Indian Card Clothing Company Ltd Management Discussions

A) Industry Structure and Developments:

Indian Spinning Industry and Outlook for 2026-27

India continues to be one of the worlds largest and most diversified spinning centres, with a large installed base of spinning capacity producing a wide range of yarns across cotton, polyester, viscose, other man-made fibres and various blends. The Indian textile industry benefits from an established raw-material base, a large domestic market, a skilled workforce and a well-developed textile manufacturing ecosystem.

Indias spinning industry remains an important participant in the global cotton yarn market. The sector has also continued to adopt modern spinning technologies, including compact spinning, automated process control, electronic quality monitoring and higher- speed machinery. The diversification of fibre consumption towards polyester, viscose, recycled fibres and other man-made fibres is also creating opportunities for spinning mills to expand their product portfolio.

During the financial year 2025-2026, the area of cotton cultivation was approximately 115 lakh hectares, which is almost same to the last financial year. As against the total cotton production of 290 lakh bales during the financial year 2024-25, the estimate of the total cotton production during the year 2025-26 is 282 lakh bales of 170 kgs. each. The average yield in kilograms per hectare as projected for the financial year 2025-26 is 428 kilograms, which is lower by 12 kilogram per hectares as compared to previous financial year. [Figures are as estimated by the Committee on Cotton Production and Consumption (COCPC) in its meeting held on 28.07.2026].

During FY 2025-26, the Indian spinning industry continued to operate in a challenging environment. Demand conditions for yarn remained uneven across domestic and export markets, while spinning mills continued to face pressure from cotton prices, energy costs, currency depreciation, increased labour costs global trade uncertainties and shipping challenges due to regional conflicts. Export demand, however, showed signs of improvement towards the latter part of the financial year, with Indian cotton yarn witnessing renewed demand from several international markets.

The textile industry is also witnessing a gradual shift in global sourcing patterns. The continuing "China plus one" strategy adopted by international textile and apparel companies provides India with an opportunity to increase its share in global textile supply chains. The expansion of Indias free-trade and trade-facilitation initiatives is expected to support the competitiveness of Indian textile and apparel exports over the medium term. At the same time, the textile industry continues to face structural challenges. Global competition from countries such as China, Vietnam, Pakistan, Bangladesh, Indonesia remains significant. Indias textile industry also needs continued investment in modernisation, automation, productivity enhancement and movement towards value-added products.

The demand for card clothing is closely linked to the operating capacity of the spinning industry, the number and type of carding machines installed, machine utilisation, production rates and the fibre being processed. The gradual modernisation of the installed carding base, together with increasing adoption of high-production cards calls for strong and durable card clothing.

Indias substantial installed base of spinning machinery also provides a recurring replacement and re-clothing market. As card clothing is a consumable component of the carding process, replacement demand is linked to machine utilisation and the nature of fibres processed.

The carding process remains a critical stage in spinning, as it performs the essential functions of fibre individualisation, cleaning and alignment. The quality and performance of card clothing therefore have a direct bearing on yarn quality, productivity and process efficiency.

The card clothing market continues to be competitive, with global and domestic manufacturers competing across OEM supplies and the re-clothing market. Major carding machine manufacturers have established relationships with their associated card clothing suppliers, while independent card clothing manufacturers compete for replacement and re-clothing business.

For ICC, the changing technology landscape presents both challenges and opportunities. The gradual movement from conventional low-speed cards towards highspeed and high-production carding machines requires continuous product development and technical engagement with customers. ICCs development of products for highspeed applications and its focus on specialised card clothing are therefore important elements of its growth strategy.

The non-woven and technical textile sectors represent another opportunity that the Company is exploring.

Indias continuing efforts to develop technical textiles and increase domestic manufacturing capabilities are expected to create opportunities for suppliers of specialised machinery components and consumables. ICC, with its established domestic manufacturing capabilities in non-woven card clothing, is uniquely positioned to be able to participate in this segment.

B) SWOT Analysis:

Strengths:

• ICC has an established brand and market presence of around seven decades in the card clothing industry.

• The Company has strong technical expertise and manufacturing capabilities in metallic card clothing and non-woven wires.

• ICC has an established sales and service network covering major spinning centres in India and international markets.

• The Company has a presence in the non-woven card clothing segment.

• Continuous investment in automation and process improvement provides a foundation for improving productivity, quality and manufacturing consistency.

• ICC has a diversified product portfolio covering card clothing, non-woven wires, machines and servicing.

• The Companys technical and product-development capabilities enable it to develop specialised solutions for new fibres, higher production rates and evolving customer requirements.

• ICC continues to focus on developing products for high-speed carding applications, which represent an important growth segment for the card clothing industry.

Weaknesses:

• The Companys business remains closely linked to the cyclical nature of the textile spinning industry.

• Due to the criticality of quality of card clothing required in the spinning segment, the industry requires specialised and high-quality raw materials, much of which are dependent on imported sources, exposing the Company to high cost of imported raw-material, smaller volumes increased cost and foreign-exchange risks.

• ICC does not have captive relationships with all leading carding machine manufacturers, resulting in the need for sustained technical efforts to qualify products on new-generation machines.

• The traditional low-speed carding segment is mature and is gradually declining in importance relative to high-speed and high-production carding machines.

• Establishing products on newly installed high-speed cards requires extensive customer trials, technical validation and a longer gestation period.

• Price competition, high volume imports and dumping from international manufacturers, remains a challenge in several international markets under mining the Companys competitive edge.

Opportunities:

• Modernisation of the installed spinning machinery base provides an opportunity for increased adoption of high-performance card clothing.

• Increasing penetration of high-speed and high-production carding machines creates opportunities for ICCs advanced card clothing products.

• Increasing use of man-made, recycled and blended fibres requires specialised card clothing, creating opportunities for product innovation.

• ICCs technical expertise provides opportunities to develop application-specific card clothing for difficult-to-process and emerging fibres.

• Global diversification of textile sourcing away from China provides a medium-term opportunity for Indian textile machinery and component manufacturers.

• Continued development of Indias textile and technical-textile ecosystem is expected to support demand for specialised textile machinery components.

• ICCs continued investment in automation and lean manufacturing can improve manufacturing efficiency and competitiveness.

Threats:

• Prolonged weakness in global textile and apparel demand can result in lower utilisation of spinning mills and postponement of card re-clothing.

• Geopolitical tensions and changes in international trade policies can adversely affect exports and logistics costs.

• Increased competition from Chinese card clothing manufacturers, particularly in price-sensitive markets, remains a concern.

• OEM-associated card clothing suppliers may have an advantage in the initial and early replacement cycles of new carding machines.

• Volatility in steel and other critical raw-material prices may adversely affect margins.

• Regulatory requirements relating to import of specialised alloy and high-carbon steel can affect procurement lead times and costs.

• Foreign-exchange volatility may impact export realisations and the cost of imported raw materials.

• Rising energy, labour and logistics costs can adversely affect manufacturing costs.

• Spinning mills may defer replacement of card clothing during periods of low yarn demand or weak profitability.

C) Operations

i) Product-wise Operational Performance:

Metallic:

The metallic card clothing business continued to operate in a challenging market environment during FY 2025-26. Demand remained influenced by the subdued operating conditions prevailing in parts of the spinning industry and the postponement of certain capital investments and modernisation programmes.

The Company continued its efforts to strengthen its presence in the higher-value segment of card clothing through development and promotion of products designed for high-speed and high-production carding applications.

The increasing adoption of fine-count yarn production, higher production rates and specialised fibre blends is expected to support demand for technically advanced card clothing. ICC continues to focus on improving product performance, service life and productivity for such applications.

The Company also continued to work closely with customers through trials and technical support to establish its products on newer-generation carding machines.

Non-woven:

The non-woven business continues to be an important growth area for ICC. Demand for non-woven products is supported by their increasing use in hygiene, filtration, automotive, medical, construction and other industrial applications.

ICC continued to strengthen its position in this segment through product development, customer engagement and application-specific solutions.

The Companys international presence, including its operations in Turkey and its relationship with Garnett Wire Limited, UK, provides an important platform for developing the non-woven business internationally.

The Company will continue to focus on specialised wire designs and products capable of processing a wide variety of natural, synthetic, recycled and bast fibres.

Machines:

Demand for machines used for mounting, maintenance and servicing of card clothing remained influenced by the cautious investment environment in the spinning industry.

As spinning mills defer capital expenditure during periods of subdued demand, the market for card-clothing-related service machines remains dependent on the pace of modernisation and capacity expansion.

ICC continues to maintain its capabilities in this segment and will focus on opportunities arising from replacement, maintenance and modernisation of the installed carding machinery base.

As the Company has developed a range of service machinery capable of being used in the growing market of recycled fibres and non-woven products, the Company has an opportunity to capture a larger share in this high value market.

Servicing:

Service support remains an important component of ICCs customer proposition. Technical servicing enables the Company to maintain close relationships with textile mills and provides valuable feedback regarding card clothing performance, fibre-processing conditions and customer requirements.

During the year, the Company continued to provide technical and service support to customers across key textile centres.

The Company will continue to strengthen its service capabilities with the objective of improving customer retention, increasing product acceptance and generating opportunities for replacement card clothing.

ii) Measures Taken for Improving Operational Efficiency:

During the year under review, the Company continued its focus on improving operational efficiency through automation, process optimisation and productivity improvement initiatives.

The operations team continued to work on Lean manufacturing principles with emphasis on:

• improving manufacturing productivity;

• reducing process losses and wastage;

• improving machine utilisation;

• enhancing quality consistency;

• optimising manpower deployment;

• improving manufacturing lead times; and

• strengthening process controls.

The Company will continue to evaluate opportunities for automation and process improvement to enhance its competitiveness and improve cost efficiency.

D) Outlook:

The outlook for the card clothing industry remains closely linked to the recovery in global textile and apparel demand and the utilisation levels of spinning mills.

During FY 2025-26, the industry continued to face challenges arising from subdued demand in certain markets, geopolitical uncertainties and cost pressures. However, there were signs of improving export demand towards the end of the financial year, particularly for Indian cotton yarn.

The Company expects that a sustained recovery in textile and apparel demand, improvement in spinning-mill utilisation and renewed investment in modernisation could support the card clothing market.

The gradual replacement of older carding machinery and increasing adoption of highspeed carding machines are expected to create opportunities for higher-performance card clothing.

ICC will focus on the following strategic priorities:

1. Increasing market penetration in high-speed and high-production carding applications.

2. Strengthening the Companys presence in the non-woven and technical textile sectors.

3. Developing specialised card clothing for new and difficult-to-process fibres.

4. Expanding international business through existing sales and service infrastructure.

5. Strengthening the Companys presence in international markets.

6. Increasing customer engagement through technical service and application support.

7. Improving manufacturing productivity and cost competitiveness.

8. Continuing investment in product development and innovation.

Although the Company remains cautiously optimistic that an improvement in global textile demand and increased utilisation of spinning and non-woven machinery will create a more favourable environment for the card clothing industry over the medium term, in the short term the prospect of a return to profitability appears to be challenging.

E) Risks and Concerns:

The demand for card clothing in the re-clothing market is dependent on the operating capacity of carding machines, their production rate, machine utilisation and the type and volume of fibres processed. A prolonged slowdown in textile and apparel demand may result in lower utilisation of spinning mills and postponement of card re-clothing, thereby adversely affecting demand for card clothing.

The Company is exposed to volatility in the prices and availability of critical raw materials, particularly high-carbon and alloy steels. Regulatory requirements relating to quality standards and imports may also affect procurement costs and lead times. The Company is also exposed to foreign-exchange fluctuations on account of its international operations and import of certain raw materials.

Geopolitical developments, trade restrictions, tariff changes, international freight costs and economic conditions in major export markets may impact the Companys international business.

Increasing competition from Chinese manufacturers, particularly in price-sensitive markets, remains a concern. In addition, card clothing manufacturers associated with carding machine OEMs may have an advantage in the initial replacement cycles of new machines.

The Company also faces the risk of changes in fibre mix. The increasing use of synthetic, recycled and blended fibres requires continuous development of specialised card clothing products and technical expertise.

Other risks include fluctuations in energy costs, labour costs, interest rates, taxation, foreign exchange, natural disasters, supply-chain disruptions and changes in government regulations.

The Company continuously evaluates these risks and takes appropriate measures to mitigate their potential impact.

F) Internal control systems and their adequacy:

A firm of auditors manned by technically and commercially qualified personnel carries out internal audit, of Nalagarh plant, which is followed up by discussion with each department, the Chief Executive Officer and in the Audit Committee. Wherever risks have been identified in processes or systems, these have been addressed by implementing a more robust process.

The Company has a costing system to help control costs and to take decisions on pricing. Pursuant to Notification No. G.S.R. 725(E) dated July 31, 2018 whereby the Companies (Accounts) Amendment Rules, 2018 were notified, the Company is maintaining the Cost Records under sub-section (1) of section 148 of the Companies Act, 2013. A certificate of a Practising Cost Accountant has been obtained certifying that the Company has maintained the Cost Records as per the statutory requirements mentioned above.

The Companys manufacturing facility has ISO 9001 certification, which is renewed from time to time.

The Company operates in ERP environment and has implemented the Oracle System for the purpose of "Internal Financial Controls" within the meaning of the explanation to Section 134(5)(e) of the Companies Act, 2013, read with Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014. Subsequent to the restructuring exercise of Finance & Accounts function of the Company, internal financial controls with re-defined Risk Control Matrix were laid down which are adequate and were operating effectively during the year under review. The Board of Directors has adopted adequate internal control policies and procedure for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, safeguarding its assets, prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely preparation of reliable financial information.

The Board of Directors is of the opinion that for the year ended March 31, 2026, the Company has sound internal financial controls commensurate with the nature and size of the business operations of the Company.

G) Financial performance and operational performance:

• Standalone Financial Performance

During the year under review, the Company earned a total revenue of Rs. 5,723.32 Lakh as against Rs. 7,995.38 Lakh in the previous year. The profit for the financial year 2025-26 is Rs. 420.42 Lakh as against profit of Rs. 9,184.72 Lakh for the financial year 2024-25.

• Consolidated Financial Performance

During the year under review, the Company along with its subsidiaries achieved a total consolidated revenue of Rs. 6,419.15 Lakh for the year ended March 31, 2026, as against Rs. 8,591.50 Lakh for the previous year ended March 31, 2025. The consolidated profit after tax for the year under review is Rs. 371.97 Lakh as against consolidated profit after tax of Rs. 9,186.88 Lakh for the previous year.

H) Material developments in Human Resources / Industrial Relations:

Industrial relations of the Company were cordial throughout the year. Your Company recognises the need for a strong, dynamic and motivated Human Resources. Over the years Company has maintained consistency in its efforts in training and developing its human resource to sustain in the increasing competition.

I) Key financial ratios, significant changes therein and its explanation:

Particulars	2025-26	2024-25	Remarks
Debtors Turnover Ratio (in times)	3.64	3.72	Variation due increase in average accounts receivables.
Inventory Turnover Ratio (in times)	1.24	1.52	Marginal improvement due to better utilisation of Inventory.
Interest Coverage Ratio (in times)	0.78	2.71	Last years ratio has been restated. Interest Coverage Ratio for the year under review has deteriorated due to a decline in profit during the current year.
Current Ratio (in times)	10.59	3.57	The increase in the current ratio during the year is mainly due to the reclassification of certain investments and loans from non-current assets to current assets, resulting in an increase in current assets as compared to the previous year.
Debt Equity Ratio (in times)	0.00	0.04	The major decrease in this ratio is on account of repayment of loan of in full during the year.
Operating Profit Margin (in %)			During the year under review the Company has incurred an operating loss of Rs. 864.58 Lakh as against Rs. 1,473.65 Lakh during the previous financial year. Since the Company has been incurring losses, Operating Profit Margin cannot be ascertained.
Net Profit Margin (in %)	12%	255%	Net profit ratio decreased during the current year as compared to the previous year, primarily due to the profit recognized on the sale of land and building in
			the previous year vis-avis no such sale of asset has taken place during the year under review together with a significant decline in fair value gains on financial assets.

J) Return on net worth, significant changes therein and its explanation:

Return on net worth for the financial year 2025-26 was 2% as against 29% for the financial year 2024-25. The decrease in the return on the net worth was primarily due to the profit recognized on the sale of land and building in the previous financial year vis-avis no such sale of asset has taken place during the year under review together with a significant decline in fair value gains on financial assets.

K) Cautionary Statement:

Statements in the Management Discussions and Analysis Report describing the Companys projections, estimations, expectation and predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from the expressed or implied. Important factors that would make a difference to the Companys operations include demand and supply conditions, raw material prices, changes in government regulations, tax regimes, competition and economic developments within and outside the country.