Aarnav Fashions Ltd Management Discussions

Global Economy

In Calendar Year (CY) 2024, the global economy demonstrated resilience amid persistent headwinds, recording a steady growth of 3.3%. The expansion was driven primarily by emerging and developing markets, which grew by 4.3%, while advanced economies posted a more modest growth of 1.8%. The divergence highlighted both the stronger momentum in Asia and the relative structural challenges facing mature markets.

The United States economy expanded by 2.8%, supported by resilient labour market conditions, healthy wage growth, and robust consumer spending. The effects of tight monetary policy began to moderate as inflation eased, enabling a gradual shift in expectations toward lower interest rates in late 2024.

The European Union experienced a more subdued recovery, constrained by weak domestic demand, an energy transition that continued to weigh on industrial competitiveness, and lingering structural rigidities in labour and capital markets. Growth remained uneven across member states, with southern economies benefiting from tourism while core manufacturing hubs continued to face external demand weakness.

In China, growth slowed further as property market stress persisted and weighed on household confidence and investment activity. Despite supportive fiscal and monetary measures, momentum remained below pre-pandemic averages, with spillover effects felt across regional supply chains.

Despite these challenges, global economic output reached approximately USD 110.5 trillion in nominal terms (or USD 196.1 trillion in Purchasing Power Parity [PPP] terms), reflecting the underlying resilience of the world economy.

Inflationary pressures eased notably, with global headline inflation moderating to 5.7% in 2024 compared to 6.5% in 2023. Advanced economies saw sharper disinflation due to tighter monetary policy and lower energy costs, while emerging markets recorded a gradual stabilisation in food and commodity prices.

International trade volumes expanded modestly, driven by resilient demand in Asia and parts of Africa, though selective tariff measures by the US and supply chain realignments under the "China+1" strategy created disruptions in certain segments, including textiles and intermediate goods. Energy markets stabilised following the European energy crisis of 2022-23, but geopolitical tensions in Eastern Europe and the Middle East kept commodity price volatility elevated.

Overall, major economies displayed adaptability, supported by easing financial conditions, improved supply chain resilience, and ongoing fiscal support in key regions. While medium-term growth prospects remain subdued compared to the pre-global financial crisis decade, 2024 marked a year of relative stability, providing a foundation for gradual global recovery.

Global GDP Growth Trend (2024-2026)

Economy Type Global Economy

Source. IMF

INDIAN ECONOMY

India has consolidated its position as one of the worlds fastest-growing major economies, emerging as the fourth-largest globally—surpassing Japan—with a GDP of about USD 4 trillion. In FY 2024-25, the economy maintained a robust growth rate of 6.5% in real terms (9.8% nominal), underscoring its resilience amid global uncertainty. This expansion was underpinned by strong domestic consumption, a surge in infrastructure investments, key structural reforms, and rapid growth in the digital economy. Core sectors—including manufacturing, agriculture, and services—posted healthy growth, collectively boosting both rural and urban spending.

Inflation eased from 5.4% to 4.6%, strengthening consumer confidence and supporting a rebound in discretionary demand. To sustain liquidity in the financial system, the Reserve Bank of India (RBI) infused ^1.5 trillion, which encouraged lending and spurred investment activity. Rural demand remained steady, aided by stable agricultural production and government support schemes, while urban consumption benefitted from rising incomes and evolving lifestyle patterns.

Growth momentum strengthened in Q4 FY 2024-25, which recorded 7.4% GDP expansion, led by construction (10.8%), public administration (8.7%), and financial services (7.8%). On the demand side, private consumption rose 7.2% for the year, while gross fixed capital formation expanded by 7.1%, surging 9.4% in Q4 on the back of robust infrastructure push.

The positive trajectory carried into FY 2025-26, with Q1 GDP growth at 7.8%, positioning India as a key driver of global economic expansion. Global agencies echo this outlook: Fitch Ratings reaffirmed Indias investment grade rating (BBB-) and projected growth of 6.5% for FY 2025-26, citing structural strengths. However, Moodys recently revised growth expectations to around 6.3%, reflecting risks from global trade headwinds and softer private investment.

Looking ahead, Indias ambition to become a developed economy by 2047 will require sustaining ~8% annual growth, supported by higher capital formation (raising investment from ~31% to 35% of GDP), continued policy reforms, and deeper integration into global value chains.

OUTLOOK- MACROECONOMICS

Indias ascent to the position of the worlds fourth-largest economy, with a GDP of about USD 4 trillion, underscores its resilience and structural progress. Despite persistent global challenges, the outlook for FY 2025-26 remains favourable, with GDP growth expected to remain steady at around 6.5%, supported by domestic investment, expanding manufacturing activities, and improvements in trade and financial markets.

Policy measures are expected to stimulate consumption and sustain momentum. The revision of the income tax exemption limit to ^12.75 lakh and the forthcoming 8th Pay Commission recommendations are likely to increase disposable incomes, thereby supporting household spending. At the same time, the Reserve Bank of Indias anticipated repo rate cut is expected to improve liquidity, reduce borrowing costs, and boost investor confidence.

Externally, India continues to pursue a cautious but strategic trade agenda. The upcoming India-UK Free Trade Agreement (FTA) is expected to reduce tariffs, streamline customs processes, and strengthen bilateral investments. Coupled with moderating inflation, these initiatives are expected to support consumer demand, broaden market access, and reinforce Indias sustainable growth trajectory.

INDUSTRY OVERVIEW:

The Indian textile and apparel sector is poised for significant transformation, backed by strong government support and global demand trends. Flagship schemes such as the Production Linked Incentive (PLI) programme and the establishment of PM MITRA Parks are expected to create integrated textile hubs with world-class infrastructure and scale advantages. Concurrently, branding initiatives such as Kasturi Cotton aim to elevate Indian cottons profile as a premium global commodity, strengthening Indias position in international markets.

The industry is also embracing Textiles 4.0, a paradigm shift characterised by automation, digitisation, and data-driven production processes. Alongside this, there is a strong focus on sustainable manufacturing practices, with eco-friendly production gaining momentum as both consumers and global brands place increasing emphasis on traceability and environmental responsibility.

Together, these developments are expected to improve productivity, enhance competitiveness, and attract foreign investment into the sector. By combining scale, sustainability, and innovation, India is well positioned to expand its role as a key global textile hub, meeting both domestic demand and international market requirements.

STRENGTHS

• Robust Domestic Market

Indias growing middle class and rising disposable incomes continue to fuel strong domestic demand for textiles and apparel. This creates a stable consumption base that cushions the industry against global downturns.

• Competitive Advantage in Cotton

Being one of the worlds largest producers of cotton, India enjoys raw material security and cost efficiency. This advantage supports both domestic manufacturing and global exports of cotton-based textiles.

• Government Support

Strategic initiatives such as the Production Linked Incentive (PLI) scheme, PM MITRA Parks, and export incentives are creating world-class infrastructure and boosting competitiveness. These policy measures are also strengthening Indias positioning in global value chains.

• Skilled Workforce

The sector benefits from a vast pool of skilled and semi-skilled workers, particularly in weaving, spinning, and garment manufacturing. This labour force provides flexibility and productivity, supporting both traditional and modern manufacturing setups.

WEAKNESSES

• Fragmented Industry Structure

The predominance of small and medium enterprises (SMEs) results in limited economies of scale and lower bargaining power. This fragmentation hampers the ability to invest in technology and brand-building on a global scale.

• Technology Gaps

While global peers are adopting Industry 4.0 practices rapidly, Indian textile players face slower uptake of automation, digitisation, and advanced manufacturing. This lag impacts operational efficiency and competitiveness in high-value markets.

• High Dependence on Cotton

Despite increasing global demand for synthetic and blended fabrics, the industry remains heavily reliant on cotton. This limited diversification restricts market adaptability and exposes the sector to fluctuations in cotton output and prices.

• Compliance Challenges

With stricter global norms on sustainability, labor, and ESG disclosures, many smaller firms struggle to comply. Non-compliance risks reputational damage, loss of export opportunities, and higher operational costs.

OPPORTUNIES

• Global Shift to Sustainable Textiles

Consumers worldwide are increasingly prioritising eco-friendly, organic, and recyclable fabrics. This trend offers India an opportunity to differentiate itself through sustainable production practices and capture premium markets.

• Rising FDI Inflows

Foreign investment in integrated textile parks and advanced manufacturing units is accelerating technology transfer, enhancing scale, and creating global supply chain linkages. This inflow also boosts competitiveness and export capacity.

• Export Expansion

Trade agreements such as the proposed India-UK Free Trade Agreement and other bilateral deals will lower tariffs and streamline access to global markets. These developments could significantly enhance Indias export share in textiles and apparel.

• Textiles 4.0

Adoption of automation, AI-driven production, and digital supply chain management can transform productivity and cost efficiency. These innovations will enable Indian firms to align with global buyers expectations for speed, transparency, and traceability.

THREATS

• Global Economic Uncertainty

Slower growth in advanced economies and volatility in consumer demand may impact Indias export momentum. A downturn in global retail and fashion markets poses risks to order volumes.

• Geopolitical Tensions

Trade disruptions, evolving tariff structures, and currency fluctuations create uncertainty for exporters. Geopolitical developments in key markets can affect supply chain reliability and profitability.

• Climate Risks

The sector is highly exposed to climate change, with risks ranging from cotton crop failures due to erratic monsoons to waterintensive manufacturing pressures. These risks could affect both input costs and long-term sustainability.

• Intense Global Competition

Competitors such as Bangladesh and Vietnam, with lower production costs and preferential trade access, continue to challenge Indias market share. Price pressures in global markets may impact margins and profitability.

RISKS AND CONCERNS

The Company has successfully devised and put into operation an all-encompassing system for risk management. This system is specifically designed to not only recognize and handle the risks linked with its operational undertakings but also to play a pivotal role in the decision-making procedures that steer the Company towards accomplishing its objectives. By curbing potential losses, refining the management of uncertainties, and optimizing opportunities, this framework aims to facilitate the Companys goal attainment. Its core purpose is to foresee, assess, and alleviate risks that possess the potential to significantly affect the Companys business objectives.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has an adequate internal control system commensurate with its size and the nature of its business in order to achieve efficiency in operation and optimum utilization of resources. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information. Internal audits are conducted in the Company on regular basis.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

(Amount in Lakh)

During the year under review, Company has earned total income of Rs. 37908.37 Lakh as against the total income of Rs. 35676.23 Lakh of previous year. The total income of the company was up by 6.34% over previous year. Further, Profit before Tax in the financial year 2024-2025 stood at Rs. 1225.87 Lakh as compared to Rs 759.25 Lakh of last year and Net Profit after Tax stood at Rs. 923.94 Lakh compared to profit of Rs. 561.70 Lakhs for previous year. The profit of the Company increased about 64.50% as compared to previous financial year.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCE / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company holds the view that Culture and Employee Experience stand as the sole distinguishing factors in the present landscape of intense competition. The Company is actively striving to establish a workspace that fosters a sense of value, support, and empowerment for all individuals to unleash their utmost potential. A primary concentration lies in nurturing internal talent, and a significant number of our business leaders have risen from within the organization, contributing significantly to our achievements. Notably, a considerable effort is directed toward promoting diversity and inclusion, exemplified by our heightened focus on recruiting women.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS ALONGWITH EXPLANATION

In compliance with the requirement of the Listing Regulations, the key financial ratios of the Company along with explanation for significant changes (i.e., for change of 25% or more as compared to the immediately previous financial year will be termed as significant changes), has been provided hereunder:

DISCLOSURES RELATING TO VARIOUS RATIOS

Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.:-

The Return on Net Worth (RoNW) has experienced a substantial increase as compared to the immediately preceding financial year, primarily attributed to a substantial increase in Earnings Before Depreciation, Interest, and Taxes (EBDIT)

CAUTIONARY STATEMENT

This sections content encompasses the Companys objectives, projections, expectations, and estimations, potentially qualifying as forward-looking statements as defined by relevant securities laws and regulations. These forward-looking statements hinge on specific assumptions and anticipations of forthcoming events. However, the Company cannot assure the precision or realization of these assumptions and expectations. Real-world outcomes may substantially differ from the expressions or implications in the statements due to external factors beyond the Companys control. The Company disclaims any obligation to publicly adjust, modify, or revise forward-looking statements based on subsequent developments.