Mrs Bectors Food Specialities Ltd Management Discussions.

GLOBAL ECONOMY

Over a year has gone by since the pronouncement of COVID-19 as a global pandemic. The unprecedented ‘black swan even not only precipitated a major global recession in 2020 but also resulted in devastating loss of lives and livelihoods. Countries across the world braved a multi-dimensional crisis, which included health shock, major disruption in the domestic economy triggered by harsh lockdowns, capital flow reversals and slump in consumer demand. Furthermore, contactintensive service sectors were hit disproportionately hard.

As per the estimates of the United Nations Department of Economic and Social Affairs, the world output shrank by 4.3% in 2020. This is over 3x the impact witnessed during the global financial crisis of 2008-09. With an estimated output decline of 5.6%, the pandemic hit developed economies the hardest owing to stringent and prolonged lockdown measures that were imposed during the outbreak. The contraction was milder in developing countries compared to the developed countries, with output shrinking by 2.5%. The least developed countries saw their GDP contract by 1.3% in 2020, demonstrating greater inherent resilience to withstand external shocks.

IMF WEO (World Economic Outlook) April 2021 projects the global economy to grow by 6% in 2021, moderating to 4.4% in 2022. Growth recovery across the globe is expected to experience tailwinds as additional fiscal support in key large economies and vaccination-led growth materialises in the second half of the year. Global trade in goods and services is projected to grow 8.4% and 6.5% in 2021 and 2022 following -8.5% contraction in 2020. Because of the unprecedented policy response, both conventional and unconventional, the COVID-19-led recession is likely to leave smaller scars over the future. However, IMFs long-term outlook suggests that some emerging market economies and developing countries have been hit harder and are expected to suffer more significant losses at least over the medium-term.

INDIAN ECONOMY

Contributing 3.2% of the share of global gross domestic product (GDP), India is the 7th largest economy in terms of nominal GDP and the third largest in terms of purchasing power parity, contributing 7.8% to the global GDP.

India has maintained an average of 6-7% growth over the last few years, emerging as the fastest growing G20 economy. As per the Economic Survey 2020-21, Indias real GDP and nominal GDP is expected to record a 11% and 15.4% growth, respectively, in FY2021-22. The rebound is to be led by the low base and continued normalisation in economic activities as the rollout of COVID-19 vaccines gathers traction.

To alleviate the economic stress triggered by the pandemic, the Indian Government announced a H20.9 lakh cr economic package (or about 10% of GDP). Of this, 1.2% of GDP consisted of direct fiscal spending, and the rest comprised:

• Loans and guarantee schemes of H10.4 lakh cr, or about 5% of GDP

• RBIs liquidity measures of H8.01 lakh cr, or about 3.8% of GDP

The guarantee schemes and liquidity measures aided growth in bank credit and enabled abundant liquidity in the financial sector, which was directed toward impacted segments like industrial and services sectors. Furthermore, various stimulatory measures adopted by the RBI ensured sufficient liquidity at all times during FY2020-21. For instance, the central bank reduced policy rates once during in May 2020 by 40 basis points (bps) to 4%. Thus, its unprecedented monetary easing and open market purchases kept interest rates at comfortable levels during the year, despite a record growth in Government borrowings.

A growth-centric and expansionary Union Budget for 202122 puts out hope that it will set the tone for infrastructure growth over the next few years. The fiscal deficit for 202122 is budgeted at 6.8% of Indias GDP — though high, but way below the revised estimate of 9.5% in 2020-21. Given the unprecedented economic disruptions caused by the pandemic, such deficits are in line with actions taken globally. Thus, the resilience demonstrated by the Indian economy, coupled with a growth-centric Union Budget and the RBI maintaining an accommodative stance to sustain growth on a durable basis, will expectedly see the Indian economy grow at a faster clip than other economies once the coronavirus- related uncertainties subside.

On another positive front, with the Governments impetus on vaccination for all in the 18+ age group so far and the ramping up of the health infrastructure of the country, including the supply of essential medicines, the GDP is expected to regain momentum in FY22. Along with economic stimulus, accelerated pace of vaccination is expected to emerge as a major economic stimulus, going forward.

GOVERNMENT INITIATIVES

The Finance Ministry announced an outlay of H1.97 lakh cr for the Production-Linked Incentive (PLI) scheme for 13 identified sectors. The scheme, which aims to boost domestic manufacturing under the governments Atmanirbhar Bharat initiative, was introduced in March 2020 and is expected to result in a minimum production worth more than $500 billion in five years, according to the Commerce Ministry. For the foods sector, the government approved the central sector scheme under "Production Linked Incentive Scheme for Food

Processing Industry (PLISFPI)" to support the development of global food manufacturing champions commensurate with Indias natural resource endowment, and support Indian brands of food products in the international markets with an outlay of H10,900 cr. Among the broader objectives of the scheme, one of them is to support food manufacturing entities with stipulated minimum sales and willing to make minimum stipulated investment for expansion of processing capacity and branding abroad to incentivise emergence of strong Indian brands and strengthen Indian branded food products for global visibility and wider acceptance in international markets.

At MBFSL, this governmental initiative bodes well for our biscuit business as we are not only making investments to grow product capacities for domestic market, but are also focusing on enhancing and consolidating our global geographic footprint.

INDIAN PACKAGED FOODS MARKET

Indias demographic dividend, manifest in a young generation who is more aware and lives for the ‘here and now has proven well for demand, consumption and the overall economy. Further, availability of disposable income and shift in purchasing patterns towards organised and branded foods has also created structural demand in especially the premium and semi-premium foods category. Thus, buying power has enabled the packaged foods business to grow significantly, valued at H1,636 billion in 2020 and expected to grow at 10%+ CAGR over the next five years.

The COVID-19 induced lockdowns has only added to the demand for packaged foods, as more people started ordering for pantry stocking, also turning towards packaged branded products. Besides, convenience, availability and affordability have been key factors as well driving the demand. So while the other sectors in retail are expected to contract by 30-35% in FY21, the packaged food segment is expected to grow by leaps and bounds at a growth rate of nearly 14%.

Category-wise sale of packaged food (H billion):

Category* 2015 CAGR 2020 CAGR 2025
(2015-2020) (2020-2025)
Biscuits and bakery** 282 11% 450 9% 696
Pasta and noodles 48 10% 78 10% 125
Savoury snacks 192 23% 400 15% 805
Confectionery 190 8% 286 7% 400
Sauces, dressings & condiments 106 8% 160 9% 250
Ice cream & frozen desserts 85 7% 120 7% 170
Baby food 34 6% 45 6% 62
Others 47 16% 97 13% 180
Total 984 13% 1,636 10.40% 2,687

Source: Secondary Research, Technopak Report

* Packaged Food market size is exclusive of staples, edible oil and dairy

** Does not include fresh artisanal cakes

INDIAN BISCUITS AND BAKERY SEGMENT OVERVIEW

The Indian biscuits and bakery segment forms an important constituent of the food and grocery basket, demonstrating rising consumer propensity towards premium quality products with which they share high trust codes. Thus, this segment is expected to grow at a 9% CAGR over the next five years, from H450 billion in 2020 to a projected H696 billion by 2025.

Over the last two decades, the domestic biscuits industry has been expanding at a 10% CAGR. However, when it comes to per capita annual consumption of biscuits in the country, it lags with only 2.5 kg consumption, compared to 4.25 kg in South East Asian countries like Singapore, Hong Kong, Thailand and Indonesia, and more than 10 kg in the US and Western Europe. This deficit comprises a major opportunity for players to expand biscuit consumption in the country.

Similarly, the per capita annual consumption of bread in India is also less as compared to other countries - 1.4 kg consumption, vs. 46 kg in the US and 96 kg in the UK. The domestic market is dominated by small and regional players, with an estimated 75,000 small-scale bread manufacturers spread across the country. This offers good opportunity for consolidation among large players, especially with consumers leaning towards packaged branded breads as well as value- added loaves.

The Indian biscuits and bakery market is being buoyed by availability and affordability. With a better quality perception and assurance of hygiene, consumers are increasingly preferring ready-to-eat bakery products, as also value-added gourmet or indulgence products. This has made the segment witness much innovation in terms of offerings.

The world of modern retail, which has been a key contributor to the growth of packaged food products in the country, is characterised by supermarket chains that offer deep consumer value and convenience in terms of product range and choice, multiple payment options and even doorstep delivery. The growing clout of modern retail is characterised by the rise of e-commerce as well that has also played a fundamental role in making products accessible to a vast swath of consumers at the click of a button. Further, the pandemic has pulled forward digital adoption and hence the share of e-commerce sales in most categories is on the rise. Moreover, with consumer habits turning towards health and immunity, food products in the health space has witnessed explosive demand. Besides, rapid advancements in packaging has also contributed to building trust with consumers, while also enhancing shelf life.

Finally, with western quick service restaurants (QSRs) and cafes embedding deeper into Indian society, bakery products, including buns, muffins, etc., have gained visibility. Despite QSR sales being subdued on account of the lockdowns, etc., their focus on value meals and value-centric propositions resonate well with Indian consumers, thus ensuring structural growth opportunity for the long-term.

INDIAN BISCUIT MARKET

The biscuit segment in India accounts for about 5% of the global market, with market size estimated at H400 billion in 2020. By 2025, this share is forecast to grow by 1%, with the market expected to register a 9% CAGR every year from now till 2025, by when the industry size is estimated at H620 billion. It is to be noted here that the share of value-added premium products in the overall biscuits category is also expected to progressively rise on the back of rising consumer purchasing power, growing access via modern trade and consumer need to try out new and innovative products.

Over the last 5 years, per capita biscuit consumption in India has risen by around 16% to 2.5 kg. However, the graphic below provides a comparison with regards to consumption in other countries, which is a marker for future growth.

Another major growth frontier is rural markets. Yet, when it comes to penetration, non-branded/loose biscuits continue to drive overall biscuit consumption in these markets. However rising spending power and affluence, as also changing consumer preferences, is enabling the branded segment to make inroads into the hinterlands beyond the Tier-I and Tier-II cities and create trust with consumers and hence repeat consumption opportunities.

The Indian biscuit market is largely segregated on the basis of product type - glucose and non-glucose (NG); and price - mass, mid-premium and premium segments.

Interestingly, since 2015, the NG market growth has outpaced the glucose biscuits market growth. The NG segment mirrors mid-premium and premium price points, whereas the glucose segment mirrors mass price points, which reflects a perceptible consumption transformation towards value-added products and categories.

The mid-premium and premium biscuit market is estimated to be a H321 billion opportunity, demonstrating a 12.2% CAGR over the last five years. Rising consumer awareness and the consumer need to ‘taste new and innovative products has fuelled the segment to grow at a much higher clip against the mass category. Thus, within the overall branded biscuits market, the midpremium and premium biscuits category is expected to grow at a 9.5% CAGR, faster than the overall branded biscuits market growth of 9.2%, to reach a substantial size of H504 billion by FY25.

Within the premium biscuits category:

• Cookies constitute the largest segment, estimated at H10,600 cr and capturing about 29% market share

• Cream is the second largest category with 19% market value. The segment is estimated at H7,200 cr

• Salty cracker category is estimated at H2,200 cr

• Non-salty cracker category is estimated at H4,400 cr value

• Digestive category is estimated at H650 cr

Note: The above statistics are for FY20

The Indian biscuits market is highly competitive and fragmented with the presence of a number of large organised as well smaller regional players. While outsourcing/contract manufacturing is a key aspect of this business, it has been observed that companies that have mostly in-house production have a much stronger command over the supply, manufacturing and quality chain, which translates into better cost management and protected profitability. It has also been shown that with full control over safety standards and product development cycles, such integration has also led to their growing share of exports.

On the sales front, fast uptake is key, as biscuits, like most fast-moving consumer goods, have a limited shelf life. Furthermore, sales diversification has always been a prime endeavour, as companies look to enhance their sales footprint not only geographically, but also channel-wise, comprising retail outlets, modern retail, direct reach and even CSD, or canteen stores department for the defence personnel.

Within the various sales/distribution channels, the emergence of modern retail with its "supermarket/hypermarket" scale proposition has allowed branded biscuit players to rapidly enhance their geographic footprint. Further, this channel has also enabled companies to get insights into and incorporate different and even regional consumer preferences into their product development plans. They accentuate brand visibility as well. Furthermore, direct reach is also a growing niche where companies can have the opportunity to directly engage with consumers. With such factors, the share of modern trade in branded biscuits has steadily climbed to about 17% of the total share and is expected to rise further over the coming years.

GLOBAL BISCUIT MARKET

The global biscuit market, with key drivers that include preference, convenience, disposable income, innovation and health considerations, is projected to grow at a 6% CAGR over the next 5 years, from an estimated market value of H7,839 billion in 2020.

Considering their typical growth profile and substantial under-penetration, there has been a quicker uptake of biscuits in developing markets of Asia and Africa, which has opened up export opportunities for Indian players. Between 2017-19, biscuit exports from India have grown at a 11.7% volume CAGR to about 6.42 mn tons, which reflects rising consumer acceptance to products made in India for the world, while also demonstrating cost and quality competencies of Indian manufacturers.

Global biscuits export market:

World exports 2017 2018 2019 CAGR (2017-19)
Value (in million USD) 8,055 8,584 8,168 0.70%
Volume (in 000 tons) 5,141 4,862 6,420 11.70%

The US, Africa, Caribbean Islands and the Middle East North Africa (MENA) region have been the major markets for biscuit exports from India. A growing Indian diaspora in these countries has especially added to export growth in these regions, with share of exports of premium/semi-premium biscuits on a steady rise.

INDIAN BREADS AND BUNS MARKET

The bread and buns retail market in India, valued at H50 billion in FY20, is expected to reach a size of H76 billion by FY25, registering a 9% CAGR. Similar to biscuits, the breads segment has also been growing due to lifestyle changes, transforming consumption habits and increase in disposable incomes. Also, the unprecedented lockdowns announced during peak pandemic have encouraged home-bound consumers to experiment with DIY food and cuisines, thus increasing bread consumption, especially pizza bread, garlic bread, etc.

The per capita consumption of bread in the country has increased from 1 kg per annum in 2015 to 1.4 kg per annum in 2020; yet it is low as compared to other developed countries.

The broader market segmentation for breads is based on ingredients and price. The major mass bread segment consists of white breads made of wheat flour. Premium breads are those primarily in the health category and include wheat breads, milk and fruit breads, pizza bases, buns and value- added loaves, especially comprising the indulgence category. These are made by organised players at scale. Further, the super-premium segment consists of specialty artisanal products, like pita bread, sourdough bread, etc., which is also

When it comes to consumption, North and West India are the largest consumers of bread, the product being accepted as a staple breakfast item in these regions. Western India especially, with a higher number of urbanised Tier-I and Tier-II cities, has a strong premium breads market.

KEY GROWTH DRIVERS

• Shift in market towards packaged food and branded, organised players

• Upsurge of modern retail driving penetration and consumption

• Emergence of the omni-channel consumer comfortable in making both offline and online purchases

• Steady disposable incomes driving demand for premium and semi-premium products

• Evolving consumer taste to try out new and innovative products

• Rise of large consumer internet companies in the food delivery space creating new consumption avenues

BUSINESS OVERVIEW

At Mrs. Bectors Food Specialities (MBFSL), our strategic plan builds on our strong foundations, which include our unique portfolio of brands; our top-2 leadership positions in the fast-catching consumer fancy as international cuisines become popular in the country.

The breads industry is dominated by branded companies, which occupy around 55% of the market. The unbranded segment constitutes small hole-in-the-wall units manufacturing local products. The pandemic has severely affected such companies, while major players have consolidated their market share through their brands and distribution strength, a trend which is only likely to accelerate in the future growing north Indian markets; our pan-India sales, marketing and distribution capabilities; our attractive global footprint in 64 countries; our deep product innovation-development- commercialisation expertise and our margin expansion in recent years that has allowed us to make ongoing investments in expanding our product capacities and resource capabilities. Specifically, our innovation and new product development objectives include continuous improvement in food safety and quality, growth through new products, superior consumer satisfaction and optimised production costs. Our innovation efforts are centered around anticipating consumer demand and adapting rapidly to changing market trends and consumption patterns.

As a Company that was listed on the national stock exchanges in December 2020, our focus on shareholder and stakeholder value creation has remained a key objective of our business. Today, we continue to remain on the path of long-term value creation, despite the heightened challenges triggered by the COVID-19 pandemic, with our strategy to drive sustainable growth focused on key our priorities of:

• Fast-tracking consumer-centric innovation and growth

• Pursuing continuous operational excellence

• Fostering a winning growth culture

• Ensuring the highest standards of compliance

• Focusing on our broader responsibilities through alignment with ESG principles

We believe that successful implementation of our strategic priorities and leveraging of our strong foundations will drive revenue and profitability growth, thus enabling us to continue to create long-term value for our shareholders.

Human resources and industrial relations

At MBFSL, our people are our key asset and have been instrumental in our growth journey, enabling us to realise our goals and ambitions. A growth-oriented mindset, resilience and agility are important facets of our workplace culture.

The expansion of our existing business and addition of areas in product development, etc., have created a wide range of career opportunities for employees. Providing meaningful work to employees and opportunity to grow are important building blocks of our talent management practices. We provide an inclusive and dynamic work environment where the organisation believes in its people and recognises that its success and growth are driven by them. Further, the competence and capability of our people provide a key competitive edge to build an aspirational workplace and future-fit organisation.

We have embraced several people practices that enable us to attract and retain high-quality talent in an increasingly competitive market, and nurture a work culture that is always committed to providing the best opportunities to our employees- both managerial and shopfloor- to realise their full potential. We are committed to our reputation as an inclusive and equal opportunity employer and are focused on enhancing diversity of talent with a view to specifically enable women to join the mainstream workforce.

We foster a strong orientation to learning and development. All employees, from a new recruit to a seasoned one, are provided tailored learning opportunities as per their role, level and specific focus area. Thus, we provide our employees opportunities to learn, grow and take their careers ahead and forward, while also having robust promotion policies in place.

As a future-facing organisation, we remain committed to build capabilities ahead of requirement across the organisation, team and individual levels. Related systems, processes and people management practices are formulated and deployed to help support this endeavour, even as continuous performance enhancement is encouraged and rewarded at all levels. Organisational success is attributed to celebrating talent and success by way of career and recognition, driving a culture of meritocracy and remaining contemporary and agile.

We continued to have cordial industrial relations during the year.

FINANCIAL REVIEW (CONSOLIDATED FINANCIAL PERFORMANCE)

Despite the uncertainty and challenges surrounding the Covid-19 pandemic, MBFSL was able to rapidly pivot to the changed operating conditions and hence reported an appreciable financial performance during FY 2020-21.

The Company recorded total revenue from operations of H8,807.3 million during FY 2020-21, as compared to H7,621.2 million in the corresponding previous financial year. This growth of 15.6% was achieved on account of both volume and value expansion. The Company generated earnings before interest, depreciation and tax (EBIDT) of H1,410.5 million during FY 2020-21, vs. H928.2 mn in the previous financial year on account of higher revenue growth against comparatively lower expenses growth, which attests to the efficiency of the Companys ongoing revenue acceleration and cost optimisation programs.

Profit before tax (PBT) for FY 2020-21 stood at H970.7 million, as compared to H390.2 million in the previous fiscal year. What stands out here is the finance cost, which the Company has able to lower by almost 36% to H95.2 million during the year. Net profit for FY 2020-21 stood at H722.8 million, as compared to H303.1 million in the previous financial year, representing a substantive 138.5% growth.

Earnings per share (EPS) stood at H12.5 for the year under review, as against H5.3 in the previous financial year.

Key financial ratios

Key financial ratios for FY2020-21 (consolidated) compared to the last financial year are given below:

Particulars Current year ended March 2021 Previous year ended March 2020
Return on capital employed (%) 22.9% 13.7%
Return on equity (%) 16.8% 9.5%
Net debt to equity 0.08x 0.23x
Net working capital 30 days 33 days
Operating profit margin (%) 16.0% 12.2%
Net profit margin (%) 8.2% 4.0%

Internal control systems and their adequacy

MBFSL has put in place strong internal control system mechanisms and best-in-class processes commensurate with the size and scale of its operations. At the Company, there is a well-established multi-faceted team that conducts extensive audit throughout the year across all functional areas and submits reports to the management and Audit Committee about compliance with internal controls, efficiency and effectiveness of operations, and key process risks. Some of the major features of the Companys internal control systems that reflect sufficient adequacy include the following:

• Adequate articulation and documentation of policies and guidelines

• Preparation and monitoring of annual budgets through ongoing reviews

• Strong compliance management systems that amplify monitoring, surveillance and response

• Well-defined delegation of power with authority limits for approving revenue and capital expenditure, which is reviewed on a needs-based basis

• Use of enterprise resource planning (ERP) system to record data for accounting and consolidation and also for management information purposes

• Periodic engagement of outside experts to carry out independent reviews of the effectiveness of various business processes

Furthermore, internal audit is carried out in accordance with auditing standards to review design and effectiveness of internal control systems and procedures to manage risk, enable operational monitoring control and ensure compliance with relevant policies and procedures. Moreover, the Audit Committee of the Board regularly reviews execution of the audit plan, the adequacy and effectiveness of internal audit systems and monitoring of implementation of internal audit recommendations, including those relating to bolstering the Companys risk management policies and systems.

RISK MANAGEMENT

As a business with large-scale operations in India and around the world, we are subject to risk. Yet, our continuous endeavours comprise scanning our business landscape to identify and grade emerging risk pools and adopting all possible actions to limit or mitigate the negative impact of those risks or capitalise on or amplify their positive impacts. Though we are focused on fostering a risk-aware culture, we consider calculated risk as a means to achieve sustainable and fast-tracked growth, especially as a growth-oriented enterprise. Yet we embrace all possible measures to mitigate any negative fallouts, thus protecting long-term value.

Our business and financial results could be negatively impacted by the second or third waves of the COVID-19 pandemic. The severity, magnitude and duration of the current COVID-19 pandemic is uncertain and rapidly changing. In the year 2020, the pandemic significantly impacted economic activity and markets around the world. At our Company, we have been actively monitoring the outbreak of COVID-19 and its impact globally. Our highest priorities continue to be accorded to ensure the health and safety of our employees and continued production with all possible safety standards to sustain the food supply chain. We implemented enhanced protocols to provide a safe and hygienic working environment for our employees. We also operationalised remote working. During 2020-21, we experienced significant increase in demand and revenue growth in certain markets, as consumers increased their food purchases for pantry stocking and in-home consumption. Results were particularly strong in modern trade and e-commerce.

We operate in the food industry and are part of the global food supply chain, with a share of biscuits exports of around 12% from India. One chief objective during the pandemic was to maintain the availability of our products to meet the needs of our consumers. In response to rising demand patterns, we increased production and have not experienced any major material disruptions in our supply chain or operations. Furthermore, we have been able to continue to source raw material resource ingredients, packaging and transportation and deliver our products to our customers. Though commodity costs have become more volatile due to the pandemic outbreak, we closely monitor commodity prices and take actions accordingly, including ongoing value engineering initiatives.

While some of the initial impacts of the pandemic on our business moderated in the second and third quarter of 2020-21, the business and economic environment remains uncertain and additional impacts may arise that remain unanticipated. Barring any material business disruptions or other negative developments, we expect to continue to meet the demand of consumers for our products in India and around the world.

Some of the other key risks and their mitigation measures are elaborated below.

Risk identification Risk explanation Risk mitigation
Raw material risk w We purchase large quantities of commodities, including Wheat flour, palm and other vegetable oils, sugar, flavouring agents, etc. In addition, we also purchase and use significant quantities of packaging materials to package our products, and natural gas, fuels and electricity for our factories. An inability to efficiently manage raw material/resource procurement may dent our profitability. • Our bulk industrial buying programs enable us to get favourable pricing terms; further, our longstanding business relationships with suppliers allow us to ensure both quality and availability.
• We engage in continuous value engineering with a view to optimise raw material and energy consumption and cost.
• We use PNG at our Noida and Tahliwal manufacturing facilities.
Competition risk ss The biscuits and bread/bakery industry is highly competitive, with a number of global, pan-India, regional and local companies. Failure to effectively address competitive challenges could adversely affect our business. • We continue to anchor our consumer offering on taste, variety, product choice, availability and value, which represents an effective customer-centric proposition and key differentiator in a crowded market.
• In 2020-21, we focused on accelerating consumer-centric and volume-driven growth on the back of effective and targetted marketing that enabled us to sustain our competitive positions in our key north Indian markets.
• Diversification represents an effective counterweight against competitive pressures as it helps build and protect profitability. Our business is diversified not only in terms of product range and product segment, but also with respect to their geographic availability. In addition to a pan-India distribution network, we also export biscuit products to 64 countries of the world.
• We continue to focus on operational excellence, driven by cost discipline and continuous improvement, including in areas like sales execution and building a winning culture.
Foreign exchange risk We have a substantial export business and hence earnings in foreign currency. Any adverse movement in forex rates might have an impact on our profitability. • We have adopted a hedging (limited) mechanism that enables protection against unfavourable exchange rate movements.
• We regularly engage with our large customers abroad that also contributes to mitigating forex- related risks.
Consumer demand risk We need to accurately predict consumption trends, consumer preferences and purchase patterns to be able to continually meet those changes. • We are cognisant of the fact that consumer preferences for food products change continually, and have honed our expertise in predicting, identifying and interpreting the tastes, dietary habits, packaging and sales channel preferences of consumers in India and around the world.
• We are continuing to expand our well-being offerings and refining the ingredient and nutrition profiles of our existing products, which represents an ongoing journey to bring the best products to our consumers.
• Our omni-channel sales presence, including in modern retail, provides us the unique opportunity to closely examine evolving regional consumer preferences, enabling us to effectively respond to these changes.
• We also maintain deep focus on ethical sourcing and responsible supply chain practices to ensure brand reputation and market credibility.
Unanticipated business disruption risks Failure to effectively prepare for and respond to unanticipated disruptions in operations can cause delays in delivering products to our consumers, leading to a negative impact on our business. • The coronavirus pandemic represented a major unanticipated event that had an impact on all corners of the world. As a business with global operations, we could foresee the makings of a pandemic and hence took early steps to secure business continuity.
• We rapidly activated business continuity planning and ensured that we sustain our operations as an essential public service with full adoption of all regulatory health and safety protocols.
• We also enabled remote working wherever possible to reduce any risk of exposure, while ensuring focus on both KPIs and engagement as a means to ensure that our people were productively occupied.
Legal and regulatory compliance risk Our activities in India and in the countries where we export our products to is subject to close government oversight. Various laws govern food production, supply and distribution, and it is imperative that we comply to these laws to ensure our status as a going concern. • Our longstanding presence in the business is an effective indicator of our ability to comply with all statutory rules, regulations and guidelines in India and abroad.
• Our manufacturing/production assets have been acquired from renowned global OEMs from Denmark, Germany and Italy, etc., which enables us to assure product quality and safety.
• Our operations are endorsed by most major certification norms and standards that attest to our ability to adopt the highest standards across our operations.
ESG risk (esg) Our inability to comply with ESG (environmental, social, governance) norms and expectations might impede business growth. • We strongly believe that environmental pillar of our sustainability drive is a crucial factor for advancing business growth. As a forward-looking organisation, we are working towards various initiatives to reduce emissions, achieve energy efficiency and conserve natural resources.
• Equal opportunity employment and meritocracy are the fundamental aspects of focus on our employees, which rejuvenates the relationship we share with them. Moreover, talent grooming, women participation in our workforce and compliance to labour laws are some of our major strategic imperatives.
• We undertake meaningful initiatives to create positive impact in and around our communities.
• We have adopted best practices in governance and business conduct, implementing and monitoring initiatives and policies that enable us to sustain a culture of compliance.

CAUTIONARY STATEMENT

This report contains a number of forward-looking statements. Words and expressions, such as ‘will, ‘may, ‘expect, ‘would, ‘could, ‘might, ‘plan, ‘believe, ‘estimate, ‘anticipate, ‘likely, ‘drive, ‘objective, ‘outlook and similar expressions are intended to identify our forward-looking statements, including but not limited to statements about the impact of COVID-19 on consumer demand, costs, product mix, our strategic initiatives and our future performance. These forward-looking statements involve risks and uncertainties, many of which are beyond our control, and many of these may continue to be amplified by the COVID-19 outbreak. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.