K G Denim Ltd Management Discussions

2015 Industry structure and developments:

KG Denim Limited is a leading manufacturer of Denim Fabric. It has manufacturing facilities for Denim Fabric, Apparel Fabric, Readymade Garments and Home Textile products also generating steam for captive consumption and power for both captive consumption and outside sales. Indian textile Exports experienced a decline for the consecutive year in 2025-26, mainly attributed to the geopolitical tensions casting a shadow on the global trade.

India is one of the fastest growing economy in the world. Textile is one of the core segments in the manufacturing sector in India. However, due to geopolitical disturbances and Tariff wars there has been decline in the exports of textile across the Country. The Government of India is holding discussions with countries in Asia, Africa and Europe to explore new Markets. It is expected there would be some improvements in the export segment if the talks materialize.

Opportunity

There had been drought in the plant location due to which there was no water supply. The operations of the Company were affected severely for about 5 months. The restarting of the operations got affected due to non-availability of funds. The implementation of the restructuring for loan facilities with the Bankers was also delayed and was implemented only in March 2026.

The Company has recently concluded arrangements with the Bankers for release of working capital funds. To augment funds for working capital and reduction of debts the Company is in the process of selling non-core assets. It is hoped that the operations would be ramped up gradually from September 2026.

The recent Tariff war started by USA appears to affect the export market of textiles since USA was the major importer of Indian textiles. The Government of India is holding discussions with other countries to explore new markets.

The Company recognizes that risk is an integral and unavoidable component of the business. The Company is committed to managing the risk in a proactive and effective manner. Identify the key risks having a severe impact on our business and take suitable measures to mitigate them.

The common risks are operational risks, raw material risk, disaster risk, financial risk, foreign exchange risk and market risks etc., In todays challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans Company are imperative. Senior Executives is continuously monitoring the risk areas that could have an impact on the performance of the Company and take appropriate actions to maximize opportunities in all activities and to minimize adversity.

The Company has a proper and adequate internal control system that is commensurate with its size and nature of business, to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded, and reported correctly.

The internal control system is responsible for addressing the evolving risks in the business, reliability of financial information, timely reporting of operational and financial transactions, safeguarding of assets and stringent adherence to the applicable laws and regulations. The internal auditors of the Company are responsible for regular monitoring and review of these controls. The Audit Committee periodically reviews the audit reports and ensures correction of any variance, as may be required. Key observations are communicated to the management who undertakes prompt corrective actions.

The financial performance of the Company during the financial year 2025-26 has been discussed in the Directors Report and the audited financial statements, which have been prepared in accordance with the requirement of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, discloses a true and fair view of the performance of the company during the said period.

Number of people employed - present strength is around 134 which will increase with improvement in operations.

As the operations of the Company has been severely affected as aforesaid there had been significant reduction in the manpower. The Company is holding discussions with affected employees for amicable settlement and reemployment as the operations progresses.

The Management Discussion and Analysis contain forward looking statements regarding Companys projections and expectations and the actual results could differ materially from those expressed on account of various factors like raw material prices, change in demand, Government regulation etc., and the readers are cautioned against placing undue reliance on the same.