Kanco Enterprises Ltd Management Discussions

a) Industry structure and developments: Indias cotton yarn manufacturing sector is experiencing a rebound, with projected revenue growth of 7% to 9%. This recovery is driven by robust export demand from China, stable domestic consumption, and strong operational efficiencies, though tightening domestic raw cotton supplies remain a key challenge.

b) Opportunities & Threats: India is also the second largest producer of cotton, accounting approximately 23-25 percent of the global cotton crop. India is the second-largest country in terms of enjoying yarn-spinning capacity in the world after China, accounting for roughly 20 percent of the worlds spindle capacity. The Indian textile and apparel industry contributes about 7% to industry output in value terms and approximately 2.3% to the countrys GDP. Further, the industry contributes 13% to the manufacturing and 12% to the export earnings of the country. The availability of cotton along with huge manufacturing capacity of all kinds of cotton yarn enable it to produce a large exportable surplus.

China used to be a major importer of Indian yarn, India is now facing a big threat from cotton yarn produced in Vietnam. MSP (minimum support price) of Indian cotton has been continuously rising. The yarn prices do not rise commensurately with cotton prices leading to pressure on margins for yarn manufacturers.

Slowdown in demand growth in export market is leading to low-capacity utilization in spinning industry. Low-capacity utilization, high raw material prices continue to remain the major threats for the industry.

c) Segment analysis and review:

Particulars	Units	April 2025 to March 2026	April 2024 to March 2025	%Change
Sale of Cotton Yarn	Kgs	Nil	Nil	N.A.
Average Realisation	Rs./Kg.	N.A.	N.A.	N.A.
Average Cost of Cotton	Rs./Ton	N.A.	N.A.	N.A.
Profit/(Loss) before Interest but after Depreciation	Rs. in Lacs	215.61	(19.62)	(1198.93)

d) Outlook: The outlook for cotton yarn spinning industry looks positive with cotton yarn exports forecast to grow by 9% to 11%. Demand is surging due to tight cotton supplies in China and US trade policies driving international buyers toward Indian spinners. Operating margins, after witnessing a recovery last fiscal, are expected to see further uptick. The primary driver for the revenue uptick in fiscal 2027 will be the rebound in yarn exports to China. However, Domestic cotton acreage has shrunk by up to 20% from its 2021 peak due to uneven monsoons and water shortages. Output is projected to fall to roughly 29.2 million bales, resulting in a domestic supply deficit. A duty waiver on imported cotton expired, returning the import duty to 11%. This has increased raw material costs, although temporary Quality Control Order (QCO) relaxations for man-made fibres provide some relief.

e) Risks & Concerns: Under utilised excess capacity coupled with unbridled capacity creation purely for the sake of availing incentives is proving counterproductive. Addition of new capacity is rendering existing capacity redundant. Stagnant domestic consumption, negative export growth, high input costs and shortage of skilled workforce are common concerns.

f) Internal control systems and their adequacy: The Company has suspended operations since September 2015. The Company has adequate system of internal controls and necessary checks and balances are introduced/strengthened so as to ensure: -

a) that its assets are safeguarded and protected against losses.
b) that all transactions are authorised, recorded and reported properly.
c) that accounting records are properly maintained and its financial statements are reliable.

The significant findings, if any, are placed before the Audit Committee of the Board and corrective measures are recommended for implementation. The Company appoints external firms of Auditors to conduct internal audit and their reports are reviewed by the management and Audit Committee.

g) Discussion on financial performance with respect to operational performance:

The Company did not have any operations during the year. The profit after interest and depreciation was Rs.215.61 lakhs as compared to profit of Rs. (19.62) lakhs for the previous period.

h) Information regarding Human Resources/Industrial Relations: Industrial relations at the Company remain cordial. Manpower employed with the Company as at 31st March, 2026 was 3 compared to 3 as on 31st March, 2025.

i) Details of Significant Changes in Key Financial Ratios

Sl. Key Financial Ratios	2025-26	2024-25	Difference
1. Debtors Turnover	-	-	N.A.
2. Inventory Turnover	-	-	N.A.
3. Interest Coverage Ratio	-	-	N.A.
4. Current Ratio	0.22	0.31	(29)%
5. Debt Equity Ratio	(1.09)	(0.30)	262%
6. Operating Profit Margin Ratio	-	-	N.A.
7. Net Profit Margin Ratio	0.92	N.A.	N.A.

Notes on significant changes in financial ratios, where change is more than 25%

During the current year, Security Deposit and Advance received from Fixed Assets Buyer were adjusted against sale proceeds of machinery held for sale resulting in reduction in current assets and liabilities.

j) Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof:

Key Financial Ratios	2025-26	2024-25	Difference
Return on Net Worth	(2.11)	0.06	(3616)%

During the current year, the company sold the machinery held for sale and store inventory, which resulted in increase in profits compared to previous year

Cautionary Statement

The statements in this report describing the companys policy, strategy, projections, estimation and expectations may appear forward looking statements within the meaning of applicable securities laws or regulations. These statements are based on certain assumptions and expectations of future events and the actual results could materially differ from those expressly mentioned in this Report or implied for various factors including those mentioned in the paragraph "Risks and Concerns" herein above and subsequent developments, information or events.

For and on behalf of the Board of Director

Place: Kolkata Dated: 28th May, 2026

U. Kanoria Chairman & Managing Director DIN: 00081108