Harish Textile Engineers Ltd Management Discussions

The purpose of this discussion is to provide an understanding of financial statements and a composite summary of performance of our business. Management Discussion and Analysis (MDA) is structured as follows:

Overall Review:

A traditional industry like Indian textiles is rapidly reinventing itself with a modern twist. The over Rs. 14.80-lakh crore sector is venturing into newer markets and diversifying into newer products to stay relevant and grow.

Dating back to the Indus Valley Civilisation, the more than 5,000-year-old domestic textile industry is very vital to the Indian economy. The textile industry - which comprises fibre, yarn, fabric, garment and apparel segments - contributes around 2.3 per cent to the countrys GDP, 13 per cent to its industrial production and 12 per cent to its exports.

The textile industry is also the second-largest employment generator after agriculture, with over 4.5 crore people employed directly. It is one of the most inclusive industries, employing a large section of women and the rural population. Besides, about 80 per cent of the industry is composed of MSMEs.

India is the sixth-largest exporter of different components or segments of textiles in the world. The share of textiles in the countrys total exports is a little over 8 per cent. Moreover, Indian textiles make up about 4 per cent of the total global textile trade.

Cotton textile is a lifeline for nearly 6 crore Indians, with around 65 lakh working on cotton farms and many more crores involved in different stages of different segments of the textile industry. The Indian textile industry, which has been passing through a rough patch for the past many years, seems to be looking up gradually.

A big global push has helped the industry learn a new lesson. Unlike the cotton textile-driven Indian market, apparels and garments made out of manmade fibres - like nylon, rayon, polyester and viscose, among others - are in greater demand in global markets. Export-oriented Indian companies are slashing their overdependence on cotton and aggressively scaling up production of manmade textile-based apparels and garments to capture a greater share of their newfound global markets.

This shift is further supported by the launch of the multi-million-dollar National Technical Textiles Mission (NTTM), aimed at upscaling Indias global leadership in the technical textile space. The move into high-value technical textiles, catering to industries as diverse as healthcare, automotive, agriculture and others, is set to take the Indian industry to the next level.

The government has been launching many schemes to handhold the industry in its global quest. The Production-Linked Incentives (PLI) Scheme for Textiles has been rolled out to increase manufacturing in manmade fibres and technical textiles. Besides, the PM MITRA Parks are developing world-class industrial infrastructure for the entire value chain of the textile industry - including spinning, weaving, processing, garmenting, textile manufacturing and textile machinery. These parks - seven have already been set up - are designed to reduce logistics costs, attract FDI and improve competitiveness in global markets.

Company Performance/ Review of Operations:

For the Fiscal Year 2024-25, the Company has attained the top line of Rs. 132 crores. This records for almost 13% Y-o-Y growth in the annual turnover of the Company. The Non-Woven Business performed exceptionally well, showing an annual increase in the turnover by almost 11%. The performance of the pSf division was also increased substantially by about 17%. The Textile Engineering business is not performing well and has been incurring losses.

Non-Woven and PSF divisions are attaining their fullest capacity utilisations, and with a better product mix, the contributions from both the business segments are improving on a year-on-year basis. Particularly, the PSF division, with the help of a profitable product mix and increased capacity utilisations, has attained the EBIDTA contributions of 10% as against 7% for the Financial Year 2023-24.

Profits of Non-Woven and PSF Divisions get set off against the losses of the Textile Engineering Division.

Brief Introduction of Your Company:

Your Company is one of the leading producers of textile processing and finishing machinery in India. The machinery manufactured by your Company is well-accepted by reputed clients both in India and abroad. Your Company has successfully exported its products to over 25 countries, including prestigious markets like the United Kingdom.

The Companys manufacturing facilities are spread across 50,000 square feet in Umbergam, Gujarat.

In addition to machinery manufacturing, your Company is also engaged in the production of Non- Woven fabrics, primarily used in automotive interiors, filtration, and hygiene segments. This activity is carried out at its Umbergam plant, which has a factory building of approximately 1,10,000 square feet.

Furthermore, your Company is involved in the production of polyester staple fibre (PSF) by recycling PET bottles and waste polyester at its plant located in Gonde, Nashik.

Strengths:

Over the years, your Company has gained significant product and domain expertise across all the products it manufactures. It also has an excellent technical and design team capable of handling tailor-made and specialised projects, including those outside the textile industry.

Your Company has best-in-class infrastructure and advanced plant and machinery in this business. The PSF business is eco-friendly and sustainable as it converts PET bottles and polyester scrap into useful fibre. Your Company has domain expertise and experience in this segment, supported by strong infrastructure and ambitious plans for expansion.

The Companys Non-Woven Business offers a wide range of products catering to a broad customer base. With backward integration through its PSF plant, the Company enjoys assured raw material supply, putting it in a unique and advantageous position in the industry.

Quality:

Harish machines are known and respected for their quality and productivity, and they command premium valuation in the market.

Similarly, the PSF and Non-Woven products of your Company are well-known for their high-quality standards and reliability.

Outlook:

The outlook for the financial year 2025-2026 appears positive. The Non-Woven Business has achieved its highest-ever monthly turnover, and the recently expanded capacity is starting to yield positive results. Non-Woven Segment is also planning to expand its capacity by acquiring additional NW lines during the year to cater the market demand.

The Company has already proposed to spin off its loss making Textile Processing and Finishing Machinery Business for which postal ballot has already commenced.

The overall business scenario for both Non-Woven and PSF Segments also looks encouraging.

The recycling industry has moved from being considered a medium- to long-term viable business to now being a "must-have" for ecological development. As a result, this industry is moving from a side stream to the mainstream.

Many companies, particularly in the automotive industry, are increasingly seeking recycled materials to reduce their carbon footprint. Since your Company supplies fibre and Non-Woven fabrics mainly to automotive ancillary companies, it is well-positioned to cater to the growing demand in this segment.

OPPORTUNITIES AND THREATS:

Opportunities:

• Export markets offer strong opportunities for the engineering business.

• Specialised and tailor-made solutions for non-textile customers also present good growth prospects.

• For the PSF business, expansion plans are in place, and rising auto sales are improving opportunities for both PSF and Non-Woven Segments.

Threats:

• Potential threats include economic slowdown, liquidity issues, rising raw material prices, and unfavourable government policies.

• However, since the textile industry is one of the top three employment generators, government policies are expected to remain supportive.

Other Threats:

Geopolitical:

• Emerging geopolitical trade issues

• Trade restrictions and supply chain challenges New Competition:

• Entry of new players in the market Financial:

• Volatility in the INR/USD exchange rates

• Higher interest rate regime C yber-Security:

• Data theft/loss

• Domain-based threats

• Hacktivism

• Website/system non-availability Others:

• Possibility of global recession

• Supply chain disruptions

• Employee health and wellness concerns RISKS AND CONCERNS:

The industry is currently facing risks due to a liquidity crunch and a global economic slowdown, caused by monetary tightening and higher interest rate regimes implemented by central banks around the world.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has a well-defined organizational structure, documented policies, and an authority matrix to ensure operational effectiveness, reliability of financial reporting, and compliance with applicable laws and regulations.

The internal financial control system includes:

• Proper delegation of authority

• Segregation of duties

• System access controls

• Proper documentation and record-keeping

The Internal Auditor continuously reviews the effectiveness of these controls. Reports prepared by the Internal Auditor are reviewed by the Audit Committee.

The Company follows a risk-based internal audit policy, with the objective of identifying key processes and controls, assessing their operating effectiveness, and providing recommendations for process improvement and control enhancement.

For and on behalf of the Board of Directors
Harish Textile Engineers Limited
Sandeep Gandhi	Sunil Bhirud
Managing Director	Executive Director
DIN: 00941665	DIN: 03469816
Date: 25th June, 2025
Place: Mumbai