Nitta Gelatin India Ltd Management Discussions

Market Analysis

The global capsule market, including in India, is expanding steadily due to rising pharmaceutical and nutraceutical industries reliance on capsules as a preferred oral dosage form. Gelatin capsules are expected to maintain a dominant 85% global market share. However, demand for non-animal-based capsules (such as HPMC and Pullulan) is increasing rapidly, reflecting dietary preferences.

Though US tariffs created a dip in sales in the US market, the domestic market proved resilient enough to absorb the dwindling demand, enabling your Company to maintain business momentum for gelatin products. Meanwhile, the global collagen peptide market is experiencing robust growth, driven largely by a worldwide shift towards preventive healthcare, an ageing population seeking joint and skin health support and the increasing popularity of "beauty-from-within" nutricosmetics. These trends are expected to further bolster demand in related segments, particularly within the Indian context where wellness and preventive care are gaining significant traction. The growing affluence based on the economic development of the Country is also supporting the sustenance of demand. India is known as the Pharmacy of the World due to its cost competitiveness and manufacturing capability to produce high-quality medicines. The Indian capsule industry is experiencing rapid growth, fueled by booming nutraceutical demand, pharmaceutical outsourcing and export competitiveness. Manufacturers are increasingly leveraging demand to produce premium vitamins, supplements and specialized pharmaceutical drugs for both domestic and global markets. The industry is further strengthened by government initiatives such as "Make in India" and "Production Linked Incentive (PLI) scheme" for pharma industry, boosting local production capabilities.

Key drivers and trends in this growth include:

• High Export Potential: Indian manufacturers are gaining global recognition for high-quality production, adherence to strict regulatory compliance and cost-effectiveness, making them a preferred outsourcing partner for international markets. India continues to benefit from its status as a leading generic drug and API manufacturing hub.

• Domestic Market Boom: The market is driven by rising health awareness, high demand for health supplements, omega-3 and herbal formulations.

As a result, your Company was able to strengthen the market share for Gelatin.

Last year saw significant competition of gelatin supplies from China on account of surplus capacities and excess gelatin supplies from alternate raw material sources. This has weakened the demand for bone gelatin in the segment of low quality conscious customers. The Company has taken a conscious call not to service Chinese Gelatin customers due to gap in quality expectation and pricing pressure, which has resulted in a decline in market share in this specific segment.

However, demand across other segments – brand conscious/ regulated segments - has remained strong, enabling the Company to increase its market share in these areas and operate gelatin capacities at full utilization.

The Company has been able to source raw materials competitively and meet market demand, which has helped to ease pricing pressure through better cost economics. In addition, the imposition of tariffs by the US administration has led to a temporary dip in sales and further pricing pressure; however, in several cases, the tariffs were passed on to customers and volumes were successfully redirected to emerging markets, thus enabling the retention of the overall sales volumes.

Alternative Raw Materials Gaining Momentum

The weakening of the global leather industry has led hide suppliers to actively seek alternate end-markets, with gelatin and collagen peptides emerging as immediate and viable outlets. This has driven increased investments by hide processors, often supported by the beef industry, as part of the broader efforts to develop sustainable solutions for by-products. Consequently, production of bovine hide gelatin and collagen peptides has increased, resulting in surplus supply.

Over time, manufacturing technologies have improved, enabling greater use of beef hide gelatin in capsule applications. Capsule manufacturers are increasingly adopting these materials to manage costs, despite quality challenges and are investing in process improvements and blending strategies with bone gelatin to meet customer specifications. Further, the closure of bone gelatin plants in the UK and the US have released additional bone availability into the market.

Certain factors have exerted significant gelatin costs. Despite these headwinds, the Company has successfully differentiated itself on the quality of bone gelatin, which has maintained its market share and is actively collaborating with industry participants to develop hide-based raw materials to support future growth.

Outlook

Driven by rapid growth in the nutraceutical industry, particularly in wellness-focused and specialty products, the outlook for bone gelatin in capsule applications (both hard and soft gelatin) in the near term remains positive. Growth is supported by rising pharmaceutical production, increasing nutraceutical consumption and ongoing technological advancements in capsule manufacturing. Despite the emergence of alternative materials, bovine-derived bone gelatin continues to hold a strong and preferred position in pharmaceutical applications, owing to its consistent quality, high bloom strength and well-established safety standards.

Key Drivers

Regional Growth Drivers: Asia-Pacific will be the fastest-growing region, driven by expanding pharmaceutical manufacturing. Europe continues to lead in demand, particularly for premium and traceable gelatin. Hard gelatin capsules remain a "structural demand pillar," holding a central role in two-piece capsule production for both prescription and OTC drugs. While HPMC is growing, the high cost and 16-20-week lead times for pharma-grade HPMC are restricting a rapid shift away from gelatin which preserves its market share. Softgel applications are considered a "high value-added segment" for bone gelatin, particularly in the growing nutraceutical and wellness markets.

Nutraceutical Expansion: The nutraceutical industry is contributing significantly to bone gelatin demand for dietary supplements, with a projected 32% increase in demand for gelatin-based supplements.

Key Challenges

• Supply Chain Volatility: Fluctuating raw material costs, particularly in the bovine sector, can cause margin pressure. The Company is actively investing in sustainable and traceable sourcing and long-term contracts to manage and ensure raw material availability at manageable costs.

• Pressure from substitutes: The growth of plant-based and synthetic (HPMC, Starch) capsules is challenging gelatin in specific, mostly premium or niche markets. However, for mainstream, high-volume pharmaceutical segment, bone gelatins performance and cost-effectiveness ensure that the same remains the dominant choice.

Collagen Peptide

• The boom in global protein demand is colliding with severe whey protein supply shortages, creating a multi-year structural gap in the high-quality protein market. As whey protein becomes scarce and costly, the manufacturers are turning to collagen peptides not just as a substitute protein, but as a functional ingredient that enhances texture, stability and consumer experience in functional foods.

• Collagen peptides reliability, versatility and superior textural properties make them a natural choice for brands needing to innovate and scale despite ongoing whey protein constraints.

• Manufacturers increasingly rely on collagen to maintain product quality while reducing dependency on scarce whey protein supplies.

• A major recent demand spike will come from GLP 1 medication. Healthcare providers commonly recommend high-protein intake to maintain muscle mass, dramatically raising demand.

Segment wise performance Exports:

Gelatin exports was lower than last financial year mainly due to tariffs imposed by US administration, resulting in the customers being wary about the risk of non-supply, if contracted. Ossein/limed exports marginally increased during the year. Collagen peptide exports recorded a year-on-year doubling in sales, aided by capacity additions implemented during the course of the year and a significant

American demand. Customers were willing to pay higher tariffs and contract, if supplies are assured.

Domestic Sales:

Gelatin had a strong demand in domestic market mainly riding on capsules demand for exports. The Company was able to offset the drop in sales in export segment without value loss. Collagen peptide exports increased by 90% in terms of volumes.

DCP sales was higher by 25% due to higher price realization owing to new acid regulation making domestic Rock DCP production unviable and higher import costs.

Risks and Concerns

There exists a Risk Management Committee of executives which meets on a periodic basis for identification of major risks and mitigation plans thereof. In addition, a dedicated risk team under the aegis of a Chief Risk Officer has been constituted to keep a vigil on the key process/ business risks and to suggest mitigative actions in a timely manner for sustaining business results as per the plans of the Company.

Internal Control System

The Company has in place adequate financial controls commensurate with the size, scale and complexity of its operations.

Financial Performance

The financial results of operations of the Company for the year under review are detailed under the caption Performance forming part of the Directors Report. As per the same, the Companys operations have resulted in a pre-tax profit of 145.60 Crores for the current year as against pre-tax profit of 109.68 Crores for the previous financial year. The post-tax profit for the current year is 110.58 Crores as against post tax profit of 82.21 Crores for 2024-25. Other comprehensive loss (net of tax) for the current year is 0.64 Crores as against 0.02 Crores for the previous year. The basic and diluted earnings per share during the year was 121.81 per share as against 90.54 per share during the previous fiscal year.

Human Resources Development Workforce Overview

As of March 31, 2026, the Company had 471 permanent employees. Industrial relations remained stable and constructive throughout the year.

During FY 2025–26, the HR function continued its transition towards a structured Organization Development approach, focusing on leadership continuity, capability building, cultural alignment and digital enablement to support sustainable business growth.

Building a Future-Ready Organization - Leadership Continuity & Succession Planning

During the year, the Company undertook key leadership restructuring and succession initiatives to strengthen organizational readiness and governance continuity.

• Two senior roles were transitioned through internal promotions. (QC & Technical Services)

A Chief Operating Officer (COO) was inducted, with the existing Operations Head moving to a critical Projects role.

A new Chief Financial Officer (CFO) was appointed with the current CFO transitioning to the role of Chief Risk Officer (CRO).

These initiatives reinforce leadership continuity, strengthen governance and support the Companys transition towards a future-ready organization.

Structured Learning & Development Architecture

The Company institutionalized a three-tier Learning &

Development (L&D) framework aligned to business priorities:

• Operational Requirements - Technical capability, safety discipline, TPM and quality compliance

• Functional Requirements - Department-wise capability enhancement across core functions

• Leadership Requirements - Accountability, decision-making and value-based leadership a. As part of strengthening leadership capability, six leaders were nominated to a three-month executive programme by CII on strategizing in competitive markets, delivered by internationally reputed faculty. Additionally, a key CSR resource was nominated for a specialized CSR programme at IIM Kozhikode to strengthen the Companys capability in driving structured and impactful sustainability initiatives. b. Senior Leadership Alignment: A two-day residential leadership workshop was conducted to strengthen strategic alignment, execution discipline and cross-functional collaboration at the senior level. c. A structured mentorship programme was implemented, with trained mentors supporting early-tenure employees through a six-month guided development cycle to accelerate role effectiveness. d. Continuous learning was enabled through micro-learning interventions and self-learning modules integrated into routine workflows.

Values Embedded into Performance Governance

Organizational values were integrated into Level 1 leadership KRAs, linking behavioural expectations with performance accountability. This ensures that leadership effectiveness is evaluated not only on outcomes, but also on alignment with the Companys core values.

TEAM EXCITE - Organisation-wide Engagement Platform

The Company launched TEAM EXCITE, a structured engagement platform built on the pillars of Learning & Growth, Change & Excellence and Culture & Celebration.

Employees were organized into cross-functional groups to drive collaboration, healthy competition and collective problem-solving. The initiative strengthened engagement, enhanced participation in learning and created a platform to address operational improvement areas across divisions.

HR Digital Enablement: An integrated HRMS platform was implemented to enhance efficiency, transparency and data-driven workforce management across attendance, payroll and employee services.

Health, Safety & Employee Well-being: Employee well-being initiatives focused on preventive health, safety preparedness and overall fitness.

Key interventions included health screening camps, CPR training, wellness sessions such as Yoga and Zumba and introduction of IAM Technique -a structured Meditation practice combining body movement, breath and awareness to support mental well-being and resilience.

Way Forward - FY 2026–27

The focus for the ongoing year will be on:

Organization-wide competency mapping aligned to business needs

• Strengthening succession depth across roles

Institutionalizing Individual Development Plans (IDPs) to align employee growth with organizational capability requirements- Identification and development of high-potential employees

• Building a high-performance, accountability-driven culture

• Leveraging HR analytics for workforce planning

• Deepening the values drive across all levels, embedding values into everyday leadership and organizational practices

The Company remains committed to building a resilient, value-driven and future-ready workforce to support sustained growth.

Key Financial Ratios

Details of significant changes in key financial ratios, along with detailed explanations thereof, are as below:

Details of significant changes in key financial ratios, along with detailed explanations thereof, are as below:
Particulars	As at 31.03.2026	As at 31.03.2025	Variance	Reason
Current Ratio	5.55	3.66	52%	Significant addition to bank and reduction in borrowing compared to FY 2024-25.
Debt-Equity Ratio	0.02	0.12	-83%	The Company has repaid its debts significantly.
Return on Equity Ratio	0.22	0.21	5%
Inventory turnover Ratio	6.41	5.67	13%
Trade Receivables Turnover Ratio	5.80	5.87	-1%
Trade payables Turnover Ratio	23.82	23.87	0%
Net capital Turnover Ratio	2.10	2.52	-17%
Net profit Ratio	0.19	0.16	19%
Operating profit ratio	15.1	14.3	6%
Return on Capital Employed	0.29	0.28	4%
Return on Networth	22.2	21	6%
Return on Investment	2.79	-	-100%	There was no dividend income from the Subsidiary Company - Bamni Proteins Ltd. during the FY ended 2024-25.

CAUTIONARY STATEMENT

The Management Discussion and Analysis Report containing your Companys objectives, projections, estimates and expectation may constitute certain statements which are forward looking within the meaning of the applicable laws and regulations. Actual results may differ materially from those expressed or implied in the statements. Your Companys operations may inter-alia be affected by the supply and demand situation, tariffs imposed by US administration, input price and availability, changes in Government Regulations, Tax Laws, foreign exchange rate fluctuations and other factors. The Company cannot guarantee the accuracy of assumptions and its perceived performance for the future.

The Management believes that the strategic direction of your Company is sound and will fulfill the Shareholders expectations, both short term and long term.

	For and on behalf of the
	Board of Directors
	Sd/-
	APM MOHAMMED HANISH IAS
Kochi	CHAIRMAN
25.05.2026	DIN: 02504842