Divyadhan Recycling Industries Ltd Management Discussions

INTRODUCTION

The Management Discussion and Analysis ("MD&A") contains forward-looking statements that reflect the Companys current views with respect to future events and financial performance. These statements are based on certain assumptions and expectations of future events and are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied herein due to changes in global and domestic economic conditions, government policies, market dynamics, and other external and internal factors.

Important external factors that may affect the Companys operations include the availability and cost of raw materials, cyclical demand patterns, price volatility, changes in government regulations and tax regimes, economic developments in India and the countries in which the Company operates, Indias trade agreements, currency exchange rates, and availability of a skilled and unskilled workforce. Readers are advised to read this in conjunction with the Companys audited financial statements.

OVERALL REVIEW

The global polyethylene terephthalate (PET) recycling industry has been experiencing robust growth, supported by rising environmental consciousness, stringent government regulations on plastic waste management, and the increasing adoption of sustainable packaging solutions by the FMCG, textile, and beverage industries. The textile industry continues to play a vital role in the Indian economy, contributing to more than 15% of the countrys total exports. It is one of the largest employment generators, providing direct and indirect employment to over 35 million people. The sector has experienced sustained growth due to rising domestic and international demand, government support initiatives, and infrastructure development. It is also a critical component of the "Make in India" campaign, with immense potential for further growth and foreign exchange earnings.

During the year under review, the Company continued its core textile operations focused on full production potential of recycled product.

A. Industry Structure and Developments

The Indian textile industry has shown consistent growth, supported by multiple government initiatives such as the Scheme for Integrated Textile Parks (SITP), Production Linked Incentives (PLI), and the automatic approval route for 100% Foreign Direct Investment (FDI). The Ministry of Textiles continues to play an active role by engaging with industry stakeholders and promoting development and modernization.

The global polyethylene terephthalate (PET) recycling industry has been experiencing robust growth, supported by rising environmental consciousness, stringent government regulations on plastic waste management, and the increasing adoption of sustainable packaging solutions by the FMCG, textile, and beverage industries. Recycled PET (rPET) flakes are increasingly being used as a substitute for virgin PET in multiple applications including packaging, textiles, fibers, sheets, films, and industrial strapping. In India, the implementation of Extended Producer Responsibility (EPR) guidelines, the ban on single use plastics, and increased investments in recycling infrastructure are expected to further accelerate the demand for rPET.

B. Opportunities and Threats -

Opportunities: -

Rising demand from FMCG, textile, and beverage companies for recycled PET products. - Growing emphasis on sustainability and ESG compliance across industries. - Export opportunities for high- quality, food-grade rPET flakes. - Government incentives and policies encouraging recycling and circular economy initiatives.

Threats: -

Price volatility of virgin PET affecting the competitiveness of rPET. - Dependence on the availability and quality of post-consumer PET bottle waste. - Competition from both organized and unorganized recycling players. - Quality control challenges due to inconsistent raw material supply.

C. Outlook: -

The Company remains optimistic about Indias long-term growth prospects and is committed to contributing meaningfully to the textile of the most essential human needs. We anticipate stronger performance in the textile business in the coming year, with demand expected to rebound steadily.

D. RISKS AND CONCERNS: -

Risk is inherent to business growth. Successful companies strike a balance between taking calculated risks and delivering risk-adjusted returns. The Company identifies, assesses, and mitigates internal and external risks through robust risk management practices.

Key concerns include:

Geopolitical and tariff-related risks, which may indirectly impact the Companys customers and their supply chains.

- Currency volatility and raw material price fluctuations.

- Interest rate changes and credit availability in the real estate sector.

The Company continues to monitor all risk factors and remains proactive in adjusting its business strategies to mitigate potential impacts

E. Internal Control System:

The Board has adopted system of internal control to ensuring the orderly and efficient conduct of its business, including adherence to the Companys Policies, the safeguarding of its assets, the prevention and detection of fraud and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures. The management reviews the control systems and procedures periodically to upgrade them. Presently the internal control systems are commensurate to the size and operations of the company.

F. FINANCIAL & OPERATIONAL PERFORMANCE:

During the financial year 2025-26, the Company continued its core activities of production of Rpet Flakes within the textile sector. The Company reported a Profit After Tax (PAT) of Rs. 170.53 lakh in 2025-26 as against Rs. 153.63 lakh in the previous year.

The turnover for the year stood at Rs. 7941.35 lakh, as compared to Rs. 5948.23 lakh in the previous year.

G. KEY RATIOS:

Particulars	31st March, 2026	31st March, 2025
1 Current Ratio	0.99	3.25
2 Debt - Equity Ratio	0.07	0.04
3 Trade Receivable turnover Ratio	21.13	14.94
4 Trade Payable Turnover Ratio	10.32	15.04
5 Net Profit ratio	0.02	0.02

H. HUMAN RESOURCE MANAGEMENT AND INDUSTRIAL RELATIONS:

The Company continued to enjoy harmonious and cordial relations amongst its entire employee. The key to the success of the Company lies in its people whose skills, expertise, and talent help the Company to achieve and sustain its market position. It is the peoples commitment, technical knowhow, innovative ability and performance driven mindset that enable to react swiftly and creatively to the evolving customer and market needs.

Human resources continue to be an invaluable and intangible asset and key success factor for the Company to grow and sustain its market position in a highly competitive and challenging environment. Your Company firmly believes that people are the pivotal force behind the growth and excellence in business operations. Focus on developing leadership skills and building talent for the future and the process of improving organizational and human capability through competency mapping of managerial positions in all areas of the Companys operations, continued as a major initiative. The Company is committed to provide the right environment to its employees to work and to inculcate a sense of ownership and pride.

I. CAUTIONARY STATEMENT:

Statements in this Report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied. Investors are cautioned that this discussion contains statements that involve risks and uncertainties.

Words like anticipate, believe, estimate, intend, will, expect and other similar expressions are intended to identify such forward looking statements. The Company assumes no responsibility to amend, modify or revise any forward-looking statements, on the basis of subsequent developments, information or events.