Damodar Industries Ltd Management Discussions

1. Global Economic Overview

The global economy witnessed moderate growth during FY 2025-26 despite continued geopolitical tensions, persistent inflationary pressures in certain economies, fluctuating commodity prices and evolving global trade dynamics. While inflation moderated across several advanced economies, monetary policies remained relatively restrictive for a significant part of the year, resulting in cautious consumer spending and slower industrial growth in some regions.

Global supply chains continued to stabilise compared to previous years, supported by improved logistics and easing freight costs. At the same time, international businesses increasingly focused on supply chain diversification, sustainability, digital transformation and responsible sourcing. The “China+1” sourcing strategy continued to benefit emerging manufacturing economies, including India, creating opportunities across the textile and apparel value chain. Sustainability continued to remain one of the key priorities for global textile buyers. Increasing regulatory requirements relating to environmental compliance, circular economy practices, recycled materials, traceability and carbon footprint reduction encouraged manufacturers to invest in greener technologies and sustainable manufacturing processes.

India continued to remain one of the fastest-growing major economies during FY 2025-26, supported by robust domestic consumption, strong public infrastructure investments, favourable demographic trends and prudent macroeconomic policies. Government initiatives aimed at enhancing manufacturing competitiveness, improving logistics infrastructure, promoting exports and encouraging investments continued to strengthen the countrys industrial ecosystem.

The Governments continued emphasis on initiatives such as “Make in India”, the Production Linked Incentive (PLI) Scheme, PM MITRA Parks and the National Technical Textiles Mission is expected to strengthen Indias position as a global manufacturing hub. Rising urbanisation, increasing disposable incomes and expanding organised retail continue to support domestic demand for textile and apparel products.

The Indian textile and apparel industry remains one of the largest contributors to the countrys manufacturing sector and is the second-largest employer after agriculture. The industry encompasses the complete textile value chain, including fibre, yarn, fabric, garments, technical textiles and home textiles, making India one of the few countries with an integrated textile manufacturing ecosystem.

During FY 2025-26, the industry demonstrated resilience despite fluctuations in raw material prices, global demand uncertainties and competitive pressures from other textile-exporting nations. Domestic demand remained healthy, while export markets showed gradual signs of recovery in key regions.

The increasing preference for sustainable products, recycled fibres, value-added yarns and innovative textile solutions continued to create new growth opportunities. Growing investments in technical textiles, automation, digitisation and smart manufacturing further enhanced the competitiveness of Indian textile manufacturers.

The Indian yarn industry continues to benefit from its integrated textile value chain, abundant availability of cotton and man- made fibres, skilled workforce and well-established spinning infrastructure, making India one of the worlds leading producers and exporters of cotton yarn. Indias growing role in the global "China+1" sourcing strategy, coupled with increasing investments in automation, sustainable manufacturing and value-added yarns, has further strengthened the industrys global competitiveness.

The industry is also supported by favourable Government initiatives, including the PM MITRA Parks Scheme, the Production Linked Incentive (PLI) Scheme and the National Technical Textiles Mission, which are aimed at strengthening manufacturing infrastructure, promoting exports and encouraging technological advancement. Rising domestic consumption, increasing demand for specialty, recycled and sustainable yarns, along with expanding applications in technical textiles, continue to provide a strong foundation for the long-term growth of the Indian yarn industry.

The Indian yarn industry continues to operate in a dynamic and competitive business environment. Volatility in cotton and man- made fibre prices, rising energy, logistics and labour costs, and fluctuations in foreign exchange rates continue to exert pressure on operating margins. The industry also faces intense competition from major yarn-exporting countries such as China, Bangladesh and Vietnam, necessitating continuous focus on cost optimisation, product innovation and operational efficiency.

In addition, evolving global sustainability standards, stricter environmental regulations and increasing customer expectations for traceability and responsible sourcing require continuous investments in advanced manufacturing technologies and sustainable production practices. Geopolitical uncertainties, changing international trade policies and supply chain disruptions also pose challenges to export-oriented businesses. Nevertheless, the Indian yarn industry remains well positioned to address these challenges through technological advancement, product diversification, operational excellence and expansion into new domestic and international markets.

The Indian yarn industry continues to present significant growth opportunities, supported by increasing domestic consumption, improving export demand and the global shift towards diversified sourcing under the "China+1" strategy. Growing demand for value-added, specialty, melange, recycled and sustainable yarns is creating new opportunities for manufacturers with strong product development capabilities and efficient manufacturing processes.

The increasing adoption of automation, digital manufacturing and advanced spinning technologies is expected to improve productivity, quality and operational efficiency across the industry. Furthermore, expanding applications of technical textiles, increasing preference for environmentally sustainable yarns and continued Government support for the textile sector are expected to drive innovation and product diversification. These developments, together with the exploration of new export markets and growing demand for premium yarn products, are expected to strengthen the long-term growth prospects of the Indian yarn industry.

Discussions often center on strategies to address the challenges while capitalizing on opportunities. Key aspects include investing in modernization and technology upgrades to enhance efficiency and competitiveness. There is also a focus on promoting sustainable practices throughout the value chain, from sourcing to production and waste management. Strengthening supply chain management is crucial to reduce delays and costs. Developing skilled labor through focused training programs and industry-academia collaborations is also a priority. Diversifying product portfolios to cater to changing consumer preferences and exploring emerging markets is another key area of discussion. Finally, collaborating with government and research institutions to foster innovation and address industry-specific challenges is considered essential for future growth.

In essence, the Indian textile sector is navigating a period of significant transformation, driven by technological advancements, evolving consumer demands, and a growing emphasis on sustainability. By strategically addressing challenges and capitalizing on opportunities, the industry aims to strengthen its position as a major player in the global textile market and contribute substantially to Indias economic growth.

Damodar Industries Limited is one of Indias leading manufacturers of high-quality cotton, melange, specialty, slub, multi- blend and value-added yarns catering to the domestic as well as international markets. Backed by over four decades of industry experience, the Company has established a strong reputation for product quality, innovation and customer-centric solutions. Its diversified product portfolio, long-standing relationships with customers and suppliers, and focus on operational excellence have enabled the Company to maintain a strong position in the highly competitive yarn industry.

During FY 202 5-26, the Company continued to strengthen its operational and financial performance through prudent cost management, improved operational efficiencies and a continued focus on value-added products. Despite a challenging business environment characterised by volatility in raw material prices and global market uncertainties, the Company maintained stable profitability, strengthened its liquidity position and improved its capital structure. The improvement in key financial parameters, including the Debt-Equity Ratio and Interest Coverage Ratio, reflects the Companys disciplined financial management and focus on sustainable growth.

Innovation continues to remain a key driver of the Companys long-term growth strategy. Damodar Industries has a well- equipped Research & Development Centre supported by experienced designers and technical professionals who continuously develop innovative yarn blends and value-added products to meet the evolving requirements of customers across domestic and international markets. The Company offers an extensive range of specialty yarns catering to apparel, home textiles, knitting and fashion segments.

The Company has made significant investments in modern manufacturing technologies to enhance productivity, product quality and operational efficiency. Its advanced spinning facilities include state-of-the-art Open End Rotor Spinning machines, Italian technology-based equipment and other modern manufacturing systems capable of producing a wide range of premium and value-added yarns. Continuous investments in technology upgradation, product innovation, sustainability initiatives and process improvements have strengthened Damodar Industries position as one of Indias leading manufacturers of specialty and value-added yarns.

Damodar Industries Ltd is actively engaging in green initiatives to promote sustainability. This includes leveraging renewable energy sources like solar power and incorporating recycled fibers into their manufacturing processes.

Damodar Industries Limited remains committed to integrating sustainable practices into its manufacturing operations. The Company continues to leverage solar energy as part of its renewable energy initiatives to reduce dependence on conventional power sources, improve energy efficiency and lower its carbon footprint. The adoption of solar energy not only contributes to cost optimisation but also supports the Companys commitment towards responsible manufacturing and environmental stewardship. These initiatives strengthen operational sustainability while enhancing the Companys competitiveness in both domestic and international markets.

Sustainability remains a key focus area for the Company, with increasing emphasis on the use of recycled fibres and environmentally responsible manufacturing practices. The growing global demand for sustainable yarns, driven by increasing consumer awareness and the sustainability commitments of leading international brands, presents significant opportunities for the Company. By incorporating recycled fibres and promoting resource-efficient manufacturing processes, the Company contributes to the principles of a circular economy through reduced waste generation, conservation of natural resources and lower environmental impact.

The Company continues to focus on product innovation, process optimisation and sustainable manufacturing technologies to develop high-quality value-added yarns that meet evolving customer requirements. These initiatives, coupled with continuous improvements in energy efficiency, responsible sourcing and environmental management, reinforce the Companys long-term commitment to sustainable growth and responsible business practices.

During the financial year 2025-26, Damodar Industries Limited demonstrated resilience amidst a challenging business environment characterised by fluctuations in raw material prices, changing global demand patterns and cost pressures. The Company reported Total Income of Rs. 43,954.92 lakh as against Rs. 44,664.74 lakh in the previous year, registering a growth of 4.30%, supported by stable operational performance and continued focus on value-added yarns.

The Company reported EBITDA of Rs. 2,424.49 lakh during the year as compared to Rs. 4,676.13 lakh in the previous year. Profit After Tax (PAT) stood at Rs. 537.24 lakh as against Rs. 540.17 lakh in FY 2024-25, reflecting stable profitability despite margin pressures arising from higher input costs and competitive market conditions. Net Worth increased to Rs. 14,787.48 lakh from Rs. 14,397.85 lakh in the previous year, demonstrating the Companys continued focus on strengthening its financial position.

The Companys financial ratios continued to reflect prudent financial management. The Debt-Equity Ratio improved to 1.13 from 1.31, indicating a stronger capital structure and lower financial leverage. The Current Ratio improved to 1.41 from 1.37, reflecting a comfortable liquidity position, while the Interest Coverage Ratio increased to 2.33 from 2.12, demonstrating an improved ability to service finance costs. Operating Profit Margin remained largely stable at 5.63%, highlighting consistent operational performance despite market volatility.

Overall, the Companys financial performance reflects its continued emphasis on operational efficiency, disciplined cost management, product diversification and sustainable growth. The management remains focused on improving profitability, optimising working capital, strengthening the balance sheet and creating long-term value for all stakeholders.

Human resources continue to be one of the Companys most valuable assets and play a vital role in achieving sustainable growth and operational excellence. The Company is committed to fostering a performance-driven, inclusive and safe work environment that encourages innovation, teamwork and continuous learning. The Company believes that employee engagement, skill enhancement and leadership development are essential for strengthening organisational capabilities and achieving long-term business objectives.

The Company continues to invest in employee training and development through various technical, functional and behavioural learning programmes aimed at enhancing productivity and professional competencies. Equal emphasis is placed on maintaining high standards of health, safety and employee well-being across all manufacturing facilities. The performance management system is designed to recognise merit, encourage individual growth and reward excellence, thereby fostering a culture of accountability and continuous improvement. Cordial industrial relations prevailed throughout the year.

Statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may constitute "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to various factors, including changes in economic conditions, government policies, global market developments, raw material prices, foreign exchange fluctuations, interest rates, energy costs, competitive pressures and other risks and uncertainties beyond the Companys control. The Company undertakes no obligation to publicly update or revise any forward-looking statements based on subsequent events or developments, except as required under applicable laws.