Jakharia Fabric Ltd Management Discussions

The management discussion and analysis report provides an over view of the financial activities for the fiscal year ended on 31st March 2025, gives an overall sight of the textile industry and Companys strategy to deal with that. This report is designed to focus on current years activities, resulting changes and other known facts in conjunction to the financial and strategic position of the Company.

Economic Review Global Economy

Tire year 2024 began with confidence that inflation was largely beaten and that major economies would likely avoid recession. Those expectations were correct. However, as the year ended, it became increasingly clear that inflation remained more persistent than anticipated. And while the United States experienced strong growth, most other advanced economies did not. Moreover, as the year ended, many economies including India experienced currency depreciation, which could potentially become disruptive especially for emerging market economies.

As 2025 begins, there is some uncertainty due to the likely shift in policy following numerous elections around the world. New policies could lead to new trajectories for inflation, borrowing costs, and currency values, as well as trade flows, capital flows, and costs of production. Meanwhile, governments and central banks continue to navigate a balance between a desire to suppress inflation and a goal to boost growth.

Tire global economy exhibited steady yet uneven growth across regions in 2024. A notable trend was the slowdown in global manufacturing, especially in Europe and parts of Asia, due to supply chain disruptions and weak external demand. In contrast, the sendees sector performed better, supporting growth in many economies. Inflationary pressures eased in most economies. However, sendees inflation has remained persistent.

Despite global uncertainty, India has displayed steady economic growth. Indias real GDP growth of 6.4% in FY25 remains close to the decadal average.

The US economy continues to outperform its developed economy peers. Real gross domestic product growth for 2024 is expected to reach 2.8%. Despite elevated interest rates, consumer spending has grown strongly. A relatively tight labor market, stronger inflation-adjusted wage growth, and a sharp increase in immigration have supported

aggregate consumer spending. Business investment has also held up relatively well, largely due to industrial policies that caused a sharp increase in factory construction.

Tire Federal Reserves preferred measure of inflation, the personal consumption expenditures (PCE) price index, had come down to 2.3% in October 2024 on a year-ago basis, from 2.8% in March 2024. As a result, the Fed was able to cut the federal funds rate by 100 basis points between September and December 2024. Although additional rate cuts are anticipated for 2025, the pace of those cuts is expected to be modest, due in part to the persistence of sendees inflation. Tire mix of federal fiscal policy could also affect the pace of future rate cuts.

Aside from the uncertain policy environment, the US economic outlook remains bright. The economy is gradually slowing toward its potential rate of growth. Unemployment remains low, and inflation is nearing 2%. As a result, the Fed is expected to ease monetary policy at a modest pace, which should prevent a more protracted slowdown in the near term.

Indias GDP growth slowed to 6.0% year over year in the first half of fiscal year 2024 to 2025, significantly below the Reserve Bank of Indias (RBI) projection of 6.9%. Consequently, the central bank lowered its annual growth forecast to 6.6% from 7.2%. The first advanced estimate by the Centra] Statistical Office pegs growth to be 6.4%. Tire slowdown was primarily driven by a moderation in gross fixed capital formation, which grew by 6.4% in the first half, as capital expenditure utilization fell to 37.3%, down from 49% last year. This decline was attributed to the elections in the first quarter and weather-related disruptions in the su bs equ ent quai ter.

Additionally, geopolitical disruptions, particularly in the Red Sea, Bangladesh Political Instability and rising global trade disturbances including US tariff implications impacted the trade balance adversely On the production side, gross value added grew by 6.2% in the first half of the fiscal year, down from 8.0% in the same period last year. Performance in the secondary sector remained weak at 6%, but the farm and service sector demonstrated resilience. Despite the overall economic slowdown, several sectors managed to sustain positive momentum, highlighting pockets of strength within the

economy. These sectors played a critical role in supporting growth amid external and domestic pressures.

I I Rural consumption: Agricultural growth hit a five-quarter high of 3.5%, driven by strong monsoons, healthy kharif (or monsoon or autumn crops) harvests, and improved Rabi (winter crops) sowing in the second quarter. Indicators like sales growth in fast-moving consumer goods and a lower number of jobs demanded under the Mahatma Gandhi National Rural Employment Guarantee Act of 2005 reflect rural consumption strength this fiscal year.

I I Services: Services grew 7.1% in the first half of the fiscal year, with a large contribution coming from the financial, real estate, and professional sendees sectors. Sendees exports also surged 12.8% year over year, reaching US3 248 billion from April to November 2024, with November exports reaching the highest levels ever. This shows the rising significance of sendees to growth and urban income.

I I High-value manufacturing exports: With the support of government schemes, Indian manufacturing is moving up the value chain. Electronics, engineering goods, and chemicals now make up 31% of exports, supported by contributions from micro, small, and medium enterprises and rising credit availability.

I I Fiscal deficit control: At 3.1% of GDP in the second quarter, the fiscal deficit remains manageable, with government spending on capex expected to rise significantly in the second half of the year to meet annual targets.

Indian Economy Scenario

The Economic Survey 2024-25 notes that agriculture growth remained steady in first half of FY25, with Q2 recording a growth rate of 3.5 %, marking an improvement over the previous four quarters. Healthy "Kharif¹ production, abovenormal monsoons, and an adequate reservoir level supported agricultural growth. The total "Kharif¹ food grain production is estimated at a record

1647.05 lakh metric tonnes (LMT) in 2024- 25, higher by 5.7 % compared to 2023-24 and 8.2 % higher than the average food grain production in the past five years.

The industrial sector grew by 6 % in first half of FY25, and is estimated to grow by 6.2 % in FY25. Q1 saw a strong growth of 8.3 %, but growth moderated in Q2 due to three key factors. First, manufacturing exports slowed significantly due to

weak demand from destination countries, and aggressive trade and industrial policies in major trading nations. Second, the above average monsoon had mixed effects - while it replenished reservoirs and supported agriculture, it also disrupted sectors like mining, construction, and, to some extent, manufacturing. Third, the variation in the timing of festivities between September and October in the previous and current years led to a modest growth slowdown in Q2 FY25.

Despite various challenges, India continues to register the fastest growth in manufacturing PMI, stated the Surrey. Tire latest Manufacturing PHI for December 2024 remained well within the expansionary zone, driven by new business gains, robust demand, and advertising efforts.

Tire services sector continues to perform well in FY25, emphasizes the Surrey. A notable growth in Q1 and Q2 resulted in 7.1 % growth in first half of FY25. Across sub-categories, all the sub-sectors have performed well. Indias services export growth surged to 12.8 % during April—November FY25, up from 5.7 % cent in FY24.

The Economic Survey states that growth process has been ably supported by stability on fronts such as inflation, fiscal health, and external sector balance. On inflation, the Survey states that retail headline inflation has softened from 5.4 % m FY24 to 4.9 % in April — December 2024. Food inflation, measured by the Consumer Food Price Index (CFPI), has increased from 7.5 % in FY24 to 8.4 % in FY25 (April- December), primarily driven by a few food items such as vegetables and pulses. Indias consumer price inflation will gradually align with the target of around 4 % in FY26 as per RBI and DIF.

The Survey observes that stability in the banking sector is underscored by declining asset impairments, robust capital buffers, and strong operational performance. The gross nonperforming assets (NPAs) in the banking system have declined to a 12-year low of 2.6 % of gross loans and advances. The capital- to-risk-weighted assets ratio (CRAR) for Schedule Commercial Banks stands at 16.7 % as of September 2024, well above the norm, says the Survey.

Government Grants and Policies:

Government policies play an important role in shaping the future of the textile industry in India.

The government has recognized the potential of the industry and has implemented various policies to promote its growth and competitiveness in the global market. Also, the government has announced incentives and tax breaks to promote exports and attract foreign investment in the textile sector. These policies aim to boost Indias exports and position it as a global textile hub.

Pivotal government policies and initiatives are steering the future of Indias textile industry. Key programs like "Make in India" are fostering an ecosystem of innovation and investment. Additionally, the textile policy and the production- linked incentive scheme aim to boost competitiveness and attract investments. At the same time, the Technical Textiles Mission seeks to promote advanced textile applications in various sectors. The governments plans for 75 textile hubs, skill development programs, and encouragement of FDI and JVs further contribute to the industrys growth, supporting innovation, productivity, and global competitiveness.

Tire government has been, implementing various policy initiatives and schemes to encourage cotton spinning millers in the country, including the 67 announcement of key reforms under a Special Package that includes additional incentives under

the Amended Technology Upgradation Fund Scheme (ATUFS), relaxation of Section 80JJAA of the Income Tax Act, and the introduction of fixed- term employment for the apparel sector. Under the Market Access Initiative (MAI) Scheme, the government offers rebates on state and central taxes and levies that are integrated into production, as well as aid to exporters. Schemes like SAMARTH (Scheme for Capacity Building in the Textile Sector) aim to address the shortage of skilled workers in the textile sector with a target of training 10 lakh people. Tire Cott-Ally mobile app was created to help farmers by providing information on minimum support prices (MSP), locating nearby procurement centers, tracking payments, sharing best farming practices.