Megastar Foods Ltd Management Discussions

Pursuant to Schedule V to the Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management Discussion and Analysis Report covering business performance, industry trends, opportunities, challenges and outlook (within limits set by the Company s competitive position) is given below:

Wheat flour continues to be one of the most widely consumed food ingredients globally, primarily due to the presence of gluten — a protein that imparts strength, elasticity and desirable texture to dough and baked products.

The demand for wheat flour is being driven by multiple factors, including population growth, rising disposable incomes, increasing consumption of bakery and convenience foods and changing lifestyle patterns. Its versatility as a key ingredient in bakery and fast-food products such as bread, noodles, pasta, and breakfast cereals has further accelerated global consumption.

Additionally, wheat flour enjoys a competitive advantage over flour made from other grains, being relatively cost-effective and readily accessible to consumers across all socio-economic segments. These attributes continue to support the sustained growth of the wheat flour market worldwide.

Industry Trends

Economic Review

a. Global Economy Overview

Global growth prospects are softening, with trade barriers, tighter financial conditions, waning confidence, and policy uncertainty expected to weigh on activity, according to the OECD s latest Economic Outlook. Global GDP is projected to slow from 3.3% in 2024 to 2.9% in both 2025 and 2026, with the sharpest deceleration anticipated in the United States, Canada, Mexico, and China.

The global economy continues to face significant headwinds, driven primarily by rising trade tensions and heightened policy uncertainty. For emerging markets and developing economies (EMDEs), this weak outlook constrains the capacity to generate employment and reduce extreme poverty, a challenge further exacerbated by subdued foreign direct investment inflows.

In this environment, global cooperation is essential to restore a stable trade framework and provide greater support to vulnerable nations, including those in fragile and conflict-affected situations. At the domestic level, decisive policy measures are required to contain inflationary pressures and build fiscal resilience. Over the longer term, unlocking job creation and sustainable growth will depend on reforms aimed at enhancing institutional quality, attracting private investment, and strengthening human capital and labour markets.

World Economic Outlook Growth Projections

PROJECTIONS

(Rea 1 GDP, annual percent change!	2024	2025	2026
World Output	3.3	2.0	3.0
Advanced Economies	1.0	1.4	1.5
United States	2.8	1.8	1.7
Euro Area	0.9	0.3	1.2
Germany	-0-2	0.0	0-9
France	1.1	0.6	1.0
Italy	0.7	0.4	0-8
Spain	3.2	2.5	1.8
Japan	0.1	0.6	0.6
United Kingdom	1.1	1.1	1.4
Canada	1.5	1.4	1.6
Other Advanced Economies	2.2	1.8	2.0
Emerging Market and Developing Economies	4.3	3.7	CO
Emerging and Developing Asia	5.3	4.5	4.6
China	s.o	4 0	4.0
India	6-5	6.2	6.3

(Source: IMF, World Economic Outlook, April 2025) b. India Economic Overview

India s GDP growth eased to 6.5% in FY25, the slowest pace in three years; down from 9.2% in FY23. As the new fiscal begins, India s growth momentum is powered by three robust engines a resilient consumer base, a widening investment horizon, and a digitally skilled, agile workforce. Urban consumption is climbing, private capex is gathering pace, and India s tech-savvy talent is fuelling innovation while making its mark on the global stage.

Looking ahead, India is set to retain its crown as the world s fastest-growing major economy through 2026, with GDP forecast to expand 6.3% in 2026, according to Morgan Stanley s Global Investment Committee. This resilience stems from robust domestic demand, steady structural reforms, and a supportive policy backdrop — even amid rising protectionism and global trade disruptions. (Source: IBEF)

Global Food Processing Sector Overview in FY 2024-25

In 2025, the global food processing industry is undergoing rapid transformation, fuelled by technological innovation, evolving consumer preferences, and a heightened focus on sustainability. Health-conscious demand is driving the shift towards organic, low-sugar, and plant-based products, prompting manufacturers to reformulate offerings with reduced unhealthy ingredients and added functional components such as probiotics and antioxidants. Advanced technologies like high-pressure processing (HPP) and pulsed electric fields (PEF) are enhancing product safety and quality, extending shelf life, and preserving nutritional and sensory value without relying on traditional thermal methods.

The Global Food Processing Market size is expected to be worth around USD 395.5 Bn by 2034, from USD 204.5 Bn in 2024, growing at a CAGR of 7.6% during the forecast period from 2025 to 2034.

The Food Processing Industry transforms raw agricultural commodities into consumable food products that are easy to prepare and safe to eat. In 2024, the industry reported significant growth, underscored by an increasing global demand for processed foods fuelled by rising urbanization and the expansion of the middle class, particularly in emerging economies. The driving factors for the industry include the rising consumer preference for convenient, ready-to-eat products that do not compromise on nutritional value.

According to the Food and Agriculture Organization (FAO), global processed food sales are expected to continue their upward trajectory, driven by urban lifestyles and changing dietary preferences.

The market is expected to grow at a CAGR of 7.6% during the forecast period from 2025 to 2034.

(Source: Global Food processing Market)

India Food Processing Sector Overview

India s food processing sector is expanding rapidly, backed by government initiatives under Make in India and a 30% higher budget allocation for 2024-25. Key programmes include the Pradhan Mantri Kisan SAMPADA Yojana (?4,600 crore till 2026), which has sanctioned over 1,600 projects such as Mega Food Parks and cold chains, and the Production-Linked Incentive Scheme (?10,900 crore till 2027), supporting 171 companies and creating nearly 2.9 lakh jobs. The PM Formalisation of Micro Food Processing Enterprises scheme (?10,000 crore till 2026) aims to formalise 2 lakh units under the One District-One Product approach. Plans for 2025-26 include setting up 100 NABL-accredited food-testing labs, while events like World Food India 2024 showcase India s potential as a global food hub.

(Source: PIB)

Wheat sector in India

India s wheat sector is one of the largest in the world, forming a crucial pillar of the country s food security and rural economy. As the second-largest global producer after China, India has consistently expanded its wheat output from around 86 million tonnes in 2015-16 to a projected record 115-117 million tonnes in 2024-2025, driven by improved seed varieties, irrigation facilities, and government support through Minimum Support Prices (MSP) and large-scale procurement.

The Food Corporation of India (FCI) plays a central role, maintaining buffer stocks well above safety norms to supply the Public Distribution System (PDS) and welfare schemes. While domestic demand of about 102-103 million tonnes is fully met, exports remain restricted under the ban imposed in 2022 to prioritize domestic availability and price stability. The sector s growth outlook is positive, with projections suggesting output could reach 120 million tonnes by 2028; however, weather volatility, especially heatwaves during the grain-filling stage, remains a key risk. Overall, India s wheat industry stands as a resilient and strategically managed segment of its agricultural economy, balancing farmer incomes, consumer needs, and national food security.

Growth Drivers in India s Wheat Market

? Improved Seed Varieties - Adoption of high-yielding, climate-resilient wheat varieties developed by ICAR and state agricultural universities has boosted productivity.

? Mechanization & Technology Adoption - Greater use of combine harvesters, precision farming tools, and IoT-based monitoring improves efficiency and reduces post-harvest losses.

? Favourable Climatic Zones - The Indo-Gangetic plains offer fertile soil and suitable climate for large-scale wheat cultivation, making India naturally competitive in production.

? Rising Domestic Demand - Wheat remains a dietary staple, with steady demand growth from urban and rural households, food processing industries, and institutional buyers.

Opportunities in the Wheat industry

? Technological Advancements: Utilizing advanced agricultural technologies such as satellite- based crop monitoring and AI-driven advisory systems can optimize farming practices and improve productivity. At the same time, advanced technologies like high-pressure processing (HPP) and pulsed electric fields (PEF) are improving food safety, extending shelf life, and preserving nutrition and taste without relying on traditional heat-based methods

? Consumer Trends: Adapting to changing dietary preferences and food trends can help businesses in the wheat sector stay relevant and meet the evolving needs of consumers.

? Rising health awareness is driving demand for organic, low-sugar, plant-based, and functional foods, prompting processors to reduce unhealthy ingredients and add probiotics or antioxidants.

Challenges

? Changing Consumer Preferences: Rapid shifts in dietary habits and lifestyle trends require constant product innovation.

? Regulatory Compliance: Adhering to evolving food safety and quality regulations increases operational complexity.

? Skilled Workforce Shortage: Limited availability of trained manpower in modern food processing technologies can hinder productivity.

Future Outlook

? Growth Potential: With a growing population and increasing urbanization, the demand for flour is expected to rise, driving further growth in the industry.

? Innovation: Continued innovation in milling processes and product development, such as gluten- free or specialty flours, will likely play a key role in the industry s evolution.

Overall, the flour milling industry in India is robust and continues to adapt to changing market demands and technological advancements.

Company overview

Megastar Foods was incorporated in 2013 and listed as a public company since 2018. It is a leading wheat- based processing company headquartered in Chandigarh with a state-of-the-art manufacturing facility in Punjab.

The company specializes in producing a wide portfolio of products such as atta, maida, suji/rawa, bran, and organic flours. The company leverages the cutting-edge Buhler machinery and modern, automated infrastructure including state-of-the-art equipment for flour testing and R&D, and quality control systems to deliver hygienic, top-quality flour. The company has an installed processing capacity of 710 MTPD or up to 259,150 MTPA.

The company has various certification such as Halal, BRCGS, FSSAI, and SEDEX (SMETA), enabling the company to serve multinational clients such as Nestle, PepsiCo, Mondelez, General Mills, ITC Foods, and Bimbo Bakeries India, etc. The company has earned recognition as a preferred supplier and has longstanding partnerships with various global multinational companies. The company continues to grow as a trusted supplier in the flour and food ingredient space.

Guided by the vision of its Chairman & Managing Director, Mr. Vikas Goel, the company combines traditional expertise with modern technology to expand its footprint and strengthen its position in the global food processing value chain.

Financial Overview (Consolidated basis)

Particulars (? Lakhs)	FY 2024-25	FY 2023-24
Revenue from Operations	36,101	27,493
EBITDA	2,229	1,508
Dep & Amortization	536	257
PBT	526	822
PAT	379	632
EPS	3.36	6.19

Wheat Market News

12 th July 2025: The food ministry has approved a reserve price of wheat under the open market sale (OMSS) to bulk buyers such as flour millers. The wheat will be sourced from the surplus stocks available

with the Food Corporation of India (FCI), priced at Rs 2550/quintal for 2025-26, against the minimum support price (MSP) of Rs 2425/quintal for the season.

28 th May 2025: Indias robust wheat harvest is replenishing reserves, ensuring the nation can meet domestic demand without imports this year, contrary to previous market speculation. Increased production, driven by favourable weather and improved seeds, has led to record procurement levels by the Food Corporation of India.

RISK AND CONCERN/RISK MANAGEMENT IN FLOUR MILLING

Risk management in the flour milling industry is crucial due to the sector s reliance on raw materials, production processes, and market dynamics. Here s a detailed look at the risks and concerns, along with strategies for managing them:

1. Raw Material Risks

• Supply Chain Disruptions: Variability in wheat supply due to weather conditions, pest infestations, or geopolitical issues can impact production.

Management Strategies:

• Diversification: Source wheat from multiple suppliers or regions to reduce dependency on a single source.

• Inventory Management: Maintain strategic reserves of raw materials to buffer against short-term disruptions.

• Forward Contracts: Enter into forward contracts or futures to lock in prices and secure supply.

• Quality Variability: Differences in wheat quality can affect the consistency of flour products.

2. Operational Risks

• Equipment Failures: Machinery breakdowns can halt production and lead to financial losses.

Management Strategies:

• Preventive Maintenance: Establish a preventive maintenance schedule to regularly check and service equipment.

• Training: Ensure that staff are well-trained in equipment handling and troubleshooting.

• Workplace Safety: Flour milling involves dust and machinery, which can pose safety risks.

Management Strategies:

• Safety Protocols: Develop and enforce strict safety protocols and provide regular safety training to employees.

• Dust Control: Implement effective dust control systems to minimize hazards and improve air quality.

3. Market Risks

• Price Fluctuations: Volatility in wheat prices can affect profit margins.

Management Strategies:

• Hedging: Use financial instruments like futures contracts to hedge against price fluctuations.

• Pricing Strategies: Develop flexible pricing strategies to pass on some of the costs to customers if necessary.

• Demand Variability: Changes in consumer preferences or economic conditions can impact demand for flour products.

Management Strategies:

• Market Research: Conduct regular market research to understand consumer trends and adjust product offerings accordingly.

• Diversification: Expand product lines to include specialty flours or value-added products to cater to different market segments.

4. Regulatory and Compliance Risks

• Compliance with Standards: Adherence to food safety regulations and quality standards is critical.

Management Strategies:

• Regulatory Awareness: Stay updated with local and international regulations and ensure compliance.

• Certification: Obtain necessary certifications (e.g., ISO, FSSAI) to demonstrate adherence to quality and safety standards.

• Labelling and Packaging: Incorrect labelling or packaging can lead to legal issues and customer dissatisfaction.

5. Environmental Risks

• Sustainability Concerns: Environmental regulations and sustainability issues can impact operations.

Management Strategies:

• Eco-friendly Practices: Adopt sustainable practices such as waste reduction, recycling, and energy-efficient processes.

• Compliance: Ensure compliance with environmental regulations and consider certifications for sustainable practices.

6. Financial Risks

• Cash Flow Management: Managing cash flow is essential to handle operational costs and unexpected expenses.

Management Strategies:

• Financial Planning: Develop a robust financial plan with forecasts and budgets to manage cash flow effectively.

• Reserve Funds: Maintain reserve funds to cover unexpected expenses or financial downturns.

7. Technological Risks

• Cvbersecuritv: As the industry adopts more digital solutions, cybersecurity becomes a concern.

Management Strategies:

• Cvbersecuritv Measures: Implement strong cybersecurity measures and regularly update systems to protect against breaches.

• Data Backup: Regularly back up critical data to prevent loss in case of cyber incidents.

By identifying these risks and implementing effective management strategies, flour milling operations can enhance their resilience and maintain smooth production and distribution processes.

INTERNAL CONTROL SYSTEM

Internal control systems in flour mills are essential for ensuring efficient operations, safeguarding assets, and maintaining compliance with regulations. Effective internal controls help mitigate risks related to financial accuracy, operational efficiency, and regulatory compliance. Here s a detailed look at the key components of internal control systems in flour mills:

1. Control Environment

• Management Commitment: The commitment of senior management to ethical behavior, adherence to regulations, and internal controls is crucial. It sets the tone for the entire organization.

> Key Practices:

o Code of Conduct: Establish and enforce a code of conduct for employees at all levels. o Training: Provide regular training on internal controls, ethics, and compliance.

• Organizational Structure: An effective organizational structure with clear reporting lines and responsibilities supports internal controls.

> Key Practices:

o Segregation of Duties: Ensure that no single individual has control over all aspects of any critical transaction (e.g., authorization, recording, and custody). o Reporting Lines: Clearly define and communicate reporting lines and responsibilities.

2. Risk Assessment

• Risk Identification: Regularly assess and identify risks related to operations, financial reporting, and compliance.

> Key Practices:

o Risk Assessments: Conduct periodic risk assessments to identify potential internal and external risks.

o Risk Mitigation: Develop and implement risk mitigation strategies based on the assessment.

• Control Activities: Implement control activities to address identified risks.

> Key Practices:

o Standard Operating Procedures (SOPs): Develop and document SOPs for key processes such as procurement, production, and quality control. o Checklists and Authorization: Use checklists and require proper authorization for critical transactions and activities.

3. Control Activities

• Operational Controls: Ensure controls are in place to manage and oversee daily operations.

> Key Practices:

o Production Controls: Monitor and control the production process to ensure adherence to quality standards and efficiency.

o Inventory Management: Implement controls for managing inventory, including regular stock counts and reconciliation.

• Financial Controls: Ensure accurate and timely financial reporting.

> Key Practices:

o Accounts Reconciliation: Regularly reconcile accounts, including bank statements and general ledger accounts.

o Expense Authorization: Require proper authorization and documentation for all expenses and purchases.

• Physical Controls: Protect physical assets and inventory from theft or damage.

> Key Practices:

o Access Controls: Restrict access to critical areas, such as the cash office or inventory storage, to authorized personnel only.

o Security Measures: Implement security measures such as surveillance cameras and alarm systems.

4. Information and Communication

• Information Systems: Use reliable information systems to support operations and internal controls.

> Key Practices:

o System Security: Implement strong cybersecurity measures to protect against data breaches and unauthorized access.

o Data Integrity: Ensure data accuracy and integrity through regular system audits and updates.

• Communication: Establish effective communication channels to ensure that internal control policies and procedures are understood and followed.

> Key Practices:

o Internal Reporting: Regularly communicate performance, compliance, and control issues to relevant stakeholders.

o Feedback Mechanisms: Provide mechanisms for employees to report issues or concerns related to internal controls.

5. Monitoring and Evaluation

• Ongoing Monitoring: Continuously monitor the effectiveness of internal controls.

> Key Practices:

o Internal Audits: Conduct regular internal audits to evaluate the effectiveness of internal controls and compliance with policies.

o Performance Metrics: Use performance metrics to assess the efficiency and effectiveness of operations.

• Periodic Reviews: Periodically review and update internal control systems to address changes in the business environment or operations.

> Key Practices:

o Control Review: Regularly review control activities and make adjustments as needed based on audit findings or changes in risk assessments. o Policy Updates: Update internal control policies and procedures to reflect changes in regulations, technology, or business practices.

6. Documentation and Reporting

• Documentation: Maintain thorough documentation of internal control processes, procedures, and compliance.

> Key Practices:

o Process Documentation: Document all internal control processes, including procedures and control activities.

o Audit Trails: Keep detailed audit trails for financial transactions and operational activities.

• Reporting: Ensure accurate and timely reporting of financial and operational information.

> Key Practices:

o Financial Reports: Prepare and review financial reports to ensure accuracy and compliance with accounting standards.

o Compliance Reports: Submit required compliance reports to regulatory authorities as needed.

Implementing a robust internal control system in a flour mill helps safeguard assets, ensure accurate financial reporting, and maintain compliance with regulations, ultimately supporting the overall efficiency and effectiveness of the operation.

HUMAN RESOURCES

The Company has consistently endeavoured to attract the best talent, provide an inspiring and engaging work environment, and retain achievers and high performers, while instilling a strong sense of loyalty towards the organization. Continuous efforts are made to enhance employees involvement in decisionmaking and to nurture them for future leadership roles.

Industrial relations remained harmonious throughout the year, supported by open communication and active engagement with the workforce through various forums. As on March 31, 2025, the Company s employee strength stood at 256.

OTHER DISCLOSURES

S.NO	PARTICULARS	FORMULA	2025	2024	Changes %	Explanation
1	CURRENT RATIO (Times)	CURRENT ASSETS	1.37	4.61	-70.29	For significant increase in current liabilities
		CURRENT LIABILITIES
	CURRENT ASSETS		8,262.27	4,724.68
	CURRENT LIABILITIES		6,032.93	1,025.09
2	DEBT-EQUITY RATIO (times)	LONG TERM DEBTS	0.84	0.55	51.84	For increase in long term debts
		SHAREHOLDERS EQUITY
	LONG TERM DEBT		7,774.23	5,035.88
	SHAREHOLDERS EQUITY		9,305.85	9,152.86
3	DEBT SERVICE COVERAGE RATIO (Times)	PAT+INTEREST ON LT DEBTS +DEPRECIATION	0.81	1.36	-40.06	for increase in debt to serve
		INTEREST ON LT DEBT +PRINCIPAL PAID/TO BE SERVED DURING THE YEAR
	EARNINGS AVAILABLE FOR DEBT SERVICE		1,374.10	1,108.72
	TOTAL DEBT SERVICE		1,691.08	817.92
4	RETURN ON EQUITY RATIO (%)	PROFIT AFTER TAX	4.09	8.99	-54.47	For reduction in earnings and increase in equity
		AVG. EQUITY SHAREHOLDERS FUND
	PROFIT AFTER TAX		377.56	616.33
	AVERAGE SHAREHOLDERS EQUITY		9,229.36	6,858.84
5	INVENTORY TURNOVER RATIO (Times)	COST OF GOODS SOLD	11.78	11.73	0.48	NA
		AVERAGE INVENTORY
	COST OF GOODS SOLD		32,748.53	23,659.17
	AVERAGE INVENTORY		2,779.15	2,017.48
6	TRADE RECEIVABLES TURNOVER RATIO (Times)	SALES	10.23	9.94	2.91	NA
		AVERAGE TRADE RECEIVABLE
	SALES		35,011.74	25,405.82
	AVERGE TRADE RECEIVABLE		3,421.53	2,554.94
7	TRADE PAYABLES TURNOVER RATIO (Times)	TOTAL PURCHASE	101.14	80.71	25.31	For significant increase in net purchases.
		AVERAGE TRADE PAYABLE
	TOTAL PURCHASE		32,352.63	21,697.16
	AVERAGE TRADE PAYABLE		319.88	268.82
8	NET CAPITAL TURNOVER RATIO (Times)	TOTAL SALES	11.81	8.96	31.75	For increase in sales and decrease in average net working capital
		NET WORKING CAPITAL
	TOTAL SALES		35,011.74	25,405.82
	AVERAGE NET WORKING CAPITAL		2,964.46	2,834.02
9	NET PROFIT RATIO (%)	PAT	1.08	2.43	-55.55	For reduction in earnings
		NET SALES
	NET PROFIT		377.56	616.33
	NET SALES		35,011.74	25,405.82
10	RETURN ON CAPITAL EMPLOYED (%)	EBIT	10.41	9.11	14.33	NA
		FIXED ASSETS+CURRENT ASSETS-CURRENT LIABILITIES
	EBIT		1,670.66	1,210.78
	CAPITAL EMPLOYED		16,047.77	13,296.83
11	RETURN ON INVESTMENT	EBIT	N.A.	N.A.	N.A.	N.A.
		AVERAGE INVESTMENTS
	INCOME GENERATED FROM INVESMENTS		-	-
	AVERAGE INVESTMENTS		250.00	250.00

CAUTIONARY STATEMENT

In summary, the statement about forward-looking statements in the MD&A report serves as a cautionary note, indicating that while the company provides projections and expectations about future performance, actual outcomes may differ significantly due to various factors. This disclaimer is important for setting

realistic expectations and for understanding the potential risks associated with the companys future plans. Investors and stakeholders should use this information to make informed decisions, keeping in mind the inherent uncertainties in predicting future performance.

Date: 06.08.2025 Place: Chandigarh	For and on behalf of MEGASTAR FOODS LIMITED
	SD/- VIKAS GOEL Chairman & Managing Director DIN: 05122585	SD/- VIKAS GUPTA Whole Time Director DIN:05123386