Shubhshree Biofuels Energy Ltd Management Discussions

GLOBAL ECONOMY OVERVIEW

The global economic context has become modestly more favorable since last June, following several years characterized by overlapping negative shocks. Inflation appears to be moderating without a substantial slowdown in key economies, and monetary policy easing has now become widespread. In the next couple of years, deceleration in the two main engines of the global economy—the United States and China—is expected to be offset by firming growth elsewhere, including in many emerging market and developing economies. In all, the post-pandemic global economic expansion is forecast to remain on a steady path. However, the global economy appears to be settling at a relatively low level of growth—one insufficient to foster sustained economic development and catch up in per capita incomes—with the possibility of further headwinds from heightened policy uncertainty, growing trade fragmentation, slower than-anticipated progress in reducing inflation, and weaker activity in major economies. Global trade growth rebounded last year, despite weak manufacturing activity in some key advanced economies. The recovery was driven by goods trade, which firmed in the third quarter of last year, partly owing to inventory buildups. Meanwhile, services trade growth continued to moderate. In 2025-26, trade growth is set to pick up further but will still remain below its 2010-19 average pace in nearly two-thirds of economies. Recourse to trade restrictions remains prevalent—with the number of new measures implemented in 2024 five times higher than the 2010-19 average.

Aggregate commodity prices softened by about 3 percent in 2024, primarily reflecting improving supply conditions for energy and food commodities, despite heightened geopolitical tensions. Commodity prices are projected to ease further over the forecast horizon. A small decline in oil prices last year reflected ample potential oil supply amid decelerating global oil consumption. A significant further decrease in oil prices is expected in 2025-26 as production expands while global oil demand growth remains modest. Base metals prices are set to stabilize over the forecast horizon, mirroring steady global growth. Meanwhile, prices for staple food crops, having fallen notably in 2024, are expected to post a small further decline. Global headline inflation has continued to gradually ease, in part reflecting falling commodity prices and the lagged effects of monetary tightening.

Fiscal policy is estimated to have been broadly neutral for global growth in 2024, with previously expected fiscal consolidation plans delayed in some major economies. Going forward, fiscal policy is generally anticipated to be modestly contractionary. The pace of fiscal consolidation is expected to pick up in EMDEs excluding China, and in some advanced economies—although not in the United States—as governments intensify efforts to realign spending with revenues. This is likely to exert a modest drag on near-term global growth.

Global growth is stabilizing as inflation returns closer to targets and monetary easing supports activity in both advanced economies and emerging market and developing economies (EMDEs). This should give rise to a broad-based, moderate global expansion over 2025-26, at 2.7 percent per year, as trade and investment firm. However, growth prospects appear insufficient to offset the damage done to the global economy by several years of successive negative shocks, with particularly detrimental outcomes in the most vulnerable countries. From a longer-term perspective, catch-up toward an advanced economy, income levels have steadily weakened across EMDEs over the first quarter of the twenty-first century. Heightened policy uncertainty and adverse trade policy shifts represent key downside risks to the outlook. Other risks include escalating conflicts and geopolitical tensions, higher inflation, more extreme weather events related to climate change, and weaker growth in major economies. On the upside, faster progress on dis-inflation and stronger demand in key economies could result in greater-than-expected global activity. The subdued growth outlook and multiple headwinds underscore the need for decisive policy action. Global policy efforts are required to safeguard trade, address debt vulnerabilities, and combat climate change. National policy makers need to resolutely pursue price stability as well as boost tax revenues and rationalize expenditures in order to achieve fiscal sustainability and finance needed investments. Moreover, to raise longer-term growth and put development goals on track, interventions that mitigate the impact of conflicts, lift human capital, bolster labor force inclusion, and confront food insecurity will be critical.

(Source-https://openknowledge.worldbank.org/server/api/core/bitstreams/f983c12d-d43c-4e41-997e-252ec6b87dbd/content)

INDIAN ECONOMY OVERVIEW

India continues to demonstrate robust economic performance amid global uncertainties, maintaining its status as the worlds fastest-growing major economy. The International Monetary Fund (IMF) projects Indias real GDP growth at 6.2% for 2025, supported by strong domestic demand and resilient private consumption. Inflationary pressures have eased significantly, with the Consumer Price Index (CPI) inflation declining to 3.16% in April 2025, the lowest since July 2019. This moderation is largely attributed to a substantial drop in food prices, notably an 11% year-on-year decrease in vegetable costs. The Reserve Bank of India (RBI) has responded by reducing the policy repo rate by a total of 50 basis points in 2025, bringing it down to 6.00% as of April 9, 2025.

The RBIs accommodative monetary policy stance aims to stimulate investment and consumption, further bolstering economic growth. With inflation under control and supportive fiscal measures in place, Indias economic outlook for 2025 remains positive, underpinned by structural reforms and a focus on infrastructure development.

BIOFUEL SECTOR

Bio-fuels provide a strategic advantage to promote sustainable development and to supplement conventional energy sources in meeting the rapidly increasing requirements for transportation fuels associated with high economic growth,as well as in meeting the energy needs of Indias vast rural population. Bio-fuels can increasingly satisfy these energy needs in an environmentally benign and cost-effective manner while reducing dependence on import of fossil fuels and thereby providing a higher degree of National Energy Security. The Indian approach to bio-fuels is based solely on non-food feedstocks to be raised on degraded or wastelands that are not suited to agriculture, thus avoiding a possible conflict of fuel vs. food security.

(Source: https://pib.gov.in/newsite/PrintRelease.aspx?relid=56469)

India boasts a strong agricultural and allied sector that contributes approximately 20% to the countrys GDP and supports the livelihood of over 50% of the population. This vast agricultural base provides an abundant and widespread availability of biomass feedstock, positioning India uniquely for biomass fuel production. Biomass has long been an essential energy source in India, offering multiple benefits including renewability, carbon neutrality, and the potential to generate significant rural employment opportunities.

The cultivation of bioenergy crops such as jatropha, sugarcane, maize, and mustard alongside traditional crops promotes agricultural diversification. This not only provides farmers with additional income streams but also enhances soil health through effective crop rotation practices. Additionally, converting agricultural residues—such as crop straw, husks, and other biomass—into biofuels supports waste reduction, offers farmers supplementary income, and improves overall agricultural productivity by optimizing resource utilization.

KEY STRUCTURAL DRIVERS FOR THE SECTOR

The biomass fuel sector in India is shaped by a combination of strategic, economic, and environmental factors that collectively drive its growth and development. These structural drivers establish the foundation for sustained expansion and innovation within the industry, positioning biomass as a pivotal component of Indias renewable energy landscape.

Here is a list of a few structural drivers for the sector:

• Abundant Agricultural Biomass Availability: Indias vast agricultural landscape generates significant quantities of biomass in the form of crop residues, forestry waste, and dedicated energy crops.. Over 700 MMT of agri-residue is generated annually; 220 MMT is surplus and underutilized. The large-scale availability of this feedstock provides a reliable raw material base essential for biomass fuel manufacturing. The strong linkage with the agricultural sector also helps in rural job creation and income diversification for farmers.

• Supportive Government Policies and Regulatory Framework: Governments across the globe, including India, have strengthened renewable energy mandates and carbon reduction targets, promoting biomass adoption.

India, in particular, is advancing policies to encourage biomass fuel integration. Notably, the Ministry of Power has mandated vide a notification dated June 16, 2023 that coal-based thermal power plants incorporate biomass pellets blended with coal. Effective from FY 2024-25:

• All coal based thermal power plants of power generation utilities with bowl mills, shall on annual basis mandatorily use minimum 5% blend of biomass pellets made, primarily, of agro residue along with coal with effect from FY 2024-25. The obligation shall increase to 7% with effect from FY 2025-26.

• All coal based thermal power plants of power generation utilities with ball & race mills, shall on annual basis mandatorily use 5% blend of biomass pellets (torrefied only) made, primarily, of agro residue along with coal with effect from FY 2024-25. The obligation shall increase to 7% with effect from FY 2025-26.

• All coal based thermal power plants of power generation utilities with ball & tube mills, shall on annual basis mandatorily use 5% blend of torrefied biomass pellets with volatile content below 22%, primarily made of agro residue along with coal with effect from FY 2024-25.

• Recently, pursuant to the Statutory Directions issued by the Commission for Air Quality Management (CAQM), all brick kilns located in districts beyond the NCR region of Haryana and in the State of Punjab are mandated to adopt co-firing using paddy straw-based pellets or briquettes. To support this directive, the States of Haryana and Punjab have outlined a phased implementation plan, aiming to achieve at least 50% co-firing by November 1, 2028. The yearwise co-firing targets are as follows:

o 2024-25: Minimum 5% co-firing

o 2025-26: Minimum 10%co-firing

o 2026-27: Minimum 20%co-firing

o 2027-28: Minimum 35%co-firing

o 2028-29 onwards: Minimum 50%co-firing

This initiative is part of a broader strategy to reduce stubble burning, manage agricultural residue sustainably, and curb air pollution from brick kiln operations.

• Benchmark Pricing: Industry norms suggest a sustainable ex-factory price range to cover costs of raw material procurement, processing, logistics, and quality assurance. While not officially fixed by the government, this range ensures product quality and long-term viability.

• Capital Subsidies (MNRE): Financial incentives are provided for setting up pellet manufacturing units, with additional benefits for plants in priority regions to address stubble burning and air pollution.

• Electricity Duty Exemption: A multi-year exemption of Electricity duty in several states helps reduce operational costs for energy-intensive pelletizing processes.

• Infrastructure & Finance Support: Includes collateral-free loans, interest subvention, priority lending, and support for mechanized biomass collection and rural aggregation.

• Climate Change Mitigation and Renewable Energy Targets: Indias commitment to reducing greenhouse gas emissions and increasing the share of renewables in its energy mix has positioned biomass fuels as a key contributor to national goals. Biomass is recognized for its carbon-neutral properties, helping the country meet international climate agreements while reducing reliance on fossil fuels.

• Technological Advancements and Innovation: Continued improvements in biomass processing technologies—such as pelletization, torrefaction, gasification, and anaerobic digestion—have enhanced fuel quality, efficiency, and cost-effectiveness. Innovation in supply chain management and storage also addresses challenges related to feedstock seasonality and transportation.

• Waste Management and Environmental Sustainability: By converting agricultural and forestry waste into usable fuel, the biomass sector plays a critical role in managing waste, reducing openfield burning, and minimizing environmental pollution. This enhances soil quality and helps achieve zero-waste targets aligned with circular economy principles.

• Energy Security and Import Substitution: Biomass fuels contribute to reducing Indias dependence on imported coal and petroleum products. Developing indigenous biomass resources enhances national energy security and reduces exposure to global energy price volatility.

• Rural Economic Development and Employment Generation: Biomass fuel manufacturing plants are typically situated close to biomass sources in rural areas, creating direct and indirect employment opportunities. This fosters rural development, supports agrarian economies, and promotes sustainable livelihoods through value addition to agricultural residues.

COMPANYS PERFORMANCE

Operating revenue in FY 2024-25 grew by 72.77% as compared to FY 2023-24 and around 177.50% as compared to FY 2022-23.Operating margin was at 6.7% in FY 2024-25. PAT increased to Rs. 809.85 Crores in FY 2024-25.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The overview of financial performance with respect to operational performance of the Company can be obtained from the various following ratio analysis.

PARTICULARS	Numerator/ Denominator	2024-25 (in %) 2023-24 (in %)		Change in %	Reasons for more than 25% Variance
Debtors Turnover ratio	Revenue from Operations	9.4	16.16	-41.83	Companys Turnover has been increased substantially due to which companys Account receivables increased.
	Average Debtors
Inventory Turnover ratio	Revenue from Operations	67.7	204.83	-66.95	Companys average inventory holding is increased as compared to last year.
	Average Inventory
Debt Service Coverage Ratio	Earnings Available for Debt Service	33.57	22.77	47.41	Companys profitability has been increased.
	Current Interest and Installments of Loan
Current Ratio	Current Asset	2.24	2.01	11.49	NA
	Current Liabilities
Debt Equity Ratio	Total Debts	0.28	0.09	224.77	Debt Equity ratio is on the higher side as compared to previous year because of Company raised working capital loan this year only.
	Equity
Operating Profit Margin	EBITDA excluding Other Income	6.93	5.28	31.31	Companys Turnover has been increased substantially and company is managed to achieve economies of scale benefits.
	Revenue from Operations
Net Profit Margin	PAT	4.98	3.51	41.9	Companys Turnover has been increased substantially and company is managed to achieve economies of scale benefits.
	Revenue from Operations
Return on equity	PAT	43.33	68.3	-36.57	Company has issued Equity in current financial year through an IPO due to which equity increased and companys profitability has been increased.
Return of Capital employed	Average Shareholders Equity	28.45	62.85	-54.73	Company has issued Equity in current financial year through an IPO due to which equity increased and companys profitability has been increased.
	EBIT
Return on assets	Average Capital Employed (Total Debt + Equity)	16.37	23.65	-30.78	Such return is decreased due to sluggish market conditions.
	PAT
	Total of Balance Sheet

SEGMENT-WISE PERFORMANCE

The Company deals only in one segment i.e. manufacturing and trading of biomass fuels which includes biomass pallets and briquettes, accordingly there is only a single reportable segment.

OPPORTUNITIES AND THREATS

Indias biofuels sector is undergoing rapid evolution, driven by progressive government policies, growing energy needs, and the global imperative to reduce carbon emissions. As a company committed to sustainable energy and agricultural recycling, Shubhshree Biofuels Energy Ltd is well-positioned to leverage sectoral growth, while also remaining mindful of the challenges that could impact long-term scalability.

Opportunities

• High Green Energy Potential: Indias biomass sector offers a generation potential of over 28,000 MWe, creating vast room for renewable energy substitution.

• Environmental Impact: Biofuels can help reduce up to 90 million tons of CO 2 emissions annually, enabling industries to align with carbon neutrality goals.

• Large Market Size: The estimated Total Available Market (TAM) from biomass co-firing in the power sector alone is over ^55,000 crore, presenting significant business potential.

• Cost-Effective Infrastructure Use: Existing power plant infrastructure can be utilized for biomass cofiring, lowering capital outlay.

• Support for ESG Goals: Growing focus on sustainability and clean energy adoption across sectors supports long-term demand for biofuels.

Threats

• Lack of Standardization: The absence of a robust quality assurance framework for biomass fuels affects market credibility.

• Procurement and Policy Gaps: Inconsistent or unsupportive procurement mechanisms may hinder secure supply arrangements.

• Underdeveloped Ecosystem: Limited ecosystem development affects scalability, especially in logistics, supply chain, and end-user integration.

• Technical and Workforce Challenges: Shortages of skilled manpower and technical know-how constrain efficient manufacturing and innovation.

• Market Acceptance Barriers: Resistance to switch from conventional fuels and behavioral inertia among potential customers limit adoption.

• Seasonal and Regional Dependence: Biomass availability and demand are often seasonal and geographically concentrated, impacting operational consistency.

• Competitive Pressure: Low entry barriers in biomass fuel production may lead to increased competition and price pressures.

Despite these challenges, the Company is proactively addressing risks through strategic planning, stakeholder collaboration, and investments in quality, innovation, and operational excellence. We remain confident in the sectors long-term growth and our ability to play a leading role in Indias clean energy transition.

RISKS AND CONCERNS

The biomass fuel sector, while promising, presents several operational and strategic risks, particularly for early-stage players like Shubhshree Biofuels Energy Ltd. As a company operating in a relatively nascent and evolving industry, we face challenges related to market acceptance, cost volatility, and supply chain reliability.

Some of the key risks impacting our business include:

• A limited track record of profitability and ongoing stabilization of our manufacturing operations, which may affect near-term financial performance.

• The undeveloped nature of the biomass fuel market compared to conventional fuels, requiring significant efforts in customer education and market penetration.

• High client concentration, geographical dependency (primarily Northern India), and seasonal fluctuations that could impact revenue consistency.

• Raw material availability and price volatility, along with limited long-term supply agreements, could adversely affect manufacturing continuity and margins.

• The absence of strong entry barriers may intensify competition from both organized and unorganized players, exerting pressure on pricing and market share.

• Dependency on third-party logistics and power availability also pose operational risks, especially in regions with infrastructure constraints.

Given our limited operating history, the business remains exposed to uncertainties in demand forecasting, customer acquisition, and supply chain planning.

The Company continues to identify, monitor, and mitigate these risks through strategic initiatives including supply diversification, customer base broadening, operational efficiencies, and technology investments. While challenges persist, our long-term outlook remains positive, backed by sectoral growth drivers and our mission-driven approach to sustainable energy solutions.

OUTLOOK

Shubhshree Biofuels Energy Ltd remains highly optimistic about the long-term prospects of the biofuels sector, which is emerging as a cornerstone of Indias clean energy and sustainability roadmap. With strong policy momentum, expanding market potential, and heightened global emphasis on carbon reduction, the sector offers significant opportunities for innovation, inclusion, and impact.

In alignment with our mission to be a leading agricultural recycling company, we are leveraging technology, sustainability, and innovation to transform agricultural waste into clean energy. Our approach ensures not only value creation but also inclusive growth-empowering rural communities, supporting local economies, and advancing environmental stewardship.

Our vision to lead Indias biofuel sector by delivering quality, sustainable energy solutions shapes every strategic decision we make.

Backed by our core values of trust, passion, fairness, and relationship-building, we foster partnerships that enhance stakeholder confidence and support a cleaner, greener future. As we continue to grow, we remain deeply rooted in our commitment to integrity, sustainability, and long-term impact.

With a clear strategic direction and a purpose-driven approach, Shubhshree Biofuels Energy Ltd is wellpositioned to drive growth, lead sectoral transformation, and contribute meaningfully to Indias bioeconomy.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains a robust framework of internal controls tailored to its operational scale and complexity. The internal control framework is designed to ensure proper safeguarding of assets, maintaining proper accounting records and providing reliable financial information and other data. This system is supplemented by internal audit, reviews by the management and documented policies, guidelines and procedures. The Company has a well-defined organizational structure, authority levels, internal rules and guidelines for conducting business transactions. The Company intends to undertake further measures as necessary in line with its intent to adhere to the procedures, guidelines and regulations, as applicable, in a transparent manner. The internal financial controls with reference to the Financial Statements are commensurate with the size and nature of business of the Company.

Furthermore, a firm of Chartered Accountants conducts internal audit periodically and presents report to the Audit Committee of the Company. These internal control system, coupled with internal audit procedures, provide reasonable assurance to the Statutory Auditors regarding the reliability of financial reporting and compliance with the applicable Indian Accounting Standards (Ind AS), Companies Act and its rules, SEBI Regulations and other relevant regulations.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company firmly considers its employees as its most valuable and strategic assets. Our growth and expansion are driven by the dedication, skills, and consistent efforts of our people. We continue to remain an equal opportunity employer, fostering an inclusive, merit-based culture that encourages leadership, innovation, and responsibility.

In line with our long-term vision, we are focused on:

• Upskilling and reskilling our workforce through structured learning and development programs.

• Mentoring employees to take on broader roles and responsibilities within the organization.

• Embedding industry best practices and stakeholder feedback into our people strategies to enhance the overall employee experience.

We also emphasize the importance of work-life balance, professional development, and a supportive work environment. Employees are encouraged to take ownership of projects and contribute meaningfully to organizational goals.

The Company is deeply committed to women empowerment and has taken several steps to promote leadership opportunities for women and create an inclusive work culture.

As on March 31, 2025, the Company had 40 permanent employees. Our team remains united in its mission to contribute meaningfully to sustainable development and environmental conservation.

	For and on behalf of Board of Directors For SHUBHSHREE BIOFUELS ENERGY LIMITED (FORMERLY KNOWN AS SHUBHSHREE BIOFUELS ENERGY PRIVATE LIMITED AND SHUBHSHREE BRICKS PRIVATE LIMITED)
	Sd/-	Sd/-
	(Sagar Agrawal)	(Aastha Agarwal)
Date : 25.08.2025	Chairman and Managing Director	Director
Place: Jaipur	DIN:03209247	DIN:07172285