Baroda Rayon Corporation Ltd Management Discussions

Overview of Economy & Industry Scenario

Global Economy and Outlook

In Calendar year (CY) 2025, the global economy grew by 3.4%, supported by moderating inflation despite persistent supply-side pressures and uneven regional recovery trends. Emerging Market and Developing Economies (EMDEs) continued to outperform advanced economies, while advanced markets grew at a moderate pace of around 1.9% amid softer consumption and investment activity. The United States recorded growth of approximately 2.1% and global inflation moderated from 5.8% to nearly 4.1% during the year.

Looking ahead, global growth is projected to moderate to around 3.1% in CY2026 and improve marginally to approximately 3.2% in CY2027, while inflation is expected to gradually ease further over the medium term. The outlook remains influenced by geopolitical developments, evolving trade dynamics and financial market conditions. However, stable monetary conditions, easing inflation and improving economic activity are expected to support liquidity, investment sentiment and capital flows, creating a relatively supportive environment for the real estate sector.

The global economy demonstrated remarkable resilience in 2025, achieving a growth rate of 3.4%, despite heightened trade tensions and persistent policy uncertainty. Economic activity was supported by technology-led investments, accommodative financial conditions and targeted policy measures across major economies.

However, following a period of resilience in the face of elevated trade barriers and uncertainty, global activity now faces a significant headwind from the outbreak of conflict in the Middle East. With the closure of the Strait of Hormuz and damage to critical production facilities in a region central to global hydrocarbon supply, it raises the risk of a significant energy shock.

Looking ahead, the global outlook remains broadly stable, albeit cautious. Structural drivers, particularly sustained investment in technology and AI, along with continued policy support are expected to support global economic stability. Policymakers will need to encourage the diffusion and adoption of new technologies while ensuring adequate investment in skills development to support a smoother labour market transition.

Indian Economic Overview

India remained one of the fastest-growing major economies during the year, with real GDP growth projected at 7.7%, supported by strong domestic consumption, sustained investments and prudent fiscal management. CPI inflation moderated to around 3.2%, supporting macroeconomic stability and consumer sentiment. Strong FDI inflows, manufacturing growth of 8.1% and services expansion of 9.1%, along with the C1.97 lakh crore PLI scheme across 14 strategic sectors, further strengthened industrial and economic activity.

The outlook for FY2027 remains positive, with GDP growth projected at around 6.6%, supported by urbanisation, resilient domestic demand and stable monetary conditions, with the repo rate maintained at 5.25%. Infrastructure-led development remains a key growth catalyst, with public capex increased to approximately 12.2 lakh crore in the Union Budget 2026 27. Continued investments in urban infrastructure, transport corridors and emerging economic clusters, along with the development of Tier-II and Tier-III cities, are expected to support long-term real estate demand and broad-based economic growth.

Despite navigating multiple headwinds, India achieved real GDP growth at 7.6%, supported by robust domestic demand conditions and strong business optimism. Economic activity remained relatively resilient, with leading indicators pointing towards continued momentum in manufacturing. Within this broader growth environment, the textile and apparel sector, contributing approximately 2.3% to Indias GDP and employing over 45 million people, remained a significant beneficiary of Indias economic momentum. Direct tax exemptions for the middle-income segment under the Union Budget 2025-26 supported disposable incomes, thereby strengthening consumption. Building on this, the accelerated rationalisation of GST 2.0 slabs ahead of the festive season further boosted demand, while also providing relief to MSMEs and the informal sector amid subdued external demand conditions. Against this backdrop of easing price pressures, inflation moderated to multi-year lows, enabling the Reserve Bank of India to implement a cumulative 125-basis-point rate cut in 2025 to support growth and revive credit demand.

Looking ahead, Indias growth outlook remains positive, underpinned by strong services sector, continued infrastructure investment and ongoing structural reforms. The proposed India EU Free Trade Agreement is expected to provide access to over 99% of Indias exports,4 while the recently concluded India UK FTA opens further avenues for trade expansion. Continued focus on infrastructure, manufacturing, digital transformation and supply chain diversification is likely to strengthen Indias position as a global hub for production and consumption.

TEXTILES

Global Textile Industry

The US$ 1.16-1.39 trillion global textile industry went through a phase of recalibration marked by uneven consumer demand, geopolitical disruptions, tariff uncertainties, and supply chain realignments in FY 2025-26.

While demand in apparel remained muted across key western markets, segments such as technical textiles, home textiles, and value-added products continued to show resilience. Sustainability, traceability, and supply chain diversification emerged as defining themes, with global brands increasingly shifting sourcing strategies towards reliable and compliant manufacturing destinations.

Indian Textile Industry

For Indias US$ 152.40 billion textile market, FY 2025-26 has been a year of resilience amid global headwinds. Despite export volatility and pressure on cotton-led segments, India continued to strengthen its position as a diversified and integrated textile manufacturing hub, averaging a 3.83% annual growth rate to reach US$ 213.75 billion by 2034. Domestic demand remained relatively stable, while policy initiatives such as PLI, PM MITRA parks, and the push towards MMF and technical textiles supported long term structural growth. Rising cotton prices, logistics challenges, and tariff-related uncertainties impacted margins across the value chain. The industry is now increasingly transitioning towards man-made fibres, technical textiles, digitalisation, and sustainable manufacturing practices. Indias strong raw material base, integrated value chain, and improving global positioning continue to create long-term opportunities, even as the sector navigates short-term demand and pricing pressures.

Risk & Concerns

The broader trends in the economy are expected to have a direct impact on your Companys growth prospects as well. Inflation is expected to remain elevated for the foreseeable future, driven by war-induced commodity price increases and broadening price pressures. In addition, the anticipated increase in interest rates by Central Banks in the coming year are also expected to lower growth and exert pressure on economies particularly those in emerging markets.

In these circumstances, the ability to successfully navigate cost pressures would have a significant bearing on the overall performance of your Company. Diminishing purchasing power and demand due to the economic circumstances could result in fundamental shifts in consumer behaviors and adversely impact the market for textiles.

Your companys entire operational activities in textile segment are stand still since August 2008.

REAL ESTATE Indian Real Estate Market

Indias real estate sector is expected to sustain its growth momentum supported by continued urbanisation, strong infrastructure investments, favourable demographic trends and rising household incomes. Strong residential demand, increasing redevelopment activity and growing participation from institutional investors are likely to support sector expansion. Additionally, improving connectivity across major metropolitan regions and a growing preference for organised developers are expected to drive long-term growth and strengthen the sectors overall outlook.

Opportunities, Threats and Challenges

Opportunities

Indias real estate sector is experiencing renewed momentum, underpinned by strong demand, rising disposable incomes, and a favorable policy environment. The Baroda Rayon Corporation Limited, backed by proven execution capabilities, and strategic presence in key geographies, is well-positioned to leverage this upward trajectory.

The company has inherent strength due to its prime location.

The current environment in the real estate industry poses challenges to the entry of new competitors. With the trend leaning towards a smaller number of dominant developers in each region, this period of consolidation offers an attractive chance for current real estate firms to meet the increasing demand for housing.

Threats

While we are favorably positioned to capitalize on the growth prospects within the Indian real estate sector, there are potential challenges that the industry might need to navigate in the near to medium term.

The real estate industry is subject to extensive regulations, and any negative adjustments in governmental policies or the regulatory framework can negatively influence the sectors performance. Significant delays in procedures related to acquiring land, determining land use, initiating projects, and obtaining construction approvals are common. Changes in policy applied retrospectively, along with regulatory obstacles, could affect profitability and diminish the appeal of both the sector and the companies active within it.

In recent years, the landscape of real estate financing has shown a marked divergence. Well-established developers with lower debt levels have continued to secure funding with relative ease, benefiting from the selective approach of lenders, while those with weaker financial standings have encountered challenges in accessing capital. The performance of the real estate sector is intricately connected to the broader economic recovery and the prevailing monetary policies. The RBI has adopted an accommodative stance for now to bolster economic growth but has kept a hawk eye on the inflation trajectory. The central bank could reverse its stance, which may pose challenges for the real estate sector in the form of higher housing loan costs and an escalation in financing costs for developers.

As the countrys second-largest employment provider, the real estate sector relies significantly on manual labour. The pandemic severely impacted this sector due to labour shortages, disrupting project completion schedules. Consequently, theres a pressing need for the adoption of alternative construction methods that are less dependent on manual labour and more on technology.

Discussion of the Financial Performance with respect to operational performance

The company has following ongoing real estate projects at Udhna, Surat City namely

1) Shree Laxminarayan Industrial Park - Z Row Plotted Development (RERA No. - PR/GJ/SURAT/SURAT CITY/Surat Municipal Corporation/PN221AA10121/121022) which was launched in August 2022 and have received overwhelming response from the customers. Out of total 503 units, 85% of units were sold till March 2026.

2) Surat Textile Bourse Phase -1 (Part-A) Commercial (RERA No. - PR/GJ/SURAT/SURAT CITY/Surat Municipal Corporation/CN283AA10183/261222) was launched in October 2022. Out of total 323 units, 17% of units were sold till March 2026.

3) Surat Textile Bourse Phase -1 (Part-B) Commercial (RERA No. - PR/GJ/SURAT/SURAT CITY/Surat Municipal Corporation/CN317AA10217/280223) was launched in December 2022.

Key Financial Ratios -

Sr. No. Key Financial Ratios	2025-26	2024-25	Variance %	Detailed comments
1 Debtors Turnover	3.88	4.73	-18.11	Decrease in Net Credit Sales
2 Inventory Turnover	0.10	0.17	-40.89	Decrease in Net Sales
3 Interest Coverage Ratio	6550.20	3388.24	93.32	Increase in interest expenses
4 Current Ratio	3.48	3.54	-1.77	-
5 Debt Equity Ratio	0.45	0.47	-4.82	-
6 Operating Profit Margin (%)	58.36%	29.45%	158.33	Increase in earnings available for debt service and decrease in debt service
7 Net Profit Margin (%)	35.06%	39.28%	-10.74	Decrease in Net Profit
8 Return on Equity (%)	5.79%	11.46%	-49.56	Decrease in Net Profit after tax
9 Return on Capital Employed (%)	3.95%	7.60%	-48.02	Decrease in EBIT
10 Return on Investment (%)	7.33%	9.61%	-23.75	Increase in Gain on Investment

For and on behalf of the Board of Directors

Damodarbhai Patel
Chairman & Managing Director
DIN: 00056513

Place: Surat
Date: August 27, 2026