Iris Clothings Ltd Management Discussions

GLOBAL ECONOMY

In CY 2024, the global economy stabilised and witnessed steady growth of 3.3% despite rising trade tensions and policy shifts. The US and China are particularly impacted by tariff escalations, disrupting global supply chains and dampening investment. Inflation remained elevated in some regions, and financial markets showed signs of volatility. Despite these concerns, economic activity maintained a steady pace, supported by robust government expenditure, resilient household consumption and rising labour force

participation. According to the International Monetary Fund (IMF), global economic growth is projected to decline to 2.8% in 2025, with a recovery anticipated at 3% in 2026, driven by easing of inflation and continued support from Central Banks through favourable monetary policies. Inflation is forecasted to further decrease to 4.3% in 2025 and 3.6% in 2026. While the recent US tariffs has impacted global trade momentum, the removal of trade barriers and acceleration of structural reforms across economies will support long-term global growth.

INDIAN ECONOMY

The Indian economy remains a key driver of global growth, supported by strong domestic demand, sound macroeconomic fundamentals, and prudent policies. Despite global headwinds, the Indian economy continued to grow at 6.5% in FY2025 and sustained its position as one of the fastest-growing major economies of the world. The International Monetary Fund (IMF), projects GDP growth at 6.2% in 2025 and 6.3% in 2026, supported by stable fundamentals and effective policy measures. Inflation outlook is benign, while financial stability is underpinned by resilient banks and non-bank financial institutions with robust capital buffers and low non-performing loans. To support long-term growth, the government has launched key initiatives such as the PM Gati Shakti Master Plan, Startup India, and the Production Linked Incentive (PLI) Scheme, aimed at strengthening infrastructure, manufacturing, and digital sectors. These efforts highlight IndiaRss commitment to building a self-reliant and globally competitive economy.

Source: International Monetary Fund

INDIAN TEXTILE & APPAREL INDUSTRY

IndiaRss textile industry is the second-largest global producer of textiles and garments and a major employment generator, supporting over 45 million people. The Indian Textile and Apparel market has grown steadily from US$ 106 billion in 2019-20 to US$ 147 billion in 2024-25, registering a CAGR of 7%. This growth has been fuelled by strong domestic demand, supported by a normal monsoon, easing inflation, and increased consumer spending during the festive season.

The organised retail apparel sector expanded by of 8-10%, driven by rising preference for affordable fashion. Additionally, the sportswear and athleisure categories have seen a notable increase, fuelled by growing health awareness and a shift towards comfort-centric clothing. Organised brands in this segment, including D2C players and multinational companies, recorded revenue growth of 15-20%.

Furthermore, the government is actively strengthening the sectorRss global competitiveness through initiatives like the

Rs10,683 Crores PLI Scheme and PM MITRA Parks, focussed on improving infrastructure and scale. States such as Andhra Pradesh, Gujarat, and Tamil Nadu have introduced new textile policies aimed at enhancing investment, employment and exports.

With rising global demand, a strong focus on sustainability, and 100% FDI permitted under the automatic route, IndiaRss textile and apparel sector is poised for robust expansion.

INDIAN KIDS APPAREL INDUSTRY

According to TechSci Research report, Indian Kids Apparel Market was valued at US$ 24.6 Billion in 2024 and is projected to reach US$ 29.4 Billion by 2030, growing at a CAGR of 3.0%. The segment has emerged as one of the most dynamic within the Indian fashion industry, driven by a large and growing population of children under the age of 14. Factors such as increasing disposable incomes, urbanisation, and changing lifestyle patterns have

ignificantly contributed to the marketRss transformation from asic clothing to a fashion-driven category.

hildrenRss increased exposure to digital content through ;artoons, YouTube and social media has influenced their lothing preferences for character-themed and trend-driven pparel featuring superheroes, cartoon characters, and opular movies. Simultaneously, parents are increasingly rioritising fashionable, comfortable, and branded clothing

for their children. This shift in consumer behaviour has encouraged both domestic and international brands to invest in innovative design, marketing, and digital engagement.

The market outlook appears promising, supported by rising demand for premium and sustainable clothing. Brands are increasingly adopting organic fabrics and eco-friendly production methods, to align with the health-conscious and environmentally aware consumers. Moreover, the growing popularity of gender-neutral and athleisure wear is also gaining momentum by further diversifying the product landscape.

Key Trends observed in the Kids Apparel Market:

• Major metropolitan cities such as Delhi, Mumbai, Bengaluru, and Hyderabad dominate the kids

apparel market, driven by higher urban population and increased purchasing power and the expanding presence of organised retail and branded outlets

• The t-shirt segment continues to hold a dominant market share due to their casual and comfortable and versatile nature, making them a core item in childrenRss wardrobes

• The rise of local brands offering fashionable designs at competitive prices has further fuelled the kids apparel market growth

• The offline segment remains dominant due to growing demand for quality kidswear. Manufacturers are trying to expand their distribution channels and product portfolios

I IRIS Clothings Limited is a fast-growing kidsRs apparel company that is engaged in manufacturing, designing, branding, and selling garments for kids wear. Established in 2005, the company has built a position in the kidsRs wear market with its signature brand “DOREME”

COMPANY OVERVIEW

IRIS Clothings Limited is a fast-growing kidsRs apparel company that is engaged in manufacturing, designing, branding, and selling garments for kids wear. Established in 2005, the company has built a position in the kidsRs wear market with its signature brand “DOREME”. Renowned for its unique collection of readymade garments, IRIS Clothings caters to fashion needs of children and toddlers with a diverse range of tailored designs.

The journey of DOREME began through a distributor-retailer network based out of Mumbai. Since then, the brand has been steadily gaining popularity from word-of-mouth publicity. It has also gained significant presence in the retail stores given its high-quality and stylish range of collection and the companyRss ability to continuously launching new products with varied designs.

The company currently operates out of 4 key manufacturing sites located in Howrah, West Bengal. This strategic base supports the brandRss extensive presence in 26 states across India, with Maharashtra, Rajasthan, Gujarat, and NCR being the key markets. The companyRss distribution network is robust, with 186 distributors actively selling DOREME garments. In pursuit of growth, IRIS Clothings is focussing on domestic expansion through the launch of Exclusive Brand Outlets across India and is also extending its reach internationally with exports to Africa, Nepal and Saudi Arabia.

Over the years, the company has built a strong presence in the offline market, however, it is also building presence in the online market. The launch of D2C website and www. doreme.in, marks the brandRss presence into the digital marketspace, offering customers an alternative platform to access its products.

PRODUCTS AND SERVICES

The company specialises in manufacturing and selling of readymade garments and clothing accessories for kids under its brand “DOREME”. The brand DOREME offers a wide range of collection for infants, toddlers, and junior boys and girls, catering to their needs for both indoor and outdoor.

The product portfolio includes a wide range of items across categories such as summer wear, winter wear, sportswear, and swimwear. The collection includes an array of tops, t-shirts, pyjamas, trousers, shorts, dresses, polyfil suits, sweatshirts, hoodies, joggers, dryfit and accessories such as bags and bottles.

DEVELOPMENTS IN FY2025

• Expansion of Product offerings: During FY2025, IRIS continued to strengthen its product portfolio with a strategic focus on the infant wear segment. The company introduced new categories including infant sets, cord sets, nightwear, and fresh designs under the Disney apparel line. These new offerings have been

carefully crafted to meet the customers changing needs and have been positively received in the market

• Enhanced Distributor Network: Building on steady growth in the B2B segment, IRIS expanded its domestic distribution network by adding 20+ new distributors during the year. The strategic focus has been on deepening relationships with existing distributors rather than merely expanding network in breadth alone

• Launch of Exclusive Brand Outlets (EBOs): In

pursuit to strengthen D2C presence, IRIS launched 5 new exclusive brand outlets in FY2025, increasing total store count to 7. This retail expansion reflects the companyRss commitment to improving customer reach and enhancing brand visibility through a focussed and trend-driven growth strategy

• Global Exports: IRIS continues to expand its international footprint with exports to countries including Nepal, Portugal, Mozambique, Zambia, and Saudi Arabia, where products are sold under the "DOREME” brand. The company aims to strengthen its presence further in key regions such as the UAE, Middle East, Saudi Arabia and Portugal in the coming years by increasing depth within existing markets.

STRATEGY

• Expanding Geographical Footprint: The DOREME brand has significantly broadened its reach in over 26 states across India, with a robust and growing network of 186 distributors. In FY2025, the company added 21 new distributors, focussing on deepening its presence in key markets such as Maharashtra, West Bengal, and other western regions. Additionally, the company aims to increase its distributor network to 300 by FY2030 through both market expansion and consolidation in existing regions

• Strengthening Retail Presence: The company is enhancing its retail footprint by opening Exclusive Brand Outlets (EBOs) and currently have 7 operational EBOs. Looking ahead to FY2026, the company plans to open 20 company-owned EBOs, adopting a cluster- based expansion model with a focus on building brand visibility, particularly in the eastern regions where its presence is currently limited

• Product Category Enhancement: Product

diversification remains a key growth driver for the company. FY2025 marked the successful launch of a new line of winter sportswear for kids, which has been very well received for its quality and innovation. The company plans to expand its offerings further by introducing a new innerwear line and enhancing its sportswear collection. These efforts support the

broader vision of positioning DOREME as a leading kidswear brand in India

• Expanding Capacities: To support growing demand,

IRIS plans to increase its daily production capacity from 34,000 to ~38,000-39,000 pieces, with a planned capex of Rs 5-7 Crores in FY2026. This incremental investment in stitching capacity is expected to increase revenue to 200 Crores. Additionally, a larger capacity

expansion plan is under consideration, which could potentially double the companyRss current output

• Digital Initiatives: IRIS is accelerating its digital transformation by expanding its online presence. The launch of D2C platform, www.doreme.in. represents a key milestone in reaching customers directly. The brand is also active on major digital marketplaces like FirstCry and has strengthened engagement across social media platforms. On the B2B front, all wholesalers are now integrated into a centralised digital platform to improve sales efficiency and reduce inventory turnover, enabling better decision-making and faster market response

• New Designs every year: Staying aligned with fast-changing industry trends, IRIS introduces 90% new designs annually, with only 5-10% of previous collections being repeated. This dynamic design strategy enables the brand to stay ahead of market trends and cater to the evolving preferences of customers, which is expected to contribute significantly to top-line growth in the coming years

OUTLOOK

IRIS Clothings is well-positioned for its next phase of growth, with a focussed strategy to strengthen its direct-to-consumer (D2C) segment alongside its established distributor network. Building on the strong brand recall of DOREME, the company plans to open approximately 100 retail stores in the coming years and is actively investing in building a dedicated retail team to support this expansion. Product diversification remains a key priority, with continuous updates to the merchandise portfolio to meet evolving consumer needs. The successful completion of a rights issue in April 2025, raising Rs 47.5 Crores, reflects strong shareholder confidence and provides the capital needed to enhance operational efficiency and scale up the business. With growing organic demand, planned capacity expansion, and an enhanced retail presence, IRIS is poised to accelerate its growth path. The company remains committed to creating long-term value while reinforcing DOREMERss position as a leading kidswear brand in India.

Strengths and Opportunities

Strengths:

• Brand Recognition: IRIS has built strong brand recall among retailers, which is a testament of the companyRss impactful brand image related with high-quality dress fabric

• Merchandise Collection: The companyRss strength is its strong merchandise collection, offering a diverse range of appealing products that caters to various customer preferences

• Design and Manufacturing: The design conceptualisation is supported by seven state-of- the-art manufacturing facilities, enabling IRIS to maintain high standards of quality and innovation in its product offerings

• Licensing Agreement: Lucrative licensing agreement with Disney, allowing the company to manufacture and sell kids apparel featuring Disney and marvel characters which enhances the product appeal and marketability

• Competitive Pricing: To make the product offerings accessible to a broader customer base, the company offers quality products at reasonable prices. A wide price ranges from Rs 200-2000

• Market Presence: Strong distribution presence in the western region, ensuring regional dominance and maximum customer reach

Opportunities:

• Urbanisation in India is on the rise, with more people migrating from rural areas to urban cities in search of better opportunities. Urban areas tend to have higher purchasing power and greater exposure to fashion trends, leading to an increased demand for kidsRs apparel

• Character-driven and theme-based apparel is one of the most dominant and commercially successful trends in the Indian kidswear space. This trend is particularly potent in tier I and tier II cities where access to digital content is high

• IndiaRss large and youthful population is a significant advantage for the kidsRs apparel sector, with children (aged 0-14 years) accounting for nearly 30% of the total population. This demographic advantage ensures a consistent and expanding consumer base for kidswear across the country

• Omnichannel retailing has emerged as a powerful trend reshaping the shopping experience in IndiaRss kids apparel market. While brick-and-mortar stores still dominate in many regions, e-commerce platforms have made significant inroads, particularly among tech-savvy urban families

• Parents today are increasingly investing in fashionable clothing for their children, not just for comfort and everyday use, but also to reflect individuality and personal style. This cultural shift is leading to rise in demand for trendy, stylish, and sustainable clothing options

Going forward, these factors will surge the demand for kids and toddlers, helping the company on the path of accelerated growth.

RISKS AND CONCERNS

The existing uncertainties related to customers holding their purchase, supply chain disruptions and raw material price volatile can dampen the performance of the Company. However, the CompanyRss long-standing relationships with suppliers allows Iris to exercise better price at the time of raw material procurement. Moreover, the distributorsRs confidence on the Company and the brand helps Iris to easily pass on price hikes to avoid material impact on margins. IrisRs current manufacturing locations helps them to benefit through locational synergies as well when it comes to raw material and skilled labour availability.

INTERNAL CONTROL

The Company maintains adequate and effective Internal Control Systems commensurate with its size and complexity. It believes that these systems provide, among other things, a reasonable assurance that transactions are executed with management authorisation. It also ensures that they are recorded in all material respect to permit preparation of financial statements in conformity with established accounting principles along with the assets of the Company being adequately safeguarded against significant misuse or loss. An independent Internal Audit function is an important element of CompanyRss Internal Control System. This is supplemented through an extensive internal audit programme and periodic review by the management and the Audit Committee of Board.

The Company provides a diverse and an inclusive work environment that helps the employees feel a sense of belonging and companionship with their team. Because of our inclusive work culture and ability to offer opportunities for career growth, we are able to attract and retain the best of talent.

FINANCIAL PERFORMANCE

HUMAN RESOURCE

We strongly believe that our employees have been the key pillars of our success in this market. Therefore, we continue to empower and motivate our workforce to unleash their potential so they can achieve individual excellence and enhance their contribution in achieving departmental goals. The Company provides a diverse and an inclusive work environment that helps the employees feel a sense of belonging and companionship with their team. Because of our inclusive work culture and ability to offer opportunities for career growth, we are able to attract and retain the best of talent. The employee strength of the Company stood at 1,401, as of March 31, 2025.

CAUTIONARY STATEMENT

Statements in this report on Management Discussion and Analysis, describing the CompanyRss objectives, projections, estimates, expectations, or predictions may be forwardlooking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those expressed or implied. Important factors that could make a difference to the CompanyRss operations include finished goods prices, raw materials costs and availability, global and domestic demand supply conditions, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India. The Company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future based on subsequent developments, information, or events.