Vintage Coffee & Beverages Ltd Management Discussions

[Pursuant to Schedule V (B) of the Securities and Exchange Board of India (Listing Obligations and

Disclosure Requirements) Regulations, 2015]

1. OVERVIEW

Coffee is one of the most traded agricultural commodities in the world. It provides jobs for 125 million people. Coffee is grown on 12.5 million farms worldwide, of which 67—80 per cent are smallholder farms primarily located in developing countries, including 22 low Human Development Countries.

As per USDA, the global green coffee production for the year 23-24 was 169.2 million bags and consumption were at 170 million bags. Certified closing stocks were put at 23 million bags.

The favourable demand supply situation along with lower certified closing stocks and un-favourable weather conditions, ensured that green coffee prices started moving up and March24 were already high leading to increase in prices of value-added products also.

Instant coffee market is valued at USD 11.4 billion. The market is further projected to grow in the forecast period of 2022-2027 at a CAGR of 4.9% to reach USD 15.2 billion by 2026.

Spray dried instant coffee dominated the global instant coffee market at the lower end of price spectrum. granulated coffee and freeze-dried instant coffee complete the other higher priced segments in Instant Coffee.

Instant coffee is available in concentrated liquid, powdered form and in granules, in sachets or glass jars, thus, are gaining immense popularity, especially among the working population across the globe.

GLOBAL ECONOMIC TRENDS

For most part of last year US CPI was at 3.1% showing modest disinflation trend easing prices across food, energy and core goods.

US unemployment rates were flat at 3.7%. The non-farm pay rolls were also at higher levels.

China CPI continues to be in the deflationary zone as demand is lower due to falling property prices and government has initiated corrective measures to arrest the situation and we can see a modest recovery.

RESILIENT INDIAN ECONOMY

India, meanwhile, enjoys a euphoric moment as its economic activity is gaining momentum amid continuing global uncertainties.

CPI% was at 5.6% with prices being elevated. Fuel inflation contracted slightly.

Industrial production was robust at 11.7% and shows increasing production trends. GST revenues were increasing at 10.3 % Yoy growth, SGST Showed 13.7% YOY growth and IGST showed 7.3% growth.

PMI for manufacturing showed a slight easing due to lower exports but is in expansion zone.

Fuel consumption index increased by 2.6%. Electricity production was marginally up.

Equity markets showed upward trend with a return of around 7.2%. Indian markets showed resilience amid weak global trends. NIFTY clocked 8 years of positive returns. NIFTY-100 showed all time high growth. Foreign exchange earnings also were more than the outflows at USD 23 billion vs USD 22billion.

COFFEE INDUSTRY IN GROWTH PHASE

With improving economies, Factors such as increasing out of home coffee consuming population, rapid urbanization, rising e-commerce retail sales, accelerating disposable income, increasing instant coffee preference, growing demand for specialty coffee and increasing green coffee consumption in emerging economies are expected to drive the market. However, the growth of Coffee Industry may be challenged by weather uncertainties, retail consolidations and stringent regulations.

A few notable trends include growth of premium coffee shops, high demand for cold brew coffees, increasing desire for functional coffee (coffees infused with Vitamins, Minerals, Anti-Oxidants and other ingredients offering health benefits) and increasing gourmet coffee sale in certain sections of USA.

The fastest growing markets are the developing economies. Topping this is the Asia-Pacific, where due to a rise in the demand for coffee by the working population, growing presence of a large number of coffee chains and increasing e-commerce retail sector coffee consumption is on the rise.

GLOBAL COFFEE TRENDS

World coffee production for 2024/25 is forecast to rebound 7.1 million bags from the previous year to 176.2 million due primarily to continued recovery in Brazil and rebounding output in Indonesia. With additional supplies, global exports are expected up 3.6 million bags to 123.1 million primarily on strong shipments from Indonesia and Brazil. Consumption is seen 3.1 million bags higher to 170.6 million. Ending stocks are expected to rise 1.9 million bags to 25.8 million following 3 years of decline.

The global coffee segments are Conventional coffee and Instant Coffee. Instant Coffee is made for convenience and much higher in terms of value. This segment has been growing at around 4.9% on a year-on-year basis. Global coffee consumption has been estimated at 178 million bags with a demand for 7 million bags of coffee.

Economically developing countries are the biggest consumers. There is a big market in the private label segment of Instant coffee for Vintage to comfortably expand mostly to Africa, Baltic and Central Asian countries.

In spite of slower growths of economies globally, recessionary trends and political disturbances in some geographies, Coffee as a beverage is evincing big demand and penetrating well into traditional tea drinking areas. Hence the global coffee market is anticipated to reach US$134.25 billion in 2024, Vintage is well positioned to gain a fraction of this ever-growing coffee market.

VINTAGE COFFEE CONTINUES ITS AGGRESSIVE EXPANSION

Vintage Coffee and Beverages Ltd (VCBL) is expanding aggressively in an organic manner and expanding business both in terms of increase in production and sales.Your company has now. penetrated into new countries such as Vietnam, GCE countries and New Zealand already so far this year and many more new entries are on the cards. This growth continues to be on the strong foundation of product quality and customer relationships. Customer retention ship continues to be at around 95%. The company has to date developed close to a thousand blends and is present directly in over 25 countries and indirectly in many more with close to 43 key customers. Delecto Foods Private Limited, the Instant chicory manufacturing subsidiary of VCBL has developed a key product and gained first mover advantage, which is helping company gaining inroads in new markets and segments.

The company is managed by people with good experience and deep understanding of the market dynamics and are developing strategies to identify new products, segments and customers.

The company has a state of the art automated manufacturing unit with large production capacities and equipment to deliver a good cup with good quality and rich taste. it has capabilities to quickly develop and introduce new products and packaging to meet the requirements of the market.

Plans are on to enhance capacity utilisation to 100%; procure green coffee at optimal prices with six month supply visibility at any time; renew the existing contracts on hand and bag additional orders from new markets; have an uninterrupted production and dispatches; and also focus on domestic sales front too in segments such as e-commerce, Exclusive retail outlets , Corporate Vending and out of home opportunities and thereafter foray into branded space in the retail segment.

BUSINESS REVIEW

The company has taken several initiatives to improve operations and sales in FY 25. Strategic sourcing of green coffee at right time at right prices, broadening the customer base, Focus on value added products will ensure robust top line and bottom line growths over the preceding years.

FINANCIAL METRICS

The Turnover of the company has increased from Rs.62.89 Crores in 2022-23 to Rs.131.04 Crores in FY2023-24.this turnaround has improved profit from 3.86 crores in FY 2022-23 to Rs.11.98 Crores in FY2023-24.Return on Equity has improved from 3.56% in 2022-23 to 7.21% in 2023-24. Debt to Equity Ratios have improved from 0.94 in 2022-23 to 0.58 in 2023-24. Earnings per share have improved from Rs.0.55 in 2022-23 to Rs1.14 in 2023-24. Graphical representation is presented here.

2. INDUSTRY STRUCTURE AND DEVELOPMENTS

As being seen in the recent trend, global consumption is increasing. Consumption increase is being observed in developing countries in line with economic growth. Developed countries are looking at premiumization of products.

People are becoming more sensitised to social and ethical aspects in daily life in general and for coffee in particular. We are observing demand for certified coffee products..

3. OPPORTUNITIES

Globally instant coffee consumption is on the rise. we are seeing big growth opportunity in Middle east, central asia and Asia in general and India in particular. Your company is on the verge of launching products in various segments and look forward to exciting times in the market in the coming days both in the in-home and out of home segments.

4. RISK, CONCERNS AND THREATS

As always,Global economy, Political disturbances continue and may pose potential problems.Despite increase in coffee consumption, new players are joining to cater to the increasing demand.

However, your company has sound planning and strategy in place to meet the stated budgetary targets. It has robust processes to identify blind spots and is geared up to meet all the potential challenges and confident to meet its set objectives for the year.

5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has laid down procedures and control framework for the governance of orderly and efficient conduct of its business, including adherence to policies, safeguarding of assets, prevention and detection of fraud and errors, accuracy and completeness of accounting records and timely preparation of reliable financial reports. These include regulations in manual or automated (ERP) applications including other IT applications, wherein transactions are approved and recorded). Appropriate review and control mechanisms are one of our mandates in ensuring that such control systems are adequate and are operating effectively on an ongoing basis. The Company is responsible for establishing and maintaining optimal internal controls in preparation and presentation of financial statements, including assertions on the internal financial controls.

6. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE REVENUES - STANDALONE:

During the year under review, the Company on a standalone basis has recorded an income of Rs.7389.42 Lakhs and Profit of Rs.327.84 Lakhs as against the income of Rs.3574.83 Lakhs and Profit of Rs.115.37 Lakhs respectively in the previous financial year ending 31.03.2023.

REVENUES - CONSOLIDATED:

During the year under review, the Company on a consolidated basis has recorded an income of Rs. 13103.86 Lakhs and Profit of Rs.1198.28 Lakhs as against the income of Rs.6289.05 Lakhs and Profit of Rs.386.20 Lakhs respectively in the previous financial year ending 31.03.2023.

7. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Your Company treats its Human Resources as its important assets and believes in its contribution to the all-round growth of the Company. The Company takes steps from time to time to upgrade and enhance the quality of this asset and strives to maintain it in agile and responsive form. The Company is an equal opportunity employer and practices fair employment policies. The Company is confident that its Human Capital will effectively contribute to the long-term value enhancement of the Organization. The Company has complied with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the year under review, relationship between the management and the employees continued to be cordial. The Companys Directors wish to place their sincere appreciation for the devoted services of all employees and workers of the Company on record.

8. DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS YEAR (STANDALONE FINANCIAL STATEMENTS)

Sl. No Ratio	Formula to Calculate Ratio	31-03-2024	31-03-2023	31-03-2024	31-03-2023
(a) Current Ratio	Current Assets	1,597.85	421.97	2.39	0.44
	Current Liabilities	668.35	949.35
(b) Debt Equity Ratio	Total Debt	1,079.53	436.39	0.06	0.03
	Total Equity	18,706.34	13,794.97
(c) Debt Service Coverage Ratio	Earnings before interest, tax and exception items	470.15	158.92	14.73	52.65
	Interest expenses + prinicipal repayments made during the period for long term loans	31.92	3.02
(d) Return on Equity Ratio	Net Income	327.84	115.37	1.75%	0.84%
	Shareholders Equity	18,706.34	13,794.97
(f) Trade Receivables Turnover Ratio	Value of Sales and Services	7,389.42	3,574.83	9.85	10.59
	Average Trade Receivables	749.82	337.53
(g) Trade Payables Turnover Ratio	Turnover	7,389.42	3,574.83	21.85	28.16
	Average Trade Payables	338.25	126.93
(h) Net Capital Turnover Ratio	Turnover	7,389.42	3,574.83	0.40	0.26
	Net Capital	18,706.34	13,794.97
(i) Net Profit Ratio	Net Profit after T ax	327.84	115.37	4.44%	3.23%
	Turnover	7,389.42	3,574.83
(j) Return on Capital Employed	EBIT	470.15	158.92	2.38%	1.12%
	Capital Employed	19,785.88	14,231.36
(k) Return on Investment	Net Profit after T ax	327.84	115.37	1.75%	0.84%
	Shareholders Equity	18,706.34	13,794.97

9. ANY OTHER SECTOR SPECIFIC RATIOS, AS APPLICABLE

Not applicable

10. DISCLOSURE OF ACCOUNTING TREATMENT:

During the preparation of Financial Statements of F.Y. 2023-24 the treatment as prescribed in an accounting standards has been followed by the Company. There are no significant changes in Accounting Treatment as followed by the Company in current financial year as compared to previous financial year.

11. CAUTIONARY STATEMENT:

Although we believe we have been prudent in our projections, estimates, assumptions, expectations or predictions while making certain statements, realization is dependent on various factors. Should any known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information.