Digjam Ltd Management Discussions

ECONOMICS OVERVIEW

GLOBAL ECONOMIC OVERVIEW AND OUTLOOK

The global economy continues to face headwinds: growth has slowed, inflation remains sticky, and geopolitical tensions loom large. Major economies like the U.S. and China are slowing, prompting a downward revision of global growth forecasts. Nonetheless, a full-blown worldwide recession isnRs.t anticipated, though the global economy appears to be settling into a persistent low-growth pattern. Key policy levers·macroeconomic stability, structural reforms, climate-conscious strategies, and improved external economic conditions·will be critical to boosting longterm growth.

The global economy continues to face headwinds·including slower growth, persistent inflation, and geopolitical tensions· with major economies such as the U.S. and China particularly impacted. IMF (July 2025) sees a modest rebound: global growth at 3.0% in 2025, edging up to 3.1% in 2026, buoyed by fiscal support and easing trade distortions. Contrasting sharply, UNCTAD warns of a recessionary drift, projecting growth at only 2.3% in 2025, reflecting deepening trade tensions and heightened uncertainty. The OECD forecasts a slowdown to 2.9% for both 2025 and 2026, with the weakest performance expected in the U.S., Canada, Mexico, and China. PIIE aligns with the subdued outlook, revising global GDP growth to 2.7% in 2025, modestly rising to 2.8% in 2026, down from 3.2% in 2024. IMF (via Reuters) recently downgraded its global growth forecast from 3.3% to 2.8% for 2025, citing effects from century-high U.S. tariffs; it also cut the U.S. growth outlook to 1.8% and ChinaRs.s to 4.0%. Despite weak short-term prospects, there are early signs of stabilization. The World Economic Forum suggests that easing tariff threats, continued central bank support, and AI-driven investment could lift global GDP growth above 3% by mid-2026.

Summary (2025-2026 Global Growth Forecasts):

INDIAN ECONOMIC OVERVIEW AND OUTLOOK

IndiaRs.s textile fabric trading sector is projected to remain a key driver of the countryRs.s manufacturing-led growth in 2025, supported by rising domestic demand and export opportunities. The industry is benefiting from the governmentRs.s push to strengthen textile value chains through initiatives like the PLI Scheme for Textiles and the PM MITRA Parks, aimed at boosting infrastructure, integrating supply chains, and improving competitiveness.

A growing emphasis on technical textiles, sustainability, and digitization is reshaping the sector, while strategic policy measures, including extended import duty exemptions on cotton and incentives for innovation, are helping stabilize costs and encourage investment. With IndiaRs.s textile exports projected to cross USD 65 billion by FY 2025-26, the sector continues to play a vital role in the countryRs.s trade growth.

Although U.S. tariff hikes pose challenges·impacting around 70% of textile and apparel exports·the industry is diversifying trade ties by tapping into Europe, Australia, and other Asian markets, with the upcoming India-UK FTA expected to open new opportunities. Domestic consumption remains robust, driven by the rising middle class and a shift toward branded apparel, offering a cushion against global headwinds.

Overall, IndiaRs.s textile fabric trading business stands on strong fundamentals, supported by proactive policy, expanding infrastructure, and domestic market resilience. However, global demand volatility, raw material price swings, and trade disruptions remain key risks. Continued focus on innovation, diversification, and sustainable practices will be essential to sustaining long-term momentum.

MACROECONOMIC ENVIORNMENT

The financial year 2024-25 presented a challenging yet evolving backdrop for the textile trading business. Global geopolitical tensions, trade disruptions, and volatility in commodity prices created uncertainties in international markets, directly impacting IndiaRs.s textile value chain. While IndiaRs.s economy remained one of the fastest-growing globally, the sector faced significant headwinds from fluctuating raw material costs·particularly cotton and synthetic fibers·which added pressure on margins.

Persistent inflation in the first half of the year further dampened consumer purchasing power, leading to muted demand for apparel and home textiles both domestically and in key export markets. The textile trading segment, closely tied to retail sentiment and global supply chain stability, saw slower order flows and increased working capital requirements. Although inflationary pressures began easing toward the end of the year, the prolonged period of price volatility left a visible impact on trading volumes and profitability.

Amid these challenges, supportive government initiatives such as PLI schemes, duty exemptions, and PM MITRA parks provided some relief, enabling businesses to manage costs and strengthen competitiveness. However, the sector continues to navigate global trade uncertainties, tariff risks, and shifting consumer trends, underscoring the need for operational agility and market diversification.

INDUSTRY OVERVIEW

The Indian textile trading business, a critical link in the countryRs.s textile and apparel value chain, plays a vital role in facilitating domestic distribution and global exports. The sector is witnessing a phase of transformation, driven by evolving market dynamics, supply chain integration, and heightened focus on sustainability.

Key trends shaping the industry include increased adoption of organized trading networks, a shift from traditional wholesale models to digitally enabled B2B platforms, and growing demand for value-added and specialized fabrics such as technical textiles, eco-friendly materials, and performance fabrics. Rising consumer preference for branded and quality-certified products is prompting traders to strengthen partnerships with manufacturers and global brands, while e-commerce platforms and digital marketplaces are expanding market reach.

Government initiatives such as the PLI Scheme for Textiles, PM MITRA Parks, and import duty relief on raw materials are fostering investment and boosting IndiaRs.s competitiveness in global trade. With IndiaRs.s textile exports projected to cross USD 65 billion by FY 2025-26, the trading sector stands to benefit from both domestic consumption growth and diversified export markets.

BUSINESS OVERVIEW

DIGJAM is a leading entity in the textile trading sector in India, specializing in the trading of PV (Polyester Viscose) and PW (Pure Wool) fabrics. The company operates from its single trading unit located in Bhiwandi, Maharashtra.

The business is structured around the following key activities:

• Fabric Trading: The core business involves procuring and distributing high-quality PV and PW fabrics to domestic retailers, apparel manufacturers, and institutional clients.

• Specialty & Premium Fabrics: Focus on premium and value-added fabrics, catering to the evolving needs of fashion and apparel brands.

• Customer-Centric Approach: Committed to quality, timely delivery, and customer satisfaction, which is reflected in the companyRs.s strong, widely recognized, and valuable brand, DIGJAM.

The company leverages its efficient logistics network and strong supplier relationships to ensure seamless operations, maintaining its reputation as a reliable and customer-focused textile trading business.

PERFORMANCE REVIEW (FINANCIAL AND OPERATIONAL)

The company navigated a difficult operating environment, with results reflecting prevailing industry headwinds, alongside the discontinuation of its manufacturing unit at Jamnagar.

Financial Performance Highlights (Consolidated, YoY):

The company has demonstrated a strong turnaround in its financial performance for the year ended March 31, 2025, compared to the previous year.

Total Income: The company recorded a significant increase in total income, rising to Rs.1,839.92 lakh in FY 2024-25 from Rs.253.11 lakh in FY 2023-24, reflecting robust growth in domestic and export sales of PV and PW fabrics.

EBITDA and Margin: EBITDA improved substantially to Rs.333.30 lakh, with an EBITDA margin of 18%, up from Rs.18.80 lakh (7%) in the previous year. This indicates enhanced operational efficiency and cost management in the continued textile trading operations.

Profit Before Tax (PBT): The company reported a PBT of Rs.197.91 lakh in FY 2024-25, turning around from a loss of Rs.350.66 lakh in FY 2023-24. The PBT margin improved to 11% from -139% previously, highlighting the improved profitability of the continued operations.

Net Profit (Post-Exceptionals): Net profit from continued operations stood at Rs.197.91 lakh, compared to a loss of Rs.350.66 lakh in the prior year, reflecting the positive impact of higher sales, operational efficiencies, and lower finance costs.

Note: The company has discontinued its operations in Jamnagar, and any financial activity relating to that is shown separately as a discontinued operation. The above table represents only the continued operations of the textile business of Digjam.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS:

OPPORTUNITIES AND THREATS

Opportunities:

• Expansion in Premium, Man-Made, and Specialized Fabrics: Growing demand for value-added fabrics, technical textiles, and man-made fabrics (MMF) is creating opportunities for traders to cater to premium and niche segments.

• Market Penetration & Distribution Networks: Increasing organized retail, e-commerce growth, and omnichannel platforms are enabling traders to reach Tier 2/3 cities and expand their client base.

• Government Support: Policies like the PLI Scheme for Textiles, PM MITRA Parks, and import duty exemptions on raw materials·including synthetic and MMF inputs· are enhancing competitiveness and facilitating smoother operations for trading businesses.

• Global Sourcing Diversification (Rs.China Plus OneRs.):

International brands seeking alternative suppliers due to geopolitical tensions and tariffs are opening avenues for Indian traders to capture a larger share of global textile trade, particularly in man-made fibers and technical textiles. Free Trade Agreements (FTAs), such as the India- UK FTA, could further accelerate export opportunities.

Threats & Challenges:

• Intense Competition: Traders face stiff competition from global markets like Bangladesh, Vietnam, and China, which benefit from scale efficiencies and lower cost structures.

• Input Cost Volatility: Fluctuating prices of raw materials· including cotton, yarns, and man-made fibers·can directly impact margins and pricing strategies.

• Demand Volatility: As seen in FY25, subdued consumer demand·both domestically and in key export markets· remains a challenge for trading volumes.

• Sustainability and Compliance Pressures: Increasing emphasis on ESG (Environmental, Social, and Governance) standards requires traders to invest in sustainable sourcing, responsible man-made fiber production, supply chain transparency, and regulatory compliance, raising operational costs.

SEGMENT- WISE OR PRODUCT- WISE PERFORMANCE

The Company is engaged in the business of Branded Textile and Apparels. The Company is dealing only in this single segment and hence segment wise performance is not applicable to the Company.

RISKS, CONCERNS, AND MITIGATIONS

The textile trading business is exposed to several risks:

• Macroeconomic Risks: Fluctuations in inflation, exchange rates, and global economic growth could affect demand for textiles, impact export orders, and influence trading margins.

• Market-related Risks: The trading sector faces intense competition both domestically and internationally, with shifting consumer preferences and evolving demand for man-made fabrics, technical textiles, and specialty fabrics.

• Operational Risks: The business is vulnerable to supply chain disruptions, volatility in raw material prices (including cotton, yarns, and man-made fibers), and challenges in managing inventory across multiple markets and distribution channels.

The company is actively working to mitigate these risks by diversifying its product portfolio to include high-growth segments such as man-made fibers, technical textiles, and premium fabrics, strengthening supply chain resilience, and leveraging relationships with manufacturers and global buyers to maintain a competitive edge. Investments in digital trading platforms and logistics optimization are also being made to enhance operational efficiency and reduce market exposure.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has implemented a comprehensive internal control framework, critical for managing its complex and geographically dispersed textile trading operations. This framework is designed to ensure accuracy and reliability in financial reporting, operational efficiency, protection of inventory and other assets, and strict compliance with applicable laws and regulations.

The internal audit function continuously monitors the effectiveness and adequacy of these controls, with findings regularly reviewed by the Audit Committee of the Board. This oversight ensures that the trading business maintains high standards of governance, minimizes operational and financial risks, and supports sustainable growth across domestic and international markets.

HUMAN RESOURCES

Our employees are the backbone of our textile trading business and the key drivers of our success. The company is committed to fostering a culture of excellence, continuous learning, and inclusivity. We prioritize attracting, developing, and retaining the best talent in the industry. Through structured training and development programs, we enhance the skills and capabilities of our workforce, ensuring they are well-equipped to meet the evolving demands of the business and contribute effectively to our growth and operational excellence.

SUSTAINABILITY AND ESG HIGHLIGHTS

• Sustainable Sourcing: Increased use of eco-friendly, recycled, and certified fabrics, including man-made and specialty textiles.

• Environmental Management: Active monitoring of energy, water, and waste across supply chains to minimize environmental impact.

• Social Responsibility: Focus on fair labour practices, worker safety, and supplier accountability, ensuring ethical operations.

• Product Quality & Traceability: Maintaining high standards to ensure reliability and transparency across all traded products.

• Governance & ESG Oversight: Board-level ESG committees oversee risk management, compliance, and integration of sustainability into business strategy.

OUTLOOK

Despite challenges in FY 202425, the textile trading business is well-positioned for growth. Early signs of recovery in domestic and export demand, particularly for man-made, technical, and specialty fabrics, are encouraging.

Key focus areas for FY26:

• Market Recovery: Leveraging strong trading networks to capture renewed demand.

• Expanded Reach: Strengthening distribution channels across India and key export markets.

• Profitable Growth: Optimizing product mix and operational efficiency to enhance margins.

• Trade Opportunities: Preparing to capitalize on emerging FTA-driven export opportunities.

With a resilient strategy, robust operations, and sustainable practices, the company is poised to navigate market uncertainties and drive long-term growth.

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF -

Return on Net Worth (RoNW) stood at (197.00) % for FY 2024-25, compared to (76.14)% in FY 2023-24. The decline is primarily due to the erosion of shareholdersRs. equity arising from accumulated losses over previous years, which has substantially reduced the average net worth base. The CompanyRs.s net worth was further impacted by losses incurred during the year and exceptional charges related to the discontinuation of the Jamnagar manufacturing unit. Consequently, the negative RoNW reflects these equity reductions and should not be viewed in isolation from operational performance. The management remains committed to enhancing operational efficiencies, rationalising costs, and restoring profitability, with a view to strengthening the CompanyRs.s equity position over the coming years.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the companyRs.s objectives, projections, estimates, and expectations may constitute forward-looking statements as per applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Key factors that may affect the companyRs.s operations include global and domestic economic conditions impacting textile demand and supply, fluctuations in raw material and finished fabric prices, changes in trade policies, tariffs, and government regulations, as well as shifts in tax regimes and other applicable statutes.