Faze Three Ltd Management Discussions

Management Discussion and Analysis Report for the Financial Year under review as stipulated in Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015-

ECONOMY AND OUTLOOK

India closed FY 2025 26 as the fastest-growing major economy for the fourth consecutive year, with the macro picture stronger than what was projected at the start of the year. Growth was front-loaded and broad-based. India remained among the fastest-growing major economies during FY 2025 26 despite an uncertain global environment marked by geopolitical tensions, elevated trade barriers and supply-chain realignments.

In 2025-26, Inflation was the standout positive surprise. Headline CPI declined for nine consecutive months to an 8-year low of 1.6% in July 2025 before edging up to 2.1% in August, GST rate rationalisation from 22 September 2025 (GST 2.0) lowered consumer prices across ~ 10 to 12% of the CPI basket. Inflation then began to normalise CPI rose to 3.4% in March 2026 and 3.48% in April 2026, the fastest reading in a year but still well below the RBI target midpoint. The inflation outlook for FY27 is now hostage to crude. every US$10/bbl rise in oil prices increases Indias current account deficit by 0.4 0.5% of GDP, and if oil sustains at US$100/bbl, average inflation in India will likely rise above 4.5% for FY 2026-27, with the CAD moving towards 3% of GDP versus a 1.5% baseline. The vulnerability extends beyond crude virtually all of Indias LPG and Natural Gas Liquids imports, and 60% of natural gas imports, come from the Middle East, particularly Qatar, with potential spillovers to fertiliser and food production.

Global conditions remained mixed during FY 25-26. The year opened with an unprecedented tariff shock an escalation in early April 2025 before pauses and a de-escalation in May 2025. The US economy continued to show resilience with solid employment and moderate growth despite higher interest rates with AI-related trade grew close to 40% versus a 6.5% global average in 2025, while parts of Europe showed gradual improvement aided by lower energy prices and targeted fiscal support enabling the Fed, ECB, and RBI to ease. Trade policy shifts/ protectionism, especially elevated tariffs and trade restrictions introduced by major economies during 2025 26, reshaped global supply chains and trade flows, prompting firms to reconfigure global sourcing strategies.

Inflation pressures moderated across several major economies during the year, allowing central banks especially the U.S. Federal Reserve and the European Central Bank to consider policy easing, however, the outlook softened materially in early FY27 with the US-Israel/Iran conflict abruptly reversed recent disinflationary trends. Major central banks have abandoned their previous easing strategies, shifting instead to extended rate pauses or hawkish holds to stabilize market expectations. This transition marks the definitive end of the negative government bond rate era, which concluded in 2022. Geopolitical tensions, including ongoing conflicts in Eastern Europe and the Middle East, volatility in commodity and energy markets, as well as uncertainties in U.S. China relations, continue to cast a shadow over the global outlook. These developments have increased risks relating to supply-chain disruptions, energy security and global financial market volatility.

In contrast to the cautious outlook for much of the developed world, continue demonstrating comparatively stronger growth momentum, with India leading the pack. According to International Monetary Fund (IMF) estimates released during 2026, Indias GDP growth is expected to remain resilient at around 6-6.5% in FY 2026 27, supported by strong domestic consumption, government-led infrastructure investments, manufacturing growth and digital transformation initiatives. Indias economic growth is driven by strong domestic demand, structural reforms, and sustained government investment. Indias performance is being bolstered by a number of positive factors, including a young and growing workforce, rising urbanization, and increasing digital penetration. The governments focus on infrastructure development, particularly in roads, railways, and energy, is creating a strong foundation for future growth.

Indias resilience is also reflected in its strong fiscal and external position, healthy GST collections, robust digital economy growth, and sustained momentum in infrastructure spending, which continue to support domestic consumption and manufacturing activity.

Indias services sector, especially in information technology and financial services, remains a global leader. At the same time, efforts to boost manufacturing under initiatives like Make in India and Production Linked Incentive (PLI) schemes are beginning to show results. These policies aim to integrate India more deeply into global supply chains and reduce dependence on imports. The technical textiles segment continues to emerge as a significant growth area for India, supported by rising demand across sectors such as infrastructure, healthcare, mobility, defense and industrial applications. Government initiatives under the National Technical Textiles Mission and increasing global demand for specialized textile products are expected to create long-term opportunities for Indian manufacturers. Furthermore, Indias improving ease of doing business, enhanced logistics networks, and digitized public service delivery systems are helping to attract foreign direct investment.

India also continues to benefit from U.S.-led restrictions on Xinjiang-linked Chinese cotton and the global China Plus One source strategy, with global firms expanding their sourcing and manufacturing base across geographies including India. This is particularly evident in sectors like technical textiles, Man-Made Fiber (MMF)-based apparel, value-added textile exports, and electronics. MMF-based textiles and apparel continue to witness relatively faster growth globally compared with traditional cotton-based products. India is increasingly focusing on expanding MMF manufacturing capabilities and value-added product offerings to improve global competitiveness and diversify export opportunities.

TEXTILE INDUSTRY

Indias textile industry among the oldest and most diverse in the world continues to be a cornerstone of the countrys economic and social framework. FY26 was a year the Indian textile industry will not forget, it was hit by the most severe trade shock in decades. The tariff escalation came in waves, began with 10% on 2 April 2025 and was rapidly escalated, with rates for India rising to 25% by 7 August 2025 and to 50% by 28 August, The 50% wall lasted nearly six months until early February 2026 coinciding with the peak Christmas-stocking ordering season for US retailers, Despite this, the headline number for the year held up better than expected. As of 2026, the Indian textile and apparel industry has an estimated size of USD 179 billion and it remains the second-largest employment generator in India after agriculture, providing direct employment to over 45 million people plus 100 million in allied sectors, and contributing approximately 2.3% to national GDP, around 11% to manufacturing gross value added and 8.63% to total exports. Looking ahead to FY 2026-27, the industry is positioned for steady growth, driven by expanding domestic consumption, increasing global demand, and strong government support.

The Indian textile and apparel industry spans the entire value chain from fibre, yarn and fabrics to apparel, home textiles, handicrafts and technical textiles. Indias status as the second-largest textile exporter globally, after China, is underpinned by its strong raw material base especially in cotton, where India ranks as one of the largest producers worldwide, contributing about 23% of global cotton production.

FY 2025-26 was a year of tariff-led uncertainty, geopolitical volatility and margin pressure for export-oriented businesses. However, the same environment also strengthened Indias relevance in global home and technical textile sourcing, supported by China Plus One strategies, tariff realignment and supply-chain diversification by large international retailers.

Global trade realignments and tariff differentials are also expected to create medium-term opportunities for Indian manufacturers and exporters. During FY 2025 26, uncertainty in tariff structures and trade restrictions imposed on Chinese exports by certain major economies, compared with relatively less dispute with India, enhanced Indias attractiveness as an alternative sourcing destination and escalating China plus one trend. This trend is expected to support incremental investments and supply-chain diversification towards India across manufacturing and textile sectors.

Further, progress on proposed and ongoing trade agreements with key markets such as the European Union, the United Kingdom and the United States is expected to strengthen Indias export competitiveness over the medium to long term. The full benefits of these trade arrangements, including improved market access and supply-chain integration opportunities, are likely to become progressively visible over the next one to two years.

Domestically, the growth of the sector continued to be fueled by rising urbanization, growth in organized retail, increasing penetration of e-commerce platforms and increasing disposable incomes. Industry estimates indicate that the market may reach approximately US$ 350 billion by 2030.

On the export front, Indias global competitiveness continues to improve. According to data released by the Ministry of Textiles, In FY2025-26, the countrys textile and apparel exports reached 3.16 lakh crore (approximately USD 37-38 billion), up 2.1% from the prior year, with targets of USD 45 billion or higher in coming years supported by China+1 supply-chain diversification and FTAs. The United States remains Indias largest export market, accounting for over 28-29% of total textile exports, particularly in segments like home textiles.

Home textiles, in particular, have emerged as a key growth driver. India has consolidated its position as the second-largest exporter of home textiles globally, accounting for nearly 7-8% of the global trade in this segment. Bed linen, bath towels, curtains, and rugs are key categories, with bed and bath linen alone making up around 70% of the Indian home textile market. The annual turnover of the home textiles industry in India is estimated to be around INR 1,137 billion (approx. USD 11.9 billion) as of 2026, and it is expected to grow steadily through 2027, driven by both export and domestic demand.

The Government continues to support the sector through various policy initiatives like the PM MITRA (Mega Integrated Textile Region and Apparel) Parks and the Production Linked Incentive (PLI) scheme, RoSCTL and RoDTEP export incentive schemes, infrastructure development initiatives and free trade agreement negotiations with key global markets. These measures are intended to improve production efficiency, catalyse job creation across manufacturing and allied services, and enhance export competitiveness by attracting investment, creating globally competitive manufacturing hubs, encouraging integrated value chains, scale production and greater participation by domestic and global brands.

During FY 2025 26, the Government also continued efforts towards strengthening market access through bilateral and regional trade agreements, which are expected to improve export competitiveness and integration of Indian textile manufacturers into global value chains.

FAZE THREE LIMITED COMPANY OVERVIEW

Faze Three Limited (hereinafter referred to as FTL/the Company) is engaged in manufacturing and exporting superior quality high-end Home Textile products supplying to top retailers across the globe. It has a diversified product line, main products include Bathmats, Bath Rugs, Chairpads, Blankets, Rugs, Throws, Floor covering, Bed spreads, Patio Mats, Seat covers etc., The Company is known for its sheer pursuit for innovation, ideas and designs which reflects in its products and has enjoyed being a preferred vendor to most of its customers. Majority of FTLs revenue (90%) is derived from Exports to USA, UK and Europe region. The Company has eight state of the art facilities situated at Dadra and Nagar Haveli, Vapi (Gujarat), Aurangabad (Maharashtra) and Panipat (Haryana) in India. Refer www.fazethree.com for more details.

The company has significantly invested across all factories / product lines to scale up to 2-3x of current level of operations in terms of capacity. The scale will happen within the same customer base by adding volumes in products or introducing new product category to a customer. We intend to grow and double volumes every 4-5 years sustainably.

PERFORMANCE - YEAR 2025-26

Financial Performance

1. Delivered a robust 6-year CAGR of 20 % in Revenue, 16 % in EBITDA, 11% in EPS.

2. Q4 FY-2026 recorded the highest-ever quarterly revenue run rate, crossing INR 280 Cr

3. Total Consolidated Income for year ended March 31, 2026, stood at INR 932.76 Crores vs INR 701.74 Crores for year ended March 31, 2025 representing a 33% year-on-year growth. This strong performance was achieved despite tariff-related disruptions between April 2025 and February 2026 and a period of significant global trade uncertainty, underscoring the Companys resilient execution capabilities and sustained customer demand.

4. EBIDTA at INR 92.24 Crores vs INR 92.23 Crores and PAT at INR 33.57 Crores vs INR 40.66 Crores

5. During the year under review, the Companys margins were impacted due to volatility and uncertainty relating to global trade policies and tariff structures, particularly during the first half of the financial year. With improving visibility on demand and evolving global supply-chain realignments, the Company remains focused on significantly improving margins while efficiently managing the anticipated growth in business volumes going forward.

6. Earnings Per Share for year ended March 31, 2026, INR 13.80 per share versus INR 16.72 per share for year ended March 31, 2025.

7. Invested over ~INR 300 Crores from internal accruals across units for Expansion, new machinery, new location, new technologies, new product lines & debottlenecking since FY 2019

Awards

The Company was awarded Dun & Bradstreet Business Enterprises of Tomorrow Summit 2025 Business Excellence Awards in Category - Best Global Business in June 2025.

The Company was awarded Dun & Bradstreet - G7 CR Technologies Business Enterprises of Tomorrow Summit 2024 Business Excellence Awards in Category Mid-Corporate Textile & Textile Articles in June 2024.

The Company awarded status of Four-Star Export House from Ministry of Commerce & Industry (Upgraded from Three-Star Export House in November 2023).

The Company was awarded with Dun & Bradstreet "Business Enterprises of Tomorrow 2022" Business Excellence Awards in Category Mid-Corporate Textile & Textile Articles on November 29, 2022.

The Company was recognized as one of the "Best Global Business Category (Mid-Corporates) in India 2021"by Dun and Bradstreets Business Excellence Awards 2021 on November 24, 2021.

The Company was recognized as one of the leading "Mid-Corporates in India - 2020 "by Dun and Bradstreets premier publication released on November 25, 2020.

The Company was awarded the Dun & Bradstreet - RBL Bank SME Business Excellence Awards 2019 in the Mid- Corporate Segment for excellence in the Textile Sector.

Ratings

The Credit Rating of the Company was re-affirmed at CARE A1 (Short term); CARE A (Long term) (in September 2025).

Products

The Company has a diversified product basket which includes cotton and rubber backed bathmats, blankets, durries, throws, hand tufted carpets and rugs made of cotton and wool, cushion covers, curtains as well as poly cotton and cotton mask, table covers, patio mats, seat covers amongst many others under the technical textiles ambit.

Geographic distribution

Majority (~90%) of Revenue is derived from direct exports to organized retail in USA, UK and Europe region.

SWOT ANALYSIS

The Companys strengths lie in a well-diversified product portfolio and a wide global customer base.

1. Long-standing relationships with reputed international retailers across multiple categories ensure stable revenue visibility. With over three decades of operational experience since its incorporation in 1985, the Company has demonstrated resilience through various economic cycles.

2. Its in-house design and development capabilities, coupled with globally benchmarked manufacturing facilities, enable the quick introduction of new products.

3. The business operates with a long-term debt-free capital structure, giving it the flexibility to expand capacity without increasing leverage.

4. Its focus on value-added products, efficient execution and customer-centric manufacturing model positions the Company favorably in an increasingly diversified global sourcing environment.

5. Products are positioned in the $10 $25 retail price range, a segment that historically remains resilient during downturns.

6. Additionally, the Companys expanded capacity and order-backed manufacturing model with direct exports ensure efficient operations and readiness to capture demand surges.

Opportunities for the company are substantial-

1. Global supply-chain diversification strategies adopted by large international retailers and brands, particularly under the "China Plus One" framework, are creating incremental sourcing opportunities for Indian textile manufacturers.

2. In addition, relatively favourable tariff positioning for Indian exports in certain categories, compared with China and some competing geographies, is expected to support Indias competitiveness in global textile and home textile markets.

3. For bath-mats and made-ups specifically: the combination of a US tariff, UK CETA implementation, EU FTA rollout, and continued cotton input-cost easing creates the cleanest export setup the segment has had in three years, with expected to improve market access and export competitiveness over the medium term, provided crude/freight stay contained and the trade deal sticks.

4. The company is well-positioned to expand in categories historically dominated by China, such as floor coverings, table and outdoor products, window curtains, and other value-added textiles. The strong US jobs market, rising incomes, and post-inflation recovery support sustained consumption in home textiles.

5. Further, its investment in Mats and More Pvt. Ltd., Wholly Owned Subsidiary is aimed at expanding its presence in the floor coverings segment, particularly in patio mats and other outdoor textile products, thereby enabling deeper engagement with existing customers and addressing emerging demand opportunities. The subsidiary has an installed revenue capacity of approximately INR 150 crore, with current capacity utilisation at around 30%, providing significant headroom for scalable growth in line with confirmed business visibility.

6. The government incentives, such as PM MITRA Parks and the PLI scheme, RoSCTL and RoDTEP export incentive schemes present major long-term growth catalysts.

On the other hand, the Company faces challenges that could impact its growth trajectory.

1. Global demand conditions remain susceptible to macroeconomic uncertainties, inflationary pressures, geopolitical tensions and changes in international trade policies.

2. Any slowdown in key export markets, particularly the United States and Europe, may affect demand for textile and home textile products.

3. Volatility in raw material costs and foreign exchange rates poses ongoing challenges to maintain margins.

4. Additionally, intense competition from China, other South Asian countries, and low-cost producers globally continues to exert pricing pressure.

5. Further, changes in tariff structures, delays in implementation of trade agreements or adverse regulatory developments in export markets may impact the pace of sourcing diversification towards India.

6. Heavy dependence on export markets means the business remains vulnerable to external demand cycles and global economic conditions.

However, the Company boasts an operational track record spanning four decades, having been incorporated in 1985. Over this period, it has successfully navigated multiple economic, geopolitical, and industry-specific cycles, demonstrating resilience and adaptability in the face of challenges such as global recessions, raw material volatility, currency fluctuations, and shifting trade policies. This long-standing presence in the market reflects not only the stability of its business model but also the depth of its customer relationships, the strength of its leadership team, and its ability to evolve product offerings in line with changing consumer preferences and market trends.

INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

Companys internal controls are commensurate with its size and the nature of Companys operations which monitor business processes and is based on a solid framework of policies, procedures, behaviours, and organisational practices designed to ensure efficient operations, dependable reporting, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring full compliance with all applicable laws and regulations.

Further, the strong Management Information System is an important component of the Companys control environment. This system is vital considering it provides reliable financial and operational information and timely data, allowing management to make more informed decisions and improving overall governance.

Internal control activities and monitoring are carried out by professionals who possess the essential experience, objectivity, and in-depth knowledge of both the Companys operations and the industries in which it operates

These systems are working effectively and are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all levels.

The efficacy of the internal control system is validated by internal auditors and re-examined by the management. The Internal Control systems are quarterly assessed by the Audit Committee and the report of the same is submitted to the Board for its review. Our Audit Committee has concluded that, as of March 31, 2026, our internal financial controls were adequate and operating effectively.

HUMAN RESOURCES/ INDUSTRIAL RELATIONS

The Company has 8 state-of-the-art manufacturing facilities situated at Dadra and Nagar Haveli, Gujarat, Haryana and Maharashtra in India and employs over 3000 workers directly and indirectly.

The Company regards its human capital as the most critical driver of its competitive advantage in a labour-intensive home textiles business. The Company fosters a growth-oriented work culture with a safe, productive, and healthy environment. The Company prioritizes the development of all its employees through personnel management system with structured training and skill-development programmes across units aimed at building a deeper internal talent pipeline. The Company is led by an experienced management team with vast domain knowledge. The operations are overlooked by its directors / professional management who are highly qualified and have extensive industry experience. The management is also backed by well-defined second-tier management with designated functional heads for each department. The Professional Management along-with second-tier management & functional heads provides training for skill development as well as grooms leaders as a part of succession planning to ensure business continuity. The Company has continued its investment in Human Resource and Talent acquisition during last year.

The Company continuously taking efforts to provide safe working environment, trainings, strict standards of personal hygiene, necessary infrastructure and equipment across all our operations. We are equally focused on protecting the lives and livelihoods of all our employees. The operations of the Company are conducted in such a manner that it ensures safety and security of all the workers and employees.

POLLUTION AND ENVIRONMENTAL CONTROLS

The Company has continued its efforts to have sustainable practices to conserve energy and adoption of clean energy across our manufacturing operations.

The Company is continuously looking for ways to replace fossil fuel energy with renewable energy. Air emissions from boilers and process equipment are supported by the progressive transition to cleaner fuels including Piped Natural Gas (PNG) for thermal applications at the processing unit in North India from Coal Based Boilers to Gas Based Boiler and has signed agreement for supply of Gas with Indian Oil Adani Gas Private Limited. These efforts have also helped improve environment in surrounding area as well as reduced reliance on Coal Import for India. The Company operates in-house Effluent Treatment Plants (ETPs) at its dyeing facilities in Silvassa and Panipat to treat process wastewater generated from its dye houses, with treated water being recycled back into utility and process applications to the maximum extent feasible. On the energy front, the Company has commissioned 3.5 MW of rooftop solar power capacity at its Silvassa facility supplying ~35% of share of the units captive power requirement. Companys finished goods warehouses (capacity upto 130 HQ containers at a time) are operated by fully Electric lithium-ion fleet of forklifts / reach trucks. Apart from being cost effective, it enhances goal & commitment towards ESG. In line with its commitment to sustainable manufacturing and energy conservation, the Companys initiatives are reinforced by a robust framework of globally recognized certifications. The ISO 14001 Environmental Management System certification underscores the Companys structured approach to minimizing environmental impact through efficient resource utilization and waste reduction.

The Company endeavors to have minimum impact on the environment with sustainable production methods, use of energy efficient and environment friendly technology, the progressive use of recycled and eco-friendly raw materials across its product range, etc. Sustainability has always been a culture in the Company which believes in giving back to the environment and the society. It believes that profitability not only depends on the actual profit but also the benefit derived by the community through the activities of the Company. Water conservation continues to receive focused attention through rainwater harvesting, condensate recovery, and process optimisation in the dye houses.

Along with collection and processing, your Company is also progressing towards making plastics packaging circular by eliminating unwanted plastics by moving from Conventional polybag to Recycled polybags as well as ensuring there is no plastic waste. The Company continues to focus on sustainable raw materials, including organic cotton, recycled polyester, and 100% recycled polypropylene in its product offerings. All manufacturing processes are designed to minimize carbon footprint and are regularly upgraded to enhance environmental performance.

Additionally, certifications such as OEKO-TEX Sustainable Textile Production (STeP), Global Recycled Standard (GRS), Higg Index, and Better Cotton Initiative (BCI) further validate the Companys adherence to environmentally responsible practices across its energy, water, and material usage. These certifications not only ensure regulatory compliance but also drive continuous improvements in the Companys energy management systems, fostering a culture of sustainability and accountability at all levels of operations.

All the manufacturing facilities of the Company have requisite permissions and certificates under the pollution and environmental laws of the state. The Company actively participates in the sustainability programs with international standards by adopting strict measures and alternatives to control the negative impact on the environment which includes optimum production methods, use of renewable energy, responsible sourcing, use of recycled materials, zero waste, high health and safety standards, etc., Such efforts by the company are regularly applauded by the customers which help them tick their responsible sourcing commitments.

OUTLOOK

The Company enters FY 2026 27 with a constructive outlook, supported by a meaningful improvement in the trade environment, a steadily diversifying export market mix with pipeline of opportunities in all of our core business categories, the growth potential is immense based on customers projections subject to ones ability to manufacture, bandwidth across design & development to turnaround faster. Beyond the United States, the implementation of the India UK Comprehensive Economic and Trade Agreement (CETA) eliminating duties on up to 99% of Indian textile exports to the UK that previously attracted tariffs of up to 12% together with the conclusion of the India EU Free Trade Agreement granting near-zero-duty access to the worlds largest single trading bloc, opens significant headroom for the Company to deepen wallet share with existing European retailers and to onboard new programmes that were previously rendered uneconomical by tariff differentials. The Company is looking at very encouraging feedbacks from customer on our enhanced ability to now deliver larger volumes in our core focus on value added home & technical textiles.

The combination of tariff normalisation in the Companys largest market, preferential access into the UK and EU, supportive domestic policy, robust demand in the bath and floor-coverings segments, and the Companys own readiness in terms of capacity, brand portfolio, balance sheet and sustainability credentials provides a firm foundation for next leg of growth, an expansion in margins, and continued value creation for all stakeholders.

KEY FINANCIAL RATIOS:

Sr. No. Ratios	2025-26	2024-25	Explanation for significant change (more than 25%)
1. Debtor Turnover Ratio (times)	8.89	7.99	NA
2. Inventory Turnover Ratio (times)	2.59	2.06	Genuine inventory draw down (finished goods/WIP down 19cr) against strong sales not just volume-driven COGS.
3. Current Ratio (times)	1.17	1.39	NA
4. Debt Equity Ratio (times)	0.57	0.40	New capex funded via first-ever long-term bank loan + higher short-term borrowings + new supplier bills discounting leads to increase in debt equity ratio.
5. Interest Coverage Ratio (times)	0.28	0.43	Debt service up on new borrowings; net operating income also dipped slightly
6. Operating Profit Margin (%)	9.54	13.62	NA
7. Net Profit Margin (%)	0.04	0.06	Other expenses and depreciation grew faster than revenue; margin fell 6.4% ?
			3.5%
8. Return on Net Worth (times)	0.11	0.15	NA

CAUTIONARY STATEMENT

Statements used in the Management Discussion and Analysis should be read in conjunction with the Companys Audited Standalone and Consolidated financials along with the auditors report as on March 31, 2026 which forms an integral part of the annual report, describing the Companys objectives, projections, estimates and expectations, may constitute forward-looking statements within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ.

	For and on behalf of Board of Directors
	Faze Three Limited
	Sd/-
	Ajay Anand
Date: May 22, 2026	Chairman & Managing Director
Place: Mumbai	DIN: 00373248