing

The Company launched innovative marketing campaigns around the flagship brands in key markets to strengthen the brand equity to gain market share and to increase the recall of its brands among its consumers. The marketing efforts were further strengthened with forging partnerships with leading players across different distribution channels, to increase availability and visibility. The Company adopted 360 degree approach to target its consumers at all touch points. With changed scenario on account of pandemic, the Company revisited its marketing strategies and added Digital as a main platform for marketing to be on top the mind of its consumers.

The marketing activities in the Indian market revolved around increasing the reach, strengthening the brand and an uninterrupted engagement with the consumer. The Company organised digital campaigns under various themes such as experiential cooking, healthy food and relationships, based on consumer insights from search engine behaviour and prevailing trends. Consequently, we launched easy to cook recipes to help consumers prepare tasty food at home during the lockdown with ease. Our Daawat Brown Rice campaign with Shilpa Shetty aimed at generating awareness on the immunity boosting feature, received a good traction from our consumers. Our television commercials (TVC) were created to instill positivity in peoples mind and aimed at celebrating relationships amongst people during these trying times. The Pehli Daawat campaign, wherein various celebrities participated, immediately connected with consumers who were deprived of in-person social interaction during the lockdown period. Furthermore, the Daawat festive campaign during Raksha Bandhan aimed to highlight the social distancing way of celebrating life and relationships.

As a Brand, we are focusing on offering the right product to satisfy customer demand across all the channels such as General Trade, Modern Trade, HORECA and E-commerce. The Company has strengthened its presence across

10 lakhs +

Total Views on Influencer Campaign e-commerce platforms as it provides us the opportunity to foster a deeper engagement with the consumers through improved product messaging.

Meghna Gobble, Your Food Lab

Partnership with social media influencers

International

The Company has adopted geography-wise marketing strategies keeping in mind the ethnicities we are focusing on, the existing brand share and the target brand share we want to achieve in the respective geographies.

The marketing campaigns in US focused on strengthening the brand equity of the Royal brand through print and digital advertising, in-store demos and displays on ‘Avocados from Mexico chain. Product awareness campaigns for Royal brand were also planned through the distribution of digital coupons to increase the consumer conversion ratio. The Company also increased its presence in regional grocery chains to improve visibility.

To increase the acceptance of Royal Ready to Heat and Royal Chef Secret, advertising campaigns were conducted on print, social and linear streaming media. The social media campaigns, in particular, revolved around festivals, New Year celebrations and Back to School meal ideas for the entire family. With the help of local social media influencers, creative meal ideas were also promoted through the campaign.

The Company further strengthened its market share by introducing new _avours, products and innovative packaging strategies. While Royal Ready to Heat expanded its offering with the introduction of 4 new ethnically inspired _avours, the Jasmine rice brand ‘817 Elephant, helped to improve the market share in this segment. Furthermore, the Company added two new brands of Basmati rice in its existing portfolio in North America to strategically respond to consumer demands and sustain a competitive edge. While Royal Golden Sella was introduced to serve consumers from Bangladesh and Afghanistan, at affordable rates, Indus Valley was launched to negate the stress from disruptor brands. The Daawat Quick Cook Brown Basmati rice was launched in early 2021 to cater to the evolving needs of South Asian consumers in the North American markets.

In the Middle East, the marketing initiatives were targeted to attract local consumers. The Company introduced an Arabic logo for all products available in the region, concentrated on branding efforts for e-commerce and expanded its distribution network to serve consumers better.

New products, particularly Daawat Cuppa Rice in the convenience segment, was launched along with the Indus Valley brand. Daawat was also launched in two large supermarket chains– Lulu and Danube. The promotional activities aimed to improve the reach of products through distribution of influencer kits which ensured better visibility at stores.

In Rest of World, customized campaigns were launched to strengthened the position of our brands.

Daawat listed in

Leading Grocery Chains

across Europe

Growth Enablers

Digital transformation

The Company has made investments on the digital transformation across value chain, i.e., manufacturing, supply chain and sales and marketing. It adopted a system thinking approach wherein each component of the chain representing a specific function within the organisation was reviewed and a structured process was created. The robust process flow was further layered with IT based digital capabilities and automation with a strategic objective to build a leaner and well-informed organization through process automation, real time online MIS systems and remote data capturing using mobile devices.

Digital intervention at Sales level also helped the Organization to track the productivity of Sales team and add more efficiency at market level. Marketing strategy was revamped and aligned with the changing scenario in Consumer space. Digital took a significant share of our strategy and the Organization drove lots of digital initiatives to expand its reach to consumers across geographies.

The digital intervention across value chain has helped the organization to grow and expand its business in India as well as across geographies along with driving the agenda of margin expansion through cost optimization.

Human Resource

LT Foods Ltd takes pride in a culture that promotes care, transparency and innovation as cornerstones of its people agenda. Our values reinforce our commitment to be an organization that ensures equal opportunity, respect and fairness for all our employees. Being a recipient of "Great Place To Work" certification consecutively for the past two years is a testimony to the same.

Driven by our core values of Consumer Centricity, Integrity, Continuous Innovation, Passion for Excellence, Respect for People and Responsibility, we enable our people to truly have a sense of ownership at LT Foods, learn and develop as individuals and perform to their highest potential even as they grow the business in a symbiotic relationship.

The Company has always believed in providing opportunities to internal talent for leadership roles and our talent management program ensures readiness of talent for such opportunities as and when they occur. Our Campus Hiring program is also based on the tenets of infusing fresh talent in the organization and creating an ever churning talent engine to fuel our business growth.

As part of our commitment to consistently evolve our people practices, LT Foods embarked upon the journey of HR Transformation in 2020. The objective is to build a future ready organization to support the next phase of growth. To achieve this, over the next year our HR systems & processes in the critical areas of Talent Acquisition, Development, Performance Management, Talent Management, Career Progression and

Total Rewards will be reviewed and modified as needed. Responding to the changing needs of the business the existing competency framework is also being redefined and it will be at the core of all the people processes and practices.

The Company has a dedicated team of over 2000+ employees across geographies including India to nurture the growth of the Company.

Food safety and Certifications

LT Foods abides by stringent food safety standards prescribed at India and International levels to deliver superior quality products to its customers. Through its state-of-the-art testing facilities, it undertakes a wide range of reliable and analytical tests to verify the safety, identity and purity of its food products. The Company also conducts several quality audits to ensure compliance to country specific standards applicable in its areas of operation.

The Company to provide confidence to its consumers/customers world wide has set up a high end analytical laboratory. The laboratory complies with local and global standards like NABL, FSSAI, EIC, EU & USFDA. The Assurance laboratory has been setup

strategically within LT Foods biggest and most modern rice state of the art manufacturing facility at Bahalgarh and close to the Organic plant at Kamaspur to serve the needs of both the conventional and organic business emanating from Nature Bio Foods.

The laboratory utilizes cutting edge instrumentation with modern protocols and skilled technical personnel to offer analytical solutions comparable anywhere.

A dedicated team of highly skilled scientists takes the responsibility to carry out this challenging task and meet customer expectations.

Plant Certification Standards
LT Foods Limited ISO 45001 : 2018 (Health and Safety)
Sonepat, Haryana ISO 9001 : 2015 (Qualiy Management System)
ISO 14001 : 2015 (Environment Management System)
SQF (Safe Quality Foods)
BRC Global Standard for Food Safety
IFS (Food Safety)
ISO 17025: 2005 NABL, EIC & - Laboratory Management System
SA 8000 (Social Standard)
Halal
Kosher Certification (OU)
LT Foods Limited FSSC 22000 : 2010 (Inclusive ISO:22000 & ISO/TS 22002-1)
Varpal, Amritsar BRC Global Standard for Food Safety
Subsidiaries
Daawat Foods Limited ISO 45001 : 2018 (Health and Safety)
Mandideep, Madhya Pradesh ISO 9001 : 2015 (Quality Management System)
ISO 14001 : 2015 (Environment Management System)
FSSC 22000 : 2010( Inclusive ISO:22000 & ISO/TS 22002-1)
BRC Global Standard for Food Safety+ Costco Addendum
FSMA
FDA IFS (Food Safety)
HACCP
SA 8000 (Social Standard)
Sedex Halal
Kosher Certification (OU)
NOP (National Organic Programme) of USFDA Organic Standard
NPOP (National Programme for Organic Production)
Registration of Rice mills for USA & China
EIA- IPQC
Nature Bio Foods Limited FSSC 22000 (Food Safety Standard)
(Organic Division) NOP (National Organic Programme) of USFDA Organic Standard.
NPOP (National Programme for Organic Production)
EEC 837:2007 (Europe Organic Standard)
IFS (Food Safety)
Kosher Certification ( OU )
Fair Trade
Halal
BRC
Raghunath Agro Industries Private Limited FSSC:22000:2015 FDA
Amritsar, Punjab
LT Foods Americas FSSC 2200: GFSI Certification for Processing, Storage and Distribution
(International Food Safety)(with Costco Addendum)
Certified Organic Processor NOP (National Organic Program with
Canadian Equivalency)
Kosher Certification (OU)
Non-GMO Project Verified
State Department of Health
FDA Preventive Controls (FSMA) and Site Registration; FDA LACF (Low
Acid Can Food) RTH) , Safe Food For Canadians
Plant Certification Standards
LT Foods Europe BRC Global Standard for Food Safety version – 7
SKAL – Organic
GMP + (Feed)
IFS - 6.1
Fairtrade

Financial Overview

A broad-based growth across the three segments - Basmati & Other Specialty Rice, Organic Food and Ingredient business and Health and Convenience segment have collectively led to an overall increase in revenue by 12% to reach H 4,686 crore during the year versus H 4,173 crore in the last year on account of increased revenue from US, Europe and Organic business.

The Company posted an increase in the Gross Profits by 21.3% to H 1,459 crore during year from H 1,202 crore in the previous fiscal. Moreover, the gross profit margins increased by 232 basis points to 31.1% during the year due to change in product mix and lower input cost

While EBITDA increased by 17.6% to H 598 crore during the fiscal 2020-21, the EBITDA margin grew by 58 basis points due to the increase in Gross Profits.

Riding on the back of a strong brand equity, the Company leveraged on its robust global supply chain network including distributors and retailers across the globe to record a 45% increase in net profits to H 289 crores during the year under review. The overall Profit margins also expanded by 139 basis points to 6.2% in the year under review led by 34% reduction in finance cost.

The Companys debt portfolio reduced by H 205 crore to H 1,253 crore in FY 21 driven primarily by the significant cash flows amounting to H 345 crores generated during

the year under review owing to a strong performance in the year. Consequently, the debt-to-equity ratio reduced significantly from 0.91 in FY20 to 0.66 in the current fiscal year with Debt-EBITDA ratio declined from 2.9 to 2.1.

Moreover, the Company recorded a 193-basis point increase in Return on Capital Employed (ROCE) to 15.6% and 283 basis points increase in Return on Equity (RoE) to 15.3% in the year under review which further indicates the operational efficiency and solid financial strength of the Company.

Standalone financial performance (K in crore)

FY2020-21 FY2019-20 Growth
Revenue 2,326 2,378 (2%)
Gross Profit 474 440 8%
EBITDA 205 199 3%
EBIT 179 173 3%
PBT 146 113 29%
PAT 106 85 25%
EPS 3.33 2.66 25%
Cash Profit 132 112 18%
Net Worth 966 871 11%
Consolidated financial performance (K in crore)
FY2020-21 FY2019-20 Growth
Revenue 4,686 4,173 12%
Gross Profit 1459 1202 21%
EBITDA 598 509 17%
EBIT 490 417 18%
PBT* 402 285 41%
PAT 289 199 45%
EPS 8.57 5.77 49%
Cash Profit 398 291 37%
Net Worth 1890 1599 18%

Outlook

The Company has delivered on all its strategic pillars i.e. Growth, Margin Expansion and Strengthening the Financial metrics which is visible in our financial performance as the well. The overall revenue of the Company has increased by 12% on year on year basis.

The Basmati and other Specialty Rice segment business grew by 9% bolstered by the growth in demand especially in our International business. The Organic business grew an impressive 51% versus last year. Health & Convenience business also grew by 45%.

The Gross Margins expanded by 232 bps to 31.1% due to change in product mix and lower input cost. The EBITDA margins also expanded by 58 bps to 12.8% vs. 12.2% last year and was up by 18% from H 509 to H 598 crore. The PAT increased by 45% to H 289 crore while the margins expanded by 139 bps to 6.2%.

The financial metrics also improved, Return on Capital Employed (ROCE) improved by 193 bps to 15.6%. Return on Equity improved by 283 bps to 15.3%. The debt-equity ratio improved from 0.91 to 0.66 times as the overall debt of the Company was down by H 205 crore to H 1,253 crore on Y-o-Y basis. The DEBT to EBITDA ratio stood at 2.1. Current ratio has also improved significantly to 1.70 from 1.52 last year.

The Company aims to further consolidate and grow its market share by increasing consumer penetration across all segments. LT Foods endeavours to widen its supply and distribution across the globe by expanding and improvising its product offerings, to include unique, healthy and innovative products. To drive margin expansion, it plans to change its product mix with products that assure higher margins, increase efficiency and drive cost synergies.

Going forward, Company will continue to focus on its strategic goal to create progressive, sustainable, profitable and growing business to create value for its stakeholders.

We endeavour to achieve this through solidifying leadership position across geographies via organic and inorganic routes and grow via product portfolio expansion through continuous innovation across business segments, i.e., Basmati and Other Specialty Rice, Organic Food and Ingredient business and Health and Convenience segment. We are consciously investing in growing and politically stable countries to strengthen our business across geographies. We aim to drive our agenda of margin expansion via cost management, benefits of scale and better product mix across geographies and business segments.

For the Companys Strategy refer to page number 16 of the Report.

Opportunities & Threats

A detailed analysis of opportunities across our businesses is given in the industry overview section and mega trends in food industry on page 25 that highlight the emerging opportunities for our Company. The corresponding threats have been captured in the risk mitigation section at page 48 of the report, capturing risks and possible mitigation action plans.

Internal control systems

LT Foods has a well-established system of internal controls and procedures, in line with the size and nature of its operations. The Company regularly conducts internal audit of operations, establishments and stockyards to ensure that the set processes are strictly adhered to. The Audit Committee reviews the reports of internal auditors and evaluates the operational efficiency of the internal control systems. The Committee then suggests improvements in the Companys business processes, systems, and internal controls to the Board of Directors. The Company has created an inhouse team who diligently works on improvements suggested by renowned team of auditors i.e Grant Thornton Bharat, LLP. Annual internal audit plans are prepared by internal auditors in consultation with the Audit Committee. The Company has implemented SAP, the worlds leading ERP system, to automate the internal control environment and keep track of processes and performance.

Governance & Audit

The Company is committed to earn the trust of our customers, shareholders, employees, suppliers, distributors, local community and other stakeholders through fair and efficient governance framework by upholding the highest standards of integrity, transparency and accountability. The Company recognises the significance of continuous improvement of corporate governance model, and efforts are directed consistently towards realising this goal. During the year under review, the appointment of MSKA & Associates as Group Statutory Auditor, will further strengthen the compliance monitoring framework across the Companys wide geographic operational presence.

Cautionary Statement

Statements in this report on

Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied since the Companys operations are influenced by many external and internal factors beyond its control. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, based on any subsequent developments, information or events. Readers are cautioned that the risks outlined here are not exhaustive. Readers are requested to exercise their judgment in assessing the risks associated with the Company.