Sheetal Cool Products Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A. CAUTIONARY STATEMENT:

The statements in the “Management Discussion and Analysis Report” describe the Companys objectives, projections, expectations, estimates or forecasts which may be “forward-looking statements” within the meaning of the applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied therein due to risks and uncertainties. Important factors that could inuence the Companys operations, inter alia, inclu de global and domestic demand and supply conditions aDecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic, political developments within the country and other factors such as litigations and industrial relations.

B. COMPANY OVERVIEW:

Sheetal Cool Products Limited has grown up and got its wings presently spread over 6 major states of India such as Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Kashmir and Noida (UP) and more than 10 nations abroad like USA, Switzerland, Singapore, Australia Africa, Nepal, etc. The company has acquired BRCGS (Brand Reputation Compliance for Global Standard), FSMA (Food Safety Modernization Act) & EIC (The Export Inspection Council) certicates al ong with FSSAI, ISO

22000:2018, ISO 9001:2015 etc. For manufacturing more than eight categories of food products under a single plant. It is also counted, as per Economic Times, as one among the top 150 fastest growing companies in India. Sheetal is in the Top 500 High-Growth Companies of Asia-Pacic 2021 ranking created by The Financial Times, Nikkei, and Statista.

C. INDUSTRY STRUCTURE AND DEVELOPMENT

GLOBAL ECONOMY:

Global growth is projected to fall from an estimated 3.5 percent in 2022 to 3.0 percent in both 2023 and 2024. While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook (WEO), it remains weak by historical standards. The rise in central bank policy rates to ght ination continues to weigh on e conomic activity. Global headline ination is expected to fall from 8.7 percent in 2022 to 6.8 percent in 2023 and 5.2 percent in 2024. Underlying (core) ination is projected to decline more gradually, and forecasts for ination in 2024 have been revised upward. The recent resolution of the US debt ceiling stando_ and, earlier this year, strong action by authorities to contain turbulence in US and Swiss banking reduced the immediate risks of financial sector turmoil. This moderated adverse risks to the outlook. However, the balance of risks to global growth remains tilted to the downside. Ination could remain high and even rise if further shocks occur, including those from an intensication of the war in Ukraine and extre me weather-related events, triggering more restrictive monetary policy. Financial sector turbulence could resume as markets adjust to further policy tightening by central banks. Chinas recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers. Sovereign debt distress could spread to a wider group of economies. On the upside, ination could fall faster than expected, reducing the need for tight monetary policy, and domestic demand could again prove more resilient. In most economies, the priority remains achieving sustained disination while ensuring financial sta bility. Therefore, central banks should remain focused on restoring price stability and strengthen financial supervision and risk monitoring. Should market strains materialize, countries should provide liquidity promptly while mitigating the possibility of moral hazard. They should also build scal bu ers, with the composition of scal adjustment ensuring targeted support f or the most vulnerable. Improvements to the supply side of the economy would facilitate scal consolidation and a smoother d ecline of ination toward target levels.

D. INDIAN ECONOMY:

The global economy turned out to be resilient in 2023 in spite of tightening financial conditions engendered by restrictive monetary policy stances, geopolitical tensions and geoeconomic fragmentation. Global GDP rose by 3.2 per cent in 2023 (3.5 per cent a year ago1) supported by buoyancy in the US and major emerging market and developing economies (EMDEs). Global ination eased to 6.8 per cent in 2023 from 8.7 per cent a year ago on the back of monetary tightening and restoration of supply chains. Pandemic-induced loosening in scal policy exerted upward pressures on the global public debt-GDP ratio in an environment of sluggish growth and elevated interest rates. Global merchandise trade volume contracted by 1.2 per cent in 2023 from an expansion of 3.0 per cent in 20222, dragged down by rising trade restrictions and a rotation of demand away from goods to services. Global financial markets exhibited bouts of volatility in response to uctuating perceptions on the monetary policy trajectory among market participants in spite of high for longer stances articulated by central banks. Sovereign bond yields hardened in the first half of 2023-24 and exhibited sizeable two-way movements in the second half. The US dollar remained rm through the year, putting downward pressures on emerging market economy (EME) currencies.

Amidst global uncertainty, the Indian economy exhibited resilience during 2023-24, with real GDP growth3 improving to 7.6 per cent from 7.0 per cent in 2022-23, supported by robust xed investment. On the supply side, econ omic activity was supported by the improvement in the manufacturing sectors protability which benetted from lower i nput prices as well as the sustained momentum in services activity, offsetting the slowdown in the agricultural sector.

(Source: https://m.rbi.org.in/Scripts/AnnualReportPublications.aspx?Id=1402)

Industry Structure and developments. Overview of Global Dairy Industry Market Overview:

“Dairy Market: The global dairy market size reached US$ 944.7 Billion in 2023. Looking forward, IMARC Group expects the market to reach US$ 1,459.3 Billion by 2032, exhibiting a growth rate (CAGR) of 4.95% during 2024-2032. The rapid urbanization, increasing awareness about health and nutrition, signicant technological advancements , rising popularity of dairy-based snacking, shifting dietary preferences and favorable government policies and regulations are some of the major factors propelling the market. As the global population continues to grow, so does the demand for essential nutrients, such as calcium and protein, which are abundantly found in dairy products. For example, as per the U.S. Census Bureau, after a historically low rate of change between 2020 and 2021, the US resident population increased by 0.4%, or 1,256,003, to 333,287,557 in 2022. Additionally, more people are transitioning from traditional diets to modern ones that include processed foods and dairy products, which is bolstering the market growth.

With more and more people moving to cities for opportunities and leading busy lifestyles, convenience has become a key factor in food choices. According to United Nations Conference on Trade and Development (UNCTAD), the share of urban population is projected to increase to 56.9% in 2022. It is higher in the developed parts (79.7%) than in the developing regions (52.3%). Besides this, dairy companies have capitalized on this trend by offering a wide range of packaged, ready-to-eat (RTE), and on-the-go dairy options. Urban consumers are increasingly looking for quick and nutritious meals, making dairy an attractive choice due to its nutritional content and versatility in various recipes. As a result, the urbanization trend is propelling the future of global dairy market.

There has been an increase in the demand for ready-to-eat (RTE) products, such as butter, frozen desserts, milk powder, and yogurt, which is contributing to the market growth. Subsequently, evolving food habits have further led to the establishment of fast-food chains and quick service restaurants (QSR), wherein different varieties of cheese, condensed milk, buttermilk, and sour milk are employed as major ingredients. Moreover, the rising availability of avored milk and ice creams in innovative avors, such as chocolate, strawberry, vanilla, and almond, is acting as a grow th-inducing factor. Apart from this, key players in developing regions are consistently investing in improving the milk procurement network and promoting domestic dairy farming practices, which is creating a positive outlook for the market. In addition to this, the advent of modern retail facilities and improvement in cold chain logistics, particularly in emerging economies, are further supporting the market growth. A signicant increase in research and development (R&D) activities in the dairy industry to introduce novel product variants and expand existing product portfolios is fueling the market growth further. Other factors, such as rising health concerns, increasing population and rapid urbanization and industrialization, are also driving the global dairy market growth.

Source:https://www.imarcgroup.com/global-dairy-market#:~:text=The%20global%20dairy%20market%20size,4.95%25 %20during%202024%2D2032.

Overview of Dairy Industry in India:

The Indian dairy market is one of the largest and fastest growing in the world. In 2023, the market was valued at INR 16,792.1 billion, and is expected to reach INR 49,953.5 billion by 2032, with a compound annual growth rate (CAGR) of 13%. This growth is driven by a number of factors, including Technological innovation, Improved retail and e-commerce platforms, better cold chain infrastructure, Increasing disposable incomes, and Growing health consciousness.

India is also the worlds top producer of milk, contributing 24.64% of global production in 2021-22. Milk production in India has increased by 58% over the past nine years, reaching 230.58 million tonnes in 2022-23. Uttar Pradesh is the state that produces the most milk, accounting for around 18% of the countrys total, followed by Rajasthan, Andhra Pradesh, Gujarat, and Punjab. However, the milk production per animal is signicantly low as compared to the other major dairy pr oducers. Moreover, nearly all the dairy produce in India is consumed domestically, with most of it being sold as uid milk. Because of this, the Indian dairy industry holds tremendous potential for value-addition and overall development.

E. KEY BUSINESS SEGMENTS:

The Company is a diversied, research and development focused food processing Company with operation s in three key business verticals i.e. milk and milk products, Frozen Foods and namkeen products. The company is diversied in other subsegments like bakery products, sweets and frozen vegetables. Detailed information of two key business segments is as below: i. MILK AND MILK PRODUCTS:

Sheetal Cool Products Ltd began its journey with the production of milk and milk products. There are three brands for Ice cream segment namely Sheetal, Rich Cream and JAdore Ice Creams. More than 170 variety products are available under Sheetal brand in the categories of Cups, Premium Cups, Ripple Special, Sugar Free, Jamel Lassi, Kids Special, Candies, Kul, Cones, Novelties, Classic Series, Sandwich, Cakes, Tubs, Party Pack and Catering Pack. There are more than 73 avours of Jadore Ice Creams under the categories namely Cups, Cones, Candy, Bar, Sticks, Naturals, Novelties, Cakes, Pastry, and Take Home. Rich creams are in more than 10 varieties. Sheetal Cool Products Ltd has given special attention to the storage of milk and its by products. Sheetal Gold, Sheetal Silver, Sheetal Taza, Sheetal Slim N Trim, Sheetal Tea Special, Sheetal Anytime Tea, Sheetal Curd, Sheetal Buttermilk, Sheetal Butter and Sheetal are the products in this segment. ii. NAMKEEN, BAKERY PRODUCTS AND FROZEN ITEMS: The namkeen segment is having a wide range of 88+ varieties with delicious taste , quality and hygiene at a reasonable cost is its remarkable trademark. Sheetal Frozen Food Segment has been established with remarkable characteristics of Sheetal Cool Products. Pizza, Pav bhaji, varieties of Parathas , Vada Pav, Chinese Bhel, etc are some of the delicious frozen food products from our manufacturing unit. The bakery products are Cookies, Khari, Rusk, Bread, Pav, etc. There are also differently avored sweets, daily used frozen vegetables etc.

F. BUSINESS OPPORTUNITIES AND OUTLOOKS:

The Budget 2022-23 seeks to lay the foundation of the Indian economy over the Amrit Kaal period of the next 25 years leading to 100 years of independence in 2047. The government is emphasizing the role of PM GatiShakti, Inclusive Development, Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition and Climate Action, as well as Financing of Investments.

India is one of the fastest growing economies globally and the Government of India is determined to make it a ve trillion economy by 2025. A growing working population and rapid urbanization will drive strong consumption growth, boosting demand for dairy and dairy products in India. Product innovation is always needed as consumers not only prefer safe ingredients and additives but also useful ones. We creates opportunities mainly in product innovation, specialized products, and product extensions for the various existing food processors. Consumers have become aggressive in demanding better, safer, and convenient food products and are willing to pay a higher price for health and convenience. The performance of the company is expected to improve with stabilized economic situation in India and across the globe. We expect this trend to continue at least in the foreseeable future. Hence, the Company does not see any medium to long term risks in the companys ability to continue as a going concern and in meeting its liabilities as and when they fall due.

G. CHALLENGES/ THREATS:

Unseasonal Rainfall Impact: One of the signicant setbacks we encountered this year was the unexpect ed and untimely rainfall in Gujarat, which is one of the largest ice cream markets in India. Sales for the last quarter of this year experienced a sharp decline as compared to the corresponding period in the previous year. Typically, March marks the onset of warmer weather and a surge in ice cream sales, but these unusual weather conditions disrupted our sales cycle.

Despite these formidable obstacles, our commitment to delivering the highest-quality products at exceptionally competitive prices remains unwavering. We are well-prepared to confront and overcome these challenges as we continue our journey forward.

H. SEGMENT WISE OR PRODUCT WISE PERFORMANCE:

Segment Reporting as dened in Ind AS 108 is not applicable since the Company operates in only one s egment.

I. RISK AND CONCERN

1. The Company is facing risk and concern with respect to Susceptibility of protability to changes in government policies and environmental conditions along with volatility in raw material prices Milk prices: Milk Prices are sensitive to government policies as marked by Minimum Support Price and other regulations. Milk being a major raw material for SCPL, makes it susceptible to government regulations and to risks related to volatility in global milk powder prices. The key raw materials for manufacturing ice-cream are skimmed milk powder, milk, butter, and cream, which the company procures from local dairies or farmers.

2. The Company is facing risk and concern with respect to Seasonality of demand as well as challenges arising from changing consumer tastes and preferences.

3. The Company is facing risk and concern with respect to High competition in the ice cream segment from the organized as well as unorganized markets: Indian ice-cream market is largely dominated by un-organized players with innumerable small and seasonal companies doing the business in various regions. Further, there are large number of big and medium-sized ice-cream companies in India which leads to a highly competitive environment. Although, there is a huge opportunity for industry players since India is one of the fastest growing markets for ice-cream consumption due to its large population and growing per capita income; however, the company faces high competition from various other established brands like Amul, Havmor, Kwality Walls, Cream Bell, Mother Dairy, Vadilal, Top ‘N Town, Dinshaws, etc in its various key markets However, Company is equipped to meet the challenges by better marketing tactics and eHective management to overcome all such challenges.

J. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has in place an adequate system of internal control commensurate with its size and nature of business. The system provides reasonable assurance in respect of providing financial and operational information, complying with applicable statutes, safeguarding of assets of the Company and ensuring compliance with corporate policies.

The Company has availed the services of independent professional rm for Internal Audit, which checks the effectiveness of the internal controls with an objective to provide an independent, objective, and reasonable assurance of the adequacy and effectiveness of the Companys risk management, control, and governance processes. The scope and authority of the Internal Audit activity are approved by the Audit Committee. Internal Auditor reports directly to the Audit Committee of Board. Audit Committee periodically reviews the Internal Audit Reports and issues guidance and advice. The Audit Committee also seeks the views/opinions of statutory auditors on the adequacy of the internal control systems in the Company. Minutes of the Audit Committee are put up to the Board of Directors. The Companys Audit Committee reviews adherence to internal control systems, internal audit reports and legal compliances. This committee reviews all the results of the Company and recommends the same to the Board for its approval.

K. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES:

Our people are our strongest asset. The Company invests in building best-in-class teams, led by exceptional professionals. Over the years, the Company has nurtured a meritocratic, empowering, and caring culture that encourages excellence. The Company encourages the development of talent by providing its people with opportunities to sharpen their capabilities, encouraging innovation, lateral thinking, and developing multiple skills. Through this approach, it prepares its people for future leadership roles.

The management is focused on a transformational Human Resources Strategy, which supports the constant reinforcement of our competitive advantage. During the year, the Companys industrial relations remained cordial with its employees. The Company has 860 employees as of the closure of the Financial Year.

L. PROGRESS DURING THE YEAR:

The company has taken certain steps in the last year to increase the growth which resulted into maintain the turnover. Highlights of certain steps as follows: In a signicant step forward, Sheetal successfully entered a Memorandum of Understanding (MOU) with the esteemed Adani Group, opening new avenues for collaboration and growth.

Following the successful completion of our US export, we have seen a signicant increase in demand for our products. We have also started exporting to other countries, such as Singapore, Japan, South Korea, Seychelles, and more. This has allowed us to win the hearts of millions of people with our delicious products.

To meet the growing demand, we have expanded our distribution network and now have channel partners in over 6 more states. We are committed to providing our products to as many people as possible, and we believe that this expansion will help us achieve our goal.

M. FINANCIAL PERFORMANCE: COMPARISON OF F.Y 2023-24 WITH F.Y 2022-23.

Financial Performance with Respect to Operational Performance is discussed in the main part of the Report. Details of Key Financial Ratio are given below: Reason for change for more than 25%

1. Debtors turnover ratio

The trade receivable turnover ratio has decreased on account of giving higher credit period to customer during current year.

N. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof: Return on Net Worth is decreased in current year, as the average net worth of the company is increased as compared to previous year.

Disclosure of Accounting Treatment:

In the preparation of financial statements, there is no treatment different from that prescribed in an Accounting Standard has been followed during the financial year under review.