VST Industries Ltd

RESILIENT TODAY. STRONGER TOMORROW.

In a year defined by industry-wide challenges, we demonstrated our ability to adapt, evolve and emerge stronger- positioning VST for accelerated growth in the years ahead."

Dear Shareholders,

I am pleased to present our Annual Report for FY25. This was a year that tested our resilience in a hyper competitive environment, but our conviction in our strategic direction began to pay off. While external headwinds persisted, your Company responded with decisive action. We strengthened our foundation and positioned ourselves to capitalise on emerging market opportunities.

FY25 presented formidable challenges across our sector. Persistent inflationary pressures on key raw materials—particularly leaf tobacco-compressed margins industry-wide. Global supply chain disruptions and volatile market conditions added further complexity to our operating environment.

However, these challenges also revealed VST's fundamental strength. Through strategic procurement optimisation and enhanced supplier partnerships, we minimised adverse impacts. Overall, the operating environment continued to affect our volumes and profitability in the first half. However, focused execution ensured favourable recovery in the second half which we will strive to sustain in the next financial year and beyond.

Largely stable regulatory and tax regime in recent years along with growth in disposable incomes is driving growth in the mid-premium segment of this category. While your Company has historically been strong in the value segment, your Company's recent strategic brand interventions are enabling participation in this segment, allowing us to effectively compete with entrenched players.

Your Company delivered revenues of '1,809.43 Crores in FY25. Profit after tax stood at '290.4 Crores. The tobacco leaf business continued its strong trajectory. It generated revenues of '472 Crores and profits of '58 Crores. This revenue represents a 6.7% growth over the previous year.

The Board has recommended a final dividend of '10 per share.

This underscores our commitment to consistent value creation for shareholders even in challenging times.

The mid-premium segment now represents nearly 40% of the industry. This shift affected our portfolio adversely. There has been a sustained effort over the last few years to establish our brands in this hyper-competitive segment. Our strategy is to provide enhanced value to adult consumers through consumer relevant innovations. We now have efficient processes to support this. Regional insights were leveraged by our experienced R&D team to build a strong new product pipeline. This led to promising launches during the year in contemporary formats such as demi-slims coupled with local flavours. New launches were ably supported by region-specific offers and sales strategies.

I am happy to report that in FY25, we have begun to see progress in this area. Our portfolio is now poised to be stronger and more sustainable for the future. We are committed to returning to growth and now have a platform to make this happen. EDITIONS has emerged as a key growth engine, transforming it from a regional offering into our second national brand after TOTAL. TOTAL is poised for further expansion, with new mid-premium variants being rolled out. We also continue to support regional trademarks like Charms, Special, and Moments with relevant innovation and activation efforts, especially in the value segment where we retain firm leadership.

Your Company's new manufacturing facility at Toopran, integrating the Secondary Manufacturing Division (SMD) is now fully operational. This state-of- the-art plant symbolises our future readiness, anchored in productivity, efficiency and sustainability. It strengthens our ability to deliver world- class products while maintaining cost competitiveness.

We continue advancing our digital transformation. We are future-proofing our distribution network to enhance reach in core markets. This also accelerates penetration in emerging territories. Our agility in adapting across people, processes and platforms will keep us ahead of market shifts.

Looking ahead, we are optimistic. Our actions are grounded on three active pillars—portfolio upgradation, deeper digital enablement and geographic penetration—across both the value and mid-premium segments. With more robust brand-building efforts and a sharper go-to-market model, we aim to grow ahead of the industry over the long term. Meanwhile, our tobacco leaf business continues to show strong momentum. We remain committed to nurturing this through niche cultivation models and trusted farmer partnerships.

Through VST Cares, our flagship CSR programme, we continue creating positive impact. We reach approximately one Million families across sanitation, education, environmental sustainability and rural development. Care remains at our core. This reflects our commitment to sustainable business practices.

On behalf of the Board, I extend heartfelt gratitude to our management team and ~700 dedicated employees. Their perseverance and passion drove our success this year. Their commitment to excellence has been instrumental in overcoming challenges. They have helped build a stronger VST for tomorrow.

As we move forward, I am confident in VST's strategic focus, operational excellence and commitment to all stakeholders. These strengths will continue creating sustainable value for shareholders. We will also contribute meaningfully to the communities we serve.

I reiterate VST's commitment to creating a long-term value for all our stakeholders, including employees, shareholders, customers and to the communities we operate in while upholding the highest standards of integrity, transparency and social responsibility.

Thank you for your continued trust and support.