AKI India Ltd Management Discussions

A. Industry structure and developments:

Indias leather industry holds a significant place in the countrys manufacturing landscape, contributing consistently to economic development and employment. While its direct contribution to GDP may be modest compared to other industries, its value chain integration with sectors such as fashion, textiles, and retail amplifies its broader economic influence. Leather and leather goods also form a core component of Indias export portfolio, positioning the country among the leading exporters globally. Markets like the European Union, the U.S., and Japan are major destinations, and the sector accounts for nearly 10 12% of Indias total manufactured exports, thereby playing a key role in foreign exchange earnings.

Production and Supply Chain: India boasts a robust leather production ecosystem that encompasses everything from raw material sourcing and tanning to final manufacturing and distribution. Major leather-producing states include Tamil Nadu, Uttar Pradesh, West Bengal, and Maharashtra. The industry features a blend of organized large-scale enterprises and smaller, informal production units. This structural diversity allows the sector to address a wide range of market demands from mass-produced goods to high-end, custom-designed products.

Domestic Market: Domestic demand for leather products in India is rising steadily, fueled by higher disposable incomes, rapid urbanization, and evolving fashion preferences. Urban consumers, especially the middle class, are increasingly gravitating toward branded and stylish leather items. Footwear continues to dominate the domestic market, followed by accessories and apparel. A notable trend is the growing consumer awareness and demand for sustainable and environmentally friendly leather alternatives, aligning with broader global trends.

Export Market: Exports form the backbone of Indias leather industry, with over half of the output targeted at global markets. The European Union remains the top importer of Indian leather goods, followed by the U.S. and parts of Southeast Asia. Indian leather products are recognized for their superior quality and traditional craftsmanship, giving them a competitive edge in international markets. Nonetheless, Indian exporters face stiff competition from cost-efficient producers in countries like China, Vietnam, and Bangladesh.

Global Market Trends: Globally, the leather goods market is evolving with shifting consumer expectations. Ethical sourcing, eco-conscious production methods, and traceability are becoming critical factors influencing purchasing decisions. Demand is rising for products that offer both style and sustainability. Digitalization, personalization, and faster turnaround times are also shaping the global leather trade.

Regional Insights: Regionally, North America and Europe continue to be strongholds for leather exports due to stable demand and high consumer standards. The Asia-Pacific region is emerging as a high-growth market, driven by increasing affluence and western fashion influence. Trade policies, tariffs, and economic fluctuations across different regions also play a vital role in shaping the industrys growth trajectory.

Competitive Landscape: The competitive environment in the leather sector is intense, with several established Indian and global brands vying for market share. Players compete on parameters such as quality, design innovation, pricing, and delivery capabilities. In recent years, the industry has witnessed strategic collaborations, mergers, and acquisitions aimed at expanding global footprints, improving technological capabilities, and strengthening supply chains.

B. Financial Performance:

Revenue Analysis: The company saw strong revenue growth, especially from footwear and international markets. E-commerce and direct-to-consumer channels performed particularly well.. Highlight any significant growth areas or declines. Cost Structure: Input costs rose due to higher raw material, labor, and logistics expenses. However, efficient procurement and operational controls helped manage overall cost impact. Profitability: Gross and operating margins were stable, supported by pricing strategies and volume growth. Net profit improved despite inflationary pressures and currency fluctuations. Capital Expenditure: Capital Expenditure was directed toward facility upgrades, automation, and R&D. These investments aim to boost efficiency and support future expansion. Product Development: The company introduced sustainable and fashion-forward leather products, responding to global trends. Innovation focused on both design and functionality. Sales and Marketing: Marketing efforts emphasized digital platforms, influencer tie-ups, and customer engagement. These strategies improved brand visibility and boosted sales performance. Supply Chain Management: Global supply chain disruptions were addressed through supplier diversification and inventory planning. Digital tools improved logistics tracking and resilience.

C. Challenges and Opportunities:

A. Environmental and Regulatory Challenges:

The leather industry consumes large amounts of water and chemicals, leading to issues like pollution and waste management. Environmental laws are becoming stricter in India and abroad, requiring manufacturers to shift toward greener processes and invest in sustainable technology.

B. Global Competition:

Indian leather producers face tough competition from countries like China, Vietnam, and Bangladesh, which offer lower-cost and faster production. To stay competitive, Indian firms must enhance quality, design, and innovation while building stronger global branding. Theres a growing opportunity to lead in sustainable and ethically produced leather goods, which are in increasing demand worldwide.

C. Technological Advancements:

Embracing automation, digital tools, and advanced machinery can improve production efficiency and reduce labor dependence.

Investment in technology can lower costs and help meet rising quality and environmental standards.

E-commerce offers new opportunities to sell directly to international consumers, by passing traditional retail and expanding market reach.

D. Government Support and Initiatives:

A. Policy Initiatives:

The Government of India has rolled out targeted programs like the Indian Leather Development Programme (ILDP) to strengthen the sector. The initiative focuses on expanding production capacity, upgrading infrastructure, and improving workforce efficiency across the leather value chain.

Several export-driven policies, including duty drawback schemes and export incentives, are designed to enhance Indias competitiveness in global markets and support exporters with financial benefits.

B. Skill Development:

To address the industrys workforce challenges, the Leather Sector Skill Council (LSSC) was set up. It plays a key role in training and certifying workers across various functions, aiming to raise productivity and product quality.

Skill-building efforts now emphasize modern competencies such as sustainable practices, advanced manufacturing, and creative design ensuring that the Indian workforce remains relevant in a rapidly evolving global market.

C. Investment Promotion:

The leather industry benefits from 100% FDI approval, which has opened the doors for foreign investors to set up operations in India. This has led to greater capital inflow, introduction of advanced technologies, and improved business practices.

Additionally, the Productivity Linked Incentive (PLI) scheme is aimed at driving fresh investments, improving output, and positioning India as a preferred hub for leather production on a global scale.

E. Future Outlook:

A. Growth Prospects:

The Indian leather sector is expected to witness steady expansion, fueled by increasing domestic consumption and growing demand in international markets.

Embracing eco-conscious and ethical manufacturing practices will be essential for unlocking new business opportunities.

As global markets recover from the disruptions caused by the COVID-19 pandemic, the leather goods segment is likely to see renewed demand offering a favourable environment for Indian exporters to regain momentum.

B. Strategic Focus Areas:

Sustainability: Environmental responsibility is becoming a central focus, with manufacturers adopting green tanning techniques, improving waste management, and integrating recycling processes. Companies aligning with these sustainable practices will be better positioned in eco-sensitive global markets.

Innovation and Technology: Future success will heavily depend on the industrys ability to modernize. Investing in R&D and upgrading to advanced production systems will enable better product quality, faster turnaround, and the ability to cater to changing consumer trends in both design and material use.

Market Diversification: While traditional markets like the European Union and the Unite States remain crucial, Indian leather exporters are actively exploring emerging regions such as Latin America, Africa, and Southeast Asia. Expanding into these markets will reduce dependence on a few regions and spread business risk more effectively.

F. Risks and concerns:

The leather industry faces risks from low-cost Chinese imports, rising demand for non-leather substitutes, and counterfeit products. Technology obsolescence is a concern, affecting efficiency and competitiveness. Government policy shifts and global economic instability also impact performance. Diverse consumer preferences worldwide make it challenging to meet all market needs. Maintaining consistent quality while keeping prices competitive is crucial for sustaining growth.

G. Internal control systems and their adequacy:

The Company has implemented internal control systems that are well-aligned with the scale and complexity of its operations. These controls are designed to safeguard company assets, prevent loss or misuse, and ensure that all financial transactions are accurately authorized, recorded, and reported. The systems are regularly reviewed to maintain effectiveness and compliance.

H. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2024-25 is described in there as a part of Board of Directors of the Company.

I. Material developments in Human Resources / Industrial Relations front including number of people employed:

The Company follows a people-centric HR philosophy aimed at fostering a high-performance culture where employees are encouraged to reach their full potential. A structured performance management system has been implemented to align individual goals with organizational objectives and drive continuous improvement. The work environment promotes personal growth, accountability, and team collaboration. Industrial relations during the period remained positive and harmonious. The Company continues to maintain a committed and efficient workforce.

J. Segment-wise or Product-wise performance:

The Company operates in single Segment i.e. Leather & Leather Goods.

K. Key Financial Ratios:

In accordance with the SEBI (Listing Obligations and Disclosures Requirements) Regulations 2018 (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in Key sector specific financial ratios. In this regard, the Company has no significant changes in any key sector specific financial ratios to report.

L. Cautionary Statement:

This Management Discussion and Analysis may contain certain forward-looking statements relating to the Companys objectives, plans, projections, and expectations, as defined under applicable laws and regulations. These statements are based on current assumptions and estimates, and actual results may differ materially due to various known and unknown risks and uncertainties. Factors such as economic conditions, regulatory changes, tax policies, political developments, and natural disasters, many of which are beyond the Companys control and that may significantly impact operational performance and outcomes.

Registered Office:	By the Order of the Board of
D-115, Defence Colony, Jajmau,		AKI India Limited
Shiwans Tanney, Kanpur Nagar, Jajmau,
Uttar Pradesh, India 208 010
	Sd/-	Sd/-
Place: Kanpur
	Sameena Asad Iraqi	Mohammad Ajwad
Date: 22nd July, 2025
	Whole-time Director	Managing Director
	DIN: 01668732	DIN: 07902475