Active Clothing Co Ltd Management Discussions

ECONOMIC OVERVIEW

GLOBAL ECONOMY

In FY 2024-25, the global economy maintained a growth rate of 3.3% despite economic turbulences. This growth highlights the resilience of economies around the world. The US economy has demonstrated resilience amid global disinflation trends driven by a series of interest rate cuts by the US Federal Reserve to further stimulate economic growth. In addition, robust consumption and a strong performance by the corporate sector helped the US economy to grow steadily. The global inflation level fell from an annual average of 6.6% in FY 2023 to 5.7% in FY 2024. The decline in inflation was largely attributed to the implementation of stringent monetary policies by central banks and an expansion in energy supply. These factors played a crucial role in stabilising prices and sustaining economic growth.

The emerging markets expanded at 4.3%, significantly outperforming the 1.8% growth rate of advanced economies despite facing a complex economic landscape. Despite concerns regarding potential stagflation and recession, economic activity maintained a steady pace, supported by robust government expenditure, resilient household consumption and a significant increase in labour force participation.

INDIAN ECONOMY

The economy of India continued to grow at an estimated rate of 6.5% in FY 2024-25 and sustained its position as one of the fastest-growing major economies of the world. Strong performance across the manufacturing and services sector remained a primary driver of this growth. Inflation moderated to 4.7% during FY 2025, supporting economic stability and improving consumer confidence. This moderation of price pressures supported economic momentum and reflects demand across various industries. The Indian government also played an instrumental role in maintaining growth with notable structural reforms probusiness regulations and considerable investment in infrastructure development. All these efforts cumulatively improved the investment environment and provided a robust foundation for long-term economic growth. In addition, government policies like Make in India have significantly aided the manufacturing sector, heightening Indias competitiveness in the global market and establishing the nation as a manufacturing and export hub. Schemes such as the Production Linked Incentive (PLI) Scheme for Textiles is designed to increase manufacturing and encourage technical textiles, while the ‘PM MITRA Parks scheme is aimed at creating world-class industrial infrastructure in seven states to enable integrated textile value chains. Further, the ‘Samarth scheme has been able to train more than 3.82 lakh beneficiaries successfully, with a placement rate of 77.74%, highlighting the sectors increasing emphasis on skill development and employment generation.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian apparel industry experienced a mixed recovery in FY 2024-25, post-pandemic and amidst global economic uncertainties. According to industry data, the Indian textile and apparel market is valued at approximately USD 165 billion, with domestic consumption contributing around 70% and exports the remaining 30%.

Key trends influencing the sector in FY25:

Rising consumer demand in Tier II and Tier III cities.

Strong growth in e-commerce and omni-channel retail.

Increasing preference for sustainable and ethically sourced fashion.

Government support through schemes like PLI (Production Linked Incentive) and PM MITRA parks.

INDIAN TEXTILE AND APPAREL INDUSTRY REVIEW

Indias textile and apparel industry holds a significant position in the countrys economy, contributing approximately 2.3% to the GDP, 13% to industrial production, and 12% to exports. It also stands as the second- largest employer, providing jobs to 45 million people directly and 100 million in allied sectors. India is the worlds fourth-largest producer and exporter of garments after China, Bangladesh and Vietnam and the worlds second-largest producer and exporter of textiles after China. Nearly two-thirds of Indias textile exports go to the US and the UK due to its enterprises commitment to high quality. However, adverse economic conditions, compounded by the Red Sea crisis, have taken a toll on textile exports. In the fiscal year 2023-24, textile exports declined by 3.4% year-on-year, with textiles worth $34.43 billion Key Developments in FY25

Growth Drivers

• Rising domestic demand: Driven by an expanding middle class, urbanization, and increased fashion consciousness.

• Boom in e-commerce & D2C: Digital-first brands gained significant ground, especially among Gen Z and millennials.

• PLI Scheme implementation: Major investments in MMF (man-made fibers) and technical textiles under the governments Production Linked Incentive scheme.

• Free trade agreements (FTAs): With UAE, Australia, and progress with UK and EU, enhancing export opportunities.

• STRONG POLICY SUPPORT

India aims to increase its share in the global textile and hence the Indian government with multiple initiatives in place will boost the apparel and textile market in the coming years.

Challenges

• Export slowdown in H1FY25 due to global macroeconomic pressure and geopolitical instability.

• Raw material volatility, especially in cotton, impacting margins.

• Logistics bottlenecks and port congestion affected timely deliveries, especially for exporters.

OPPORTUNITIES Export Growth through FTAs

• India-UAE, India-Australia FTAs have reduced tariff barriers, making Indian exports more competitive.

• Potential India-EU and India-UK FTAs could open high-value markets for Indian garments and home textiles.

Rising Domestic Demand

• Expanding middle class, rising incomes, and increased fashion awareness are boosting consumption.

• Tier II and III cities are emerging as new retail hubs with untapped potential.

E-commerce and D2C Boom: Online apparel sales are growing at a CAGR of 20%+, driven ^bY^:

o Mobile penetration

o Influencer-led marketing

o Rapid adoption of social commerce platforms

o Many startups are entering with niche fashion categories and direct-to-consumer (D2C) models.

Shift to Organized Retail

• Consumers increasingly prefer branded, quality-assured apparel.

• Organized retail is expected to grow to ~45% of the market by 2028, opening space for mid-size brands.

Growth in Technical Textiles

• Fastest growing segment (~15% YoY), supported by:

o Industrial use (automotive, construction) o Healthcare and hygiene textiles

o Government support under National Technical Textiles Mission Sustainability & Green Manufacturing

• Strong demand for:

o Organic cotton o Recycled fibers o Waterless dyeing o Zero-waste production

• Sustainability is a key differentiator in global sourcing decisions.

Increasing Global Sourcing from India

• Global brands are diversifying away from China ("China+1 strategy").

• India is seen as a reliable alternative, especially for cotton-based and high-skill apparel.

Digital & Smart Manufacturing

• Adoption of Industry 4.0 tools like:

o AI-driven design o 3D sampling o Automated cutting/sewing

• These technologies are helping SMEs scale and meet export compliance standards.

Active Clothing Co. Limited is a premier apparel manufacturer based in Mohali, Punjab, specializing in flat- knitted sweaters, jackets, and circular-knitted t-shirts and sweatshirts. As Indias one of the leading fully integrated "design-to-shelf¹ solution provider, the company offers comprehensive services encompassing design, manufacturing, and retail. Active Clothing has built a strong reputation as a trusted partner for leading global fashion brands, including Levis, George, Pepe Jeans, ONLY, Jack & Jones, Vero Moda, Next, Skechers, Guess, Puma, Ted Baker London, T.K. Maxx, United Colors of Benetton, and Adidas. With its end- to-end capabilities, the company is a preferred choice for high-fashion streetwear worldwide.

With a state-of-the-art facility, Active Clothing ensures that all processes from concept development to final production·are conducted under one roof. This integrated model allows for strict quality control, faster turnaround times, and efficient order management, making it a reliable partner for some of the worlds most recognized fashion brands. The companys core product line includes flat-knit sweaters, fly-knit shoe uppers, circular knits, outerwear jackets, and wovens. Expanding beyond its traditional offerings, Active has also introduced new categories such as knitted beanies and gloves, soft-knitted toys, and athleisure products, further strengthening its market presence.

A key differentiator for Active Clothing is its tech-enabled design and manufacturing platform, which enhances efficiency and sustainability in product development. Through virtual knitting and digital sampling, the company helps brands reduce waste, save time, and optimize costs while maintaining high design precision. This innovative approach aligns with the evolving needs of the fashion industry, where speed, sustainability, and digital integration are increasingly essential.

As the only company in India to offer a true design-to-retail model, Active Clothing is strategically positioned for growth. With increasing demand from both domestic and international fashion brands, the company continues to expand its reach, particularly in the high-fashion winter wear segment. Its strong technological foundation, robust manufacturing capabilities, and commitment to quality and sustainability make it a trusted name in the global apparel industry.

Active Clothing remains focused on scaling its operations, enhancing its product portfolio, and building longterm partnerships with premium global brands. The companys ability to seamlessly blend creativity, technology, and manufacturing expertise ensures that it stays ahead in an evolving and competitive market.

The company got listed on the BSE on March 26, 2018 with an IPO of ? 26.56 Cr.

In FY25 the company reported Total Income of ? 297.12 Cr, EBITDA of ? 28.49 Cr, and PAT of ? 8.45 Cr

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY A properly designed and consistently enforced system of operational and financial control helps the Companys Board of Directors and management to safeguard the resources, produce reliable financial reports, and comply with laws and regulations. Effective internal control also reduces the possibility of significant errors and irregularities and assists in their timely detection when they do occur. The internal Auditors regularly monitor and evaluate the efficiency and adequacy of internal control systems in the Company, its compliance with operating systems and accounting procedures, and ensures that the internal control systems are properly followed by all concerned departments of the Company. Significant audit observations and corrective actions are taken thereon and are presented to the Audit Committee of the Board

HUMAN RESOURCE & INDUSTRIAL RELATIONS The Company has an excellent track record of cordial and harmonious industrial relations and, over the years, not a single man-day was lost on account of labour unrest. In view of its aggressive growth plans, the Company enhanced its focus on improving human resource productivity and efficiency. The Company is of the firm belief that human resource is the driving force that propels a Company towards progress and success. The Company is committed to the development of its people. The total permanent employee strength of the Company was as of March 31, 2025. The Industrial relations were cordial and satisfactory.

BUSINESS PERFORMANCE OVERVIEW - FY25

FY25 marked a pivotal year of strong growth, strategic investment, and operational discipline for Active Clothing Co Limited Despite a challenging global environment shaped by macroeconomic volatility, persistent inflationary pressures, and shifting consumer preferences, the Company delivered resilient and consistent performance across all key metrics.

Strengthening Our Global Position

Active Clothing continued to solidify its position as a leading global, asset-light fashion infrastructure platform. Our unique operating model·focused on agility, scalability, and sustainability·enabled us to serve a diversified portfolio of global fashion brands and retailers with efficiency and reliability.

Expansion into new markets and deeper penetration in existing geographies allowed us to diversify revenue streams and reduce market concentration risk.

Strategic Investments

In line with our long-term vision, FY25 saw targeted investments in:

Digital transformation, including automation, data analytics, and supply chain optimization tools.

Talent development and leadership programs to enhance organizational capabilities and strengthen our future-readiness.

OPERATIONAL PERFORMANCE & FINANCIAL REVIEW during the FY2024

Particulars (? Cr)

FY25

FY24

YoY Change

 

Total Income	297.12	212.66	39.72%
EBITDA	28.49	21.23	34.24%
PAT	8.45	4.86	73.73%
Diluted EPS (?)	5.45	3.13	74.12%

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

As per SEBI (Listing Obligations and Disclosure Requirements)( Amendment) Regulations,2018, the Company is required to provide details of significant changes (change of 25% or more as compared to immediately previous year) in key financial ratios. Accordingly, the Company has identified the following ratios as key financial ratios:-

Ratio	Unit	FY 2024-25	FY 2023-24	% Change
Debtors turnover	Times	2.84	2.84	NIL
Inventory turnover	Times	3.41	2.92	0.49
Debt Service Coverage Ratio	Times	1.51	1.48	0.03
Current Ratio	Times	1.31	1.35	(0.04)

Dear Shareholder(s),

Sub.: Mandatory update of PAN and Bank details against your share holding

SEBI vide circular dated April 20, 2018 directed to the Bank through their RTA to collect copy of PAN and Bank Account details of all shareholders holding securities in physical form. Further, the Company / RTA of the Company has to follow the procedure mentioned in the said circular. In compliance of the said circular of SEBI, shareholders, who have not furnished PAN and Bank Account particulars till date, are requested to furnish PAN and Bank Account particulars to the RTA/Company for registration, as per the format enclosed.

You are hence requested to submit the following documents within 21 days of receipt of this communication:

o Enclosed form duly filled in and signed by all the shareholders. o Self-attested copy of Pan Card of all the holders. o Cancelled personalised cheque leaf

(In absence of personalised cheque, self-attested copy of first page of pass book) o Address proof (self-attested copy of Aadhaar-card)

In case if you have any queries or need any assistance in this regard, please contact;

IMPORTANT & URGENT FOR YOUR IMMEDIATE ACTION

Dear Shareholder(s),

In terms of Regulation 40 of the SEBI (LODR) Regulations, 2015 as amended vide Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)(Fourth Amendment) Regulations, 2018 (Gazette Notification dated June 8, 2018 of SEBI), it is notified that except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed w.e.f. from December 05, 2018, unless the securities are held in dematerialised form with a depository.

In view of the SEBIs circular dated June 08, 2018, all Members of the Company, who are holding shares of the Company in physical form, are requested to take note of the impact of the aforesaid amendment in Regulation 40 on transfer of shares held in physical form w.e.f. December 5, 2018 and get their shares dematerialized at the earliest.

Process for Dematerialization of shares in Physical form is as under:

A shareholder can get his shares dematerialized by submitting a Dematerialization Request Form (DRF) to its Depository Participant (DP). ADP is usually an intermediary between a shareholder and the Depository i.e. NSDL & CDSL.

After submission of DRF, a demat request is raised by DP with a unique DRN (Demat Request Number) and the physical share certificates are sent for verification to the concerned authorities (RTA).

Upon verification from RTA, the DP team will convert all the physical share certificates into electronic form. It takes approximately 21 days for the DP team to convert physical shares into demat Form or electronic form.

In case of death of a shareholder before converting shares into demat mode, legal heirs will have to transmit the shares in their name and then get the dematerialization done in their respective names.

In case of loss of physical shares, the shareholder will have to get the duplicate share certificates issued in his name from the Company. After receiving the duplicate share certificates, the shareholder can get his shares dematerialized by filling the DRF.

Request you to please demateralize your physical shares.