KG Petrochem Ltd Management Discussions

GLOBAL ECONOMY

The global economy continued to demonstrate resilience during FY 2025-26 despite geopolitical uncertainties, trade disruptions, inflationary pressures, and varying monetary policy responses across major economies. While inflationary trends moderated in several developed economies, global growth remained uneven due to persistent supply chain challenges, elevated interest rates, and geopolitical tensions.

International trade witnessed gradual recovery supported by improving consumer demand and easing logistics constraints. However, uncertainties arising from geopolitical developments, currency fluctuations, and changing trade policies continued to impact business sentiment across sectors, including textiles.

The medium-term outlook for the global economy remains cautiously optimistic, supported by improving inflation trends, technological advancements, and continued investments in manufacturing and infrastructure across emerging economies.

During FY 2025-26, global economic activity remained resilient despite elevated inflation in several economies, geopolitical conflicts, changing trade policies and higher interest rates. However, consumer spending in key developed markets remained cautious, particularly for discretionary products such as home textiles. International trade was also affected by geopolitical tensions and shipping disruptions, resulting in higher logistics costs and longer supply chains. These developments continued to influence export-oriented manufacturing industries worldwide.

India continued to be one of the fastest-growing major economies in the world during FY 2025-26. The countrys economic growth was supported by strong domestic consumption, sustained government capital expenditure, expanding manufacturing activities, robust infrastructure development, and a stable financial system.

Government initiatives such as "Make in India", Production Linked Incentive (PLI) Schemes, PM Gati Shakti, and continued focus on ease of doing business have strengthened the manufacturing ecosystem and improved Indias competitiveness in global markets.

Indias favourable demographic profile, increasing urbanization, growing middle-class consumption, and rising exports continue to provide a strong foundation for long-term economic growth. The outlook for the Indian economy remains positive, supported by healthy domestic demand and increasing investments across sectors.

Indias continued emphasis on manufacturing-led growth, infrastructure development, export promotion and ease of doing business has strengthened the countrys position as a preferred global sourcing destination. Government initiatives aimed at improving logistics, enhancing manufacturing competitiveness and encouraging investments continue to support long-term industrial growth.

The global textile industry witnessed mixed trends during FY 2025-26. Demand for home textile products remained subdued, particularly in the United States, owing to inflationary pressures, cautious consumer spending, inventory rationalization by large retailers and uncertainty arising from changes in U.S. tariff policies. Geopolitical developments and shipping disruptions further affected international trade and export demand. Despite these short-term challenges, long-term industry fundamentals remain favourable, supported by increasing urbanization, rising disposable incomes, growing housing and hospitality sectors, and increasing consumer preference for premium and sustainable home textile products.

India remains one of the worlds largest textile manufacturing hubs with a strong presence across the entire textile value chain, from fibre and yarn production to finished garments and technical textiles.

The Indian textile industry continues to benefit from:

Strong domestic demand;

Increasing export opportunities;

Government support through various policy initiatives;

Growing demand for technical textiles;

Availability of skilled manpower and manufacturing infrastructure.

The sector is witnessing increasing investments in modernization, automation, sustainable manufacturing practices, and value-added product segments. Technical textiles continue to emerge as a significant growth driver, creating new opportunities for Indian manufacturers.

The long-term prospects of the Indian textile industry remain favourable, supported by increasing global sourcing from India, rising domestic consumption, and policy support from the Government.

India continues to strengthen its position as a preferred sourcing destination owing to its integrated textile value chain, skilled workforce and competitive manufacturing capabilities. The industry is increasingly focusing on value-added products, sustainability, automation and technical textiles. However, export-oriented manufacturers continued to face challenges during FY 2025-26 due to subdued global demand, fluctuations in raw material prices and changing international trade policies.

The Company is engaged in the manufacturing and marketing of textile products, garments, technical textiles, and allied products. The Company has established itself as a reliable manufacturer catering to both domestic and international markets.

The Company has over two decades of established operations in the terry towels and made-ups segment, which continues to be its principal business.

Apart from textiles, the Company is engaged in the manufacturing of artificial leather and also operates as a consignment stockist of GAIL (India) Limited for polymer products in Rajasthan.

The manufacturing facility at Kotputli, Rajasthan has an installed capacity of approximately 6,200 MTPA for terry towels and 100 lakh metres for synthetic PU/PVC leather, while the stitching unit and agency division operate from VKI, Jaipur.

The Companys manufacturing facilities are equipped with modern infrastructure and supported by a skilled workforce, enabling it to deliver quality products while maintaining operational efficiency. The Company serves both domestic and international customers and has established long-standing relationships with reputed overseas buyers, contributing to repeat business over the years.

During FY 2025-26, the Company recorded Revenue from Operations of 31,365.62 Lakhs as compared to 37,538.82 Lakhs in the previous year.

Total Income stood at 32,138.77 Lakhs against 37,942.46 Lakhs in FY 2024-25.

Profit Before Tax for the year was 595.10 Lakhs as compared to 712.34 Lakhs in the previous financial year, while Profit After Tax stood at 445.13 Lakhs as against 550.82 Lakhs in FY 2024-25.

Despite challenging market conditions and pricing pressures in the textile sector, the Company continued to maintain stable operations through effective cost management, operational efficiencies, prudent financial discipline, and customer-focused business strategies.

During the year, the Companys textile division witnessed lower export volumes, particularly in the U.S. market, owing to subdued demand and tariff-related uncertainties. Despite lower revenues, the Company maintained stable operating profitability through improved cost efficiencies, moderation in raw material costs and improved performance of its artificial leather business. The Companys capital structure further strengthened with lower dependence on external borrowings and improved debt coverage indicators. Despite lower revenues during the year, the Company maintained stable operating margins through effective cost management, moderation in raw material prices and improved profitability in the artificial leather segment.

Increasing demand for premium home textile products.

Expansion into new export geographies to reduce dependence on traditional markets.

Growth in the artificial leather segment.

Increasing demand for sustainable and value-added textile products.

Leveraging long-standing relationships with reputed international customers.

Operational efficiencies through cost optimization and technology adoption.

Continued uncertainty in global trade policies and tariff structures affecting exports.

Dependence on the U.S. market for a significant portion of exports.

Volatility in cotton and other raw material prices.

Shipping disruptions arising from geopolitical developments.

Foreign exchange fluctuations, though partially mitigated through prudent hedging practices.

Competitive pressures in the global textile industry.

The Company remains optimistic about its long-term growth prospects despite near-term challenges in the export market. While demand from certain overseas markets continues to remain subdued owing to tariff-related uncertainties and inflationary pressures, the Company expects stability in operations through diversification of customer base and export destinations, improved operating efficiencies and sustained focus on value-added products. Growth in the artificial leather business, prudent working capital management and strengthening customer relationships are expected to support future performance.

The Company operates in a competitive and dynamic business environment and is exposed to various risks including:

Concentration of exports in limited geographical markets.

Customer concentration, with a significant share of revenue generated from key customers.

Cyclicality of the textile industry.

Raw material price volatility.

Foreign exchange risk, mitigated through forward contracts.

Working capital intensity due to higher inventory and receivable levels.

Geopolitical developments affecting logistics and international trade.

The Company continuously monitors these risks and has implemented appropriate mitigation measures including inventory management, foreign exchange hedging, supplier diversification, operational controls and compliance monitoring systems.

The Company has established adequate internal control systems commensurate with the size, nature and complexity of its operations. These systems are designed to ensure efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.

The Internal Auditor periodically reviews the effectiveness of internal controls and submits reports to the Audit Committee. The Audit Committee regularly reviews internal audit findings and monitors implementation of corrective actions wherever necessary.

The Company continues to maintain prudent financial discipline, effective working capital monitoring and comprehensive risk management processes to support sustainable operations. The management believes that the Companys internal control framework is adequate and operating effectively.

The Company firmly believes that its employees are its most valuable asset and key contributors to its success. The Company continues to focus on employee development, skill enhancement, performance management, workplace safety and employee engagement.

Industrial relations remained cordial throughout the year. The Company maintains a healthy work environment and continues to invest in training and development initiatives to improve employee productivity and operational excellence.

The Company has complied with all applicable statutory requirements and regulatory provisions. A system of regular compliance reviews and monitoring is in place to ensure adherence to all applicable laws and regulations.

Statements in this Management Discussion and Analysis Report describing the Companys objectives, expectations, estimates, projections and predictions may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to various factors including changes in economic conditions, government regulations, taxation policies, foreign exchange fluctuations, raw material prices, demand-supply conditions, competitive pressures and other factors beyond the Companys control. The Company undertakes no obligation to publicly update or revise any forward-looking statements.