Filatex India Ltd Management Discussions

Global Economy

In 2024, the global economy experienced heightened uncertainty and slow growth as major events shaped markets and policy. The Russia-Ukraine conflict persisted, sustaining volatility in energy and grain markets Europe managed to avoid an acute energy crisis but continued to struggle with elevated costs, resulting in sluggish EU growth. The US presidential election dominated headlines, contributing to investor caution and delaying significant while a divided Congress stifled Chinas economy remained stable but did not return to pre-pandemic growth, hampered by a weak property sector and soft export demand. India stood out as a rare bright spot, maintaining robust growth above 6% on the back of government investment, production-linked incentives, and its emergence as a China+1 destination for global supply chains.

Central banks in the US and Europe kept interest rates elevated, responding to sticky core inflation. Financial market volatility continued, with some emerging economies such as Argentina and Egypt experiencing currency and debt distress amid dollar strength. Geopolitical tensions in the Middle East, including the Gaza conflict and Red Sea shipping disruptions, impacted global trade routes and raised shipping costs. US-China tensions accelerated the fragmentation of supply chains in sectors such as semiconductors and green technology. The drive for sustainability propelled by the EUs new carbon border tax and stricter reporting forced companies worldwide to adjust sourcing, increasing costs but opening opportunities for new players.

Overall, 2024 reinforced a world of regionalized trade and multiple economic speeds. Growth and investment gravitated toward economies with policy stability and clear energy transition strategies, while risks from geopolitical shocks, inflation, and debt crises remained top of mind for decision-makers.

Outlook for Global Economy

The global economy is expected to strengthen in 2025 as inflation continues to ease and central banks gradually shift toward monetary easing. After a year marked by geopolitical disruptions and policy caution, advanced economies particularly the US and Europe are likely to benefit from lower interest rates, which should unlock new corporatedecisions, investment and spur consumption. majorfiscalinitiatives. Emerging markets are set to regain momentum, buoyed by the return of capital flows and continued expansion in Asia, led by India and Southeast Asia. Supply chain resilience investments made in 2024 will further regionalize trade, with countries such as Vietnam,

Mexico, and India capturing a larger share of global manufacturing. AI adoption and green technologies will become central growth engines, while expanded climate regulations (such as the EUs Carbon Border Adjustment Mechanism) begin to reshape manufacturing and cross-border trade. Risks remain: lingering geopolitical tensions (particularly in the Middle East and Ukraine), possible resurgence of protectionist trade measures, and vulnerabilities in emerging market debt. However, overall, 2025 is expected to mark a modest acceleration in global GDP growth (2.9 3.2%), a return to more normalized inflation (2 2.5% in advanced economies), and greater opportunities for sectors aligned with the green and digital transitions.

Global Textile Industry

The global textile industry in 2024 navigated multiple disruptions linked to real-world events. Unforeseen shipping disruptions in the Red Sea resulting from Houthi attacks sharply increased container costs and lengthened delivery times between Asia and Europe. Exporters in Bangladesh, India, and Vietnam felt margin pressure, while European retailers responded by holding higher inventories and shifting procurement timelines.

Chinas economic slowdown led to weak demand for upstream machinery and materials, although its export competitiveness persisted through aggressive pricing. Western buyers diversified sourcing toward Bangladesh and Vietnam, but labour unrest and higher compliance costs in these markets constrained further gains. Sustainability regulation, especially from the EU, drove rapid change in industry practices. Suppliers accelerated investment in traceability, recycling, and waste management to meet new rules, while smaller firms struggled with complexity and cost. Major apparel brands ramped up circular economy initiatives, while the laggards risked losing access to key markets. The India-EU FTA negotiations and new US tariff reviews on Chinese textiles shifted sourcing patterns, favouring South and Southeast Asian exporters. Raw material prices, such as cotton, stabilized after the previous years droughts, but polyester and energy costs stayed high due to ongoing Middle East volatility.

Outlook for Global Textile Industry

The global textile industry is positioned for a rebound in 2025, following a challenging year shaped by logistics disruptions and regulatory changes. As supply chains adjust to new realities and shipping lanes stabilize, manufacturers are likely to benefit from smoother trade flows and improved cost efficiency.

Polyester continues to dominate the global textile industry, as highlighted by the Global Materials Report from Textile Exchange, which notes that over 90% of the growth in the textile sector over the past five years has been driven exclusively by polyester. With an anticipated annual compounded growth rate (CAGR) of 3.5% for the textile industry in 2025, it is expected that approximately 90% of this growth will again be contributed by polyester, reinforcing its position as the primary fibre in global textiles. Sustainability will be a decisive factor: compliance with ESG and recycled content requirements especially for EU and US buyers will be table stakes, driving continued investment in recycling, traceability, and energy efficiency. Digitalization and automation will accelerate, particularly in manufacturing hubs such as China, India, and Vietnam. Trade agreements concluded or advanced in 2024 (including potential India-EU and UK FTAs) are likely to open new export opportunities for Asian producers. Market consolidation is expected to continue, with the largest and most innovative players capturing share.

While some volatility in input costs may persist, overall sector profitability is expected to improve. Brands and suppliers with agile supply chains, strong ESG credentials, and diversified sourcing strategies will lead industry growth in 2025.

Indian Textile Industry

In 2024, Indias polyester yarn and MMF industry responded to a complex set of real-world challenges and opportunities. Disruptions in shipping lines led to increased shipping costs and longer lead times for exports to Europe, prompting many Indian companies to redirect focus toward Middle Eastern, African, and Asian markets. Government support, including PLI schemes and progress on FTAs (notably with the EU and UK), spurred investments in capacity expansion and recycling technologies. Leading Indian firms ramped up recycled polyester output to meet strict EU sustainability requirements, securing new orders from global brands that prioritized traceability and ESG credentials. The steep devaluation of the Indian Rupee (INR) against the Euro significantly impacted the polyester filament yarn and MMF segments. It escalated import costs of essential rawmaterialssuchasPTAandMEG, benefit of currency depreciation generally typically denominated in foreign currencies. Consequently, manufacturers experienced pressure on profit margins, prompting them to optimize supply chains, renegotiate procurement contracts, and explore alternative sourcing strategies to mitigate currency-related cost escalations.

Domestic demand held steady, bolstered by government infrastructure projects and a growing consumer base. However, input cost volatility especially for PTA, MEG, and energy along with skilled labour shortages, remained challenging. Competitive pressure from China and Vietnam intensified as global buyers diversified their sourcing strategies. Labor unrest in Bangladesh and energy shortages in Pakistan enabled Indian exporters to capture new business in select segments, though volatility in feedstock prices and increasingly complex compliance demands continued to pose challenges.

Outlook for Indian Textile Industry

Indias polyester yarn and man-made fibre industry is poised for strong growth in 2025, building on investments and policy momentum from the previous year. Capacity expansions in input raw materials and new recycling projects are expected to come online, supported by favourable government schemes and increased foreign direct investment, as global brands diversify their sourcing strategies away from China. Completion of free trade agreements, particularly with the EU and UK, is expected to open new markets for Indian exporters, while rising compliance with ESG norms and traceability requirements will further boost Indias competitiveness on the world stage. The domestic market will remain robust, driven by steady growth in apparel and home textiles.

The steep devaluation of the Indian Rupee (INR) against the Euro in 2025 will have continued implications for the industry. Although export competitiveness is expected to improve, enhancing Indias attractiveness as a sourcing hub for European buyers,the does not fully pass through to Indian manufacturers. Foreign importers often pay based on the adjusted rupee value, effectively reducing the actual export value of goods in international terms. Ongoing currency volatility will also maintain upward pressure on raw material import costs, especially PTA and MEG, potentially impacting margins. Manufacturers are likely to continue investing in strategic sourcing initiatives, currency hedging mechanisms, and more robust supply chain optimizations to mitigate these risks.

Technology adoption is also gaining traction, especially in automation, AI-driven demand forecasting, 3D sampling, and omnichannel order fulfilment. public incentives to digitize supply chains, improve design agility, and respond faster to shifting consumer trends. The rise of direct-to-consumer brands and e-commerce has facilitated greater flexibility and reduced lead times across the value chain. Looking at the overall outlook, Indias textile industry is increasingly well-positioned to emerge as a long-term global sourcing leader focused on innovation, sustainability, and supply chain resilience.

Company Overview

The companys promoters with over four decades of experience in marketing and manufacturing synthetic filament yarns give us a strong competitive edge. We are also closely associated with our consumers of specialty filament yarns that allows us to manufacture new and innovative products as per their individual needs. We have marketing offices in all the major markets viz. Delhi, Mumbai and Surat. While the major customers and exports are directly handled by our marketing offices, small customers are catered through a network of dealers spread throughout the country. Driven by strong leadership, we are players are leveraging focusedonincreasing capacities, widening our reach, maximising our efficiency, allocating capital effectively, and ensuring sustainability. We firmly believe that our diligent planning and strong execution capabilities set us apart.

From our day-to-day operation to our long-term strategic vision, our differentiator has always been our focus on better execution. These execution capabilities manifest in numerous forms, including quality enhancements that we undertake, sustainability practices that we implement, and the social activities that we contribute to. As the company looks towards the future, its commitment to excellence remains unwavering. The ability to adapt swiftly and seize emerging opportunities will continue to be its guiding principles. The company is dedicated to harnessing technological advancements and aligning its operations with sustainable practices. The focus on sustainability is not just a commitment but a driving force behind strategic decisions. The company is resolute in its efforts to reduce its environmental footprint and foster social responsibility. By integrating these principles into core operations, the company aims to create long-term value for its shareholders and contribute positively to the communities it serves.

Financial Performance

Quarterly Performance	Q1FY25	Q2FY25	Q3FY25	Q4FY25
Revenue from Operation (In Cr)	1,054.34	1,049.10	1,068.69	1,080.02
EBIDTA (In Cr)	60.90	45.71	75.37	75.72
PBT (In Cr)	43.90	18.35	62.27	55.69
Profit after tax (In Cr)	32.29	13.47	47.43	41.38
Production (Qty/ MT)	97,580	94,993	1,02,207	96,523
Sales (Qty/ MT)	95,962	96,256	1,01,431	96,561

Key Financial Ratios

Ratio	FY25	FY24	%Change	Reason for Variance (if any)
Current Ratio	1.40	1.44	-2.78%
Debt Equity Ratio	0.09	0.19	-52.63%	Long term debt is significantly reduced during the year
Debt Service Coverage Ratio	4.15	3.53	17.56%
Return on Equity (ROE)	10.62%	9.61%	10.51%
Inventory Turnover Ratio	9.67	10.37	-6.75%
Debtors Turnover Ratio	34.44	34.27	0.50%
Trade Payables	7.71	8.98	-14.14%
Turnover Ratio
Net Capital Turnover Ratio	16.52	19.17	-13.82%
Net Profit Ratio	3.16%	2.58%	22.48%	Marginal Improvement
Return on Capital
Employed (ROCE)	12.53%	11.31%	10.79%
Return on Investment	5.22%	7.13%	-26.79%	The income generated from invested funds, primarily through debt based mutual funds and equity arbitrage mutual funds, recorded an aggregate return of 8.21% during FY25, compared to 7.13% in FY24, which reflects a growth of 15.15%. However, during the current financial year, the company made a gradual investment aggregating to 10.74 crores in equity shares. Owing to a significant market correction last quarter, returns from this equity investment turned negative, resulting in a net return of 5.22% on the total investment portfolio.

Human Resources and Industrial Relations

At the heart of the Companys enduring success lies its people. The workforce is, and continues to be, the Companys most valuable asset driving innovation, operational excellence, and long-term growth.

To cultivate a motivated and future-ready workforce, the Company has implemented people-centric policies that encourage talent development, accountability, and internal mobility. These policies are designed to align individual capabilities with organizational goals, offering employees ample scope for advancement through skill-building, role enrichment, and structured career progression. The Company remains committed to promoting a healthy work-life balance, recognizing it as a foundation for sustained productivity and employee well-being. Transparent performance appraisals and productivity-linked incentive schemes foster a culture of ownership and engagement. Industrial relations have remained peaceful and constructive, supported by equitable and consistent HR policies. The Company emphasizes open communication and mutual respect, resulting in a stable and cohesive work environment. A strong culture of meritocracy is reinforced through high-quality recruitment, especially at senior levels, where temperament and managerial aptitude assessments help evaluate the leadership potential of candidates. This ensures not just domain expertise, but also the essential soft skills required for effective team leadership. Continuous learning is a cornerstone of the Companys HR strategy. Training programs at all levels are conducted regularly to sharpen both technical and behavioral competencies. Special attention is given to succession planning for key roles. High-potential employees and family members undergo rigorous cross-functional training and mentorship, equipping them for greater responsibilities and seamless leadership transition. In a dynamic industry landscape, the Companys HR philosophy is anchored in stability, fairness, and growth ensuring that its people remain inspired, empowered, and aligned with the Companys long-term vision.

Internal Control Systems and Their Adequacy

Filatex maintains a robust and well-structured internal control system designed to ensure operational efficiency, safeguard assets against unauthorized use, protect proprietary information and support the integrity of financial reporting. The system is carefully aligned with the Companys scale, complexity, and operational diversity.

At its core, the Company follows a comprehensive budgetary control framework, wherein actual performance is regularly monitored against defined benchmarks. A clear organizational structure, authority matrix, and set of internal policies reinforce the systems effectiveness and accountability.

These controls are instrumental in ensuring the accuracy and reliability of financial records, compliance with statutory requirements, and proper maintenance of asset registers. The system facilitates the preparation of financial statements that reflect a true and fair view of the Companys affairs.

To ensure objectivity and independence, Filatex engages an external professional agency as its Internal Auditor. In accordance with the guidelines of the Audit Committee, the Internal Auditor conducts Operations & Systems audits, assessing not only compliance with internal policies but also the adequacy and effectiveness of key control mechanisms. The findings and recommendations from these audits are reviewed by senior management and the Audit Committee of the Board. Based on these insights, timely and appropriate actions are taken to further strengthen the internal control environment and ensure ongoing compliance with evolving regulatory standards.