Sukhjit Starch & Chemicals Ltd Management Discussions

Global overview¹

In CY 2024, the global economy experienced a period of mixed performance due to several persistent and emerging forces. Despite various setbacks, most of the regions witnessed a gradual stabilisation, supported by flexible monetary policies, supply chain realignments and adaptive behaviour from both the consumers and businesses adjusting to new economic landscape. Global GDP grew at 3.3% during CY 2024. Emerging Markets and Developing Economies (EMDEs) showed stronger growth, expanding by 4.3%, surpassing the 1.8% growth in developed economies. This consistent performance is largely due to the proactive monetary measures implemented by central banks worldwide. Global inflation showed a declining trend, though the pace varied across regions. The inflation rate declined from 6.7% in CY 2023 to 5.8% in CY 2024. Even though the rate of inflation is feasible, the economic activity showed resilience and grew steadily with advanced economies returning to their inflation targets sooner than emerging and developing economies.

The forecast for global economic growth in the upcoming years is projected to be 2.8% in CY 2025.The forecast for the nonfuel commodity prices is broadly stable, however inflation has decreased for advanced economies. The inflation is expected to fall from 4.3% in CY 2025 to 3.5% in CY2026, with inflationary pressures abating more swiftly than expected in many countries. It is anticipated to ease the monetary policy, placing economies in a better position. However, it is important for the countries to remain vigilant in monitoring and implementing effective monetary policies to keep the inflation trajectory under control.

During FY2025, Indias economy demonstrated dynamism and flexibility, remaining one of the fastest growing major economies, despite global headwinds such as trade-related uncertainties and tariff impositions. The economy grew by approximately 6.5%² during the year under review, driven by a strong domestic consumption, strategic policy initiatives undertaken by the Government of India to boost the manufacturing sector and focus on infrastructure investments.

Indias services exports saw an encouraging rise from $341.06 billion in FY 2024 to $383.51 billion in FY2025.³ Gross Foreign Direct Investment (FDI) demonstrated a strong comeback, increasing from $71.3 billion in FY 2024 to $81.0 billion during FY 2025.⁴ Despite overall market growth, the starch industry faced sluggish demand from certain sectors such as FMCG. This subdued offtake was primarily due to inventory rationalisation, cost optimisation measures, and cautious purchasing behaviour, which impacted short-term volume growth.

The future projections for the Indian economy indicate a GDP growth of 6.5% in FY 2026. This marks a downward revision from earlier estimates; however, strong domestic demand, fuelled by demographic dividends, growing middle-class income, robust rural consumption and strong services sector continues to support overall economic momentum. These projections carry significant downside risks due to potential global trade disruptions and a delayed synchronised recovery in western economies. Despite these challenges, Indias economic resilience is evident in its capital markets, which have shown increasing stability due to the rising participation of Domestic Institutional Investors (DIIs) offsetting foreign capital volatility. While inflation remains a concern, proactive government interventions and probable increase in agricultural output are expected to keep it within a manageable range, potentially easing in the next fiscal year.⁵

As of CY 2024, the global starch derivatives market is valued at approximately $65.41 billion, reflecting the scale and significance of the global starch industry. This industry relies on key raw materials such as corn, cassava, potato and wheat to produce wide range of derivatives. North America led the market in CY 2024, although the Asia Pacific region is rapidly emerging as a major growth hub, driven by rising demand from the food industry and expanding industrial applications. Starch derivatives serve as thickeners, stabilisers, binders and emulsifiers across various end-user industries including food & beverages, pharmaceuticals, chemicals and paper & pulp, underlining their diverse utility and growing demand.

The global starch market is positioned for sustained growth, with the starch derivatives segment projected to reach $68.66 billion by CY 2025, at a CAGR of 5.0% and further to $85.09 billion in CY2029 at a CAGR of 5.5%. Concerns regarding rising obesity rates are expected to increase the demand for starch derivatives that aid in glycaemic control and fat reduction. Expanding applications across non-food sectors such as pharmaceuticals and textiles are broadening the markets base. Consumer preferences are shifting toward natural, plant-based and gluten-free diets. Urbanisation, increasing disposable incomes and evolving dietary trends in emerging markets are expected to contribute to this positive outlook. Key trends shaping the future of the industry include functional and specialty starches, sustainable sourcing and production practices, continued investment in research and development and advancements in processing technologies.

The Indian starch and starch derivatives market in FY 2025 witnessed a challenging yet evolving landscape. Demand for functional starch derivatives such as thickeners, emulsifiers, gelling agents and film-forming additives remained stable across key end-use sectors including food and beverages, pharmaceuticals, personal care, paper, textiles, animal nutrition and FMCG. However, profitability across the industry came under pressure due to significant volatility in maize prices, driven by fluctuating demand from ethanol manufacturers and erratic supply trends. Export growth was constrained by evolving global tariff structures and reduced price competitiveness, limiting opportunities in international markets. Domestically, while consumption was moderate, steady production levels and disciplined cost management allowed companies to maintain operational continuity.

Encouragingly, recent market developments point to some easing in raw material pressures. Corn starch prices are expected to see moderate relief during the running year, due to improved domestic supply and balanced demand dynamics, especially from the food processing and paper sectors.⁸ The broader economic environment remains supportive of long-term sectoral growth. Robust credit profiles in manufacturing and consumption-led industries, along with consistent access to financing, provide a favourable backdrop for demand expansion. These structural strengths are expected to underpin steady volume growth in Indias starch and starch derivatives market, even as players continue navigating near-term volatility.

Indias starch and starch derivatives markets are showing a positive trend, with an expected CAGR of 4.6% by 2030. This growth is anticipated to be driven by the rising demand for modified starch due to its improved properties and applications in the food industry, particularly in fast foods and low-calorie products, fuelled by increasing health awareness and growing prevalence of obesity and diabetes. The market will also benefit from growing consumer interests in clean-label offerings and functional foods. Increasing applications in various sectors such as confectionery, cosmetics, pharmaceuticals (as tablet binders) and other industrial uses will further propel market expansion. The abundant availability of raw materials and ongoing investments by key players will continue to support this growth.

The demand for modified starch is increasing due to its improved functionality, such as altered cooking processes, reduced retrogradation, enhanced film creation and adhesion. Fast food restaurants frequently use modified starch to improve food flavour, taste and texture, further driving its demand. The rising number of obese and diabetic individuals and growing health awareness are also contributing to the demand for low-calorie food products that utilise modified starch.

Starch and its derivatives are utilised in a wide range of applications beyond the food and beverage industry, including feed, paper, pharmaceuticals, bioethanol and cosmetics. Their functional properties, such as acting as thickeners, stabilisers, emulsifiers and film-forming additives, make them valuable in these sectors. The increasing interest in natural cosmetics is expected to expand the market for starch derivatives in the cosmetics industry. Additionally,, increasing innovation is expected to drive demand for glucose-corn syrup.

Due to high production and potentially lower consumption of starch and starch derivatives in India, exports contribute significantly to the markets revenue growth.

The emphasis on animal nutrition offers opportunities to develop specialised feed products incorporating starch derivatives as binders and energy sources to enhance nutrition and performance. The predicted increase in global meat consumption by 2030 is expected to drive investment in quality feed additives such as starch derivatives.

Indias Fast-Moving Consumer Goods (FMCG) sector is likely to grow by 6% to 8% in revenue and 4% to 6% in volume this year. This growth is primarily driven by moderating food inflation, declining interest rates and select tax benefits, which are expected to boost urban demand, while rural consumption remains stable. These positive trends bode well for companies supplying starch and related products to key FMCG sectors such as food and personal care.

The inadequate manufacturing of specialty and modified starches to meet the demand from different sectors is restraining the market growth across the country. This suggests a gap between the growing demand for these value-added products and the current production capabilities.

A significant challenge stems from the growing diversion of maize toward ethanol production under the governments biofuel initiatives. This "food versus fuel" dynamic has led to increased price volatility and raw material uncertainty for starch manufacturers, who depend heavily on maize as a primary input. The resulting supply-side strain has adversely impacted cost structures and margin stability across the industry.

The Indian starch and starch derivatives market is competitive, with numerous domestic and multinational players trying for market share. This intense competition can pose a challenge for individual players in terms of pricing, market penetration and maintaining profitability.

Keeping pace with technological advancements is a significant trend as well as a persistent challenge. Companies need to invest in better and cheaper ways to make starch products. If the companies dont, they may struggle to make good-quality products and stay competitive.

As more people and businesses want eco-friendly products, starch makers face both opportunities and challenges. Companies and businesses need to adopt sustainable materials and cleaner production methods. This shift can be expensive and complicated, especially when trying to keep the supply chain clear.

Global trade tensions, especially between the US and China, are causing economic uncertainties and may slow down global growth. Elevated tariffs and evolving trade regulations could delay business investments and affect demand. While India remains relatively resilient, supported by low inflation and strong service exports, the threat of low-cost imports from countries like China poses challenges for domestic manufacturers. In response, the government has imposed additional duties on select imports.

Established in 1943, Sukhjit Starch and Chemicals Limited is one of Indias oldest and largest starch manufacturers, specialising in the production of starch and its derivatives. Over the years, the Company has built strong relationships with leading brands and customers, across diverse industries. Sukhjit has a comprehensive product portfolio which includes items such as Maize Starch, Dextrines, Pregel Starch, Liquid Glucose, High Maltose Syrup (HMS), Malto-Dextrin Powder, Monohydrate Dextrose, Anhydrous Dextrose, Sorbitol 70%, Maize Gluten, Maize Germ, Maize Oil and Maize Bran (Cattle Feed).

The Companys primary location is, Phagwara , Punjab with manufacturing units in Phagwara (Rehana Jattan) in the state of Punjab, Nizamabad in Telangana, Malda in west Bengal and Gurplah in Himachal Pradesh. Sukhjits products cater to a wide range of sectors including food and beverages, paper and board, personal care, pharmaceuticals, textile, FMCG and animal and pet foods. The Company is focused to evolving in harmony with nature while adhering to stringent international standards as demonstrated by its FSSAI, GMP, ISO 9001:2015 and FSSC:22000 certifications.

The Company anticipates improved margins in the upcoming years. This optimism is driven by expectations of a rise in end product prices, largely due to increased demand from various sectors / end users & also due to decrease / stability in raw material costs. The Company expects improvement in inventory gains and benefits from debottlenecking efforts, which are enhancing production capability and operational flexibility.

Sukhjit Starch has nurtured strong partnerships with leading FMCG brands, many of which have very long relationship with the Company. This collaboration allows Sukhjit to align its capacity expansions with future supply requirements. This synergy is expected to support sustained volume growth in targeted product segment and strengthen its position in the FMCG sector.

The Company has recorded high sales volumes compared to the previous year, demonstrating strategic agility and operational excellence.

The Company has done a stock split (i.e. subdivision of its existing equity shares) of face value of H 10 each to equity shares of face value of H 5 each, aimed at improving share liquidity and enhancing value for the shareholders.

Beyond the FMCG and pharma sectors, Sukhjit Starch is also witnessing resurgence in demand from the paper and textile segments. These growing opportunities are expected to contribute to both revenue and volume.

The Sukhjit Starch and Chemicals Limited, places a significant value on its human resources, recognising its work force as pivotal to the Companys success. The Company strives to cultivate a conducive working environment that encourages both professional and personal growth. A key aspect of the Companys HR strategy is promoting continuous learning and providing opportunities for career growth. The Company believes that investing in its people is an investment in its future. Sukhjit offers a comprehensive range of training programmes, both internal and external, aimed at equipping employees with the necessary skills and knowledge to excel in the respective fields. The Company encourages skill development across various functions to support employee growth within the organisation. The Company regularly organises key training and development programs for different departments. It encourages inter-locational transfers to help employees diversify their skill sets. Employee well-being and safety are also given utmost importance, with time-tested systems and preventive measures in place. The Company periodically provides training on safety measures and organises medical check-up camps.

The Company is open to the direct employment of physically disabled persons, ensuring they have equal rights and access to benefits. The Company also emphasises fostering a culture of knowledge sharing and collaboration through initiatives such as mentorship programmes and interdepartmental workshops.

The Company is dedicated to building an inclusive workplace and strictly enforces policies against any kind of discrimination. In addition, the Company is committed to providing stable job opportunities paired with professional work environment and a decent pay structure. It has helped the Company to retain its workforce including senior professionals for decades.

The Sukhjit Starch & Chemicals Ltd. Places significant emphasis on Research and Development (R&D) as a strategic pillar in strengthening its market position. The Companys R&D hub, located in Phagwara, supports all its manufacturing units.

Notable R&D activities include-

Co-developing high-yielding maize varieties with agriculture universities/leading seed companies

Creating low-cost and environmental friendly solutions for the paper industry

Customising sweetener formulations for varied applications

Creatingsolutionsforsugar-freeconfectioneryproducts

Formulating low moisture absorption solutions for the pharmaceutical sector.

The Company addresses a broad range of social needs, including education, healthcare, environmental sustainability and infrastructure development. The Company had remained focused on literacy, empowering women, facilitating health and sustaining the environment through initiatives in education, health and the environment. During the year, the Company spent H 181.41 Lakhs on CSR activities, including promoting education especially to girls & other students from rural areas/ from economically weaker section, organising blood donation camps, free healthcare camps, other health care and hygiene activities, distribution of free ration and tree plantation / other environment sustainability activities. A separate detailed report on the CSR activities of the Company forms part of the Directors Report.

Sr.1 Due to higher receivables Sr.2 Due to higher inventory Sr.3 & 8 Due to lower profits

Sr.5 Due to increase in net worth & decrease in long term debt Sr.6 & 7 Due to lower margin on sales

The Company focuses on manufacture of starch and its derivatives. The strategy of procuring and conserving an adequate supply of basic raw materials at an optimum cost is expected to potentially lead to enhanced operating outcomes in the upcoming years. The Company is undertaking capacity expansion in its existing locations to optimise its operations. It is also focused on managing debt and is currently in a comfortable position having with debt to equity ratio at 0.19 and having almost nil long-term bank borrowings.

The Sukhjit Starch and Chemicals Limited employs a risk management framework to effectively address the risks and challenges. This helps in building a strong corporate governance culture, proactive risk recognition and robust internal controls to ensure growth and financial stability of the Company.

The Company upholds strong internal control protocols to manage timely and accurate reporting and documentation of every transaction, as well as to protect and maintain its assets from unauthorised use. The management has also established and maintained internal controls for financial reporting and regularly evaluates their effectiveness. The independent auditors have also examined the internal financial control systems of the Company and have expressed their opinion that the Company has an adequate internal financial controls system over financial reporting which was operating effectively as of 2025. Further, the Audit Committee of Board meets regularly to discuss the important issues (if any) highlighted by the internal Auditors and the statutory Auditors of the Company.

The Management Discussion and Analysis Report contains forward-looking statements based on data available to the Company, assumptions about economic circumstances, current government policies and so on. Despite managements ongoing monitoring of market conditions and other factors, the Company cannot guarantee the accuracy of its assumptions or future performance. As a result, actual results, performance, or accomplishments may vary significantly from those anticipated in any such forward-looking statement. The Company accepts no responsibility to publicly change, modify, or revise any forward-looking statement based on any later development, information or event.