Sampre Nutritions Ltd Management Discussions

This Management Discussion and Analysis report provides an in-depth review of Sampre Nutritions Limiteds ("the Company") performance, strategic initiatives, and market positioning for the fiscal year 2023-24. This report addresses key aspects of our operating environment, including the prevailing macroeconomic conditions, industry dynamics, and business performance metrics.

State of the Economy 2024-25

Indias GDP expanded by 6.5% in financial year 2024-25, driven by private consumption, government capex (+17.4% YoY) and services growth. Inflation moderated to an average of 4.5%, hitting a low of 2.8% in May 2025. However, global challenges including record-high commodity prices and tariff escalations weighed on external trade. Despite this, India attracted USD 71 billion in FDI inflows, maintaining its position as the fastest-growing major economy.

Macroeconomic Outlook

Growth is projected at 6.3-6.5% in financial year 2025-26, supported by strong domestic demand and a neutral monetary policy stance with the repo rate at 5.50%. Inflation is expected to remain within 3-4%, aided by supply-side easing. Risks persist from U.S. tariff actions of up to 50% on Indian exports, volatile crude, and commodity price shocks. Yet, structural strengths, i.e., demographics, digitalisation, and reformsare expected to underpin resilience.

Confectionery Industry Overview

The Indian confectionery sector, valued at INR 379 billion in 2024, is projected to grow at 5.2% CAGR. Chocolate contributed USD 2.9 billion, expanding at ~7% CAGR, while sugar confectionery and gum segments catered to volume growth. Global majors like Mondelez (=60% chocolate share) and Perfetti (= 25% sugar/gum) dominate. Export-facing units faced indirect pressures from tariff-linked supply chain costs, though domestic demand remained the primary driver.

Key Industry Trends

Premium chocolates and gifting packs grew 27% during festive seasons, while low unit packs at INR 1 to INR 10 remained resilient. Quick commerce deliveries rose over 150% YoY, becoming a leading impulse channel. Rising cocoa costs (crossing USD 12.000/MT) and tariff-induced cost pass-throughs prompted 5 12% price hikes. Shrinkflation, flavour innovations, and co branded launches helped mitigate volume risks.

Emerging Trends

Health-conscious consumers boosted demand for sugar-free and functional confectionery, with the segment valued at USD 72 million in 2024. Compound chocolates and hybrid products gained share as cost-effective substitutes amid cocoa and trade-related input cost surges. Digital D2C contributed 8-10% of sales for key players. Seasonal and limited-edition offerings aligned with local festivals captured premium margins, offsetting tariff-related cost headwinds.

Key Market Opportunities

Premium chocolate is expected to grow at 7-8% CAGR, driven by urban gifting and festive demand. Expanding into tier-2/3 cities which contribute nearly 45% of FMCG growth, they offer significant headroom through affordable SKUs. Quick-commerce, projected at USD 5 billion GMV by 2026, is an emerging high-velocity channel. Functional and fortified confectionery remains an attractive adjacency. At the same time, tariff actions, particularly from the U.S., pose a medium-term risk for export-linked supply chains.

Market Challenges and Risks

Input volatility remains a key concern, with cocoa prices rising by more than 140% year on year in 2025 and sugar availability impacted by domestic export controls. Tariff-related uncertainties and higher freight costs risk inflating operating expenses. Persistent inflation and shrinkflation practices may impact consumer trust. Regulatory changes such as front-of-pack labelling and restrictions on marketing high- sugar products near schools could affect product strategy. Competition from both multinational majors and agile domestic players continues to add pricing and promotional pressures.

Impact of Tariffs

Tariff measures introduced by the United States in 2025, with rates of up to 50% on selected Indian exports, created external pressures on Indias trade environment. These measures are estimated to have reduced GDP growth potential by about 50 to 60 basis points. For the confectionery sector, tariffs indirectly raised input and logistics costs, particularly for export-linked supply chains. Companies will need to diversify sourcing, adopt cost-optimisation strategies, and explore alternative markets to mitigate long-term tariff risks.

The Company continued to strengthen its position in the sugar confectionery and chocolate segments, with steady domestic demand across value packs and growth in premium ranges. Quick-commerce contributed significantly to volumes, while exports faced indirect cost pressures from tariffs and input prices. Despite inflationary headwinds, product diversification into centre filled candies and gifting packs sustained category relevance.

The Company expects demand momentum to remain resilient in financial year 2025-26, supported by festive consumption, quick-commerce penetration and growing acceptance of premium and health- oriented offerings. Ongoing capacity utilisation and brand partnerships will aid topline growth. Continued focus on efficiency and input cost management will be critical to protect margins amidst volatile global commodity prices.

The key risks include volatility in raw material prices, particularly cocoa which rose more than 140% year on year, and regulatory changes related to food labelling and health standards. Tariff actions in global markets pose challenges for export-linked supply chains. Inflationary trends and shrinkflation may impact consumer trust at entry price points. Competitive intensity in the confectionery sector remains high.

The Company has established a robust internal control framework covering financial reporting, operational efficiency and compliance with applicable laws. Controls are regularly reviewed by the Audit Committee and statutory auditors to ensure adequacy. Technology led monitoring, segregation of duties and periodic testing have further strengthened the effectiveness of controls during financial year2024 25.

On a consolidated basis, the Company reported stable revenues of approximately INR 25.1 crore in financial year 2024-25, broadly in line with the previous year. Q4 revenues grew to INR 7.8 crore compared to INR 4.8 crore in Q4 financial year 2023-24, reflecting improved product off take and distribution gains. The consolidated net result showed a loss of INR 7.7 crore, largely due to higher finance costs and investments in subsidiaries. The Current Ratio stood at 1.17 (previous year 1.31), while the Debt-Equity Ratio improved to 0.19 from 0.78, demonstrating deleveraging and balance sheet strengthening. Liquidity remained adequate to support operations and growth commitments.

The Company s workforce continues to be a critical driver of growth, with employee costs accounting for around 43% of operating income. During the year, structured training programs were introduced to improve production efficiency, quality assurance, and safety compliance across units. Employee engagement initiatives were undertaken to align staff with the Company s long-term vision. Industrial relations remained cordial with no work stoppages or disputes reported in financial year 2024 - 25. The focus remains on creating a performance driven and inclusive work culture that fosters innovation, accountability, and retention of skilled manpower.

The financial year 2024-25 was marked by challenging operating conditions, with rising input costs, subdued demand in certain categories, and tariff-related pressures impacting margins. This resulted in a decline in profitability, with negative EBITDA and net loss for the year. While the working capital cycle was stretched due to higher receivable days, improved inventory management helped reduce stockholding levels. The Company continued its deleveraging efforts, bringing down the debt-equity ratio significantly, thereby strengthening the balance sheet. Despite the reported loss, book value per share improved on account of reduced leverage and infusion into reserves, positioning the Company for recovery as demand conditions stabilize.

During the financial year 2024-25, the Company experienced margin pressures, leading to negative EBITDA and net loss, which adversely impacted profitability ratios such as EPS, NPM, and RONW. Working capital efficiency saw mixed trends: debtor days increased reflecting delayed recoveries, while inventory days improved due to tighter stock management. On the balance sheet front, the debt-equity ratio improved significantly owing to repayment of borrowings, leading to a stronger solvency position. Book value per share rose by over 40% due to retained reserves and reduced leverage despite the years loss.

While the financial ratios for financial year 2024-25 reflect the impact of an adverse operating environment, the Company has undertaken structural measures to strengthen its fundamentals. The significant reduction in debt levels has improved solvency and provides flexibility for future growth. Management remains focused on improving cash flows through tighter credit discipline, enhancing margins by rationalizing costs, and leveraging industry opportunities in emerging categories. With a more resilient balance sheet and streamlined operations, the Company is positioned to restore profitability and deliver sustainable shareholder value over the medium term..

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied due to economic conditions, changes in government policies, tariff structures, regulatory developments, competitive dynamics, and other incidental factors. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements based on subsequent developments, information or events.