Kesoram Industries Ltd Management Discussions

Performance Overview

The Companys Business-wise performance during the year is shown below:

/ Lakhs

Sl. No.	Particulars	31 st March, 2026	31 st March, 2025
1	EBIDTA	3,541.34	(2,416.65)
2	Finance Cost including interest	-	-
3	Cash Profit / (Loss)	3,541.34	(2,416.65)
4	Depreciation	21.07	1,053.40
5	Profit / (Loss) Before Tax and Exceptional Items	3,520.27	(3470.05)
6	Exceptional Item	(24,215.49)	(19,000.00)
7	Tax expenses	(8.64)	1,941.88
8	Profit / (Loss) for the year from continuing operation	(20,686.58)	(24,411.92)
9	Gain on demerger/ (loss) from discontinued operation	-	5,67,563.44
10	Total Profit / (Loss) for the year	(20,686.58)	5,43,151.51

During the year under review, the Company continued its focus on the business operations of Rayon, Transparent Paper & Chemicals under its wholly owned subsidiary, Cygnet Industries Limited.

Industry Overview: In relation with Business of the Subsidiary

Indias textile sector is currently undergoing a structural transformation, moving from a traditional cotton-heavy reliance to a globally competitive Man-Made Fibre (MMF) ecosystem. This shift is essential to capture a larger share of global trade, as MMF currently dominates 72% of global fibre consumption.

The governments Vision 2030 aims to expand textile exports from the current Rs 3 lakh crore to Rs 9 lakh crore. MMF-based textiles and apparel are the primary engines for this growth, supported by the Production Linked Incentive (PLI) schemes that have been expanded to cover a wider array of MMF fabrics and apparel.

In FY 2025-26, man-made yarn, fabrics, and made-ups outperformed other segments, recording a robust 3.6% growth in exports. This demonstrates the increasing international and domestic demand for synthetic and regenerated alternatives to traditional cotton.

Viscose Filament Yarn (VFY) is a high-value segment within the Man-Made Fibre (MMF) industry, benefiting from rising demand for sustainable alternatives to cotton. As a regenerated cellulose fibre, VFY combines the comfort of natural fibres with the versatility of synthetics, offering biodegradability, high absorbency, and a silk-like drape. Its growing popularity in eco-conscious fashion and premium textiles has made it a preferred choice for ethnic wear, festive garments, and modern apparel.

Sustainable Cellulosic Transparent Paper

The subsidiary continues to leverage the same high-quality cellulose chemistry used in VFY production to manufacture Kesophane® (Cellulose Transparent Film/Paper). The core technical competency in handling wood-pulp-derived cellulose for VFY production provides the subsidiary with a significant competitive advantage in the transparent film market.

In a landscape where plastic alternatives are increasingly mandated, Kesophane® remains a vital, non-toxic, and biodegradable solution. It remains the gold standard for fresh produce packaging due to its ability to regulate moisture and gas, naturally extending the shelf life of perishables.

Risks and Concerns

- Trade Distortions & Import Pressure : The VFY and Cellulosic Transparent Paper segments face intensified competition from low-cost imports, particularly from China. This pressure is compounded by the US governments 2026 Section 301 tariff policy, which imposes additional duties of 10%-12.5% on various global economies. This trade environment

is likely to divert redirected Chinese production capacity toward price-sensitive markets like India, leading to dumping that threatens domestic margins and market share.

- Escalating Compliance & Operational Costs : Operating within the textile and chemical sectors involves rigorous adherence to evolving environmental, social, and labour regulations. As of 2026, the transition toward green manufacturing-while essential-is both capital-intensive and time-consuming. Compliance with new labour codes and sustainability standards (e.g., the Tex-Eco Initiative under the Union Budget 2026-27) requires constant investment in process modernization, which can strain liquidity for MSME-level operations.

- Stagnant Adoption of Sustainable Alternatives : Despite the growing USD 11.1 billion green packaging market in India, the mass-market transition away from low-cost plastics (like BOPP) remains slow. Price sensitivity continues to favour petroleum-based films, as the industrial composting infrastructure remains underdeveloped, hindering the widespread circular economy adoption of bio-degradable cellulose films like Kesophane®.

- Capital Constraints & Capacity Utilization : The business is constrained by lower capacity utilization due to limited access to funds for essential Capex and working capital.

- Global Macroeconomic and Raw Material Price Sensitivity : The textile industry remains vulnerable to geopolitical uncertainties, supply chain disruptions, forex volatility, high interest rates, and fluctuations in key inputs such as wood pulp and chemicals. Without long-term supply arrangements, diversified sourcing, and adequate pricing power, the Subsidiary may face margin pressures due to difficulty in passing on increased costs to customers.

- Skilled Labour and Technology Gap : There is a growing disparity between traditional manufacturing methods and the industrys requirement for high-tech, precision-engineered cellulose products. As the sector shifts toward Industry 4.0 (using AI for flaw detection and process optimization), the shortage of specialized technical labour and the cost of modernizing legacy equipment remain significant hurdles for maintaining quality consistency against global competitors.

Growth Drivers

- China plus One Opportunity : Global procurement teams are increasingly diversifying supply chains beyond China due to geopolitical risks and high tariffs on Chinese goods in certain categories. India is emerging as a preferred textile manufacturing hub, with the sector targeting significant export growth toward USD 65-100 billion by 2030. VFY and speciality cellulosic transparent film manufacturers are well positioned to benefit from this shift by offering reliable and sustainable alternatives.

- Rising Demand for Sustainable Packaging : Growing environmental awareness and stricter regulations are accelerating the shift toward biodegradable and plastic-free packaging solutions. Cellulose-based transparent films like Kesophane® are gaining traction due to their sustainable properties, extended shelf-life benefits for agricultural produce, and alignment with evolving Extended Producer Responsibility (EPR) norms.

- Regulatory Support for Domestic VFY Industry : The Directorate General of Trade Remedies (DGTR) continues to support the domestic VFY industry. The ongoing anti-dumping investigations into VFY (specifically above 75 deniers) originating from China serve as a critical shield, allowing domestic players to stabilize pricing and recover market share from predatory, low-cost imports. These measures provide a more stable pricing environment and enable domestic manufacturers to improve capacity utilization and invest in long-term growth.

- Export Growth Opportunities : The anticipated zero-duty access under the India-EU FTA, along with ongoing UK and EFTA trade negotiations, provides a strong growth opportunity for Indias cellulose-based exports. Rising global sustainability mandates, including the EUs Packaging and Packaging Waste Regulation (PPWR), are driving demand for bio-based and compostable packaging solutions. This creates opportunities for Kesophane® to access high-value OECD markets, expand into specialized applications, and improve export margins while reducing dependence on price-sensitive domestic markets.

Business going forward

The brands Kesoram Rayon (Viscose Filament Yarn) and Kesophane® (Cellulose Transparent Film) maintain strong market equity, though operational performance in recent years has been challenged by funding constraints and modernization needs. Following the cement business demerger, the company reported consolidated revenue of Rs 67 crore in Q4 FY26, signalling a period of stabilization as it refocuses on its core textile and specialty paper segments. The business is now actively pivoting to address its untapped potential by leveraging the global China plus One shift and rising demand for certified bio-compostable packaging.

The following critical ratios have changed beyond the 25% indicative threshold specified in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:

Sl No.	Particulars	2025-26	2024-25	Explanations
(i)	Current Ratio	1.37	0.50	-
(ii)	Return on Equity	-0.46	-0.57	Due to current year loss

Note: Figures of the previous year have been regrouped/ reclassified to confirm to current periods classification. Sustainability

Sustainability remains Companys key focus area and continuously working towards addressing challenges around issues of climate and energy, environment, circular economy and community. The Company is diligently working towards the goals set for reducing carbon emissions, replacing traditional fuel sources with renewable energy, mindful management of water and waste and conservation of biodiversity.

Internal Control Systems and their adequacy

This has been covered in the Directors Report.

Material Developments in Human Resources

Employees constitute the Companys most important assets. This belief has been instilled in the Company to further amplify its people practices especially in the area of talent management.

The number of people employed as on 31 st March, 2026 is separately covered under Annexure VII to the Directors Report.

Place: Kolkata Date: 27 th May, 2026

For and on behalf of the Board of Directors

Satish Narain Jajoo	P. Radhakrishnan
Chairman	Whole-time Director & CEO
DIN : 07524333	DIN : 08284551