Golden Carpets Ltd Management Discussions

[Pursuant to Regulation 34 read with Para B of Schedule V of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015]

The Directors of your Company are pleased to present the Management Discussion and Analysis Report for the financial year ended 31st March 2026.

The Indian textile and apparel industry remains one of the oldest and largest sectors of the Indian economy, contributing about 11% of Indias manufacturing Gross Value Added (GVA) and around 11% of the countrys total merchandise exports. India continues to be the sixth largest exporter of textiles and apparel globally, holding a share of nearly 4% of the global trade in this segment. Within this broader canvas, the handmade carpet and floor coverings segment continues to be a significant value-added, employment-intensive export category for the country.

Global Real GDP Growth (%)

[Bar chart showing: 2023 - 3.5%, 2024 - 3.3%, 2025 - 3.3%, 2026E - 3.1%, 2027F - 3.2%]

Source: IMF World Economic Outlook, April 2026

GLOBAL ECONOMY OVERVIEW:

Calendar year 2025 saw the global economy display steady, if unspectacular, resilience of around 3.3% growth, aided by robust technology-sector investment, favourable financial conditions and continued fiscal and monetary support, even as elevated trade barriers and policy uncertainty persisted through the year. This momentum, however, has been abruptly interrupted in 2026 by the outbreak of conflict in the Middle East, which has triggered a fresh round of commodity price volatility, firmer inflation expectations and tighter financial conditions across major economies.

Assuming the conflict remains limited in duration and scope, global growth is projected to moderate to 3.1% in 2026 and recover marginally to 3.2% in 2027, a step down from the 2024-25 trend and well below the pre-pandemic historical average of 3.7%. Global headline inflation is expected to tick up in 2026, before resuming its downward trajectory in 2027. The slowdown in growth and rise in inflation are expected to be more pronounced in emerging market and developing economies, particularly commodity importers with pre-existing external vulnerabilities.

Downside risks continue to dominate the outlook. A longer or broader conflict, deepening geopolitical fragmentation, a reassessment of expectations around artificial-intelligence-driven productivity gains, or a renewed escalation in trade tensions could weaken growth and unsettle financial markets further. Elevated public debt levels and eroding institutional and policy buffers in several economies add to these vulnerabilities, underscoring the need for a balanced policy approach focused on structural reforms and strengthened multilateral cooperation.

India: Real GDP Growth vs CPI Inflation

[Bar/line chart showing: FY22-23 - Real GDP 7.0%, CPI 6.7%; FY23-24 - Real GDP 9.2%, CPI 5.4%; FY24-25 - Real GDP 6.5%, CPI 6.5%; FY25-26E - Real GDP 7.3%, CPI 2.0%; FY26-27F - Real GDP 6.5%, CPI 6.5%]

Source: RBI, MOSPI, NSO estimates (FY25-26 estimate per RBI Monetary Policy)

INDIAN ECONOMY OVERVIEW:

India continues to be one of the fastest growing major economies in the world, and this resilience was clearly on display through the financial year under review. Real GDP growth accelerated through FY 2025-26, rising from 7.8% in the first quarter to a six-quarter high of 8.2% in the second quarter, driven by robust domestic consumption, buoyant services and industrial activity, and a supportive fiscal and monetary environment. On the back of this momentum, the Reserve Bank of India (RBI) progressively revised its full-year GDP growth projection for FY 2025-26 upward, from an initial estimate of 6.5% to 7.3%.

The inflation environment through the year was unusually benign, described by the RBI Governor as a rare Goldilocks period of high growth alongside exceptionally low inflation. Headline retail (CPI) inflation eased through the year to reach multi-year lows, aided by a sharp correction in food prices, a favourable monsoon, softer global crude prices, and the beneficial pass-through of the GST rate rationalisation implemented from September 22, 2025. This provided the RBI with the policy space to reduce the repo rate to 5.25% during the year while maintaining a neutral stance.

On the external front, Indias current account deficit remained well contained, supported by strong services exports, robust remittance inflows and steady FDI inflows. A significant positive development during the year was the reduction in US reciprocal tariffs on Indian goods from a peak of 50% to 18% easing pressure on export-oriented sectors including textiles and carpets. India also concluded the India-UK Comprehensive Economic and Trade Agreement (CETA), which is set to come into force from July 15, 2026 and will eliminate tariffs on nearly 99% of Indian exports to the UK, including textiles, home furnishings and carpets.

Looking ahead, international agencies remain broadly consistent in projecting continued robust growth for India through FY 2026-27, in the range of 6.2% to 6.6%, positioning India to remain among the fastest growing major economies notwithstanding the headwinds emanating from the Middle East conflict and global trade uncertainty.

INDIAS LEADERSHIP IN HAND-MADE CARPETS:

India remains the worlds foremost producer and exporter of handmade carpets, leading in both volume and value. Indias carpet exports grew from approximately US $1.39 billion in FY 2023-24 to about US $1.54 billion in FY 2024-25, representing nearly 40% of global handmade carpet exports. Indian carpets reach over 70 countries, with key importers including the United States, Germany, the United Kingdom, Australia, Canada, South Africa, France, Italy, and Brazil. Indias historic tradition of craftsmanship, centred in major clusters such as Bhadohi/Mirzapur (Uttar Pradesh), Rajasthan, Jammu & Kashmir, Telangana, Gujarat, and others, supports over 2 million artisans, mostly rural and women, working across a wide range of carpet types (Indo-Persian, silk, wool, Kilim, hand-tufted, etc.).

The sector stands to benefit meaningfully from two favourable trade developments during the year: the reduction in US tariffs on Indian goods from 50% to 18%, and the India-UK CETA coming into force from July 15, 2026, which eliminates UK import duties of up to 12% on textiles and floor coverings, placing Indian exporters on a level footing with competing sourcing hubs such as Bangladesh, Vietnam and Cambodia. Industry strategies continue to evolve towards digital customisation, e-commerce platforms and sustainable, traceable product lines, supported by Government initiatives spanning skill development, trade events, financial incentives and Geographical Indication (GI) protections for clusters such as Bhadohi and Kashmir.

INDUSTRY STRUCTURE AND DEVELOPMENT:

Indias carpet manufacturing segment continues to benefit from the countrys broader ambition to scale its textile sector to US $350 billion by 2030, with exports expected to contribute US $100 billion. The Union Budget 2025-26 raised textile sector outlays by nearly 19% to support modern PM MITRA textile parks, R&D centres and skill missions, while the Production Linked Incentive (PLI) scheme continues to channel investment into export-ready value addition across the sector.

The industry is further supported by an expanding network of trade agreements. Alongside the India-UK CETA and the reduced US tariff regime, India concluded a Free Trade Agreement with New Zealand in April 2026 and announced the conclusion of India-EU FTA negotiations in January 2026, both of which are expected to widen market access for labour-intensive sectors including carpets and home textiles over the medium term.

However, the carpet industry continues to face structural challenges, including continued reliance on outdated weaving technology, high fixed-cost structures, infrastructure gaps, and mounting competition from machine-made imports, particularly from Turkey, which continues to impose high import duties on Indian-origin carpets while Indias own duty structure remains comparatively favourable to machine-made imports. These constraints collectively exert pressure on operating margins. As the Company continues to invest in automation, design innovation, strategic partnerships, and digital marketing, its performance trajectory remains tied to both domestic reforms and global trade dynamics.

Country-wise share of Indias exports (2024-2025)

[Pie chart showing various country shares: 59%, 18%, 6%, 5%, 4%, 3%, 3%, 2%]

Indias carpet and other floor coverings export (US$ million)

[Bar chart showing: 2017-18 - 1,711.2; 2018-19 - 1,765.9; 2019-20 - 1,666.1; 2020-21 - 1,869.2; 2021-22 - 2,233.0; 2022-23 - 1,366.0; 2023-24 - 1,395.0; 2024-25* - 363.4]

Source: Department of Commerce & Industry, Textile Export Promotion Council
Note: * Until June 2024

OPPORTUNITIES AND THREATS:

Opportunities:

1. Favourable Government Initiatives

Expansion of PM MITRA Parks, the PLI scheme, and the nearly 19% increase in textile sector outlay under the Union Budget 2025-26, aimed at improving infrastructure, reducing logistics costs, and supporting capacity expansion for textile and carpet manufacturers.

2. India-UK CETA and Improved US Tariff Regime

The India-UK Comprehensive Economic and Trade Agreement, effective July 15, 2026, eliminates UK duties of up to 12% on textiles and carpets, while the reduction in US tariffs on Indian goods from 50% to 18% materially improves cost competitiveness in the Companys two largest export markets.

3. Export Growth Potential

India targets US $100 billion in textile exports by 2030 (from a base of approximately US $35-39 billion), with strong demand for high-value handmade carpets and floor coverings continuing to underpin this ambition.

4. Rising Global Preference for Sustainable Products

Increasing demand for eco-friendly, natural fibre, and handcrafted carpets aligns with Indias traditional strengths in artisanal craftsmanship and traceable, low-carbon production.

5. Digitisation & Direct-to-Consumer Channels

Increasing adoption of e-commerce platforms, digital design tools, and online customisation enables direct access to global customers and niche interior segments.

6. Product Diversification

Opportunities to expand into carpet tiles, luxury vinyl flooring, and custom floor coverings catering to hospitality, office, and commercial spaces.

Threats:

1. Technological and Cost Disadvantages

Continued reliance on manual production and outdated machinery leads to lower productivity and higher fixed costs compared to global competitors using automated systems.

2. Unfavourable Trade Dynamics

Export competitiveness continues to be hampered by unequal tariff structures, such as high import duties on Indian carpets in Turkey (~46%) versus comparatively lower duties on machine-made imports into India (~20%).

3. Geopolitical and Global Demand Risks

The outbreak of conflict in the Middle East in 2026 has introduced fresh volatility in energy prices, freight costs and global financial conditions, with a longer or wider conflict, or renewed trade tensions, posing risks to demand in key export markets (US, UK, EU).

4. Operational and Regulatory Challenges

Complex labour laws, infrastructure gaps, and fluctuating raw material prices increase operational uncertainty and reduce cost efficiency.

5. Raw Material and Supply Chain Issues

Rising raw material prices, scarcity of wool fibres, and supply delays and discontinuities constrain the ability of Indian manufacturers to compete with other carpet-producing countries, impacting export volumes from India.

SEGMENT WISE PERFORMANCE:

The Company operates in a single segment, i.e. the carpets business. Hence, the Business Segments reporting in accordance with the applicable Accounting Standard on Operating Segments is not applicable.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The financial statements of the Company for FY 2025-26 have been prepared in accordance with the applicable provisions of the Companies Act, 2013 and the Indian Accounting Standards (Ind AS) notified thereunder, and form part of this Annual Report. The Companys operational performance during the year under review, including turnover, profitability and key operating metrics, has been discussed in detail in the Boards Report and the financial statements, to which reference is invited.

OUTLOOK:

The outlook for the Indian carpet and flooring industry remains constructive, underpinned by sustained global demand, an improving trade-policy environment following the India-UK CETA and the reduced US tariff regime, and emerging opportunities in digital and sustainable manufacturing. India continues to be the worlds largest exporter of handmade carpets, commanding nearly 40% of global market share, and remains well positioned to benefit from the Governments broader vision to expand textile exports to US $100 billion by 2030, with carpets and floor coverings identified as a key value-added export segment.

The India carpets and rugs market is estimated at approximately US $1.18 billion in 2026, and is projected to grow at a CAGR of over 9% through 2031, driven by rising demand for eco-friendly, artisanal, and customisable products in high-income markets such as the United States, Europe, the UK, and newer geographies including Scandinavia and Latin America. The growing importance of sustainability and traceability in global sourcing continues to create favourable conditions for Indian handmade carpets, which are perceived as ethical, durable, and environmentally responsible.

Domestically, increasing urbanisation, rising disposable incomes, and evolving interior decor preferences continue to spur demand for high-quality carpets, rugs, and flooring materials in residential and commercial segments. At the same time, Government initiatives such as PM MITRA Parks, the enhanced PLI outlay under the Union Budget 2025-26, and targeted investment in export clusters like Bhadohi and Mirzapur are expected to enhance production capacity, reduce costs, and improve logistical efficiencies across the value chain.

However, the industry must continue to navigate structural challenges, including technological gaps, high fixed costs, and trade-related asymmetries, even as it contends with near-term global uncertainty arising from the Middle East conflict and its impact on energy prices and freight costs. While competing countries such as Turkey and China continue to gain ground in machine-made carpets through automated production and aggressive pricing, Indias long-term competitiveness will depend on modernisation, skill development, and the adoption of digital technologies such as AI-enabled design, virtual customisation, and direct-to-consumer (D2C) marketing. Overall, the Company remains cautiously optimistic about the medium- to long-term prospects of the Indian carpet industry, and aims to capture emerging growth opportunities while mitigating structural and market-driven risks.

RISK AND CONCERNS:

In line with regulatory requirements, the Company has framed a Risk Management Policy to identify and assess key business risk areas and a risk mitigation process. A detailed exercise is carried out at regular intervals to identify, evaluate, manage and monitor all business risks. The Board periodically reviews these risks and suggests steps to control and mitigate the same through a properly defined framework.

In todays complex and rapidly evolving business environment, almost every business decision requires the management to balance risk and reward. Effective risk management is therefore critical to the Companys continued success. Increasing integration of global markets, evolving products and transactions, and an increasingly stringent regulatory framework require an integrated approach to risk management. The sustainability of the Companys business is derived from the following:

Identification of the diverse risks faced by the Company, including geopolitical, trade-policy, currency, raw material and technology-related risks. The evolution of appropriate systems and processes to measure and monitor such risks. Risk management through appropriate mitigation strategies within the policy framework. Continuous analysis and review of all such risks at various levels of management through an effective information system.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has implemented a comprehensive and well-structured internal control system that is commensurate with the nature, scale, and complexity of its business operations. The system is designed to ensure efficiency in operations, compliance with applicable laws and regulations, and safeguarding of assets. It encompasses all critical business processes, including procurement, production, sales, finance, and human resources. The Company continuously monitors the effectiveness of these controls through regular management reviews, and the Statutory Auditors have, in their report, commented on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting for the year under review.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES:

The Company continues to maintain good and cooperative relationships with its employees. This positive environment helps improve employee performance and encourages them to work effectively with the Company. As on March 31, 2026, the Company had 8 permanent employees on its rolls.

The Company also ensures a safe and respectful working environment, with strict measures in place to prevent any kind of physical, verbal, or sexual harassment and is in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

SIGNIFICANT CHANGES IN THE KEY FINANCIAL RATIOS AND OTHER PARAMETERS:

There have been no material changes in the key financial ratios or other financial parameters of the Company during the financial year under review, as compared to the previous year. The Company continues to maintain financial stability and operational consistency across all core performance indicators.

DISCLOSURE OF ACCOUNTING TREATMENT:

In the preparation of the financial statements for FY 2025-26, the Company has followed the treatment prescribed under the applicable Indian Accounting Standards (Ind AS), and no treatment different from that prescribed in any Accounting Standard has been followed.

CAUTIONARY STATEMENT:

The statements made in this Management Discussion and Analysis Report describing the Companys objectives, expectations, projections, estimates, or forecasts may constitute forward-looking statements within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events.

Actual results may differ materially from those expressed or implied due to various risks and uncertainties. Key factors that may impact the Companys performance include fluctuations in demand and supply conditions, availability and cost of working capital and raw materials, changes in government policies, trade agreements and tariff structures, exchange rate movements, geopolitical developments including the ongoing conflict in the Middle East, and broader economic developments in India and across global markets.