Tapi Fruit Processing Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS & OUTLOOK Introduction

The world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A Slight acceleration for advanced economies-where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025. will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forec ast for global growth five years from now at 3.1 percent is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies.

India is now the fifth-largest economy in the world GDP rankings list due to its strong economic foundations, thriving domestic demand, careful financial management, high saving rates and favourable demographic trends. The countrys major economic contributors are traditional and modern agriculture, technology services, the handicraft industry, and business outsourcing. Indias GDP registered a growth of 8.4 percent in the third quarter of FY24, according to the estimates of the Statistics Ministry. The new numbers showed a remarkable 4.1 percent increase in GDP growth compared to the third quarter of FY23 when it was 4.3 percent. In Q1 FY24, GDP growth surged to 7.8 percent, surpassing many major economies of the world, such as the US, UK, and China. This was an impressive achievement compared to the 6.1 percent growth rate in the preceding quarter. Within various sectors of India, the agriculture sector demonstrated a visible growth rate of 3.5 percent, while the manufacturing sector had 4.7 percent growth. In the Q2 FY24, the GDP growth of 7.6 percent showed a broad-based recovery of India from the pandemic. Especially domestic demand for employment increased in spite of the global risk and unexpected factors. While the agriculture, forestry and fishing industry saw growth of 1.2 percent, the manufacturing sector also saw growth of 13.9 percent compared to Q1 FY24. Q3 FY24 shook everyone as it surpassed the past growth of 7.6 percent to 8.4 perc ent. This quarters growth has been the highest since the last five quarters. Growth in certain sectors, like services, manufacturing, and construction, has had quite an impact on the rise of the GDP growth rate. Private consumption has also provided a good surge to the GDP growth rate.

The Indian food processing industry has grown rapidly with an average annual growth rate of 8.3% in the past 5 years. With a market size of US$ 866 billion in 2022, the food industry will play a vital role in the economys growth. The domestic food market is projected to grow by over 47% between 2022 and 2027, reaching US$ 1,274 billion. In 2023, the food market will generate US$ 963 billion in revenue and the market is anticipated to expand at a CAGR of 7.23% between 2023-27, backed by the rise in population, changing lifestyle and food habits due to rising disposable income and urbanization. Indias agricultural and processed food exports have gone up to more than US$ 50 billion in 2022-23, accounting for 22.6% of the overall agri-food exports. The growing consumption of food is expected to reach US$ 1.2 trillion by 2025-26, owing to urbanization and changing consumption patterns.

The global fruit pulp industry has witnessed steady growth in the recent years. It will grow from USD 1.41 billion in 2023 to USD 1.47 billion in 2024 at a CAGR of 4.3 %. The fruit pulp market size is expected to see steady growth in the next few years. It will grow to USD 1.76 billion in 2028 at CAGR of 4.5%. The increasing demand for pulp-based food products is expected to drive the growth of the fruit pulp market going forward. Pulp-based food products refer to processed food items in which fruit or vegetable pulp is incorporated to enhance the natural flavour and taste of desired fruit and vegetable. In pulp-based food products, fruit pulp is utilized in the production of goods including jams, marmalades, jellies, candies, beverages, and flavourings that contain fruit. India is emerging as a prominent market for fruit and vegetable pulps, with the industry forecasted to increase by USD 165.5 million, at a CAGR of 8.09% between 2023 and 2028. The fruit pulp market is experiencing significant growth, driven by several key factors . Urbanization and evolving consumer lifestyles are primary catalysts, leading to a surge in demand for convenient and healthy food options. Processed fruits, including pulp, are increasingly preferred due to their extended shelf life and ease of use. Additionally, the rise in health consciousness and the increasing popularity of functional foods are further boosting the market growth. Overall, these factors are fueling the expansion of the fruit pulp market, making it an attractive investment opportunity for businesses. The maximum demand is for mango, guava, tomato, and mixed fruit pulps.

Some of the key factors fuelling the consumption of fruit and vegetable pulp globally includes: a widening application in food products, rising private label offerings, investments in pulp processing technology, and capacity expansions by leading players. Developed regions like North America and Europe are mature markets. The Asia-Pacific region and Latin America offer strong growth potential owing to rapid urbanisation, rising incomes, and an increasing middleclass population. Overall, the fruit and vegetable pulp sector is poised for a prosperous future globally backed by a strong health and wellness trend.

The global jellies & gummies market size to be valued at USD 17.7 billion by 2025 and is expected to grow at a compound annua l growth rate (CAGR) of 3.5% during the forecast period. The market growth is attributed to growing vegan population, booming candy industry, rising awareness regarding the side effects of chocolate consumption, and increasing consumer spending. Jellies and gummies have been gaining an increasing traction among the consumers on account of their frequent purchases and growing consumption of candies over chocolate. Factors impacting the purchase decision of consumers include unique flavors, textures, candies design, shape, packaging, and sugar content. Snacking, personal rewards on-the-go, occasions, and holidays are the major reasons for the consumption of jellies and gummies. Candies are mostly popular among kids and they are the major target consumers for the candy makers.

The global organic food and beverages market size was estimated at USD 231.52 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 13.9% from 2024 to 2030. One of the primary factors driving market expansion is growing awareness about the health benefits associated with the consumption of organic products. Sales of organic food and beverages are projected to rise as a result of the change in purchasing behavior of consumers. In addition, the rising popularity of non-GMO products among consumers is driving market growth. The market has witnessed substantial growth due to the increased accessibility of organic foods and beverages. Organic products are no longer confined to niche stores or farmers markets.

The global nutraceuticals market size was USD 217.22 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 9.6% from 2024 to 2030. The primary factors driving the market growth are preventive healthcare, increasing instances of lifestyle-related disorders, and rising consumer focus on health-promoting diets. Additionally, increasing consumer spending power in high-growth economies is projected to contribute to the growing demand for nutraceutical products. The growing demand for dietary supplements and nutraceuticals is also attributed to consumer preferences shifting towards self-directed care in the treatment of lifestyle disorders such as cardiovascular disorders and malnutrition. Nutraceuticals are associated with various medical and health benefits, which is driving their increased adoption among consumers globally. Rising healthcare costs, coupled with the increasing geriatric population across the world, are anticipated to assi st the global nutraceutical industry growth over the forecast period. Consumers attitude is very positive towards functional foods mainly because of the added health and wellness benefits offered by these products. The rising geriatric population, increasing healthcare costs, changing lifestyles, food innovation, and expectations regarding higher prices have aided overall growth.

? Providing financial assistance and fiscal incentives to develop common supply chain infrastructure including cold storage, packaging, logistics etc. to lower investment costs, increase viability, and ensure regulatory compliance. ? PLI schemes to support the creation of infrastructure to encourage manufacturing champions based out of India. ? Promoting processing clusters and strong linkages from farm to retail through measures like setting up Mega Food Parks with appropriate incentives. ? Supporting the creation of services for R&D, testing, quality improvement, marketing etc., to enhance innovation, competitiveness, and eco-friendly packaging. ? Creating a Rupees 2000 Crores fund in NABARD to provide affordable credit for boosting the food processing sector. ? Assisting new and existing micro food enterprises through capital investment support along with strengthening linkages, common facilities, training etc., through the Pradhan Mantri Formalisation of Micro food Processing Enterprises (PMFME) scheme. ? Supporting the setting up of new micro units and upgrading existing micro food processing units, through the PMFME scheme.

Tapi Fruit Processing Limited is thriving in the highly favorable business environment for the Indian food processing industr y, capitalising on the increasing demand for processed fruits and vegetables. The company have a successful track record of over two decades in the Indian food industry which has enabled them to develop an effective business model with stringent control over processes, including raw ingredient procurement, manufacturing operations, inventory management across their large range of products and SKUs, management of distribution logistics across India, as well as managing deemed export sales. Tapi Fruit Processing Limited unwavering commitment to sustainability and ethical manufacturing practices, differentiates it from the commoditised nature of this industry enabling it to become the preferred supplier to top brands globally. The Company actively embraces renewable energy, water conservation measures, and effective waste management initiatives, demonstrating its dedication to minimising its environmental footprint. The domestic candied fruits and jelly industry also experienced a year of robust growth. Some factors for this growth include the resurgence of out-of-home channels and pent-up demand driven by consumers returning to socialising along with increased outreach in rural electrification and increase of capacities by large brands. The Indian beverages industry presents significant growth opportunities in the future, driven by deeper penetration into rura l markets, an expanding demographic profile, and a growing middle-class population. Furthermore, with the growth in per capita income, consumers are willing to spend more on premium and niche products. Urbanisation is also playing a significant role in the growth of the industry, as more people move to urban areas and have greater disposable income. The Company has implemented several strategic initiatives to enhance its operational excellence.

Tapi have placed a strong emphasis on developing their in-house R&D abilities, which, has been instrumental in companys growth. Their in-house R&D initiatives have resulted in the expansion of companys product portfolio, maintaining the quality of our products and translating feedback received from customers, dealers and distributors into concrete results. The research and development activities emphasize designing and developing new products keeping in mind market standards, customer requirements, cost of production and compliance with applicable standardization norms.

? Growing Packaged Food and Beverage Consumption: Large and Expanding Indian Market

? International Market Expansion: Introducing Products to Cater to Indian Diaspora and Ethnic Food Aisles ? Premium Product Development: Targeting Consumers Seeking High-Quality Offerings ? Strengthening Supply Chain and Business Practices: Enhancing Operational Efficiency and Cost Reduction

? High Tax Structure

? Volatility in Commodity and Currency Rates: Led by inflationary pressures and mobility restrictions ? Broad-Based Cost Pressures: Including commodity prices, input cost inflation, and freight challenges

The company is primarily engaged in the business of FMCG product, which constitute a single reportable segment in accordance with Ind AS 108 "Segment Reporting".

Financial Highlights INR In Hundred

During the year under review, the revenue from operation of the Company was stood at INR 21,01,666.52 Hundred as against that of INR 20,51,084.49 Hundred for previous year. Revenue from operation of the Company was increased by 2.47% over previous year. Loss before Tax for the financial year 2023-24 stood at INR 24,089.89 Hundred as against Loss before Tax of INR 21,127.84 Hundred making the net loss of INR 25,193.29 Hundred for the financial year 2023-24 as against the net loss of INR 19,426.84 Hundred for the financial year 2022-23. Due to increase in raw material prices and other expenses, the Company could not generate the requisite profit even though increase in revenue from operations. The Board is making its continuous efforts for re-visiting the purchase policy of the Company and increasing the capacity utilization of manufacturing capacity. Management had decided for expansion of production capacity and production area for generating more revenue and profit. The Management is also confident in addition of new automated Production and Packing machinery will help to achieving reduction in the fixed cost and manual intervention in the production will lead the Company to generate the profit in the coming years. Company has also opened company operated retail outlet and addition of New profitable Products as well as expansion in nutraceutical products which will help in generating more revenue and profits.

The consolidated revenue from operation of the Company for financial year 2023-24 stood at INR 22,28,526.71 Hundred as against that of INR 20,67,208.21 Hundred for previous year. Loss before Tax for the financial year 2023-24 stood at INR 15,724.39 Hundred as compared to INR 20429.55 Hundred for the previous financial year 2022-23. The consolidated net loss of INR 18,247.53 Hundred for the financial year 2023-24 as compared to INR 18904.31 Hundred for the previous financial year 2022-23.

The Company is exposed to various risks and uncertainties which may adversely impact its performance. The Companys future growth prospects and cash flow generation could be materially impacted by any of these risks or opportunities. The major risks as identified by the Company are demand-risks due to any resurgence in the COVID 19 pandemic, currency risk associated with imports, unfair competition, etc. The Company follows the Enterprise Risk Management (ERM) framework to manage and mitigate such risks which is primarily based on the integrated framework for enterprise risk management and internal controls developed by the Company.

Internal Control system and adequacy Internal Control measures and systems are established to ensure the correctness of the transactions and safe guarding of the assets. Thus, internal control is an integral component of risk management. The Internal control checks and internal audit programmes adopted by the Company plays an important role in the risk management feedback loop, in which the information generated in the internal control process is reported back to the Board and Management. The internal control systems are modified continuously to meet the dynamic change. Further the Audit Committee of the Board of Directors reviews the internal audit reports and the adequacy and effectiveness of internal controls.

The Company believes in establishing and building a strong performance and competency driven culture amongst its employees wi th greater sense of accountability and responsibility. The Company has taken various steps for strengthening organizational competency through the involvement and development of employees as well as installing effective systems for improving their productivity and accountability at functional levels. The Company acknowledges that its principal asset is its employees. Ongoing in-house and external training is provided to the employees at all levels to update their knowledge and upgrade their skills and abilities. As on March 31, 2024, the Company had total 68 full time employees. The industrial relations have remained harmonious throughout the year.

Statements in this Report, describing the Companys objectives, projections, estimates and expectations may constitute forwa rd looking statements within the meaning of applicable laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events. These statements are subject to certain risks and uncertainties. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The actual results may be different from those expressed or implied since the Companys operations are affected by many external and internal factors, which are beyond the control of the management. Hence the Company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments, information or events.