Radico Khaitan Ltd Management Discussions.

Company Overview

Radico Khaitan Limited ("Radico Khaitan" or the Company) is among the oldest and one of the largest manufacturers of Indian Made Foreign Liquor ("IMFL") in India. Earlier known as Rampur Distillery Company, Radico Khaitan commenced its operations in 1943 and over the years emerged as a major bulk spirits supplier and bottler to other spirit manufacturers.

Driven by the vision of the promoters, in 1997 the Company started its own brands with the launch of 8PM Whisky. During the first decade (i.e. 1997-2006), the Company focused its efforts on building a strong manufacturing platform, developing a robust pan India distribution network and achieved sales volume of over 10 Million cases. The next decade (i.e. 2006 onwards) was the era of premiumization that started with the launch of Magic Moments vodka, which went on to become the largest selling vodka in India and one of the largest globally. During this period, Radico Khaitan achieved premium sales volume of over 7 Million cases.

In the last ten years, Radico Khaitan has been able to successfully expand its premium brand portfolio. The Company has launched twelve new brands over the last decade of which eleven are in the premium category. Radico Khaitan is one of the few companies in India to have developed its entire brand portfolio with inhouse capabilities. This is a true testament to the Companys focus on innovation, R&D strength and understanding of customer preferences.

The Company has three distilleries in Rampur (Uttar Pradesh) and two in joint venture with RNV in Aurangabad (Maharashtra) in which Radico Khaitan owns 36% equity. The Company has a total capacity of over 157 Million litres and operates 33 bottling units spread across the country.

The Companys brand portfolio across the IMFL categories of Whisky, Brandy, Rum and White Spirits includes Magic Moments and Magic Moments Verve Vodka, Morpheus and Morpheus Blue Brandy, 8PM and 8PM Premium Black Whisky, 1965 The Spirit of Victory Rum, Rampur Indian Single Malt Whisky, Jaisalmer Indian Craft Gin, Contessa Rum, Old Admiral Brandy, After Dark Whisky, Pluton Bay Rum and Regal Talon Whisky. Currently, Radico Khaitan has four Millionaire brands which are 8PM Whisky, Contessa Rum, Old Admiral Brandy and Magic Moments Vodka. In FY2020, 8 PM family of brands crossed sales volumes of 10 Million cases and two of the Companys brands, 8 PM Premium Black Whisky and Morpheus Brandy, are approaching the milestone of annual sales of a million case in the near to mid-term.

Radico Khaitan is also one of the largest providers of branded IMFL to the Canteen Stores Department (CSD), which has significant business barriers to entry. The Company has been successfully building its brand equity in international markets and currently exports its products to over 85 countries. Particularly, after the launch of luxury products such as Rampur Indian Single Malt and Jaisalmer Indian Craft Gin, Radico Khaitan has been able to establish a niche position for itself in the global spirits market.

Macroeconomic Overview

Global Economy

During the first quarter of CY2020, an already slowing economic activity was severely accentuated by the outspread of the COVID-19. The pandemic has spread at an alarming rate, infecting millions of lives across the globe and bringing economic activity to a near standstill as countries imposed stringent restrictions to contain the spread of the virus. Necessary measures to reduce the contagion and protect lives will take a short-term toll on the economic activity but should also be considered as an important investment in long-term human and economic health.

Despite the extraordinary efforts of the governments to counter the downturn with policy support, global GDP is expected to contract in CY2020. The deep recession triggered by the pandemic is likely to have a longer term impact through lower investment, an erosion of human capital through loss of employment and displacement, and weakening of global trade and supply chain linkages. IMF projects a partial recovery for CY2021, with stronger growth rates, but the level of GDP is likely to remain below the pre-COVID period. There is still a high degree of uncertainty about the strength of the rebound. The evolution of the pandemic, the containment efforts, the development and the availability of vaccines, the macroeconomic fallout, its impact on financial and commodity markets, is all unclear.

Notwithstanding the difficult circumstances, there are reasons for optimism as well. After the strong containment measures including lockdowns and social distancing practices, the number of new cases has come down in countries which had major outbreaks. The unprecedented pace of work on treatments and vaccines also promises hope. The swift and substantial economic policy actions taken in many countries will help protect people and firms, thereby saving the economy from even more severe pressure and create the backdrop for a smooth recovery.

Policies to rebuild both in the short and longterm will comprise strengthening of health services and putting in place targeted stimulus measures to drive growth. This will include support for the private sector and direct benefit transfers. During the mitigation period, countries are likely to focus on sustaining economic activity with support for households, firms and essential services.

Indian Economy

Even before the breakout of COVID-19 in March 2020, the economic environment in FY2020 was marred by slow economic activity and liquidity crunch. This is reflected in the subdued demand, weak consumer sentiment and high rate of unemployment. During the year, Indian government has undertaken various policy measures to arrest the slowdown and boost the economy including the reduction in corporate tax rate, direct benefit transfer and increased budgetary allocations to key sectors such as infrastructure, agriculture and MSMEs. Furthermore, the Reserve Bank of IndiaRs.s decision on cutting repo rate by 185 bps on a cumulative basis during FY2020 and another 40 basis points in May 2020 shall support the aggregate demand and private investment as well as ease liquidity given the COVID-19 situation. In particular, the reduction in corporate tax rate is expected to provide a significant impetus to the industry. It makes India much more competitive globally and should accelerate investments in the economy.

In Q4 FY2020, real GDP growth of 3.1% was the lowest in over 6 years. Outbreak of COVID-19 in the fourth quarter posed fresh challenges in an already difficult economic environment. To contain the outspread of the virus, a nationwide lock down was announced from 25th March which resulted in stalling economic activity for 40 days and impacted consumption as well as demand and investment. Significant reduction in urban consumption could lead to a steep fall in the demand of non-essential goods.

Weak domestic consumption and consumer sentiment will result in firms delaying their capex, which will in turn put additional pressure on growth. However, the reverse migration of workers is likely to result in increase in rural income and consumption in the near term. Low oil prices are likely to provide a temporary initial support to growth once restrictions to economic activity are lifted. The falling oil prices may improve the countryRs.s twin deficit (fiscal and current account) and give some headroom to the government.

The severe disruption on demand caused by the pandemic has created a large cash flow gap for the economy. The severity of the impact is contingent on the level of indebtedness of individual firms and their working capital requirements. As the Indian economy attempts to find a balance between steps taken to mitigate the health risk and economic risks, immediate measures need to be undertaken to prevent liquidity collapse and intensifying health interventions. Given the evolving situation and uncertainty, it is difficult to assess the exact impact of COVID-19 on the economy.

Industry Overview

Consumer Sector

India represents one of the largest consumer markets globally with significant growth opportunities due to its low current per capita consumption. One of the key reasons for this growth is also the expansion of the high- middle class income groups and decline in the number of households below the poverty line. Given the large domestic consumption propensity, the economy is relatively resilient to the external disruptions and down cycles of public investments. India has a young working population which will continue to drive both income and consumption in the long run. With the access to internet and mobility, this young population is well informed and is aspirational. This supports the case for a strong consumption growth in India and presents significant opportunities to consumer product companies like Radico Khaitan.

FY2020 can be characterised by global macroeconomic volatility and uncertainty. Last year also experienced weather disruptions in the form of late onset of monsoon in certain parts of the country, delayed post-monsoon showers in other parts and a delayed winter. Global trade dynamics and volatile commodity cycles continue to increase the uncertainty further. The economic impact of COVID-19 is trickling in on the backdrop of an already challenging business environment. Consumer markets decelerated last year with rural markets declining at a sharper rate than urban markets. However, the trends were dissimilar across categories with food & beverage showing more resilience. Consumers are likely to hold back on discretionary spends in the coming months, with focus on health and hygiene leading to future behaviour shifts.

Going forward technology will take a centre stage for providing convenience and enhanced experiences to consumers.

Spirits Industry in India

After a strong run in FY2019, spirits industry grew at a much slower pace during FY2020 due to the general economic slowdown, increase in taxes and duties, flooding in several states and general elections in the first quarter. There was an overall slowdown in consumption led by consumers cutting down on discretionary spends. A significantly higher raw material pricing scenario deteriorated industry margins and further dampened business sentiment. Due to the governments increased focus on ethanol blending, ENA (extra neutral alcohol) prices have been under pressure during the year. Government is targeting to increase the amount of ethanol in gasoline to 20% in a decade from 6% currently to reduce its dependence on oil imports.

According to Euromonitor International, during CY2019 overall IMFL volumes increased by 4.2% to 335 Million cases of 9 litres each. Traditionally, brown spirits which include Whisky, Brandy and Dark Rum, have been the major contributors (96.4%) towards overall IMFL sales volume. During CY2019, whisky constituted the largest segment with 63.9% of the sales volumes and 75.0% of the value. Whisky industry expanded by 5.4% during the year, both in value and volume terms. White Spirits such as vodka and gin account for 3.6% of the total IMFL volumes and 6.2% of the value. The industryRs.s focus on premium brands has enabled manufacturers to identify relatively less price sensitive consumers that ultimately drive value growth. The young and aspirational working population forms the core of this segment.

Over the past five years, where the overall vodka category has registered a compounded growth of 4.1%, super-premium and premium vodka volumes have increased at 7.8% and 5.1%, respectively.

Flavored vodka continues to gain popularity and market share. It now constitutes about a third of the overall vodka industry and has grown at a rate of 6.8% over CY2014-2019. During CY2019, premium and super premium category vodka accounted for about 67% of the total vodka volumes compared with around 60% five years ago. This trend is expected to continue and the share of premium category vodka is anticipated to increase further. Overall vodka industry volume is expected to grow by 6.4% and value by 8.0% during CY2020-2024 period. Flavored vodka volume accounts for more than half of the overall vodka sales for Radico Khaitan. The Company is extremely well positioned with the market leading share in this segment with its Magic Moments brand.

While Rum as a category registered a meager 0.3% growth in volumes over CY2014-2019, premium and super premium category rum increased by 5.4% and 1.2%, respectively over

The Indian Spirits Industry Outlook

The nationwide lock down to contain the outbreak of COVID-19 resulted in loss of sales during the last week of the financial year. This lock down was eased with the resumption of liquor sales only from May 4, 2020 onwards which saw consumers rushing to the liquor stores in large numbers disregarding social distancing norms. State governments undertook various measures to control the situation

the same period. To capitalize on this premium growth trend, Radico Khaitan has two brands positioned in the premium rum segment - Pluton Bay and 1965 The Spirit of Victory.

including restriction on shop opening timings and introduction of e-tokens. Post reopening, to cover the loss of revenues, many states increased duties and taxes in the range of 10% to 75%. While a nominal increase in duties may not have a significant impact on industry volumes, exorbitant hikes in duties, e.g. 70-75% in certain states, is likely to impact industry volumes for those states.

Current lock down of restaurants and bars, and change in eating out habits is expected to have a short to medium term impact on the on-premise industry volumes. From putting together campaigns to sharing DIY cocktail recipes on digital platforms, liquor brands are doing all that is possible to fight against this pandemic. To counter the impact, many states have allowed selling of liquor from restaurants, bars and hotels for off-premise consumption.

Digital marketing and social media will play an even more important role on how brands are targeting their consumers going forward.

In context of the COVID-19 pandemic and to make-up for the loss of sales with consumers refraining from going for liquor purchase, many state governments have now allowed home delivery of liquor. Home delivery is made by retailers directly and also through agencies like food aggregators and standard technology platforms. In long run, this may help in increasing industry revenues as many consumers, particularly women, are not comfortable going out to buy liquor from shops.

According to Euromonitor International, IMFL volume is expected to decline by (15.3)% in CY2020 to reach 284 Million cases. However, during the CY2020-2024 period, IMFL sales volume is expected to recover sharply and grow at a CAGR of 5.9%. During the same period IMFL industry value is expected to grow by 5.7%. The vodka industry is expected to perform better during the same period with volume growth of 6.4% and value growth of 8.0%.

Although in the short term the spirits industry has faced significant challenges, the longterm dynamics of the industry remain intact. There are a number of factors that make India one of the top markets for global spirits companies. These include growing disposable incomes particularly with the younger Indian, expansion of the middle-class, increasing rural consumption and dispersed urbanization, greater acceptance of social drinking and a higher proportion of the young population entering the drinking age. India has a young demographic profile and over 15 Million people are expected enter the drinking age every year which represents significant growth opportunities for the industry in the long term.

The youth segment is expected to redefine consumption growth given their access and exposure to mobiles and the internet. This young consumer group is ready to experiment but is focused on the customer experience offered by a product, in particular its brand, design and aspirational value. They are not only increasing in number but will also become more affluent with time. As a group, they are a high priority target market for the leading spirits manufacturers, who are particularly focused on effective online marketing strategies and lifestyle-oriented communication. The upper-middle class and high-income group of consumers are also focused on upgrading to branded or higher priced offerings, or adding new products or services to their consumption routine.

Business Strategy

Over the years, Radico Khaitan has evolved from being just a distiller of spirits for others to a leading IMFL company in India with a highly reputable brand portfolio. With a deep understanding of consumer preferences, the Company is committed to driving innovation across brand categories and operations. Radico Khaitan continues to selectively launch new products in the premium category, enhance operating procedures and adopt various go-to- market strategies based on complex and rapidly evolving distribution channels. The Companys objective has been to drive growth that is led by premium products and is profitable, sustainable and responsible. In context of the current crisis, the Company has adopted a deliberate and prudent approach which is not very different from our long term strategy.

Continue to Strengthen the Premium Brand Portfolio

Radico Khaitan continues to work on making its core brands more aspirational and driving premiumisation by impactful innovations and understanding the needs of consumers.

The Company continues to engage with its consumers through various online and offline platforms to gain their behaviour insights. This enables Radico Khaitan to track consumption patterns and changing preferences which drives product innovation. In depth understanding of the ever-evolving consumer preferences and a robust R&D pipeline has enabled the Company to launch new products as well as variants of existing products. The longstanding strategy of continuous innovation and value creation has also helped Radico Khaitan sustain its leadership position across key product categories.

Investment in innovation has enabled the Company to grow its market share for existing products while at the same time capturing new categories (Rampur Indian Single Malt whisky and Jaisalmer Indian Craft gin) and new product segments (Magic Moments Electra ready to drink). Furthermore, it has helped in bridging portfolio gaps (8PM Premium Black whisky) and providing long-lasting customer experiences. It has also enabled the Company to offer choices for its existing loyal consumers who are looking to upgrade (Magic Moments Verve vodka and Morpheus Blue brandy). Radico KhaitanRs.s wide portfolio across various categories offers its consumers a choice for all occasions and provides an edge over competing brands.

Enhance Focus on Digital Marketing

Over the last few years, Radico Khaitan has been increasing its focus on digital and social media initiatives to improve consumer engagement and build data analytics capabilities for faster and efficient decision making across the value chain. It has become increasingly important today to create a strong digital footprint to enhance visibility and stay relevant. The Company has expanded its presence on the digital platforms through social media promotions and has enhanced brand visibility. Radico Khaitan has been promoting its brands through targeted digital media campaigns to connect with the millennial and strengthen its brand recall.

All of the Companys leading brands such as Rampur Indian Single Malt and Jaisalmer Indian Craft Gin have their own microsites therefore enabling online consumer experience. Other core brands such as Magic Moments and

8PM Premium Black have significant online presence through dedicated social media pages. Digital marketing and consumer engagement technologies enable the Company to interface with its potential consumers based on their choices and preferences. This enables Radico Khaitan to make its marketing efforts more targeted and efficient.

Leaner Operations and Cost Structure

Radico Khaitan is taking a conscious effort towards the review of each and every fixed cost line item. Particularly in context of the COVID-19 scenario, this will enable the Company to further optimize costs and make operations much leaner. ENA and packaging material form a major portion of the variable costs. Radico KhaitanRs.s significant distillation capacity of 157 Million litres makes the Company selfdependent for its ENA requirements to a large extent and also provides a cushion against volatility in the ENA prices. The Company has a capacity to store 3 monthsRs. equivalent of its molasses requirements. This insulates the Company against short term fluctuations in molasses prices. Radico Khaitan has also taken steps to optimize variable cost structure which includes rationalisation of the bottle supplies and diversification of its supplier base thereby limiting the net cost impact. The Company has undertaken a comprehensive exercise to review further areas of cost optimisation which will help in mitigating raw material price pressure. This includes weight optimisation of glass bottles and reuse of market bottles in the regular category products.

Digital Transformation at Workplace

Sudden emergence of COVID-19 as a global health crisis had forced companies to make digital transformation a strategic focus. At the beginning of the lockdown, everyone struggled with the complexities of enabling remote access infrastructures on short notice. This made us realize that simplifying digital platform will drive rapid progress. One of the ways to achieve this is by identifying critical services and functions to adopt a modular approach to enable business continuity. Radico Khaitan is leveraging vital technology components, to drive transformation in the work environment and support the workforce. The Company is driving enterprise-wide collaboration over a single platform and utilizing the power of machine learning to automate business- as-usual tasks. Strong technology core is not limited to enhancing the remote work environment. It includes leveraging unified data accessibility and AI-driven tools to implement intelligent business systems. This will enable real-time, consensus-driven decisions that will go a very long way in building an adaptive and agile organization.

Opportunities

Economic Growth:

The Indian economy has grown at a strong pace in the recent years, outperforming most of the emerging markets to become one of the fastest growing major economies in the world. Although, FY2020 has been impacted by the global slowdown and FY2021 looks challenging due to the pandemic, IMF projects a partial recovery for FY2021, with stronger growth rates. In the longer term, India is bound to be an important contributor to the global economic growth.

Favourable Demographics:

India has a young demographic profile and over 15 Million people are expected enter the drinking age every year which represents significant growth opportunities for the industry. Furthermore, by 2030, India is expected to add about 140 Million middle- income and 21 Million high-income households, overall nearly doubling the total share of these segments to 51%.

Growth of Rural Consumption and Urbanisation:

Rural consumption is expected to grow faster than the urban India with growing incomes and greater internet penetration which is expected to drive the consumption growth in India further. Furthermore, reverse migration of labours after the outbreak of COVID-19, will lead to higher rural consumption.

Changing Consumer Preferences:

Rising affluence is the biggest driver of increasing consumption. Additionally, consumer behaviour and spending patterns are shifting as disposable incomes rise and Indian society evolves with a preference for lifestyle and aspirational brands.

Increased Alcohol Accessibility and Availability:

There has been an increase in the variety of alcoholic beverages and brands with most of them easily available in government licensed outlets, government shops, private licensed retail chains, restaurants, pubs and bars. The social acceptability of alcohol consumption has improved in India. Exposure to lifestyle in advanced economies has changed the consumption patterns among the youth particularly women. Furthermore, sale of alcohol was allowed through online channel which is also likely to enhance accessibility for many consumers, particularly women, who are not comfortable buying liquor from shops.

Improved Operating Environment:

The importance of the liquor industry to the stateRs.s exchequer cannot be understated. A significantly improved operating environment led by state-wide price increases and favourable policy changes resulted in this robust industry performance. During the last few months, Radico Khaitan received price increases in a couple of key liquor consuming states. The Company continues to focus on achieving price increases in various other regional markets in which it operates. Any further price increases achieved will help improve the revenues as well as profitability.

Regional Diversification:

The Company has a strong manufacturing and wide distribution presence across the country.

Its strategically located manufacturing facilities and distribution centres at various locations provide easy access to key markets. Apart from a nationwide presence, strategic location also helps to avoid the high taxes levied on interstate movement of finished and in-process liquor.

International Business

Over the years, the Company has made investments in building brand equity in international markets and has been successful in creating a large and loyal global consumer base. Radico KhaitanRs.s Rampur Indian Single Malt whisky and Jaisalmer Indian Craft gin were launched keeping in mind the global audience and have received strong traction from consumers since their launch. Today, the Company has become a truly global player and its brands are available in over 85 countries worldwide. In FY2020, export accounted for 5% of the total Net sales. Radico KhaitanRs.s products have gained strong foothold across continents and channels. Whether developed markets such as USA, Canada, Europe and Australia or developing economies in Asia Pacific, Africa and Middle East, the Companys brands are on growth trajectory. Travel Retail has been the focus channel and Rampur Indian Single Malt whisky and Jaisalmer Indian Craft gin have already made their mark at the Dubai Duty Free as well as other travel retail destinations in the Indian subcontinent. Jaisalmer Indian Craft gin is listed with Heinemann and available at airport duty free shops across Europe.

Travel restrictions imposed due to COVID-19 is expected to have a short term impact on the travel retail and exports segment.

Environment Friendly Initiatives at Rampur Plant Radico Khaitan has adopted the strategy of reduce, recycle and reuse with the objective to recover clean and green energy which is utilized in boiler as fuel and power generation through back pressure turbine and biogas gensets without affecting water, air and environment quality. The Company has made investment for technology upgrade at the Rampur plant which has resulted in the plant being more efficient and environment friendly.

The Company has installed and commissioned integrated evaporators in the grain spirits plant, which converts the entire thin slop into wet cakes that can be sold as cattle fodder. This has helped in bringing down the effluent discharge from grain plant to zero. Radico Khaitan has also installed and commissioned integrated evaporators in the molasses distillation plant resulting in reduction of spent wash generation. After the RSW evaporator, effluent is passed through the RO plant and BMSW evaporator plant for further treatment after which only about 25% of the total effluent is left for biocomposting. Radico Khaitan has increased the bio-composting area by 7 acres.

Radico Khaitan has installed a condensate polishing unit (CPU) in March 2019. Using this technology, the Company is able to reduce the fresh water consumption by about 70% through recycling of steam condensate to boilers, using MEE condensate for dilution of molasses and recycling RO permeate through CPU for cooling towers and fermentation.

A CPU helps reclaiming waste water and consequently reduces the consumption of fresh water and saves natural resource. This technology plant has been adopted from Paques, a French biological waste water and gas treatment company. It is one of the latest technologies in the world and the very first installation in India.

As per the Central Pollution Control Board guidelines, distilleries are required to achieve 60% effluent volume reduction with solid concentration of molasses and reduce spent wash up to 30% through MEE/RO or both. Radico Khaitan has achieved 75% reduction in effluent volume. Furthermore, Radico Khaitan is consuming 8 litre of water for production of one litre of alcohol compared to the industry average of 10-15 litres of water per litre of alcohol.

Supply Chain Management

Radico KhaitanRs.s supply chain management strategy is centred around customer service, cost efficiency and operational excellence.

Radico Khaitan has 33 bottling units spanning across the entire country, of which 5 are owned and 28 are contract bottling units.

These widespread manufacturing locations, state level different taxation laws coupled with consumers spread across the country requires it to maintain a comprehensive supply and distribution platform.

The Company has put in place a robust distribution system that enables the Company to ensure availability of products across channels and geographies. Radico Khaitan has also evolved its go-to-market strategies to keep pace with the changing dynamics of the market. In addition to a strong sales and distribution network, the Company leverages information technology and advanced demand forecasting to ensure timely delivery of its products to the customers.

Radico Khaitan remains focused on high productivity levels and product excellence across its manufacturing platform. The Company continues to introduce best practices to become more agile such as Demand-Driven Supply Chain, Total Productivity Management and Six-Sigma.

The Companys products are sold through over 75,000 retail and 8,000 on-premise outlets. Apart from wholesalers, a total of around 300 employees divided into four zones, each headed by a regional profit centre head, ensure an adequate on-the-ground sales and distribution presence across the country. Radico Khaitan continues to strive to build flexibility across the supply chain to ensure reliable volume deliveries at the right place in a timely and cost- effective manner.

Internal Control Systems & Adequacy

The Companies Act, 2013 emphasizes the need for an effective internal financial control system in a company which should be adequate and shall operate effectively. Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014 requires the information regarding adequacy of internal financial controls with reference to the financial statements to be disclosed in the DirectorRs.s report.

Radico Khaitan has an elaborate internal control system commensurate to the size of the Company, nature of its business and complexity of its operations. Business risk assessment procedures have been set in place for selfassessment of business risks, operating controls and compliance with corporate policies. There is an ongoing process to track the evolution of risks and delivery of mitigating action plans.

This system continuously monitors compliance to internal processes across the operations to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposition, that transactions are authorised, recorded and reported correctly and that operations are conducted in an efficient and cost-effective manner. Standard operating procedures manuals have been established in all functional areas which are updated regularly. The system includes internal controls over financial reporting, which ensures the integrity of financial statements of the Company and eliminates the possibility of frauds.

The internal control system aims to make sure that the business operations function efficiently and applicable laws, rules, regulations and policies of the Company are followed. The internal audit function periodically performs audit of various processes and activities. The Audit Committee reviews the effectiveness of the internal control system, and also invites Directors and senior management personnel to provide periodic updates on operational effectiveness and controls. A CEO and CFO Certificate, forming part of the Corporate Governance Report, confirms the existence and effectiveness of internal controls and reiterates their responsibilities to report deficiencies to the Audit Committee and rectify the same. The Company has appointed Grant Thornton as their internal auditors, which in turn submits quarterly reports to the Audit Committee.

Information Technology (IT)

Radico Khaitan focuses on leveraging technology and data it captures for the efficient management of its business operations, better customer experience, enhancing the supply chain, and making the sourcing and supply forecasts more accurate. Its efficient systems, stable infrastructure, secured landscape and support mechanism add to the Companys economic value and competitive positioning.

The Company regularly monitors the IT system and infrastructure which is useful and relevant to its business and which supports shareholder value through growth, innovation, simplification and efficiency. Radico Khaitan remains committed to ensuring an effective internal IT control environment that provides assurance of efficient operations, security of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, as well as the timely preparation of reliable financial information.

For a consumer products company like Radico Khaitan, IT also plays the role of a key enabler to create enriching consumer experience through the provision of insights to consumer preferences. To this end, organisation wide reports, analytics and dash boards are made available to support real time and effective decision making process.

At Radico Khaitan, IT is managed through a robust governance process that covers value delivery, cost optimisation, technology management, support and education. The IT system in the Company forms the backbone for carrying out all the business operations, communication and collaboration, more so in the post-COVID era. It also provides information for effective decision making, monitoring and management control. IT risk management is addressed by covering all aspects of IT security and business continuity planning.

Human Resource (HR) Management

Radico Khaitan believes that the growth of a company is largely dependent on its ability to stay ahead of the curve through constant innovation, know its consumerRs.s preferences and deliver superior consumer experience. Across all this, human capital remains at the core. Therefore, Radico Khaitan has developed a culture of continuous learning, innovation and collaboration across the organisation.

Radico Khaitan considers people and products as its biggest assets. The Companys HR agenda is focused on progressive human resource management policies, creating an inclusive work culture, building a robust and diverse talent pipeline and driving greater employee engagement. The human resource department is focused on developing, nurturing and professionally growing the employees to achieve their true potential. The Company strongly believes that great brands are built by motivated and inspired employees who can enable the building of a customer-focused, competitively-superior, performance-driven and future-ready organisation.

The Company follows an open-door policy with its senior management being approachable. Radico Khaitan focused on building leadership capability and recognising line managers who provide a flexible and respectful work environment for their teams. All employees have well defined key performance indicators (KPIs), which are aligned to the organizational goals and form the basis of performance evaluation. With clearly defined goals, outcomes-based assessment and even sharper alignment of performance and rewards,

Radico Khaitan has further strengthened its performance management system and its culture of accountability.

There are no financial or commercial transactions that have resulted in a potential conflict of interest between senior management and the Company. During the fiscal year there has been no loss of production at any of the Companys manufacturing facilities due to industrial unrest.

Cautionary Statement

Statements in this Management Discussion and Analysis contains "forward looking statements" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Radico KhaitanRs.s future business developments and economic performance. While these forward-looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Radico Khaitan undertakes no obligation to publicly revise any forward-looking statements to reflect future / likely events or circumstances.