Ovobel Foods Ltd Management Discussions

The company operates in the domain of egg powder and frozen egg manufacture and exports. At present, there are only few other companies that are active in this domain in India. Your Company has identified the new markets and increased its customer base and product range.

Your company has built a reputation over the years amongst its customer for quality products. The companys sustainability has been centered around enlarging its presence within profitable and attractive retail niches, capitalizing on robust brand building and manufacturing foundation.

The management is making efforts to capitalize on the existing brand name and taking several other steps to register steady growth. In this regard the management has implemented its expansion plan in the new unit which is strategically focused on enhancing production capacity and diversifying the companys product offerings. The expansion initiative at the new unit is aimed at leveraging advanced technology and process optimization to meet the growing demands of both domestic and international markets. With this, the management anticipates not only an increase in operational efficiency but also the ability to swiftly respond to evolving customer preferences and emerging market trends.

Due to several corrective measures taken by the management, companys products are in high demand both in domestic and international markets. This unique advantage is likely to result in bringing in more and more opportunities of added commercial advantage during the days ahead. We are in an age where world over the faith of people have got re-imposed in healthy living and healthy eating, and the Company sees it as on opportune time to increase its customer base in both Indian and international markets. The Company is constantly looking forward to enter new markets as well.

While international competition poses a threat to the companys future operations, your Directors are confident in effectively countering it by utilizing their past experience and skills. Market fluctuations due to economic conditions such as inflation, currency fluctuations, and overall economic conditions have a major influence on both production costs and other overheads, thereby affecting prices in the egg powder market. To mitigate these risks to a certain extent, management has decided to pursue backward integration, by owning poultry farms, to ensure a stable and reliable supply of raw materials (eggs) for egg powder production. This reduces dependency on external suppliers and minimizes risks associated with supply chain disruptions. By owning or controlling egg production facilities, companies can potentially reduce costs associated with purchasing eggs at market prices, providing a competitive advantage, especially during periods of price volatility in the egg market.

The company was operating in one predominant segment i.e. manufacture of standard egg powder and frozen egg. At present the company is involved in making specialized products in this segment.

Despite the rise is raw material prices, your directors have prioritized in improving its quality measures and have been successful in keeping its clients happy on the product quality front. The management looks to the future with optimism.

> Recent and ongoing increases in raw material prices across the country have led to a steady rise in production costs.

> The industry is also grappling with escalating manpower expenses, which pose a significant challenge.

> A slowdown in international trade adds another layer of concern for business operations.

> Despite these headwinds, the company has successfully retained its clients and achieved better returns by consistently delivering high-quality products.

> Changes in trade policies, tariff structures, or international agreements could alter global export- import dynamics and affect market access for egg powder producers.

> Disruptions to transportation infrastructure, whether due to war, port congestion, or changes in shipping routes could further impact the cost and efficiency of export activities.

The company has got adequate internal control systems in place for the current level of operations of the company and your management would continue to strengthen this. To mitigate these threats, management adopts proactive strategies such as diversifying export markets, maintaining strong relationships with logistics providers, staying informed about regulatory changes, optimizing supply chain flexibility, and implementing robust risk management practices

Your Company prepares its financial statements in compliance with the requirements of the Companies Act, 2013 and recognized accounting policies and practices, Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act. These financial statements were prepared on a historical cost basis. Your management accepts the responsibility for the fair presentation of the additional information presented in the notes to the financial statements for the purpose of additional analysis of the financial statements. The financial statements have been prepared as per the requirements of Schedule III (Division II) notified by the Ministry of Corporate Affairs and the operating cycle has been considered as one year. This also enables in reasonably presenting the Companys state of affairs and profits and cash flows for the year ended March 31st, 2025.

The company has experienced, loyal professionals working in production, sales, administration, marketing, finance and compliance. The company has got very good industrial relations and the employees and the management has very cordial relationship between them. Your Company prides in the commitment, competence and dedication of employees. The Companys structured induction at all levels and management development programs have helped enhance competence.

i. Debt Service Coverage Ratio - the Debt Service Coverage Ratio as on 31 March 2024 was 00.11 whereas as on 31^st March 2025 it is 0.06, a considerable variance of -42.68% year on year.

Explanation: The sales prices have reduced and Increased borrowings and repayment. Company being regular in repayment of principal and interest has been able cover its debt cost appropriately out of current year earnings though there is a lower earning as compared to previous year.

ii. Return on Equity Ratio - the Return on Equity Ratio as on 31 March 2024 was 0.26 whereas as on 31^st March 2025 it is 0.11, a considerable variance of -57.70% year on year.

Explanation: In current year, the profits have reduced due to lower gross profit margin compared to previous year and as a result the return on equity has also reduced. Also, the average shareholders equity has increased due to significant profits in the previous year.

iii. Return on Capital employed - the Return on Capital Employed Ratio as on 31 March 2024 was 26.37% whereas as on 31^st March 2025 it is 12.37%, a considerable variance of -53.12% year on year.

Explanation: The profit and EBIT has come down and simultaneously capital investments has increased significantly during the current year, due to which there is a reduction in return on capital employed.

iv. Net Profit % - the net profit percentage as on 31 March 2024 was 10.24 % whereas as on 31^st March 2025 it is 4.8%, a considerable variance of -53.12% year on year.

Explanation: In the current year, the net profit has come down as compared to the previous years due to lower gross profit margin. The costs have also increased during the current year contributing towards decreased profits. As a result the net profit percentage has come down.

v. Return on Investment - the Return on Investment Ratio as on 31 March 2024 was 0.12% whereas as on 31^st March 2025 it is 41.44%, a considerable variance of 34306.31 % year on year.

Explanation: Increase in return on investment is due to increase in the fair value of the investment in equity as at the year end.

vi. Current Ratio -The Current ratio as on 31 March 2024 was 3.01% whereas as on 31^st March 2025 it is 1.66 %, a considerable variance of -44.75% year on year.

Explanation: The current ratio has reduced in the current year for the following reasons. Borrowings has significantly increased as at year end especially because of higher bills discounted, increase in trade payables and increase in advance from customers which has increased the current liabilities. There is a reduction in current asset due to reduction in bank balances as a result of investment in Non current assets. Trade receivables have also increased due to higher sales volume.

vii. Trade Receivables turnover ratio - The Trade Receivables turnover ratio as on 31 March 2024 was 13.51 whereas as on 31^st March 2025 it is 20.00, a considerable variance of 48.04% year on year.

Explanation: Trade receivables have increased due to higher sales volume in the year end.

viii. Net Capital turnover ratio - The net capital turnover ratio as on 31 March 2024 was 3.63 whereas as on 31^st March 2025 it is 7.43, a considerable variance of 104.91% year on year.

Explanation: Operation levels have increased for the year 2024-25 as compared to the previous year and working capital ratio has decreased significantly for the year as compared to previous year.

ix. Operating Profit Margin - The Operating profit margin as on 31 March 2024 was 11.50 where as on 31^st March 2025 it is 3.44, a considerable variance of -70.06 year on year.

Explanation: Operating profit margin have decreased for the year 2024-25 as compared to the previous year as the raw material cost increased significantly for the year as compared to previous year.

xiii. Interest Coverage Ratio - The Interest coverage ratio as on 31 March 2024 was 14.35 where as on 31^st March 2025 it is 4.31, a considerable variance of -69.97% year on year.

Explanation: Interest coverage ratio have decreased for the year 2024-25 as compared to the previous year as the borrowings and raw material cost increased significantly for the year as compared to previous year.

Certain statements made in the management discussion and analysis report may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections and so on, whether express or implied. Several factors could make a significant difference to the Companys operations. These include economic conditions affecting demand and supply, government regulations and taxation, natural calamities and so on over which the Company does not have any direct control.