Katare Spinning Mills Ltd Management Discussions

1. Current scenario of Economy

The current economic landscape is characterized by a blend of cautious optimism and prevailing uncertainties. Globally, economies are grappling with inflationary pressures fueled by rising raw material costs and energy prices, alongside persistent supply chain disruptions. These factors have contributed to an environment of volatility, impacting operational costs for businesses across sectors, including textiles and solar energy. Geopolitical tensions and trade conflicts have further intensified market unpredictability, affecting global trade flows and potentially leading to fluctuations in demand and supply chain stability. Central banks worldwide are adjusting monetary policies in response to inflation and economic growth concerns, influencing borrowing costs and investment decisions.

In the Indian context, the economy demonstrates resilience amid these global challenges, with moderate growth projections supported by strong domestic consumption, substantial government infrastructure investments, and a burgeoning young demographic. The governments proactive measures, including stimulus packages and policy initiatives such as the Production Linked Incentive (PLI) scheme, aim to bolster industrial activity and investment. Despite this, inflationary trends driven by global commodity price shifts and supply chain constraints are closely monitored by the Reserve Bank of India (RBI) and the government.

2. Business Segment

Textile Industry:

The Indian spinning mill industry is facing a number of challenges, including high production costs, low yarn prices, and a slowdown in demand. These challenges have led to many mills incurring losses and some even shutting down.

The high production costs are due to factors such as rising raw material prices, power tariffs, and labour wages. The low yarn prices are due to the increasing competition from China and other countries. The slowdown in demand is due to the weak global economy.

The Government has taken some steps to address the challenges facing the spinning mill industry. These include providing financial assistance to mills, reducing import duties on raw materials, and promoting exports. However, more needs to be done to help the industry recover. The textile industry, a pivotal segment of the global economy, continues to experience dynamic shifts influenced by evolving consumer preferences, technological advancements, and regulatory changes. The Indian textile sector, which is a major contributor to employment and economic output, is adapting to these changes with a focus on sustainability and innovation.

The outlook for the spinning mill industry in India is uncertain. If the challenges are not addressed, the industry could continue to decline. However, if the Government is able to provide effective support, the industry could rebound and become more competitive.

Solar Power Project:

The Solar industry is growing rapidly and is expected to play a major role in Indias energy future. The solar energy sector has emerged as a critical component of the global transition towards renewable energy. Driven by government policies, technological advancements and growing environmental awareness, the sector is witnessing significant expansion. India, with its ambitious solar targets and supportive policy framework, is positioned as a key player in this transformation.

Considering the involvement of power part in the cost of finished goods, the Company has set up 1 MW power project for captive consumption and additional electricity is sold to MSEB. This is the first net metering installation in the Maharashtra. During the financial year total 14,91,913 electricity units have been generated and it helps the Company to reduce the cost of productions and move ahead towards goal of sustainable growth.

3. Industry Outlook

Textile Industry:

The outlook for the textile industry in India is positive. The industry is expected to grow at a healthy pace in the coming years. The growth of the industry will create jobs and boost the economy.

Here are some of the specific trends that are expected to shape the textile industry in India in the coming years:

Growth of the e-commerce sector: The growth of the e-commerce sector is expected to boost the demand for textile products. This is because e- commerce platforms offer a wider range of products and convenient shopping experience.

Increased focus on sustainability: There is an increasing focus on sustainability in the textile industry. This is due to factors such as environmental concerns and the growing demand for ethical products. The textile industry is adopting sustainable practices, such as using recycled materials and water-saving technologies.

Personalization: There is an increasing demand for personalized textile products. This is due to factors such as the growing popularity of social media and the increasing affluence of consumers. The textile industry is adopting new technologies to personalize products, such as 3D printing and laser cutting.

Innovation: The textile industry is constantly innovating to develop new products and processes. This is being driven by factors such as the increasing competition and the need to meet the changing needs of consumers. The textile industry is developing new products, such as smart textiles and functional textiles.

These are just some of the trends that are expected to shape the textile industry in India in the coming years. The industry is undergoing a transformation, and it is expected to become more sustainable, innovative, and customer-centric.

Solar Power Project:

The solar energy industry continues to witness strong growth globally and remains one of the key drivers of the transition towards clean and sustainable energy. Declining technology costs, increasing deployment of renewable energy, technological advancements, growing demand for clean electricity and supportive government policies are expected to continue creating significant opportunities for the solar energy sector in the coming years. The industry is also witnessing increasing adoption of utility-scale solar projects, rooftop solar, open-access renewable energy, hybrid renewable energy projects and distributed solar applications.

India continues to be one of the worlds leading solar energy markets. The Government of India has placed renewable energy at the centre of its long- term energy transition strategy, supported by policy initiatives, regulatory measures and programmes aimed at accelerating renewable energy deployment and increasing the share of clean energy in the countrys electricity mix.

As per the latest data published by the Ministry of New and Renewable Energy (MNRE), Indias cumulative installed solar power capacity stood at approximately 164.59 GW as on 31 July 2026, compared with approximately 150.25 GW as at 31 March 2026. The installed solar capacity as on 31 July 2026 comprised approximately 122.57 GW of ground-mounted solar projects, 30.74 GW of grid-connected rooftop solar, 4.77 GW of the solar component of hybrid projects and 6.51 GW of off-grid solar capacity.

The Government of India has undertaken several initiatives to accelerate the adoption of solar energy, including the National Solar Mission, PM Surya Ghar: Muft Bijli Yojana, PM-KUSUM, the Solar PV Module Production Linked Incentive (PLI) Scheme, Grid Connected Rooftop Solar Programme and other renewable energy initiatives. These programmes are aimed at promoting utility-scale and distributed solar generation, supporting domestic manufacturing, encouraging rooftop solar adoption and increasing access to clean and affordable electricity.

India has set ambitious long-term targets for its energy transition, including achieving 500 GW of installed renewable energy capacity by 2030, increasing the share of non-fossil fuel sources in installed electricity capacity and achieving net-zero carbon emissions by 2070. These targets, together with continued investments in transmission infrastructure, energy storage, green energy corridors and renewable energy projects, are expected to support sustained growth in the solar energy sector.

4. Opportunities

Textile Industry:

The demand for apparel is growing globally, due to factors such as rising disposable incomes, increasing urbanization, and changing lifestyles. This is creating opportunities for spinning mills to produce more yarn to meet the demand.

There is an increasing focus on sustainability in the textile industry. This is due to factors such as environmental concerns and the growing demand for ethical products. Spinning mills can capitalize on this trend by adopting sustainable practices, such as using recycled materials and water-saving technologies.

o Sustainability Trends: Growing consumer demand for sustainable and eco-friendly textiles presents opportunities for product differentiation and market growth.

o Market Expansion: Opportunities to enter new geographical markets and expand our product offerings.

o Technological Advancements: Potential to leverage new technologies to enhance product quality and manufacturing efficiency.

There is an increasing demand for personalized textile products. This is due to factors such as the growing popularity of social media and the increasing affluence of consumers. Spinning mills can cater to this demand by offering customization options, such as choosing the yarn type, color, and weight.

The growth of the e-commerce sector is creating opportunities for spinning mills to reach a wider customer base. Spinning mills can sell their products online through e-commerce platforms, such as Amazon and Flipkart. India is a major exporter of textile products. Spinning mills can capitalize on this by exporting their products to countries around the world.

These are just some of the opportunities in the spinning industry in the upcoming years. The industry is undergoing a transformation, and it is expected to become more sustainable, innovative, and customer-centric. Spinning mills that are able to adapt to these changes will be well- positioned to succeed in the future.

Solar Power Project:

The global solar energy industry continues to witness strong growth, supported by increasing demand for clean and renewable energy, declining technology costs, technological advancements, energy security considerations and supportive government policies. The increasing focus on decarbonisation and transition towards low-carbon energy systems is expected to create significant opportunities across the solar energy value chain, including project development, engineering, procurement and construction, operation and maintenance, rooftop solar, open-access renewable energy, energy storage and integrated renewable energy projects.

India represents one of the worlds fastest-growing renewable energy markets and has significant long-term potential for solar power generation. As per the latest data published by the Ministry of New and Renewable Energy (MNRE), Indias cumulative installed solar power capacity stood at approximately 164.59 GW as on 31 July 2026, including approximately 122.57 GW of ground-mounted solar, 30.74 GW of grid- connected rooftop solar, 4.77 GW of the solar component of hybrid projects and 6.51 GW of off-grid solar. The continued increase in installed capacity reflects the strong growth potential of the Indian solar power sector.

There are a number of solar projects that are being deployed in India, such as solar farms, rooftop solar systems, and solar water heaters. These projects are creating opportunities for solar companies to provide engineering, procurement, and construction (EPC) services, as well as solar products and solutions.

There are a number of new solar technologies that are being developed, such as concentrated solar power and solar thermal energy. These technologies are expected to play a role in the future of solar energy, and they are creating opportunities for solar companies to develop and deploy these technologies.

These are just some of the opportunities in the solar industry in the upcoming years. The industry is undergoing a transformation, and it is expected to become more sustainable, innovative, and customer-centric. Solar companies that are able to adapt to these changes will be well- positioned to succeed in the future.

5. Risks and Concerns

The Government policies and volatile economic environment have a bearing on the overall performance of the company. Continuous Quality Improvement is the need of hour as there are different demand pattern all over the world. Striking a balance between the quality and price of products.

6. The Financial and Operational Performance

During the financial year under review, the Company recorded revenue of Rs. 36,303/- thousand from its spinning segment as against Rs. 53,642/- thousand in the previous financial year, representing a decline of approximately 32.32% in revenue.

The decline in turnover was primarily attributable to the challenging operating environment faced by the textile and spinning industry during the year, including fluctuations in cotton prices, yarn realizations, subdued market demand and pressure on operating margins. Volatility in the prices of key raw materials, particularly cotton, together with changes in market conditions and demand for cotton yarn, affected the Companys production, sales volumes and overall realizations during the year.

The performance of the spinning industry continues to be influenced by various external factors, including cotton availability and prices, yarn prices, domestic and export demand, power and other input costs, exchange-rate movements and general economic conditions. These factors may have a direct impact on the profitability and operational performance of spinning companies.

The management continues to closely monitor market conditions and is taking appropriate measures to improve operational efficiency, optimize production and capacity utilisation, control operating costs, improve product mix and strengthen marketing and sales efforts. The Company is also evaluating suitable measures and opportunities to improve its operating performance and financial position in the coming years.

The management remains focused on adopting prudent business practices, maintaining appropriate internal controls and making reasonable and informed estimates and judgments in the preparation of the financial statements, with a view to ensuring that the financial statements present a true and fair view of the state of affairs of the Company.

Despite the challenging operating environment and decline in turnover during the year under review, the management remains committed to improving the Companys operational efficiency and financial performance. The Company expects that improvement in market conditions, better capacity utilisation, cost optimization measures and strengthening of its business operations will support the Companys performance in the years ahead.

7. Internal control, systems and adequacy

The Company is committed to maintaining adequate internal control systems as a part of efficient corporate governance. The system ensures that all transactions are authorized, recorded and reported correctly to safeguard assets and protect them from any loss due to unauthorized use or disposition. The operating managers make sure that all operations within their area are compliant and safeguarded against all risks whereas on the other, auditors carry out random audits to detect flaws in the system, which makes it effective and efficient. Internal audit reports are prepared to create awareness and to take corrective actions on the respective units or areas, which need rectification. These reports are then reviewed by the management team and the Audit Committee for follow-up action.

8. Human Resources Development

The Company places its utmost value on the human resource and contribution from the employees is always fine-tuned towards to achieve the overall organization performance by constant education, training and various incentive schemes, which are in vogue. A motivated and efficient workforce can help it attain its target in a realistic manner. Taking cognizance of that fact, the Company provides extensive training to its employees in order to develop their skill sets and keep them motivated. The Company appreciates the productive co-operation extended by its employees in the efforts of the management to carry the Company to greater heights.

9. Safety and Environment

The Company ensures high safety and environmental standards in all its operations at all the units. Safety needs are continuously monitored and preventive actions are initiated through departmental safety committees consisting of plant staff and workmen.

10. Significant Financial Ratios Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore.

Sr. No.	Particulars	FY 2025- 26	FY 2024- 25	Variance (in % )	Detail explanation for change ( where the change is 25% or more As compared to i the immediately previous financial year)
1	Current Ratio	0.68	0.78	13%	Not applicable since the change is less than 25%.
2	Debt Service Coverage Ratio	0.03	-0.08	134%	Debt Service Ratio has improved by 134% from (0.08) to 0.03 the improvement is primarily attributable to increase in Net Operating Income driven by higher recovery of energy charges classified under other income. This has resulted in improved profitability & debt servicing at this during the current year.
3	Return on Equity Ratio	-0.02	-0.01	-27%	Return a Equity has varied by 27% from (0.01) time to (0.02) times. During the year under review in compliance with Ind A12-Income tax & as a matter of prudence the company has recognized Deferred Tax Liability Only. Deferred Tax Assts not been recognized due to absolve of virtual certainty supported by convincing evidence regarding availability of future taxable profits. This conservation accounting treatment has resulted in higher net loss thereby impacting the ROE.
4	Trade Receivables Turnover Ratio	1.75	3.09	44%	The revenue from operations witnessed a significant decline during the year under review, owing to prevailing adverse & sluggish market conditions in the Cotton Industry. The cyclical downturn & subdued demand have impacted the top-line performance & consequently the efficiency ratio, as
					compared to the previous financial year.
5	Trade Payable Turnover Ratio	81.48	139.49	42%	The variance is primarily attributable to reduction in yarn purchases in line with lower sales volume an account of adverse market conditions in the cotton Sector.
6	Net Capital Turnover Ratio	-2.12	-5.34	60%	The variance in the Net Capital Turnover Ratio is attributable to a dual impact: a substantial expansion in the working capital requirements alongside the contraction in revenue from operations as detailed in the preceding disclosures. This simultaneous increase in capital lock-up and decline in top- line performance compressed operating liquidity and directly impacted the relevant efficiency metrics during the year under review.
7	Net Profit Ratio	-0.78	-0.34	130%	The variance is mainly due to significant decrease in revenue from operations & pressure on operating margins on account of sluggish market conditions as explained above, resulting in higher net loss during the current year.
8	Return on Capital Employed	-0.01	-0.01	28%	Variance 28.5% Decrease in ROCE is due to lower EBIT an account of significant decrease in revenue from operations as discussed in point No.4 & increase in average capital employed during the year.
9	Return on Investment	0.08	0.05	37%	The variance of over 25% is attributed to negligible dividend income received during the year under review. Due to the small base value of the income, even minor shifts in absolute returns created a disproportionate variance in the ratio

11. Cautionary Statement

Certain Statements in this report on Management Discussion may be forward looking statements and which have been issued as required by applicable Securities Laws and Regulations. There are several factors which would be beyond the control of Management and as such, may affect the actual results which could be different from that envisaged. Comments of the Board of Directors on the observations pointed out in the Secretarial Audit Report;

Sr. No.	Observations by Secretarial Auditor	Comments by the Board
1	There are delays in certain cases w.r.t. the filing of e-Forms with the Registrar of Companies, Pune, Maharashtra	Due to the technical issues, the Company has not able to file forms to ROC within due dates, but the Company has complied the compliances asap.
2	In accordance with Regulation 31(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, it is noted that 3,650 equity shares (representing 0.13% of the total shareholding) held by the Promoters and Promoter Group remain pending for dematerialization as on the year-end date.	We have requested concerned promoters and promoter group to take necessary steps for conversion of physical shares into dematerialized form.
3	The Company has not complied with the provisions of Section 124 of the Companies Act, 2013 and the applicable rules thereunder, relating to the transfer of unclaimed and unpaid dividends, along with the corresponding shares, to the Investor Education and Protection Fund (IEPF). The unpaid dividend pertains to the amount declared at the Annual General Meeting held in the year 2013.	The Company was in CIRP process in 2021-22, due to this the Company was unable to complete compliances under Section 124 of the Companies Act, 2013. We assure that, the management will take all the necessary steps to complete the pending the compliances.

 

By Order of the Board of Directors

KATARE SPINNING MILLS LIMITED

SD/-

KISHORE KATARE

MANAGING DIRECTOR

(DIN- 00645013)

Add: 14/30 Ground Floor, B Wing, Katare complex,

Gandhinagar, Bl. No. 10 Solapur 413006 Place: Solapur

Date: 21st August, 2026