Sharat Industries Ltd Management Discussions

1. Global Macroeconomic Situation in FY26

Global growth stabilizes as inflation eases, creating a more supportive backdrop for seafood demand.

During FY26, the global economy transitioned into a "New Steady State" following the acute monetary tightening and supply chain shocks of previous fiscals. Global real GDP growth expanded at a stable rate of approximately 3.2%, as major central banks shifted toward neutral interest rate postures in response to global disinflation. The global median inflation rate moderated toward 4.2%, providing welcomed relief to consumer purchasing power and stabilizing discretionary retail spending across prime seafood-importing regions in North America, Western Europe, and East Asia.

While international maritime logistics faced ongoing rerouting adjustments around the Red Sea and Suez Canal, container freight rates settled into a predictable, albeit elevated, structural baseline. Exporters and broadline distributors managed logistics volatility through long-term carrier contracts, extended planning horizons, and strategic safety stock buffers.

This macroeconomic stabilization created a supportive demand environment for high-value marine proteins, particularly frozen shrimp, as food service channels in the U.S. and Europe experienced steady footfall recovery and retail channels adjusted pricing to preserve consumer demand.

2. Indias growth in comparison to other nations

India leads the growth current.

India maintained its standing as the fastest-growing major economy during FY26, significantly outperforming regional peers and advanced industrial economies. Supported by sustained public capital expenditure, robust urban consumption, and a resurgent rural economy, India achieved a real GDP growth rate of 7.7% in FY26.

This strong macroeconomic backdrop provided Indian aquaculture processors with a stable domestic operational environment-marked by access to competitive working capital, expanding port infrastructure along the Eastern seaboard, and targeted central government incentives-enabling exporters like Sharat Industries Limited to scale international shipments.

3. Global shrimp market trajectory in FY26 and FY27 outlook

The global shrimp aquaculture sector continued to navigate a period of structural realignment through FY26, marked by regional production divergences and rebalancing trade corridors. As the sectors production data is compiled and reported on a calendar-year basis, the figures below reflect the latest available calendar year 2025 estimates, published progressively through the year by Kontali Analyse AS and by RaboResearch in partnership with the Global Seafood Alliance (GSA). Kontalis mid-year survey (June 2025) estimated global vannamei production would reach 5.84 million metric tons, a 6% increase over 2024; the subsequent GSA-Ra- bobank producer survey (October 2025) put full-year growth at a more measured 2% to 3%, taking total volume to approximately 6.1 million metric tons. Black Tiger (Penaeus monodon) shrimp output grew faster still, expanding by an estimated 4% to approximately 650,000 metric tons globally — led by Vietnam, China, India, and Bangladesh — as Asian farmers increasingly pivoted toward the species in search of better farmgate realizations.

Ecuador continued to anchor global volume growth. Calendar-2025 output was estimated to have expanded in the mid-to-high teens: RaboResearchs Gorjan Nikolik put growth at approximately 15%, while industry estimates presented at TARS 2025 (Vitapro) indicated growth closer to 18%, reaching roughly 1.75 million metric tons, as farms that had changed ownership resumed production and stocking densities intensified further. Rabobanks November 2025 outlook described Ecuador as "back in a big way," citing continued investment in processing capacity and improved feed formulations that are positioning the country to capture additional U.S. market share into 2026.

Indias sector crossed a production milestone during the year. The Society of Aquaculture Professionals (SAP) 2025 crop review reported full-year output of approximately 1.05 million metric tons — comprising 989,000 tonnes of L. vannamei and 60,500 tonnes of Black Tiger shrimp — up from roughly 1.0 million tonnes the prior year, an increase of approximately 5%. Farmers reported improved management of Enterocytozoon hepatopenaei (EHP) pressure through crop-cycle adjustments and more selective use of multiple broodstock lines, while Indias Black Tiger revival continued to gain pace, supported by SPF broodstock from both domestic (RGCAs Nicobar line) and international (Unibio, Moana) breeding programs.

Vietnams production picture proved more mixed than initially anticipated. Translucent post-larvae disease (TPD) delayed pond stocking and reduced survival rates in the first quarter of calendar 2025, and full-year industry estimates for vannamei output ranged widely, from approximately 470,000 to 600,000 metric tons, with several analysts pointing to a modest year-on-year contraction rather than growth. Black Tiger output, however, continued to expand, reaching an estimated 200,000 metric tons and anchoring the broader regional shift toward the species.

Chinese domestic shrimp production continued to face structural headwinds from tightening environmental regulation. The China Statistical Yearbook reported full-year vannamei production oRs. 2.37 million metric tons (of which an estimated 1.53 million tonnes came from saline systems and 880,000 tonnes from freshwater systems), while a number of industry participants cited materially lower figures of approximately 1.7 million metric tons, reflecting differences in survey scope and methodology. Regardless of the precise base, growth was constrained by stricter enforcement of groundwater-use and wastewater-discharge rules, a slowdown in new greenhouse investment, and continued EHP-related disease pressure.

Looking ahead to FY27 (calendar 2026), RaboResearch and the Global Seafood Alliances Global Aquaculture Outlook 2026 projects global shrimp aquaculture will expand by approximately 3% — broadly similar to the pace estimated for calendar 2025 — as the market moves toward a more balanced supply-demand equilibrium after two volatile years. A notable structural trend is the continued pivot toward Black Tiger (P. monodon) shrimp: global monodon output is forecast to grow approximately 6% in 2026, up from an estimated 4% in 2025, driven principally by India and Vietnam as farmers seek better margins amid rising production costs for vannamei — a trend directly relevant to Sharat Industries Limiteds own strategic pivot toward Black Tiger sourcing through its Gujarat processing arrangement.

Regulatory developments will also shape FY27 trade flows: India and Indonesia must be added to the European Unions approved list for antibiotic-use compliance (EU Regulation 2023/905) by 3 September 2026 to retain EU market access, while exporters to the EU and UK — including Vietnam — face a new requirement, effective 2026, for pre-slaughter electrical stunning of shrimp, as adopted by major retailers including Tesco, Marks & Spencer, Sainsburys, and Waitrose.

4. Aggregate Indian Seafood Export Performance (FY26)

India maintained its prominent standing in the global marine protein trade during FY26, supported by expanding coastal aquaculture infrastructure, modern processing facilities, and continuous policy backing from government agencies. Official trade data released by the Marine Products Export Development Authority (MPEDA), under the Ministry of Commerce and Industry, shows that India achieved an all-time high in seafood exports, shipping 1,972,018 metric tons (MT) valued at f73,890.46 crore (US$ 8.46 billion) during FY26. This represents a robust year-on-year growth of 16.13% in volume and 18.40% in rupee value.

Frozen shrimp remained the primary growth catalyst for Indias marine export basket. In FY26, frozen shrimp exports expanded to 792,647 MT, generating f49,037.93 crore (US$ 5,624.48 million) in foreign exchange earnings. Frozen shrimp accounted for 40.19% of total export volume and 66.52% of total dollar earnings. Year-on-year, frozen shrimp revenues grew by 13.16% in Indian Rupee terms and 8.64% in US Dollar terms, reflecting strong market resilience despite ongoing trade defense reviews and logistics challenges in traditional Western destinations.

The composition of Indian shrimp exports continued its structural evolution in FY26. While Litopenaeus vannamei maintained its position as the largest volume contributor, commercial farming and exports of Black Tiger shrimp (Penaeus monodon) and Fresh Water Scampi (Macrobrachium rosenbergii) registered double-digit expansion across key Asian and European markets. The revival of Black Tiger aquaculture—enabled by Specific Pathogen Free (SPF) broodstock and targeted incentives—allowed Indian processors to command premium price realizations, further accelerating diversification away from commodity block-frozen L. vannamei formats.

Based on official MPEDA statistics for FY26, India strengthened and diversified its global supply footprint across primary importing hubs:

1. China (Rank 1 by Volume, Rank 2 by Value): China solidified its status as Indias largest market by volume absorbing 490,369 MT of total seafood valued at US$ 1,611.32 million. Frozen shrimp imports reached 169,505 MT, as Chinese buyers increased purchases of raw material blocks and head-on shrimp formats for domestic consumption and reprocessing.

2. United States (Rank 2 by Volume, Rank 1 by Value): The U.S. remained Indias top export destination in value terms, importing 279,193 MT of seafood worth f20,263.27 crore (US$ 2,328.74 million). Frozen shrimp continued to dominate U.S. receipts at 256,128 MT, accounting for 93.55% of Indias total export value to the United States. Volume and value of exports from India to the U.S. reduced by 19.51% and 14.22% (USD) respectively compared to FY25, a significant drop due to various trade defense measures such as tariffs, countervailing duty (CVD) and anti-dumping duty (AD).

3. European Union (Rank 3 by Value): EU member states imported 297,518 MT of Indian seafood valued at US$ 1,592.09 million, including 135,599 MT of frozen shrimp. The EU market saw strong double-digit growth, driven by sustained demand for certified value-added and sustainable lines.

4. Southeast Asia (Rank 4 by Value, Rank 2 by Volume): Regional processing hubs across Southeast Asia (led by Vietnam and Thailand) imported 451,756 MT of Indian marine products worth US$1,348.97 million, of which 83,810 MT was frozen shrimp destined for custom re-processing and re-export.

5. Japan (Rank 5 by Value): Japan imported 105,228 MT of seafood valued at US$ 452.91 million, including 40,776 MT of premium frozen shrimp, driven by demand for raw-peeled formats and Black Tiger shrimp.

6. Middle East (Rank 6 by Value): Middle Eastern destinations absorbed 76,743 MT of seafood worth US$ 283.00 million, including 30,478 MT of frozen shrimp catering to growing retail and hotel/food service channels.

Source: MPEDA Annual Export Statistics (FY26), Seafood Exporters Association of India (SEAI).

5. SIL Export Market Review: Russia, United States, and China

The global trade landscape for farmed shrimp in FY26 was framed by geopolitical realignments, trade defense measures, and evolving import demand patterns across primary destination markets. Indian exporters actively adjusted market allocations, diversified species offerings, and formed strategic operational partnerships to navigate evolving trade regulations and duty structures.

Geographic Realignment of Sharat Industries Export Portfolio

The United States Market: Trade Defense and Tariff Structures

The United States maintained its position as Indias top export destination in value terms during FY26, absorbing 279,193 MT of seafood worth f20,263.27 crore (US$ 2,328.74 million). Frozen shrimp continued to dominate US imports from India at 256,128 MT, representing 93.55% of Indias total export value to the United States.

Flowever, market access remained complex due to ongoing regulatory and trade policy measures under the supervision of the US Department of Commerce (DOC) and the US International Trade Commission (ITC). Following the conclusion of countervailing duty (CVD) investigations into frozen warmwater shrimp, final determinations established CVD rates between 4.36% and 5.70% across major Indian exporters, alongside active anti-dumping duty (AD) administrative reviews.

While landed import costs for US buyers increased due to these duty levies, Indian processors with diversified portfolios mitigated top-line risk by redirecting volume. Sharat Industries Limited (SIL) intentionally calibrated its US market exposure down from over 70% of revenue prior to FY23 to approximately 22% in FY26, insulating overall profitability from US trade defense actions as the company enters FY27.

The Chinese Market: Volume Demand and Black Tiger Sourcing

China solidified its standing as Indias largest market by volume in FY26, importing 490,369 MT of marine products valued at US$ 1,611.32 million, including 169,505 MT of frozen shrimp. Chinese import demand remained characterized by strong purchasing volumes for Head-On Shell-On (HOSO) formats, raw catering stock, and large-grade Black Tiger shrimp (P. monodon).

To capitalize on this demand during FY26, Sharat Industries Limited expanded its commercial presence in China through an asset-light processing arrangement with a Gujarat-based seafood unit. This collaboration enabled SIL to source, process, and ship high-margin Black Tiger shrimp directly to Chinese buyers.

By expanding beyond commodity Vannamei formats, SIL accelerated inventory turnover and established a stronger customer base across mainland Chinese distributor channels—a strategic priority that will continue into FY27.

The Russian Market: Strategic Export Anchor

The Russian Federation established itself as a vital strategic market for specialized Indian seafood exporters seeking insulation from North American trade friction. Operating without the countervailing duties present in the United States, the Russian market provided consistent, large-volume demand for frozen block-frozen shrimp and raw processing inputs.

For Sharat Industries Limited, Russia served as the primary export anchor during FY26. This structural market alignment supported SILs financial growth in FY26 driving Total Operating Income to f524.72 crore, while hedging earnings against shipping route disruptions in Western transit corridors and tariff headwinds in traditional markets.

Export Market Summary

6. SWOT Analysis

Strengths

Robust financial performance and improving returns: Revenue grew 37.9% and Profit After Tax grew 59.7% during FY26, with Return on Equity improving to 10.3% (FY25: 7.3%) and Return on Capital Employed improving to 18.5% (FY25: 17.4%), reflecting more efficient use of the Companys capital base.

Strengthened capital base with conservative leverage: Net worth grew 13.0% to TI54.59 crore, supported by retained earnings and the receipt of final call money on the FY25 rights issue. The Debt-Equity ratio improved to 0.84x and the Debt Service Coverage Ratio improved to 2.46x, while the Companys credit rating was affirmed at CRISIL BBB/Stable.

Integrated and diversified operating model: Over 35 years of operational expertise spanning shrimp farming, feed manufacturing (under the Vannastar brand) and processing at Nellore, Andhra Pradesh, complemented by an asset-light Black Tiger (P. monodon) processing arrangement in Gujarat broadened the Companys FY26 revenue base.

Diversified, de-risked export markets: A

deliberate multi-year rebalancing of export markets away from concentration in the United States (down from over 70% of revenue prior to FY23) toward Russia, China and other geographies has reduced the Companys exposure to U.S. trade-defense duties.

Weaknesses

Margin sensitivity to raw material costs:

Cost of materials consumed grew 49.6% during FY26, materially outpacing revenue growth of 37.9% and compressing EBITDA margin by 53 basis points to 7.4%, notwithstanding strong absolute profit growth — underscoring the Companys exposure to input-price volatility in a commodity-linked value chain.

Rising working-capital intensity: Inventories grew 43.2% to ^107.75 crore and net debt grew 18.2% to ^113.06 crore over the year, while cash and bank balances declined 21.9%, reflecting the working-capital demands of scaling operations.

Single-location processing concentration: The Companys primary processing operations for Vannamei shrimp remain concentrated at its Nellore facility, exposing operations to regional weather events, disease outbreaks and other localised disruptions.

Opportunities

Black Tiger (P. monodon) shrimp scaling: Rising global demand for Black Tiger shrimp and the Companys asset-light processing arrangement in Gujarat position it to capture premium-realisation export volumes without further capital-intensive farm expansion.

Feed division growth: Continued expansion of the Vannastar feed brand among third-party farmers offers a source of high-margin revenue that is less directly linked to shrimp commodity price cycles.

Continued government policy support: Ongoing support under the Pradhan Mantri Matsya Sampada Yojana (PMMSY), the PM-MKSSY sub-scheme, and the RoDTEP export-incentive scheme is expected to continue supporting cold-chain modernisation, biosecurity infrastructure and export competitiveness.

Threats

Global supply-side competition:

Continued low-cost, high-volume Vannamei production from Ecuador exerts pricing pressure in commodity block-frozen shrimp formats.

Trade policy and duty risk: Continued exposure to countervailing and anti-dumping duty regimes on Indian shrimp in the United States, alongside evolving regulatory requirements in the European Union and United Kingdom, could affect market access and cost competitiveness in those markets.

Biological and disease risk: Farm-level susceptibility to Enterocytozoon hepatopenaei (EHP), White Spot Syndrome Virus (WSSV) and other pathogens could affect harvest volumes, quality and cost of sourcing.

7. SIL FY27 Operational Outlook

Trade Defense Duties in the U.S. Market: Preliminary Countervailing Duty (CVD), Anti-Dumping (AD) and tariffs by the U.S. created pricing friction for Indian shrimp exporters during FY26. SIL will continue to proactively manage its exports to the U.S. based on the ongoing market dynamics.

Biological Risks and EHP Management: During FY26 farm-level productivity in parts of Andhra Pradesh was impacted by the Enterocytozoon hepatopenaei (EHP) microsporidian parasite, leading to uneven harvest sizes and premature harvests. This led to various farmers across Andhra moving towards SPF Black Tiger cultivation instead of L. Vannamei. SIL will closely monitor these trends as it could trigger price fluctuations. We will also have to further strengthen farm-gate monitoring to prevent diseases and biological risks.

Elevated Freight Baselines: Freight costs continue to remain structurally elevated relative to pre-2024 levels due to Suez Canal transit restrictions. This is pushing exporters to transition toward higher unit-value, value-added products (e.g., peeled, cooked, skewered shrimp) to protect net margins per container. SIL will also look to be agile and continue to improve its value-added offerings.

Revenue Trajectory: Sharat Industries Limited (SIL) is positioned to build on its strong FY26 performance (where Total Operating Income expanded 38% YoY to f524.72 crore and Net Profit reached f 15.90 crore). Revenue expansion in FY27 will be driven by scaled exports of not only Vannamei shrimp from Nellore but also Black Tiger shrimp through asset-light processing arrangements in Gujarat.

Geographic Diversification Strategy: SIL will continue its strategic market pivot, maintaining a strong market anchor in Russia while expanding shipments to East Asia and Europe to diversify and improve profitability.

8. Financial Review of FY 2025-26

The Company recorded a year of broad-based financial improvement in FY 2025-26, with double-digit growth in revenue, profitability, net worth and return ratios, alongside a stable capital structure. Revenue from operations grew 37.9% to Rs. 524.72 crore (FY25: Rs. 380.53 crore), and Profit After Tax grew 59.7% to ^15.90 crore (FY25: ^9.96 crore), reflecting higher volumes across the Companys businesses and continued financial discipline.

Revenue growth during the year was driven by a combination of higher export shipments to our primary customer base and the addition of a merchant export business through a strategic partnership in Gujarat for Black Tiger Shrimp. Export sales of shrimp grew 23.2% to ^342.24 crore (FY25: ^277.87 crore), reflecting the Companys continued efforts to diversify and improve its revenue base. Including export incentives, total export revenue stood at ^361.99 crore, up 23.6% over FY25 (^292.98 crore).

Cost of materials consumed grew 49.6% to ^441.51 crore, outpacing revenue growth of 37.9% and resulting in a 53 basis point compression in EBITDA margin to 7.4% (FY25: 7.9%), notwithstanding a 28.8% increase in absolute EBITDA to ^39.04 crore. Employee benefits expense was well contained, rising 5.2% to ^8.76 crore, and finance costs rose only 2.2% to ^11.73 crore despite the higher scale of operations, reflecting disciplined cost management outside of raw material inputs. Other expenses grew 24.0% to ^70.99 crore, broadly in line with the growth in scale of operations.

Balance Sheet and Capital Structure

The Companys balance sheet strengthened further during the year. Total assets grew 13.0% to ^315.92 crore, and net worth grew 13.0% to ^154.59 crore (FY25: ^136.81 crore), supported by the years retained profits and receipt of final call money on shares allotted under the FY25 rights issue. Paid-up equity share capital increased to ^39.21 crore (3,92,14,451 fully paid-up equity shares of ^10 each) from ^38.05 crore in the previous year, and the Authorised Share Capital of the Company was increased from ^50 crore to ^60 crore during the year.

Inventories grew 43.2% to ^107.75 crore, reflecting the working-capital investment required to support the years higher volumes across processing and trading operations, while trade receivables were held broadly in check, growing only 3.3% to ^100.33 crore despite the much sharper growth in revenue — an outcome reflected in the improvement in the trade receivables turnover ratio discussed below. Total debt (including current maturities) increased 10.9% to ^129.66 crore and net debt increased 18.2% to ^113.06 crore, while cash and bank balances declined 21.9% to ^16.60 crore, consistent with the funding of higher working capital and capital expenditure during the year. Trade payables grew 18.8% to TI9.61 crore.

8. Financial Ratios

Details of Significant Changes in Key Financial Ratios