Paramount Cosmetics (India) Ltd Management Discussions

Statements in this Report, particularly those which relate to Management Discussion and Analysis, describing the Companys objectives, projections, estimates, and expectations, may constitute ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied. Some important factors that could influence the Companys operations include the effects of demand & supply conditions affecting the selling prices of our products, raw material availability, and prices, future changes in government policies & regulations, tax laws, economic conditions within the country, and various other factors.

> INDUSTRY OUTLOOK

The Indian Beauty and Personal Care (BPC) industry continues to be one of the fastest-growing consumer sectors. As of FY2024, the market was valued at USD 27.77 billion, with expectations to reach USD 66.9 billion by FY2034, registering a Compound Annual Growth Rate (CAGR) of approximately 10.8%.

A notable sub-sector within this broader landscape is traditional cosmetics, which include bindi, kajal, and kumkum— products that are culturally rooted and continue to demonstrate consistent demand across both urban and rural demographics.. While these products have conventionally enjoyed widespread rural patronage, recent years have seen their resurgence among urban consumers as expressions of ethnic identity, especially during festivals, weddings, and religious ceremonies.

• Traditional cosmetics like bindi, kajal, and kumkum form a niche but resilient segment within Indias broader personal care and beauty industry, which is projected to grow at a CAGR of 10-12% over the next few years.

• These products are primarily consumed by women across urban and rural India, with bindis and Kumkum retaining strong cultural relevance, especially among married women and during festivals.

• Kajal, however, has transcended tradition and become a mainstream eye cosmetic, driving sales even among younger demographics

• Eyeliner: A rapidly growing segment, eyeliner has become a staple in daily grooming routines. With variants like liquid, gel, pencil, and felt-tip pens, it caters to diverse application styles—from precision lining to bold graphic looks.

Market Dynamics

• The traditional cosmetics category is bifurcated into cultural utility and aesthetic appeal. Bindis, once solely symbolic of marital status, now appear in designer formats with velvet textures, crystal embellishments, and reusable adhesive technologies. Kajal, historically valued for its Ayurvedic benefits, has transformed into a fashionable eye cosmetic, popular among both traditional consumers and millennials seeking smudge-proof, herbal alternatives. Kumkum, predominantly used in religious rituals, has transitioned from loose powder to convenient liquid applicators.

• The growth trajectory of these sub-segments reflects both resilience and adaptability. While the overall traditional cosmetics market is projected to maintain a steady CAGR of 3-4%, kajal leads the pack with projected growth of 8-10%, driven by its dual role as a beauty and wellness product. The rise of cruelty- free, natural, and multi-functionalofferings has further catalyzed demand.

• The Indian eyeliner market alone was valued at USD 345.4 million in 2023, and is projected to grow to USD 407.7 million by 2030, at a CAGR of 2.7%. This growth is driven by rising beauty consciousness, social media influence, and increased male grooming adoption.

Consumer Behavior & Brand Evolution

Consumer preferences are becoming increasingly nuanced. Urban customers show a strong inclination toward branded, designer, and wellness-infused products, while rural populations continue to favor affordability and familiarity. Younger consumers, especially Gen Z and millennials, are shaping trends through digital channels, where influencer culture and beauty tutorials significantly influence purchasing behavior.

> KEY BUSINESS DEVELOPMENTS TN THE COMPANY DURING THE CURRENT YEAR

Paramount Cosmetics (India) Limited has been a trusted name in the Indian traditional cosmetic segment since 1985. It has been grooming India with safe, hygienic, and best-in-quality color cosmetics like Bindis, Kum- Kum, and Kajal under the well-admired and popular brand name "SHILPA". Shilpa as a brand stands for purity. Not just in its ingredients, but in innovation as well. Formulated with skin-friendly ingredients and natural extracts, each Shilpa Product is a class apart. Shilpas wide range of products includes Sticker Bindis to Kumkums, Sindoor, and Kajal.

The financial year 2024-25 presented formidable challenges, marked by a volatile macroeconomic environment, persistent inflationary pressures, and geopolitical uncertainties that disrupted businesses and consumer markets globally. Despite these headwinds, we remain steadfast in our belief that our business model is more relevant than ever. The company has been strengthening its market presence and operational efficiency across key product categories- bindi, stickers, kum kum, and kajal. The major developments include:

1. Market Expansion

Increased distribution channels to enhance product accessibility.

2. Product Innovation

Launched new formulations for Liquid Sindoor in two categories - Matte and Shimmer, and introduced two new variants in Sticker, i.e., Cheery Red and Scarlet Red.

Expanded product variations to cater to diverse consumer preferences.

> FINANCIAL PERFORMANCE

1. Sales and Other Income

Sales of your Company for the year were Rs. 2038.01 lacs as against Rs. 2180.62 lacs in the previous year.

2. Employment Cost

The expenses of employment costs for the year were Rs. 245.76 lacs as against Rs. 229.30 lacs in the previous year.

3. Finance Cost

The interest and Finance charges for the years were Rs.159.98 lacs as against Rs. 173.63 lacs in the previous year.

4. Depreciation

The depreciation for the year was Rs. 54.99 lacs as against Rs. 67.21 lacs in the previous year.

5. Profit Before Tax

Profit before tax (PBT) stood at Rs. 6.52 lacs as against Rs. 9.88 lacs.

6. Profit/(Loss) After Tax

Profit after tax (PAT) was Rs. 3.00 lacs as against a profit of Rs. 2.14 lacs in the previous year.

> SEGMENT-WISE GROWTH OUTLOOK

Segment-Wise Growth Outlook

> OPPORTUNITIES

1. Cultural Resurgence Among Youth

There is a growing cultural resurgence among younger generations who are increasingly embracing traditional Indian elements in their fashion choices. Bindis and kumkum, once seen mainly as symbols of tradition, are now being adopted as style statements, especially during festivals, weddings, and cultural events. Social media trends, influencer endorsements, and a renewed sense of cultural identity have contributed to the popularity of ethnic accessories among Gen Z and millennials.

2. Innovation in Product Formats

Traditional products like bindis, kumkum, and kajal are being reimagined in modern, user-friendly formats. Antimicrobial bindis address hygiene concerns, liquid kumkum is now available in a variety of shades to match different outfits, and herbal kajal offers both cosmetic and therapeutic benefits. These innovations not only enhance product appeal but also meet the evolving needs of health-conscious and convenience-seeking consumers.

3. Export Potential and Global Appeal

Bindis and kumkum are gaining recognition in international markets, not just as cultural symbols but also as fashion accessories. Their rising popularity among global consumers—particularly within yoga, wellness, and noho-fashion communities—presents strong export potential. With the right branding, these products can be positioned as part of a global Indie or Ayurvedic beauty trend.

4. Digital Marketing and E-commerce Expansion

The rise of digital marketing and e-commerce has enabled traditional brands to break regional boundaries and connect with a broader, tech-savvy audience. Social media platforms, influencer collaborations, and direct-to- consumer strategies have boosted product visibility. E-commerce portals like Nykaa, Amazon, and Etsy have further expanded market access, allowing for nationwide and international distribution.

> THREATS

In the Indian cosmetic industry, several threats pose challenges to companies operating in this sector. Understanding these threats is crucial for strategic planning and risk mitigation. Here are some prominent threats:

1. Regulatory Compliance: Stringent regulations regarding product safety, labeling, and ingredient restrictions can pose challenges for Cosmetic companies.

2. Counterfeit Products: Counterfeit products are replicas of genuine products that are produced to deceive consumers into believing they are purchasing the original brand. Imitation makeup, skincare products, and perfumes that copy well-known cosmetic brands. Counterfeiting not only results in revenue loss but also tarnishes brand integrity and consumer trust.

3. Competitive Landscape: The Indian cosmetic market is highly competitive, with both domestic and international brands vying for market share. Intense competition can lead to pricing pressures, eroding profit margins, and necessitating differentiation strategies to stand out in the crowded marketplace.

4. Economic Volatility: Fluctuations in the Indian economy, including currency devaluation, inflation, and changes in consumer spending patterns, can affect purchasing power and consumer confidence, influencing demand for cosmetics and discretionary spending.

5. Digital Disruption: The rise of e-commerce and digital platforms transforms the retail landscape, altering consumer shopping behaviors and brand-consumer interactions. Cosmetic companies must adapt their marketing and distribution strategies to thrive in the digital age while mitigating risks such as cybersecurity threats and online counterfeit sales.

Addressing these threats requires a proactive approach, including investing in research and development, strengthening regulatory compliance measures, enhancing brand protection efforts, fostering innovation, diversifying supply chains, and engaging with consumers to understand and adapt to evolving preferences and market dynamics. However, these challenges also provide opportunities for manufacturers to innovate, improve operations, and build consumer trust through transparency and quality assurance.

> RISKS AND CONCERNS

? For a company, the risks and concerns align with broader cosmetic industry challenges, but also present unique aspects specific to traditional beauty products. Consumer safety remains a paramount issue, as Kum Kum is often applied directly to the forehead and bindi stickers adhere to the skin for extended periods. Ensuring that these products are free from harmful chemicals, allergens, and irritants is critical in maintaining customer trust and meeting health regulations.

? In addition to safety, regulatory compliance is a significant concern. Cosmetics and traditional adornments must adhere to stringent government standards, including certifications for non-toxic ingredients and sustainable production processes. The risk of counterfeit products further complicates market integrity, as fake versions can harm consumers and dilute brand reputation.

? Moreover, the sourcing and quality of raw materials play a vital role in ensuring authenticity and safety. Kum Kum, for instance, often contains synthetic dyes, which, if improperly formulated, may pose health risks. Ethical sourcing and rigorous quality control can mitigate these issues and enhance brand credibility.

? A lot of these products are from an unorganized sector which is not regulated in terms of sourcing. Quality check, R&D. For lower price often people uses low quality items which may have severe adverse effects.

? The business also faces competition from both established brands and emerging players. To stay relevant, continuous innovation in designs, materials, and marketing strategies is crucial. There is also an increasing consumer preference for eco-friendly packaging and natural formulations, making sustainability another pressing factor.

Finally, cultural relevance and changing consumer trends must be considered. While traditional products have a loyal customer base, younger generations may seek modern variations that blend tradition with contemporary aesthetics. By addressing these challenges with proactive risk management, research-driven development, and ethical business practices, the Company can strengthen its position and build long-term customer loyalty in the cosmetics industry.

> INTERNAL CONTROL SYSTEMS

A robust internal control system is essential to ensure operational efficiency, regulatory compliance, and financial integrity. The internal control systems encompass the following key areas:

1. Quality Control Measures - Since the products come into direct contact with the skin, stringent quality checks are made at various stages of production. This includes raw material inspection, adherence to safety standards, and final product testing to eliminate harmful substances and ensure consistency.

2. Supply Chain and Procurement Controls - To maintain product quality and cost efficiency, the company implements procedures for vendor verification, ethical sourcing of materials, and inventory management. Proper documentation and audits help in mitigating risks related to counterfeit raw materials or supply chain disruptions.

3. Financial Oversight and Fraud Prevention - Implementing accounting controls such as segregation of duties, financial reconciliations, and digital tracking systems can prevent fraud and ensure transparency in transactions. Regular financial audits and budget analysis help in mitigating risks related to financial discrepancies.

4. Product Development and Innovation Controls - To stay competitive, the company establishes a structured process for research and development (R&D). This includes controlled testing environments for new formulations, market analysis, and structured approval procedures before launching new products.

5. Workforce and Operational Security -Internal protocols are in place for employee training, ethical workplace conduct, and operational safety procedures. Standardized work instructions and automated checks can enhance productivity while minimizing human errors.

6. Customer Feedback and Market Monitoring - A dedicated system for tracking customer feedback and market trends in the company responds proactively to concerns, improves product offerings, and manages brand reputation effectively.

> HUMAN RESOURCES

The success of our company is deeply rooted in the strength and dedication of our workforce. Our Human Resources (HR) department plays a crucial role in fostering a positive, inclusive, and growth-oriented work environment. We prioritize employee well-being, professional development, and engagement by implementing structured training programs, welfare initiatives, and open communication channels. Compliance with labor laws and ethical business practices remains a key focus, ensuring fair treatment, equal opportunities, and a safe workplace for all. As we move forward, we aim to leverage technology-driven HR solutions to enhance talent acquisition, workforce efficiency, and employee satisfaction, reinforcing our commitment to building a

motivated and skilled team that drives our companys continued success.

The Human Resources department bridges the gap between the management and employees in the Company. Additionally, the fact that the company focuses on the betterment of its employees is commendable. Employee development and well-being contribute not only to individual growth but also to overall company success and morale. With 63 employees as of March 31^st 2025, its clear that our company is of a moderate size, where each employees contributions can make a significant impact.

> CONCLUSION

Despite facing financial challenges in the fiscal year 2024-25, Paramount Cosmetics India Limited remains committed to resilience and strategic growth. The company acknowledges the difficulties encountered, including market fluctuations and operational constraints, which contributed to the reported losses. However, management is actively implementing measures to optimize costs, enhance product offerings, and strengthen market presence. With a clear focus on innovation and efficiency, the company is confident in its ability to navigate future challenges and restore profitability. Paramount Cosmetics India Limited remains dedicated to delivering value to stakeholders and positioning itself for sustainable success in the coming years.