Shellz India Ltd Management Discussions

This discussion covers the financial year ended 31 March 2026 and should be read with the audited financial statements and notes in this Report. FY 2025-26 figures are consolidated (Shellz India Limited and its wholly owned subsidiary, Shellz Overseas Private Limited, from 22 March 2026); FY 2024-25 figures are standalone, as reported.

1 Industry structure and developments

India remains one of the least penetrated confectionery markets in the world. Indians ate about 0.39 kg of confectionery per person in FY25, against 9.1 kg in the USA and 14.4 kg in Germany, and treats priced between ?1 and ?10 carry 86% of purchase intent (Ken Research). Most of these treats are still bought at the kirana counter, through a long chain of super stockists, distributors and wholesalers.

Three shifts shaped the year. Quick-commerce apps grew quickly in large cities and became a place where new brands and formats are discovered. Consumers, especially younger ones, asked for less sugar without giving up taste. And input costs for cocoa, fats, sugar and packaging stayed volatile, which rewards makers who can reformulate and buy well.

2 Our business and performance by segment

The Company makes and sells confectionery: chocolates, baked treats, jellies and candies. The Board reviews performance by brand and by channel.

Hugs, our everyday brand, carried ?173.3 crore of sales at price points of ?1, ?2, ?5 and ?10. Tosca, relaunched for quick commerce and a younger buyer, grew 64% to ?2.7 crore; Tosca Oat Choco won the Agriculture Innovation Award at Asia Retail Congress. Our non-branded business grew 17% to ?16.6 crore, including ?2.0 crore of private label for partner brands, up from ?0.4 crore.

We launched 19 new products, taking the range to 126 products, and reached the trade through 344 super stockists in around 24 states.

3 Financial performance

Revenue from operations grew 3% to ?192.6 crore. The years progress came from margin rather than volume. Materials consumed fell to 73.4% of revenue from 79.1%, as we put more chocolate and better-margin formats into the range and began making at Sonipat. EBITDA rose 30% to ?31.5 crore, and the EBITDA margin rose to 16.4% from 13.0%.

Employee costs rose 27% and other expenses 39%, mainly for the Sonipat plant. Finance costs rose 9% on higher average borrowings. Profit after tax rose 48% to ?13.2 crore, and consolidated earnings per share were ?15.13 after the 11:1 bonus issue.

Net worth rose 43% to ?60.2 crore, helped by ?5.0 crore of fresh equity raised in September 2025 and the years profit. Total borrowings rose to ?100.8 crore, mainly long-term loans for Sonipat, while short-term borrowings fell. Debt to equity improved to 1.68 from 1.86.

4 Key financial ratios

Changes of 25% or more. Debtors turnover fell because trade receivables rose to ?48.6 crore at year end, from ?35.6 crore, while sales rose 3%. Receivables outstanding for more than 180 days were ?10.2 crore, and we are tightening credit terms and collections with larger stockists. Current ratio improved as short-term borrowings fell and advances to suppliers for Sonipat rose. Operating margin and net profit margin improved for the reasons set out above. Return on net worth was broadly flat, as the higher profit was earned on a larger equity base.

Opportunities. Low per-capita consumption and the strength of ?1-?10 formats leave a long runway for affordable treats. Quick commerce lets a new brand like Tosca reach city buyers without a national distribution build-out. Partner brands increasingly want a capable maker for private label. And a modern plant at Sonipat, built to the standards international buyers expect, opens room for exports.

Threats. Large national and multinational brands compete for the same counter, and new entrants arrive often. Input-cost swings can squeeze margins quickly. Most of our sales are in the north and through larger stockists, which concentrates risk. Changes in FSSAI, labelling or tax rules can raise costs or force reformulation.

6 Outlook

In FY 2026-27 our priorities are to move more of our manufacturing to Sonipat in phases, so that more of what we sell earns its better margins, and to bring new lines on stream there for more chocolate and more formats. We will keep designing for the price on the counter first, keep the kirana store at the centre of our distribution, and keep reducing sugar only where the product still tastes like a treat.

7 Risks and concerns

The principal risks we watch, and our response to each, are set out on the Risk management page of this Report: input costs, the timing of the move to Sonipat, funding, customer and regional concentration, food safety, competition, regulation and dependence on the Hugs and Tosca brands. The Board reviews these each year through the Audit Committee. The provisions and contingent liabilities, and the recoverability of older trade receivables, were also reported by our statutory auditors as key audit matters.

8 Internal control systems and their adequacy

The Company has internal controls proportionate to its size and the nature of its business, covering purchasing, inventory, sales, collections, payroll and financial reporting. Food safety is managed under ISO 22000:2018. The Audit Committee reviews the internal control environment and the reports of the statutory auditors.

The statutory auditors have expressed an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting. Two areas are being strengthened. The audit trail (edit log) feature of our accounting software, which the auditors reported as not yet enabled, is being enabled. And quarterly stock and debtor statements filed with our lenders, which differed from the books in the first two quarters, are now reconciled before filing; the third- and fourth-quarter statements agreed with the books.

9 Human resources

Shellz had 220 people at 31 March 2026, up from 134 a year earlier, as we staffed the Sonipat plant. We invest in our food and packaging technologists, our engineers and our line teams, and in safety on the shop floor. Industrial relations remained cordial throughout the year.

10 Cautionary statement

Statements in this discussion describing the Companys objectives, plans, estimates and expectations may be forwardlooking statements within the meaning of applicable laws. Actual results may differ materially from those expressed or implied, because of factors including changes in demand, input prices, competition, government regulation, tax laws, economic conditions in India and other factors outside the Companys control. The Company undertakes no obligation to update these statements.