Kalpa Commercial Ltd Management Discussions

Indian Economy

The Indian textile industry is one of the largest and most integrated textile industries in the world, covering the entire value chain from natural and man-made fibres to spinning, weaving, knitting, processing, garment manufacturing, technical textiles, and home furnishings. The sector is among the largest contributors to Indias manufacturing output, exports, employment generation, and foreign exchange earnings. During FY 2025-26, the industry witnessed steady improvement in both domestic and export demand compared with the previous financial year.

India continued to remain the fastest-growing major economy during FY 2025-26, supported by strong domestic consumption, sustained government capital expenditure, resilient services and manufacturing sectors, stable financial markets, and continued structural reforms. According to the National Statistics Office (NSO), Indias Real Gross Domestic Product (GDP) grew by 7.7% in FY 2025-26, compared with 7.1% in FY 2024-25, reflecting broad-based economic expansion. Real Gross Value Added (GVA) also increased by 7.9% in FY 2025-26, compared to 7.3% in the previous financial year.

The Governments continued focus on infrastructure development, manufacturing, digital transformation, logistics, and ease of doing business strengthened economic activity across sectors. Various policy initiatives, including the PM MITRA Parks Scheme, Production Linked Incentive (PLI) Scheme for Textiles, and the National Technical Textiles Mission, continued to support investment, capacity expansion, and modernization of the textile industry.

Indias favourable demographics, rising disposable incomes, increasing urbanisation, rapid growth in organised retail, and expansion of e-commerce continued to drive domestic demand for textile and apparel products. The countrys integrated textile value chain, availability of skilled manpower, and competitive manufacturing ecosystem continue to strengthen its position as a preferred global sourcing destination.

Global Economy

The global economy demonstrated resilience during Financial Year 2025-26 despite continued geopolitical tensions, trade policy uncertainties, inflationary pressures in certain economies, and volatility in energy and commodity prices. Supply chain disruptions witnessed in previous years eased significantly, while global trade and manufacturing activities gradually recovered. However, higher interest rates in several advanced economies and cautious consumer spending continued to impact global demand.

The global textile and apparel industry experienced gradual improvement during the year as inventory levels normalized in key export markets such as the United States and Europe. Global buyers continued to diversify their sourcing strategies under the "China Plus One" approach, creating opportunities for emerging manufacturing destinations, including India. Sustainability, digitalization, automation, circular economy practices, and responsible sourcing remained key priorities across the global textile value chain.

Market Growth: The global textile market was valued at approximately USD 1.16 trillion in 2025 and is projected to reach USD 1.61 trillion by 2033, reflecting a compound annual growth rate (CAGR) of around 4.2%. Growth is expected to be driven by increasing global demand for apparel, expansion of e-commerce, rising disposable incomes in emerging economies, and growing

Indias Growth: Over the medium term, Indias growth will gradually rise with continued implementation of structural reforms that will raise productivity and incentivize private investment. It will be driven by recovery from transitory effects of currency exchange initiative and implementation of national Goods and Services Tax (GST) and supported by strong private consumption growth. Indias progress on structural reforms in recent past, including through implementation of GST will help reduce internal barriers to trade, increase efficiency and improve tax compliance.

The Ministry of Textiles has indicated that the Indian textile industry has expanded to nearly US$190 billion during FY 2025-26 and has set an ambitious target of reaching US$350 billion by 2030, supported by investments in capacity expansion, technical textiles, sustainability, and enhanced export competitiveness.

Challenges to Indias growth: Though Indias medium-term growth outlook for India is strong, important challenge to it is to enhance inclusiveness. Moreover, Indias high public debt and recent failure to achieve budgets deficit target, adoption of technical and sustainable textiles. calls for continued fiscal consolidation into medium term to further strengthen fiscal policy credibility. Moreover, it should also ease labor market rigidities, reduce infrastructure bottlenecks, and

Improve educational outcomes for lifting constraints on job creation and ensuring that demographic dividend is not wasted.

Ministry of Textiles estimates Indias technical textiles sector to achieve a remarkable ~11% CAGR over FY25-FY30 to USD 54bn from ~USD 26bn estimated in FY25. There exists huge untapped opportunity for India in this space, as it captures only ~8-10% of the global technical textiles market standing at ~USD 260bn. India has been a net exporter of technical textile products and has seen strong growth here.

The economic reforms are supported by creating a business-friendly environment, climate-conscious actions, improving ease of living, and strengthening the governance systems and processes. With various government investment initiatives on the physical and digital front, deployment of artificial intelligence, enabling a favorable investment climate, coupled with the ease of living and ease of doing business, today we are the 5th largest economy with a GDP of US$ 3.7 trillion.

The Indian textile industry navigated a complex economic environment in 2025-26. While domestic consumption remained steady, global factors presented significant challenges. Geopolitical tensions and rising input costs led to a decline in textile exports for the second consecutive year. Despite these headwinds, the industry demonstrated resilience and a commitment to adaptation.

The Indian textile industry, a historic powerhouse, navigated a turbulent year in 2025-26. While boasting potential for growth, the sector grappled with a decline in exports and internal headwinds, painting a picture of unfulfilled promise.

1. GLOBAL ECONOMIC OUTLOOK

The global textile industry is experiencing robust growth, with market size projected to reach $3 trillion by 2030. Key drivers include increasing apparel demand, particularly in developing economies, and the rise of e-commerce. Sustainable and circular economy practices are also gaining traction, influencing manufacturing processes and material development.

Key Trends and Outlook:

Regional Growth:

Developing economies, particularly in Asia, are experiencing significant growth, with China and India expected to be major contributors to market expansion.

E-commerce Influence:

The rise of online apparel sales is driving demand and influencing how textiles are produced and distributed.

Sustainability Focus:

Consumers are increasingly demanding ecofriendly and ethically produced clothing, pushing for sustainable manufacturing practices and material innovations.

Circular Economy:

The circular economy concept, focusing on recycling and waste reduction, is gaining momentum, encouraging innovation in textile recycling and upcycling.

Technological Advancements:

Automation, AI, and data analytics are reshaping textile manufacturing, leading to increased efficiency and customization.

Regionalization of Supply Chains:

Geopolitical factors and supply chain vulnerabilities are prompting companies to diversify sourcing and manufacturing, leading to a more regionalized approach.

Cotton Yarn:

The global cotton yarn market continues to demonstrate steady growth. According to recent industry estimates, the market is expected to reach approximately US$93.11 billion in 2026 and is projected to reach US$127.40 billion by 2034, representing a CAGR of approximately 4.0%. Growth is supported by continued demand for cotton-based apparel, home textiles, breathable fabrics and expanding textile manufacturing, particularly in the Asia-Pacific region.

2. CHALLENGES:

Despite the challenges experienced by the Indian textile industry in recent years, the outlook for the sector remains cautiously optimistic, supported by improving global demand, diversification of international sourcing, increasing domestic consumption, technological advancement and favourable developments in Indias trade relationships.

Intense Global Competition:

Indian textile manufacturers operate in a highly competitive international environment, particularly against countries such as China, Bangladesh, Vietnam and other Asian economies. Maintaining competitiveness requires continuous improvement in product quality, productivity, cost efficiency and delivery capabilities.

Raw Material Price Volatility:

Fluctuations in the prices of cotton, yarn, manmade fibres, dyes and other inputs can affect production costs and operating margins.

Weather conditions, global commodity prices and changes in supply and demand may contribute to volatility in raw-material prices.

Energy and Logistics Costs:

Textile manufacturing involves significant consumption of power and other utilities. Changes in energy prices, transportation costs and logistics expenses may increase the overall cost of production and place pressure on margins.

Changing Consumer Preferences:

The textile and apparel industry is characterised by rapidly changing fashion trends and consumer preferences. Customers increasingly seek better quality, innovative designs, competitive pricing, shorter delivery cycles and sustainable products, requiring companies to remain responsive and adaptable.

Technology and Modernisation:

Rapid technological developments are transforming textile manufacturing. Investment in modern machinery, automation, digitalisation and advanced manufacturing processes is increasingly necessary to improve productivity, quality and efficiency. The cost of technology adoption and the availability of skilled manpower remain important considerations.

Sustainability and Regulatory Compliance:

Growing emphasis on environmental sustainability, responsible sourcing, recycling, waste management, water conservation and energy efficiency is increasing the compliance requirements for textile companies. Adapting to evolving domestic and international environmental standards may require additional investments and operational changes.

Supply Chain Disruptions:

The textile value chain is dependent on the timely availability of raw materials, transportation and logistics services. Any disruption caused by geopolitical events, transportation constraints, natural events or other unforeseen circumstances may affect production schedules and customer deliveries.

Bright Spots amidst the Gloom:

• Strength in Domestic Production: Despite the export slump, domestic production of textile and apparel products continued to show promise. The availability of raw materials like cotton, coupled with a skilled workforce, provides a strong foundation for the industry.

• Focus on Technical Textiles: A silver lining emerged in the growing focus on technical textiles, used for industrial applications. This segment witnessed significant growth, driven by government initiatives and increasing demand from sectors like automobiles and healthcare.

• Government Support: The Indian government implemented various initiatives to bolster the industry. Schemes like the PLI (Production Linked Incentive) scheme aimed at attracting investments and promoting technological advancements.

RECENT DEVELOPMENT & OVERVIEW

With the improvement in the economic scenario, there have been various investments in various sectors of the economy. Growth remained supported by domestic consumption, public investment, improving private investment sentiment and strengthening economic fundamentals. Indias real GDP growth for FY 2025-26 has been estimated at approximately 7.7%, compared with 7.1% in FY 2024-25.

Indias per capita GDP, measured on a purchasing power parity (PPP) basis, has recorded substantial growth over the years, supported by sustained economic expansion, rising productivity and increasing domestic consumption.

Some of the important recent developments in Indian economy are as follows:

• The Economic Survey 2025-26 projected real GDP growth of 6.8%-7.2% for FY 2026-27, indicating continued expectations of sustained economic expansion.

• Indias textile and apparel exports, including handicrafts, increased from approximately Rs.2,97,004 crore in FY 2024-25 to Rs.3,25,339 crore in FY 2025-26, registering a CAGR of approximately 4.7%.

• The PM Mega Integrated Textile Regions and Apparel (PM MITRA) Parks Scheme continues to be an important initiative for strengthening Indias textile manufacturing infrastructure.

• Seven PM MITRA Parks have been approved in Tamil Nadu, Telangana, Gujarat, Karnataka, Madhya Pradesh, Uttar Pradesh and Maharashtra, with an overall outlay of approximately Rs.4,445 crore up to 2027-28.

• During FY 2025-26, Indias technical textile exports were approximately Rs.29,217.60 crore, while imports were approximately Rs.25,797.40 crore, resulting in a trade surplus of approximately ^3,420.20 crore.

• Bharat Tex 2026, held in July 2026, further strengthened Indias position as a global textile sourcing, investment and innovation destination.

• The top 100 companies in India are leading in the world in terms of disclosing their spending on corporate social responsibility (CSR), according to a 49-country study by global consultancy giant, KPMG.

• The bank recapitalization plan by Government of India is expected to push credit growth in the country to 15 per cent, according to a report by Ambit Capital.

• The Niti Aayog has predicted that rapid adoption of green mobility solutions like public transport, electric vehicles and car-pooling could likely help India save around Rs 3.9 trillion (US$ 60 billion) in 2030.

• Indian impact investments may grow 25 per cent annually to US$ 40 billion from US$ 4 billion by 2025, as per Mr Anil Sinha, Global Impact Investing Networks (GIINs) advisor for South Asia.

• The Union Cabinet, Government of India, has approved the Central Goods and Services Tax (CGST), Integrated GST (IGST), Union Territory GST (UTGST), and Compensation Bill.

3. OPPORTUNITIES AND THREAT

The growth of the Company is subject to opportunities and threats as are applicable to the industry from time to time. The Company has risk management policy in place for risk assessment and treatment of the same.

? OPPORTUNITIES

Indias per capita GDP, measured on a purchasing power parity (PPP) basis, has recorded substantial growth over the years, supported by sustained economic expansion, rising productivity and increasing domestic consumption.

• Indias textile and apparel exports, including handicrafts, increased from approximately Rs.2,97,004 crore in FY 2024-25 to Rs.3,25,339 crore in FY 2025-26, registering a CAGR of approximately 4.7%.

• The PM Mega Integrated Textile Regions and Apparel (PM MITRA) Parks Scheme continues to be an important initiative for strengthening Indias textile manufacturing infrastructure.

• Seven PM MITRA Parks have been approved in Tamil Nadu, Telangana, Gujarat, Karnataka, Madhya Pradesh, Uttar Pradesh and Maharashtra, with an overall outlay of approximately Rs.4,445 crore up to 2027-28.

• During FY 2025-26, Indias technical textile exports were approximately Rs.29,217.60 crore, while imports were approximately Rs.25,797.40 crore, resulting in a trade surplus of approximately Rs.3,420.20 crore.

• Bharat Tex 2026, held in July 2026, further strengthened Indias position as a global textile sourcing, investment and innovation destination.

? THREATS

Growth of the Companys asset book, quality of assets and ability to raise funds depend significantly on the economy. The performance of capital market in India has a direct correlation with the prospect of economic growth and political stability. With the Indian growth declining in the past year or two, the level of confidence of corporate has gone down which in turn has an impact on their expansion plans with the result that investment activity is at one of its lowest. Lack of determined action from Government to jump- start investment cycle and carry on the reforms may continue to affect the financial services sector. Despite great opportunities, there are significant factors presenting threats to our businesses:-

• Uncertainty of political situation in the country leading to concerns of diffused focus on growth and reforms;

• Slowing economy, tight monetary policy and continued high inflation leading to decelerating investment demand;

• Regulatory changes across the world impacting the landscape of business;

• Attrition of employees caused by strong demand from ever increasing number of market participants The likely increase in capital mobilisation from the primary market, increase in resource mobilisation by mutual funds and phenomenal growth in secondary market volumes provide significant business opportunities for the Company.

4. RISK AND CONCERN

The Company is mainly exposed to market risk (including liquidity risk), interest risk and credit risk. While risk is an inherent aspect of any business, the Company is conscious of the need to have an effective monitoring mechanism and has put in place appropriate measures for its mitigation including business portfolio risk, financial risk, legal risk and internal process risk.

5. INTERNAL CONTROL SYSTEM

The Company has a sound internal control system. All transactions are subject to proper scrutiny. The Management takes immediate corrective action wherever it is being pointed out to help streamline the internal control process. The management shall ensure the effectiveness of the working of such policy

6. HUMAN RESOURCES

The Companys employees remain its most valuable asset and continue to be the cornerstone of its sustained growth and success. Kalpa Commercial Limited is committed to fostering a work environment that promotes innovation, collaboration, integrity, continuous learning, and employee well-being. The Company firmly believes that a motivated, skilled, and engaged workforce is essential for achieving operational excellence and delivering long-term value to stakeholders.

During the financial year under review, the Company continued to invest in talent development through various learning and skill enhancement initiatives aimed at improving employee productivity, operational efficiency, and leadership capabilities. Emphasis was also placed on employee engagement, workplace safety, performance management, and maintaining a culture of accountability and inclusiveness.

The Company remains committed to providing equal opportunities for growth, encouraging diversity, and maintaining a safe, healthy, and respectful work environment across all its business operations. Continuous efforts are made to strengthen employee capabilities in line with the Companys expanding business requirements and strategic objectives.

Industrial relations throughout the year remained cordial, harmonious, and productive. The Company maintained constructive engagement with its workforce, resulting in uninterrupted operations and no loss of man-days due to industrial disputes or labour unrest during the year.

7. FINANCIAL PERFORMANCE DURING FY 2025-26

During the year under review, the Company demonstrated a significant improvement in its operational and financial performance. The revenue from operations increased substantially to Rs.3,144.29 lakh in FY 202526, as compared to Rs.281.28 lakh in FY 2024-25, reflecting strong growth in the Companys business operations.

The Company recorded a Profit After Tax (PAT) of Rs.61.55 lakh during FY 2025-26, reflecting improved profitability and operational performance during the year.

The Company also recorded a substantial increase in its revenue from operations during the year under review. The improved revenue performance, coupled with better operational efficiency, contributed to the Companys turnaround from loss to profit.

The substantial improvement in revenue and the turnaround from loss to profit demonstrate an improvement in the Companys financial performance during the year. The increase in borrowings and current liabilities has resulted in a change in the Companys debt-equity and current ratios, which continue to be monitored by the management.

The Management remains focused on improving operational efficiency, strengthening financial discipline, optimizing working capital and enhancing profitability in the coming financial years.

8. KEY FINANCIAL RATIOS

RATIO	FY 2025-26	FY 2024-25	% OF CHANGE	REASONS FOR CHANGE IN THE RATIO BY MORE THAN 25%
Current Ratio	1.16	6.29	-5.13%	NA
Debt-Equity Ratio	3.8	0.1	3.7%	NA
Debt Service Coverage Ratio	N.A.	N.A.	N.A.	NA
Return On Equity ratio	0.027	-0.1232	15.02%	NA
Inventory Turnover Ratio	21.52	N.A.	N.A.	NA
Trade Receivables Turnover Ratio	9.79	0.88	8.91	NA
Trade Payables Turnover ratio	4.98	0.58	4.4	NA
Net Capital turnover ratio	1.38	0.13	1.25%	NA
Net profit ratio	0.0196	-0.9728	99.24%	Significant improvement due to the turnaround from a loss in FY 2024-25 to a profit in FY 2025-26..
Return on Capital Employed	0.0365	-0.1179	15.44%	NA
Return on Investment	0.027	-0.1232	15.02%	NA.

9. DISCLOSURES

During the year the Company has not entered into any transaction of material nature with its promoters, the directors or the management, their subsidiaries or relatives etc., if any that may have potential conflict with the interest of the Company at large.

All details of transaction covered under related party transaction are given in the notes to account.

10. CAUTIONARY STATEMENT

Statement made herein describing the Companys expectations are "forward looking statement." The actual results may differ from those expected or predicted since the Companys operations are influenced by many external factors which are beyond the control of the Company. Prime factors that may make difference to the Companys performance include market conditions, economic conditions, Government regulations and Tax Laws, Political situation etc. over which the Company does not have any direct control.