Borana Weaves Ltd Management Discussions

DISCLAIMER

Statements in the Directors Report & 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 difference to the Companys operations include raw material availability and its prices, cyclical demand and pricing in the Companys principal markets, changes in government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors.

The global textile market size is valued at USD 1,210 billion in 2026 and is forecasted to reach at USD 1,610 billion by 2033, at a CAGR of 4.2% from 2026 to 2033. Asia Pacific dominated the global market, accounting for the largest revenue share of 49.9% in 2025. The demand for textiles is rising due to fast fashion, growing urbanization, and increasing disposable incomes in emerging economies.

The global weaving industry is a vital segment of the textile value chain, responsible for converting yarn into woven fabrics used in apparel, home textiles, technical textiles, automotive interiors, and industrial applications. It bridges upstream fiber spinning and downstream garment manufacturing. The industry is characterized by a diverse production base, varying levels of technological advancement, and increasing emphasis on sustainability and innovation.

The market is heavily concentrated in the Asia-Pacific region, characterized by a mix of high-tech automated mills and decentralized, small-scale local operations.

India is one of the major textile production bases in the world in weaving sector. The total fabric production from water jet looms in India is projected to grow from 12.1 billion meters in 2025 to over 18.5 billion meters by 2031. The weaving and overall textile industry in India has a bright outlook. The market is Driven by massive domestic demand, government support like PM MITRA Parks, China Plus One, and a shift in global buyers looking for stable supply chains, India accounts for major global loom capacity.

Growing population, urbanization, and increasing disposable incomes are driving demand for apparel, home textiles, and technical textiles, creating significant growth opportunities for the weaving industry.

Government initiatives such as the PM MITRA Parks Scheme, Production Linked Incentive (PLI) Scheme for Textiles, China Plus One and export promotion measures are encouraging modernization, investment, and capacity expansion.

India is strengthening its position as a reliable sourcing destination as global brands diversify their supply chains beyond China. Free Trade Agreements (FTAs) with several countries are expected to enhance market access and boost exports.

Investment in Water Jet Machines, automation of manufacturing activities and use advanced technologies is improving productivity, fabric quality and resulting in cost efficiency.

Consumers and global brands are increasingly demanding eco-friendly products made from organic cotton, recycled fibers, and sustainably produced fabrics, creating opportunities for manufacturers investing in green production.

The rapid expansion of online retail platforms and changing fashion trends are increasing demand for diversified woven fabrics and shorter production cycles.

Manufacturers can improve profitability by producing high-value fabrics, designer textiles, functional fabrics, and technical textiles, rather than relying solely on conventional woven fabrics.

Frequent fluctuations in the prices of cotton, polyester, and other fibers significantly affect production costs and profit margins.

Competition from low-cost textile-producing countries such as China, Bangladesh, Vietnam, Pakistan, and Turkey places pressure on pricing and market share.

Increasing electricity tariffs, fuel prices, freight charges, and transportation costs reduce operational efficiency and profitability.

Global geopolitical tensions, pandemics, shipping delays, and trade restrictions can interrupt the supply of raw materials and delay product deliveries.

Compliance with stricter environmental standards related to water usage, wastewater treatment, carbon emissions, and chemical management requires substantial investments.

The weaving industry faces challenges in attracting and retaining skilled workers, while rising labor costs affect competitiveness.

Changes in exchange rates impact export earnings and increase the cost of imported machinery and raw materials.

Fast-changing fashion trends and increasing demand for customized products require manufacturers to remain flexible and continuously innovate.

The Indian weaving industry consists largely of small and medium enterprises (SMEs), which often face challenges in accessing advanced technology, finance, and export markets.

Companies that do not modernize their machinery and production processes risk lower productivity, inferior product quality, and reduced competitiveness in global markets.

The revenue performance is as under:

(Amount in Lakhs)

Indias textile industry, a cornerstone of the nations economic fabric and it is experiencing remarkable growth. Indias textile industry is projected to reach $350 billion by 2030, driven by a 10% compound annual growth rate. Export figures paint an equally promising picture. In FY26, the total exports of textiles and apparel (including handicrafts) stood at US$ 35.52 billion, with Ready-Made Garments (US$ 15.77 billion), Cotton Textiles (US$ 10.25 billion), and Man-Made Textiles (US$ 5.23 billion) as the key contributors.

The industrys robust performance is particularly noteworthy in its role as an employment generator. With projections suggesting the creation of 3.5 crore jobs by 2030, the textile sector continues to be one of the largest employers in Indias manufacturing landscape.

The governments proactive stance has played a crucial role in this success story. The Production Linked Incentive (PLI) scheme has emerged as a game-changer, attracting substantial foreign direct investment and enhancing production capabilities. The PM MITRA scheme, focusing on integrated textile parks, is addressing infrastructure gaps and streamlining operations.

The Union Budget 2026-27 places the textile sector at the heart of Indias growth, underlining its strategic importance to the economy. By prioritising this labour-intensive industry, the Budget acknowledges textiles as a key driver of job creation, export growth, rural livelihoods and sustainable manufacturing.

The industrys growth is also being driven by evolving global market dynamics. Western markets increasing demand for sustainable and ethically produced textiles has created new opportunities for Indian manufacturers.

Growth opportunities: Interestingly, the current political crisis in Bangladesh has opened new avenues for Indian textile manufacturers. Global buyers, seeking stable supply chains, are increasingly turning to India, presenting an opportunity to capture a larger market share.

Sustainability and Innovation: Manufacturers are shifting toward eco-friendly practices to meet both domestic demands and stringent international export standards. The technological landscape is evolving too, with a growing focus on technical textiles driven by demand from automotive and healthcare sectors. This

diversification is creating new revenue streams and fostering innovation within the industry.

Regional Dominance: Gujarat remains the undisputed powerhouse of Indian textile and weaving sector resulting in major production, housing a vast majority of the countrys manufacturing capacity.

Key Risks and Challenges: The path forward isnt without challenges. The industrys fragmented nature, with numerous small and medium enterprises, poses scalability challenges. Rising freight rates and complex logistics continue to pressure profit margins.

Borana Weaves Limited is well-positioned to capitalize on the growing opportunities in the textile sector, supported by its modern manufacturing infrastructure, established production capabilities and focus on operational efficiency. The Company intends to strengthen its core business of manufacturing greige fabric, enhance capacity utilisation, improve cost efficiencies and explore opportunities in value-added and manmade fibre-based textile products. With a continued focus on quality, sustainability, technology and efficient resource utilisation, the Company aims to strengthen its competitive position and achieve sustainable longterm growth.

The Companys operations are exposed to various risks including fluctuations in raw material prices, changing consumer preferences, competitive pressures, foreign exchange volatility, regulatory changes, and macroeconomic uncertainties. The management continuously evaluates these risks and implements suitable mitigation strategies through prudent procurement practices, cost optimization initiatives, diversified customer relationships, and efficient inventory management.

The list of the potential risks the industry is exposed to domestically/internationally is given below:

a. Raw Material Price Risk: The weaving manufacturing industry is inherently dependent on key raw materials such as yarn, dyes, chemicals and other inputs. Volatility in commodity prices arising from market imbalances, climatic conditions, or geopolitical developments may impact production costs and operating margins.

b. Global Economic and Market Risk: Macroeconomic uncertainties, inflationary pressures, geopolitical conflicts, and fluctuations in consumer spending patterns across major economies may influence demand for textile and apparel products, thereby affecting industry growth prospects.

c. Foreign Exchange Risk: Fluctuations in foreign currency exchange rates may impact export realizations, import costs, and overall competitiveness in global markets.

d. Competitive Intensity Risk: The Indian textile sector competes with both domestic and international manufacturers. Increased competition from low-cost manufacturing countries and changing global sourcing patterns may exert pressure on pricing, market share, and profitability.

e. Regulatory and Sustainability Compliance Risk: The increasing focus on environmental stewardship, social responsibility, and governance standards has led to stricter regulatory requirements globally. Compliance with evolving environmental, labour, and sustainability regulations may require continuous investments in technology, systems, and processes.

f. Supply Chain and Logistics Risk: The industry relies on efficient procurement and distribution networks. Disruptions arising from geopolitical tensions, transportation constraints, raw material shortages, or global trade disturbances may impact operational continuity and delivery schedules.

g. Energy and Utility Cost Risk: Manufacturing operations require significant consumption of power, fuel, water, and other utilities. Any substantial increase in utility costs may affect

operational efficiency and cost competitiveness.

h. Financial Risk: It is the uncertainty associated with how firms finance its business like by issue of shares, debentures, taking loans from government / financial institutions etc. Such financial transactions also include risk of default in payment of interest, dividend or repayment of capital due to various internal or external factors like increase in credit days of debtors, inflation, interest rate fluctuations, change in government policies etc. It may lead to loss of liquidity, falling assets value, significant change in cash inflow and outflow etc.

i. Liquidity Risk: Liquidity Risk reflects the possibility/position that a party may have insufficient funds to settle an obligation for full value when due because of insufficient capital or difficulty in selling as asset or an investment to generate capital, but will have funds to cover settlement obligations on some unspecified date thereafter. In non-bankruptcy situations, the allowable methods to cover short positions are generally driven by local market conventions. As a result, liquidity could be adversely affected by prohibitions on transactions such as Repos, Reverse Repos, Securities Lending and other allied components.

j. Global Risk: Global risk refers to an uncertain event or condition that can cause significant negative impact to several countries or industries for a long period of time. India is still emerging in the market of textile industries. There is a tremendous competition around the world. Indian manufacturers will have to face a tough fight to sustain in the competition. Due to poor infrastructure facilities, the production and transaction cost remain high in India. Also, Indias logistic disadvantage due to its geographical location can give it a major thumb-down in global trade. As a result, high cost of shipments and longer lead time coupled with lack of infrastructure facility may prove to be a major hindrance. To overcome this problem, India needs to increase the size of its industrial infrastructure to capture the efficiencies of the economies of scale and it must cluster the textile production.

k. Political Risk: Political risk may be defined as the probability that a political event will impact adversely on a firms profit. It represents the financial risk that a countrys government will suddenly change its policies. A new law or a change in an existing could have a significant impact on an investment. Whatever laws the government passes today may be extinct tomorrow. This risk covers restriction on remittances in the buyers country or any government action which may block or delay payment to the exporter, war, revolution or civil commotion in the buyers country, cancellation or imposition of new export / import licensing restrictions in the buyers country, any other kind of loss occurring either in India or outside India which is not within the control of the exporter or the buyer.

l. Technology and Innovation Risk: Rapid advancements in manufacturing technologies, automation, and digitalization require continuous modernization and innovation. Failure to adopt emerging technologies may affect productivity, product quality, and competitive positioning.

The Company has established adequate internal control systems commensurate with the size and nature of its business to ensure efficient operations, safeguarding of assets, accuracy of financial reporting, and compliance with applicable laws and regulations. These controls are regularly reviewed through internal audits to ensure their effectiveness and continuous improvement. The management believes that the internal control framework is adequate and operating effectively to support the Companys business objectives and governance standards.

During the year 2025-26, the Company recorded total revenue of Rs. 38,859.31 Lakhs against Rs. 29,031.04 Lakhs in the year 2024-25, representing an increase of around 33.85% during the year the Net Profit after

tax of the Company for the year 2025-26 stood at Rs. 6,461.20 Lakhs as compared to Rs. 4,020.23 Lakhs in the year 2024-25 which has increased by around 60.71%.

To conserve resources for the Companys future growth plans, no dividend is being recommended by the Directors for the year ended March 31, 2026.

At Borana Weaves Limited, employees are recognized as the cornerstone of the Companys success and sustainable growth. The Company remains committed to fostering a positive, inclusive, and performance- driven work environment that encourages continuous learning, innovation, and professional development. During the year under review, focused efforts were made towards skill enhancement, employee engagement, leadership development, and workplace safety through various training and development initiatives. The Company continues to promote a culture of collaboration, accountability, and operational excellence while ensuring employee well-being and welfare. Industrial relations remained cordial and harmonious throughout the year, reflecting the Companys commitment to maintaining a motivated and empowered workforce aligned with its long-term business objectives.

Interest Coverage Ratio: The variance is due decrease in debt.

Current Ratio: The variance is due to substantial rise in Current assets.

Debt-Equity Ratio: The variance is due to increase in Shareholders Equity due to IPO Proceeds.

There is a variance of 49.79 % due to increase in capital employed due to IPO Proceeds and increase in Net profit.

Sustainability has been deeply embedded into the Companys business and has become an integral part of its decision-making process while considering social, economic and environmental dimensions. During the year 2025-26, a Sustainable Development Strategy was developed with a focus conversation of energy and efficient use of technology.

The Company places the highest priority on the health, safety, and well-being of its employees. Adequate safety measures, including fire protection systems, first-aid facilities, proper ventilation, and work place safety infrastructure, are maintained across its operations. Regular safety awareness and training programs are conducted to promote a safe working environment and ensure compliance with applicable health and safety standards. These initiatives contribute to employee well-being, operational efficiency, and sustainable business growth.

The Company is equipped with modern infrastructure facilities which assist in smooth production. The Companys manufacturing unit is outfitted with advanced machines and equipment and a trained staff, who have years of experience behind them. To sell products to the clients, the Company has facilitated a smooth transportation mechanism through a strong base of transporters and traders.

The above Management Discussion and Analysis contain certain forward-looking statements within the meaning of applicable security laws and regulations. These pertain to the Companys future business prospects and business profitability, which are subject to several risks and uncertainties and the actual results could materially differ from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties, regarding a fluctuation in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulation etc. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable. The Company does not undertake to make any announcement in case any of these forward-looking statements become materially incorrect in future or update any forward-looking statements made from time to time on behalf of the Company.