Kanco Enterprises Ltd Management Discussions

a) Industry structure and developments: Indias cotton spinning industry grow by 5 to 6 per cent in financial year 2024-2025. The countrys yarn exports declined on account of exceptionally high cotton production in Chaina, and the unrest in Bangladesh. There was also increase in domestic demand from apparel and home textile manufacturers.

b) Opportunities & Threats: India is also the second largest producer of cotton, accounting for 23-24 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:

d) Outlook: The outlook for cotton yarn spinning industry looks positive with a rebound in exports and favorable domestic demand

are expected to drive Indias cotton yarn. Uptick in volumes will primarily drive a 7-9% revenue growth in the current fiscal, supported by modest increase in yarn prices. Operating margins, after witnessing a recovery last fiscal, are expected to see

further uptick of 50-100 bps this fiscal, owing to stable cotton yarn spreads. The primary driver for the revenue uptick in fiscal 2026 will be the rebound in yarn exports to China. However, prices are expected to taper as cotton yarn realisations remain unsustainable at current levels, which may affect demand

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.(19.62) lakhs as compared to profit of Rs.(17.90) 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, 2025 was 3 compared to 3 as on 31st March, 2024.

I) Details of Significant Changes in Key Financial Ratios

Notes on significant changes in financial ratios, where change is more than 25%: The change in ratio resulted from nil turnover during the year under review.

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.