Celebrity Fashions Ltd Management Discussions

Economic Overview

India is the sixth-largest exporter of textiles and apparel globally, accounting for roughly 4–4.1% of world exports in 2024, as per PIB. The US absorbs about 29% of Indian textile and apparel exports, roughly $10.3 billlion. Other major markets include the European Union and the UK.

Indias garment export total around $35 billion annually, with roughly a third, about $12 billion, destined for US market. In this backdrop, the new tariff regime will have a dual impact on the Indian economy, hitting both its energy import costs and its export competitiveness.

The U.S.s decision to impose a 50% tariff on Indian imports marks a pivotal and abrupt turn in global trade dynamics.

Reserve Bank of Indias GDP growth forecast for 2025-26 after tariffs is 6.5%. The earlier predictions of major institutions like IMF, WTO are now subject to change due to August 27, USA Tariff effect.

Tariffs significantly impact the Indian economy by affecting trade dynamics, GDP growth, and specific sectors, particularly textiles, electronics, and agriculture.

The various implication of traffic increase details below.

Sector-Specific Effects: Certain sectors are more vulnerable to tariff impacts. The textiles and electronics industries, which account for significant portions of Indias exports, face margin pressures and potential job losses due to increased costs and reduced competitiveness. The steel and agriculture sectors are also expected to be affected, with potential retaliatory measures from trading partners further complicating the situation.

Trade Dynamics: Tariffs can alter the flow of trade between countries. For India, tariffs imposed by other nations, particularly the US, can lead to reduced competitiveness of Indian exports. For instance, the US has imposed tariffs on Indian textiles, gems, and electronics, which are key export sectors. This can lead to decreased demand for these products in international markets

GDP Growth: Economists predict that US tariffs could reduce Indias GDP growth by 20-40 basis points. If tariffs remain in place, Indias GDP growth could fall below 6% in the current fiscal year, impacting overall economic stability. The Reserve Bank of India has also adjusted its growth forecasts in light of these tariffs, indicating a slowdown in economic activity.

Long-Term Economic Strategy: The Indian government is exploring ways to mitigate the negative impacts of tariffs, including potential tariff reductions on US imports to foster better trade relations. The ability of Indian industries to adapt to changing trade dynamics will be crucial in navigating the challenges posed by tariffs.

Industry Structure and Development

India is the 6th largest exporter of Textiles & Apparel in the world in 2023. The share of textile and apparel including handicrafts in Indias total exports stands at a significant 8.21% in 2023-24. India has a share of 3.9% of the global trade in textiles and apparel. Major textile and apparel export destinations for India are USA and EU with around 47% share in total textile and apparel exports. The sector holds importance from the employment point of view as well.

Textile Industry is one of the biggest contributors to the economy with a 2.3% contribution to the gross domestic product (GDP)Indias Textile & Apparel (T&A) Industry is one of the oldest industries and has a formidable presence in the national economy. Indian T&A industry is the second largest in the world after China and spans across the entire value chain. T&A sector is the 2^nd largest employment-providing sector in India after agriculture. It provides direct and indirect employment to more than 10 crore people including a large number of women and the rural population.

The two major markets – the US and EU – accounting for over 60 per cent of the Indian textiles and apparel demand, have remained sluggish for the last six months, due to headwinds arising out of surge of inflation and uncertain geopolitical scenario. Consumers in these two and other markets have cut down spending on clothing, as they have to spend more on other household expenses.

Opportunities & Threat:

The 50% tariff effectively raises the cost for U.S. importers, forcing them to make a difficult choice: absorb the higher cost, ask Indian suppliers to take a hit on their margins, or divert their sourcing to other, lower-tariff countries. This could be major challenge for Indian exporters.

With tariffs increasing, manufacturers now face the dual challenge of higher raw material costs and transportation costs.

Indian exporters facing rising input costs and the necessity to remain competitive. This could increase the pricing pressure.

Indias textile and apparel products, including handlooms and handicrafts, are exported to more than 100 countries across the globe. Indias key export destinations for textiles and apparel products include countries namely the USA, Bangladesh, UAE, UK, Germany, and among others. The USA is the largest importer among all, importing about one-fourth of the total exports from India.

During FY25 (April to December), the USA is the top export destination for the textile and apparel industry, accounting for a 29% share of overall exports which has grown from a 24% share witnessed in FY20. India and UAE signed a Free Trade Agreement (FTA) that went into effect on May 1, 2022, and India is also in the process of negotiating FTAs with the EU, Australia, Canada, Israel, and other countries/regions which is likely to boost exports of Indian textile and apparels in future by providing a competitive edge over other exporting countries. Furthermore, Indias consolidated foreign direct investment (FDI) policy circular 2020 provides 100% FDI in single-brand product retail trading and up to 51% FDI in multi-brand retail trading, subject to certain conditions. This continues to attract leading international retailers to source their garment and home textiles requirements from India and drives interest from new export destinations.

High inflation across the globe has reduced the consumers purchasing power, which is the major cause of slowdown in textiles and apparel exports. Developing countries including India are facing serious challenges in textiles and exports.

Segment Review

Celebrity Fashions Limited is engaged in the business of designing, manufacturing and selling of garments and we cater to the demand of leading international brands.

Risks and Concern

The textile industry is facing limitations in accessing the latest and best technology while also failing to meet the global standards in the competitive export market. Apart from these issues like child labour, competition from neighboring countries regarding low-cost garments, personal safety norms, infrastructure bottlenecks, rising environmental concerns are some of the challenges the Indian textile industry faces.

Several risks including the lower profit share, alongside cost reduction pressure from the buyers threaten the survival of the Readymade Garment exporters.

Outlook

In FY24, the share of textile and apparel in Indias total exports was 8.21% while Indias share of the global trade in textiles and apparel stood at 3.9%.

The coming year is likely another year full of challenges and opportunities for the Indian apparel industry. Despite the challenges ahead, we believe that our principal competitive strengths, which differentiate us from other players in the garments industry will help us to progress in the right direction in times of uncertainty.

Internal Control Systems and their Adequacy

The Company has developed adequate internal control system commensurate to its size and business to ensure that all assets are safeguarded and protected against any loss from unauthorized use or disposition and that all transactions are authorized, recorded and reported correctly. The internal audit reports are periodically reviewed by the Management together with the Audit Committee of the Board. The Company has a strong Management Information System as a part of Control Mechanism.

Human Resources/Industrial Relations

Industrial relations have continued to be harmonious at all units throughout the year. No man-days were lost due to strike, lock out etc.

Measures for employees safety, their welfare and development received top priorities. Your Company has a vision of being an ‘Injury Free and ‘Zero Environment Incident organization. Over the past many years, your Company has been progressing well on the safety record in factories and facilities. The Company had around 2856 employees as on 31^st March 2025.

Financial Performance:

The Companys performance during the year as compared with previous year is summarized below:

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40.84

			FY 2024-25				FY 2023-24
Particulars			Amount		% to		Amount		% to
			(In Crs.)		Revenues		(In Crs.)		Revenues
Revenue from Operations			165.26		99.75		342.62		99.9
Other Income			0.41		0.25		0.23		0.1
Total revenues			165.67		100.00		342.85		100.0
Cost of Materials			74.38		44.90		172.61		50.3
Changes in Inventories of			0.29		0.18		34.21		0.0
Finished Goods	&
Work-in-Progress - (Inc) / Dec
Employee Benefit Expenses			60.94		36.78		75.61		22.1
Other Expenses			36.28		21.90		11.9
Total Expenses			183.93		111.02		341.04		99.5
		FY 2024-25				FY 2023-24
Particulars		Amount		% to		Amount		% to
		(In Crs.)		Revenues		(In Crs.)		Revenues
EBIDTA		-6.22		-3.75		19.59		5.7
Depreciation		6.27		3.78		8.12		2.4
Finance Costs		5.77		3.48		9.66		2.8
Profit / (Loss) before Tax and		-18.26		-11.02		1.81		0.5
Exceptional Items
Exceptional Item - Expense /		0		0.00		0.04		0.0
(Income)
Profit / (Loss) before Tax		-18.26		-11.02		1.85		0.5
after Exceptional Items
Tax Expenses		0		0.00		0		0.0
Other comprehensive income		-0.18		-0.11		0.32		0.1
Total Comprehensive		-18.44		-11.13		2.17		0.6
Income for the year

Profitability and Financial risks ratios :

Key Ratios	FY 2024-25	FY 2023-24	Change (%)
Current Ratio	1.00	1.25	-0.20
Debt Equity Ratio	2.84	1.58	0.80
Operating Profit Margin (%)	-0.04	0.06	-1.67
Net Profit Margin (%)	(0.11)	0.01	-12.05
Interest Coverage Ratio	-2.63	1.64	-2.60
Debtors Turnover Ratio	3.04	7.75	-0.61
Inventory Turnover Ratio	1.78	3.12	-0.43
Return on Net worth (%)	-0.89	0.05	-18.80

1. The Net Equity has increased due to additional equity allotment and Debt has reduced on Redemption of 1%CRPS.

2. Decreased revenue and Increase in Rate of Interest

3. Decreased revenue and Increase in Rate of Interest & Employee Cost has effected in Net Profit Ratio.

4. Increased credit terms to new customers has impacted the Debtors.

5. Regulated the supply chain process and meet seasonal supply to customers, inventory levels are maintained.

6. Reduction in revenue has drastically impacted business and resulted to negative PAT.

Disclaimer

Statement 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 materially differ from those expressed or implied.

Forex Risk

The Companys policy is to systematically hedge its long term foreign exchange risks as well as short term exposures in line with its hedging policy. In addition to this, the company also has a natural hedge on the imports of the company which is almost 40%-50% of its Exports.

Strategic Response

In light of these challenges, CFL has redefined its operating model by diversifying into new markets, exploring new business categories, and enhancing its execution capabilities. The company has adopted globally accepted lean practices with a sharp focus on meeting tight delivery deadlines and ensuring operational agility.

CFLs renewed framework is anchored on three core pillars:

1. Capacity Utilization

2. Operational Excellence

3. Quality of Revenue

I. Capacity Filling and No Idle Capacity

For a contract manufacturing business like Celebrity Fashions Limited (CFL), optimal utilization of production capacity is critical. In the past, order concentration with a few large customers often resulted in idle capacity when demand cycles fluctuated. To overcome this, CFL has now embarked on a conscious strategy of:

Diversified Customer Base – Building relationships with new international buyers, regional retailers, and emerging fashion brands to avoid over-dependence on any single market or client.

Product & Category Expansion – Extending beyond core garments into adjacent apparel and lifestyle categories, thereby ensuring a consistent order pipeline across seasons.

Dynamic Capacity Allocation – Implementing a flexible production planning model where lines can be quickly repurposed across different product types, ensuring minimum downtime.

Demand Forecasting & Alignment – Collaborating closely with buyers to get early visibility of demand, aligning procurement and production schedules to prevent excess idle time.

This approach ensures that the companys infrastructure and workforce are fully utilized, which in turn reduces fixed cost pressure and enhances overall competitiveness.

II. Operational Excellence

CFL recognizes that the new global sourcing environment demands faster lead times, higher quality standards, and leaner operations. To achieve this, the company has committed itself to an operational excellence framework driven by:

Lean Manufacturing Practices – Adoption of global best practices such as Just-in-Time (JIT), Kaizen, and 5S to eliminate waste, reduce rework, and increase throughput.

Technology-Enabled Efficiency – Investment in digital planning tools, automated cutting, and real-time production monitoring to increase accuracy, reduce errors, and improve speed.

Skilled Workforce Development – Continuous training programs to upskill employees in multi-line operations, ensuring workforce flexibility and accountability.

Quality Assurance Systems – Strengthened in-line and end-line quality checkpoints with data-driven root cause analysis to minimize defects and ensure consistent buyer satisfaction.

Sustainability in Operations – Integrating eco-friendly processes like water-efficient washing, renewable energy adoption, and waste reduction, which not only drive efficiency but also enhance brand value with global buyers.

Through these measures, CFL is positioning itself as a reliable, agile, and competitive partner in the global apparel supply chain

III. Quality of Revenue / Fiscal Discipline

CFLs strategic shift is not merely about recovering lost volumes but about ensuring that future growth is profitable, sustainable, and resilient. The focus on Quality of Revenue is being achieved through:

Balanced Customer Mix – Expanding into markets beyond the US (Europe, Middle East, and domestic retail partnerships) to reduce geographical risk and currency exposure.

Higher-Margin Orders – Prioritizing value-added products, smaller fashion runs, and specialty apparel that command better margins instead of competing purely on volume and price.

Working Capital Discipline – Tight monitoring of receivables, inventory, and payables to ensure liquidity and financial stability.

Prudent Borrowing & Debt Management – Engaging with financial partners for structured repayment schedules and moratoriums where necessary, while maintaining a strict cap on new debt.

Cost Optimization Without Compromising Quality – Streamlining overheads and improving resource efficiency while safeguarding employee welfare and product standards.

This pillar ensures that every unit of revenue contributes positively to the companys long-term financial health and protects it from the vulnerabilities of overexposure to any single client, market, or product