Baroda Rayon Corporation Ltd Management Discussions

Overview of Economy & Industry Scenario

Global Economy and Outlook

In calendar year 2024, the global economy demonstrated considerable resilience, achieving a growth rate of 3.3% according to the International Monetary Funds (IMF) World Economic Outlook. This growth occurred despite of uneven progress across different regions and sectors. Headline inflation eased to 5.8%, moving closer to central bank targets and triggering the initial round of interest rate cuts in several major economies.

Labour markets remained relatively robust, with unemployment rates hovering near historic lows, although there were signs of slight softening. Strong nominal wage increases, coupled with declining inflationary pressures, led to an improvement in real household incomes. Nevertheless, private consumption stayed muted, reflecting cautious consumer sentiment and persistent uncertainty.

Geopolitical tensions, especially in Eastern Europe and the Middle East-intensified, contributing to global instability. These developments disrupted trade, investment flows, and financial markets, continuing to weigh on business confidence and long-term investment planning.

The global economy is at a critical juncture, with significant internal and external imbalances and vulnerabilities. Major policy shifts are underway, generating a new wave of uncertainties with potentially significant implications for the functioning of the global economy. The global economic outlook for 2025 is characterized by slower growth, with the US trade policy playing a significant role in shaping the landscape. The average US duties remain historically elevated, continuing to exert a drag on global trade and activity. This uncertainty surrounding US trade policy is expected to contribute to slower global growth, with advanced economies projected to grow by only 1.2%.

The ongoing war situations in Russia and Ukraine and escalating war situation in middle east countries can present significant risk of oil price surges, straining public finances and raising inflation. Disruption of trade routes can lead to higher shipping and insurance costs and volatility in financial markets which may lead to investors shift towards safe-haven assets. The emerging geopolitical landscape presents a cautious and complex picture of the global economy for the year 2025. Escalating trade tensions and policy uncertainty and escalating war situations are major drivers for the economic outlook. The divergent and swiftly changing policy positions and deteriorating sentiment could lead to tighter global financial conditions. Demographic shifts threaten fiscal sustainability, while the recent cost-of-living crisis may reignite social unrest. The financial market landscape is marked by increased uncertainty and market volatility, against the backdrop of stretched valuations within many segments of financial markets. Global growth is projected to decline, following a period of steady but underwhelming performance. As per the IMF report of April 2025, the global growth is expected to decline to 2.8% in 2025 and 3% in 2026, down from 3.3% in both 2024 and 2023. Advanced economies are projected to grow at 1.4% in 2025, with the US slowing to 1.8% and the Europe at 0.8% and emerging market and developing economies are expected to slow down to 3.7% in 2025 and 3.9% in 2026.

India continues to be one of the fastest-growing major economies globally, supported by its favourable demographic profile, strong domestic consumption, ongoing structural reforms, and a sustained drive towards digital transformation. Key contributors to this growth include healthy GST collections, expanding infrastructure, manufacturing sectors, and rapid technological adoption across industries. The governments emphasis on improving the ease of doing business and nurturing a vibrant startup ecosystem has further bolstered economic momentum.

However, GDP growth moderated to 6.5% year-on-year in FY2025, reflecting the combined impact of global economic headwinds and domestic challenges. Factors contributing to this slowdown include a decline in manufacturing output, elevated food inflation, tepid urban demand, limited job creation, widening trade deficits, and subdued private sector investment. Despite these hurdles, India remains on a stable growth trajectory, driven by robust manufacturing, diversifying services, increased infrastructure spending, and government-led initiatives promoting digitalisation, financial inclusion, and business-friendly reforms. Efforts to diversify trade through new free trade agreements have helped mitigate external risks, while rising urbanisation and growing middle class have supported consumer spending. Inflationary pressures, driven by global supply chain disruptions and volatile commodity prices, prompted the Reserve Bank of India (RBI) to take proactive measures to balance inflation control with economic growth. Indias total exports reached a record high of $824.9 billion in 2024-25, driven by strong services exports and increased merchandise exports excluding petroleum products. This figure represents a 6.01% increase over the US$778.1 billion exported in 2023-24, marking a significant leap in the countrys economic trajectory. Private consumption saw a rebound, contributing to overall economic growth.

Indias real GDP is expected to expand by 6.3% in FY2025-26 and 6.4% in FY2026-27. This growth will be primarily driven by a gradual recovery in private consumption, supported by rising real incomes due to moderate inflation, recent tax relief measures, and a strengthening labour market. Investment activity is likely to benefit from falling interest rates and robust public capital expenditure. However, increased tariffs from the

United States may dampen export performance. Inflation is projected to remain stable at around 4%, in line with trend-level economic growth. Nonetheless, risks such as spike in global commodity prices could lead to higher food inflation.

The Union Budget for FY 2025-26 outlines a path of moderate fiscal consolidation, targeting a reduction in the fiscal deficit from 4.8% of GDP in FY2024-25 to 4.4% in FY2025-26. With inflation well within the target range, monetary policy is expected to gradually shift towards a more accommodative stance. Enhancing the efficiency of public spending through better targeting of energy and fertilizer subsidies, along with rationalizing tax expenditures, could free up resources for other developmental priorities. Additionally, improvements in logistics, digital infrastructure, and greater policy predictability especially in tax administration are expected to encourage private sector investment.

The global textile industry comprises textile manufacturing, refining and retail clothing. A multi-billion dollar manufacturing sector, the global textile business consists of production, refining and sale of synthetic and natural fibres. As of 2025, the textile market size is estimated at USD 748 billion and is expected to reach USD 889 billion by 2029, growing at a CAGR of 3.5% between 2024 and 2029. The textile industry is a dynamic market with key players being China, European Union, US and India. China is the largest textile producing and exporting country in the world. On the other hand, the European Union comprises Germany, Spain, France, Italy and Portugal at the forefront with a value of more than one-fifth of the global textile industry. India is the third-largest textile manufacturing industry and is responsible for more than 6% of the total textile production globally.

With rapid industrialization and the advent of technology, textile industry is incorporating modern installations to increase the production of textiles. The industry is also observing a paradigm shift towards natural fibers such as cotton, silk, linen, wool, hemp, jute, and cashmere. These fibers are favored for their low density and high strength compared to conventional fibers, leading to a rise in demand for fiber fabrics. Additionally, post pandemic awareness of hygiene products has contributed to the growing popularity of natural fiber fabrics in the textile industry.

As one of the largest textile industries in the world, the Indian textile industry contributes approximately 2.3% to the countrys GDP, 13% to industrial production and 12% to total exports earnings. India is one of the largest producers of cotton and jute in the world. It is also the 2^nd largest producer of silk, with 95% of the worlds hand-woven fabric comes from India. Indias total textile exports are expected to reach USD 65 Billion by FY2026 and is expected to grow at 10% CAGR 2019-2020 to reach USD 190 Billion by 2025-2026. The textiles and apparel industry in India has strengths across the entire value chain from fibre, yarn, fabric to apparel. The Indian textile and apparel industry is highly diversified with a wide range of segments ranging from products of traditional handloom, handicrafts, wool and silk products. India has been observing a robust trade in technical textile products and the country has been a net exporter. The government has also launched the Production Linked Incentive Scheme with an approved outlay of Rs. 10,683 crore to promote production of Man-Made Fibre Apparel, Man-Made Fibre Fabric and products of Technical Textiles in the country.

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.

The global real estate sector in 2024 navigated a transitional year, shaped by macroeconomic stabilization, shifting demand patterns, and increased focus on sustainability. Residential Real Estate saw mixed performance. While affordability challenges persisted in developed markets due to high interest rates and tight supply, emerging economies particularly in India and Southeast Asia witnessed strong housing demand driven by urban growth and rising incomes. Government support measures in China attempted to stabilize its troubled property sector, with modest results.

Commercial Real Estate continued to undergo structural change. The office segment remained under pressure in many global cities as hybrid work reduced demand for traditional office space. Conversely, industrial and logistics assets performed strongly, fueled by e-commerce growth and supply chain reconfiguration. Retail real estate showed signs of recovery, especially in regions with strong tourism and consumer spending.

Investment activity remained cautious but selective. Global real estate investors favored asset classes like logistics, data centers, healthcare, and green buildings. Real Estate Investment Trusts (REITs) showed varied performance, with industrial and alternative segments outperforming office and retail.

Sustainability and ESG integration became central to asset strategy and development. Regulatory focus on climate resilience, energy efficiency, and green certifications continued to grow across regions.

Despite all the external and internal roadblocks in CY24, including inflation, general elections and geopolitical tensions, India continues to be one of the fastest growing major economies in the world. The Indian real estate sector has shown robust growth since the pandemic. While initial recovery saw a surge in housing sales, commercial leasing has also gained significant traction over the past year. Hospitality sector continues to do exceedingly well with average daily rates at an all-time high. As India moves from being a low-income to a middle-income country, household incomes and spending will continue to rise giving a long runway for growth in the real estate sector. Real estate will continue being a driver of growth and employment and will continue to take larger share of the countrys GDP, as is the case in other more developed and advanced economies.

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.

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.

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, 80% of units were sold till March 2025.

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, 13% of units were sold till March 2025.

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 -

ANNUAL REPORT 2024-2 5

Page 29