Cantabil Retail India Ltd Management Discussions

<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS </dhhead>

ECONOMIC OVERVIEW

Indian Economic Overview

The macroeconomic environment in 2024-25 remained complex, shaped by evolving geopolitical developments across economies. However, in India, the economy remains fundamentally resilient. The Indian economy continues to stand out among large economies. Indias economy remained stable and resilient in FY2025, recording a GDP growth at 6.5%, closely aligning with the countrys decadal average. This growth was driven by strong private consumption, improved business investment and a recovery in rural demand. Supportive government policies, improved credit availability and capital inflows also contributed to strengthening Indias economic activity. The uptick in domestic demand, particularly in discretionary spending and employment levels, contributed significantly to broad-based economic expansion.

Retail inflation in India, measured by the Consumer Price Index CPI), eased to 4.6% in FY 2025. Reflecting a positive shift in the countrys price stability. In March 2025, the year-on-year inflation rate declined further to 3.34%, indicating continued relief for consumers. The encouraging drop in overall inflation is the result of effective monetary policy by the Reserve Bank of India and timely government measures, including better supply management and targeted subsidies, which helped keep prices under control and supported household budgets.

The Reserve Bank of India has projected real GDP growth at 6.5% for 2025 26, maintaining the same rate as estimated for 2024 25. Structural drivers a young population, urbanisation, and digital proliferation are creating a dynamic consumption base. The Indian consuming class is not only expanding, but their aspirations are increasingly aligned with global trends, particularly in fashion, lifestyle, and food categories.

Indian Apparel Industry

The Indian Apparel Industry is a key sector in the countrys economy and an important segment of the Indian textile and clothing value chain. It is one of the largest contributors to employment, industrial production, and export earnings. Indias rich textile heritage, combined with a rapidly growing consumer base and increasing fashion consciousness, positions the country as both a production powerhouse and a lucrative market.

India is the worlds second-largest producer of textiles and garments and the sixth-largest exporter globally, encompassing a wide range of products including apparel, home textiles, and technical textiles. The country holds a 4.6% share of global trade in textiles and apparel, with the sector contributing 2.3% to GDP, 13% to industrial production, and 12% to national exports. In FY24, Indias textiles and apparel exports stood at USD 34.43 billion, with an ambitious target of USD 100 billion by FY30. Government initiatives like the Production Linked Incentive (PLI) scheme, valued at Rs. 10,683 crore (USD 1.44 billion), aim to boost production in man-made fibre (MMF) apparel, fabrics, and key technical textile segments. India already ranks among the top five global exporters in several textile categories and is projected to reach USD 65 billion in exports by FY26. Domestically, the market is expected to expand at a CAGR of 10%, reaching USD 350 billion by 2030, supported by rising income, fashion consciousness, and urbanization. The global outlook is equally promising, with the global apparel market projected to grow at a CAGR of 8% to USD 2.37 trillion, and global textile and apparel trade expected to reach USD 1.2 trillion by 2030. These trends underscore Indias strong potential to become a dominant global hub for textile and apparel production, backed by government support, a skilled workforce, and expanding export capabilities. Overall, Indias apparel sector stands at a promising juncture, with strong foundations and a clear path for scalable and inclusive growth.

According to CRISIL Ratings, Indias organized retail apparel sector is expected to post a revenue growth of 8 10% in FY25, fuelled by factors such as a normal monsoon, easing inflationary pressures, and robust demand during the festive and wedding seasons. A key growth driver is the rising consumer shift towards affordable, trend-driven fashion that mirrors high-end designs. On a broader scale, Indias textile industry is anticipated to double its contribution to GDP from the current 2.3% to around 5% by 2030 underscoring its growing economic significance. The

Indian textile and apparel market is projected to reach a size of USD 350 billion by 2030, supported by strong domestic consumption, rising exports, and targeted government interventions such as the PLI scheme and textile parks under PM-MITRA. This paints an optimistic outlook for Indias position in the global textile value chain, with the country poised to become a major hub for both value and volume in apparel and textile manufacturing.

Market Size and Growth:

The Indian apparel industry is experiencing robust growth, driven by rising disposable incomes, rapid urbanization, increasing fashion consciousness, and a young, aspirational population. With a consumer base spanning mass-market to luxury segments, the sector benefits from a favourable demographic dividend and a rapidly expanding middle class making it a compelling long-term growth story.

India is now the fourth-largest fashion market globally, underpinned by one of the worlds largest retail ecosystems.

Private labels and retailer-owned brands are emerging as strong value creators, offering competitive pricing to consumers while delivering higher margins and brand equity to retailers. These in-house brands are evolving into scalable, self-sustaining business models.

Simultaneously, the industry is shifting toward experience-led retail. Investments in immersive store design, curated product displays, ambient lighting, and digital engagement are becoming key differentiators in building brand loyalty and driving footfall.

Export Potential:

India ranks among the worlds leading apparel exporters, recognized for its diverse product offerings, skilled workforce, and cost-effective manufacturing. The textile and apparel sector remains a vital source of foreign exchange earnings, contributing significantly to Indias overall export portfolio. The industrys strong export orientation is further enhanced by preferential trade agreements, duty-free access to key global markets, and a suite of government-led incentives and policy support. With an established presence in the U.S., EU, Middle East, and emerging markets, India is strategically positioned to capture a larger share of the global textile and apparel trade, which is projected to reach USD 1.2 trillion by 2030.

Source https://www.ibef.org

ABOUT CANTABIL RETAIL INDIA LIMITED

Cantabil Retail India Limited: A Leading Integrated Apparel

Brand

Established in 1989, Cantabil Retail India Limited has grown into a prominent player in the Indian apparel industry, specializing in the design, manufacturing, branding, and retailing of a wide range of apparel and accessories. The company strategically entered the garment manufacturing and retailing space in 2000, marking its foray with the launch of its first exclusive Cantabil store in New Delhi.

Manufacturing Excellence & Capacity

Cantabil boasts a 200,000 sq. ft. state-of-the-art manufacturing facility located in Bahadurgarh, Haryana, equipped with cutting-edge machinery to ensure high-quality production standards. This facility has an annual production capacity of 1.8 million garments, covering a diverse product portfolio including casual trousers, formal trousers, suits, jackets, and shirts. To complement this, the Company operates with dedicated production units and strategically located warehouses, which collectively ensure efficient inventory management, seamless supply chain operations, and timely delivery across its retail network.

Extensive Retail Network

As of March 31, 2025, Cantabils retail footprint includes 599 Exclusive Brand Outlets (EBOs). These stores operate under a hybrid model comprising company-owned, leased, and franchisee-operated outlets, allowing the company to optimize capital deployment while accelerating market penetration. This extensive retail presence positions Cantabil strongly to tap into the growing demand for branded apparel across urban and semi-urban markets.

Customer-Centric Approach

Cantabils brand philosophy centres on delivering high-quality, fashionable apparel at accessible price points, catering to a broad consumer demographic ranging from young professionals to the fashion-conscious middle class. The company emphasizes continuous innovation in design and customer experience, adapting swiftly to emerging trends and evolving consumer preferences. This customer-focused strategy has helped Cantabil build strong brand loyalty and a robust repeat customer base.

Growth and Scalability

With a vertically integrated model spanning design, production, and retail, Cantabil is well-positioned for scalable growth. The companys ongoing investments in manufacturing capacity expansion, supply chain efficiency, and retail network enhancement underpin its ambition to increase market share and improve margins. Additionally, the hybrid retail model offers flexibility and mitigates risks, facilitating faster expansion with controlled capital expenditure.

Financial Overview

The performance of the Company for the financial year ended March 31 , 2025, is as follows:

? Revenue from Operations for FY25 grew by 17% to 721.1 crores as compared to 615.6 crores in FY24. Company reported highest ever yearly revenue during FY25. This growth was primarily driven by the addition of new stores and a 15.9% increase in volume sales, reflecting strong market demand and effective expansion strategies.

? EBIDTA for FY25 grew by 26% to 205.0 crores as compared to 162.7 crores in FY24. EBIDTA margin for FY25 stood at 28.4% as compared to 26.4% in FY24.

? PAT for FY25 grew by 20% to 74.9 crores as compared to 62.2 crores in FY24. PAT margin for FY25 stood at 10.4% as compared to 10.1% in FY24. Company reported highest ever yearly PAT during FY25.

? EPS for FY 2025 stood at 8.95 as compared to 7.6 in FY2024.

? ROE for FY 2025 stood at 20.8% while ROCE stood at 36.5%.

Resource and Liquidity

As of March 31, 2025, the companys net worth stood at 393.1 crore, with zero debt, highlighting a strong and debt-free financial position.

The cash and Cash equivalent at the end of March 2025 were at Rs.27.9 crore.

As a part of planned strategy, over the year the company has seen steady growth in the number of stores and consequently our retail business area.

Financial Year	No. of Stores
FY 2024-25	599
FY 2023-24	533
FY2022-23	447
FY2021-22	378
FY2020-21	320

Category wise business performance

The company operates across Four key segments: Mens Wear, Womens Wear, Kids Wear and Accessories. Its diverse product portfolio includes complete range of Formal and Casual wear in its across Garment categories and a range of accessories catering to men.

Revenue share from these categories is as follows

Categories	% of Revenue
Mens Wear	81%
Womens Wear	11%
Kids Wear	3%
Accessories	5%

Risks and concerns

Like any business, the Company faces a variety of internal and external risks in its daily operations and pursuit of long-term goals. To effectively manage these risks, it has established comprehensive policies and conducts dedicated risk workshops across all business verticals and key support functions. During these sessions, risks are systematically identified, assessed, and analysed, with appropriate actions taken to either accept or mitigate them within the organizations defined risk appetite. Additionally, regular reviews of risk registers are conducted to maintain continuous oversight and proactive risk management.

The following are the primary Risks and Concerns faced by the Company:

Credit Risk:

The Company maintains a low exposure to credit risk, supported by strict policies governing retail sales where payments are collected in cash or via credit cards. In its investment strategy, the Company follows prudent criteria aimed at minimizing credit risk from investment products and counterparty risk from financial institutions. Assessments of counterparties include evaluations of their solvency, liquidity, asset quality, and management discipline, along with their ability to perform under stressed market conditions.

Interest Rate Risk:

To mitigate interest rate risk, the Company actively manages its debt-to-equity ratio by balancing external borrowings with internal cash accruals. Prudent working capital management further helps in minimizing interest expenses. Additionally, the Company is committed to reducing its overall debt exposure to further lower financial risk.

Competition Risk:

Operating in a highly competitive market with numerous players, the Company has strategically differentiated itself through superior product quality, innovative design, and consistent customer focus. Ongoing investments in technology and talent development reinforce its competitive advantage, while a loyal and stable client base provides additional resilience. The Company mitigates competitive pressures through disciplined management, customer-centric offerings, competitive pricing, aggressive marketing, and sound financial practices.

Price Risk:

Fluctuations in raw material prices, energy costs, and other input expenses can affect the Companys profitability and cost efficiency. To manage these risks, the Company continuously monitors market trends and supply conditions related to raw materials and power availability, enabling proactive cost management and operational resilience.

Liability Risk:

To mitigate liability risks from equipment damage, employee injuries, or third-party claims, the Company relies on comprehensive contractual safeguards and robust insurance coverage.

Opportunities

Indias vast domestic market, with a population touching 1.5 billion, offers tremendous growth potential in textiles and apparel consumption. Rising demand for nonwoven textiles is driving increased imports of advanced machinery and technology, facilitated by preferential tariffs and liberalized foreign direct investment (FDI) policies.

Growing fashion consciousness and a surge in demand for branded, high-quality clothing reflect evolving consumer preferences, creating abundant opportunities for quality brands to capture market share.

Key growth drivers include:

· Government initiatives such as the Scheme for Integrated Textile Parks (SITP) and the Technology Upgradation Fund Scheme (TUFS), which incentivize private investments and skill development.

· Liberal FDI policy allowing 100% foreign ownership in textiles, alongside free trade agreements with ASEAN and ongoing negotiations with the European Union, boosting export potential.

· Competitive advantages rooted in abundant raw materials like cotton, wool, silk, and jute, a skilled labour force, and cost-efficient production.

· Rising consumer prosperity, shifting lifestyles, and increased organized retail penetration have attracted international fashion brands, expanding the market for fashion apparel.

· Indias position as the worlds largest producer and net exporter of cotton ensures reliable and competitively priced raw materials, reinforced by low labour, power, and water costs.

· Demographic and social changes, including more women entering the workforce, are driving demand for womens workwear and career apparel.

In summary, the Indian textile sector is well-positioned for robust growth, supported by progressive government policies, rich resource availability, increasing consumer spending power, and dynamic market trends.

Challenges/ Threats

Global Competition:

The Indian textiles sector faces intense competition from low-cost manufacturing hubs like China and Bangladesh. This global pressure necessitates innovative strategies to reduce production costs and enhance competitiveness.

Inadequate Infrastructure:

Logistical bottlenecks, unreliable power supply, and underdeveloped transportation networks hamper operational efficiency, posing a significant challenge to scaling and timely deliveries.

Skilled Labour Shortage:

A persistent shortage of skilled labour exacerbated by factors such as labour migration creates workforce challenges. Focused skill development programs and sustainable labour models are essential to bridge this gap.

Environmental Compliance:

Growing emphasis on environmental sustainability requires the industry to meet stricter regulations. Adopting eco-friendly technologies and sustainable practices is critical to ensure compliance and long-term growth.

Internal control systems and adequacy

The Company has established robust internal control systems to safeguard its assets from unauthorized use or loss and to ensure that all transactions are properly authorized, recorded, and reported. These controls are designed to maximize operational efficiency, optimize resource utilization, and ensure compliance with applicable laws and regulations, including the Companies Act, 2013, SEBI guidelines, labour laws, and tax statutes. The systems also support improvements in financial management and investment policies, facilitating effective information flow for thorough monitoring.

An independent and qualified Audit Committee of the Board regularly reviews the internal control framework and its impact on the Companys overall performance. The internal audit function, reporting directly to the Audit Committee, is responsible for safeguarding assets, ensuring the accuracy of accounting and operational data, and overseeing adherence to corporate policies related to financial reporting, accounting standards, information security, project appraisal, and corporate governance.

The Company conducts monthly business reviews as a key operational control, assessing unit performance and initiating corrective actions as needed. Additionally, a capital expenditure control system governs the authorization of investments in new assets and projects, with accountability measures to ensure timely and budget-compliant implementation.

The Audit Committee and Senior Management receive regular updates on internal audit findings and the status of remedial actions. The Committee also reviews quarterly, half-yearly, and annual financial statements. Detailed disclosures on the Audit Committees functioning and other Board committees are included in the corporate governance section of the Annual Report.

During the year, a comprehensive review of internal financial controls was conducted, yielding satisfactory results. Recommendations for enhancements have been identified and are being implemented. Policy guidelines and Standard Operating Procedures (SOPs) are continuously updated to align with evolving business needs.

Human Resources

The Companys HR philosophy centres on building a high-performance culture that inspires every individual to realize their full potential. We are committed to fostering an environment that promotes personal and professional excellence, enabling employees to contribute meaningfully towards both their own goals and the organizations broader objectives. Currently, our dedicated workforce exceeds 5,000 employees, and we maintain harmonious and positive industrial relations.

Understanding that our employees are vital to our success, we regularly conduct internal assessments to identify skill and competency gaps. To address these, we offer targeted development programs, including continuous skill enhancement training. Our commitment to attracting and retaining motivated talent is unwavering, as we recognize that an engaged and skilled workforce is fundamental to sustainable growth.

Investing in employee development remains a top priority. We will continue to provide comprehensive training initiatives and allocate resources to enhance skills and productivity. Ensuring our employees have a deep understanding of our customer-centric culture and quality standards is essential, empowering them to adapt effectively to evolving customer preferences and market demands.

By nurturing and empowering our workforce, we aim to build a resilient and agile organization capable of thriving amid a dynamic business environment, consistently delivering exceptional value to our customers.

Information Technology

In our pursuit of performance-driven growth, the Company has leveraged a profound understanding of local market needs while maintaining agility to adapt swiftly to evolving consumer preferences. This strategic approach has been pivotal in driving our notable progress. Central to this success is the implementation of a robust Enterprise Resource Planning (ERP) system alongside a comprehensive suite of advanced IT solutions, which have streamlined complex operational processes and enabled rapid responsiveness to dynamic market conditions.

Our tailored IT infrastructure supports critical business functions including cash management, in-store operations, logistics, human resources, project management, maintenance, and administrative activities. These systems have delivered tangible benefits such as minimizing product shortages, reducing pilferage, and preventing out-of-stock scenarios, thereby significantly boosting overall operational efficiency.

By combining deep local market insights with technology-driven adaptability, we have established a strong competitive advantage and consistently enhanced value for our stakeholders. Committed to continuous innovation, we remain focused on refining our IT capabilities and exploring cutting-edge solutions to optimize processes, ensuring sustained growth and operational excellence.

Outlook:

As we embark on the new fiscal year, Cantabil Retail India Ltd. is well-positioned to capitalize on multiple favourable trends within the Indian market, reinforcing its standing as a leading integrated player in the design, manufacturing, branding, and retailing of apparel and accessories nationwide. The following key factors are anticipated to drive the Companys growth and enhance overall performance:

1. Rising Disposable Income and Expanding Middle Class:

Indias economy continues to demonstrate steady growth, driving higher income levels and an improved standard of living across the population. As disposable incomes rise, consumer demand for branded apparel and lifestyle products is set to expand significantly. Cantabil Retail India Ltd. is strategically positioned to leverage this favourable trend and increase its market share within this expanding consumer base.

2. Growing Urbanization and Changing Lifestyles:

Rapid urban growth coupled with evolving fashion consciousness is expanding market opportunities, particularly in tier 2 and 3 cities.

3. Youthful Demographics:

A large and young population fuels demand for trendy, affordable, and diverse fashion offerings.

4. E-commerce and Omnichannel Retail Expansion:

The surge in online shopping and integration of offline and online channels provide greater reach and convenience for consumers. Leveraging a robust online platform and an omni-channel strategy, the Company is well-equipped to serve the growing segment of tech-savvy consumers who favour digital shopping. Cantabil plans to continue investing in its e-commerce infrastructure and digital marketing initiatives to accelerate online sales and further strengthen its digital footprint.

5. Government Support and Favourable Policies:

Initiatives like the Production Linked Incentive (PLI) scheme, relaxed FDI norms, and textile parks stimulate investments and manufacturing capabilities.

6. Technological Advancements:

Adoption of ERP systems, AI-driven demand forecasting, and supply chain digitization improve operational efficiency and customer experience.

7. Sustainability and Ethical Fashion Trends:

Increasing consumer preference for eco-friendly products encourages innovation and brand differentiation.

8. Increasing Penetration of Organized Retail:

Growth of exclusive brand outlets (EBOs), malls, and retail chains provides an enhanced shopping environment and brand visibility.

9. Rising Women Workforce Participation:

Expanding career opportunities for women are driving demand for formal and workwear apparel.

10. Rising Income and Improving Standard of Living:

Indias economy continues to demonstrate steady growth, driving higher income levels and an improved standard of living across the population. As disposable incomes rise, consumer demand for branded apparel and lifestyle products is set to expand significantly. Cantabil Retail India Ltd. is strategically positioned to leverage this favourable trend and increase its market share within this expanding consumer base.

11. Brand Awareness and Recognition:

Cantabil has successfully established a strong brand presence in the Indian retail market. The companys unwavering commitment to offering high-quality products, contemporary designs, and competitive pricing has struck a chord with customers across diverse demographics. As brand awareness continues to grow, Cantabil is well-positioned to attract increased footfall in its retail outlets, driving higher sales and expanding its market share.

12. Customer Loyalty and Retention:

Building and maintaining customer loyalty remains a key priority for Cantabil Retail India Ltd. The company is committed to investing in targeted customer engagement programs, personalized product offerings, and loyalty reward schemes to encourage repeat purchases and nurture long-term relationships.

Looking ahead, Cantabil is optimistic about capitalizing on the significant opportunities arising from Indias robust economic growth, rising disposable incomes, and increasing brand recognition. With strategic initiatives focused on expanding retail footprint, strengthening e-commerce capabilities, driving design innovation, and optimizing cost management, the company is well-positioned to deliver sustained growth and enhanced shareholder value.