Fractal Industries Ltd Management Discussions

Management Discussion & Analysis Report

Global Economy Overview

The global economy remained resilient through CY 2025 despite a challenging operating environment marked by heightened geopolitical tensions, evolving trade policies and economic uncertainty. Global growth is projected at 3.1% in CY 2026 and 3.2% in CY 2027, supported by continued policy measures, investment and resilient private-sector activity. However, growth remains uneven across economies, with emerging market and developing economies facing greater exposure to external shocks, particularly through commodity prices, currency movements and financial conditions. The escalation of conflict in the Middle East has further increased risks to global activity through higher energy and food prices, supply-chain disruptions and financial-market volatility. At the same time, continued technology related investment, including in artificial intelligence, is expected to support productivity and provide an avenue for future growth, although trade fragmentation, elevated public debt and geopolitical uncertainty remain key challenges to the global outlook.

India entered FY 2025-26 with a relatively strong domestic foundation, with economic activity increasingly supported by household consumption, investment, services, and improving industrial activity. Real GDP growth of 7.6% reflected the resilience of domestic demand even as global trade and geopolitical conditions remained uncertain. Headline inflation moderated to 2.1%, supporting purchasing power, while favourable agricultural output provided stability to rural demand. Industrial activity also strengthened, with the industrial sector estimated to grow by 6.2%, supported by infrastructure spending and policy initiatives aimed at expanding domestic productive capacity. The policy environment remained focused on strengthening the economys productive capacity and competitiveness. Public capital expenditure of EI2.2 lakh crore for FY 2026-27 is expected to support infrastructure development and investment, while PLI schemes across 14 sectors have attracted more than U2.16 lakh crore in cumulative investments. Continued investments in infrastructure, manufacturing, digitalisation and emerging technologies, alongside deeper global trade integration, are broadening the foundations of Indias economic growth.

The India Supply Chain Management Market was valued at USD 1,131 million in 2025 and is projected to reach USD 2,757 million by 2031, registering a CAGR of 16% during 2026-2031. The market is witnessing increasing adoption of integrated, cloud-based platforms as enterprises seek to improve demand planning, procurement, inventory management, fulfilment and logistics. The growth of e-commerce, increasing requirements for inventory visibility and the migration from fragmented planning tools towards cloud-native platforms are supporting market expansion.

- E-commerce and Omnichannel Fulfilment: Rising online and quick-commerce adoption is driving demand for efficient inventory management, faster replenishment and agile fulfilment.

Increasing adoption of cloud and Al is enabling greater scalability, integration, automation and data- driven supply chain management.

Businesses are prioritising end-to-end visibility, realtime monitoring and integrated supply chain solutions to improve planning, inventory management and operational resilience.

- Supply Chain Resilience: Businesses are strengthening supply chain resilience through diversified sourcing, better risk monitoring and flexible operating models to manage disruptions and demand volatility.

- Warehouse Automation: Increasing adoption of warehouse automation, robotics and digital inventory systems is improving order accuracy, throughput and operational efficiency across fulfilment networks.

The Indian apparel market was valued at USD 88 billion in 2025 and is projected to reach USD 117.05 billion by 2034, registering a CAGR of 3.16% during 2026-2034. The sector is undergoing a steady transformation, supported by rising disposable incomes, expanding urban middle-class demographics and increasing penetration of organised retail across Tier I and Tier II cities. Mass apparel continues to account for the largest category share at 71.6% in 2025, reflecting broad-based demand across price-sensitive consumer segments, while womens apparel accounted for 41.5% of end-use demand. West India represented the largest regional market, with a 35.4% share, supported by key commercial and fashion centres including Mumbai, Pune and Ahmedabad.

- E-commerce and Digital Retail: Rapid e-commerce adoption is expanding digital fashion consumption and driving demand for wider product reach and faster fulfilment.

- Rising Disposable Incomes: Increasing disposable incomes and a growing urban middle class are supporting higher apparel spending and greater demand for diverse fashion offerings.

- Organised Retail Expansion: Increasing penetration of organised retail across Tier I and Tier II cities is expanding branded apparel consumption and strengthening market access.

- Changing Consumer Preferences: Growing fashion consciousness and demand for affordability, convenience, speed and variety are driving shorter product cycles and frequent assortment refreshes.

- Product Innovation and Personalisation: Data-led product development, improved sizing solutions and evolving designs are enabling brands to enhance customer experience and reduce product returns.

Fractal Industries Limited ("Fractal" or "the Company") is a specialised, end-to-end supply chain management company serving the rapidly evolving e-commerce fashion industry. Headquartered in Mumbai with a Pan- India presence, the Company enables fashion brands, marketplaces and private labels to manage high-volume, multi-category operations across the apparel value chain. Fractals integrated capabilities span garment design, sourcing and manufacturing, along with warehousing, fulfilment and supply chain management, enabling coordination from product development and production through inventory management and last-mile fulfilment. The Company combines scalable manufacturing infrastructure with process-driven operations, quality standards and technology-enabled supply chain management to support demand visibility, inventory optimisation, efficient inventory movement and faster turnaround times. Its data-led and integrated design- to-delivery model enables clients to respond to evolving consumer preferences and shorter fashion cycles while improving operational efficiency. With an expanding ecosystem of fashion and e-commerce clients, scalable infrastructure and end-to-end capabilities, Fractal is positioned to address the growing complexity of digital commerce and support brands in delivering products to customers efficiently at scale.

The Company operates in a market supported by the rapid growth of e-commerce, evolving consumer preferences and increasing demand for agile and integrated supply chain solutions, creating opportunities to expand its customer base, deepen relationships with existing clients and broaden its presence across geographies and product categories. Its integrated design-to- delivery capabilities, manufacturing infrastructure and technology-enabled processes provide scope to support fashion brands and marketplaces with faster product cycles, efficient inventory management and responsive fulfilment. At the same time, the Company remains exposed to risks arising from changing fashion trends and consumer demand, customer concentration, supply chain disruptions, fluctuations in raw material, labour and logistics costs, and intense competition across the apparc and e-commerce ecosystem. Rapid technological developments and evolving regulatory requirements may also necessitate continued investments in infrastructure, systems and capabilities.

Fractal Industries considers its human capital an important enabler of its integrated apparel and supply chain operations. As of 31 March, 2026, the Company had [] permanent employees and [] contractual workers, with personnel deployed across warehouse and supply chain,

production and quality control, merchandise and design, administration, finance, sales and other functions. The Company seeks to maintain a capable and responsive workforce aligned with its operational requirements, while leveraging the experience of its senior management in the supply chain management and apparel manufacturing sectors.

Fractal Industries maintains internal control and compliance mechanisms designed to support operational discipline, safeguard assets, maintain the accuracy of financial reporting and ensure adherence to applicable laws and regulations. The Audit Committee is responsible for reviewing internal financial controls, risk management systems, internal audit reports and control weaknesses, and for monitoring the adequacy of the Companys internal control framework. The Company continues to strengthen its internal control and compliance processes in line with the growing scale and complexity of its operations.

The Company operates in a dynamic apparel and e-commerce environment and is exposed to risks relating to customer concentration, changing consumer demand,

supply chain disruptions, employee and contractual labour availability, working capital requirements and regulatory compliance. The Company seeks to identify and monitor such risks through management oversight and Board-level governance mechanisms, with the Audit Committee reviewing the Companys risk management systems. Given the concentration of revenues among key customers, continued diversification of its customer base and strengthening of operational capabilities remain important to maintaining business resilience.

This Management Discussion and Analysis contains statements relating to the Companys business, industry, strategy, financial performance and future prospects that may constitute forward-looking statements. These statements are based on the Companys current expectations, assumptions and available information and are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied due to factors including changes in market conditions, consumer demand, customer relationships, supply chain conditions, regulatory developments, operating costs and other factors beyond the Companys control. Readers are advised not to place undue reliance on such forward-looking statements, which speak only as of the date of this report.