Kalpa Commercial Ltd Management Discussions

Annexure -1

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:

Market Growth:

The global textile market is projected to grow from $1.84 trillion in 2024 to over $3 trillion by 2030, with a compound annual growth rate (CAGR) of 7.4%.

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 eco-friendly 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.

Specific Examples:

China: Is expected to add the most significant market size to the global apparel market, growing by over $378 billion by 2025.

India: Is projected to be the second most attractive apparel market, adding around $121 billion by 2025.

Cotton Yarn:

The global cotton yarn market is projected to grow at a CAGR of approximately 4%.

Circular Economy:

The circular economy of textiles market is projected to grow with a CAGR of 13.8%.

Online Apparel Sales:

Global online apparel sales are expected to reach $1.39 trillion by 2033, growing at a CAGR of 8.7%.

The global economy is facing a period of slow but steady growth, according to major institutions like the International Monetary Fund (IMF) and World Bank. Heres a quick breakdown:

• Growth: Forecasts predict global GDP growth to stay around 3.1-3.2% in 2024 and 2025 [IMF, OECD]. This is a sluggish pace compared to historical averages.

• Advanced vs. Emerging Economies: Theres some divergence. Advanced economies might see a slight acceleration, while emerging markets could experience a modest slowdown.

• Risks: Downside risks are significant, including geopolitical tensions, trade disruptions, rising interest rates, and climate shocks [World Bank].

The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) has projected India to grow at 6.4% in 2025 and 2026. It also held that India will again emerge as worlds fastest-growing major economy at least for the next two years (2025 and 2026).

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 GST tax 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.

Global Growth: Projects global growth slowing significantly: 2.3% in 2025, with a modest rise to 3.8% in 2026-27. Developing economies are expected to grow 3.8% in 2025 and 3.9% in 2026-27, but this is still distinctly lower than prior decades.

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, 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, climateconscious 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 2024-25. 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 2024-25. While boasting potential for growth, the sector grappled with a decline in exports and internal headwinds, painting a picture of unfulfilled promise.

A Year of Challenges:

• Export Downturn: Indian textile exports, a crucial driver of the industry, witnessed a second consecutive year of decline, falling 3% to $34.4 billion [Textile Excellence]. This can be attributed to factors such as the global slowdown, rising import competition from Bangladesh and China, and geopolitical tensions impacting key markets like the US and EU.

• Rising Input Costs: Fluctuating cotton prices, a mainstay for Indian textiles, coupled with rising energy costs, squeezed profit margins for manufacturers. This put pressure on the industrys competitiveness in the international market.

• Demand Fluctuations: Domestic demand, though showing signs of revival, remained sluggish due to inflationary pressures and cautious consumer spending. This further hampered the industrys growth potential.

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

Indias economy demonstrated strong resilience in FY 2024-25, registering a real GDP growth of 6.5%, supported by robust performance in construction, services, and agriculture sectors. Inflation moderated significantly, dropping to a multi-year low of 1.76% in July 2025, while foreign exchange reserves reached a record USD 640.3 billion, reflecting macroeconomic stability. Employment generation also remained healthy across IT, logistics, and manufacturing, with companies offering an average salary hike of 9.8%, showing confidence in future business prospects.

Trade and investment activity remained buoyant, with merchandise exports growing 6% and services exports rising 11.9% during the year. FDI inflows rose 17.9% YoY to USD 55.6 billion, largely directed into sectors like technology, green energy, and infrastructure. M&A activity also picked up, driven by deals in digital services, renewables, and manufacturing. The governments continued focus on infrastructure development, through a record capex allocation, and initiatives like the PLI scheme have further boosted investor confidence and business expansion.

Indias digital ecosystem and startup landscape have grown rapidly, with over 1,10,000 startups contributing to employment and innovation. Electric vehicle (EV) adoption and green energy investments surged under supportive policy frameworks. On the global front, India maintained its investment-grade credit rating and is projected to become the third-largest economy by 2027. The outlook remains positive, with growth forecasts of 6.5% for FY 2025-26, backed by strong domestic demand, policy reforms, and digital innovation.

The government has also strengthened its focus on ease of doing business, GST compliance, and public digital infrastructure such as UPI and ONDC, making India a global model for inclusive digital transformation. With increased emphasis on sustainability, innovation, and capital investment, businesses across sectors are realigning strategies to capture growth opportunities in this evolving economic landscape.

2. 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.

3. 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 Company enjoys cordial relations with its work force across all categories.

7. 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.

8. 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.

For Kalpa Commercial Limited

Ishant Malhotra

Managing Director

DIN: 06459062

Date: September 02, 2025

Place: Delhi