Birla Cotsyn India Ltd Management Discussions

ANNEXUREV

GLOBAL ECONOMY:

The global economy in FY 2024-25 continues to navigate a complex environment marked by moderate growth, persistent inflationary pressures, and geopolitical uncertainties. In response to these headwinds, governments worldwide prioritised policy reforms and aimed at prioritising innovation, enhancing supply chain resilience and promoting economic diversification to secure long-term stability. After experiencing strong post-pandemic recovery in 2021-22, momentum slowed in subsequent years due to tighter monetary policies, supply chain disruptions, and geopolitical conflicts.

According to multilateral agencies, global GDP growth for FY 2024-25 is projected to remain modest, led by diverging performances across advanced and emerging economies. Advanced economies, particularly the United States and the Eurozone, are witnessing softer growth on account of high interest rates, reduced fiscal support, and subdued investment demand. In contrast, emerging economies, especially India and select Asian markets, are projected to outperform owing to resilient domestic demand, structural reforms, and robust services and manufacturing sectors.

OUTLOOK:

The outlook for the global economy in FY 2024-25 remains cautious yet stable. Growth is projected to stay moderate at around 3.0%, reflecting a delicate balance between resilience in some economies and persistent headwinds in others. Advanced economies are expected to witness subdued expansion due to the lagged impact of tight monetary policies, fiscal consolidation, and weaker consumer demand. Emerging and developing economies, however, are likely to remain the primary growth engines, supported by domestic consumption, infrastructure investments, and favourable demographics.

Inflationary pressures are expected to gradually ease but will likely stay above pre-pandemic levels, prompting central banks to maintain a vigilant stance. Global trade may continue to face challenges from supply chain realignments, energy price volatility, and rising protectionist tendencies. Geopolitical risks, including conflicts and economic fragmentation, remain significant downside risks to stability.

In the positive side, technological innovation, digital transformation, and green energy transitions are expected to provide new avenues of growth and investment. The global economys medium-term trajectory will depend largely on policy coordination, geopolitical developments, and the pace of recovery in key economies such as the United States, China, and India.

Overall, while uncertainties persist, the global economy is expected to demonstrate resilience, with emerging markets playing a pivotal role in driving growth momentum.

INDIAN ECONOMY:

India has continued to consolidate its position as one of the fastest growing major economies in the world during FY 2024-25. Despite global headwinds, the Indian economy has demonstrated resilience, supported by strong domestic demand, policy reforms, and robust macroeconomic fundamentals. According to various estimates, Indias GDP growth for FY 2024-25 is projected in the range of 6.5% - 7.0%, significantly higher than most advanced and emerging economies.

Key Drivers of Growth:

1. Consumption and Demand:

Household consumption has remained a major driver of economic activity, supported by rising disposable incomes, urbanisation, and growth in rural demand. The services sector, particularly digital services, financial services, and tourism, has witnessed strong momentum.

2. Investment and Infrastructure:

The Government of Indias continued emphasis on infrastructure development through higher capital expenditure, along with initiatives such as the National Infrastructure Pipeline and PM Gati Shakti, has catalysed private sector investment. Increased FDI inflows in sectors such as electronics, renewable energy, and manufacturing have further strengthened growth prospects.

3. Industrial and Manufacturing Sector:

The Make in India initiative, coupled with the Production-Linked Incentive (PLI) Schemes, has supported growth in manufacturing, especially in electronics, textiles, and automobiles. The shift in global supply chains is also creating opportunities for India as an alternative manufacturing hub.

4. Agriculture and Rural Economy:

The agriculture sector continued to provide stability, though it remains susceptible to monsoon variability and climate challenges. The governments focus on rural development and agri-infrastructure is expected to boost rural incomes and demand.

5. External Sector:

Indias external sector has shown resilience, with robust services exports offsetting the pressures on merchandise trade due to global slowdown. Remittances have remained strong, further supporting the current account balance.

6. Inflation and Monetary Policy:

Inflation has moderated from previous highs but continues to require careful monitoring. The Reserve Bank of India (RBI) has maintained a balanced approach to ensure price stability while supporting growth. The Indian rupee has remained relatively stable despite global currency volatility, aided by strong forex reserves.

OUTLOOK ON THE INDIAN ECONOMY:

The outlook for the Indian economy in FY 2024-25 remains strong, with India expected to continue as one of the fastest-growing major economies globally. GDP growth is projected to remain in the range of 6.5% - 7.0%, underpinned by resilient domestic demand, government- led infrastructure spending, and private sector investment momentum.

The services sector is anticipated to maintain robust growth, particularly in IT, financial services, tourism, and digital solutions, while manufacturing and industry are expected to benefit from the governments Production-Linked Incentive (PLI) schemes, expanding global supply chain realignments, and increasing FDI inflows. The infrastructure and construction sectors will continue to receive significant impetus through higher public capital expenditure and programs such as PM Gati Shakti and the National Infrastructure Pipeline.

Inflationary pressures are expected to ease gradually but will remain contingent on global commodity price movements and the performance of the monsoon. The Reserve Bank of India (RBI) is likely to pursue a balanced monetary stance, ensuring price stability while supporting growth. On the external front, resilient services exports, strong remittances, and stable foreign exchange reserves are expected to cushion pressures from a volatile global trade environment.

Structural reforms in taxation, financial inclusion, digitalisation, and green energy transition will continue to strengthen Indias long-term growth potential. Risks, however, remain in the form of global economic slowdown, geopolitical tensions, climate-related vulnerabilities, and the challenge of sustaining employment creation at pace with population growth.

Overall, India is well-positioned to sustain a high-growth trajectory in FY 2024-25, supported by strong fundamentals, policy-driven reforms, and increasing investor confidence. The country is expected to play a pivotal role in driving global economic growth in the medium term.

INDUSTRY OVERVIEW:

Global Textile and Apparel Industry

The global textile market size was estimated at USD 1.11 billion in 2024 and is projected to reach USD 1.61 billion by 2033, growing at a CAGR of 4.2% from 2025 to 2033. The demand for textiles is rising due to fast fashion, growing urbanization, and increasing disposable incomes in emerging economies. Consumer preferences are shifting toward trendy, comfortable, and affordable clothing, fueling retail apparel demand.

Key Market Trends & Insights

• Asia Pacific dominated the textile market with the largest revenue share of 49.5% in 2024.

• The U.S. textile industry is shifting toward domestic innovation, sustainability, and technical textiles.

• By raw material, the silk segment is expected to grow at the fastest CAGR of 4.5% over the forecast period.

• By product, the nylon segment is expected to grow at the fastest CAGR of 4.9% over the forecast period.

• By application, the household segment is expected to grow at the fastest CAGR of 4.8% over the forecast period.

• Market Size & Forecast

• 2024 Market Size: USD 1.11 Billion

• 2033 Projected Market Size: USD 1.61 Billion

• CAGR (2025-2033): 4.2%

• Asia Pacific: Largest market in 2024

In addition, the rise of e-commerce platforms has made textile products more accessible globally. There is also increasing use of technical textiles in industries such as automotive, construction, and healthcare. Population growth and higher per capita clothing consumption are accelerating textile production. Seasonal fashion cycles and influencer-led marketing have further escalated demand. Moreover, postpandemic recovery is reviving both consumer and industrial textile usage.

Source: https://www.grandviewresearch.com/industry-analysis/textile-market

Key drivers include a booming apparel industry, technological advancements in textile manufacturing, and the expansion of organized retail. Sustainability is a growing driver as eco-friendly and organic fibers attract environmentally conscious consumers. Industrial uses of textiles-such as geotextiles, medical textiles, and automotive interiors-are growing rapidly. Government policies supporting textile parks and export incentives also play a major role. Increased demand for home decor and furnishing textiles further contributes to the market growth. In addition, demand for anti-bacterial, fire-resistant, and water-repellent fabrics is increasing across sectors, especially in defense and healthcare.

There is a strong trend toward smart textiles, such as fabrics integrated with sensors and conductive fibers for health and fitness monitoring. Bio-based and recycled fibers are gaining momentum, with brands adopting closed-loop systems. Digital textile printing is revolutionizing custom apparel and reducing water waste. Blockchain is being tested for textile traceability and transparency. Fashion brands are launching biodegradable and zero-waste collections. Growth in 3D knitting technology enables faster, on-demand production with reduced material wastage. In addition, collaborations between fashion and tech companies are creating innovative wearable technologies.

INDIAN TEXTILE AND APPAREL INDUSTRY:

Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, with the capital-intensive sophisticated mills sector at the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of fibre/yarns from natural fibres like cotton, jute, silk, and wool, to synthetic/man-made fibres like polyester, viscose, nylon and acrylic.

The decentralised power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. Indias textiles industry has a capacity to produce a wide variety of products suitable for different market segments, both within India and across the world.

According to Crisil Ratings, the organised retail apparel sector is projected to achieve revenue growth of 8-10% in FY25, driven by rising demand from a normal monsoon, easing inflation, and the festive and wedding seasons.

The market for Indian textiles and apparel is projected to grow at a 10% CAGR to reach US$ 350 billion by 2030. Moreover, India is the worlds 3rd largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$100 billion.

The textiles and apparel industry contributes 2.3% to the countrys GDP, 13% to industrial production and 12% to exports. The textile industry in India is predicted to double its contribution to the GDP, rising from 2.3% to approximately 5% by the end of this decade.

Global apparel market is expected to grow at a CAGR of around 8% to reach US$ 2.37 trillion by 2030 and the Global Textile & Apparel trade is expected to grow at a CAGR of 4% to reach US$ 1.2 trillion by 2030.

Indias home textile industry is expected to expand at a CAGR of 8.9% during 2023-32 and reached US$ 23.32 billion in 2032 from US$ 10.78 billion in 2023.

The Prime Minister Mega Integrated Textile Region and Apparel (PM MITRA) Parks Scheme aims to establish 7 world-class mega textile parks with state-of-the-art infrastructure, plug-and-play facilities, and a fully integrated textile value chain with a total investment of US$ 541.82 million (Rs. 4,445 crore) for the years up to 2027-28 was approved by the government. These parks are expected to attract investments worth Rs. 85,370 crore (US$ 10 billion).

INDIAN COTTON TEXTILE INDUSTRY:

India is the largest producer of cotton globally, accounting for 23% of total global cotton production. It is a crop that holds significant importance for the Indian economy and the livelihood of Indian cotton farmers. Cotton grows over 13.06 million hectares in India compared to 33.1 million hectares globally. The Indian cotton industry provides livelihood to about 60 million people in the country.

Indias total production of cotton in the 2024-25 season have been estimated at 302.25 lakh bales of 170 kgs. Total production of cotton in the year 2023-24 (provisional) is 32.5 million bales (bales of 170 kg each). Total production of cotton in the year 2022-23 was 33.6 million bales and in 2021-22, it stood at 31.1 million bales. The total cotton supply till end of the cotton season 2024-25 (i.e. upto 30th September 2025) is estimated at 357.44 lakh bales of 170 kgs. The cotton exports for 2024-25 crop year are estimated to be at 18 lakh bales of 170 kgs. The Central Zone (which comprises states like Gujarat, Maharashtra, and Madhya Pradesh) was the biggest producer of cotton in India in 2022-23, with Gujarat being the highest producer of the Central Zone, contributing 9.49 million bales (bales of 170 kg each). Saurashtra constitutes about 70% of Gujarats cotton production, with farmers in Amreli - the states largest cotton district - playing a key role. Yavatamal, Buldhana, Akola, Amravati, Nagpur, Washim, and Wardha are the districts of Vidarbha which are Maharashtras major cotton-producing areas.

Export Trend

In 2022, India stood as the third-highest exporter of raw cotton globally, accounting for about 11% of the total global exports.

The value of cotton exports reached US$ 6.78 billion in FY24, and Rs. 73,233 crore (US$ 8.48 billion) in FY25 (until December 2024).

As per the Cotton Corporation of India, Indias total cotton exports were 2.8 million bales in 2023-24*, 3.0 million bales in FY23, value to US$ 5.66 billion in FY23 compared to US$ 10.78 billion in 2021-22, and US$ 6.3 billion in 2020-21. It accounted to 1.25% and 2.55% of Indias total exports in 2022-23 and 2021-22, respectively.

The Government of India along with the Export Promotion Council has set a long-term target of US$ 100 billion for textiles industry exports by 2025-26 and growing productivity from the current level of around 450 Kg lint per hectare to at least 800-900 Kg lint per hectare. The focus continues to adopt the latest innovative technologies and global best farming practices to enhance productivity and achieve sustainable quality cotton output. To achieve these goals, the emphasis remains to motivate cotton farmers through awareness meetings, timely advisories and transfer of technology from the lab to the field in the most effective manner by using natural methods and adopting modern scientific farm practices.

Government Initiatives:

1. The government has been implementing various policy initiatives and schemes to encourage cotton spinning millers in the country, including the announcement of key reforms under a Special Package that includes additional incentives under the Amended Technology Upgradation Fund Scheme (ATUFS), relaxation of Section 80JJAA of the Income Tax Act, and the introduction of fixed- term employment for the apparel sector. Under the Market Access Initiative (MAI) Scheme, the government offers rebates on state and central taxes and levies that are integrated into production, as well as aid to exporters. Schemes like SAMARTH (Scheme for Capacity Building in the Textile Sector) aim to address the shortage of skilled workers in the textile sector with a target of training 10 lakh people. The Cott-Ally mobile app was created to help farmers by providing information on minimum support prices (MSP), locating nearby procurement centers, tracking payments, and sharing best farming practices.

2. The Union Budget 2025-26 has announced a five-year Cotton Mission to increase cotton productivity especially extra-long staple varieties. Science & Technology support will be provided to farmers under this Mission. The Mission is in keeping with the 5 F principle and will increase income of the farmers and augment a steady supply of quality cotton. By boosting domestic productivity, this initiative will stabilise raw material availability, reduce import dependence and enhance the global competitiveness of Indias textile sector, where 80% of capacity is driven by MSMEs.

3. The Government of India launched Mega Investment Textiles Parks (MITRA) during the Union Budget for 2021-22 under which seven textile parks will be established over a period of three years. This will enable the textile industry to become globally competitive, boost employment generation and attract large investments. Additionally, the Confederation of Indian Textile Industry (CITI), one of the leading industry chambers of the textile sector in India has been working across 1,700 villages of Rajasthan, Madhya Pradesh, and Maharashtra in association with about 90,000 farmers to improve yield and production of cotton in a sustainable way.

COMPANY OVERVIEW:

Birla Cotsyn was established in 1941. The Sprawling unit is located at Malkapur & Khamgaon (Maharashtra) in the industrial belt of Central India. Birla Cotsyn (India) Limited is having Cotton Ring Spun Yarn, Open End Yarn and Synthetic Blended Yarn manufacturing facility with state of Art machineries. The company has excellent sales network in India and abroad for 100% Grey Cotton Yarn, Grey and Dyed Solid Griddles, Fancy, Knitting and Weaving Yarns in various blends and counts.

Malkapur has facilities of about 42, 000 spindles to manufacture cotton yarn both combed and compact spreading over 100 acres of land at MIDC Malkapur. This setup has also 114 airjetlooms.

CORPORATE INSOLVENCY RESOLUTION PROCESS/ LIQUIDATION

The Honble National Company Law Tribunal (“NCLT”), Mumbai Bench, had admitted a petition filed by M/s. Edelweiss Asset Reconstruction Company Limited in its capacity as Secured Creditors under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) (“Code”) for initiation of Corporate Insolvency Resolution Process (“CIRP”) for Birla Cotsyn (India) Limited (“the Company”) Smt. Sujata Chattopadhyay (IP Registration No. IBBI/IPA-003/IP-N00044/2017-18/10353) was appointed as the Interim Resolution Professional (“IRP”) to carry out the functions under the IBC, 2016. Pursuant to the constitution of Committee of Creditors (“CoC”) deliberations ensued in furtherance of a Resolution Plan, but to no avail. The CoC, in its Fifteenth Meeting dated 16.08.2019, passed a resolution seeking initiation of the Liquidation Process of the Corporate Debtor, with a voting share of 91.24%. Accordingly, an application for initiation of Liquidation Process came to be filed before this Tribunal, which was admitted vide Order dated 24.09.2019. Shri. Anil Goel (i.e. Petitioner in the captioned Company Scheme Petition) was thereafter appointed as the Liquidator of the Corporate Debtor to oversee the same in accordance with the provisions of IBC, 2016 and the relevant Regulations.

Thereafter, pursuant to Section 230, Section 66 and other applicable provisions of the Companies Act, 2013 read with IBC, 2016 and its related regulations, a Composite Scheme of Compromise and Arrangement between (“Approved Scheme”/ “Scheme”) Nikhil Jain, Rohstoffe International Private Limited and Wendt Finance Private Limited (together referred to as “Acquirer”) and the Company and its creditors and shareholders was presented before the Honble NCLT and the same was approved by the Honble NCLT vide its order dated January 09, 2025 (“Order”). The order was uploaded on the Honble NCLT Website dated January 14, 2025.

Pursuant to sanction of the Composite Scheme of Compromise and Arrangement under Section 230 of the Companies Act, 2013 read with the Insolvency and Bankruptcy Code, 2016, the Corporate Debtor shall stand revived on a ‘clean slate basis, whereby all claims, liabilities, demands and proceedings against the Corporate Debtor, not forming part of the sanctioned Scheme, shall stand extinguished and no person shall be entitled to initiate or continue any action in respect thereof. The said protection is in consonance with the doctrine of clean slate as propounded by the Honble Supreme Court in Arun Kumar Jagatramka v. Jindal Steel and Power Ltd. [(2021) 7 SCC 474] and Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657], ensuring that the Acquirers step proceedings against the erstwhile promoters and management shall continue unaffected in terms of Section 32A of the IBC, 2016.”

Pursuant to Clause 5.1 of Part II (Details of the Business Plan for Revival of the Company) of the Scheme, a Monitoring Committee has been constituted comprising of 1 representative of the Acquirer; 1 representative of the Secured Financial Creditors, and the current Liquidator appointed for the Company, as below, which are responsible for supervision and implementation of the Scheme.

ROAD AHEAD:

The company is revived pursuant to Section 230, Section 66 and other applicable provisions of the Companies Act, 2013 read with IBC, 2016 and its related regulations, a Composite Scheme of Compromise and Arrangement between (“Approved Scheme”/ “Scheme”) Nikhil Jain, Rohstoffe International Private Limited and Wendt Finance Private Limited (together referred to as “Acquirer”) and the Company and its creditors and shareholders was presented before the Honble NCLT and the same was approved by the Honble NCLT vide its order dated January 09, 2025 (“Order”). Following this, the reconstituted Board, effective from February 10, 2025, commenced maintenance and repair of the factory machinery, and trial production began in August 2025. The Company is now working towards restarting and stabilizing its operations by January 2026.

HUMAN RESOURCES:

The Company HR function is aligned with the Companys overall growth vision and continuously works on areas such as recruitment and selection policies, disciplinary procedures, reward/recognition policies, learning and development programmes as well as all-round employee development.

The Company provides a safe and rewarding environment that attracts and retains a talented team and where employees are engaged in delivering exceptional results to the customers and investors.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has external teams carrying out various types of audit to strengthen the internal audit and risk management functions. The Internal Financial Control over Financial Reporting System are existing and operative, however based on the observations of the auditors, the Company is further strengthening the Internal Financial Control systems over financial reporting.

CAUTIONARY STATEMENT:

The statements made in this Management Discussion and Analysis regarding the Companys objectives, projections, estimates, and expectations may constitute “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied due to various factors, including but not limited to, changes in economic conditions affecting demand, supply, and pricing in domestic and international markets, alterations in government policies, regulatory requirements, taxation laws, and other incidental or unforeseen factors.

For and on behalf of the board of Directors of Birla Cotsyn (India) Limited