Bombay Dyeing & Manufacturing Company Ltd Management Discussions

During the financial year 2025-26, the Indian economy demonstrated resilient and robust performance, maintaining its position as one of the fastest-growing major economies globally with real GDP growth estimated at around 7.4%, underpinned by strong domestic demand, rising private consumption, and robust investment activity. Broad-based expansion across services, industry, and agriculture, coupled with stable macroeconomic fundamentals, low inflation, and prudent fiscal management, supported this growth trajectory despite a fragile global environment marked by geopolitical and trade uncertainties. According to official estimates from the Government of Indias Economic Survey 2025-26, this growth momentum reflects both sustained economic vitality and structural resilience in the face of external challenge.

The Indian real estate and construction landscape is experiencing a profound structural evolution, marked by a decisive shift toward institutional quality and professional governance. This maturation is driven by increased transparency and a move toward large-scale corporate participation, which has significantly enhanced operational efficiency. reflecta sector that is increasingly Such developments stable and well-positioned to serve as a primary engine of national economic progress. Demand within the premium residential segment has experienced an unprecedented surge, as a growing demography of buyers seek high-quality, integrated living environments. Parallel growth in the commercial and hospitality sectors is providing the essential infrastructure required to support the nations rapid urbanization. Expansive infrastructure projects across major economic centers are further catalyzing this expansion, setting the stage for the market to reach a massive total valuation in the long term. In FY 2025-26, the Indian Polyester Staple Fibre (PSF) industry continued to sustain steady growth, underpinned by robust demand from the textile and non-woven sectors as well as structural expansion in domestic downstream applications; the market remained resilient despite global input price volatility, with solid PSF demand driven by apparel, home textiles and industrial usage, while policy shifts in duties and quality control norms influenced the competitive landscape of the Man Made Fibre (MMF) value chain. The bed & bath retail segment, which forms a core part of the broader home textile market, exhibited strong growth momentum driven by rising urbanization, increasing disposable incomes, and expanding organized and online retail channels, with bed linen leading product demand and consumers increasingly opting for premium and aesthetically differentiated offerings.

The Mumbai Metropolitan Region (MMR) residential real estate market in FY 2025-26 demonstrated continued resilience, with demand momentum sustaining across both mid-income and premium segments. The year witnessed a more balanced interplay between supply and absorption compared to the previous fiscal, as developers cautiously resumed project launches in response to strong sales velocity seen over the past two years.

Residential registrations in MMR remained robust, supported by end-user driven demand, stable interest rates for most of the year, and increasing preference for home ownership over rental accommodation. The premium and luxury housing segments, in particular, continued to outperform, driven by rising disposable incomes, wealth creation in financial markets, and an expanding base of high-net-worth and ultra-high-net-worth individuals.

On the supply side, new project launches saw a measured increase, with developers focusing on financially viable, well-located developments rather than aggressive expansion. Inventory levels across MMR showed signs of gradual normalization, with faster absorption in established micro-markets such as South and Central Mumbai, while peripheral locations continued to see relatively higher inventory overhang. Pricing trends during the year reflected steady appreciation across key micro-markets, particularly in the premium segment. Developers maintained pricing discipline, supported by strong demand fundamentals and limited availability of land parcels in core locations. Infrastructure development continued to act as a key growth catalyst. Progress on major infrastructure initiatives such as metro rail network expansion, coastal road connectivity, trans-harbour link operationalization, and Navi Mumbai International Airport development has enhanced accessibility across the region. These developments are expected to unlock new growth corridors and further strengthen real estate demand in both central and suburban markets.

The Indian real estate sector continues to be a critical driver of economic growth, with strong linkages to multiple ancillary industries and significant employment generation household incomes, and evolving lifestyle preferences continue to support long-term housing demand.

Within MMR, opportunities remain strong in the premium and luxury segments, where demand continues to be driven by aspirational buyers, wealth creation, and limited supply in prime locations. Additionally, redevelopment and joint development opportunities in land-constrained urban pockets present a significant established developers with strong execution capabilities. Government initiatives, including continued focus on infrastructure development, digitization of land records, and policy support for housing, are expected to further improve transparency and investor confidence in the sector.

However, the sector continues to face certain structural challenges. Construction costs remain elevated due to volatility in key input materials such as steel and cement, putting pressure on project margins. Regulatory approvals and compliance requirements continue to impact project timelines, while liquidity conditions in certain segments of the developer ecosystem remain tight.

Affordability concerns persist in the mid-income segment due to sustained price appreciation, potentially impacting demand elasticity. Additionally, increasing competition in the premium segment may lead to higher customer acquisition costs and pressure on sales velocity if not supported by differentiated offerings.

The outlook for the MMR real estate market remains positive, with expectations of sustained demand in the coming years driven by strong economic fundamentals, continued infrastructure development, and favourable demographics.

The premium and luxury housing segments are expected to continue leading market growth, supported by increasing affluence and evolving consumer preferences towards larger, amenity-rich homes. At the same time, redevelopment-led supply in core urban locations is likely to play a critical role in addressing demand-supply dynamics.

For the Companys Real Estate Division, the strong brand positioning, established track record in executing large-scale developments and presence in prime micro-markets provide a solid foundation for future growth. The successful execution and sales performance of earlier phases within the ICC development have reinforced customer confidence and market credibility.

The upcoming phases of established ecosystem advantages, including infrastructure readiness, location attractiveness, and brand recall. The Companys continued focus on calibrated launches, disciplined pricing strategy and efficient capital allocation is expected to support steady cash flow generation and profitability.

Despite the positive outlook, certain risks remain inherent to the sector. Elevated input costs continue to pose a challenge to maintaining margins, particularly in fixed-price commodity prices could impact project viability.

Geopolitical tensions in the Middle East have emerged as an additional area of concern. Any escalation in the ongoing conflict could disrupt global supply chains, particularly for key construction inputs such as crude oil derivatives, steel, and logistics costs. A sustained increase in crude oil prices may lead to higher transportation and material costs, thereby exerting further pressure on construction budgets and overall project economics. Additionally, volatility in global financial markets arising from geopolitical uncertainty could impact investor sentiment and liquidity flows into real estate.

Regulatory risks, including delays in approvals and evolving compliance requirements, may affect project timelines and execution efficiency. Additionally, dependence on external financing and liquidity conditions could influence project rollout and completion schedules. From a demand perspective, sustained price increases may impact affordability, particularly in the mid-income segment, potentially leading to demand moderation. Changing consumer preferences, including demand for larger living spaces and integrated developments, require continuous adaptation in product design and offerings. Macroeconomic factors such as interest rate movements, inflationary pressures, and global economic uncertainties may also influence buyer sentiment and investment decisions.

The global home textile industry continues to witness steady growth, driven by rising urbanization, increasing disposable incomes and evolving consumer preferences toward aesthetically designed and functional home products. Demand for premium bedding, bath linen, decor textiles and lifestyle-oriented home products continue to strengthen as consumers increasingly invest in improving their living spaces. India remains a key contributor to the global home textile sector, supported by a strong manufacturing base, availability of skilled labour and an established export ecosystem. The domestic market has also gained momentum, driven by rapid urban housing expansion, a growing middle class and increasing consumer preference for branded home textile products. These factors continue to drive demand across metropolitan and emerging tier-2 markets alike.

The Indian retail landscape is undergoing rapid transformation with the increasing integration of omnichannel commerce, where consumers combineareexpectedto benefit from digital discovery with in-store shopping experiences. Organized retail, e-commerce platforms, and marketplace channels are gaining greater share in home textile sales, while digital platforms are enabling brands to reach a wider consumer base. Consumers are also becoming more conscious of sustainability, product quality, and durability, creating opportunities for brands offering premium cotton fabrics, eco-friendly dyes and responsibly manufactured products. Within this evolving environment, the Home & You business of Bombay Dyeing continues to leverage its strong heritage brand, product innovation capabilities and multi-channel distribution network to strengthen its presence in the organized home textile market. contracts. Any further escalation in

The home textile and home lifestyle segment presents several significant growth opportunities for increasing consumer inclination towards premium bedding, bath linen, and designer home products, which is expanding the market for branded home textile companies. The gradual shift from unorganized to organized retail provides additional opportunities for established brands to expand their market share. Furthermore, the growth in e-commerce platforms, marketplaces and direct-to-consumer channels enables companies to reach a wider consumer base beyond traditional retail networks. Increasing environmental awareness is also encouraging demand for sustainable fabrics and eco-friendly dyes, while rising consumer spending on home decor continues to support demand across all core categories.

While the business shows strong potential, there are certain market risks that require proactive mitigation. There is intense competition from domestic brands, private labels, and international home decor retailers. Price competition from unorganized market participants offering lower-priced alternatives remains a constant pressure on the industry. Additionally, fluctuations in cotton prices and raw material costs continue to impact margins. Rapidly evolving consumer preferences require continuous product innovation, and increasing logistics and distribution costs can affect overall retail profitability. The ability to adapt to these shifts while maintaining cost efficiencies remains critical to navigating the competitive landscape.

The outlook for the retail business remains positive, supported by the growing demand for branded home textile products in Indias expanding consumer market. The Company intends to further strengthen its product portfolio across bedding, bath linen, comforters, blankets and lifestyle home textile categories, while continuing to emphasize superior fabric quality, contemporary designs and value-driven offerings. Strategic focus will remain on expanding the omnichannel retail presence by integrating physical retail with digital platforms and strengthening e-commerce partnerships and direct-to-consumer channels.

In addition to expanding its reach, the Company is committed to enhancing product innovation and design capabilities to cater to evolving consumer preferences. By leveraging the strong brand equity of Bombay Dyeing, the division aims to strengthen customer trust and loyalty while simultaneously improving operational efficiencies across sourcing, manufacturing and supply chain operations. With the continued growth of organized retail channels, the retail segment is well-positioned to benefit from long-term structural growth in the domestic home lifestyle market.

Despite favorable market dynamics, the Home & You business continues to face certain risks that require continuous monitoring and mitigation. The global business environment remains subject to macroeconomic and geopolitical uncertainties. Tariff measures imposed across certain international markets have affected export competitiveness for several textile manufacturers. As a result, surplus inventory originally intended for export markets may be redirected to the domestic market at discounted prices, potentially leading to product dumping and heightened price competition in the Indian market.

Geopolitical tensions, including conflicts in the Gulf region and other global hotspots, may disrupt global trade flows, logistics networks, and supply chains. Such developments may also influence crude oil prices and transportation costs, indirectly impacting textile production and distribution expenses. The industry is also exposed to volatility in key raw material prices, particularly cotton and other inputs, which may lead to pricing uncertainty and margin pressures. Furthermore, fluctuations in consumer demand arising from global economic conditions and inflationary pressures may affect sales growth across discretionary retail categories. The Company continues to closely monitor these developments and adopts prudent sourcing, pricing and inventory management strategies to mitigate potential impacts.

The Company continues to operate as one of the five producers Polyester Staple Fibre (PSF) in the country. The industry landscape remains divided between a single market leader, which is fully vertically integrated, and the remaining producers, including your Company, which operate as stand-alone polyester manufacturers. Over the last nine years, significant new capacity resulted in a substantial surplus within the domestic market, leading to intensified competition and pricing pressures. During the period under review, the overall polyester industrys capacity utilisation remained at below 80%. In contrast, your Company achieved a comparatively higher utilisation rate of approximately 81.1%. The slight decline in utilisation compared to the previous year was primarily attributable to a scheduled maintenance shutdown conducted in November and December 2025, a critical operational activity typically undertaken every 6-7 years. Furthermore, global geopolitical events combined with inflationary pressures and recessionary trends in Western countries posed significant challenges, impacting overall industry margins.

The fiscal year was characterized by extreme volatility in crude oil prices, which directly influenced the cost of essential petrochemical raw materials such as PTA and MEG. Domestic availability of these raw materials remained tight, necessitating a continued reliance on imports to sustain optimum operating rates. Theprevailing excess capacity in the domestic market has been the primary driver of lower margins across the sector. Despite these challenges, your Company maintains a competitive advantage through its diverse range of high-quality fibres, which enjoy wider market acceptance and versatile usage across various applications.

The textile industry experienced significant

2025-2026, largely driven by tariff issues in the USA and geopolitical instability, specifically the West Asia conflict involving Iran and the USA, which hindered global economic performance. Domestically, the industry continues to grapple with an inverted GST structure, where Man-Made Fibres (MMF) are taxed at 18%, a rate significantly higher than that of cotton, thereby inflating production costs and discouraging fresh capital investment. Additionally, Indian PSF prices remain substantially higher than those in China. The Companys ongoing energy-saving initiatives are expected to enhance the operational strength and cost-efficiency of the PSF Divisioncomingyears . the

Given the persistent volatility in crude oil and petrochemical prices stemming from the ongoing West Asia war, the Company remains committed to a cautious and strategic approach. However, the medium-term outlook appears promising due to the anticipated implementation of Free Trade Agreements (FTA) with the United Kingdom and the European Union later this year. These agreements are expected to provide a significant boost to the broader industries, opening new avenues for growth and export potential.

The Companys profitability remains sensitive to several external factors, most notably the cost of raw materials and energy, both of which are heavily dependent on global crude oil prices. As major input costs are denominated in US Dollars, fluctuations in the Indian Rupee/ US$ exchange rate present a continuous risk to margins. Additionally, the demand for PSF is closely linked to the supply and pricing of the domestic and global cotton crop. The surplus capacity within the domestic market has led to aggressive price undercutting, placing further pressure on margins. Finally, any escalation in existing global conflicts or delays in their resolution remains a primary area of concern for the business environment moving forward. additions across the sector have

Segment-wise performance together with a discussion on operational and financial performance has been covered in the Directors Report which should be treated as forming part of this Management Discussion and Analysis Report.

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

M/s. PKF Sridhar Santhanam LLP, Chartered Accountants, were the Internal Auditors of the Company for FY 2025-26. The reports and findings of the Internal Auditors and the internal control system are periodically reviewed by the Audit Committee. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the internal audit report, process owners undertake corrective action in the respective areas and thereby strengthen the controls. Significant audit observations and are presented to the Audit Committee of the Board.

At Bombay Dyeing, employees are its prime assets and a vital key to its success. The Company is committed to creating a professional culture to nurture and enable people to grow in their careers alongside Companys success. The Company constantly strives to strengthen its manpower in alignment with the business needs and continue to engage them through various initiatives in the realm of learning & development opportunities, reward & recognition, employee engagement activities and career growth.

The Company has identified the following ratios as key financial ratios:

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulation, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.