Sheetal Cool Products Ltd Management Discussions

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 influence the Companys operations, inter alia, include global and domestic demand and supply conditions affecting 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 is a leading player in the Indian food industry, with a strong presence across more than 10 major states of India, including Gujarat, Maharashtra, Madhya Pradesh, Rajasthan, Jammu & Kashmir, Punjab, Himachal Pradesh, Chhattisgarh, Telangana, West Bengal, Sikkim, Odisha, and Uttar Pradesh. Beyond domestic operations, the company has expanded its footprint to over 15 international markets, such as the USA, Japan, Australia, Hong Kong, UAE (Dubai), Saudi Arabia, Bahrain, Kuwait, Qatar, Zambia, Congo, South Korea, Vietnam, Mauritius, and Bhutan, among others.

The company is certified with globally recognized standards, including BRCGS (Brand Reputation Compliance for Global Standards), FSMA (Food Safety Modernization Act), and EIC (Export Inspection Council), along with FSSAI, ISO 22000:2018, and ISO 9001:2015. These certifications underscore Sheetals commitment to quality and safety in manufacturing across seven major categories of food products.

Recognized for its rapid growth and excellence, Sheetal has been featured by The Economic Times among the Top 150 Fastest Growing Companies in India. Furthermore, it is listed in the Top 500 High-Growth Companies of Asia-Pacific 2021, a ranking curated by The Financial Times, Nikkei, and Statista

C. INDUSTRY STRUCTURE AND DEVELOPMENT GLOBAL ECONOMY:

According to the International Monetary Fund (IMF)1, global growth at 3.3 per cent in 2024 (3.5 per cent a year ago) was below the historical average (2000-19) of 3.7 per cent, owing to structural challenges like weak investment, slow productivity growth and high debt levels. Moreover, the pace of economic activity was impacted by moderation in economic growth in some Asian and European economies, protracted geopolitical tensions and sluggish recovery in Chinas consumption demand and property market. Global inflation eased to 5.7 per cent in 2024 from 6.6 per cent in 2023, reflecting the impact of gradual monetary tightening and the easing of supply chain constraints, but still remained above pre-pandemic levels, largely driven by persistent price pressures in the services sector.

Global financial conditions remained largely accommodative in major AEs, reflecting the shift towards less restrictive policy to boost economic activity as inflation started gradually converging to the target levels. After softening in the first half of 2024, sovereign bond yields rose again in AEs during the second half of the year amid renewed inflation concerns and divergent monetary policy trajectories of major central banks. Sovereign bond yields in emerging market and developing economies (EMDEs) generally moderated amidst the global rate cut cycle. The US dollar remained strong throughout the year with consequent downward pressures on a number of AE and EME currencies. Global equity markets inched up higher notwithstanding intermittent volatility driven by concerns over stretched valuations, divergent monetary policies, slower pace of disinflation, geopolitical risks and uncertainty on the evolution of tariff policies.

D. INDIAN ECONOMY:

Against the backdrop of a steady global growth amidst multiple headwinds, the Indian economy remained resilient during 2024- 25, supported by robust macroeconomic fundamentals, proactive policy measures and sustained government capital expenditure. Although real gross domestic product (GDP)3 growth moderated to 6.5 per cent in 2024-25 India remained the fastest growing major economy. Economic activity was supported by an improvement in consumption demand and net exports on the expenditure side, and buoyant services sector and recovery in agricultural production on the supply side.

Growth in gross value added (GVA) in the agriculture and allied sector in 2024-25 stood at 4.6 per cent as compared with 2.7 per cent a year ago, driven by record foodgrains production aided by adequate reservoir levels and favourable weather conditions. Horticulture sector also performed better than last year, driven by higher production of onion and potato. The government has initiated Digital Agriculture Mission to bring innovative farmer-centric digital services, which will enable transparent, efficient, easier and faster service delivery to the farmers. This will also enhance productivity and sustainability of Indias agriculture sector. Moreover, the government is promoting quality seed production and

distribution through various schemes to enhance climate-resilience and improve crop yield in the agriculture sector.

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

Overview of Global Dairy Industry Market Overview:

"Dairy Market: The global dairy market size reached USD 991.5 Billion in 2024. Looking forward, IMARC Group expects the market to reach USD 1,505.8 Billion by 2033, exhibiting a growth rate (CAGR) of 4.75% during 2025-2033. The rapid urbanization, increasing awareness about health and nutrition, significant 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 flavored milk and ice creams in innovative flavors, such as chocolate, strawberry, vanilla, and almond, is acting as a growth-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 significant 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:

With over 1.3 billion people, there is a massive consumer base for dairy products in India. As the population continues to rise, the demand for essential nutrients provided by dairy products also accelerates. Besides this, the agricultural nature of the country ensures a significant presence of livestock, particularly cows and buffaloes. This abundance of milk- producing animals facilitates a steady supply of raw milk for dairy processing and production. Additionally, the Indian dairy industry has witnessed significant modernization and infrastructure development, which has enhanced milk collection, processing, and distribution capabilities. This has made dairy products more accessible to consumers across urban and rural areas, driving the global dairy market outlook. Moreover, the Government of India is providing various schemes, subsidies, and incentives related to dairy, which is supporting the global dairy market growth. For example, the Government of India launched National Programme for Dairy Development (NPDD) scheme to improve the quality of milk and its products and increase share of organized milk procurement. The scheme will be implemented in India for the period of five year from 2021 -22 to 2025-26.

E KEY BUSINESS SEGMENTS:

To balance seasonal demand, minimize off-season impact, and optimally utilize power and manpower, the company has diversified into multiple product segments. This strategic diversification enhanced production efficiency, and a broader consumer base.

The key diversified segments include:

Ice Cream Products

Made from pure milk (not frozen desserts), offering a rich and authentic taste. Product varieties include:

• Cups

• Kulfi

• Candy & Cones

• Novelties

• Cakes & Pastries

• Family Packs and Party Packs Namkeen Products

A wide range of products, including wafers, fryums, and other savory snacks, known for taste, quality, and hygiene Milk & Milk Products

Comprising both essential and premium products:

• Milk, Buttermilk, and Curd

• Ghee, Paneer, Butter, and Flavored Milk

Bakery Products

Freshly baked items such as:

• Bread, Khari, Rusk, and a range of Cookies Sweets

Traditional Indian sweets including:

• Gulab Jamun, Rasgulla, Mango Ras, Basundi, and Shrikhand Ready-to-Eat Products

Convenient and delicious frozen food offerings like:

• Parathas, Naan, Samosa, Tikki, and assorted Pizzas Ready-to-Cook Products

Frozen essentials for quick meal preparation:

• Green peas, Sweet Corn, Cut Vegetables etc

By offering a wide range of products, the company can tap into diverse consumer preferences and cater to various market segments. This strategy strengthens brand presence across multiple categories, reducing dependency on a single product line. Ultimately, diversification enhances business stability, market competitiveness, and long-term profitability.

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 Gati Shakti, 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 five 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:

Apart from competition as a major challenge, the threat of uneven natural conditions has persisted over the last 2 to 3 years. Early monsoon and unseasonal rainfall have adversely impacted, and at times slowed down, the companys top line during this period. However, the company has effectively managed to maintain its revenue levels with only a marginal decline despite these unfavorable conditions.

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 defined in Ind AS 108 is not applicable since the Company operates in only one segment.

I. Risk and Concern

Risk and concerns exist in every industry; the key lies in how effectively a company prepares and implements strategic planning to mitigate them. Continuous monitoring, proactive risk assessment, and adaptive measures are essential to ensure business resilience and sustainable growth.

1. Price Fluctuation of Raw & Packing Materials

The Company is exposed to fluctuations in the prices of key raw materials and packaging materials, which can significantly impact production costs and overall profitability. Factors such as global commodity trends, supply-demand imbalances, and changes in vendor pricing policies contribute to this volatility.

2. Change in Climate Conditions

Unpredictable weather patterns and climate changes is always been a concern factor. Such conditions can disrupt supply chains and also alter consumer demand patterns, posing a risk to business stability.

3. Competition from Larger and Local Players

The Company operates in a highly competitive market with numerous established and local players offering similar products.This creates pricing pressure and the possibility of reduced market share if differentiation and brand positioning are not effectively maintained.

Mitigation Approach:

The Company continuously monitors these risks and adopts strategies such as backward integration to manage price fluctuation and bulk purchase well before the season to avoid scarcity and price hikes, a diversified portfolio to manage climate conditions, and a consistent approach in providing quality products at fair prices along with product innovation to beat competition

J. INTERNAL CONTROL SYSTEM ANDTHEIR 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 firm 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 891 employees as of the closure of the Financial Year.

L. PROGRESS DURINGTHEYEAR:

In the domestic market, the company expanded its presence by adding new states and strengthening its sales force on a state-wise basis. The company also increased its focus on essential products such as milk and milk-based products, where there is significant potential to boost the top line.

In the Ice Cream and Namkeen segments, the company developed new products and implemented strategic changes, which will contribute to the growth in top line in the coming year. Although the top line was impacted due to natural factors, the company is making every effort to achieve growth in the coming years.

On the export front, the company enhanced its global footprint by adding more countries, resulting in an increase in the top line compared to the previous year.

During the year, the company planned a 4.9 MW solar project near Amreli, which is scheduled to commence operations in FY 2025-26. This initiative will help reduce electricity costs and positively impact profitability.

Additionally, to improve operational efficiency and ease of doing business, the company has decided to implement an ERP system to synchronize all departments on a single platform. Implementation of the ERP system is expected to begin in FY 2025-26.

M. Financial Performance:

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. Debtorsturnover ratio

The primary reason for the increase in the debtors turnover ratio is that, during the year, the company extended the credit period for select debtors with a strong repayment history and long-standing relationships. Furthermore, the company continues to receive regular payments from these debtors.

2. Return on Net worth

Reason For subsequent change in Return on Net worth is due to company has lower profitability during the year where as there is a increase in equity fund and repayment of long term finance debt in financial year as compare to previous reporting year.

Disclosure of AccountingTreatment:

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.