Vidhi Specialty Food Ingredients Ltd Management Discussions

This discussion provides an assessment by Management of the current financial position, results of operations for the financial year ended March 31, 2025, market scenario, industry position, global and Indian economy and its impact of the Company. Information presented in this discussion supplements the financial statement, schedules and exhibits for the financial year ended March 31, 2025.

Global Economic Overview:

After a succession of adverse shocks in recent years, the global economy is facing another substantial headwind, with increased trade tension and heightened policy uncertainty, contributing to a deterioration in prospects across most of the worlds economies. For emerging market and developing economies (EMDEs), the ability to narrow per capita income gaps with richer countries, boost job creation, and reduce extreme poverty remains insufficient. The outlook largely hinges on the evolution of trade policy globally. Downside risks to the outlook predominate, including an escalation of trade barriers, persistent policy uncertainty, rising geopolitical tensions, and an increased incidence of extreme climate events. Growth is expected to weaken to 2.3 percent in 2025, with deceleration in most economies relative to last year. This would mark the slowest rate of global growth since 2008, aside from outright global recessions. New U.S. trade policy created a structural shock to the worlds economy, with the uncertainty generated by higher tariff scrimping demand globally. Conversely, policy uncertainty and trade tensions may ease if major economies succeed in reaching lasting agreements that address ongoing trade disputes. The challenging global context faced by EMDEs is compounded by the fact that foreign direct investment inflows into these economies have fallen to less than half of their peak level in 2008 and are likely to remain subdued. Across EMDEs, domestic policy action is also critical to contain inflation risks, strengthen fiscal resilience through improved revenue mobilization, and reprioritize spending. To unlock job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labour markets.

Outlook: Global co-operation is needed to restore a more stable and transparent global trade environment for mitigating risks and promoting growth. Governments should focus on policies that promote healthy aging, enhance labour force participation and foster productivity growth. Continued investment in infrastructure can help stimulate economic growth and improve long-term productivity whereas businesses needs to adapt to changing market conditions and be prepared to navigate a more volatile global landscape.

Domestic Economic Overview:

India, the worlds fourth-largest economy, has emerged as the fastest-growing major economy and is on track to become the worlds third-largest economy with a projected GDP of $7.3 trillion by 2030. India is projected to be worlds fastest growing major economy (6.3% to 6.8% in 2025-26). This transformation is the result of a decade of decisive governance, visionary reforms, and global engagement under the present Government. Driven by robust domestic demand, a dynamic demographic profile, and sustained economic reforms, India is asserting its rising influence in global trade, investment, and innovation. The numbers reflect Indias shift in last Eleven years, from a ‘dependent economy to a self-reliant, globally competitive powerhouse. At the core of this transformation is the vision of ‘Aatmanirbhar Bharat, a movement that promotes innovation, entrepreneurship, and technological sovereignty. Strategic initiatives like the Production Linked Incentive (PLI) schemes, revitalization of MSMEs, and the expansion of digital infrastructure have laid the foundation for a high-growth, high-opportunity economy. Digital transactions surged 9x in volume (FY18–FY24), with UPI processing 172 billion transactions in 2024 alone. Inflation was reduced from an average of 8.2% (2004–14) to around 5% (2015–25) through targeted fiscal and monetary policies. Retail inflation fell to 4.6% in 2024–25, the lowest since 2018–19. Tax revenues hit record highs with GST collections peaking in April 2025 and tax-to-GDP ratio estimated at 12% for FY26 Indias GDP has witnessed a remarkable transformation over the past decade. At current prices, GDP has increased from Rs. 106.57 lakh crore in 2014–15 to an estimated Rs. 331.03 lakh crore in 2024–25, an approximate threefold rise. In 2024–25 alone, nominal GDP grew by 9.9% over the previous year, while real GDP (at constant prices) increased by 6.5%, reflecting sustained economic momentum. This steep growth reflects the countrys expanding economic base and rising income levels.

India has rapidly become one of the worlds most attractive destinations for Foreign Direct Investment (FDI), fueled by structural reforms, investor-friendly policies, and enhanced global competitiveness. Investor confidence has surged due to improvements in key international rankings and strategic initiatives. Indias digital payment transactions volume grew from 2,071 crore in FY 2017–18 to 18,737 crores in FY 2023–24, achieving a CAGR of 44% whereas the value of transactions rose from Rs. 1,962 lakh crore to Rs. 3,659 lakh crore, with a CAGR of 11%. Over the past decade, India has undergone a profound economic transformation rooted in structural reforms, visionary policymaking, and unwavering political will. From achieving historic GDP growth and record exports to revolutionizing digital payments and empowering millions through financial inclusion, the country has laid the foundation for a resilient, equitable, and future-ready economy. With robust FDI inflows, expanding trade, and innovation-driven sectors leading the charge, India is no longer a passive participant in the global economy, it is a key architect of its future. As the country moves confidently toward its goal of becoming a top three economic power, the momentum signals that Indias economic rise is not just a moment—it is a movement. Indias GDP is forecasted to grow between 6.5% and 6.7% in FY2026, powered by domestic demand, fiscal support, and stable inflation. The impact of reciprocal tariffs imposed by the United States on Indian GDP could be range bound Impact of reciprocal tariffs on Indias exports to the US. The tax exemptions announced in the budget will increase consumer spending and may boost GDP by 0.6% to 0.7%. However, uncertainty around the tariff rates imposed by the United States on Indian exports could offset those gains by 0.1% to 0.3% and hence the outlook remains optimistic, but cautious.

Industry Structure & Development:

Food colours are standard in our everyday lives, and they may even be found in meals and drinks we wouldnt anticipate. Food colours are added to food or drink to modify the hue to make it more palatable. Natural food colours, synthetic food colours, are two broad categories of food colours. Food colours are employed in commercial food manufacturing and home cooking to persuade consumers to buy a product based on its visual appeal. It improves the products taste, texture, and appearance while preserving its flavour and freshness. Any dye, pigment, or chemical that gives Colour when added to food and drink is a food colouring or colour additive. They are available in liquids, powders, gels, and pastes. Food colouring is used in both commercial and household food manufacturing. Food colourants are also utilized in cosmetics, medicines, home craft projects, and medical gadgets, fertilizers among other non-food, uses natural food colours, artificial food colours and contemporary trends are discussed in this article.

Color is an important factor increasing consumers acceptability to food products. This is due to consumers always links food color with other qualities such as ripeness, freshness, and food safety. Food colours are ingredients that are added to food or beverage to enhance its appearance. When colours are added to food products imparts very bright and tempting effect which influences the consumer to buy a product through visual perception. Colour is a key component to enhance the ultimate appetizing value and consumer acceptance towards foods and beverages.

The food color market is segmented into type, application and region.

A) Type – Food color market is categorized into natural color and artificial color.

B) Application -Beverages, Dairy & Frozen Desserts, Bakery & confectionary, Meat products, Processed food &Vegetables, Oils & fats, sweets and snacks, cosmetic, Pharma product, etc.

C) Region wise – Food color market analyzed across North America (U.S., Canada and Mexico), Europe (Germany, France, UK, Italy, Spain and rest of Europe), Asia-Pacific (China, Japan, Australia, India and rest of Asia-Pacific), Latin America (Brazil, Argentina, Colombia and rest of Latin America), Middle East (Saudi Arabia, Egypt, Nigeria and rest of Middle East) and Africa (South Africa, Nigeria, and rest of Africa).

Every year incremental demand of ~Rs. 1,500 to Rs, 1,700 crores is expected to generate globally for Food color. According to Future Market Insights, the global food color market is projected to be valued at USD 4.83 billion in 2025, with a forecasted rise to USD 8.46 billion by 2035, at a CAGR of 6.3%.

Market Analysis

The global food colours market continues to demonstrate strong growth, driven by rising demand for natural and clean-label ingredients across the food and beverage industry. Valued at approximately USD 4.8 billion in 2025, the market is projected to reach over USD 8.4 billion by 2035, registering a CAGR of around 6.3%. This growth is largely supported by increasing consumer awareness regarding artificial additives, coupled with regulatory movements in key markets such as the United States and Europe, which are progressively restricting the use of synthetic dyes. Natural food colours, derived from plant, animal, and microbial sources, are leading the market with over 55% share, while synthetic colours are witnessing a gradual decline due to health and safety concerns. Key application areas include beverages, confectionery, bakery, dairy, and processed foods, with beverages accounting for the largest share due to rising consumption of functional and ready-to-drink products.

In India, the food colours market mirrors global trends but with unique domestic dynamics. Estimated at USD

104.3 million in 2023, the Indian market is expected to grow to approximately USD 166.8 million by 2030, reflecting a robust CAGR of 6.9%. While synthetic colours continue to dominate in mass-market segments due to cost advantages, the demand for natural colours is rising steadily, driven by increasing urban health consciousness, regulatory support, and rapid growth in the FMCG sector. India also benefits from the abundant availability of raw materials such as fruits, vegetables, and spices, which support the local production of natural colourants. Key consumption sectors include snacks, confectionery, beverages, and bakery products, which are expanding in line with changing consumer preferences and the penetration of organized retail. With rising focus on food safety, innovation, and sustainable sourcing, the Indian food colours market presents significant long-term opportunities for both domestic and international players.

Overview of Vidhis Business and its Position in Food Colour Manufacturing Industry:

Vidhi is a globally recognized and leading manufacturer in the food colour industry, with a robust presence across over 80 countries spanning six continents. Operating within a critical segment of the Indian chemical and food processing industry, the Company specializes in the production of superior synthetic food-grade colourants, including Synthetic Water-Soluble Colours, Aluminium Lakes, FD&C Colours, D&C Colours, Blends, Co-Blended Lakes, and Granules. These colourants are essential ingredients used across a wide range of sectors, including food and beverage, pharmaceuticals, confectionery, dairy, pet food, cosmetics, and healthcare.

The Company has established world-class manufacturing infrastructure with two primary facilities: one in Dhatav Village, Raigad District, Maharashtra, and another at its recently commissioned greenfield site in Dahej, Bharuch District, Gujarat. These facilities span over 2.8 lakh sq. ft. combined and are equipped with modern technologies to ensure efficiency, compliance, and scalability. The Dahej plant, which began commercial operations in December 2023 following a successful trial phase, has significantly increased the Companys total production capacity from 325 MTPM to 675 MTPM. Vidhi is now the third-largest manufacturer of synthetic food-grade dyes globally and the second-largest in Asia, with an annual installed capacity exceeding 7,200 MTPA.

Vidhis strong technical capabilities, in-house R&D infrastructure, and backward integration in critical processes have positioned the Company as a high-quality, reliable partner for major global brands such as Nestl?, Britannia, Pepsi, Cipla, Parle G, Unilever, ITC, among others. Over 95% of its production is exported, with the American continent accounting for 50% of FY 2024–25 revenue, followed by Europe (17%) and Australia (27%).

Quality and compliance are central to Vidhis operations. The Company was the first in India to receive ISO 9002 certification for synthetic food colour manufacturing (in 2000). It currently holds ISO 9001:2015 and ISO 22000:2005 certifications, and its facilities have been audited and approved by the U.S. FDA. All products carry Halal and Kosher certifications, catering to a diverse global customer base.

To further capitalize on market opportunities, the Company is developing an additional production facility at Roha Phase II, through its wholly owned subsidiary Arjun Food Colorant Private Limited, located in the same industrial zone in Dhatav, Raigad District. Environmental clearance has been sought for the facility, which, once operational, will further enhance the Companys manufacturing capacity and support the launch of new, high-margin products. This expansion is aligned with Vidhis strategy of sustainable growth, capacity-led volume expansion, and value creation for stakeholders.

Vidhis integrated approach includes a fully equipped laboratory accredited by the Bureau of Indian Standards (BIS) and a dedicated R&D team consisting of PhDs and qualified chemists. The Company continuously focuses on improving process efficiencies, product innovation, and expanding its product portfolio to meet evolving global regulatory and customer requirements. The combination of technical strength, aggressive marketing, and operational excellence has enabled Vidhi to maintain its leadership position in the global synthetic food colour market.

Outlook:

The outlook for the global food colour industry remains positive, underpinned by growing demand across beverage, bakery, confectionery, and processed food segments. The increasing popularity of flavoured drinks, nutritional beverages, and ready-to-eat products continues to drive market expansion. While synthetic food colours remain highly demanded due to their cost-effectiveness, high stability under light and heat, and resistance to microbial contamination, there is a parallel and growing shift towards natural colourants, particularly in developed markets. Natural colours, however, face challenges in cost, formulation complexity, and regulatory approvals.

Global trade dynamics continue to shift. Ongoing trade tensions among major economies such as China, the U.S., and Western Europe have impacted global supply chains, resulting in a realignment of sourcing and manufacturing strategies. These disruptions, along with Chinas evolving chemical industry landscape—marked by stricter environmental norms, tighter financing, and consolidation—have created an opportunity for Indian chemical and specialty manufacturers to gain market share in global value chains.

For Vidhi, this macroeconomic environment offers a strategic advantage. The Company is well-positioned to leverage its capacity expansion, backward integration, and enhanced product mix to strengthen profitability. The Dahej Greenfield plant, having completed its first full year of commercial operations, is expected to contribute significantly to the top line and margin expansion by focusing on high-margin value-added products.

Additionally, Vidhis forward-looking investments in R&D and infrastructure—such as the upcoming Roha Phase II facility—are expected to bolster its market competitiveness. The Companys focus on operational efficiencies, expanding customer base, deeper geographic penetration, and increasing wallet share from existing clients, aligns with its growth-oriented strategy.

Overall, the Company expects sustained growth in revenue and profitability, supported by rising global demand, expanding production capacities, regulatory compliance, and a well-diversified export footprint. As the global and domestic landscape evolves, Vidhi remains committed to innovation, customer satisfaction, and long-term value creation for all stakeholders.

Opportunities and Threats:

The Company has a well set up infrastructure in respect to manufacturing capacities, human resources, technical expertise, etc. which are a key factor for future growth of its business. The Company can bank on its in-house R&D for development of new products, quality improvements and cost reductions. Another important aspect which helps the Company in having its diverse portfolio of products is the fact that, the manufacturing capacities are fungible. The dedicated teams for Quality Management and Quality Assurance, helps in maintaining the standards required for various products. The entire project or process is designed to ensure delivery of Best Quality Products. Companys products are having various quality certificates. Further, expansion plans and backward integration will enable the Company to cash on the various opportunities available to the Company.

Opportunities:

1. High Barriers to Entry & Regulatory Advantage

The food colours segment is highly regulated and technically demanding, resulting in strong entry barriers. Vidhi, being one of the few companies with robust technical expertise and necessary quality approvals, stands to benefit from this oligopolistic structure.

2. Growing Global Demand & Export Potential

The global food and beverage colour market is growing steadily, projected at a CAGR of around 6%, with annual incremental demand of ?1,500–1,700 crore globally. With India contributing approximately 16% of global dyestuff and dye intermediate production Vidhi is well-positioned to tap both the domestic and export markets.

3. Cost & Supply Chain Advantages from Trade Realignments

Amid trade wars, Indian chemical manufacturers could benefit from shifts away from Chinese suppliers. While raw material costs have risen due to tariff-driven inflation, localizing inputs and playing to Indias cost- competitiveness could offer longterm advantages.

4. Diversification into New Markets

Given escalating tariff tensions—especially with the U.S.—theres a clear strategic opportunity to diversify exports into regions like EU, UK, ASEAN, Africa, Middle East, and potentially CPTPP nations.

Threats:

1. Tariff-Driven Export Vulnerabilities

Escalating tariffs—from 25% to potentially 50%—on Indian exports to the U.S.—threaten the competitiveness of processed food products, including colours, spices, and more. This could lead to cancellations or reduced orders. Moodys also flags food as a sensitive category, exposed to reciprocal U.S. tariffs.

2. Geopolitical Disruption & Supply Chain Volatility

Volatile trade policies and tariff oscillations make long-term planning difficult for F&B ingredient suppliers.

Companies may face surging input costs, sourcing delays, and regulatory complexities.

3. Rising Raw Material Costs

Indias reliance on raw materials—often imported from China—has sown vulnerabilities. Tariffs on Chinese materials have led to 10–15% higher costs. While Indian specialty chemicals might benefit in some areas, food colour producers must navigate higher input costs or slimmer margins.

4. Trade Protectionism & Input Scarcity

Broader agricultural and food trade tensions, driven by protectionist policies and wars (e.g., Ukraine conflict, Indonesian export bans), can disrupt the supply of ingredients, raise costs (like edible oils & fertilizers), and intensify nontariff obstacles

Risks and Concerns:

Steep U.S. Tariffs on Indian Goods

The U.S. has imposed an additional 25% tariff on Indian-origin goods, taking total duties to as much as 50%, responding to Indias increased imports of Russian oil.

This sharp rise threatens to undermine the price competitiveness of Indian exports, including potentially those of food colours and their raw materials

The risk extends beyond cosmetics—export-dependent industries are bracing for 20–30% shipment cuts starting September 2025

Segment–wise or product-wise performance:

In accordance with Ind-AS 108, the Company has a single reportable business segment, namely, manufacturing and trading of food colours and chemicals. Thus, the segment wise or product wise performance report is not given in the report. The Company has manufactured 4081 MT food colours during the financial year 2024-25 against 4507.19 MT in the previous year.

Net Sales by Geography:

Discussion on financial performance with respect to operational performance:

i. Financial Performance:

During the year under review, your Company has achieved Revenue from operations of Rs. 38,230.30 lakhs. The comparative figures are tabulated below. The Company has achieved net profit after tax of Rs. 4357.23 lakhs for the financial year 2024-25. EBITDA stood at Rs. 7,008.98 lakhs for the financial year 2024-25. An operational EBITDA has increased to 2.25% for financial year ended March 31, 2025 as compare to reduction of 33.80% for the financial year ended March 31, 2024.

Finance Cost has been decreased to Rs. 247.96 lakhs for the financial year 2024-25 compared to Rs. 323.81 lakhs for the previous year. Depreciation and Amortization stood at Rs. 744.85 lakhs for the financial year 2024-25 compared to Rs. 622.41 lakhs for the previous year.

(Rs. in Lakhs)

Particulars	F.Y. 2024-25	F.Y. 2023-24
To Total Revenues from Operation	38,230.30	29,796.57
Revenues from Exports	30,127.12	24,190.76
EBITDA	7,008.98	5,843.78
PAT	4,357.23	3,662.10
Earnings per share	8.71	7.34

ii. Operational Performance:

Overall, the macro-economic situation is still challenging and policy measures taken by the Government are yet to impact the business in a big way. However, Company posted excellent growth in top as well as bottom line on the back of planned austerity measures and optimum resource management.

The Companys performance with regard to the export manufacturing sales volumes, increased in the financial year 2024-25 to 87% of total sales as compare to 89% of total sales in previous year, domestic trading sales increased in the FY 2024-2025 to 14% as compare to decrease to 11% in FY 2023-24.

The Companys main focus is on manufacturing activities and trading is not the focus area of business. In reporting period companies manufacturing sales remains almost same as compare to last year. By a combination of a better product mix helped by specialty products and continual improvement in the efficiency of operations at both the locations, the Company has tried keeping its operating margins healthy for all the four quarters and has achieved to have a reasonable EBITDA level. Turnover of the Company has been increased by 28.30% as compared to decreased in previous year whereas the other income is also increased by 33.41%. There is Increase in the Manufacturing Operations in the Reporting Period; however, the said plunge in the turnover of the Company was predominantly due to substantial reduction in Trading Activities.

Environmental & Hazardous Safety and Quality Assurance:

Vidhi commits itself to ethical and sustainable operation and development in all business activities. Sustainability enhances innovative ways to do business. This is a necessary prerequisite for value creation. Sustainability at the Company is an integral part of the way we work and this helps the company to position itself in the sustainable market, build a competitive advantage through differentiation, support profitable growth, create added value for stakeholders, build brand image and reputation and anticipate and mitigate risk.

Our ability to treat customers, employees, neighbors and environment in a responsible way is not only ethically correct but also strengthens our partnership with those stakeholders upon whom our success as a Company ultimately depends. The Company takes initiatives to reduce environment, health and safety risks in the production, storage, distribution, use of products and disposal of waste. These include efficient use of energy and resources and continuous improvement of our processes to minimize the impact of our activities on the environment.

As your Company deals with chemicals and is in the business of manufacturing food colours and trading in specialty chemicals, it has to make sure that the highest degree of safety measures is maintained in order to avoid any risk at the workplace. Your Company is committed to maintain its operations and workplace free from incidents and significant risk to the health and safety of its stakeholders through improved their work skills, strong channels of communication, safety awareness, and sound training practices.

The Companys certified manufacturing activities complies with ISO 9001:2015, ISO 22000:2005 and HACCP which reflects the Companys continued commitment towards Quality, Environment, Occupational Health and safety approaches.

Internal Control Systems and its Adequacy:

The Company has a system of internal controls to ensure that all its assets are properly safeguarded and not exposed to risks arising out of unauthorized use or disposal. The Internal Control system is supplemented by programs of internal audit to ensure that the assets are properly accounted for and the business operations are conducted in adherence to the laid down policies and procedures. The internal control system also focuses on processes to ensure integrity of the Companys financial accounting and reporting processes and compliance with the Companys legal obligations. The Company has a well-defined risk management programme for identifying and mitigating risks across all the functions which are reviewed by the Audit Committee and Board of Directors of the Company periodically.

The Company has a Risk Management Committee of the Board of Directors which meets regularly to review inter alia risk management policies, adequacies of internal controls, the financial information and other issues related to the Companys operations. The Internal Auditors along with finance team plans the audit schedule for the year in consultation with CFO and the Audit Committee. The Audit Committee of the Board approves the internal audit plan at the start of every financial year to ensure the coverage of most of the functions with a view to minimise associated risks. Independent external teams have been engaged as the Internal Auditors to perform the internal audit function, assess the internal controls and statutory compliances in various areas and also provide suggestions for improvement. The Audit Committee regularly reviews the major findings of the internal audits with respect to different locations and functions to help take effective steps in ensuring compliance.

Human Resources:

Performance measurement is a fundamental principle of the management. The measurement of performance is important because it identifies performance gaps between current and desired performance and provides indication of progress towards closing the gaps. The Company believes that human resources are a critical factor for its growth. The Company invests in its employees for the growth of their skills and talents so as to meet the growth aspirations of the business. The emphasis is on grooming in-house talent enabling them to take on larger responsibilities. The senior management team spends considerable time in reviewing the existing talent base and processes used for honing the skills of the members in the talent pool and assessing their preparedness for taking on new assignments.

Compensation and benefits packages have always been pivotal to retaining and motivating employees. To remain competitive in compensation and rewards offered, continual efforts were made to make compensation and benefits flexible and market-linked.

The relations with the employees and workers remained cordial and harmonious throughout the year. The Company had total work force of 96 as on March 31, 2024.

Details of significant changes in key financial ratios (i.e. change of 25% or more as compared to the immediately previous financial year):

Ratios	F.Y. 2024-25	F.Y. 2023-24	% Change
Debtors Turnover	2.91	3.35	-13.13
Inventory Turnover	4.99	5.25	-4.95
Interest Coverage Ratio	28.27	18.34	54.13
Current Ratio	2.92	4.80	-39.17
Debt Equity Ratio	0.31	0.16	93.75
Operating Profit Margin (%)	18.75%	19.70%	-4.82
Net Profit Margin (%)	11.66%	12.39%	-5.89
Return on Net worth (%)	14.42%	13.03%	10.67

Reason for change in change of 25% or more in key financial ratios as compared to the immediately previous financial year:

a) Current Ratio (%): Current Ratio declined to 2.92% as against 4.80% in previous year. The ratio is lower due to increase in current liabilities mainly on account of higher working capital borrowings during the current year.

b) Interest Coverage Ratio (%): Interest Coverage Ratio is favorable and increased to 28.27 % as against 18.34% in Previous year. The said increase in primarily due to increase in the earnings in the current year on account of increased improved Business environment.

c) Debt Equity Ratio (%): The Debt Equity ratio is increased to 0.31% as compared to previous financial year.

The said increase is mainly due to increase in working capital borrowings during the current year.

Cautionary Statement

Certain statements under ‘Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could materially differ from those expressed or implied, since the Companys operations are influenced by many external and internal factors beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent developments, information or events.