GHCL Textiles Ltd Management Discussions

Readers are cautioned that this Management Discussion and Analysis contain forward-looking statements that involve risks and uncertainties. When used in this discussion, the words "anticipate", "believe", "estimate", "intend", "will", and "expected" and other similar expressions as they relate to the Company or its business are intended to identify such forward looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements and risks and opportunities could differ materially from those expressed or implied in such forward-looking statements. The important factors that would make a difference to the Companys operations include economic conditions affecting demand supply and price conditions in the domestic and overseas markets, raw material prices, changes in the Governmental regulations, labour negotiations, tax laws and other statutes, economic development within India and the countries within which the Company conducts business and incidental factors. The Company undertakes no obligation to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events. This report is prepared on the basis of public information available on website / report / articles etc. of various institutions. The following discussion and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto.

The management of GHCL Textiles Limited has reviewed the Companys performance and key business developments for the financial year ended March 31, 2026, and shared its perspective on the road ahead. The outlook reflects the current economic environment and business landscape, though future developments, both domestic and global, across economic, social, and political fronts may influence actual outcomes.

The global economy demonstrated measured resilience in 2025, navigating a challenging landscape defined by geopolitical tensions, elevated interest rates, and persistent supply-side pressures. According to the IMF World Economic Outlook, April 2026, world GDP grew by 3.4 percent in 2025 and is projected to expand by 3.1 percent and 3.2 percent in 2026 and 2027 respectively. These projections, which assume a limited-scale conflict in the Middle East, reflect a broadly stable growth trajectory as the global economy transitions beyond the initial shocks of high inflation.

In the advanced economies, central banks have begun pivoting toward monetary easing as inflationary pressures recede. U.S. inflation, however, remains slightly above target, sustaining complexity in global capital flows and currency markets. Energy costs and supply chain stability continue to command boardroom attention worldwide. Sustained hostilities in the Middle East have periodically amplified geopolitical risk premiums, pushing energy prices higher and straining traditional trade routes. Against this backdrop, the global industrial sector is embracing what we see as a defining strategic shi of "resilience through diversification", characterised by the regionalisation of supply chains and a deliberate effort to reduce exposure to volatile logistics costs. For a manufacturer with our international footprint, this recalibration of global trade presents both risk managing and opportunity to capture.

India stands apart. In a world of tepid recoveries and uncertain outlooks, India continues to a irm its position as the fastest-growing major economy globally. As per the First Advance Estimates released by the National Statistics O ice for FY 2025-26, Indias Real GDP is estimated to reach 201.90 lakh crore, reflecting robust growth of 7.4 percent. This momentum is underpinned by a sustained infrastructure push, with government capital expenditure driving a meaningful rise in gross fixed capital formation and reinforcing the productive capacity of the broader economy.

The "Make in India" initiative has evolved from a policy aspiration into a powerful structural catalyst. As per the Economic Survey 2025-26, Manufacturing Gross Value Addition (GVA) grew by 9.13 percent in Q2 FY 2025-26, buoyed by targeted Production Linked Incentive (PLI) schemes and a strategic shi toward medium and high-technology manufacturing. Complementing this, Indias retail inflation averaged a benign 1.7 to 2.6 percent during the fiscal year, and foreign exchange reserves reached a historic high of USD 701.4 billion, providing macroeconomic stability and a robust bu er against external shocks.

These macroeconomic dynamics directly inform our operational strategy:

Export Demand: While global growth remains moderate, the accelerating "China Plus One" diversification strategy, combined with socio-political disruptions in competing nations such as Bangladesh, continues to redirect Readymade Garment orders toward India, strengthening the demand outlook for Indian yarn and fabric manufacturers.

Input Cost Management: Volatility in global energy prices reinforces our resolve to expand our renewable energy footprint. We aim to source over 70 percent of our total energy requirements from green sources, materially de-risking our EBITDA margins against fuel price fluctuations.

Domestic Resilience: Rising discretionary incomes and rapid urbanisation provide a stable domestic floor for yarn and fabric demand, a meaningful bu er even when international markets encounter temporary headwinds.

The global textile market, valued at approximately USD 988 billion in 2024, continues its long-term growth trajectory, propelled by e-commerce expansion and the structural dynamics of fast fashion. FY 2025-26, however, introduced tangible headwinds that tested the sectors agility. Traditional trade routes faced disruption due to the US-Iran conflict, resulting in shipment delays and a sharp escalation in logistics and shipping costs, all of which exerted pressures that resounded across the global supply chain.

Yet, within these headwinds lie compelling tailwinds for India. Socio-political instability in competing garment-manufacturing nations, particularly Bangladesh, has meaningfully accelerated the shi of Readymade Garment orders toward Indian suppliers. Further, the progressive execution of Free Trade Agreements (FTAs) with the UK, the EU, and other key markets is expected to deliver a sustained demand tailwind for Indian exporters, improving market access and competitive positioning on a structural basis.

Indias inherent advantages in textiles are well established. As the worlds second largest producer of cotton, India commands a significant raw material advantage. The textile sector is also among the most consequential for the Indian economy, second only to agriculture as an employer, providing direct employment to approximately 45 million people and supporting an additional 60 million through allied activities. This scale underscores the sectors strategic importance to the national growth.

The Indian textile industry is distinguished by its remarkable diversity, spanning from handwoven and handspun traditions at one end to sophisticated, technology-driven mills at the other. The presence of integrated players across the full value chain, from raw material production through yarn, fabric, and garments places India in a uniquely competitive position on the global stage. Within this chain, yarn manufacturing converts raw fibres into yarn through a defined sequence of processes, beginning with spinning, followed by weaving and knitting. Yarns may be derived from natural fibres such as cotton and wool, or from man-made fibres (MMF) including polyester, viscose, nylon, acrylic, and polypropylene, a segment that is growing rapidly in relevance and value.

On the cotton front, domestic arrivals reached 281 lakh bales by March 2026, up from 273 lakh bales in the prior year. Despite this increase in supply, domestic prices surged from 55,000 per candy in December 2025 to Indian textile value chain 62,000 per candy by March 2026, mirroring trends in international NY futures, a dynamic that reinforces the importance of disciplined raw material procurement and inventory management.

Looking ahead, the Indian textile and apparel market is well positioned for sustained growth. Rising discretionary incomes, rapid urbanisation, and the adoption of fast-fashion consumption patterns will drive domestic demand. Simultaneously, structural forces including increased online retailing, an accelerating shi from cotton to man-made fibre, strong growth in technical textiles, and the ongoing migration of global textile production outside of China will collectively bolster Indias export opportunity. We believe GHCL Textiles is strategically positioned to capture a disproportionate share of this expanding market.

GHCL Textiles Limited was established through the demerger of the spinning business from GHCL Limited, effective April 1, 2023, and has been listed on both NSE and BSE since June 12, 2023. This demerger was purposefully structured to simplify the corporate architecture, create an independent growth platform, and maximise long-term shareholder value.

Today, GHCL Textiles stands as one of Indias prominent yarn manufacturers and exporters. Our manufacturing operations are located at Paravai, Madurai and Manaparai, Tiruchirapalli, in the state of Tamil Nadu. Our spinning facilities are modern and well-capitalised, comprising 2.25 lakh ring spindles, 3,320 rotors, 5,760 TFO spindles, 5 Airjet Spinning machines, and 15 knitting machines. Underpinning our operations is a significant renewable energy portfolio of 65 MW of wind and solar capacity in Tamil Nadu. This portfolio of green assets deliver a tangible, structural cost advantage while advancing our sustainability commitments.

Operational excellence is foundational to our identity. Our well-managed production processes are designed to maximise productivity and minimise waste, while sustaining a reliable and responsive raw material supply chain. We maintain rigorous standards for worker safety and workplace hygiene, fostering a culture that is both productive and people centred. Our commitment to green energy is not merely aspirational. We have made substantial progress toward our goal of sourcing 75 percent of our total energy requirements from renewable means, and this momentum continues.

Our product portfolio reflects deliberate diversification into value-added segments. We manufacture speciality yarns including GIZA, SUPIMA, Australian, CmiA, Tencel, Viscose, and rPET Yarn, as well as woven and knitted fabric for both domestic and international markets. Over the years, our product basket has expanded meaningfully, encompassing tailor-made specialty yarns, forward-integrated fabric products in knitted and greige formats, and penetration into new application segments and geographies. This diversification is both a competitive differentiator and a margin enabler.

Quality and customer orientation are at the core of how we operate. We exercise rigorous quality control at every stage of production, and we invest in building deep, strategic partnerships with a select base of customers across domestic and international markets. This approach has allowed us to build enduring relationships, earn market trust, and maintain a competitive edge that goes beyond price alone.

The results of our diversification strategy are visible in our numbers. Export contribution has grown to 10.2 percent of revenue in FY 2026, up from 5.5 percent in FY 2019. The share of fabric in total revenue has expanded to 13.7 percent in FY 2026, from nil in FY 2019, which demonstrates a meaningful structural shi reflecting our deliberate move up the value chain.

Our commitment to growth is backed by capital. We have committed to invest over 1,000 crores in capacity and capability, of which 600 crores have already been deployed. During the year, we successfully commissioned 25,000 new spindles, 15 knitting machines, and 3 MW of additional green energy capacity. The commissioning of the knitting machines represents a strategically important step towards forward-integrating our operations into value-added fabric products and positioning us to capture higher realisations as this segment scales.

We remain firmly committed to a strategy of sustainable, value-accretive growth. Our capital investment in knitting machine capacity has forward-integrated our operations into higher-value fabric products and positions us well for medium-term earnings growth. Going forward, we intend to expand our product basket, grow our value-added segment, realign our customer base toward more strategic relationships, deepen our penetration of the fabric market, and continue driving operational excellence across our manufacturing facilities. Sustainability remains a parallel priority. We will continue deploying renewable energy assets, targeting a minimum of 75 to 80 percent of our total energy requirements from green sources.

We also acknowledge, with transparency, the market challenges that create uncertainty in our operating environment. Global economic uncertainty, evolving tari conditions, changing weather patterns adversely affecting cotton crop yields, cotton price volatility, and constraints on the availability of high-quality cotton, all of these factors introduce a degree of unpredictability that we monitor closely and manage proactively.

To navigate these challenges and sustain long-term business resilience, we have embedded a set of core operating principles into our management framework. These principles of disciplined cash conversion, deep in-house expertise in cotton market dynamics, supply chain resilience, investment in value-added processing, a culture of product and process innovation, and an unwavering focus on customer satisfaction, are the differentiators that set GHCL Textiles apart. They are not merely operational practices; they are the competitive foundations upon which we intend to grow, adapt, and prosper in the years ahead.

Revenue for the financial year ended March 31, 2026 is 1,318.60 crores as against 1161.16 crores for the previous financial year ended on March 31, 2025.

Profit before financial expenses and depreciation for the financial year March 31, 2026 is 156.11 crores as compared to 116.68 crores for the previous financial year ended on March 31, 2025.

PBT (Profit before tax) for the financial year ended March 31, 2026 is 92.96 crores as compared to 63.29 crores for the previous financial year ended on March 31, 2025.

As per the Schedule V to the Listing Regulations read with Regulation 34(3) of the Listing Regulations, details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios and any changes in Return on Net Worth of the Company including explanations therefor have been provided in note no. 41(9) (refer page no. 162-163 of Annual Report).

GHCL Textiles Limited continues to operate with a strong and well-structured internal control system that supports all areas of its business. This framework remains consistent with the previous year, ensuring operational e iciency, safeguarding of assets, accurate and transparent financial reporting, and compliance with applicable laws and regulations.

The Company conducts its business with integrity, high standards of ethical behavior and in compliance with all applicable laws and regulations that govern its business. To maintain the integrity of our processes, the Company has established detailed management information systems, robust corporate policies, and clearly defined roles and responsibilities across departments. Qualified and experienced personnel oversee our internal processes, helping to prevent any unauthorized use of assets or misstatement of transactions.

To further strengthen oversight, Company engages reputed independent internal audit firms to conduct regular audits across business locations. The Audit Committee of the Board closely monitors these reports, reviews statutory compliances, and ensures timely corrective actions are taken wherever required. The Committee meets periodically to review findings from internal auditors and discuss action taken reports with the management.

The Risk Management Committee is embedded into Companys culture and day-to-day operations. The Risk Committee, constituted as per Regulation 21 of the SEBI Listing Regulations, oversees our enterprise risk framework. Internal Audit and Risk Management functions work in tandem to identify, assess, and manage key risks— both financial and non-financial. Risks are monitored regularly and control measures are tailored based on their severity and likelihood.

Further details on key business risks and mitigation strategies are provided in the Risk Management Committee section on page 69-70 of this report.

In GHCL Textiles we are really proud of our "HUMAN RESOURCES". We believe that our employees make a key difference to our business success. Employees are one of our five key stakeholders and needless to mention that managing our human capital has been our key strength and pride. It is our firm belief that nurturing and strengthening the human resource capital is of utmost importance to run the organization effectively and smoothly. Therefore, the HR function takes pride in managing the human capital both with warmth and care as a hallmark of a caring organization. The Human Capital is managed in a structured manner with key focus areas being Talent Management, Organizational capability Development, Employee Engagement and harmonious Industrial Relations. This contributes to our unique corporate identity in our journey towards high performance Coaching & Mentoring culture. Good human resource management is vital for the success of any business, therefore GHCL Textiles regularly reviews & revisits its various HR policies and practices to ensure that we comply with the values of the Company and can be benchmarked against the leaders in the industry. Our HR Mission emphasizes on creating a value driven, high performance learning organization in an engaged and digitized environment so that we are one among the employer of choice. As on March 31, 2026, number of people employed by GHCL Textiles Limited are 2833 (3050 as of March 31, 2025) including all categories and women employees consists of around 77% of total employees.