Mrs Bectors Food Specialities Ltd

Dear shareholders,

I take pleasure to address you through the pages of this Annual Report for the fiscal year 2021-22. You have shown conviction in us and we will continue to take all necessary action to further strengthen your belief in us.

Macro overview

Before I provide my analysis of the Company's performance during the year, it is essential to describe the context in which this performance was achieved. So, due to the pandemic, uncertainty in the macroeconomic sphere, changes in consumer sentiment/ demand, alteration in consumption patterns, high inflation, and weakness in international markets due to the Russia-Ukraine war continued to present challenges that we needed to grapple with which were beyond our control. We did well as we once again proved the robustness of our strategy and the resilience of our business model to register a sound performance in 2021-22. Even amid the many challenges, we remained focused on making strategic investments and taking advantage of opportunities in austerity, agility and discipline. Over the course of the year, we remained guided by the objective of offering quality food products to our consumers and institutional customers in India and overseas. Further, we did not hold back on our strategic plans and carried out a number of initiatives to transform our critical functional areas and prepare the business for future growth.

Amid the continuing effects of the virus during the year, we maintained the protocols of health and safety and the leadership team continued working to monitor the global situation and provide support for assertive decision-making. With advances made during the year in terms of the number of those immunized against COVID-19, we were able to ensure that virtually 100% of our workforce was vaccinated with at least two doses. Our actions went beyond caring solely for our staff, with this also extending to society as a whole.

Performance analysis, 2021-22

During 2021-22, we witnessed unprecedented challenges in the business environment, but the Company has been successful in mitigating them and managed to post an annual consolidated revenue growth of 12.2% during the year to H 988 crores. The salience of our brands really stood out and our focus on premiumization paired with robust operational standards helped to withstand any major demand/pricing pressures. I'm happy with the progress we achieved in striking the right balance between scale and profitability. Dependence of any single category is never a good idea for any consumer company and we focused on adding new products in both our business segments- biscuits and bakery during the year. Given the nascent stage of the packaged food industry in India, we believe in focusing on high gross margin through premiumization and this strategy will stand us in good stead in the future. A summary of our 2021-22 performance is given below:

Consolidated revenue stood at H 988 crores, vs. H 881 crores in the previous year, registering a growth of 12% Revenue from the biscuits division expanded by 3% to H 592 crores, vs. H 574 crores in the previous year

Revenues from the bakery segment increased by 31% to H 339 crores, vs. H 259 crores in the previous year

EBITDA declined by 13% YoY and stood at H 123 crores.

EBITDA margins were at 12.4%, vs. 16% during the previous year Profit after tax stood atH 57 crores, vs. H 72 crores in FY2021

The chief factor enforcing reduction in net profit as compared to

FY2021 was due to the entry tax provision reversal in the last year amounting to H 5.5 crores. Also during the year, due to the pandemic, the Company witnessed some expenses which were lower than usual in the previous year. However, going forward, we see strong growth potential in both our biscuits and bakery divisions. MBFSL is India's largest biscuits exporter with a 12% market share and a presence in 63 countries around the world. Exports under our own brands stand at a healthy 45% and our revamped export strategy will enable us to deepen the penetration of our products and gain both revenue and market share in the future. We incorporated a subsidiary in the UAE to unlock opportunities in the MENA and African markets, and all our decisions will be guided by expectation around portfolio premiumizationandbuildingourmarginprofile.

In India too, our biscuit brands under ‘Mrs. Bector's Cremica' have been able to compete well on crowded shelves, with customers picking our products for premium quality, taste and nutrition. Our focus in the domestic market is to achieve scale by continuing to deepen brand presence beyond North India to cover all the major parts of the country, and we are working on transforming our distribution to be able to achieve this goal. We are amongst the largest suppliers of buns to quick service restaurants (QSR) chains in India and our bakery brand, ‘English Oven', is one of the fastest growing brands within the premium bakery space. Further, we have launched many innovative bakery products, such as sub-breads branded as ‘English Oven Sub' and the commissioning of a sheeting line has opened up our capability to produce an even larger range of value-added products, including focaccia, panini and ciabatta breads. Going forward, we will continue to focus on expanding our product portfolio, scale and reach to be able to reach more households and institutional customers across India.

Getting ready for the future

MBFSL is at a unique point in its journey where we are looking at adding to our strengths and preparing the foundations for accelerated growth. Towards this extent, we are getting our drivers ready, including expanding our distribution reach in existing markets and entering new geographies, building management strength by hiring senior leaders and professionals in various critical areas such as operations, marketing, sales and IT, and enhancing capacities to capture growth opportunities in existing markets and new geographies.

We are focusing on technology to drive efficiency on and supply chain fronts. As a major step in this regard, we have initiated to implement salesforce automation and distributors' management system, which will help us to drive product availability across our channels, especially our premium outlets, to improve sales efficiency.

We have a large presence in North India and are looking to expand reach in our existing markets and steadily explore newer markets. We are in the process of expanding our Rajpura facility in Punjab and have plans to set up a greenfield facility in Madhya Pradesh to cater to the west and south India markets. Furthermore, in terms of new capex, the Company started investment on another biscuit line from the IPO proceeds of H 40.5 crores to finance the cost of the Rajpura expansion project, and the commercial production for this plant started in July 2022 (post balance sheet development). Besides, for bakery plant extension in Mumbai, the Company has already purchased land in Khopoli adjacent to our current factory. The total project cost is estimated at H 73 crores, including land, out of which H 25 crores would be invested in FY2023 and the balance in FY2024. Commercial production is planned to start by October 2023.

Conclusion

As we look to the future, I am excited by the opportunities that lie ahead for the Company. There is a strong pipeline of significant projects in both our business divisions and we have a strong opportunity to grow demand and consumption in the post-COVID environment. Mrs. Bectors has a long and remarkable history spanning well over four decades and I am committed to furthering this impressive heritage by helping the Company add to its successes every year, constantly improving, evolving and building our new future.