Hester Biosciences Ltd Management Discussions

ECONOMY OVERVIEW

GLOBAL ECONOMY

The global economy is projected to stabilise at a modest growth rate of 2.7% during 2025-2026.¹ While inflation is gradually approaching target levels, and monetary policies are easing in both advanced and emerging market economies, the pace of recovery remains subdued. The lingering effects of recent global shocks, such as the pandemic, geopolitical conflicts, and inflationary pressures, continue to constrain long-term growth. Moreover, the recent tariff wars have been adding friction to trade, undermining efficiency and constraining global economic growth, especially in a fragile post-pandemic world. Although there are signs of a broad-based recovery in trade and investment, these trends are unlikely to fully undo the damage inflicted over the past several years, particularly in the most vulnerable economies.

Emerging market and developing economies (EMDEs), which have driven around 60% of global economic expansion since 2000, now face a critical crossroads. Growth convergence towards advanced economy income levels has significantly slowed down with structural weaknesses, rising debt, and demographic challenges hindering progress. Without targeted policy interventions, many low-income countries may fall short of achieving middle-income status by midcentury. The income gap between developed and developing economies risks widening further, posing a challenge to global efforts for equitable and inclusive development.

The global outlook is also clouded by considerable downside risks that include escalating geopolitical tensions, policy uncertainties, protectionist trade measures, climate-related natural disasters, and persistent inflationary pressures. On the flip side, stronger-than-expected disinflation and a rebound in demand in key economies could drive global activity beyond current projections. However, to foster sustainable development and mitigate vulnerabilities, urgent action is needed at both national and international levels. This includes reforms to improve macroeconomic stability, climate resilience, and structural productivity, along with coordinated global efforts to preserve open trade and financial systems.

Regionally, growth trajectories across EMDEs vary widely. While East Asia, the Pacific, and Europe are expected to face slower growth due to domestic and external challenges, regions like Latin America,

South Asia, the Middle East, and Sub-Saharan Africa are poised for moderate recovery, buoyed by strong domestic demand and demographic advantages.

For low-income countries, reigniting growth will require increased investments in human and physical capital, strengthening governance and institutional frameworks and leveraging natural resources for a green transition. International cooperation and tailored country-specific strategies will be essential to unlock long-term growth and achieve developmental milestones.

INDIAN ECONOMY

India continues to stand out as one of the fastest- growing major economies globally, maintaining a strong growth trajectory despite prevailing global headwinds. For FY24-25, the Indian economy is projected to grow at a real GDP rate of 6.5%², reflecting its resilience amid rising geopolitical tensions and slowing global trade. Growth has been primarily driven by robust private consumption and a recovering agricultural sector. While the manufacturing sector saw a dip due to weaker industrial activity in Q2 (July-September 2024), signs of sequential recovery have since emerged. The services sector remains a major growth contributor, bolstered by strength in trade, hospitality, and financial services, with continued support from public administration and defense- related activities.

The Reserve Bank of India (RBI) has played a key role in supporting economic momentum through calibrated monetary policy. In early 2025, the Monetary Policy Committee implemented two consecutive rate cuts, 25 basis points each in February and April, bringing the repo rate down to 6.00%. These were the first such reductions in nearly five years, aimed at energizing domestic demand amid uncertainties around global trade and stringent U.S. tariff policies. Alongside stable banking liquidity and a positive inflation outlook, projected at 4% for FY26, these measures are expected to support further growth. The RBI has also underscored the need for enhanced financial safeguards, particularly to address the rising threat of digital fraud.

The International Monetary Fund (IMF) echoes this optimism, projecting Indias GDP growth at 6.5% for both FY25 and FY26.³ These forecasts reflect confidence in Indias macroeconomic stability, strengthened corporate balance sheets, and rapid

1 https://openknowledge.worldbank.org/bitstreams/90955f0c-c8dd-4a00-81b4-f3e3d28ce8ae/download

2 https://pib.gov.in/PressReleasePage.aspx?PRID=2120509

3 https://www.imf.org/en/News/Articles/2025/02/26/pr25045-india-imf-executive-board-concludes-2024-artide- iv-consultation-with-india progress in digital public infrastructure. The IMF highlights private consumption as a key driver, supported by steady income growth and favorable financial conditions. However, it also notes potential downside risks such as increasing geo-economic fragmentation, volatile oil prices, and regional conflicts, which could strain Indias fiscal health and external trade dynamics.

Looking ahead, the RBI has slightly revised its FY26 GDP growth forecast downward by 20 basis points to 6.5%, while maintaining a positive outlook with a projected 6.7% growth for FY27. This suggests continued optimism about Indias medium- term trajectory, underpinned by strong structural fundamentals. The countrys demographic advantage, expanding middle class, and ongoing investment in digital and physical infrastructure are expected to act as long-term growth enablers.

Nonetheless, challenges remain. The pace of recovery in private consumption and investments could falter if real income growth remains subdued. External factors such as shifting trade policies and energy price shocks pose additional risks. Furthermore, the slowdown in manufacturing highlights the need for targeted policy interventions to sustain industrial momentum. Despite these headwinds, Indias focus on infrastructure development, digitalisation, and financial stability lays a solid foundation for maintaining its position as the fastest-growing major economy in the years to come.

INDUSTRY OVERVIEW

GLOBAL VETERINARY HEALTHCARE INDUSTRY

The global veterinary healthcare industry is witnessing a sustained and robust growth, driven by rising pet ownership, increased awareness of animal welfare, and rapid advancements in medical technologies. According to market research, the global veterinary healthcare market was valued at USD 46.4 billion in 2024 and is expected to grow to USD 83.2 billion by 2033, registering a healthy strong compound annual growth rate (CAGR) of 6.7% between 2025 and 2033.⁴ This growth is underpinned by factors such as increasing per capita expenditure on animal healthcare, the growing trend of pet humanisation, and improving economic conditions in developing regions, which collectively contribute to the rising demand for comprehensive veterinary services.

Technological innovation, especially in the field of artificial intelligence (AI), is transforming the landscape of animal health. The AI in Animal Health market, valued at USD 1.12 billion in 2024, is projected to reach USD 2.11 billion by 2030, growing at an impressive CAGR of 11.1%.⁵ AI-driven tools are revolutionizing disease diagnostics, management, and personalised treatment plans, with significant applications in areas such as diagnostic imaging, predictive analytics, and telemedicine. These advancements are enabling more accurate, timely and cost-effective veterinary care, further supporting the industrys expansion.

The future outlook for the global veterinary healthcare industry remains highly optimistic. Key growth drivers include the increasing prevalence of zoonotic and chronic animal diseases, growing consumer awareness regarding preventive care, and continuous innovation in diagnostic and treatment technologies. While North America continues to dominate the market in terms of revenue, the Asia-Pacific region is emerging as the fastest-growing market, fueled by increasing pet ownership, rising disposable income levels, and expanding veterinary infrastructure.

In summary, the veterinary healthcare industry is entering a dynamic phase of growth and transformation. With strong market fundamentals, rising global demand for animal health services, and increasing integration of cutting-edge technologies such as AI, the sector is well-positioned to sustain its upward trajectory in the years to come.

The convergence of economic, technological, and demographic trends is creating a promising environment for continued innovation and investment across all segments of animal healthcare.

INDIAN VETERINARY HEALTHCARE INDUSTRY

The Indian veterinary healthcare industry is poised for sustained expansion, with the market estimated to reach USD 1.36 billion (approximately INR 116 billion) in 2025, rising from USD 1.24 billion in 2024. Driven by a strong CAGR of 8.63%, the sector is projected to attain USD 2.05 billion (approximately INR 174.7 billion) by 2030.⁶ This growth is underpinned by increasing demand for animal healthcare services, enhanced disease surveillance, robust government-led initiatives, including mass vaccination drives under the National Animal Disease Control Programme (NADCP), and strategic biosecurity interventions to mitigate outbreaks such as avian influenza.

Indias large livestock population and the growing companion animal segment are key demand drivers. Rising awareness around zoonotic disease prevention, food safety and animal welfare continues to fuel the need for preventive and therapeutic veterinary solutions. As the worlds largest milk producer, India demonstrates significant domestic demand for veterinary care. Under the NADCP, the Government of India has administered over 110 crore doses for Foot- and-Mouth Disease, alongside extensive immunisation efforts targeting brucellosis, Peste des Petits Ruminants (PPR), and classical swine fever, reinforcing its commitment to livestock health and productivity.

In parallel, emerging trends are transforming the industry landscape. The adoption of telemedicine and digital veterinary platforms is accelerating, especially in rural and underserved areas, in alignment with global developments in veterinary telehealth. Technological advancements, including monoclonal antibody therapies and the scale-up of veterinary API (active pharmaceutical ingredient) manufacturing, are opening new avenues for Indian producers to integrate biotechnological solutions and expand their footprint in global markets.

Urbanisation, rising disposable incomes, and growing pet ownership have led to increased demand for pet healthcare, preventive diagnostics, and specialty

4 https://www.imarcgroup.com/veterinary-healthcare-market

5 https://www.globenewswire.com/news-release/2025/04/17/3063263/0/en/Artificial-Intelligence-AI-In- Animal-Health-Market-Global-Industry-Size-Share-Trends-Opportunity-and-Forecast-2020-2030F.html?utm_ source=chatgpt.com

6 https://www.mordorintelligence.com/industry-reports/india-veterinary-healthcare-market-industry products such as nutraceuticals and grooming solutions. Indias pet care sector is evolving rapidly, with greater emphasis on wellness, veterinary clinics, and digital health services tailored for dogs, cats, and other pets.

Looking ahead, the Indian veterinary healthcare sector is expected to evolve through increased R&D investments, adoption of precision livestock management technologies, and predictive disease surveillance systems. These developments will be instrumental in enhancing productivity, strengthening national biosecurity frameworks, and ensuring the overall health and resilience of Indias livestock and companion animal populations.

INDIAN POULTRY HEALTHCARE INDUSTRY

The Indian poultry industry, a vital segment of the countrys agrarian economy, has seen consistent growth over the past decade. Valued at over INR 2,300 billion in 2024, the sector is projected to grow at a CAGR of 12.6%, reaching approximately INR 8,430 billion by 2033.⁷ India ranks 3^rd globally in egg production and 5th in poultry meat production, generating around 129.6 billion eggs and 4.5 million tonnes of poultry meat annually. This robust growth has created an increasing demand for healthcare solutions including vaccines, diagnostics, and biosecurity products to ensure the health and productivity of poultry stock.

A major boost to the industry came with the announcement of the Animal Pandemic Preparedness Initiative (APPI) 2024, launched under the "One Health" framework by the Department of Animal Husbandry and Dairying. This initiative includes the National Institute of Animal Pandemic Research and a multi-sectoral approach to improve disease forecasting, diagnostics and surveillance across India. It also aims to strengthen veterinary infrastructure and human resource capabilities through the NADRES 2.0 digital platform, contributing to more resilient and responsive poultry healthcare systems.

To combat the ongoing threat of Avian Influenza (Bird Flu), the Department of Animal Husbandry & Dairying (DAHD) has adopted a three-pronged approach comprising stricter biosecurity protocols, intensified surveillance, and a mandatory registration of poultry farms. At a high-level meeting chaired by the DAHD Secretary, the government highlighted the need for scientific monitoring and proactive industry participation to safeguard food security and rural livelihoods. The H9N2 vaccine developed by ICAR-NIHSAD has been approved for commercial use, while feasibility studies for a Highly Pathogenic

Avian Influenza (HPAI) vaccine are underway. With 34 epicenters across 8 states and rising cross-species transmission, the government is implementing a "detect and cull" strategy supported by predictive modeling tools and in coordination with scientific and state agencies.⁸

Several growth drivers continue to propel the poultry healthcare sector. These include rising urbanisation, increasing income levels, a shift toward protein-rich diets, and greater awareness of food safety and nutrition. The expansion of fast-food chains, processed poultry products and organised retail has further increased the demand for high-quality, disease-free poultry. Additionally, consumer preferences are shifting toward healthier animal protein sources, making poultry an attractive option due to its affordability and low-fat content.

Government support plays a key role in sustaining this momentum. Initiatives such as the Animal Husbandry Infrastructure Development Fund (AHIDF), with a budget of INR 29,610 crore, and the National Livestock Mission (NLM) provide financial incentives and low-interest credit for poultry units, feed mills, and healthcare services. The recently released Poultry Disease Action Plan 2024 enhances disease surveillance, promotes biosecurity, and empowers farmers and veterinarians with training and resources. These combined efforts are expected to transform the Indian poultry healthcare landscape and support the sectors long-term growth.

INDIAN ANIMAL HEALTHCARE INDUSTRY

The Indian animal healthcare industry plays a vital role in sustaining the countrys vast livestock population and supporting its agricultural economy. With approximately 535.78 million livestock, including 302.79 million bovines (as per the 20^th Livestock Census) India is the worlds largest milk producer and a leading contributor to global meat and egg production. Animal healthcare services are essential for ensuring livestock productivity, disease prevention, food safety, and rural livelihood security. As the 21^st Livestock Census is underway, new data will further illuminate the sectors evolving needs.

Indias livestock sector contributes 5.50% to the national Gross Value Added (GVA) and 30.23% to the agriculture and allied sectors GVA (2022-23).⁹ It also provides livelihoods to over 70% of rural households, especially small and marginal farmers as well as landless laborers. This highlights the importance of a robust animal healthcare system in supporting income generation, food security, and sustainable agricultural practices.

7 https://www.imarcgroup.com/indian-poultry-market

8 https://pib.gov.in/PressReleasePage.aspx?PRID=2119198

9 https://pib.gov.in/PressReleasePage.aspx?PRID=2086052

The Indian animal healthcare market is projected to grow at a CAGR of 11.5% from 2024 to 2034, reaching over USD 2.0 billion by 2034.¹⁰ This growth is driven by increasing demand for animal protein, rising pet ownership, greater awareness of livestock health among farmers, and the growing prevalence of zoonotic diseases. Government initiatives, investments in R&D, and technological innovation are further accelerating the sectors transformation.

Key Growth Drivers:

a) Rising livestock population and productivity needs

b) Increasing pet ownership and companion animal care

c) Growing awareness of animal health and welfare among farmers

d) Spread of zoonotic diseases prompting preventive care

e) Demand for safe, high-quality animal protein

f) Advancements in vaccines, diagnostics, and telemedicine

Despite positive trends, the animal healthcare industry faces several persistent challenges, including:

a) High economic losses due to disease outbreaks

b) Inadequate veterinary infrastructure in rural and remote areas

c) Antimicrobial resistance and limited vaccine coverage

d) Low penetration of livestock insurance

To address these challenges, the government and stakeholders are undertaking several measures such as strengthening disease surveillance via the National Animal Disease Reporting System (NADRS), expanding mobile veterinary units to serve remote regions, enhancing training and capacity-building for veterinary professionals, developing area-specific animal health policies tailored to regional needs and promoting livestock insurance schemes and financial protection for farmers

Major initiatives such as the National Animal Disease Control Program (NADCP), Rashtriya Gokul Mission, and Sustainable Livestock Health and Production Scheme aim to improve disease management, genetic enhancement, and productivity. Additionally, innovations like telemedicine are bridging the gap in veterinary service delivery in underserved areas.

The Animal Health System Support for One Health (AHSSOH) project is further enhancing infrastructure by upgrading district laboratories, veterinary hospitals, and deploying mobile units in high-risk areas. The Department of Animal Husbandry and Dairying (DAHD) has also partnered with the United Nations Development Programme (UNDP) to implement a digital, AI-enabled vaccine monitoring system to track stocks, flow, and storage temperatures. This initiative is expected to improve immunisation coverage and stakeholder capabilities in animal health management.

INDIAN PET CARE INDUSTRY

The Indian Pet Care Industry is undergoing a significant transformation, driven by rising pet ownership, rapid urbanisation, and increasing disposable incomes, particularly among millennials and Gen-Z consumers. As pets, especially dogs and cats, become integral members of urban households, the demand for high-quality pet care products and services is witnessing unprecedented growth, with a strong focus on health, nutrition and overall wellbeing.

The Indian pet care products market was valued at USD 628.15 million in 2024 and is projected to grow at a compound annual growth rate (CAGR) of 23.70%, reaching USD 5,269.39 million by 2034.^{10 11} This robust expansion is evident across all major segments, including pet food, healthcare, grooming, and allied services.

Key Growth Drivers

a) Rising Pet Ownership

Indias pet population has grown considerably over the past five years. Dog population increased by 73% to 33.6 million in 2023 from 19.4 million in 2018 and is expected to reach 51.5 million by 2028. Similarly, cat population rose by 117% to 3.7 million from 1.7 million in the same period.

b) Urbanisation and Higher Disposable Incomes

Urban lifestyle changes and greater earning capacity are leading to increased expenditure on pet care products, with consumers willing to invest in premium and specialised items for their pets.

10 Transparency Market Research

11 https://www.expertmarketresearch.com/reports/india-pet-care-products-market

c) Pet Humanisation Trend

Pets are increasingly being treated as family members, which is fueling the demand for premium, human-grade and health-focused products, including fortified and organic pet foods.

d) Focus on Health and Fortified Nutrition

Health and nutrition are becoming central to consumer preferences within the pet care market. The trend of pet humanisation has accelerated the demand for organic, natural and nutrient-rich pet foods. There is a notable shift towards products that are hypoallergenic, holistic and human-grade, aiming to enhance the health, immunity and longevity of pets.

Fortified diets enriched with essential vitamins, minerals, and supplements are gaining traction, especially those designed to prevent obesity, allergies, and other lifestyle-related health issues. Additionally, the growing segment of feed additives is contributing to improved animal nutrition and supports the broader growth of the pet food market.

There is also an increasing preference for sustainable packaging and environmentally friendly sourcing, aligning with global trends in responsible consumerism. These developments have opened avenues for niche brands and new entrants offering specialised, wellness-oriented pet products.

While the outlook remains positive, the Indian Pet Care Industry faces a few key challenges. Premium pet foods and healthcare products remain unaffordable for a segment of the population. Moreover, a shortage of trained veterinary professionals limits access to quality healthcare, and traditional mindsets in certain regions may slow the adoption of modern pet care practices.

Nevertheless, these challenges also present opportunities. The rise of e-commerce-projected to account for 49% of pet product sales by 2026, is improving product accessibility and enabling direct-to- consumer distribution models. Furthermore, increased collaboration between the government, private sector, and non-governmental organisations (NGOs) can address regulatory gaps and infrastructure constraints, contributing to the evolution of a more robust and inclusive pet care ecosystem.

ABOUT HESTER BIOSCIENCES

COMPANY OVERVIEW

Hester Biosciences, founded by Mr. Rajiv Gandhi in 1987 and headquartered in Kadi, Gujarat, is one of Indias leading animal healthcare companies.

The Company operates state-of-the-art vaccine manufacturing facilities in India, Nepal, and Tanzania. It is publicly listed on both the National Stock Exchange (NSE) and BSE Limited, and holds certifications including WHO-GMP, ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, and GLP, reflecting its commitment to international standards of quality, safety and operational excellence.

Hester has established a strong global footprint, exporting products to Asia, Africa, Europe, and South America, with a strategic focus on India, Nepal, and Africa. The Company maintains an active presence in over 35 countries and has engaged in key collaborations with renowned organisations such as the Gates Foundation, GALVmed and the Golchha Organisation to support animal health initiatives and vaccine outreach programs.

The Company is the second-largest poultry vaccine manufacturer in India, commanding approximately 35% of the domestic market share. It is also the worlds largest supplier of Peste des Petits Ruminants (PPR) vaccines, holding a dominant 75% share of the global market. In India, Hester leads the goat pox vaccine segment with a market share of over 70%.

Operating across two divisions - Poultry Healthcare and Animal Healthcare (which includes ruminants and pets) - Hester offers a comprehensive product portfolio comprising over 50 vaccines and 70 health products.

In addition, the Company provides specialised services such as sero-profiling kits, poultry diagnostic labs, and mastitis control programs for cattle. Hester is recognised as Indias first commercial manufacturer of the goat pox vaccine, and additionally produces PPR vaccines using both Nigerian and Sungri strains.

With a manufacturing capacity of 6.25 billion doses in India, 1.24 billion doses in Nepal, and 1.50 billion doses in Tanzania, the Company is well-positioned to meet both domestic and international demand. It also operates diagnostic laboratories in Kadi (Gujarat), Hyderabad (Telangana), and Kolkata (West Bengal), offering free diagnostic services and technical support to customers across regions.

Driven by deep market insights, advanced R&D capabilities, and a commitment to innovation, Hester is well-poised to capitalise on emerging opportunities in the global poultry, animal health, and pet care segments. Its ongoing focus on disease prevention, veterinary innovation, and capacity expansion continues to strengthen Hesters role as a key contributor to global animal health and food security.

STRATEGIC FOCUS AND INITIATIVES

Diversification and Innovation in Product Portfolio

Hester is actively expanding across both core business verticals by introducing innovative, high- demand products such as prescription-based pet foods, disinfectants, pain relief alternatives and vaccines. These efforts align with emerging market needs and support the companys long-term growth strategy. Product diversification also plays a key role in risk mitigation, reinforcing Hesters position as a comprehensive provider in the animal healthcare ecosystem.

Enhancing Operational Efficiencies

The company is driving profitability through the strategic rationalisation of underperforming initiatives and improved utilisation of manufacturing capacity. These measures are helping stabilise margins, particularly during periods of market volatility. Greater cost absorption and operational streamlining continue to enhance overall efficiency and financial resilience.

Vaccine Leadership and Government Program Engagement

Hester maintains a leadership position in poultry and livestock vaccines, with strong contributions to national immunisation programs through the supply of PPR and Goat Pox vaccines. The upcoming launch of the Avian Influenza vaccine further strengthens its portfolio. Internationally, Hester Africa secured a new tender for vaccine supply from the Tanzanian government, reinforcing its regional presence.

Global Expansion and Subsidiary Optimisation

The company continues to consolidate its global footprint through improved performance at African operations and sustained growth in Nepal. Ongoing participation in international tenders and the pursuit of strategic partnerships are expected to boost export revenues and expand market access.

Focused R&D and Capacity Leverage for Long-Term Growth

Investments in research and development remain central to Hesters long-term vision, with a focus on developing next-generation poultry and livestock vaccines. Additional manufacturing capacity is being strategically allocated to support these innovations, underscoring the companys agile, innovation-driven approach.

Advancing the One Health Initiative

Hester is committed to the "One Health" framework, recognizing the interconnectedness of animal, human and environmental health. By addressing zoonotic threats at their animal source, a strategy endorsed by the World Organisation for Animal Health (WOAH), the company contributes to global health security.

With approximately 60% of human infectious diseases being zoonotic and 75% of emerging diseases originating in animals, Hester is well-positioned to support preventive efforts at the intersection of veterinary and public health.

BUSINESS STRENGTHS

Diverse Portfolio of Products

Hester offers an extensive range of vaccines, diagnostic services, and healthcare products for poultry, livestock and companion animals. With a portfolio comprising over 50 vaccines and 70 healthcare products, the company caters to diverse market segments and generates revenue through multiple product streams, strengthening its market resilience.

Dominant positions that Hester holds in the Animal Healthcare market:

1. Second-largest poultry vaccine manufacturer in India with a 35% market share

2. Worlds largest producer of PPR vaccines with 75% global market share

3. Over 70% of Indias Goat Pox vaccine market

4. Serves as a supplier to the PPR OIE vaccine bank

5. Provides LSD vaccines to African countries and Central Asia

Robust Distribution Network

Hester has established a strong distribution network that spans both domestic and international markets. This widespread network ensures timely and efficient access to its products, enabling the company to serve a broad and diverse customer base across multiple geographies.

High-Quality Products

Hester upholds stringent quality and safety standards across all its operations. Its products are known for their efficacy in preventing and treating a wide array of animal diseases. The companys facilities are accredited with GMP and GLP certifications, along with ISO 9001:2015, ISO 14001:2015, and ISO 45001:2018, reinforcing its reputation for excellence and compliance with global standards.

Strong Focus on Research and Development

Innovation is central to Hesters growth strategy. Supported by a dedicated R&D team, the company consistently develops advanced solutions tailored to the evolving needs of the animal healthcare sector.

Its DSIR-recognised R&D laboratory in Kadi, Gujarat, underscores its commitment to scientific excellence.

In addition, its GMP-certified facilities in India, Nepal, and Africa reflect over four decades of expertise in developing high-quality veterinary vaccines.

Advanced Manufacturing Facilities

Hesters flagship manufacturing facility in Kadi (Gujarat) boasts a production capacity of 6.25 billion doses, making it the largest animal biological manufacturing unit in Asia. This is complemented by strategically located facilities in Africa and Nepal, collectively enhancing the companys manufacturing strength and responsiveness to regional market demands.

Expanding Presence in African continent

Africa represents a significant growth market for animal health solutions. Hester has established a notable presence through its operations in Tanzania, focusing on vaccines for diseases such as PPR (Nigerian strain), LSD, CBPP for ruminants, and Newcastle disease for poultry. With one of the worlds largest livestock populations, the continents growing demand for veterinary solutions positions Africa as a key driver of Hesters future growth.

Growing Global Footprint

Hester is steadily expanding its international presence, with a particular emphasis on the African continent. Leveraging its manufacturing capabilities in India, Nepal, and Tanzania, the company is entering new markets while strengthening its foothold in existing ones. Through its joint venture, Thrishool Exim Limited in Tanzania, Hester is enhancing its distribution capabilities and forging strategic collaborations to extend its global reach.

BUSINESS OUTLOOK

Hester is strategically positioned for sustained growth, leveraging its expertise in animal healthcare and its evolving product portfolio. From its early focus on poultry vaccines, the Company has diversified into an extensive range of veterinary vaccines and health products for multiple species, thereby reinforcing its leadership position in the sector. This diversification aligns with increasing global demand for comprehensive animal health solutions, particularly in livestock management and disease prevention.

A key development in the Companys strategic roadmap is the re-purposing of its Bio-Safety Level- III (BSL-3) facility which is under approval. Originally conceived for human vaccine development, the facility is now being transitioned toward the development and production of high-quality veterinary vaccines. This move not only optimises the Companys infrastructure but also enhances its capability to address emerging zoonotic threats and complex animal diseases, boosting its competitiveness both domestically and globally.

In line with international efforts to reduce antibiotic dependency in animal farming, Hester is expanding its natural and herbal product offerings. The recent launch of herbal supplements for poultry and ruminants reflects its commitment to sustainable and holistic animal healthcare. These products aim to improve immunity and overall animal well-being, addressing growing consumer and regulatory demand for safer food and animal welfare practices.

The Companys role in government initiatives, especially under the Atmanirbhar Bharat mission, continues to be a significant growth driver. Through large-scale contracts for Peste des Petits Ruminants (PPR) vaccines, Hester is not only contributing to Indias goal of self-reliance in vaccine production but also playing a vital role in minimizing economic losses in the livestock sector.

On the international front, Hester Africa marks a major milestone with the receipt of Good Manufacturing Practices (GMP) certification from the Tanzanian drug authorities. With regulatory approvals secured for manufacturing vaccines such as PPR, Contagious Bovine Pleuropneumonia (CBPP), and Lumpy Skin Disease (LSD) for ruminants and Newcastle Disease (ND) and Infectious Bursal Disease (IBD) for poultry, the African operations are poised to expand their market footprint and contribute meaningfully to consolidated revenues.

Overall, Hester is advancing with a clear vision to innovate, expand, and adapt to the evolving landscape of animal healthcare while reinforcing its position as a reliable partner in both the Indian and international markets.

FINANCIAL OVERVIEW

Hester delivered a steady financial performance in FY24-25, marked by modest revenue growth and solid improvement in profitability. The results reflect the companys ongoing focus on operational efficiency, disciplined cost management and strategic initiatives across key business segments.

In FY25, the Company reported standalone revenue from operations of INR 2,864.66 million, a marginal increase from INR 2,851.55 million in FY24. Notably, divisional product sales rose by 12% to INR 2,863.22 million, up from INR 2,566.70 million, reflecting strong momentum in the Poultry Healthcare and Animal Healthcare businesses.

Poultry Healthcare divison posted revenue of INR 1,664.39 million, representing a 16% year-on-year growth over INR 1,431.34 million in FY24. This segment contributed 58% of total revenue, up from 51% the previous year. Growth was driven primarily by robust vaccine demand, supported by heightened disease awareness and increased immunisation activity. The launch of new feed supplements and disinfectants in last two quarters also gained early traction and is expected to contribute meaningfully going forward. The division further strengthened its market position by deepening customer engagement, enhancing technical support and forging new distribution partnerships.

The Animal Healthcare segment, now includes both Ruminant and Petcare divisions, recorded revenue of INR 1,198.83 million in FY25, marking a 6% growth from INR 1,135.36 million in FY24 and contributing 42% of the Companys total revenue, up from 40% in FY24. Growth in the Ruminant division was driven by sustained demand for core vaccines and therapeutic products, successful rollout of alternative solutions to address regulatory challenges encountered earlier in the year and continued participation in government- led immunisation programs for PPR and Lumpy Skin Disease through the Goat Pox Vaccine. Meanwhile, the Petcare division saw consistent uptake of its supplement and therapeutic range, supported by initiatives to enhance brand visibility and broaden its portfolio across nutritional and treatment categories, establishing a strong platform for future expansion.

Gross Profit Margin improved to 67% in FY25, up from 65% the previous year, driven by a favourable shift in product mix.

EBITDA increased by 8% to INR 557.08 million, compared to INR 516.03 million in FY24. This improvement reflects better absorption of fixed costs and enhanced operational efficiencies across functions.

Net Profit rose 17% to INR 318.42 million, from INR 271.59 million in the previous FY24, underscoring the positive impact of cost optimisation initiatives and margin improvement efforts.

In line with our dividend policy of distributing, the Board has recommended a dividend of INR 7 per share (70% of the face value of INR 10 per share) for FY24-25, which is 19% of net profit of the Company. Demonstrating confidence in the Companys consistent cash generation and financial stability.

Significant financial ratios

Ratio	Current Period (2024-25)	Previous Period (2023-24)	% Variance	Reason for variance
1 Current Ratio	1.92	2.09	(8%)
2 Debt-Equity Ratio	0.31	0.43	(28%)	Reduction in borrowings has resulted in improvement of ratio.
3 Debt Service Coverage Ratio	1.48	1.55	(4%)
4 Return on Net Worth (%)	9.77%	8.98%	9%
5 Net Profit Margin (%)	11.12%	9.52%	17%

KEY RISKS AND MITIGATION STRATEGIES

Hester operates in a dynamic and highly regulated global veterinary healthcare market, which presents a spectrum of strategic, operational, regulatory, financial and technological risks. To proactively address these challenges, our Risk Management Committee, in collaboration with cross-functional teams, conducts periodic reviews in line with an approved risk appetite framework. This structured approach ensures business continuity, operational resilience and the sustained creation of stakeholder value. The principal risks and our corresponding mitigation strategies are outlined below:

Key Risks	Particulars	Mitigation Strategy
Economic Risks	Global inflation, fluctuating raw material prices and shifts in consumer spending, particularly in emerging economies, can affect the affordability of animal protein and influence demand for veterinary products.	We monitor global and local macroeconomic indicators to fine-tune pricing, procurement and inventory strategies. Hester is expanding into recession-resilient geographies, emphasizing operational efficiency and offering cost-effective, high-quality vaccines and health products. Long-term supply contracts and PPP models also provide stability to revenue streams.
Regulatory Risks	Increasing global scrutiny on environmental impact, antimicrobial resistance, and animal welfare standards is intensifying compliance requirements across veterinary pharma.	The Company has established a robust regulatory affairs team and implemented well-structured compliance tracking systems. We proactively engage with industry forums and regulators to stay ahead of policy changes. Periodic internal audits, employee training and a strong compliance culture help mitigate regulatory risks and reinforce our reputation as a responsible industry leader.
Peer Risks	Industry consolidation, rapid innovation cycles and pricing pressures from multinational corporations pose challenges to market share and profitability.	We invest strategically in R&D, enter into licensing and codevelopment partnerships and continuously upgrade our product pipeline. Competitive benchmarking, agile go-to-market strategies and a focus on customer-centric solutions, including strong aftersales support, help us maintain differentiation and customer loyalty in an evolving market landscape.
Product Development Risks	Emerging disease trends, evolving regulatory landscapes and the high cost of vaccine development can impact time-to-market and product success.	Hester follows a structured and agile product development framework supported by innovation hubs and advanced laboratories. Investments in talent, digital R&D tools and infrastructure accelerate time-to-market. Regular portfolio reviews and feedback loops with veterinary professionals ensure that new products meet real-world needs efficiently and effectively.
Foreign Exchange Risks	Volatility in currency markets, driven by geopolitical shifts, global interest rate movements, and trade policies, can impact profitability, especially for export operations.	We employ a prudent forex risk management strategy combining natural hedging, forward contracts and currency diversification. Our finance team works closely with operations to dynamically manage exposure. Export contracts in stable currencies and selective localisation of manufacturing further reduce the impact of forex fluctuations on margins.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

The Companys Corporate Social Responsibility (CSR) initiatives are driven by its commitment to sustainable and inclusive growth. The primary focus areas include education and infrastructure support, healthcare and sanitation, poverty alleviation, and nutrition.

The Company also undertakes several activities aligned with the prescribed CSR provisions under the Companies Act, 2013.

In addition to these, the Company is dedicated to promoting gender equality and empowering women through the establishment of homes, hostels, old age homes, orphanages, and daycare centres. It actively supports the differently-abled, provides vocational training and employment opportunities, and contributes to improving livelihoods. The Company also supports senior citizens by facilitating access to basic amenities and care.

Environmental sustainability is another core area of focus. The Company undertakes efforts to preserve ecological balance through activities related to conservation of flora and fauna, animal welfare, agroforestry, and the protection of natural resources. Furthermore, rural and slum development projects are implemented to uplift communities and create longterm, positive social impact.

The CSR Policy is formulated and recommended by the CSR Committee in line with the Companies Act, 2013 and the rules notified by the Ministry of Corporate Affairs. The Committee is responsible for monitoring the implementation of CSR activities and recommending the annual CSR budget. Through consistent outreach, the Company aims to address challenges faced by developing communities, particularly in areas such as animal husbandry and poultry farming.

In FY 2024-25, the Company undertook several impactful projects and programmes under its CSR framework:

1. Environmental Sustainability:

INR 1.03 million was allocated to the Nehru Foundation for Development - Centre for Environment Education Society under the Amdavadam Project to enhance green coverage in Ahmedabad through sustainable practices.

2. Education and Infrastructure Support:

INR 0.40 million was spent towards the construction of essential infrastructure, including prayer grounds, toilets, and paved pathways at Karshanpura Prathmik Shala, located in Karshanpura Village, Taluka Kadi, District Mehsana.

3. Educational and vocational training Support:

INR 3.00 million was contributed to Sardardham in Ahmedabad, and INR 0.90 million was allocated to Shri Bhartiya Sanskruti Samvardhak Trust in Porbandar District of Gujarat, to support education and related initiatives.

4. Healthcare and Women Empowerment:

INR 2.50 million was provided to the Raginiben Bipinchandra Seva Karya Trust in Ahmedabad District, and INR 0.50 million to Shri Kalyanraiji Sarvajanik Charitable Trust in Vadodara District, to support preventive healthcare, medical assistance, and empowerment of women.

5. Community Healthcare:

INR 0.10 million was directly spent by the Company to support education and healthcare in villages near its Meda Adraj manufacturing facility. These efforts were carried out with active participation from local residents and by leveraging government primary healthcare facilities.

6. Promotion of Sports:

INR 0.50 million was allocated to the Foundation for Promotion of Sports and Games to support Paralympic and Olympic sports across India.

All these initiatives were carried out with the active participation of the Companys workforce, demonstrating a sincere commitment to giving back to society. The Companys steadfast dedication to fostering education, health, sustainability, and cultural enrichment reflects its core values. Through its diverse CSR efforts, the Company continues to create a meaningful and lasting impact on the communities it serves.

HUMAN RESOURCES POLICY

At Hester, our people are central to our success. The Human Resources (HR) function has implemented a well-structured approach to attract, develop, retain and reward talent. We are committed to fostering a professional, inclusive and performance-driven workplace that encourages collaboration and empowers individuals to thrive.

In alignment with our focus on inclusive leadership, women have been appointed to key positions, including Executive Directors and Plant Heads across India, Nepal and Tanzania.

Hester places strong emphasis on continuous learning and development. Employees are encouraged to participate in structured training programs that bridge skill gaps and unlock their full potential. We uphold a culture of meritocracy and recognise individual and team achievements through comprehensive reward and recognition frameworks.

Our performance management system, digitally enabled and structured, ensures transparent and periodic evaluations based on clearly defined objectives and behaviors. Compensation is closely linked to both individual and organisational performance, reflecting our belief in accountability and fairness.

As part of our Talent Management Philosophy, we are building a systematic development framework that emphasises differentiated performance, accountability, transparency and long-term career progression. We also focus on structured compliance management, learning and development and cadre building for succession planning.

Overall, Hester remains committed to cultivating a high-performance culture anchored in employee engagement, productivity and holistic talent development.

INTERNAL CONTROLS

Hester has established a robust internal control framework designed to safeguard its assets and uphold operational excellence. This system ensures that every transaction is meticulously documented and compliant with all applicable regulations. The internal auditors periodically monitor the effectiveness of these controls, providing the Audit Committee and the Board of Directors with independent and reasonable assurance regarding the Companys risk management, governance, and internal control processes.

The internal control framework is proportionate to the nature, size, scope and complexity of the Companys operations. It ensures that all financial transactions are properly authorised, accurately recorded, and appropriately reported. Regular audits and inspections are conducted to confirm that responsibilities are fulfilled effectively. The Audit Committee oversees the implementation and maintenance of these financial controls, ensuring the Companys operations are conducted in an orderly and efficient manner.

The Audit Committee also periodically reviews key issues and material weaknesses identified by both internal and statutory auditors. Timely and appropriate corrective actions are undertaken to mitigate risks and enhance control measures.

CAUTIONARY STATEMENT

The statements included in the Management Discussion and Analysis section of this report, relates to the Companys objectives, projections, estimates, expectations or predictions. These are considered "forward-looking statements" under applicable securities laws and regulations. Such statements are based on certain assumptions and expectations regarding future events. However, actual results may differ materially from those expressed or implied, due to various factors. These may include global and domestic economic developments, changes in government policies, tax and regulatory laws, and unforeseen events beyond the Companys control.