Cantabil Retail India Ltd Management Discussions

ECONOMIC OVERVIEW Indian Economy

FY2025-26 was marked by a challenging global economic environment characterised by geopolitical conflicts, trade disruptions, and financial market volatility. Despite these challenges, India retained its position as one of the world s fastest-growing major economies, demonstrating remarkable resilience. Supported by robust domestic demand, sustained investment momentum, and the Government s continued emphasis on structural reforms, the economy maintained a strong growth trajectory.

The country s Gross Domestic Product (GDP) is estimated to have expanded by 7.4% in FY2025-26 compared to 7.1% in FY2024- 25. Healthy agricultural output supported rural incomes and consumption, while improving urban demand was driven by stable employment conditions, easing inflation, and supportive fiscal measures. Additionally, the fiscal saw private consumption as the primary engine of economic growth, benefiting from higher real incomes and improved consumer confidence.

During the year, retail inflation based on Consumer Price Index (CPI) stood at 3.4% against its target of 4%. The moderation in inflation enhanced household purchasing power and supported consumption- led growth. Additionally, the year also saw RBI bring down the repo rate in 3 tranches to 5.25%, driving the country s consumption story.

The Union Budget 2026-27 reflects the Government s continued emphasis on strengthening India s long-term growth trajectory through a balanced approach to fiscal prudence and strategic public investment. With sustained allocations towards infrastructure development, manufacturing competitiveness, clean energy, digital innovation, and MSME development, the Budget seeks to enhance the country s productive capacity and improve economic resilience. Reforms aimed at simplifying regulatory processes, improving credit availability, and fostering a more enabling business environment are expected to encourage private sector participation and accelerate investment-led growth. Backed by these policy initiatives, India is well positioned to sustain industrial expansion, strengthen domestic consumption, and create a robust foundation for long-term economic development, while driving higher demand across infrastructure and energy-intensive secto

Outlook

India s medium-term consumption outlook continues to draw strength from rising household incomes, urbanisation, a growing middle-income population and wider physical and digital access. These trends are expanding demand beyond the largest cities and increasing the preference for organised retail, branded products and dependable value.

Projected real GDP growth of 6.8% to 7.2% in FY2026-27, together with easing inflation and policy continuity, provides a supportive setting for discretionary consumption. Demand may nevertheless remain sensitive to food inflation, employment conditions and global volatility, requiring consumer businesses to balance expansion with value, relevance and financial discipline.

(Source: PIB, AngelOne, MoSPI, NSO)

INDUSTRY OVERVIEW Indian apparel industry

India s textile and apparel market was estimated at US$ 190 billion in FY2025-26 and is projected to approach US$ 350 billion by 2030. The domestic market accounts for nearly 80% of the industry and has expanded from approximately 6 lakh crore in FY2014-15 to around 16 lakh crore. This large home market reduces dependence on exports and provides a broad base for apparel brands, serving different price points, categories and regions.

India s financial sector continued to demonstrate resilience, supported by healthy bank balance, low levels of non-performing assets, and strong capital adequacy. Steady credit growth, prudent fiscal management, record tax collections, and foreign exchange reserves exceeding US$ 700 billion further strengthened the country s macroeconomic fundamentals and enhanced its ability to withstand external shocks.

The organised apparel market is benefitting from urbanisation, rising household incomes, better retail infrastructure and increasing acceptance of branded value propositions. Tier II, III and IV cities are becoming more important as consumers seek current designs, reliable quality and a consistent shopping experience within a considered budget.

Consumer discovery and purchase are increasingly spread across stores, marketplaces and digital channels. Physical retail remains central to fit, touch, trial and immediate purchase, while digital channels extend reach and provide earlier signals on searches, product response and regional demand. The ability to connect these channels without weakening unit economics is becoming an important operating capability.

The industry also continues to invest in manufacturing, supply- chain systems and process automation. At the same time, volatility in cotton, fabric, energy and logistics costs, shorter fashion cycles and intense price competition require closer control over product planning, sourcing, inventory and markdowns.

(Source: Wazir Advisors, Textile Sphere India)

Key trends shaping the sector

Sustainability, now a necessity: Sustainability is rapidly evolving from a competitive differentiator to a fundamental business requirement. The increasing adoption of eco-friendly materials, including organic cotton and recycled polyester, alongside low-impact dyeing and environmentally-responsible manufacturing practices, is becoming essential to meet evolving global sourcing standards and maintain export competitiveness.

Omnichannel retail gaining momentum: The convergence of physical and digital retail channels continues to reshape consumer engagement. Brands are increasingly investing in integrated omnichannel strategies that deliver seamless shopping experiences across touchpoints, while Direct-to-Consumer (D2C) business models are emerging as a key driver of customer acquisition, brand loyalty and profitable growth. With the quick commerce market projected to reach approximately 3-4 trillion by 2030, brands are increasingly adopting omnichannel strategies to improve fulfilment capabilities, enhance customer experience and strengthen market penetration across both metropolitan and emerging markets.

Strengthening workforce capabilities: Building a future-ready workforce remains central to the industry s long-term competitiveness. The continued implementation of the Samarth Scheme is helping address skill gaps through placement- oriented training programmes that equip the workforce with capabilities aligned to the evolving requirements of modern, technology-driven textile manufacturing.

Accelerating digital transformation: The adoption of Industry 4.0 technologies is becoming increasingly critical to improving productivity, efficiency and competitiveness. Manufacturers are integrating Artificial Intelligence (AI), automation and digital technologies across operations to enhance demand forecasting, optimise supply chains, strengthen quality management and improve overall operational performance.

Evolving consumer preferences: Purchasing decisions are increasingly being influenced by value, transparency and brand experience rather than price alone. Growing consumer awareness around sustainability and responsible consumption is encouraging the adoption of circular business models, including second-hand fashion, resale and apparel rental, while experiential retail continues to strengthen customer engagement.

Infrastructure-led manufacturing growth: Continued investments in integrated manufacturing infrastructure are expected to strengthen India s textile ecosystem. The development of PM MITRA Parks is anticipated to enhance manufacturing efficiency, reduce logistics costs, promote scale, attract domestic and foreign investments, and improve the global competitiveness of India s textile and apparel industry.

Deepening global market integration: India s diversified manufacturing capabilities, large domestic market and rich heritage in traditional textiles, including khadi and handloom products, position the industry favourably to capitalise on the growing global preference for ethically sourced and sustainable products. At the same time, the strategic utilisation of bilateral trade agreements is expected to expand market access, strengthen export competitiveness and facilitate deeper integration into global value chains.

Growth drivers

- Demographic dividend and urbanisation: India s expanding population and accelerating urbanisation continue to provide a strong foundation for long-term consumption growth. As the world s most populous nation, with an estimated population of 1.46 billion in 2025 and an urbanisation rate of 37.1%, the country offers one of the largest and fastest-growing consumer markets globally. Rising urban migration, improving living standards and greater exposure to global fashion and lifestyle trends are driving demand for branded, aspirational and experience-led products. Meanwhile, the rapid economic development of Tier II, III and IV cities, supported by higher disposable incomes, improved infrastructure and deeper digital penetration, is broadening the consumer base and creating significant growth opportunities for organised retail and lifestyle brands

- Growing disposable income: Rising household incomes continue to strengthen India s consumption-driven economy and support discretionary spending across apparel and lifestyle categories. Per capita Gross National Income (GNI) is estimated to have increased to ^ 1,42,119 in FY2025-26 from 1,33,501 in FY2024-25, providing consumers with greater purchasing power and reinforcing long-term demand for branded textile and apparel products

- Evolving consumer landscape: India s consumer profile is undergoing a structural transformation, driven by rising affluence, changing lifestyles and generational shifts in purchasing behaviour. Affluent and aspirational households are expected to account for nearly 55% of the country s incremental consumption growth, fuelling demand for branded and premium apparel. At the same time, Generation Z is emerging as a powerful consumption cohort, with spending projected to reach approximately 180 trillion by 2035. Their preference for digital-first engagement, trend-led fashion and personalised brand experiences is expected to significantly influence product innovation, retail strategies and demand across apparel segments

- Expanding digital commerce: The continued growth of India s digital economy is transforming the way consumers discover, evaluate and purchase apparel. India s online apparel market is projected to reach approximately US$ 63 billion by 2030, reflecting the continued acceleration of digital commerce. During FY2025-26, the sector witnessed a rapid expansion of digital-first brands, while the growing adoption of quick commerce further enhanced the accessibility and convenience of essential apparel purchases, reinforcing the evolution of India s omnichannel retail ecosystem

Opportunities

- Integrated manufacturing ecosystem: The operationalisation of seven PM MITRA Parks across states including Tamil Nadu, Gujarat and Uttar Pradesh is expected to accelerate integrated textile manufacturing, attract investments of approximately 70,000 crore and strengthen India s global manufacturing competitiveness

- Supportive policy environment: The expansion of the Production Linked Incentive (PLI) Scheme, with lower investment thresholds and an extended application timeline until March 2026, is expected to encourage higher investments, particularly in man-made fibres (MMF) and technical textiles

- Global supply chain diversification: Evolving global sourcing strategies and continued geopolitical uncertainties in competing manufacturing hubs are creating opportunities for India to strengthen its position as a preferred global sourcing destination for textiles and apparel

- Strengthening indigenous capabilities: Initiatives such as IndiaSize and VisionNxt are fostering the development of indigenous standards in apparel sizing, design forecasting and product innovation, reducing dependence on international benchmarks

- Expanding global market access: Building on trade agreements with the United Kingdom and the UAE, the proposed India-EU Free Trade Agreement is expected to significantly enhance export opportunities by improving access to one of the world s largest apparel import markets, valued at approximately _ 184 billion and projected to reach _ 193 billion in 2026

Challenges

- Tariff-related headwinds: US tariffs ranging from 25% to 50% on Indian textile exports continue to impact the sector s global competitiveness, prompting some manufacturers to shift production to countries offering more favourable trade conditions

- Evolving sustainability regulations: Stricter environmental and sustainability requirements introduced by the European Union, effective January 2026, together with the withdrawal of GSP tariff preferences, are increasing compliance costs and requiring higher investments in green certifications, particularly for MSMEs

- Raw material availability: Tight domestic cotton supplies have kept raw material prices elevated, leading the industry to seek permanent duty-free cotton imports in the Union Budget 2026-27 to strengthen supply security and improve cost competitiveness

- Cost competitiveness: Manufacturing, logistics and energy costs remain 15% to 20% higher than those in competing markets such as Bangladesh and Vietnam, placing continued pressure on operating margins, particularly for smaller industry participants

COMPANY OVERVIEW

Since its inception in 1 989, Cantabil Retail India Limited (hereafter referred to as Cantabil or The Company.) has evolved into one of India s leading fashion retailers, with an integrated business model encompassing the design, manufacturing, branding and retailing of apparel and accessories. Over the years, the Company has

transformed from a menswear-focused brand into a comprehensive family-wear destination by continually expanding its product portfolio to meet evolving consumer preferences. The introduction of women s wear in 2007 significantly broadened the brand s appeal, while the addition of men s accessories in 2013 further strengthened its lifestyle offering. Today, the Company offers a comprehensive range of formal, casual, party and ultra-casual apparel for men and women, catering primarily to the middle- and upper-middle-income consumer segments.

Backed by a customer-centric approach and a consistent focus on quality, innovation and brand building, the Company has established a strong pan-India retail presence with a total retail area of 9.15 lakh sq. ft and 652 exclusive brand outlets (EBO), spread across 308 cities and 21 states.

execution, while franchise participation continues to add value in selected markets.

Family stores remained the principal expansion format, increasing from 210 to 238. Men s stores rose from 335 to 351 and women and kids stores increased from 54 to 63. The larger family format supports a wider basket, although its higher inventory requirement makes productivity across categories and sections important.

Store format	FY2024-25	FY2025-26	Change
Family stores	210	238	+28
Men s stores	335	351	+ 16
Women and kids stores	54	63	+9
Total stores	599	652	+53

BUSINESS REVIEW

FY2025-26 operating performance

FY2025-26 combined network expansion with improved operating productivity. Revenue from operations increased by 18.3% to 852.6 crore. Volume growth of 13.33%, same-store sales growth of 5.24% and the net addition of 53 stores contributed to the increase. Average bill value rose to 4,415 from 4,01 4, while monthly sales per sq. ft. improved to 7 68 from 7 63 despite the addition of stores that were still progressing towards maturity.

Retail area expanded by 13.8% to 9.15 lakh sq. ft. New stores widened the revenue base, while positive same-store growth indicated continued contribution from the mature network. Together, these indicators show a balanced contribution from the mature network, new stores and customer spending.

Operating indicators

Indicator	FY2025-26	Comment
Revenue from operations ( crore)	852.6	18.3% year-on-year growth
Volume growth (%)	13.33	Principal contributor to revenue growth
Same-store sales growth (%)	5.24	Fourth consecutive positive year
Average bill value ( )	4,415	Increased from 4,014
Monthly sales per sq. ft. ( )	768	Increased from 763 during network expansion
Net store additions	53	Closing network of 652 stores
Retail area (lakh sq. ft.)	9.15	13.8% year-on-year growth
Inventory days (days)	126	Improved from 141 days

Retail network and format movement

The Company added 53 stores during the year. Company-operated stores increased to 526 and represented approximately 81% of the closing network, compared to 78% in FY2024-25. This mix provides closer control over merchandise, presentation, staffing and local

North and West India continued to account for the majority of revenue, supported by network density and operating experience. Expansion in Central and East India provides a measured route to geographical diversification, while new markets continue to be assessed on catchment potential, rent, fit-out cost, inventory requirement and time to maturity.

Category-wise performance

The Company has built a diversified product portfolio across four key business segments, namely Men s Wear, Women s Wear, Kids Wear and Accessories. The diversified portfolio has enabled it to cater to the apparel needs of the entire family. Its offerings span a comprehensive range of formal, casual, party and ultra-casual wear across multiple garment categories, complemented by a curated selection of men s accessories. This broad and well-balanced portfolio allows the Company to address diverse consumer preferences while strengthening its position as a one-stop destination for quality lifestyle and fashion products. The year saw the Company deepen its presence across 308 cities in 21 states with the help of 652 brand stores spanning 9.15 lakh sq. ft.

Business infrastructure and digital progress

During the year, the Company moved into a new corporate office, expanded warehousing capacity and continued investment in manufacturing. These additions support a wider product range and a larger store network. Their principal contribution will be better coordination, stock availability and operating control as the platform scales.

The implementation of an end-to-end ERP solution is intended to create a common information structure across stores, product, purchasing, manufacturing, warehouses, inventory and finance. Better visibility should enable earlier replenishment, stock transfers, ageing action and production decisions. The value of the platform will depend on phased implementation, process discipline and user adoption.

Online channels contributed around 6% of revenue and remained profitable during FY2025-26. The Company is present across leading marketplaces and operates a dedicated online fulfilment flow. Digital growth will continue to be evaluated after commissions, discounts, returns and fulfilment costs, with emphasis on profitable access and useful demand information.

FINANCIAL REVIEW Key financial highlights

( in crore)

Particulars	FY2025-26	FY2024-25
Revenue from operations	852.6	721.1
EBITDA	264.3	204.8
PAT	95.8	74.9
EPS ( )	11.4	9

Key ratios

Particulars	FY2025-26	FY2024-25	Change
Net profit ratio	11.2%	10.4%	80 bps
Return on capital employed	39.2%	36.4%	280 bps
Return on equity	22.0%	20.8%	120 bps

Revenue: During FY2025-26, the revenue from operations of the Company stood at 852.6 crore, compared to ^7 21.1 crore in FY2024-25, clocking a y-o-y growth of 18%, driven by the addition of 53 new stores and a growth of 13.33% in volumes.

registering a y-o-y growth of 28%. The PAT margin for the year stood at 11.2% compared to 10.4% in FY2024-25,.

EPS: During FY2025-26, the Earnings Per Share (EPS) of the Company stood at 11.4, compared to 9 in FY2024-25, registering a y-o-y growth 26.7%.

Debt: The Company has zero debt on its books.

ROE: The Return on Equity (ROE) for the Company stood at 22% in FY2025-26 compared to 20.8% in FY2024-25, registering a y-o-y improvement of 120 bps.

ROCE: The Return on Capital Employed (ROCE) for the Company stood at 39.2% in FY2025-26 compared to 36.4% in FY 2024-25, registering a y-o-y improvement of 280 bps.

Cash and cash equivalent: The cash and cash equivalent for the Company as on March 31, 2026 stood at 25.1 crore compared to 27.9 crore as on March 31,2025.

Management priorities for FY2026-27

The immediate priorities are centred on extracting stronger returns from the operating base created during recent yea The Company will continue to balance expansion with store productivity, inventory rotation, cash generation and the commercial return from investments in infrastructure and systems.

- Store portfolio: Select new catchments carefully, enlarge proven locations where the economics support it, and relocate or close weaker stores where the return remains inadequate

- Category productivity: Improve the contribution of women s wear, kids wear and accessories within the family-store network through better range, fit, presentation and selling capability

- Inventory and information: Use D365 and warehouse systems to improve forecasting, replenishment, transfers and action on ageing stock

- Profitable digital growth: Increase online access while maintaining discipline over commissions, discounts, fulfilment costs and returns

- Financial quality: Protect gross margin, operating cash flow and returns as stores and shared infrastructure move towards maturity

EBITDA and EBITDA margin: During FY2025-26, the Company s EBITDA stood at 264.3 crore, compared to 204.8 crore in FY2024- 25, clocking a y-o-y growth of 29%. The EBITDA margin for the year stood at 31% compared to 28.4% in FY2024-25, clocking a y-o-y growth of 260 bps.

PAT: During FY2025-26, the profit after tax (PAT) of the Company stood at 95.8 crore, compared to 74.9 crore in FY2024-25,

RISK MANAGEMENT Approach to Risk Management

Effective risk management forms an integral part of the Company s governance framework and strategic decision-making process. The Company follows a proactive and enterprise-wide approach to identifying, assessing and managing risks that could impact its strategic, operational and financial performance. By embedding risk management into business planning and day-to-day operations, the

Company enhances its ability to anticipate emerging challenges, respond to evolving business conditions and safeguard longterm value creation. Oversight of the risk management framework is exercised by the Board of Directors, with support from the Audit Committee and the management team, ensuring that risk considerations remain integral to key business decisions.

Risk Management Framework

The Company s Risk Management Committee, comprising four members of the Board with diverse industry and functional expertise,provides focused oversight of the enterprise risk landscape. The Committee periodically reviews key business risks, evaluates their potential impact and effectiveness of mitigation measures, and provides strategic guidance to strengthen organisational resilience. Supported by a structured risk management framework, the Company follows a continuous process of risk identification, assessment, prioritisation, mitigation and monitoring across its operations. This disciplined approach enables the Company to strengthen business continuity, enhance operational resilience and support the sustainable achievement of its long-term strategic objectives.

Risks and Mitigation Measures

Risks	Impact	Mitigation strategy
Economic Risk	A slowdown in the economy could impact overall business operations and project timelines.	The Government s continued focus on infrastructure development and modernisation is expected to create significant growth opportunities for the Company. Despite the global uncertainties, strong manufacturing capabilities, a diversified product portfolio and the growing global acceptance of Indian products enabled the industry to maintain its export momentum, creating ample opportunities for the Company to leverage during the year.
Quality Risk	Failing to uphold high- quality standards could harm a company s reputation and affect future project opportunities.	The brand recall of Cantabil is synonymous with quality. The Company upholds stringent quality standards across sourcing, manufacturing and distribution to ensure product consistency and customer satisfaction. The Company is also focused on implementing robust quality assurance practices throughout the value chain, including fabric and garment inspections, periodic quality audits and continuous product quality monitoring to maintain high operational standards.
Credit Risk	Availability of funds plays a pivotal role in a company s operations.	The Company s exposure to credit risk remains limited, supported by a disciplined credit management framework. Retail sales are primarily conducted through cash and digital payment modes, ensuring prompt realisation of receivables and minimising collection risk. In managing its investment portfolio, the Company adopts a prudent approach by investing with counterparties that meet stringent credit-worthiness criteria. Counterparty assessments encompass factors such as financial strength, liquidity, asset quality governance standards and the ability to withstand adverse market conditions, thereby mitigating credit and counterparty risks while safeguarding the Company s financial assets.
Competition Risk	Increased competition and aggressive pricing by new entrants could impact total sales, and compress profit margins.	The Company operates in a highly competitive apparel retail market characterised by the presence of numerous organised and unorganised playe To sustain its competitive advantage, it continues to differentiate itself through a strong focus on product quality contemporary designs and a customer-centric value proposition. Ongoing investments in technology, product innovation and talent development further strengthens its market positioning and operational capabilities. Backed by a loyal customer base, disciplined execution and prudent financial management, the Company effectively addresses competitive pressures through differentiated offerings, competitive pricing strategies, targeted brand-building initiatives and an enhanced customer experience.
Price Risk	Volatility in raw material prices, energy costs and other input expenses can impact the Company s cost structure and profitability.	To mitigate such risks, the Company continuously monitors commodity price movements, supplier dynamics and energy market conditions, enabling timely procurement decisions, effective cost optimisation and improved operational resilience in a dynamic business environment.

Human resources

The Company s people remain its most valuable asset and a key driver of sustainable growth. Its human resource philosophy is centred on building a high-performance, customer-focused and future-ready workforce by fostering a culture of collaboration, accountability, continuous learning and innovation. The Company is committed to providing a safe, diverse and inclusive workplace where employees are empowered through equal opportunities, enabling them to realise their full potential while contributing meaningfully to organisational success.

Recognising the critical role of talent in the value retail business, the Company continues to invest in capability building through structured learning and development initiatives, leadership

development programmes, future skills training and targeted competency enhancement. Regular skill assessments help identify development needs, while a combination of campus and lateral hiring ensures a robust talent pipeline. Supported by technology-enabled HR practices and employee-centric policies, the Company has built a motivated and engaged workforce with strong retention levels and harmonious industrial relations. As on 31 March 2026, the Company had 5,178 permanent employees across its operations.

To read more about this, please read the People Centricity chapter on pages 28, 29

Internal control systems and their adequacy

The Company has established a robust internal control framework to safeguard its assets, ensure the accuracy and reliability of financial and operational information, enhance operational efficiency, and ensure compliance with applicable laws, regulations and internal policies. The framework supports prudent financial management, effective resource utilisation and timely decision-making through well-defined processes and controls.

Oversight of the internal control framework is exercised by the Audit Committee of the Board, supported by an independent internal audit function that reports directly to the Committee. The internal audit function periodically evaluates the effectiveness of internal controls, risk management practices, financial reporting, information security, corporate governance and compliance with established policies, while recommending corrective actions wherever required.

The Company further strengthens its control environment through regular business performance reviews, structured capital expenditure approval mechanisms and continuous monitoring of key operational and financial paramete The Audit Committee and Senior Management periodically review internal audit observations,

the implementation of corrective measures and the Company s quarterly, half-yearly and annual financial statements. During the year, the Company s internal financial controls were reviewed and found to be adequate and operating effectively. The Company continues to strengthen its control environment through the periodic enhancement of its policies, Standard Operating Procedures (SOPs) and governance practices in line with evolving business requirements.

Cautionary statement

This Management Discussion & Analysis report makes forwardlooking statements based on certain assumptions and expectations of future events over which Cantabil Retail India Limited exercises no control. Cantabil cannot guarantee their accuracy nor can it warrant that these statements will be realised. Actual results could differ materially from those expressed or implied. Macroeconomic factors such as demand, supply, global economic and geopolitical developments, government regulatory and tax framework, liquidity in the market, etc. could impact the operations of Cantabil.