Cedaar Textile Ltd Management Discussions

The Management Discussion & Analysis Report highlights a period of strategic growth and operational strengthening, positioning the Company for sustainable expansion. The analysis focuses on key industry developments, operational performance, risk management, and future growth strategies as Cedaar Textile Limited continues to strengthen its position in the textile sector while adhering to the enhanced governance and compliance requirements applicable to a listed company.

INDUSTRY STRUCTURE AND DEVELOPMENTS

During the financial year 2025 26, Indias textile and apparel exports demonstrated resilience amidst global trade headwinds and the dampening impact of new US trade tariffs, reaching a total value of 3,25,339 Crore. While traditional export channels faced cost pressures, specialized segments and regional manufacturing hubs maintained stability by shifting focus toward value-added production.

The industry is witnessing a structural shift towards value-added, sustainable, and differentiated textile products driven by changing consumer preferences and stringent compliance standards in global markets. This transition is encouraging manufacturers to adopt modern technologies, enhance product innovation, and improve operational efficiency to offset tariff-induced margin strains.

Indias core competitive advantages including the availability of skilled manpower, cost-efficient production capabilities, and an established supply chain network continue to anchor its position in the global textile value chain. Furthermore, the growing preference among international buyers for diversified sourcing destinations helps buffer against localized trade policy shocks.

COMPANY OVERVIEW

Cedaar Textile Limited has established itself as an integrated textile company with capabilities spanning across manufacturing, trading, and distribution activities within the textile value chain. Backed by industry expertise and a customer-centric approach, the Company serves both domestic and international markets with a diverse range of textile products. The Companys objective is to cater to leading customers in India and overseas who manufacture garments for renowned fashion brands across global markets.

Core Products and Materials

The Company operates across a diversified product portfolio and utilizes a wide range of raw materials including cotton, silk, art silk, polyester, acrylic, modal, rayon, and nylon. This broad material base enables the Company to address varying customer requirements across apparel, fashion, and home textile segments while maintaining flexibility in product development and manufacturing.

Key Focus Areas

Sustainability remains central to the Companys growth strategy. Cedaar Textile Limited is focused on strengthening its presence in fashion-oriented garments through value-added yarn offerings, expanding opportunities in the safety wear segment, and increasing the supply of fire-retardant and sustainable textile products. The Company continues to align its product portfolio with changing customer preferences and evolving market trends to create long-term value.

Operational Integration

The Company follows an integrated business model encompassing procurement of raw materials, manufacturing of textile products, trading activities, and import-export operations. Its involvement across multiple stages of the textile value chain enables greater operational control, efficient resource utilization, and access to both domestic and international markets.

Market Strategy

Cedaar Textile Limited remains committed to maintaining high standards of product quality, operational efficiency, and customer service in a competitive textile industry. Sustainability is embedded in the Companys product offerings, with a growing focus on yarns manufactured from 100% organic and recycled fibres, including recycled cotton and polyester, supporting environmental conservation and responsible manufacturing practices.

Operating within the global textile and apparel sector involves navigating a dynamic and challenging risk landscape. o counter these headwinds, the Company is actively shifting focus toward value-added, sustainable, and differentiated product portfolios such as specialized melange and dyed yarns while optimizing operational efficiency and supply chain resilience to protect profitability against tariff-induced cost pressures.

CAPITAL MARKET DEVELOPMENTS

Following its successful listing on the NSE Emerge Platform, Cedaar Textile Limited continues to comply with all applicable regulatory requirements and corporate governance standards prescribed for listed entities.

The listing has enhanced the Companys visibility among investors, customers, suppliers, and other stakeholders while strengthening its governance framework, transparency, and access to capital markets. The Company remains committed to maintaining high standards of compliance, disclosure practices, and stakeholder engagement as it progresses in its journey as a publicly listed entity.

OPPORTUNITIES

The textile industry continues to present opportunities for growth through increasing demand for quality, sustainable, and value-added products. The Companys focus on melange yarns, dyed yarns, and customized product offerings positions it well to cater to evolving customer requirements across domestic and international markets while mitigating regional trade friction caused by US tariff adjustments.

Growing preference for environmentally responsible products provides an opportunity to strengthen the Companys portfolio of organic and recycled fibre-based yarns. The Companys commitment to sustainability, coupled with its focus on product innovation and quality, is expected to support long-term business growth and customer retention.

The planned expansion of yarn dyeing capacities is expected to enhance production capabilities, improve operational flexibility, and enable the Company to address a wider range of customer requirements. This expansion is also expected to support growth in higher-margin and specialized product segments.

The Companys diversified product portfolio, established customer relationships, and presence in export markets provide opportunities to expand its market reach and strengthen its position within the textile value chain. The ability to offer multiple fibre options and value-added products enables the Company to respond effectively to changing market preferences and international trade shifts.

THREATS

Challenges arising from Global Economic Uncertainty, geopolitical developments, volatility in raw material prices, fluctuations in energy and logistics costs, and changing consumer demand patterns. Intensified geopolitical tensions, economic uncertainty, and the compounding pressures of restrictive trade tariffs (particularly across major export corridors like the US) have increased landed costs, compressed operating margins, and disrupted traditional trade flows.

The Company faces intense competition from domestic and international textile manufacturers, including low-cost production hubs such as Bangladesh and Vietnam, necessitating continuous improvements in efficiency, quality, and innovation

FUTURE OUTLOOK

The Company remains focused on strengthening its operational capabilities and improving overall efficiency to Support Sustainable Long-Term Growth. Continued emphasis will be placed on enhancing productivity, optimizing resource utilization, and improving margins through value addition and process improvements.

The textile industry is expected to continue evolving with increasing demand for quality, sustainable, and differentiated products. In response, the Company aims to further strengthen its product portfolio, enhance customer relationships, and expand its presence in both domestic and international markets.

The Company is also evaluating capacity enhancement initiatives to support anticipated growth in demand, particularly in value-added and specialized yarn segments. Such initiatives are expected to improve operational flexibility and strengthen the Companys competitive position.

Sustainability remains an important focus area, and the Company is committed to improving energy efficiency and reducing its environmental footprint through the adoption of renewable energy and responsible manufacturing practices.

With a diversified product base, established market presence, and continued focus on innovation and efficiency, the Company believes it is well-positioned to capitalize on emerging opportunities in the textile sector while navigating industry challenges effectively.

RISKS AND CONCERNS

The Company recognizes that the textile industry operates in a dynamic and cyclical environment influenced by global demand conditions, macroeconomic trends, and supply-side constraints. Fluctuations in global economic activity, changes in consumer spending patterns, and evolving trade dynamics may impact demand for textile products and create uncertainty in business performance. Volatility in raw material prices, particularly cotton and synthetic fibres, remains a key risk for the industry. Sudden price movements, along with fluctuations in energy, freight, and logistics costs, may affect production costs and margins. The Company continues to monitor market conditions closely and adopts appropriate procurement and pricing strategies to manage such volatility. Foreign exchange fluctuations also pose a risk, given the Companys exposure to export and import transactions. Adverse currency movements may impact realizations and input costs, thereby affecting overall profitability. The Company continues to strengthen its risk management framework, internal controls, and operational resilience to mitigate these risks and ensure sustainable long-term growth.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate internal control system which commensurate with the size and nature of its business. The internal control system is being supported by regular reviews by management to ensure reliability of financial and all other records to prepare financial statements and other data. Further the Audit Committee of the Board review the findings and recommendations of the internal audit and suitable implementations are affected

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The Company looks ahead with hopes to continue its good run and sustained growth in the current financial year and years to follow. The Company is pushing up its marketing synergies to gain access to newer markets with its product innovation strategies, improvement in overall operations and introduction of new range of products in line with prevalent trends that will help it to sail well in the ensuing financial year

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

There are no material developments in the Human Resources area. We maintains a team of skilled and semi-skilled personnel across manufacturing, operations, and support functions and continues to invest in training, skill development, and employee engagement initiatives.

The Company focuses on attracting, developing, and retaining talented individuals with the skills and expertise necessary to support its business objectives. As the Company expands its operations and production capacity, its workforce will be strengthened accordingly. The total number of people directly and indirectly employed by the Company is 473.

KEY FINANCIAL RATIOS

The Company has identified the following ratios as key financial ratios

Ratio	For the year ended 31.03.2026	For the year ended 31.03.2025	Reason of change more than 25%
Current ratio (in times)	0.82	1.19	The current ratio declined due to an expansion in short- term obligations and current liabilities, coupled with a reduction in current assets caused by inventory liquidation at scrap value and reduced operating liquidity.
Debt equity ratio	2.22	1.76	The debt equity ratio increased primarily due to the erosion of shareholders funds following substantial net operational losses incurred during the year, which outweighed the modest reduction in total debt.
Debt service coverage	-1.17	2.81	The ratio deteriorated due to negative operational earnings resulting from export cancellations and inventory write- downs, alongside higher principal repayment obligations coming due during the year.
Return on equity ratio	-1.25	0.26	Return on equity turned negative largely due to net losses arising from geopolitical export bottle necks and material stock impairments against an increased average net worth base.
Inventory turnover ratio	2.94	1.46	The inventory turnover ratio increased primarily due to higher COGS driven by a material inventory write down of Rs.84 crore and a reduced average inventory base resulting from the scrap liquidation of deteriorated, order-cancelled yarn stock.
Trade receivables turnover ratio (in times)	4.96	21.54	The receivable turnover roped as average collection periods elongated amid market disruptions, resulting in higher average receivables against a decline in overall operational revenues.
Trade payables turnover ratio (in times)	4.72	12.26	The payables turnover decreased due to curtailment of fresh material purchases following reduced demand, combined with extended vendor settlement timelines leading to higher average outstanding trade payables.
Net capital turnover ratio (in times)	-75.98	29	The ratio turned negative primarily because net working capital slipped into a negative balance due to elevated current liabilities and inventory write-offs, alongside softened revenue from operations.
Net profit ratio (in %)	-0.44	0.06	The net profit margin fell owing to severe bottom-line losses driven by geopolitical export unviability, an Rs.84 crore inventory impairment, and reduced top-line realization.
Return on capital	-0.99	0.34	ROCE dropped as o perating earnings (EBIT) fell significantly into negative territory due to the material inventory liquidation loss, while the capital employed base remained broadly stable.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations, or predictions may constitute "forward-looking statements" within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectations of future events and are subject to various risks, uncertainties, and other factors that could cause actual results, performance, or achievements to differ materially from those expressed or implied by such statements.

Important factors that may influence the Companys operations include changes in economic conditions, government policies and regulations, raw material prices, market demand, competition, foreign exchange fluctuations, and other factors beyond the Companys control.

The Company undertakes no obligation to publicly update, amend, or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are advised to exercise appropriate caution and not place undue reliance on such forward-looking statements.