Advanced Enzyme Technologies Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

GLOBAL ECONOMY

A Year of Moderate Growth with Persistent Challenges

In CY 2023, the global economy underwent a modest recovery, growing at an estimated 3.1 %. The resurgence in economic activity was an outcome of a strong increase in consumer demand. This surge was fuelled by the accumulation of savings due to pandemic restrictions and supported by labour markets marked by abundant job opportunities. However, geopolitical tensions, ongoing supply chain disruptions and the increase of interest rates by central banks to combat inflation posed challenges to the upswing in economic activity.

Advanced economies like the United States experienced a more modest growth of 2.5% due to robust consumer spending and a strong job market. However, the Eurozone faced a challenging climb at 0.5% due to high energy prices and a less confident consumer base. In contrast, emerging and developing economies fared better, collectively experiencing a more rapid expansion at 4.1%. This can be attributed to Chinas reopening and Indias strong domestic demand. Despite the overal growth, inflation remained a major global concern.

While headline figures started to cool down towards the end of the year, they were still above central bank targets in most countries. This prompted major centra banks like the Federal Reserve and the European Centra Bank to maintain a hawkish stance, raising interest rates repeatedly and tightening financial conditions.

OUTLOOK

In FY 2024-25, the global economy has a more precarious path to cover. Despite headwinds from tighter monetary policies, reduced government stimulus and sluggish productivity, growth is projected to reach a modest 3.1% and 3.2% in CY 2024 and CY 2025 respectively. Inflation is expected to cool off at 5.8% in CY 2024 and 4.4% in CY 2025, which calls for policymakers to exercise caution in managing its descent to prevent impeding growth. Faster disinflation and Chinas recovery presents an optimistic outlook, while geopolitical tensions and persistent inflation pose downside risks. Long-term growth, especially in emerging markets, hinges on structural reforms aimed at boosting productivity and ensuring debt sustainability.

Source: WEO

INDIAN ECONOMY

Robust Growth Trajectory

India has been experiencing robust economic growth due to resilient domestic demand and proactive policy measures by the Government. One such instance was the countrys GDP growing by an impressive 8.4% in the October-December quarter of 2023, surpassing analysts expectations. The strong performance delivered by India can be attributed to the Governments capital spending push and vigorous manufacturing activity. High-frequency indicators suggest that the economys strong momentum from the September and December quarters of 2023 carried into the March quarter of 2024. Robust goods and services tax collections, rising auto sales, consumer optimism and double-digit credit growth indicate resilient urban consumption demand.

Bright Prospects and Policy Continuity

According to global rating agency Moodys, Indias GDP is projected to grow at 6.8% in CY 2024, higher than the previous estimate of 6.1%. This upward revision reflects Indias robust economic performance in CY 2023 and the diminishing impact of global economic challenges. Moodys expects the Indian economy to remain the fastest-growing among G-20 economies, anticipating policy continuity after the general election, with a sustained focus on infrastructure development. The interim budget has targeted a capital expenditure allocation of Rs.11.1 lakh crore, or 3.4% of GDP in FY 2024-25, an increase of 16.9% over the previous years estimates, further bolstering economic growth prospects.

Addressing Growth Hurdles

While private industrial capital spending has been picking up slowly, it is expected to gain momentum, aided by the ongoing supply chain diversification benefits and the Governments Production Linked Incentive (PLI) scheme, which aims to boost key targeted manufacturing industries. However, the Indian economy faces certain challenges. Private consumption growth remained subdued at 3.5% in the third quarter of FY 2023-24. To address this, the Government has undertaken several measures, including targeted fiscal stimulus packages aimed at boosting consumer spending and confidence.

Moreover, growth has been uneven across sectors, as suggested by the moderation in core GDP growth and Gross Value Added (GVA) growth. Recognising the importance of balanced sectoral growth, the Government has closely monitored this moderation and has made strategic investments in key sectors, while continuing to support Micro, Small and Medium Enterprises (MSMEs) to sustain overall economic momentum.

Additionally, the escalation of global geopolitical tensions and slowing external demand pose potential downside risks for the external sector. To mitigate these risks, the Government is actively engaging in diplomatic efforts and implementing measures to bolster the resilience of the external sector.

OUTLOOK

Despite all the challenges, Indias economic outlook remains positive, supported by robust domestic demand, government initiatives and a focus on infrastructure development. The countrys growth prospects are further bolstered by the implementation of game-changing policies, such as the PM GatiShakti, the National Logistics Policy and the PLI scheme, aimed at boosting manufacturing output and enhancing logistics efficiency.

INDUSTRY OVERVIEW

Global Industrial Enzymes Market

The global industrial enzymes market was valued at USD 7,400 million in CY 2023. It is expected to register a robust CAGR of 6.6% during the forecast period of CY 2023 to CY 2030, reaching a substantial USD 10,200 million by CY 2028. This growth is fuelled by the diverse capabilities of this market and the surging demand from various end-use industries. Some of these include biofuel, domestic cleaning, animal feed and the ever-expanding food & beverage sector. The market is expected to grow further due to the growing demand for carbohydrases and proteases. This is more so in the rapidly expanding economies of China, India and Japan, where the food and beverage applications are witnessing a significant upswing.

Advancements in genetic and protein engineering have played a pivotal role in enhancing the stability, cost-effectiveness, specificity and overall application potential of industrial enzymes.

The increasing adoption of enzymes spans across a diverse range of applications, including food and beverages, pharmaceuticals, detergents, cosmetics and numerous other industries. This trend is expected to drive substantial market growth over the estimated period.

While North America currently dominates the market, the Asia- Pacific region is poised to register the highest CAGR through the forecast period. This is due to the regions burgeoning economic growth and increasing industrialisation.

The industrial enzymes market is further expected to benefit from the growing emphasis on sustainable and eco-friendly processes, as enzymes offer a greener alternative to traditional chemical catalysts. The trend towards clean-label and natural products is also expected to boost demand for industrial enzymes. This is because they are perceived as more natural and environment-friendly alternatives to synthetic additives.

Source: Global Industrial Enzymes Market Research Report - Forecast to CY 2030, MRFR Analysis

Human Healthcare Enzymes Market

Human nutrition focuses on providing the necessary nutrients from food to sustain life and promote wellness. Digestive enzymes play a vital role in this process by breaking down complex molecules into absorbable components for the body. Secreted by digestive organs, these enzymes are widely used in the pharmaceutical, biotechnology and diagnostics industries.

The digestive enzymes market is growing due to an increase in gastrointestinal disorders across all ages, a rapidly aging population, a growing middle class, rising disease rates, changing lifestyles and increased use of pharmaceutical products after the COVID-19 pandemic.

Industrial sectors such as food and animal feed contribute to the highest demand for enzymes. However, they are also gaining popularity in personal care and cosmetic products like hair dyes and skin, oral and sun care products. Enzymes have proven useful for treating skin aging, acne, congestion and pigmentation issues, partially driven by a shift towards organic compounds over petrochemicals.

Pharmaceutical companies are increasingly using industrial enzymes as active ingredients in drugs and nutraceuticals to treat various diseases. In nutraceuticals, primarily in the US, these enzymes are used in dietary supplements and functional foods such as breakfast cereals and sports drinks.

Declining costs of DNA manipulation and sequencing are projected to drive the enzyme demand in research, biotechnology and pharmaceutical applications. An aging population in developed countries is also expected to boost the demand for healthcare specialty enzymes. Research and biotechnology applications of enzymes are estimated to increase rapidly due to advances in diagnostic tests and declining DNA sequencing costs. This is expected to lead to more testing for agricultural, food and medical applications.

Personal Care: Market Estimates and Forecast, By Region, 2019-2030

									(USD million)
Region	CY 2019	CY 2020	CY 2021	CY 2022	CY 2023	CY 2024	CY 2025	CY 2030	CAGR % (2022-2030)
North America	141.45	145.76	151.71	158.15	164.87	172.07	179.85	228.07	4.68
Europe	63.57	66.20	69.63	73.33	77.30	81.57	86.19	115.39	5.83
Asia-Pacific	91.00	95.46	101.16	107.32	113.93	121.08	128.86	178.69	6.58
Rest of the World	34.43	36.10	38.22	40.45	42.97	45.68	48.61	66.98	6.51
Total	330.45	343.52	360.73	379.25	399.06	420.40	443.52	589.14	5.66

Source: Industry Experts, Secondary Research and MRFR Analysis

Feed Enzymes Market

The global feed enzymes market is expected to witness a substantial growth from USD 828.66 million in 2023 to USD 1,261.95 million by CY 2030, at a CAGR of 6.13% during the review period. This remarkable growth can be attributed to the increasing emphasis on cost-efficiency and the need to maintain optimal livestock performance and provide protein-rich meat diets to meet the growing global demand for animal-based products.

Feed enzymes have many benefits. They help in the digestive process of livestock animals, enhancing their immunity and improving the overall nutrient content of feed. These enzymes are extremely resilient and can sustain themselves under challenging conditions such as acidic pH levels and high temperatures during feed processing operations. By optimising nutrient utilisation and enhancing animal gut health, feed enzymes contribute to reducing environmental pollution and minimising feed management costs, further amplifying their appeal in the market.

As consumer awareness and demand for naturally nutritious and healthy products continue to rise, the market for protein-based products, including dairy, eggs and meat, is expected to surge. This trend is poised to drive the demand for feed enzymes, enabling farmers and livestock owners to produce more meat per animal at a lower cost.

It will also ensure the long-term health and well-being of their livestock, ultimately boosting profitability.

Animal Feed: Market Estimates & Forecast, By Region, 2019-2030

(USD million)

Region	CY 2019	CY 2020	CY 2021	CY 2022	CY 2023	CY 2024	CY 2025	CY 2030	CAGR% (2022 2030)
North America	291.05	301.93	316.38	331.93	348.47	366.25	385.48	505.80	5.41
Europe	127.80	133.50	140.86	148.79	157.33	166.56	176.57	240.24	6.17
Asia-Pacific	182.81	192.34	204.40	217.49	231.56	246.83	263.47	370.91	6.90
Rest of the World	72.42	76.11	80.80	85.72	91.30	97.30	103.81	145.00	6.79
Total	674.09	703.88	742.44	783.93	828.66	876.94	929.34	1,261.95	6.13

Source: Global Industrial Enzymes Market Research Report - Forecast to CY 2030, MRFR Analysis

Specialty Enzymes Market

Specialty enzymes are molecular compounds that regulate chemical reactions without altering the process itself.

They are specifically employed in sustainable industrial processes across sectors like pharmaceuticals, chemical production, biofuels, food and beverage and consumer products. Recent advancements in bio-catalysis using isolated enzymes have proven more economical than utilising entire cells. This has contributed to the rapid growth of the industrial bio-catalysis market involving enzymes.

The ability of specialty enzymes to operate under mild conditions and exhibit exceptional properties during reactions has further augmented their demand. The growing pharmaceutical industry, driven by increased investments in drug production facilities to combat chronic diseases, is a significant contributor to the specialty enzymes market.

Market Drivers

Shift toward specialty adhesives and sealants: The growing demand for specialty adhesives and sealants will drive market growth, enabling manufacturers to increase profits. The transition from traditional materials to plastics in industries like automotive and aircraft is driving the demand for specialty adhesives in product assembly.

Growing demand for water-soluble polymers for water treatment: The demand for water-soluble polymers is increasing due to recent developments in the water and wastewater treatment industry. Water treatment plants are the largest consumers of water-soluble polymers. Developing nations like China and India are witnessing increased focus on wastewater treatment, driving the need for water-soluble polymers.

Increasing demand from the agrochemical industry: The global population is increasing leading to a decrease in the arable land area per person. This has led to an increased focus on raising crop yields. Specialty chemical companies are developing various yieldenhancing agrochemicals to meet this reguirement, driving market growth.

Source: Global Industrial Enzymes Market Research Report - Forecast to CY 2030, MRFR Analysis.

Others

Enzymes also find applications in other sectors like the textile, leather processing and pulp and paper industries. They are gaining recognition for their non-toxic and environment-friendly properties in textile chemical processing worldwide. This is driven by growing demands for textile enterprises to reduce pollution from production. Enzymes help in reducing processing time, saving energy and water and improving product guality with potential for process integration. They are also seeing increased use in leather processing, which is one of the most polluting industrial activities. Their adoption helps mitigate the environmental impact of this polluting process.

Others: Market Estimates & Forecast, By Region, 2019-2030

(USD million)

Region	CY 2019	CY 2020	CY 2021	CY 2022	CY 2023	CY 2024	CY 2025	CY 2030	CAGR % (2022- 2030)
North America	317.38	332.16	351.12	371.52	393.50	417.21	442.93	606.07	5.41 %
Europe	146.74	154.86	165.08	176.12	188.14	201.19	215.43	307.53	6.17%
Asia-Pacific	188.92	200.61	215.17	231.04	248.24	267.01	287.58	423.11	6.90%
Rest of the World	71.05	75.43	80.89	86.68	93.24	100.36	108.12	158.35	6.79%
Total	724.09	763.07	812.26	865.37	923.13	985.77	1054.06	1495.07	7.07%

nee: Industry Experts, Secondary Research, and MRFR Analysis

Global Probiotics Market

The global probiotics market is undergoing remarkable growth and holds immense potential. It is projected that this thriving market will continue its prosperous trajectory, attaining a substantial value of approximately USD 8,926.37 million by CY 2027.

The remarkable growth of this market can be attributed to several conducive factors. Notably, there has been an upsurge in new product launches catering to the evolving preferences and demands of discerning consumers. There is also a heightened awareness among consumers around the myriad health benefits of probiotic supplements. Some of these include improved digestive health and enhanced immune function. Apart from this, the burgeoning elderly population worldwide has contributed to the increased demand for health-promoting and preventive products such as probiotics.

Moreover, the expansion of retail channels, both traditional and online, has enhanced the accessibility and visibility of probiotic products, fostering greater consumer adoption. Companies investing heavily in research and development have created new formulas and delivery methods, improving the products available in the market. Lastly an upswing in mergers and acquisitions activities has facilitated consolidation and synergies within the industry. This has further enabled companies to leverage complementary strengths and resources, thereby propelling the probiotics market to greater heights during the forecast period.

nee: Global Probiotic Supplements Market Research Report Forecast

(2022 2027F), MarkNtel Advisors

Global Pet Probiotics Market

The global pet probiotics market is expected to witness a remarkable growth from USD 3,645 million in CY 2024 to a projected USD 6,798 million by CY 2034, at a CAGR of 6.4% over the evaluation period. This can be attributed to the growing awareness among pet owners regarding the advantages of natural, safe and efficient solutions. Probiotics are valued for their ability to enhance the immune system of pets by maintaining a healthy microbial flora in their digestive tracts.

Industry reports indicate that approximately 24% of pet owners have embraced probiotics to improve their pets digestive health, immunity and overall wellness. Probiotics are available in both liquid and solid forms. They can thus be conveniently incorporated into animal feed, ensuring effective delivery of their health benefits. Moreover, probiotics used in animal nutrition have demonstrated notable impacts on how animals absorb nutrients from their feed, leading to weight gain. Their usage has also been linked to improved quality of milk, meat and eggs. Furthermore, administering probiotics in animal feed has proven effective in bolstering gut immunity, reducing bacterial shedding, aiding disease diagnosis and enhancing overall resilience and well-being.

Source: Animal Feed Probiotic Market Outlook from 2024 to 2034, Future Market Insights Inc

Human Probiotics Market

The human probiotics market is growing. This growth is fuelled by increasing consumer awareness of the important role of gut health in improving overall well-being and enhancing digestive health and vitality. Probiotics are also gaining recognition for their potential to bolster immune function, aligning with the global emphasis on strengthening immunity in the wake of recent health challenges.

Furthermore, the application of probiotics has expanded into the realm of skincare. They have proven instrumental in nourishing benefcial bacteria that maintain skin pH balance, defend against free radical damage, enhance skin moisture barrier function, reduce oxidative stress and mitigate UV-induced skin damage. These multifaceted benefits are expected to fuel the growth of the global probiotics market.

Indian Enzymes Market

The Indian enzymes market is expected to grow from USD 440.5 million in CY 2023 to USD 669.76 million by CY 2030 at a CAGR of 7.69% during CY 2023- CY 2030. This can be attributed to the significant growth of the healthcare, food and beverage and chemical sectors. Rapid population growth and rising consumer expenditure are also driving market growth across various industries. These include human healthcare and nutrition, animal nutrition, baking, fruit and vegetable processing, brewing and malting, gram processing, protein modification, dairy processing, specialty applications, textile, leather, biomass and paper and pulp processing, biofuels and biocatalysis. This and the rising awareness among people around the importance of digestive health is driving the demand for enzyme supplements. These supplements facilitate digestion and support gut health, which is becoming a crucial concern for many individuals.

Market Drivers

• Growing demand from food and beverage applications: Food processing industries like baking, brewing and fruit juice are the largest users of food enzymes. This is an outcome of the growing global population, increasing purchasing power and greater health awareness.

• Driving environment-friendly processes: Enzymes can replace chemicals or processes that cause environmental issues. They thus help in reducing hazardous industrial waste and protecting the environment, which aligns with the need for sustainable and renewable alternative sources.

• Increasing investments in research and development (R&D): Companies are investing in R&D activities to develop new and innovative enzyme products and improve existing production processes to meet the ever- increasing market demands. This is driving growth in the Indian enzymes market.

• Expanding biotechnology sector: Indias growing biotechnology sector is contributing to the development of new enzyme applications across various industries thereby fuelling market expansion. This includes biofuels, biomass processing and biocatalysis.

Government initiatives and supportive policies: The Government of India has implemented initiatives like ‘Make in India and introduced policies to promote the growth of industries like food processing, textiles and pharmaceuticals. These initiatives are indirectly driving the demand for enzymes in the country.

Rising disposable incomes and changing lifestyles: Increasing disposable incomes and changing lifestyles of Indian consumers have led to a higher demand for processed and convenience foods. These require enzymes in their production processes, thereby boosting the enzyme market.

Indian Nutraceutical Market

The Indian nutraceutical market was valued at USD 6113.20 million in CY 2023 and is expected to register a CAGR of 11.39% during CY 2023-2029. The rising demand for functional foods, which have certain health and medical benefits, is driving the growth of plant- based nutraceuticals in India. The growing demand for natural and safe health supplements, coupled with increasing awareness about the benefits of nutraceuticals for overall health and wellness has also contributed to the growth of the market. The demand for high-quality nutraceutical products in India has been further boosted by a segment of Indian consumers who arc increasingly prioritising product quality and effectiveness over pricing. Rising veganism and an ncreasing vegetarian population in the country are further driving the adoption of plant-based products. This trend is being observed in a variety of industries, including nutraceuticals. The promising potential of the Indian market has captured the interest of global nutraceutical companies, resulting in increased focus towards the country.

Market Drivers

Rising Incidence of Chronic Diseases and Geriatric Population: There is an increase in the prevalence of chronic diseases like diabetes, cardiovascular diseases, and obesity due to changing lifestyles, urbanisation, and dietary habits. This coupled with a growing aging population, heightened awareness of age-related health concerns, and preference for natural and holistic approaches is driving market growth. Nutraceuticals help in managing and preventing chronic ailments, maintaining wellness, and addressing age-associated issues.

? Conducive Government Initiatives:

The Government established the Food Safety and Standards Authority (FSSA) in 2006 to regulate nutraceutical products, dietary supplements, and functional foods. In 2014, the Ministry of AYUSFI was formed to promote traditional healthcare practices and collaboration with the nutraceutical industry. There have also been other initiatives to improve healthcare infrastructure and funding, including provisions to invest in the development of nutraceutical products.

All this along with efforts to strengthen the domestic pharmaceutical sector have benefitted the nutraceutical industry.

• Rising Shift towards E-commerce and Online Retailing: The emergence of e-commerce platforms has enabled wider reach and accessibility of nutraceutical products. Online shopping for nutraceuticals offers convenience and is time-saving and transparent. Manufacturers are now able to establish a global online presence and cope with supply chain issues. All this and the increased adoption of e-commerce for purchasing healthcare items has accelerated the demand for nutraceuticals.

Preventive Healthcare and Personalised Nutrition: There is a growing consumer interest in using nutraceuticals for preventive healthcare, strengthening the immune system and improving overall health. There is also an increasing awareness and demand for personalised nutrition solutions based on age, gender, genetic factors and lifestyle patterns. Nutritional supplements help in addressing specific health issues or deficiencies.

Source Iechsciresearch

Indian Probiotics Market

The Indian probiotics market is witnessing robust growth due to the heightened awareness around wellness and nutrition in the younger generation amidst their fast-paced and demanding lifestyles. Traditional Indian cuisine, rich in oils, spices, refined sugars, tea and coffee, has contributed to a surge in digestive health issues. This has further fuelled the demand for functional foods and beverages such as probiotic-infused yogurts and cereals.

The expansion of the market is also catalysed by the increasing recognition of the benefits probiotics offer for gut health and immunity. Other factors include Indias burgeoning elderly population and the broader shift towards functional foods. The increasing number of women in the workforce has led to a heightened emphasis on their health requirements. This trend has driven the demand for specialised probiotic formulations, with portable and flexible packaging to accommodate on-the- go lifestyles. The availability of dairy, allergen and sugar- free probiotic products has further bolstered the growth of this market in India.

India Probiotics Supplem	ent Market Rev	renue, 2022-:	2027F				(USD million)
Year 1	CY 2022E	CY 2023F	CY 2024F	CY 2025F 1	CY 2026F 1	CY 2027F	: CAGR% :

Market Drivers

• Increasing consumer interest in gut health stimulated by rising prevalence of digestive disorders: With about 25% of Indias adult population suffering from constipation caused by metabolic disorders, there is growing awareness about the importance of gut health. This has increased consumer interest in probiotics for improving digestive wellbeing.

Fitness enthusiasts opting for probiotic supplements as physical training is linked to gut health: Research has shown that modifications in gut microbiota can enhance physical performance. As a result, fitness enthusiasts are increasingly incorporating probiotic supplements into their regimens.

• Evolving perceptions of modern parents about childrens digestive health influencing demand for kids-specific probiotic supplements: Parents are becoming more conscious about their childrens digestive health, leading to a rise in demand for kid-friendly probiotic supplements. Medical associations like the Indian Academy of Pediatrics (IAP) have also recommended probiotics for treating childhood diarrhoea.

• Increasing health awareness due to the COVID-19 pandemic and consumer inclination toward immunity- boosters: The pandemic has made people more conscious about their overall health and immunity. As a result, probiotics, known for their immune-boosting properties, have gained popularity.

Growing geriatric population and risk of chronic gastrointestinal diseases: Indias aging population is more susceptible to chronic gastrointestinal diseases, driving the demand for probiotics as a preventive and therapeutic measure.

• Increasing healthcare expenses and need for women and pediatric nutrition: Rising healthcare costs and a focus on the nutritional needs of women and children have contributed to the demand for specialised probiotic supplements.

COMPANY OVERVIEW

Advanced Enzyme Technologies Limited (AETL or Company) is a research-driven global leader in the production of enzymes and probiotics. With over three decades of experience, AETL stands as Indias largest enzyme manufacturer, offering an impressive portfolio of over 400 proprietary products crafted using over 68 indigenous enzymes and probiotics. Your Company has a strong global footprint, with a presence across the America, Europe, India and a 3% market share in the rest of the world.

AETL is committed to delivering eco-friendly solutions across diverse industries, including human healthcare, animal nutrition, food processing, brewing, textile, leather, paper, biofuels and biocatalysis.

AETLs mission is to empower consumers with side- effect-free healthcare solutions, optimise animal nutrition for farmers and enable industries to replace traditional chemical processes with sustainable enzyme-based alternatives. Your Company boasts a comprehensive portfolio of hundreds of enzyme and probiotics products, backed by cutting-edge manufacturing facilities and robust R&D centres in India, Germany and the US.

Your Companys expertise in fermented enzymes sets it apart as one of the few global manufacturers with extensive experience and proprietary knowledge in this domain. Leveraging its robust capabilities, global footprint, diverse offerings and industry-leading expertise, Your Company is well-positioned to drive growth across geographies and cement its position as a global enzyme and probiotics industry leader.

Furthermore, your Company has expanded its presence in the nutraceutical and dietary supplement market, tapping into the growing demand for natural and plant- based products. Your Companys focus on innovation, sustainability and customer-centric solutions, combined with its commitment to R&D, has enabled it to maintain a competitive edge in the market.

SUBSIDIARIES

AETL comprises eleven subsidiaries i.e. three wholly-owned direct subsidiaries, four direct subsidiaries and four step- down wholly-owned subsidiaries.

ADVANCED ENZYMES USA (AEU)

Advanced Enzymes USA Inc. (AEU) is a body corporate and a wholly-owned direct subsidiary of your Company, specialising in researching, developing and marketing cutting-edge, all-natural, highly effective and innovative enzyme solutions. AEUs primary focus is on the markets of North America and Latin America. The subsidiary holds stakes in several corporations (subsidiaries) based in the United States. In FY 2023-24, AEU recorded consolidated revenue of Rs.2,128 million and a profit after tax (PAT) of Rs.616 million.

Advanced Supplementary Technologies Corporation (AST)

A wholly-owned subsidiary of AEU, Advanced Supplementary Technologies Corporation (AST) was incorporated on December 30, 2010, with its registered address in Chino, California. Advanced Enzymes USA acquired AST on October 31,2012. AST continues to be a leading manufacturer of professional-grade, enzyme-based strength supplements, formulated to support various health concerns, including cardiovascular issues, inflammation, joint pain, digestive disorders and colon-related problems. AST uses only nongenetically modified natural ingredients, ensuring the highest quality, activity, purity and safety.

Dynamic Enzymes, Inc. (DEI) was a California-based wholly owned subsidiary of Advanced Enzymes USA that was incorporated on February 24, 2015. DEI offered high- quality systemic and digestive enzyme supplements through retail channels. During the last financial year, the Board of respective wholly-owned subsidiaries i.e. DEI and Advanced Supplementary Technologies Corporation, USA (AST) approved the merger of DEI and AST. During the year 2023, DEI merged with and into AST and consequently DEI ceased to exist.

Cal-India Foods International (Doing Business as Specialty Enzymes and Biotechnologies)

Specialty Enzymes & Biotechnologies (SEB) also known as Cal-India is a wholly-owned subsidiary of AEU and a leading producer of enzymes in the Western Hemisphere. With over 35 years of experience, SEB offers a complete range of enzyme solutions for healthcare and nutrition, primarily to North American and Latin American markets.

SEB specialises in creating custom enzyme blends from conception to finished products and offers highly effective and established enzyme products.

Enzyme Innovation (EI)

A wholly-owned subsidiary of SEB, Enzyme Innovation (EI) offers customised enzyme solutions for various industries in the US, catering to sectors such as baking and milling, brewing and malting, craft brewing and distilling, fruit and vegetable processing, animal feed, protein modification, grain alcohol, paper and pulp, waste management, wine and detergents and cleaning aids.

ADVANCED BIO AGRO TECH LIMITED (ABTL)

Advanced Bio Agro Tech Limited (ABTL) is a public limited company and a subsidiary (60%) of your Company. Established in 2004, ABTL has grown to emerge as an important player in the feed enzymes and animal nutrition industry. ABTL is engaged in promoting, developing, marketing and selling products of your company in the animal health and nutrition segment.

ABTL has positioned itself as a leader in poultry enzyme solutions in the Indian subcontinent and extends its offerings to the expansive Southeast Asian markets of Vietnam, Thailand, Malaysia and the Philippines. It specialises in manufacturing and marketing enzyme-based solutions for various industries, such as poultry and cattle. It also explores new markets for crop protection solutions and composting.

In FY 2023-24, ABTL generated revenue of Rs.448 million and a PAT of Rs.40 million.

ADVANCED ENZYTECH SOLUTIONS LIMITED (AESL)

Advanced Enzytech Solutions Limited (AESL) stands as a wholly-owned subsidiary of your Company. AESL was established on September 1,2008, as a public limited company. AESL has solidified its position as a premier provider of eco-friendly enzyme solutions, catering to a diverse array of industries encompassing textiles, leather, paper, detergents and cleaning aids. With a core focus on bioprocessing in non-food sectors, AESL endeavours to revolutionise conventional chemical processes with sustainable alternatives, leveraging enzymes, microorganisms and biodegradable compounds.

Dedicated to promoting, developing and marketing innovative solutions, AESL strives to address environmental challenges prevalent in process industries.

In FY 2023-24, AESL witnessed a commendable uptick in revenue, from Rs.134 million to Rs.153 million, underscoring its sustained growth trajectory. AESL maintained a robust PAT, with figures Rs.18 million to Rs.19 million.

JC BIOTECH PRIVATE LIMITED (JC Biotech)

JC Biotech Private Limited (JC Biotech) embarked on its journey on December 31, 1991 dedicated to the production of nutraceuticals, biopharmaceuticals and biochemicals. Your Company acquired a significant stake in JC Biotech on December 01,2016, marking a strategic alignment of vision and objectives. In FY 2023-24, JC Biotech showcased robust performance, with reported revenues reaching Rs.626 million and a commendable PAT of Rs.18 million. Demonstrating continued confidence and support, AETL augmented its stake in JC Biotech by 5.89% during the reviewed period. This culminated in a total ownership of 95.72%, further solidifying the integration and collaboration between both entities.

SCITECH SPECIALITIES PRIVATE LIMITED (SciTech)

SciTech Specialities Private Limited (SciTech), a technology-based manufacturing company was established on October 29, 2007, specialises in manufacturing effervescent granules and tablets, focusing on animal health, pharma and nutraceuticals. Your Company acquired 51% stake in SciTech on January 1 1,2021. SciTech manufactures effervescent products with aqueous granulation technology and supplies its Efferceutical and Solugran products to major markets globally. In FY 2023-24, SciTechs revenue stood at Rs.418 million, while its PAT was Rs.37 million.

SAIGANESH ENZYTECH SOLUTION PRIVATE LIMITED

Saiganesh Enzytech Solutions Private Limited (Saiganesh Enzytech) was incorporated on November 1,2022 and is located in Burhanpur, Madhya Pradesh. Your Company acquired significant stake in Saiganesh Enzytech on January 03, 2023. Saiganesh Enzytech is primarily focused on extracting latex from papaya, purifying it and providing finished papain enzyme in liquid form for use in agricultural extraction of papain enzyme. Papain is one of the most important digestive enzymes used in formulated solutions for human health & nutrition, as well as in the food industry. Saiganesh Enzytechs revenue for FY 2023-24 was Rs.267 million and its PAT for the same period was Rs.26 million.

ADVANCED ENZYMES EUROPE B.V., AMSTERDAM (NETHERLANDS) (AEE BV)

Advanced Enzymes Europe B.V. (AEE BV) is a wholly- owned subsidiary of your Company, incorporated on July 11,2017, with an issued share capital of € 2 million.

On April 07, 2023, consequent to conversion of the loan granted earlier by the Company to AEE BV, AEE BV issued 2,276,837 Equity shares of a par value of € 1 each at a share premium of € 0.63 each to your Company, against outstanding loan amount including interest aggregating to € 3.71 million. Consequent to the conversion of said loan, AEE BVs issued capital increased to € 4.28 million from € 2 million. AEE BV continues to be the wholly-owned subsidiary of your Company and there was no change in the percentage shareholding (100%) of your Company in AEE BV, post-conversion of the said loan. AEE BV is registered with the Chamber of Commerce and serves as a special purpose vehicle for the European market, holding 100% equity in evoxx technologies GmbH. In FY 2023-24, on a consolidated basis, AEE BVs revenue stood at Rs. 230 million as compared to t 240 million in FY 2022-23.

evoxx Technologies GmbH (evoxx)

evoxx is a wholly-owned subsidiary of Advanced Enzymes Europe B.V. (AEE BV) and was officially incorporated on September 7, 2016. On August 15, 2017, AEE BV acquired evoxx Technologies GmbH (evoxx), an industrial biotech company that produces enzymes and oligosaccharides used in food applications. At the time of acquisition of evoxx, its total issued share capital was € 0.16 million. During the year, evoxx converted loan/lnter Corporate deposits granted by AEE BV to evoxx into the Equity Shares of the evoxx to the extent of outstanding principal and interest accrued aggregating to € 26,92,877. Consequent to the conversion of the aforesaid loan, evoxx issued 43,307 Equity shares of a par value of € 1 each at a share premium of € 61.18 each, to AEE BV resulting in increase in issued capital from € 0.16 million to € 0.21 million. After conversion of the said loan and increase in issued capital the evoxx continues to be the wholly-owned subsidiary of your AEE BV and there was no change in the percentage shareholding (100%) of AEE BVin evoxx.

In FY 2023-24, evoxx generated revenue of Rs. 230 million. With a team of scientists and technicians, evoxx continues to focus on developing best-in-class ingredients that offer consumer health benefits.

ADVANCED ENZYMES (MALAYSIA)

SDN. BHD (AEM)

Your Company acquired AEM in the year 2017 (incorporated in 2016). During FY 2020, the Board of your Company approved the discontinuation of the business and closure of AEM and to initiate the process of closure thereto, since AEM was not giving the desired results. During FY 2023 and FY 2024, no business activities were carried out resulting into nil profit in the respective years.

During FY 2024, the Registrar of Companies, Malaysia has approved the voluntary application of AEM for its strike-off and status of AEM is appearing as ‘Dissolved. Consequently, AEM ceased to be the subsidiary of the Company, effective from November 08, 2023.

RESEARCH AND DEVELOPMENT (R&D)

Your Company operates cutting-edge R&D centres approved by the Department of Scientific and Industrial Research (DSIR). These facilities are dedicated to developing, validating and scaling up innovative technologies for commercial enzyme production. The centres specialise in cloning industrial enzymes in safe microbial hosts, including strains for thermostable and mesophilic enzymes. Additionally, specialised labs focus on process development, applied microbiology, life sciences and industrial applications, optimising enzyme solutions for diverse industries.

Your Companys R&D centres focus on developing innovative enzyme technologies and formulations. In FY 2023-24, your Company expanded enzyme libraries for biocatalysis, nutrition and food industries, developed next-gen engineered proteins for diverse applications and introduced new enzymatic solutions for pharmaceutical intermediates and bakery products. Your Company also worked on industrial waste biomass hydrolysis solutions, products for sugar reduction in baked products and improved protein digestion, new clinical indication developed for probiotics and antimicrobial studies on probiotics, alongside optimising fermentation processes and high-throughput screening methods.

Technological advancements included the adoption of high- throughput systems for efficient screenings, computational tools for protein engineering and process optimisation for large-scale fermentation. Your Company also took initiatives towards cleaner technologies, such as collaborative developments to replace chemicals with enzymes and addressing Environmental Treatment Plant (ETP) problems with enzyme solutions.

Looking ahead to FY 2024-25, your Company plans to expand enzymes and probiotics libraries, develop probiotic products for various applications, study probiotic viability under industrial conditions and create enzymes for health support and improving oil processing yields. The research expenditure for FY 2023-24 was 3.15% of net sales.

/fit MANUFACTURING FACILITIES

Your Company operates nine state-of-the-art manufacturing facilities globally. These manufacturing facilities are equipped with large-scale fermentation, recovery, purification and formulation capabilities, catering to a wide range of industries, including animal nutrition, nutraceuticals, pharmaceuticals, poultry products, cosmetics and other specialty products.

The manufacturing facilities are certified with ISO (International Organisation for Standardisation) and WHO cGMP (World Health Organisations Current Good Manufacturing Practices) standards, ensuring the highest quality and safety standards. Your Companys facilities in the US primarily focus on the blending and mixing of enzymes and probiotics.

I BUSINESS VERTICAL DISCUSSION

Your Company caters to diverse industries and verticals, including human nutrition, animal nutrition and bioprocessing. Your Companys primary objective is to enhance nutrition for both humans and animals while promoting the adoption of enzyme-based processes.

This is a sustainable and eco-friendly alternative to conventional thermal, mechanical and chemical methods.

For FY 2023-24, the human nutrition vertical, which provides active ingredients for nutraceuticals and pharmaceuticals, contributed 67% to AETLs total revenue. This was followed by the bioprocessing vertical at 16% and the animal nutrition vertical at 11 %. Your Companys contract manufacturing subsidiary, SciTech Specialities Private Limited, contributed 6% to the overall revenue.

Your Companys innovative products across our business verticals are designed to meet the varied needs of end users. Your Company introduced probiotic products targeting gut health management and AGP reduction in monogastric animals, as well as products for gut and immune health in humans. In the enzyme segment, offerings include products aimed at promoting overall well-being in pets, supporting protein digestion in humans and enhancing the texture, volume and overall properties of baked goods.

Human Nutrition

Your Company offers a broad range of enzyme products and customised solutions to pharmaceutical and nutraceutical companies worldwide. These enzymes are used as active ingredients in various formulations by Your Companys customers, in FY 2023-24, your Companys human nutrition sales stood at Rs.4,185 million.

Your Companys top-selling anti-inflammatory enzyme, serratiopeptidase, contributed 21 % of its total revenue, with sales of Rs. 1,310 million in FY 2023-24. Additionally, Your Companys direct-to-consumer (D2C) business in the human nutrition division contributed Rs. 394 million during the same period. Your Company is getting good traction from the latest product launches in weight management and sugar management in America.

Enzymes

Your Company provides exclusive enzyme products and personalised enzyme solutions to various pharmaceutical and nutraceutical companies globally, it caters to markets such as India, North America, Asia (excluding India), Europe and other regions.

Probiotics

Probiotics are live micro organisms that provide health benefits to humans and animals when consumed in adequate amounts. These beneficial bacteria are commonly used in treating various digestive disorders. Research is ongoing to explore their potential in treating a range of other diseases.

Biocatalysts

Enzymes that catalyse the transformation of non-natural compounds are known as biocatalysts. These enzymes are gaining popularity in chemical manufacturing processes due to their exceptional ability to catalyse almost all types of chemical reactions. This characteristic makes them a promising alternative to traditional catalysts. Biocatalysts are particularly valuable in the production of specialty chemicals, such as pharmaceutical actives, cosmeceuticals and oleo chemicals, due to their high value and low-volume usage.

Your Company has made significant progress in biocatalyst development for Active Pharmaceutical Ingredient (API) manufacturers. Your Company offers customised enzymatic solutions tailored to specific targets, helping them save on energy, time and chemical usage. In addition to supplying the necessary enzymes, your Company also provides guidance to API manufacturers in the process of developing their APIs through the enzymes.

Animal Nutrition

The animal nutrition vertical of your Company, delivered de-growth of 5% to register revenue of Rs. 677 million in FY 2023-24, compared to Rs. 709 million in FY 2022-23.

In future, this segment is well positioned for its upward growth trajectory.

Enzymes

Enzymes play a crucial role in improving the digestibility of animal feeds, leading to better feed-to-gain ratios for both ruminants and monogastric animals.

Enzymes like cellulase and hemicellulase enhance the nutritional content of silage, corn and soy-based feeds, while alpha- galactosidase boosts the nutritional value of Non-Starch Polysaccharides (NSP). Enzymes also improve the digestibility of pet foods for dogs and cats while promoting a stronger immune system. Your Companys enzyme products consistently deliver high guality and effective results while maintaining affordability.

Probiotics

Probiotics are live micro organisms that provide health benefits and are primarily known for their ability to promote a healthy gut microbiome. They are gaining widespread adoption in animal healthcare as an antibiotic alternative and growth promoter. Your Company has developed and tested probiotic formulations to improve nutrient absorption, boost immunity and reduce infection risks, making them an essential tool for animal well-being.

Bioprocessing

The bioprocessing business vertical exhibited mixed performance in FY 2023-24 with revenue of Rs. 962 million and Rs. 794 million in FY 2022-23. The food business grew 30% to attain Rs. 776 million, while the non-food business registered a de-growth of 6% to reach Rs. 186 million YoY (Year-on-Year).

Food Processing

Enzymes play a crucial role in the creation of appealing and nutritious food and beverages today. They offer several advantages that go beyond traditional methods. Your Company provides exclusive enzyme products and tailored enzyme solutions for various food processing industries, ncluding baking, dairy and cheese processing, fruit and vegetable processing cereal extraction, brewing, grain processing, protein processing and oil and fat processing. These specialised enzyme products help your Companys customers enhance their product quality, minimise waste, optimise resources, increase yields, lower costs and reduce environmental pollution.

Non-Food Processing

By utilising enzymes as potent biocatalysts, your Company provides eco-friendly solutions to multiple industries.

These solutions are used for manufacturing a wide range of products in the textile, leather, detergent and pulp and paper industries. These biological solutions improve the effectiveness of industrial processes as they result in significant savings in energy water and other resources. They also contribute to a reduction in waste and effluent loads. Adopting sustainable solutions can help companies meet pollution regulations and save on production costs.

DEVELOPMENTS DURING FY 2023-24

Additional 5.89% acquisition of JC Biotech Private Limited

During the year under review, your Company further increased its stake in its existing subsidiary JC Biotech Private Limited (JCB). This was achieved through the acquisition of an additional 5.89% shareholding in JCB. Your Company purchased 12,18,976 equity shares from certain selling shareholders of JCB for a total consideration of Rs. 56.07 million at Rs. 46 per equity share. Consequent to this transaction, your Companys shareholding increased from 89.83% to 95.72% of JCBs paid-up share capital. Your Company believes that this additional stake acquisition will further cement its position in the biotech industry and bolster its capabilities to deliver innovative solutions to esteemed customers.

Your Company remains firmly committed to its strategic growth and expansion initiatives, actively seeking opportunities that align with achieving its corporate objectives. Your Company continues to prioritise generating exceptional value for all its stakeholders while reinforcing its status as an eminent leader in the biotech sector. The management remains confident in capitalising on emerging prospects to propel Your Companys progress on its envisioned growth trajectory.

Acquisition of entire business undertaking of Shri Ganesh Industrial Enzymes through slump sale

During March 2023, the Board of Directors of Saignesh Enzytech Solutions Private Limited (50% Subsidiary) ["Saiganesh"] approved the purchase of entire business undertaking of Shri Ganesh Industrial Enzymes (a partnership firm based in Burhanpur, Madhya Pradesh) ("Shri Ganesh"), through a slump sale on a going concern basis for an amount not exceeding Rs. 9 million, for the purpose of market expansion and growth for products of Saiganesh. The said purchase of entire business undertaking of Shri Ganesh through slump sale was completed during the year under review. Shri Ganesh was involved in the business of processing latex from papaya, purifying and providing finish papain enzyme in liquid form (agriculture extraction of Papain enzyme) i.e. same business activity as that of Saiganesh (Health care industry). The total turnover and net-worth of the Shri Ganesh for financial year 2021 -22 was Rs. 57.6 million and Rs. 10.3 million respectively.

European Food Safety Authority, EU

(‘‘EFSA")/GRAS, US

Your Company received approval for two food enzyme dossiers i.e. TL lipase and CAL B lipase from EFSA.

These enzymes will be used as a food processing aid in modification/esterification of oils and fats

Your Company received no question letter for two GRAS filings with USFDA:

• Lactiplantibacillus plantarum enzyme will be used in food products like yogurt and other dairy products, soy products, plant-based products, fruit drinks, chewing gum, confectionery snacks and other foods

• Maltogemc alpha-amylase enzyme preparation produced by E. coli BLASC will be used as a food processing aid in baking, brewing and starch processing.

MAJOR CHALLENGES DURING FY 2023-24

Energy and Utility Expenses

Enzyme production processes are often energy-intensive, requiring significant amounts of electricity, water and other utilities. The rising costs of energy and utilities, coupled with potential scarcity or disruptions in supply, can pose a significant challenge for your Company, affecting its production efficiency and overall cost structure.

Talent Acquisition and Retention

The enzyme industry requires a highly skilled and specialised workforce, including researchers, scientists and technical experts. Attracting and retaining top talent in a competitive job market can be a challenge for your Company. This is because there is a growing demand for skilled professionals in the biotechnology and life sciences sectors.

Intense Competition and Pricing Pressure

The enzyme market is highly competitive, with numerous players operating globally. Your Company faces intense competition from both established multinational companies and emerging local players. This can lead to pricing pressures, making it challenging for your Company to maintain its profit margins while remaining competitive in the market.

Geopolitical and Economic Uncertainties

Your Company operates in a global market, with customers and suppliers located in different regions. Geopolitical tensions, trade disputes and economic uncertainties can disrupt supply chains, affect raw material availability and rmpact your Companys ability to access certain markets or distribute its products effectively.

FINANCIAL ANALYSIS ON CONSOLIDATED BASIS

Revenue from Operations

Your Companys revenue from operations on a consolidated basis increased to Rs. 6,239 million from Rs. 5,406 million in FY 2022-23. The total revenue includes nternational sales of Rs. 3,133 million (FY 2022-23 - Rs. 2,850 million), Increase of 10% and domestic sales of Rs. 3,106 million (Including export incentive of Rs. 4 million)

(FY 2022-23 - Rs. 2,557 million, (Including export incentive of Rs. 3 million), an increase of 21%. During FY 2023-24, domestic sales accounted for about 50% of your Companys revenue, up from 47% in FY 2023-24. In FY 2023-24, international sales accounted for 50% of revenue from operations versus 53% in FY 2022-23.

Financial Costs

Financial costs increased to Rs. 29 million in FY 2023-24 from Rs. 24 million in FY 2022-23.

Profit

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation excluding other income) for FY 2023-24 is marked at Rs. 2,045 million compared to Rs. 1,564 million in FY 2022-23. During FY 2023-24, profit before tax registered Rs. 1,878 million. Profit after tax Increased by 32% to Rs. 1,370 million in FY 2023-24 from Rs. 1,039 million in FY 2022-23.

Other Income

Other income for FY 2023-24 was Rs. 367 million in comparison to Rs. 255 million in FY 2022-23.

Depreciation and Amortisation

Depreciation and amortisation for FY 2023-24 increased to Rs. 352 million as compared to Rs. 350 million FY 2022-23.

Net Worth and Returns

As of March 31,2024, the net worth of the shareholders was Rs. 13,241 million compared to Rs. 12,351 million the previous year. Return on Equity (ROE) for FY 2023-24 was 11 % compared to the 9% previous year. (Return ratio is calculated based on average shareholders funds).

Cash and Cash Equivalents

Cash and cash equivalents in FY 2023-24 stood at Rs. 1,435 million as opposed to Rs. 1,233 million in FY 2022-23.

Details of significant changes (i.e. change of 25% or more as compared to the immediately preceding financial year) in key financial ratios, along with detailed explanation:

Ratio 1	FY 2023-24 1	FY 2022-23 1	Variance 1	Reason for Variance 1
Debtors Turnover Ratio	57.66 times	68.80 times	(16%)	NA
Inventory Turnover Ratio	86.85 times	83.70 times	4%	NA
Interest Turnover Ratio	58.34 times	50.16 times	16%	NA
Current Ratio	7.61 times	9.31 times	(18%)	NA
Debt Equity Ratio	0.02 times	0.01 times	77%	Increase in the cash credit facility
Operating Profit Margin (%)	33%	29%	13%	NA
Net Profit Margin (%)	22%	19%	14%	NA

> OUTLOOK

Your Company is committed to enhancing and fortifying its business model in all three divisions, including Human Nutrition, Animal Nutrition and Bio-Processing. Your Companys specific focus is to expand its enzymes and probiotics business through the development and launch of new products in its target markets. To achieve this, your Company is actively developing new molecules in the areas of enzymes, probiotics and biocatalysts. Your Company expresses a high level of confidence in its present capabilities and capital investments to effectively support its growth endeavours.

Human Nutrition

Your Company is leveraging its successful B2C business model in the U.S. to drive growth in India. Your Company is focussing on expanding its B2C business in the human nutrition segment with the introduction of new products, in weight management, sugar management and immunityboosting products like ImmunoSEB and Biome Ultra. As part of its strategy to drive growth, it has entered into a B2C brand - Wellfa - an online platform that caters specifically to the Indian market. The platform has products that will help consumers take supplement nutrients, enzymes and probiotics as per their body requirements. AETLs diverse range of products, available through Wellfa, cover immune support, skin care, gut health, metabolism boosters, detox aids, weight management solutions, stress relief and respiratory health support.

This move is expected to be a significant growth driver for your Company, it is also exploring other online avenues for selling its products, highlighting its commitment to staying ahead of the curve in the fast-paced digital marketplace.

Animal Nutrition

In the field of animal nutrition, your Company is committed to enhance the efficiency of animal feeds by creating high-quality nutritional products. To achieve this goal, your Company is continuously conducting trials and studies in its pursuit of excellence. Additionally, it is working on introducing and registering more products in both domestic and international markets. Furthermore, to expand market reach, it is targeting the U.S., MENA and Asian markets. It is also planning to appoint more distributors to achieve this goal. In order to fortify its distribution network, your Company is expanding its sales and marketing team

Probiotics

Your Company is focussed on introducing a range of probiotics products for both human nutrition and animal nutrition. In human nutrition, your Company is working towards introducing probiotics products that promote immunity development, improve gut health and support nutraceutical applications. Whereas, in animal nutrition, it is determined to launch products that boost immunity, enhance digestion and increase the nutritional value of animal feed. With the expansion of its product offerings in both sectors, your Company strives to offer effective solutions for enhancing overall health and well-being.

Biocatalysis

By developing bio catalases for API manufacturers, your Company has made substantial progress towards offering enzymatic solutions. These are tailored to specific targets, thereby reducing energy consumption, time and the use of chemicals. A few of these products are currently undergoing advanced trials at the plant level, highlighting this area as a key opportunity for your Company to persist in its efforts and focus.

Baking

Your Company has a line of enzymes, specifically tailored for the food processing sector. Your Company has submitted 14 product dossiers for review by the European Food Safety Authority (EFSA). Of these dossiers, 9 have received positive feedback (for food enzymes as processing aids). Your Companys product line performs equally well with its existing market offerings. Your Company is confident about its ability to expand in European and the North & South American baking industry, while it aims to leverage available and emerging opportunities in these regions.

Research & Development

Your Company is making substantial investments in state-of-the-art R&D centres. It is planning to lead in the formulation of new applications, with a particular emphasis on expanding its portfolio across various industries. To achieve this goal, your Company intends to expand and strengthen its R&D team.

Inorganic Expansion

Over the past five years, your Company has demonstrated a track record of successful inorganic growth through three internal accrual-based acquisitions, while maintaining its status as a zero-debt company. Your Company is committed to continue this trend by seeking out strategic acquisitions. This is aimed to further strengthen its front-end marketing capabilities, expand its geographic reach, broaden its product portfolio and enhance its B2C business.

RISKS & MITIGATION

Supply chain disruptions

? The enzymes and probiotics industry depend on a global supply chain for raw materials. The industry is at risk of disruptions due to various factors, including geopolitical tension, climate change and increasing demand for natural and sustainable ingredients. These disruptions have the potential to impact production and availability of raw materials. Hence, the companies may need to diversify their sourcing, invest in technology and collaborate with suppliers to manage supply chain risks. Your Company is constantly improving its supply chain management, by maintaining good relations with its suppliers. This, in turn, is ensuring regular supply, alongside reducing the dependency on a particular supplier, thus, allowing flexibility

# Regulatory changes

The enzymes and probiotics industry is subject to specific regulations in many countries. These regulations include requirements for safety, quality and labelling. In some markets, there may be changes in regulations related to the use of enzymes and probiotics, which could impact the ability of companies to sell their products in those markets. For example, new regulations on dietary supplements and food additives could impact the use of these solutions in food and beverage items. Your Company steadfastly follows the applicable regulatory norms that makes it industry compliant.

Competition

The enzymes and probiotics industry is witnessing growing competition, with numerous new companies entering the market and established players expanding their product offerings. This could lead to increased competition and pricing pressure, which could impact profitability for some companies. Furthermore, some companies may encounter difficulties in distinguishing their products from those of their competitors, which could potentially hinder their ability to acquire a significant market share. To mitigate this risk, your Company is constantly focussing on innovation and aligning itself to the market trend, enabling it to stay one step ahead of its competitors.

# Consumer demand

Consumer demand for enzymes and probiotics have been growing in recent years, driven by increased interest in health and wellness. However, consumer preferences may shift in response to changing trends or unforeseen events, such as the Covid-t 9 pandemic. For example, consumers may shift their spending priorities away from dietary supplements and towards other health and wellness products, such as fitness equipment or healthy foods. To keep pace with this ever-evolving consumer preference, your Company is constantly focussing on its Ft&D capabilities. It dedicatedly strives to innovate and improve products, but still may face obstacles in the form of insufficient funding, stricter regulations and technology bottleneck. To overcome these challenges, your Company can collaborate with external partners, invest in new technologies and explore new funding sources. It understands that innovation is essential for growth and it must continue to improve the quality of its products through robust Ft&D to suit consumer preference.

# Product quality and safety

Enzymes and probiotics companies must maintain excellent product quality and safety standard, to ensure risk-free consumption by humans and animals. Any issues with quality or safety could result in product recalls, legal liabilities or damage to a companys reputation. Your Company is constantly improving products that undergoes multiple stages of R&D, resulting in globally accepted highest standards.

# Intellectual property

Enzymes and probiotics companies invest significant resources in developing new products and processes. Protecting these investments requires a strong intellectual property portfolio, including patents, trademarks and trade secrets. These companies may face challenges in protecting their intellectual property from competitors or in enforcing their rights in cases of infringement. To mitigate this risk, your Company is filing for patents in a timely manner that protect it from competitors. While its experienced R&D team enables the Company to conduct thorough research and align its products with market demand.

? Forex risk

Foreign exchange (forex) risk can impact enzymes and probiotics companies due to their reliance on global supply chains, international sales and foreign investments. Currency market volatility during the year has increased the effect of this risk. To manage this risk, companies may need to implement strategies, including hedging, diversification and monitoring market developments. Your Company is taking the necessary steps to counter forex risk and mitigate currency volatility.

OPPORTUNITIES

Enzymes and probiotics are essential for maintaining a healthy gut microbiome, which has been linked to various health benefits, such as improved skin health and weight loss. The worlds growing population has led to an increased demand for enzymes and probiotics to address digestive issues and promote better overall health. As more people become aware of the benefits of these natural supplements, there is a surge in demand for high-quality products that meet their needs. This trend is particularly noticeable in countries, such as the US and India, where healthcare spending is increasing. As more people adopt vegan and vegetarian diets, the demand for plant-based enzymes and probiotics is also increasing. To cater to this demand, the supplement market is expanding its offerings, providing consumers with a range of natural digestive health solutions to choose from.

As per Healthcare Analytics Market Report published in December 2022, the global healthcare industry is expected to experience substantial revenue growth, increasing from USD 27.4 billion in CY 2022 to USD 85.9 billion by CY 2027, with a CAGR of 25.7% between CY 2022 and CY 2027.

According to National Health Expenditure Projections 2021 -30, published in Health Affairs report, it is projected that healthcare spending in the US will continue to rise. With an estimated annual growth rate of 4.9% from 2022-24 and 5.3% per year after that, it will register a total spending of USD 6.8 trillion in CY 2030.

The growing global awareness of the health benefits associated with enzymes and probiotics has resulted in a significant increase in demand. According to industry reports, the global enzyme market is projected to reach USD 14.7 billion by CY 2028, with the food & beverage sector being the largest end-user. Similarly, the global probiotics market is projected to reach USD 94.4 billion by CY 2028 due to increased awareness of their ability to enhance gut health, immunity and reduce the risk of chronic diseases. The growth of both enzymes and probiotics is being fuelled by several factors, including increased consumer awareness of their health benefits, demand for natural and sustainable products and their growing use in various industries. As a result, the demand for these products is expected to continue increasing in the coming years.

Growing awareness of the health benefits of enzymes and probiotics has led to a surge in demand for these products in India. The use of enzyme has seen an uptick in various industries, including food & beverage, pharmaceuticals and textiles. Similarly, the demand for probiotics has increased due to the rising awareness about gut health and lifestyle diseases. The growing disposable income and changing dietary patterns of Indian consumers are expected to fuel the demand for functional foods and dietary supplements that contain enzymes and probiotics in the coming years. Therefore, the Indian market for enzymes and probiotics is expected to experience substantial growth in the foreseeable future.

Further, advancements in biotechnology and genetic engineering are also creating new opportunities to develop nnovative solutions that meet current and future needs. Companies that are at the forefront of these developments may have a competitive advantage in the market.

THREATS

The enzymes and probiotics industry is facing a number of challenges that could impact its profitability and growth. One of the biggest challenges is the intense competition from newer entrants, as they are more innovative and have tower cost structures. This could lead to a reduction in market share and profitability for established companies.

Regulatory challenges are also a major concern for companies in this industry. Compliance with strict regulations and guidelines, both domestically and internationally can result in significant costs, while non-compliance can lead to fines and penalties that can harm a companys financial health and reputation. Obtaining regulatory approval for products can also be time-consuming and expensive, which can delay time- to-market and increase costs. Supply chain disruptions are another potential threat to the enzyme and probiotics market. Natural disasters, political instability and other factors can disrupt the supply chain, making it difficult for companies to manufacture and distribute their products. The Covid-19 pandemic has highlighted the vulnerability of global supply chains and their potential impact on product availability and sales.

Intellectual property infringement is also a potential challenge for companies in this market. Competitors who infringe on a companys intellectual property rights can lead to costly legal battles and a decline in market share. Lastly, evolving consumer preferences could impact the enzymes and probiotics market. Shifts in consumer trends, such as a preference for plant-based diets or a focus on sustainability, could affect the demand for enzyme and probiotics products. Companies that are unable to adapt to these changes could lose market share to more innovative and adaptable competitors.

In todays highly competitive industry, it is imperative for companies to keep up with the latest technological advancements to thrive and succeed. Failing to do so, could put companies at a disadvantage and hinder their growth prospects.

n summary, the enzymes and probiotics market face several potential threats and your Company is navigating these challenges to thrive in this sector.

INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

There is an internal control system in place at your Company to ensure the efficiency and effectiveness of its operations. The internal control system is essential to the risk identification and mitigation process. It contributes to compliance with legal requirements. Within your Company a proper communication channel from top-to-bottom and vice-versa safeguards the internal control system by considering both internal and external factors in an appropriate and timely manner.

Your Companys risk assessment and management policy is based on the concept that a robust risk management system ensures commensurate controls and monitoring mechanisms, for smooth and efficient management of the business. Various risks are identified, measured, evaluated, monitored and mitigated in the policy. A review of the risk management framework of your Company has been conducted by the internal auditors. Risk registers are prepared by the concerned departments. They contain information about the respective risks as well as their current control activities and mitigation plans, if any. Thereafter, the registers are reviewed.

On a continuous basis, IT systems are improved on a preventive basis as well as in response to hacking challenges. Evaluation of an internal control system is done by setting targets on a continuous basis, with corrective actions taken in case of any deficiency by comparing them to the actual results. According to its size and nature of operations, your Company maintains an appropriate internal control system and internal financial control. Internal auditors and Statutory auditors of your Company test and certify the internal control systems.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS

Your Company acknowledges the significance of its human resources. Your Company is dedicated to investing in its people and their processes to enrich the organisations human capital and create value for its stakeholders. With the growth and execution of new projects, there has been an emphasis on recruitment.

As a result, your Company has successfully attracted professional talent to fill gaps at various levels. The Management endeavours to create a supportive work environment through various employee engagement programmes to help employees excel. Currently, your Company has more than 350 employees (standalone basis) with diverse backgrounds.

To enhance employee performance, your Company provides better tools, technology and techniques at the workplace. It takes measures to ensure occupational safety and health at workplaces and manufacturing sites. The HR department organises training and development programmes to sharpen skills and update concepts. Furthermore, external technical training is provided to certain critical functional heads to prepare them for new projects. Your Company aims to create a culture of learning, sharing and helping others succeed, while emphasising on the importance of having a growth- oriented mindset. Additionally, your Company places importance on de-stressing technigues, as it believes that a happy individual performs better.

Throughout the year, your Company has maintained cordial industrial relation as the HR department constantly strives to maintain a constructive work environment. Your Companys focus on personnel development has enabled it to attract and retain talented employees, ensuring continued growth and success.

• CAUTIONARY STATEMENT

In this Management Discussion and Analysis Report, certain forward-looking statements may be made based on various assumptions about the Companys present and future business strategies, the environment in which it operates and other factors. Risks and uncertainties can cause actual results and information may differ materially from those stated or implied. Among these risks and uncertainties are the effects of economic and political conditions in India and abroad, volatility in interest rates and the securities market, new Government regulations and policies that may impact the Companys businesses and its ability to implement its strategies. The information contained herein, is as of the date referenced and the Company has no obligation to update it. Market data and other information have been obtained from sources deemed trustworthy by the Company or it has been estimated internally, but the accuracy or completeness cant be guaranteed.