Vadilal Dairy International Ltd Management Discussions

Indian Dairy Industry

Indias dairy sector is more than just an industry—it is a way of life. Deeply rooted in tradition, it carries immense cultural and nutritional significance while simultaneously fueling the countrys economy. Today, as consumer preferences evolve towards health, sustainability and convenience, the Indian dairy industry is embracing a unique blend of age-old expertise and modern innovation, driving a transformation that touches every corner of the value chain.

Highlights of Union Budget 2026-27 Highlights of the Union Budget 2026-27 presented on 01^st February, 2026 by the Honourable Finance Minister Mrs. Nirmala Sitaraman are as follows:

• The Union Budget 2026-27 signals a stronger policy focus on transforming Indias animal husbandry and dairy sector from a predominantly farm-level activity into an integrated, technology-enabled and commercially viable value chain.

• The allocation of ^6,153 crore to the Department of Animal Husbandry and Dairying, representing an increase of approximately 16%, reflects the Governments continued emphasis on livestock productivity, veterinary infrastructure, farmer aggregation and value-added processing.

• A key development is the proposed credit-linked capital subsidy scheme for integrated dairy and poultry value chains. From a management perspective, this is expected to improve the investment environment for enterprises involved in milk collection, processing, feed, breeding, cold-chain infrastructure, poultry operations, logistics and related downstream activities. Easier access to subsidised capital could encourage private-sector investment and support capacity expansion, particularly among small and medium-sized enterprises.

• The emphasis on Livestock Farmer Producer Organisations (LFPOs) is also strategically significant. Greater aggregation of livestock farmers can improve procurement efficiency, bargaining power, access to inputs and market linkages.

• For dairy companies and other livestock businesses, stronger farmer organisations could create more structured and reliable sourcing networks while reducing fragmentation in the supply chain. However, the effectiveness of LFPOs will depend on their governance, professional management, access to working capital and ability to establish sustainable commercial relationships.

• The proposed expansion of veterinary and para-veterinary infrastructure, including support for private veterinary colleges, hospitals, breeding facilities and diagnostic laboratories, addresses a critical constraint on livestock productivity. The proposed addition of more than 20,000 veterinary professionals could strengthen disease surveillance, preventive healthcare, breeding services and animal productivity. For industry participants, better veterinary infrastructure may translate into lower disease-related losses, improved herd productivity and greater consistency in milk and livestock output.

• Another important policy development is the focus on dairy-waste-to-energy and Bio-CNG. The exemption of the value of biogas from Central Excise duty while calculating blended CNG can improve the economic attractiveness of biogas-based fuel projects. This creates an opportunity for dairy cooperatives, private dairies and waste-management companies to develop integrated models in which cattle dung and other dairy waste are converted into renewable energy. Such initiatives can create an additional revenue stream for farmers and dairy enterprises while simultaneously reducing waste- management costs and supporting decarbonisation objectives.

• The Budgets support for cooperatives and inter-cooperative investments is likely to further strengthen the institutional framework of the dairy sector. Tax-related incentives and support for cooperative networks can improve the financial sustainability of farmer-owned organisations and potentially facilitate greater investment in processing, procurement, storage and distribution infrastructure.

1. PERFORMANCE OF THE COMPANY:

During the financial year 2025-26, the Company recorded a turnover of Rs.24.17 crore as compared to Rs.26.63 crore in the previous financial year 2024-25, representing a decrease of approximately 9.22%. The decline in turnover was primarily attributable to the overall business conditions and the factors affecting the Companys operations during the year under review. Despite the reduction in turnover, the Company continued to focus on strengthening its operational efficiency, maintaining service quality and pursuing opportunities for sustainable business growth.

2. STRATEGY:

The strategy of the management is to introduce new varieties of ice cream & frozen desserts, more than the competitors, to provide quality of the products better than the competitors and to expand network of distributors/stockiest and dealers/retailers, larger than the competitors, to achieve volume growth of at least 50% over the current year.

3. BUSINESS OUTLOOK:

The consumption of ice cream has always been increasing. There is always good scope for business growth. The Companys outlook is always promising. The approach would be to continue with the growth, momentum with balancing risk.

Financial Ratios of the Company:

b) Financial Ratios
Ratio	Numerator	Denominator	FY 2025-26	FY 2024-25
Current ratio (times)	Current Assets	Current Liabilities	1.49	1.31
Debt-equity ratio (times)	Total Debt	Shareholders Equity	3.02	2.29
Debt service coverage ratio (times)	Earnings before Interest and Tax	Debt Service	-1.34	-1.68
Return on equity (%)	Net Profit after tax	Equity	-13%	-15%
Inventory turnover ratio (times)	Cost of Goods Sold	Average Inventory	1.29	1.52
Trade receivables turnover ratio (times)	Sales	Average Accounts Receivables	5.02	7.42
Trade payable turnover ratio (times)	Purchases / Services Utilised	Average Accounts Payables	3.24	3.29
Net capital turnover ratio (times)	Net Sales	Working Capital	4.68	7.68
Net profit ratio (%)	Net Profit after tax	Net Sales	-3%	-3%
Return on capital employed (%)	Earnings before Interest and Tax	Capital Employed	-3%	-4%
Return on investment (%)*	Income generated from investments	Average Investments	-2%	-3%

4 THREATS:

a. Increasing competition from other manufactures and foreign Companies will be a major problem. Now a- days the markets are flooded with new local and regional players with cheaper products. There are few concerns like rising infrastructure and input costs, which the Company should take in mind. Since our goods is perishable, quick transport and proper storage are paramount importance. The refrigeration and deep freezing are important for company.

b. Marketing will be the most problematic area where improvements are called for. Continuous quality improvement will be the need of the hour for which urgent measures are called for from all stakeholders.

c. Consumer Behaviour:

A segment of the population may not prioritise milk quality, leading to a lack of willingness to pay for higher- quality products.

Your Company has been leveraging on the improvement given its economies of scale and with its inherent ability to adopt new technologies, which involves large investment in the production and distribution infrastructure affordable only by bigger companies like us.

Your Company enters new markets by expanding geographical areas, launching new product range, adopting new technologies, alternative market channel like online marketing. Your Company focuses on the consistent availability and procurement of quality milk throughout the year by improving the per capital yield of animals by applying scientific methods, genetic improvement, scientific feeding, properly managed animal husbandry practices etc., Your Company constantly educates the farmers on how to maintain quality and improve milk yield by arranging supply of good quality feeds to farmers.

5 INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company maintains an adequate internal control system, commensurate with size and complexity of its business. Among other things The Company has a compact organization Structure which helps it run business operation smoothly. The Company has adequate internal control system, commensurate with the size and nature of its operations. The scope of the internal audit is to ensure that the control system established by the management is correctly implemented.

All assets and resources are used efficiently and are adequately protected. All internal policies and statutory guidelines are complied with. There is accuracy in timing of financial reports and management information.

6 HUMAN RESOURCE DEVELOPMENT:

At Vadilal, Human capital is our most crucial resource contribution towards the success of the Organization. Our aim is to ensure that only individuals perfectly matching the required trade skill sets, attributes and soft skills for each position are hired. Our constant focus is to orient and induct the hire resource with a structured induction programme. Apart from this, we have introduced several notable initiatives to retain and nurture our human capital.

7 CAUTIONARY STATEMENT:

Statements made in the Management Discussion and analysis describing business outlook, projections, opportunities and threats, etc. may be "forward looking statement" within the meaning of the applicable securities, laws and regulations. Actual results could differ from those expressed or implied. Readers are hence advised not to place undue reliance on these statements and are advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regard to their own specific objections. Further, the discussion herein reflects the perception on major issues as on date and opinions expressed herein are subject to change without notice.

The Company undertakes no obligation to publicly update or revise any of the opinions or forward looking statements expressed in this report, consequent to any new information, future event or otherwise.