Radico Khaitan Ltd Management Discussions

ECONOMY OVERVIEW Global Economy Overview

The global economy demonstrated strong resilience in CY2023, following a year of receding inflation. The resilience was reflected in steady employment and rising incomes, buoyed by favourable demand. The economy was further strengthened by increased government spending, household consumption, and labour force participation. However, economic growth in CY2023 was impacted by high borrowing costs and reduced fiscal support. Geopolitical tensions and weak productivity across the globe also posed as challenges. Notwithstanding significant interest rate hikes by central banks to curb inflation, households in major advanced economies used their substantial pandemic-era savings, contributing to an unexpected economic strength in CY2023. The global economy grew by 3.2% in CY2023 and is expected to maintain a similar growth rate in CY2024 and CY2025.

Consumer price indices have shown improvement, with inflation moderately easing. This trend is also likely to boost consumer confidence in the advanced economies. In CY2023, the advanced economies grew by 1.6%, with growth projections of 1.7% for CY2024 and 1.8% in CY2025. Emerging markets and developing economies grew by 4.3% in CY2023 and are expected to grow by 4.2% in both CY2024 and CY2025. The global economic outlook is projected to encounter a balance of risks and opportunities in the coming period. Factors such as potential price spikes from geopolitical tensions, declining inflation rates in major economies, and high government debt might lead to disruptive fiscal policies. Emphasising medium-term fiscal consolidation, tailored policy responses and enhanced multilateral cooperation will be crucial to guide the global economy towards sustainable progress.

Source: IMF World Economic Outlook, April 2024

Indian Economy Overview

India remains the fastest-growing major economy, driven by robust domestic demand and favourable policies. The Indian economy is estimated to have grown by 7.6% in FY2024, up from 7.0% in FY2023. Key drivers of this growth momentum include capital expenditure on infrastructure development, rise in private corporate investment, strong service sector performance, and improved consumer confidence. This growth momentum is expected to continue in FY2025, supported by improved goods exports, increased manufacturing productivity, and higher agricultural output.

Consumption has been subdued this year, largely due to muted agricultural growth disrupted by erratic weather patterns, which impacted output and weakened rural consumption. Despite this subdued consumption, economic activity indicators suggest underlying strength that will bode well for the economy in the medium term.

The Reserve Bank of India (RBI) has maintained the policy repo rate at 6.5% during FY2024. The central bank has also reaffirmed its goal to keep headline inflation at 4% whilst maintaining the stance of withdrawal of accommodation to ensure that inflation progressively aligns to the target at the same time supporting growth.

Despite volatility in the global macroeconomic environment, the outlook for the Indian economy remains positive. Sustained political stability, enhanced government focus on public capital expenditure, increasing private capital expenditure, growing credit demand, moderating inflation, low corporate debt levels, and deleveraged balance sheets, are all expected to contribute to the economic growth. The Indian GDP is projected to grow by 7.0% in FY2025. The governments capital expenditure spending is expected to increase to 11.1 lakh crore or 3.4% of GDP in FY2025, up from the 10 lakh crore allocated last year.

Source: MOSPI, RBI

CONSUMER SECTOR

Consumer spending growth has been erratic post- pandemic, accompanied by a shift in consumption patterns. Demand for luxury and high-end products and services is increasing more rapidly than for basic goods. As the number of middle- to high-income households with rising disposable incomes grows, this trend is expected to intensify, further boosting overall private consumer expenditure.

As per the Household Consumer Expenditure Survey in India, there has been a significant shift in the consumer behaviour among Indian households over the past two decades. This shift is also driven by the countrys large young population, urbanisation trends, and changing consumer preferences. The survey highlights that the proportion of spending on traditional products (such as food, beverages, and clothing) in the past decade has fallen, while spending on luxury and aspirational products and services categories (such as travel and entertainment) has risen. It is expected that the rising number of people with higher disposable income will create a higher demand for luxury and premium products and services.

SPIRITS INDUSTRY IN INDIA

India, with its rich cultural heritage, has a thriving spirits market that reflects the diversity and preferences of its ever-evolving consumers. Spirits in India are more than just beverages; they hold cultural significance deeply embedded in traditions and rituals. This emotional connection among Indians along with the global consumers desire to experience the ancient Indian art forms, is driving the demand for new products and experiences.

Indias spirits market has been experiencing robust growth, driven by both international and local brands. International spirits brands are increasingly investing and establishing a presence in Indias vibrant market. Simultaneously, local brands are leveraging innovation to compete effectively.

The recent expansions in the Indian single malt segment and the introduction of new spirit categories, such as gin, reflect this trend. Consumers are making more premium choices, prompting the industry to cater to this growing demand. The increasing interest in craft spirits among Indian consumers is boosting the overall craft spirits category. Investments in technological and flavour innovation, expanding production capacity, and refining techniques are driving the success of craft spirits. Local producers are carving out unique market niches, attracting consumers who appreciate premium experiences.

As per Euromonitor International, the IMFL (Indian Made Foreign Liquor) industry in India grew by 5.0% to reach 389 million 9-litre cases in CY2023. In value terms, the growth was 9.2%, indicating a strong premiumisation trend. White spirits, including vodka and gin, registered a remarkable 18.4% year-on-year growth in CY2023. Globally, white spirits account for a double-digit share of the spirits industry pie, while in India, the segment accounted for only a 3.8% share. With a supportive demographic profile, and an increasing flavour and cocktail culture, this growth trend in the white spirits industry is likely to sustain.

THE INDIAN SPIRITS INDUSTRY OUTLOOK

The growth in the Indian IMFL space is expected to be driven by a combination of positive demographics, premiumisation, a more aspirational and experimental consumer base, and an enhanced consumer shopping experience. With consumers seeking premium experiences and diverse product offerings, spirits companies are expected to adapt to changing preferences by investing in quality and innovation.

The industry is expected to navigate the dynamic landscape of the Indian market and unlock new avenues for success by embracing consumer trends. As the market evolves, Indias spirits industry is set for substantial growth and innovation.

Over the last couple of years, the spirits industry has been grappling with significant raw material inflation, leading to shrinking profitability margins. Ongoing discussions are being held between the state and the industry representatives regarding pricing. Several states have already approved price hikes, helping to mitigate cost pressures to a certain extent. This scenario is further supporting the premiumisation trend, as higher-priced products are less susceptible to the inflationary environment.

According to Euromonitor International, IMFL volumes are expected to reach 511 million cases in CY2028. During the CY2024-2028 period, IMFL sales volume is projected to grow at a CAGR of 5.6%. During the same period, the IMFL industry value is expected to grow by 11.0%. The white spirits industry is expected to perform even better, with volume growth of 10.5% and value growth of 16.8%. The emergence of cocktail culture, led by vodka and gin, is anticipated to continue driving demand.

GROWTH DRIVERS

Growing Premiumisation Trend

Over the past three years, the Indian consumer industry has seen a widening gap in growth rates, with companies targeting high-income customers outperforming those serving the broader market. This trend toward premiumisation reflects a rising demand for luxury and high-quality goods and services as Indias consumer base becomes more affluent and aspirational. This shift is also supported by positive consumer confidence metrics. The Indian spirits industry is also mirroring this premiumisation trend, with companies catering to affluent consumers experiencing increased demand for premium spirits.

Euromonitor International forecasts significant growth for blended Scotch and Single malts, with double-digit compound annual growth rates (CAGR) expected through

CY2028. With increasing recognition of Indian products, international producers are also enhancing their offerings to include India-focussed spirits such as Indian Single Malt and Indian Craft Gins. The premium spirits market is expected to become more dynamic in the future, offering opportunities for brands to refine their premium positioning and stand out amidst evolving economic conditions.

Expanding Spirits Categories

While whisky dominates Indias Total Beverage Alcohol (TBA) market, other spirits categories are also emerging as consumers gradually broaden their preferences. New categories, including white spirits, have seen significant growth, driven by a willingness to explore new flavours and increased participation from female legal drinking age consumers. This trend is being propelled by social acceptance, urbanisation, rising incomes, and product innovations.

Evolving Retail Experience

The Indian spirits industry is experiencing a positive shift due to progressive excise policy changes and an evolving retail landscape. These changes are making it easier and more appealing to buy alcohol in India. Modern stores, longer operating hours, enhanced customer experiences, strategic locations, additional services, and digital integration are driving this transformation.

Regulatory Changes Supporting Industry Growth

Navigating the Indian spirits market requires managing intricate regulations, high tariffs, and inconsistent tax rates across states. However, there are signs of progress in the regulatory landscape for the spirit industry. Regular price increases and excise rate reductions in certain states have already led to increased sales volumes, suggesting that strategic regulatory changes could further stimulate growth.

COMPANY OVERVIEW

Radico Khaitan Limited (hereafter referred to as Radico Khaitan or the Company) is one of Indias oldest and largest spirit manufacturers, with a rich history dating back to 1943. Formerly known as Rampur Distillery Company, Radico Khaitan has gradually evolved from a bulk spirits supplier and bottler for other manufacturers to become a renowned name in the IMFL industry, with a strong focus on brand development, scaling operations, and robust growth.

Entering the IMFL market in 1998 with 8PM Whisky, Radico Khaitan concentrated its first decade (1998- 2006) on building robust manufacturing capabilities and achieving a pan-India presence. During this period, the Company achieved sales volume exceeding 10 million cases. From 2006, it adopted premiumisation with the launch of Magic Moments Vodka, which quickly became Indias best-selling vodka and one of the largest in the global market. The premiumisation journey accelerated in 2016 when the Company launched its first luxury brand, Rampur Indian Single Malt Whisky. Over the past decade and a half, it has built a strong portfolio of premium products, driven by consumer demand and bolstered by about 20 new brand launches.

Radico Khaitan is known for its emphasis on innovation, research and development (R&D), and customer-centricity. It stands out as one of the few companies in India to have developed its entire brand portfolio organically by using in-house capabilities. Committed to both premiumisation and business adaptability, it focusses on backward integration efficiencies to maintain competitiveness.

The Company is also a leading supplier of branded IMFL to the Canteen Stores Department (CSD), a business segment with high entry barriers due to strict brand registration requirements. Significant strides have been made in building brand equity in overseas markets, with the Companys products exported to over 100 countries, giving it an extensive global reach.

Diverse Product Offerings

The Company has developed a well-recognised brand portfolio that spans a variety of categories and segments within the IMFL industry, including whisky, brandy, rum, gin and vodka. Furthermore, the Company has seven millionaire brands, each achieving annual sales of over a million cases.

For more details on our product portfolio and millionaire brands, please refer to pages 4 to 16 of this Annual Report.

In FY2024, the Company continued to strengthen its product portfolio and drive its premiumisation strategy with the introduction of Happiness in a Bottle Gin, Magic Moments Remix Pink Vodka, Spirit of Victory 1999 Pure Malt Whisky, and The Kohinoor Reserve Indian Dark Rum.

The Companys Prestige & Above category experienced strong growth in FY2024, with a 20.3% increase in volume sales, totalling 11.26 million cases. In line with the Companys strategic focus on premiumisation, the Prestige & Above category brands represented about 46% of IMFL sales volume and 69% of IMFL sales value in FY2024. The Magic Moments brand family achieved a significant milestone in FY2024, selling a record 6.3 million cases and exceeding 1,000 crore in sales value. This represents a 25% growth in value compared to the previous year.

Substantial Backward Integration

Radico Khaitan has seven distilleries: three in Rampur (Uttar Pradesh), one in Sitapur (Uttar Pradesh), and three in Aurangabad (Maharashtra), which is a 36% joint venture. During FY2024, the Company completed the commissioning of its 350 Kilo Litres per day (KLPD) grain ENA distillery at Sitapur. This new facility not only secures long-term Extra Neutral Alcohol (ENA) supplies but also positions it strongly to capitalise on future growth opportunities in the branded business with enhanced bottling capacities.

In FY2024, the Company expanded its production capacity to 321 million litres, a significant increase from 217 million litres in FY2023. The Companys capacity is supported by a network of 43 bottling units across the country, including 5 owned facilities, 9 operating under royalty agreements, and 29 under contract. In addition, the Company has dedicated printing units at 3 locations to support the growth of Magic Moments Vodka, ensuring consistency and high-quality.

The Companys extensive manufacturing network allows it to meet consumer demand effectively while minimising interstate taxes and transportation costs. The Company strives to enhance productivity and product quality across its manufacturing platform.

Robust Distribution Network

Radico Khaitan has built a robust sales and distribution network across India, supported by efficient supply chain management. The Company reaches over 1,00,000 retail outlets and 10,000 on-premises locations. Additionally, it has organised its 300+ personnel into four zones, each led by a regional profit centre head to streamline its operations. The Companys extensive distribution network, complemented by sophisticated and efficient systems and processes, allows it to ensure consistent product availability across various channels and regions.

PERFORMANCE OVERVIEW Standalone Performance

(Rs Crore)

Year	FY2024	FY2023	Y-o-Y Change
Gross Sales	15,483.9	12,743.9	21.5%
Net Sales	4,118.5	3,142.8	31.0%
Gross Profit	1,752.0	1,314.9	33.2%
EBITDA	507.3	358.2	41.6%
Profit Before Tax (PBT)	342.0	274.8	24.5%
Total Comprehensive Income	256.7	202.6	26.7%

Note: Above numbers are on standalone basis

Key Financial Ratios

Year		FY2023	Y-o-Y Change
Debtors Turnover (days) (on Gross Sales basis)	21	23	(6.1)%
Inventory Turnover (days) (on Gross Sales basis)	20	20	(0.6)%
Creditor Turnover (days) (on Gross Sales basis)	42	51	(18.0%)
Interest Coverage Ratio (x)	6.8	13.4	(49.5%)
Current Ratio (x)	1.71	1.70	0.9%
Debt Equity Ratio (x)	0.31	0.32	(4.2%)
EBITDA Margin (%)	12.3%	11.4%	92 bps
Total Comprehensive Income Margin (%)	6.2%	6.4%	(21) bps
Return on Average Equity (%)	11.3%	9.9%	142 bps
Return on Average Capital Employed (%)	12.5%	10.2%	237 bps

During FY2024, while the prices of certain packaging materials remained stable, the costs of grain, ENA, and glass experienced volatility. This volatility exerted significant pressure on the Companys gross margins. However, by leveraging a premium product mix and implementing price increases, the Company managed to offset the impact of rising raw material costs to a large extent. With expectations of a normal monsoon and improved crop yields, early indicators suggest a softening of grain prices. The Company believes that the peak of the input costs has passed and anticipates benefiting from favourable raw material prices in FY2025.

RISK AND MITIGATION

Economic Risk

Risk Trend:

A slowdown in global economic growth due to the ongoing geopolitical tensions may lead to a reduction in disposable consumer income and a deceleration in the IMFL industry, which could adversely affect the Companys financial performance.

Inflation Risk

Risk Trend:

Disruptions in the supply chain or limited availability of raw materials may create inflationary pressure, negatively impacting the Companys earnings.

Mitigation Strategy

The Company is well-equipped to navigate short-term macroeconomic challenges due to its strong business model and extensive premium product portfolio. It also benefits from a nationwide distribution network and a strong balance sheet.

Further, with years of experience and a long-standing presence in the industry, the Company has weathered multiple macroeconomic cycles. This proven performance underscores its capability to handle future challenges effectively.

Mitigation Strategy

The Companys robust relationships with a diverse range of suppliers enable it to manage raw material requirements competitively. Continuous monitoring of global and regional commodity prices further strengthens this capability. Additionally, the Company builds strategic inventory position based on market intelligence for key raw materials.

The shift towards a premium product portfolio has considerably mitigated the impact of price volatility on margins. Moreover, with price increases approved by several State Governments, the Company is better positioned to offset the impact of rising raw material costs. Industry-wide efforts are ongoing to push for comparable price adjustments in other states as well.

Compliance Risk

Risk Trend:

As a state-regulated sector, the Indian spirit industry is subject to varying rules and compliance requirements in each state. This leads to a complex landscape where companies face a multitude of challenges, including state- specific manufacturing duties, complex tax structures, restrictions on direct advertising, and the need for multiple licenses to produce, store, and distribute products. Any changes in state regulations or failure to comply with laws may pose significant risks to the business, potentially affecting manufacturing operations, product distribution, and overall profitability.

Mitigation Strategy

The Company is committed to maintaining the highest standards of compliance and governance. With over 80 years of experience in liquor manufacturing and more than 25 years in the IMFL business, it has developed a deep understanding of the applicable laws and regulations in the states where it operates. The Company has established a comprehensive code of business conduct, along with supporting policies to ensure effective compliance. The legal and compliance team diligently ensures strict adherence to all applicable rules and regulations.

Competition Risk

Risk Trend:

The attractive growth opportunities in the Indian liquor industry may heighten competition from both international and domestic players.

Mitigation Strategy

The Company has a broad product portfolio spanning various price points, ensuring excellent quality and value for money. It has built a substantial pan- India distribution network coupled with strong brand recognition. Additionally, the Company has a robust on-the-ground sales team that monitors market developments and swiftly adapts to evolving business needs.

Given the growth in the Indian spirits market and the scale it presents, there is ample opportunity for the Company to introduce new brands that offer a compelling value proposition to consumers.

Moreover, the high entry barriers for new players create a strong moat, providing the Company with a distinct advantage in the market.

Consumer Preference Risk

Risk Trend:

Shifts in consumer preferences toward alcoholic beverages may significantly impact demand for the Companys products.

Mitigation Strategy

The Companys commitment to innovation empowers it to proactively address emerging consumer needs. Continuous customer engagement through various online and offline platforms enables it to track shifting consumer behaviour and preferences. By closely monitoring consumption patterns, the Company ensures effective product innovation and swift adaptation to changing trends. Each new brand launch undergoes a thorough 15-18 month research process, focussing on optimal blend, packaging, market positioning, and other key factors that drive consumer acceptance.

Cyber Risk

Risk Trend:

As systems and technologies become more integral to business operations, the significance of information and cybersecurity has grown considerably. Any breach could lead to the loss of sensitive data, business disruptions, potential fines, and harm to the Companys reputation.

Mitigation Strategy

The Company has adopted a robust IT system to combat escalating cybersecurity threats, ensuring protection of sensitive data from unauthorised access and leakage.

Attrition Risk

Risk Trend:

Human capital forms a critical pillar of growth, making it essential for the Company to attract and retain top talent to drive strategic business success.

Mitigation Strategy

The Company has implemented comprehensive HR initiatives to foster a progressive culture and an engaged workforce, prioritising employee well-being, diversity, and career progression. It offers an inclusive work environment with ample opportunities for growth and learning for all employees. High employee engagement, a robust reward and recognition system, and internal career advancement opportunities contribute to the Companys high retention rate.

Climate Change Risk

Risk Trend:

The increasing focus on climate change and the regulations aimed at reducing environmental impact may potentially disrupt the Companys operations.

Mitigation Strategy

The Company places a strong emphasis on sustainability in its operations. The environmental strategy focusses on reducing the Companys carbon footprint and promoting more sustainable and eco-friendly processes and products.

HUMAN RESOURCES (HR)

Radico Khaitan fosters a culture centred on performance and employee well-being, aiming to create a conducive work environment that promotes regular, need-based training and provides equal opportunities for career advancement. Policies championing financial, social, and emotional well- being are integral to the ethos of the organisation.

Culture: A growth-oriented work culture is emphasised, with a clear focus on developing premium brands. The Companys customer-focussed approach ensures effective responses to consumer needs while encouraging a professional environment that embraces calculated risks and innovation. The HR department fosters a system-driven environment that operates smoothly, regardless of individual work styles. The management promotes employee empowerment by increasingly automating systems and processes, which enhances accountability and creates a more engaged and motivated team.

Leadership Driven by Ownership: Top executives lead with a strong sense of ownership, strengthened by employee stock options that make them stakeholders. This approach fosters high engagement with the business and reflects their confidence and commitment to the organisations success. Profitability-focussed incentive schemes motivate employees at all levels, keeping them aligned with the Companys business goals.

Future Leaders: Recognising the importance of developing a pipeline of next-generation leaders, the leadership team prioritises talent management by infusing young talent into critical roles through campus selections from the countrys top management and technical institutions. This strategy ensures that the Company remains poised for future growth.

Employee Engagement: Fostering team synergy leads to increased productivity, profitability, and retention. Performance metrics emphasise human capital, recognising the significance of engaging people beyond business objectives. In-house and outbound team-building activities, as well as programmes like "Samvad" and other initiatives, serve as effective channels for enhancing employee engagement and creating a cohesive workforce.

Physical and Mental Well-being: Healthy employees are key to higher efficiency and productivity.

To enhance overall well-being, including mental wellness, the HR team organises comprehensive wellness workshops in collaboration with renowned organisations such as the "Art of Living" and other institutions. These workshops offer yoga sessions, health camps, vaccination drives, spirituality sessions, mindfulness training, stress management programmes, and mental health support resources. Open communication and access to counselling services ensure that mental well-being is prioritised. Celebrating every success and milestone unites the team and motivates them to achieve more.

INFORMATION TECHNOLOGY (IT)

Radico Khaitan has made significant strides in its IT digitisation efforts by leveraging the cloud that covers all users within the organisation. These technologies enable the Company to reach its stakeholders more effectively, focussing on key areas such as Analytics, IT Security and SAP version upgrades. By staying at the forefront of technological advancements, the Company is committed to meeting the evolving needs of the business and delivering value to the stakeholders.

IT Security: Maintaining a secure IT environment is paramount at Radico Khaitan. The Company has implemented an IT Security Awareness programme that covers all users within the organisation.

Periodic assessments of cybersecurity vulnerabilities are conducted, and the recommendations are implemented to ensure robustness of the organisations data. This commitment to robust security measures ensures that its data and systems are well-protected against evolving cyber threats.

Strengthening the ERP and Backbone: The Company has completed the migration to a new, powerful and efficient hardware to ensure smooth business operations and prevent disruptions to day-to- day activities.

Analytics and Generative AI: The Company understands the importance of data analytics capabilities and is in the process of transforming these capabilities with the introduction of cutting- edge technology. Plans are underway to launch an enterprise-wide Data Lake service, encompassing all business aspects, to enable real-time monitoring and facilitate faster, more informed business decisions. Additionally, the integration of Generative AI is being explored to enhance analytics, providing deeper insights and more accurate predictions.

SUPPLY CHAIN MANAGEMENT

Radico Khaitans supply chain management strategy revolves around customer service, ethical sourcing, innovative sourcing strategies, and a strong regional supplier base to achieve operational excellence and sustainability. The Company has built backward integration in key commodities like ENA and PET, as well as a strong supplier network across regions to enhance competitiveness in its supply chain. It will continue to invest in building long-term relationships with business partners and in the enhanced use of technology in its supply chain.

Robust Regional Sourcing and Backward Integration: The Company has set up a new PET plant in south India and a state-of-the-art glass bottle printing plant for Magic Moments Vodka in Maharashtra. The new PET plant enables the Company to cater to more than 90% of its PET supply needs from its own facilities across India. Additionally, the glass bottle printing plant in Maharashtra will strengthen the regional base for printed glass supply, reducing costs and ensuring faster product availability on shelves. Furthermore, the new grain ENA facility in Sitapur will decrease dependency on external ENA sources.

Sustainability and Ethical Practices: The Companys procurement strategy goes beyond price and quality, also considering environmental impact, ethical sourcing, and social responsibility to ensure that the organisations values are upheld in its purchases.

Recently, the Company introduced a 100% recyclable PET hipster pack as an alternative to glass.

Supplier Relationship Management: The Company views supplier relationships as long-term partnerships rather than one-off activities, investing time and efforts to build strong business collaborations. Nurturing these relationships involve a systematic, enterprise-wide assessment of supplier strengths, performance and capabilities in relation to overall business needs. The implementation of early payment through vendor discounting mechanisms, benefiting both organisations, testifies to this approach.

Internal Collaboration: The procurement team works closely with other departments, understanding their requirements and ensuring alignment with overall business strategies and operations. Periodic analysis of procurement processes is conducted to identify gaps, areas of improvement, and cost saving opportunities. A monthly MIS and review process covers important aspects such as inventory, working capital, and the overall performance of procurement cost against the budget.

Differentiated Innovative Packaging: The Company has developed various innovative packaging solutions, such as the hipster pack, to optimise costs while differentiating from contemporary industry packaging, thereby adding value to the brand. These solutions have demonstrated great potential in the marketplace and are being extending to different brands to maximise benefits for both the top and bottom lines. Additionally, this approach will reduce pressure on depleting natural resources used in the manufacture of glass bottles.

Tracking Commodity Pricing: The Company utilises various tools to monitor and control costs. A key part of the Companys procurement strategy is to continuously deepen its understanding of global commodity trends. It effectively monitors commodity pricing trends to derive analytics that support informed procurement decisions. These efforts have yielded a better understanding of the commodity and pricing index, enhancing both the quality and timing of purchase decisions and expanding the supplier base. The Company remains committed to leveraging these practices to maintain its competitive edge.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has a comprehensive internal control mechanism with adequate policies and procedures to ensure the orderly and efficient conduct of its business. This includes adherence to the Companys policies, safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial disclosures.

The Companys internal control systems are commensurate with the nature of its business, as well as the size and complexity of its operations. The internal financial controls concerning the Financial Statements are adequate.

Internal auditors validate the effectiveness of the Companys internal controls, which management regularly re-examines. The CEO and CFO provide a certificate, included in the Corporate Governance Report, affirming the existence and effectiveness of internal controls. This certificate also includes a commitment to report and address any deficiencies to the Audit Committee.

The Company has appointed Ernst & Young LLP and SCV & Co. LLP as its joint internal auditors for FY2025, who will submit their quarterly reports to the Audit Committee. The Audit Committee oversees the financial reporting process, ensuring transparency, integrity, and quality. By maintaining a specified and delegated internal control system, the Company aims to provide accurate and timely disclosures while suggesting improvements as needed.

CAUTIONARY STATEMENT

The narrative in this Management Discussion and Analysis contains forward-looking statements including, but not limited to, statements relating to implementation of strategic initiatives, future business developments and economic performance. While these forward-looking statements indicate the Companys assessment and future expectations concerning the development of its business, numerous risks, uncertainties, and other unknown factors could cause actual results to differ materially from its 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 financial conditions of third parties dealing with the Company, legislative developments, and other key factors that could affect the Companys business and financial performance. Radico Khaitan undertakes no obligation to publicly revise any forward- looking statements to reflect future/likely events or circumstances.