K P R Mill Ltd Management Discussions

ECONOMY

GLOBAL

After withstanding higher trade barriers and elevated uncertainty last year, global activity now faces a major test from the outbreak of war in the Middle East. Assuming that the conflict remains limited in duration and scope, global growth is projected to slow to 3.1 percent in 2026 and 3.2 percent in 2027. Global headline inflation is projected to rise modestly in 2026 before resuming its decline in 2027. Slowdown in growth and increase in inflation are expected to be particularly pronounced in emerging market and developing economies. Fostering adaptability, maintaining credible policy frameworks, and reinforcing international cooperation are essential to navigating the current shock while preparing for future disruptions in an increasingly uncertain global environment. (Source: IMF)

INDIA

For the world as a whole the year 2025 may have begun with one set of expectations and ended with another, India included. As per IMF GDP term India slips to sixth-largest economy (from 4th place) due to weakening rupee, Iran war impact, outflow of foreign capital and rising hedging costs, the revision in the GDP base year from 2011-12 to 2022-23. However, one notable continuity has been Indias strong macroeconomic performance. Growth was strong as evidenced by RBIs aggressive interest rates cuts and loosened liquidity conditions; Governments significant tax breaks for households in the central budget; most radical overhaul of the Goods and Services Tax since its inception; notification of the four Labour codes; contained inflation; supportive rainfall and agricultural prospects; low external liabilities; banks are healthy; comfortable liquidity conditions; respectable credit growth; strong corporate balance sheets; and the good overall flow of funds to the commercial sector. So, the rupees valuation does not accurately reflect Indias stellar economic fundamentals.

Despite the shift in global rankings, India will remain the fastest- growing major economy, according to IMF estimates. Indias economy is projected to grow at 6.4% this year and 6.6% in 2027, driven largely by healthy economic growth in India according to a report by the United Nations. The shift reflects currency-driven changes rather than structural weakness, with projections suggesting India could regain lost ground in the coming years due to its strong fundamentals.

However, the Iran War has hit hard on the Indian Economy as the country imports nearly 90% of its crude oil, higher prices widen the import bill and increase dollar outflows, putting direct pressure on the currency.

TEXTILE INDUSTRY

GLOBAL

The current Global landscape of the textile market presents a growing and multifaceted scenario, buoyed by an amalgamation of factors stimulating growth. Rising disposable incomes, urbanization, and changing lifestyles contribute significantly to the markets expansion, fostering increased demand for diverse textile products across both developed and emerging economies. The global textile market undergoes a continual evolution driven by shifting consumer preferences to technological advancements and sustainability imperatives. Additionally, digital transformation has redefined the textile market, fostering online retailing platforms and customization capabilities, and allowing consumers to engage directly with brands. The Global textile market size is expected to see strong growth in the next few years at a compound annual growth rate (CAGR) of 6.9%. However, for the first time, geopolitics topped industry concerns edging out weak demand driven by the war in Iran and surging energy prices, higher raw material costs, and logistics disruptions from the Strait of Hormuz blockade. The potential impact on the supply chain and the apparel industry are shipping route vulnerability, logistic & transportation challenges, production halt, increased operational costs, rising energy costs, complex tariffs shift in consumer spending on clothing. Stakeholders should actively explore strategies to fortify supply chains and maintain affordability amid these uncertain geopolitical landscape.

INDIA

The Indian textile sector had a tough fiscal year in FY2025- 2026. It saw steep US tariffs, and then the end of the period witnessed Middle East supply chain disruptions. Yet, Indias Textile and garment exporters collectively shrugged off the pressure and grew with immense potential for resurgence through innovation, strategic adaptation, and a commitment to sustainability. By embracing cost-effective sourcing, focusing on niche markets, leveraging technology, and prioritizing responsible practices, businesses can navigate the current landscape and secure a brighter future. Companies that prioritize cost control, supply chain resilience and product upgrading will be better positioned to withstand uncertainty and emerge stronger as condition stabilise. The Indian textile industrys future hinges on a collective effort from businesses, government agencies, and consumers. By acknowledging the challenges, embracing innovation, and prioritizing sustainability, the industry can navigate the current hurdles and emerge stronger, fostering economic growth and shaping a future of responsible and thriving textile production.

COTTON

Often heralded as White Gold, cotton is not merely a commodity in our Nation; it is the economic backbone for over Six Million farmers and the primary fuel for a textile industry that contributes significantly to Indias GDP. Indias relationship with cotton is timeless. For centuries, Indian cotton and textiles have shaped global trade, culture and craftsmanship. India has the largest area under cotton cultivation of 11.23 million hectares, 36% of world acreage and the 2nd largest producer of cotton in the world besides being one of its largest consumers. Yet our yields remain significantly lower than the global average. If we are to remain competitive against other major producers this “Yield Gap” should be bridged. Our distinct advantages are that we grow cotton across all fibre lengths thereby supporting a wide range of yarn counts, the cotton is softer and purer because it is hand-picked and we have an integrated value chain that supports the cotton eco-system. The reinstatement of the 11 percent raw cotton import duty, the weakening rupee, higher freight and insurance costs and slowed vessel movements, have further constrained raw cotton imports, resulting in higher input cost for mills and limited access to cheaper foreign cotton.

INDIAN COTTON BALANCE SHEET FOR THE SEASON 2025-26

As on 31.03.2026	(In Lakh Bales)
Opening Stock	45.50
Production	290.91
Imports	47.00
TOTAL SUPPLY	383.41
Consumption	328.00
Exports	12.00
TOTAL DEMAND	340.00
Closing Stock	43.41

(Source: Committee on Cotton Production & Consumption)

YARN

In the Indian cotton yarn market, the application segment is dominated by apparel, holding the largest share due to robust demand fuelled by a growing consumer base and increasing fashion awareness. Apparel products rely heavily on cotton yarn as a key raw material, which reinforces its significant market position, thereby enhancing the demand for cotton yarn. The Indian cotton yarn market is experiencing a robust growth trajectory driven by sustainability reflecting a growing consumer preference for eco-friendly textiles and technological advancements. India remains the largest exporter of cotton yarn, while the fastest-growing segment is organic cotton yarn, driven by rising environmental awareness. The Indian cotton yarn market is projected to grow at 7.49% CAGR from 2025 to 2035, driven by rising demand in textile applications, technological advancements, and sustainable practices Demand for Indian cotton yarn has picked up from Countries such as China, Bangladesh and Vietnam, among others, following the disruption in global logistics after the breakout of war in West Asia. In the last few years, rising cotton prices - both domestic and international have led to a narrowing spread between yarn and fibre prices. This has severely compressed gross margins, leaving Indian spinning mills with little buffer to sustain profitability.

GARMENTS

Knitwear is favored for its comfort and durability. Consumers appreciate the softness, warmth, and flexibility of knit garments. Additionally, advancements in yarn technology have resulted in improved quality, longevity, and ease of maintenance, further driving the demand for knitwear products. The knitwear market has witnessed steady growth in recent years, driven by factors such as evolving fashion trends, increasing disposable income, and growing consumer preference for comfortable yet stylish clothing. The market offers a wide range of knitwear products for men, women, and children, catering to diverse tastes and preferences. The knitwear market has considerable growth potential in emerging economies. Rising disposable incomes, urbanization, and shifting consumer preferences towards branded and fashionable clothing contribute to the expanding market opportunities in these regions. Companies can focus on establishing a presence in emerging markets and tailoring their products to meet local tastes and cultural preferences. Textile exporters and processing units in Tamil Nadu are grappling with a fresh challenge now - a sharp increase in raw material prices triggered by the ongoing West Asia crisis.

INTERNALCONTROL

The internal control framework is structured to deliver reasonable assurance that the Company fulfils its operational objectives, upholds the integrity of financial reporting, and adheres to all pertinent laws, regulations, and internal policies. A stringent system of checks and balances has been instituted to ensure transactions are duly authorised, meticulously recorded, and accurately reported. The Internal Audit function, staffed by qualified and proficient professionals, undertakes periodic audits across all departments and business units to appraise the adequacy and efficacy of internal controls and compliance protocols. The Audit Committee scrupulously reviews internal audit outcomes, deliberates significant observations with the auditors and senior management, and refers material matters to the Board for consideration. Independent Directors vigilantly assess the robustness of financial reporting and ascertain that critical financial controls?including authorisation protocols, budgetary oversight, data safeguards, and risk management frameworks?are robustly implemented. These processes are underpinned by comprehensive policy manuals and procedural guidelines, fostering consistency, transparency, and accountability across the organisation.

EMPLOYEE WELFARE

Employee welfare is a positive attitude held by the employees towards the organization and its values. KPR always recognizes its employees (90% are Women), more than any other variable, as powerful contributors to the Companys competitive position. Although technology still dominates, human resources and how they are managed is receiving increased attention in attaining competitive advantage. Employee care is linked employee engagement to business outcomes like productivity, quality improvement and retention of talent. Employee Performance indicates the financial and non- financial outcome of the employee that has a direct link with the performance of the organization and its success. KPR is a trailbreaker in exemplifying how to create a workplace that thrives on the strength of its people by providing innovative facilities including higher education, career development, placement services based on their qualifications etc.

PERFORMANCE

The yarn production and sales were in line with the Budget but the margin was low. The cotton prices were more or less stable. Fabrics were produced as per the Market requirement. Garment production and sale were higher than the Budget with better realisation. Wind power generation and the Solar Power have economised the Power Cost. No fresh term loan was availed and comfortable cash position prevailed.

EXPANSION PLANS

Under the Modernization programme, old cards in Spinning segment and knitting machine were replaced with new cards and advanced knitting machines. In view of the uncertain market conditions and geopolitical issues, no green field expansion was implemented during the year. However, garment expansion within India is under our active consideration.

RISKS AND THREATS

(a) RAW MATERIAL

Indian textile industry is predominantly cotton based and KPRs Textile segment is also cotton centric. During the current cotton season, its production was affected by unseasonal & excess rain and pest attacks, impacting the quality of cotton, while the acreages were lower, as section of farmers switched over to other crops. The Agricultural Ministry has estimated a cotton production at 292 lakh bales for the cotton season 2025-26, enabling a supply of 383 lakh bales, as against the total demand of 340 lakh bales. Though the data assures adequate availability of cotton, the trend in its prices will decide on the margin of the Spinning segment. As the cotton prices remain below MSP, given the widening price gap, CCI is expected to surpass last years procurement level. International cotton prices were firm supported by weather-linked uncertainty and a softer global crop outlook. For sustained parity with global cotton, the abolition of import duty is essential. Any easing in its prices would depend on global supply developments, domestic arrivals in the coming months, and continuity in import policy. Also the ongoing West Asia crisis has posed a sharp increase in the prices of essential chemicals and fuels for the processing units.

However, KPR with its prudent and pragmatic cotton procurement strategies and engagement of exclusive personnel in the cotton growing areas and cotton market to monitor the factors relating to its availability and supplies, the sustained supply of the quality cotton at competitive prices is ensured. As KPR being an integrated Apparel Unit, fluctuation in cost of raw material on its performance is nominal since the additional cost can be passed on to the resultant products.

(b) TECHNOLOGY OBSOLESCENCE

Despite the promising advancements in digitisation and technological upgradation within Indias textile ecosystem, the sector continues to grapple with certain technical risks and challenges such as, slow adoption of modern technologies due to high implementation costs, inadequate infrastructure, and limited access to financing for small and medium enterprises.

However, KPR has always been investing in new advanced Technology Machinery, Equipment and Processes. In addition, regular upgradation of technology advancement in the machinery and production process, through continuous modernization and automation, wherever possible, ensuring production and supply of high quality goods and services, is continued.

(c) MARKET RISKS / INDUSTRY RISKS:

Intense global competition in the textiles industry is there. Inadequate Infrastructure including inadequate logistics, power supply, and transportation networks, Inadequate port infrastructure and inefficient handling, shipping schedules are all posing challenges which always affect the industry efficiency to a large extent. Though the increasing focus on environmental sustainability and compliance with regulations carry a cost they are necessary for industrial growth. The challenges faced by the textiles industry in meeting environmental standards and explore strategies to adopt eco-friendly practices and technologies have to be taken care for industrys betterment. Fragmented Supply Chain is another challenge.

KPR is well equipped to mitigate the above challenges faced by the Industry in general, with its self-sustained green power generation, Integrated facilities, adherence to the strict COC norms stipulated by the Buyers that are centered around environmental standards and eco-friendly practices.

(d) LOGISTICS RISKS:

The textile and apparel sector operates one of the most globalized and time-sensitive supply chains. In 2025, logistics risks have intensified due to geopolitical instability, shifting trade policies, sustainability pressures, and evolving consumer expectations, longer transit times, higher insurance premiums, operational delays, and uncertainty in delivery schedules. An efficient logistics-backed supply chain ensures seamless flow of raw materials, effective processing and timely delivery to and from manufacturers. This improves a firms ability to adapt to challenges, changing markets and shifting industry trends. Nevertheless, KPRs strategically driven logistics function continues to uphold seamless sourcing and timely delivery, ensuring uninterrupted adherence to planned schedules. However, the risk relating to Strait of Hormuz still prevails.

(e) GEO - POLITICAL RISKS:

The 2026 Iran War, has escalated into a regional conflict involving proxies and Strait of Hormuz disruptions. Ongoing hostilities threaten global oil/LNG flows, driving Brent crude prices and inflating logistics, energy, and raw material costs for apparel/textile exporters. Supply chain vulnerabilities arise from Red Sea/Indian Ocean rerouting, higher shipping rates, and potential shipping disruptions, compounded by forex volatility and inflation. KPR mitigates via diversified sourcing, inventory buffers, and hedging.

(f) DISASTER RISKS:

The Company has a well-designed safety management policy that eliminates / reduces the risk of workplace incidents, injuries, and fatalities through adoption of various well defined safety measures and devices. Its proper implementation and updation enable effective prevention besides equipping the employees to handle any incident that may occur. A Leading International Buyer has honoured KPR with an award recognizing and appreciating the sustained health & safety Standards undertaken by the Company. The properties of the Company are insured against natural risks with periodical review of adequacy.

(g) FINANCIAL RISKS:

At KPR, proper financial planning evolved by qualified and competent Personnel is put in place with detailed Annual Business Plans. Annual and quarterly budgets are prepared and put up to the management for detailed discussion and analysis. The Projects and expenses are regularly monitored. Preparation of daily and monthly cash flows ensures utilization of funds in an effective manner. The Budgets are regularly placed at Audit Committee and the Board.

(h) CREDIT RISKS:

Systems are put in place for assessment of credit worthiness of customers before admission into dealing. Continuous and periodical monitoring of outstanding, appropriate recovery management system including legal course of action and vigorous follow up are adopted by the Company to mitigate this risk.

(i) FOREIGN EXCHANGE RISKS:

The Indian textile industry is highly exposed to foreign exchange risks due to currency volatility, which affects profitability, pricing, and competitive positioning in global markets. Fluctuating rupee values can reduce export revenue, increase the cost of imported raw materials, and create operational challenges, complicating financial planning and long-term investments. While many exporters use hedging instruments such as forward contracts, futures, and options to protect against currency swings, a significant portion of small and medium enterprises lack awareness and expertise in managing forex risks. Strengthening awareness and adoption of robust hedging strategies is essential for safeguarding profitability and enhancing global competitiveness. To manage our foreign exchange risk arising from commercial transactions and recognized assets and liabilities, we use forward contracts and selectively enter into hedging transactions to reduce the risks of currency fluctuations. To manage the Forex related matters we have a competent team consisting of qualified and experienced Personnel.

(j) LABOUR SHORTAGE

The Indian textile industry is facing a significant shortage of skilled labour, which is a major constraint affecting its growth. Despite having the largest labour resource in the world, the number of skilled workers comprises only a small portion of the total workforce. This shortage is a result of the general education system not being oriented towards vocational skills, and the industry requires substantial trained workers to meet global demands. The shortage has led to an increase in production costs and a migration of skilled and unskilled labourers to their home towns and villages where the industry has started growing. With the increased demand for skilled labourers, there is a need for integrated skill development schemes to address the skill gap.

That is why KPR has been consistently concentrating on upgrading its industry acclaimed HR Practices by elevating Employees academic and skill strengths through Higher Education and Vocational facilities that are unique and distinctive from others. Low absenteeism & attrition rate, higher productivity, ability to source required work force are the fruits of its strategic HR policies.

(k) STIFF COMPETITION FROM LOW COST COUNTRIES

Indias textile industry faces intense competition from low-cost countries like Bangladesh, Vietnam, and China, particularly in labour-intensive and cotton-based apparel segments. Key challenges include higher labour and energy costs, longer lead times, fragmented production units, limited adoption of man- made fibers, and lower sustainability compliance, reducing Indias global competitiveness. Competitors benefit from cost efficiencies, integrated supply chains, faster production, and favourable trade agreements. To address these gaps, India is implementing various initiatives such as the Production-Linked Incentive (PLI) scheme, the establishment of PM MITRA textile parks, skill development, adoption of automation and advanced technologies, promotion of green textiles, and pursuit of free trade agreements with various major countries. Strategic imperatives for India include integrating fragmented units, reducing input costs, improving logistics efficiency, and increasing ESG-compliant production, which collectively aim to enhance Indias global market share and regain competitiveness in the textile sector by 2030. India, as one of the fastest-growing economies in the world, has strategically leveraged Free Trade Agreements (FTAs) that are crucial for reducing trade barriers, increasing market access, and fostering economic cooperation between countries to enhance its trade relations and economic growth. Indias FTAs aim to bolster economic integration by eliminating or reducing tariffs, import quotas, and export restrictions between participating countries.

KPR is well positioned to capitalize the various initiatives undertaken by the Government. It would improve the competitiveness of our value-added product offerings in key segments and also fuels our ambition of expanding into new customer bases and geographies. Our strong design capabilities, Product Quality, compliance with sustainability norms, and end-to-end manufacturing infrastructure provide us a competitive edge.

(l) CYBER RISK AND SECURITY

In the present world, the cyber threats presented by modern tech are a cause of concern and as such cyber security measures are inevitable. Cyber security encompasses technologies, processes, and methods to defend computer systems, data, and networks from attacks. The Company employs different best practices to secure computer systems and networks as suggested by the cyber Security Team consisting of Tech Savvy Personnel. Periodical monitoring of the measures is also in place to strengthen the security systems.

In a sector as intricate and ever-evolving as textiles and fashion, effective risk management is non-negotiable. By implementing proactive strategies and staying vigilant to emerging risks, KPR not only ensures its own longevity but also elevating the overall resilience of the industry. Also, the implementation of SAP ERP, a recognized comprehensive accounting solution, is in progress.

The following measures adopted by the Company to mitigate the risk continued:

1. End-user training

2. Operating System and Application patches and updates

3. Endpoint Update and Monitoring

4. Strong password policy

5. Access control measures

6. Minimize administrative access

7. Network segmentation and segregation

8. Device security

9. Protect mobile devices

10. Strong IT policies

11. Staff training on cyber security awareness and policies

12. Data backups

13. Periodical Forensic Audit - Vulnerability Assessment and Penetration Test (VAPT) was conducted by Ernst & Young Global Limited.

14. Advance Threat Protection installed for all Mail users.

15. Configured Cloud based Disaster recovery for Data Security.

FUTURE PROSPECTS

The new Financial Year has begun and both the Central and State Governments have also announced several policy measures, with the objective of enhancing the manufacturing capacity of the country, with common infrastructure facilities and targeting exports to the tune of USD 100 Billion by 2030.The ongoing conflict in West Asia is pushing up costs for Indias apparel exporters, due to longer shipping routes and war- related surcharges. With the momentum of growth in the textile industry translating into promising future, the entire industry is on the path to embracing the recent geopolitical uncertainties and all set to achieve a faster growth during this fiscal.

The various FTAs indicate that major economies continue to favor negotiated trade arrangements over unilateral measures. Global population growth and rising per capita consumption remain the most important demand drivers. This growth is particularly pronounced in emerging economies, driven by urbanisation, lifestyle changes and increasing disposable incomes. One of Indias most significant strengths is its near end-to end presence across the textile value chain. This integrated ecosystem provides flexibility and supply security that global buyers increasingly value in an era of supply chain diversification.

	FOR AND ON BEHALF OF THE BOARD
	K.P.Ramasamy
Place: Coimbatore	Chairman
Date: 12.05.2026	DIN:00003736