Palash Securities Ltd Management Discussions

Economic Overview

The global economy remained resilient in the year 2024, expanding at 3.2% (as per IMF World economic outlook, Apr25). The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity. It is estimated to grow by 2.8% in 2025 and 3% in 2026, much below the historical average of 3.7% (2000–19) due to global challenges on various fronts. Persistent geopolitical tensions, disruptions in trade routes, and high interest rates in major economies created headwinds for global trade and consumption. However, resilient labour markets, easing inflationary pressures, and stable private consumption helped sustain economic activity, particularly in emerging markets. In the FMCG sector, demand remained steady, driven by essential consumer goods, premiumisation trends, and a growing preference for health and sustainability focused products.

In advanced economies, the United States growth forecast for 2025 is expected to slow down to 1.8%, on account of greater policy uncertainty, trade tensions and softer demand momentum, whereas the euro area is expected to grow at 0.8%, before rising to 1.4% in 2026 as financial conditions improve. Other advanced economies see stable growth, with recovering incomes offset by trade uncertainties. In emerging markets and developing economies, growth is expected to slow down to 3.7% in 2025 due to various trade measures in recent times. On the back of the recently implemented tariffs and prolonged trade policy uncertainty, Chinas growth was revised downward to 4% in 2025. Indias growth to remain stable at 6.2% in 2025 and 6.3% in 2026 supported by private consumption, particularly in rural areas.

The Indian food services sector is poised for robust growth, with a projected Compound Annual Growth Rate (CAGR) of 8.1% between 2024 and 2028. This growth is expected to be driven by many factors, including rapid urbanization, strong GDP growth, a growing young population, and increased consumer exposure. The sector currently contributes 1.9% to Indias GDP. It is expected to grow to US$ 93.16 billion i.e. Rs.7.76 trillion by 2028, up from US$ 68.31 billion i.e. Rs.5.69 trillion. Despite the setbacks experienced during the COVID-19 pandemic, the industry has demonstrated remarkable resilience, underlining the need for the government to recognize its socio-economic impact and take immediate steps to unlock its full potential.

The organized segment of the food services industry is expected to grow at a CAGR of 13.2%, achieving a market share of 52.9% by 2028. Within the organized sector, casual dining restaurants are the fastest-growing, with a 48% market share, followed by quick-service restaurants (QSRs) at 27%. By 2028, it is anticipated that QSRs will gain market share by approximately 4-5% points at the expense of casual dining restaurants. The sector is also the second-biggest employer, with 8.5 million employees currently expected to increase by over 20% to 10.3 million by 2028. The industry has also witnessed rapid growth in the online food delivery market, with an estimated 6.6 crore food delivery platform users among the urban population, showcasing the changing consumption patterns driven by convenience.

The Company is in the investment business and your company holds majority investments in its group companies. Apart from its operations in investment in securities including through its Wholly Owned Subsidiaries, the Company also continues to be engaged in business of food processing through its subsidiary Company Morton Foods Limited. The company manufactures and markets canned fruits, vegetables and food products like jams, squashes, crushes, vegetable sauces, juices and breakfast cereals under the brand Morton since 1959. To maximize sales, the company is increasing its customer base and focusing more on both retail business and e-commerce. Additionally, it has initiated the process to launch new products that will offer higher margins and eliminate the need for seasonal stocking.

The company has a manufacturing unit at Prayagraj which makes Canned fruits and vegetables, Jams, Crush & Squashes, Tomato Ketchup and Vegetable sauces etc. Breakfast cereals and Pasta, Vermicelli are manufactured by third party manufacturer and Morton Foods Ltd markets it under the brand Name Morton. The Company is also in process of entering into a new sales channel Canteen Stores Department (CSD).

Morton Foods Ltd services and operates in the following customer segments

1) General Trade / Kirana

2) Modern Trade

3) Horeca – Hotel Restaurant and Catering

4) E commerce – Amazon, Flipkart , Big Basket ,

5) Central Police Canteen Stores

6) Institutions – Taj , Hayat , Specialty Restaurants etc.

7) Defense APO – Canned fruits, Vegetables and curries for in-house consumption.

The countrys financial services sector consists of capital markets, insurance sector, banking and non-banking financial companies (NBFCs). Non-banking financial companies (NBFCs), banks, and financial institutions form the broad constituents of the credit ecosystem of the Indian financial sector, with NBFCs being a key pillar therein. The Non-Banking Financial Companies (NBFC) sector in India has experienced significant growth and transformation over the past decade, becoming an integral part of the Indian financial system.

As per RBI reports, Non-Banking Financial Companies (NBFCs) have continued to play a pivotal role in extending credit and financial services to under-served and unbanked segments of the Indian economy. As of September 2024, the sector maintained a healthy Capital to Risk-Weighted Assets Ratio (CRAR) of 26.1%, well above the regulatory minimum of 15%. The Gross Non-Performing Assets (GNPA) ratio improved further to 3.4%, reflecting a continued strengthening in asset quality. Profitability indicators remained stable, with Net Interest Margin (NIM) and Return on Assets (RoA) at 5.1% and 2.9% respectively. While credit growth moderated to 6.5% during the first half of FY 2024 - 25, following regulatory tightening on certain loan categories, the sector remains resilient, supported by strong capital bu_ers and prudent risk management practices.

Indias food processing sector is one of the largest in the world and its output is expected to reach $535 Billion by FY2025-26. The Food Processing sector in India has a quintessential role in linking Indian farmers to consumers in the domestic and international markets. The Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments across the value chain. The food processing industry has a share of 12.38% in the employment generated in all Registered Factory sector engaging approximately 1.93 Million people. Unregistered food processing sector supports employment to 5.1 Million workers as per the NSSO 73rd Round report. Major sectors constituting the food processing industry in India are grains, sugar, edible oils, beverages, and dairy products.

Your Company being an Investment Company seeks opportunities in the capital market. The unpredictability in the stock market represents both opportunity as well as challenges for the Company. During F.Y. 2024–25, Indian capital markets demonstrated resilience amid global uncertainties, supported by strong domestic consumption, a stable regulatory environment, and rising retail participation. Exchanges like the BSE and NSE recorded increased trading volumes and new listings, reflecting continued investor confidence and deepening market penetration. This momentum is expected to carry forward into FY 2025–26, backed by projected GDP growth of around 6.5%, a stable interest rate environment, and policy reforms aimed at fostering transparency and ease of doing business. SEBIs regulatory initiatives, including simpli_ed IPO processes and enhanced surveillance mechanisms, are further reinforcing institutional trust. Opportunities continue to emerge in sectors such as renewable energy, infrastructure, digital finance, and manufacturing under the PLI scheme, supported by a strong pipeline of IPOs and growing retail engagement through digital trading platforms.

However, capital markets face notable challenges. Volatility in global markets, geopolitical tensions, and rising protectionism may affect foreign institutional investment flows. The rupees depreciation and persistent inflationary pressures, driven by elevated oil prices, could impact corporate profitability and sentiment. Equity markets are also navigating valuation pressures, especially in mid- and small-cap segments, which may see corrections. Regulatory tightening around derivatives, co-lending, and high-frequency trading is introducing short-term compliance adjustments, particularly for NBFCs and institutional investors.

The food processing industry is a high growth industry and the same applies for it in Indian market. The government of India has acknowledged the food processing sector as a high priority industry and is currently promoting it with various fiscal reliefs and incentives. India has one of the largest working populations in the world. With increasing disposable incomes, this segment can be regarded as the biggest consumer of processed foods in the country. There are various threats to the Company like market Competition that forces the Company to sell its product at low cost. This also led to loss to the Company. On the other hand, raw material is based on agricultural produce which is affected by natural calamities, which deteriorate the quality of the product, which is the major threat to the Company. Also external situation like Cross-border emergencies and wars also affect the business.

The Companys business performance is inherently influenced by the operational and financial health of its portfolio companies. Growth in these underlying businesses or sectors enhances the Companys prospects, while any challenges whether due to macroeconomic headwinds, market volatility, or internal disruptions within the investee entities may adversely affect returns and overall performance.

The Company is exposed to specific risks that are particular to their respective businesses in which they operate, including market risk, credit risk, liquidity risk, interest rate risk, equity risk, operational risk, currency risk, regulatory and macro-economic risks. The Company has a robust risk management framework that strives to identify, monitor and minimize risks as also identify business opportunities.

India is projected to remain the fastest-growing large economy for 2025 and 2026, reafirming its dominance in the global economic landscape. The countrys economy is expected to expand by 6.2% in 2025 and 6.3% in 2026, outpacing many of its global counterparts. In contrast, the IMF projects global economic growth to be much lower, at 2.8 % in 2025 and 3% in 2026, highlighting Indias exceptional outperformance. The IMF has also revised its growth estimates for other major global economies. Chinas GDP growth forecast for 2025 has been downgraded to 4%, down from 4.6 % in the January 2025 edition of the World Economic Outlook. Similarly, the United States is expected to see a slowdown, with its growth revised downward by 90 basis points to 1.8 per cent. Despite these revisions, Indias robust growth trajectory continues to set it apart on the global stage. Additionally, the Economist Intelligence Unit (EIU) forecasts that India will be the fastest-growing major economy from 2024 to 2028, outpacing Chinas growth. This projection underscores Indias rising economic influence and its significant role within the BRICS nations, potentially leading to their collective nominal GDP surpassing that of the G7 by the mid-2040s. However despite these positive projections, there are certain risks that could impact growth, such as geopolitical tensions and potential disruptions in global supply chains. Additionally, Chinas economic challenges, particularly in its property sector, remain a concern for the overall regional growth outlook.

Among the largest economies, India stands out with a median age of 28.8 years in 2025, the second-highest savings rate, and a government debt-to-GDP ratio projected to decline from 81.3% in 2024 to 75.8% by 2030 unlike peers where debt levels are rising. As per the IMF, Indias economy could reach $20.7 trillion (PPP) by 2030. Using average growth rates for 2028 - 2030 as projected by IMF, India may become the worlds second-largest economy in PPP terms by 2038, with a projected GDP of $34.2 trillion.

The future of NBFCs in India is promising, with opportunities for growth driven by digitization, niche specialization, and focus on underserved markets. However, navigating the evolving regulatory landscape, embracing technology responsibly, and prioritizing customer experience will be crucial for success.

The Company operates in single segment which is to invest, deal etc. in securities. The businesses of the Company are carried out by its five Wholly-owned Subsidiaries/ Subsidiaries. The first three are wholly owned subsidiaries of the Company viz: OSM Investment & Trading Company Limited; Champaran Marketing Company Limited; Hargaon Investment & Trading Company Limited and these are registered NBFCs and primarily engaged in investment activities and whereas Hargaon Properties Ltd is a step down subsidiary engaged in investment of properties. Another Subsidiary Morton Foods Limited is engaged in the Food Processing Business.

The Company delivered a strong financial performance during the financial year ended 31st March, 2025.During the financial year 2024-25, Revenue from operations stood at Rs. 604.38 lakhs as compared to Rs.23.31 lakhs in previous year. The Company also achieved a notable improvement in profitability. Profit after tax of stood at Rs.471.79 lakhs as compared to Rs.16.36 lakhs in previous year.

On consolidated basis Revenue from operations stood at Rs.4883.01 lakhs as compared to Rs.4094.90 lakhs in previous year showing a growth from the last year. Despite the increase in revenue, the loss after tax stood at Rs.1765.19 lakhs compared to previous year of Rs.1576.02 lakhs.

The Company aims to create sustainable vision to grow the business and make long-term strategic investments in various new ventures promoted by the Company and its subsidiaries.

The Disclosure with respect to details of significant changes in key financial ratios as stipulated under Regulation 34(3) read with Schedule V Clause B of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are as follows:

The Company has an adequate system of internal control implemented by the management towards achieving efficiency in operations, optimum utilization of resources and effective monitoring thereof and compliance with applicable laws. The Internal Auditors were suggested with audit plan based on the risk profile of business activities of the organization, which were approved by the Audit Committee. The adequacy of the internal control system is reviewed by the Audit Committee of the Board of Directors. The efficacy of the internal checks and control systems are verified by the Internal Auditors as well as the Statutory Auditors. The Audit Committee reviews the internal audit plan, adequacy and effectiveness of the internal control system, significant audit observations and monitors the sustainability of remedial measures. The performance of the Company is regularly viewed by the Board of Directors to ensure that it is in keeping with the overall corporate policy and in line with pre-set objectives. The Company updates its internal control systems from time to time, enabling it to monitor adherence to internal procedures and external regulatory guidelines.

Steps have been taken to inculcate a performance-oriented culture by focusing and laying more emphasis on the performance management system. It has been Companys endeavour to attract talent from the most reputed institutions to meet the requirements of various functions. The Company will intensify efforts to create an environment where everyone feels valued, respected, and empowered to contribute their unique perceptions.

Statements in this Management Discussion and Analysis describing the Companys outlook, objectives, projections, estimates and expectations may be ‘forward looking statement within the meaning of applicable laws or regulations. Actual results may differ from those expressed or implied. Important factors that could make a difference to the Companys operations include government regulations and tax-regime, economic developments within India and abroad, financial markets and other related and incidental factors. The Company assumes no responsibility in respect of forward-looking statements that may be revised or modified in future on the basis of subsequent developments, information or events. The financial statements are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 ("the Act") and comply with the Accounting Standards notified under Section 133 of the Act read with the Indian Accounting Standards Rules, 2015. The management has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the state of affairs and profit/loss for the year. The narrative on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the annual report.