Lagnam Spintex Ltd Management Discussions

MANAGEMENT DISCUSSION & ANALYSIS

FINANCIAL YEAR 2025-26

The management discussion and analysis report provide an overview of the financial activities for the fiscal year ended on 31st March 2026, gives an overall sight of the yarn industry, opportunities and threats in the business and Companys strategy to deal with that. This report is designed to focus on current years activities, resulting changes and other known facts in conjunction to the financial and strategic position of the Company.

Economic Scenario

The textile industry in India is largest industry after agriculture and is also highly labour intensive offering the largest volume of employment. India is among the worlds largest producer of textiles and apparels.

The textiles and apparel industry in India has strengths across the entire value chain from fiber, yarn, fabric to apparel. The Indian textile and apparel industry is highly diversified with a wide range of segments ranging from products of traditional handloom, handicrafts, wool, and silk products to the organized textile industry in India. The organized textile industry in India is characterized by the use of capital-intensive technology for the mass production of textile products and includes spinning, weaving, processing, and apparel manufacturing.

The Indian textile industry remains one of the largest contributors to the countrys economy, providing employment to millions and contributing significantly to exports. The cotton yarn segment forms a critical part of the textile value chain, supplying raw material to weaving, knitting, and garment sectors.

During FY 2025–26, the Indian cotton yarn industry witnessed a gradual recovery driven by improved domestic demand and revival in exports, particularly to key markets such as China and Bangladesh. The industry is expected to record revenue growth in the upcoming years, supported by higher volumes and marginal improvement in yarn realizations.

Domestic consumption continues to account for a major share of yarn demand, while exports contribute nearly 30% of the industrys revenue. However, the industry remained exposed to volatility in raw material prices, geopolitical disruptions, and changing trade dynamics.

Indias textile sector continued to demonstrate resilience in global markets during FY 2025–26. Total textile exports, including handicrafts, increased from Rs 3,09,859.3 crores in FY 2024–25 to Rs 3,16,334.9 crore in FY 2025–26, registering a growth of 2.1%. This performance reflects steady global demand for Indian textile products and the continued competitiveness of the sector across major product categories.

Among the major segments, Ready-Made Garments (RMG) of all textiles remained the largest contributor to textile exports, rising from Rs 1,35,427.6 crore to Rs 1,39,349.6 crore, an increase of 2.9%. Cotton yarn, fabrics, made-ups and handloom products recorded exports of Rs 1,02,399.7 crore in FY 2025–26 as against Rs 1,02,002.8 crore in FY 2024–25, reflecting stable growth of 0.4%. Man-made yarn, fabrics and made-ups posted a stronger growth of 3.6%, with exports increasing from Rs 41,196.0 crore to Rs 42,687.8 crore.

The cotton yarn market size has grown strongly in recent years. It will grow from $77.75 billion in 2025 to $82.89 billion in 2026 at a compound annual growth rate (CAGR) of 6.6%. The growth in the historic period can be attributed to growth in global textile manufacturing, expansion of apparel production, increasing demand for breathable fabrics, availability of raw cotton supply, adoption of mechanized spinning processes.

Companies operating in the cotton yarn market are increasingly focusing on innovation in yarn production, including the development of compact spun yarns and blended yarns, to improve fabric quality and address evolving industry requirements. Compact spun yarns enhance fabric performance by reducing imperfections, resulting in greater strength, smoothness, and durability. Blended yarns combine natural fibers such as cotton with synthetic fibers, offering benefits such as improved sheen, higher strength, and a softer texture. These products utilize compact spinning technology to minimize yarn irregularities, delivering superior strength, smoothness, and durability, while CVC yarns blend cotton with polyester to achieve enhanced sheen and strength along with a cotton-like feel.

The cotton yarn market consists of sales of clothing, pillowcases, bedding, towels, curtains, home decor, crafts, and industrial products made using cotton yarn. Values in this market are factory gate values, that is, the value of goods sold by the manufacturers or creators of the goods, whether to other entities (including downstream manufacturers, wholesalers, distributors, and retailers) or directly to end customers. The value of goods in this market includes related services sold by the creators of the goods.

INDUSTRY DEVELOPMENTS & FUTURE OUTLOOK

India is the worlds second-largest producer of textiles and garments.

Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector on the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of yarns from natural fibres like cotton, jute, silk and wool, to synthetic/ man-made fibres like polyester, viscose, nylon and acrylic.

India is one of the largest producers of cotton and jute in the world. India is also the 2nd largest producer of silk in the world and 95% of the worlds hand-woven fabric comes from India. The Indian technical textiles segment is estimated at $16 bn, approximately 6% of the global market.

The textiles and apparel industry in India is the 2nd largest employer in the country providing direct employment to 45 million people and 100 million people in allied industries.

- India is the worlds second-largest producer of textiles and garments. It is also the sixth-largest exporter of textiles spanning apparel, home and technical products. India has a 4% share of the global trade in textiles and apparel.

- The textiles and apparel industry now contributes approximately 2% of Indias GDP and about 11% of manufacturing GVA (Gross Value Added) as of August 2025. The textile industry in India is predicted to double its contribution to the GDP to approximately 5% by the end of this decade.

- The textile industry has around 45 million of workers employed in the textiles sector, including 3.5 million handloom workers.

- Indias textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY26.

- Total textile exports are expected to reach US$ 70 billion by FY27.

The market for Indian textiles and apparel is projected to grow at a 10% CAGR to reach US$2.3 billion by 2030. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$100 billion.

The Indian apparel market stood at US$40 billion in 2020 and is expected to reach US$145 billion by 2027.

The Indian Technical Textiles market is the fifth largest in the world. The technical textiles industry was valued at US$29 billion in 2024 and is projected to grow to US$45 billion by 2026, US$123 billion by 2035, and US$309 billion by 2047.

- The fundamental strength of the textile industry in India is its strong production base of a wide range of fibre/yarns from natural fibres like cotton, jute, silk and wool to synthetic/man-made fibres like polyester, viscose, nylon and acrylic.

- The Indian textiles market is expected to be worth >US$ 209 billion by 2029.

Key segments of the textile industry

(Flowchart showing Process: Raw material -> Ginning -> Spinning -> Weaving/Knitting -> Processing -> Garment/apparel production; Output: Cotton, jute, silk, wool -> Fibre -> Yarn -> Fabric -> Processed fabric -> Final garment/apparel. Sub-segments: Yarn and fibre segment, Woollen textiles, Silk textiles, Jute textiles, Technical textiles)

The Indian Textile Industry has inherent linkage with agriculture and with the culture and traditions of the country making for its versatile spread of products appropriate for both domestic and the export markets. The textile industry is operating under different segments such as Spinning (the process of converting cotton or manmade fiber into yarn), Weaving and Knitting (converting yarn into woven or knitted fabrics), Fabric Finishing/ Processing (dyeing, printing and other cloth preparations) and Clothing (apparel manufacturing). The textiles and apparel industry in India have strengths across the entire value chain from fiber, yarn, fabric to apparel. Presently, spinning is the most consolidated and technically efficient sector in Indias textile industry.

The textile sector also has a direct link with the rural economy and performance of major fibre crops and crafts such as cotton, wool, silk, handicrafts and handlooms, which employ millions of farmers and crafts persons in rural and semi-urban areas. It has been estimated that one out of every six households in the country depends directly or indirectly on this sector. India has several advantages in the textile sector, including abundant availability of raw material and labour. It is the second largest player in the world cotton trade. It has the largest cotton acreage, of about nine million hectares and is the third largest producer of cotton fibre in the world. It ranks fourth in terms of staple fibre production and fourth in polyester yarn production.

The textile industry is also labour intensive, thus India has an advantage.

(Source: IBEF- India Brand Equity Foundation and Pib.gov)

Global textile market expected to grow at 2.5-3.5% CAGR between FY2023-FY2027 in value terms:

The global textile industry had grown consistently between FY2018 to FY2023, barring FY2020, which saw a decline due to Covid-19. Global trade restrictions due to disrupted supply chain and decline in textile products consumption amid imposed lockdown had negatively impacted the market resulting in a decline of ~0.5% in FY2020 compared to FY2019. However, the market recovered in FY2021, registering a Y-o-Y growth of 3.8% due to the easing of Covid19 restrictions and release of pent-up demand. The growth continued, with global textile industry registering a Y-o-Y increase of 3.9% in FY2022 and 0.3% in FY2023.

Going ahead, the industry is expected to grow at a CAGR of 2.5 - 3.5% between FY2023 to FY2027 to reach ~USD 1,780-1,830 billion in FY2027. Increasing demand for apparel from the fashion industry coupled with the growth of e-commerce platforms is expected to drive the market over the forecast period. Volume wise, the industry is expected to grow from 193 billion tons in FY2023 to 210-220 billion tons in FY2027, registering a CAGR of 2.0 - 3.0%.

Global textile market

(Bar chart showing market size in USD billion and volume in billion tons from CY2018 to CY2027F)

Cotton is expected to remain the largest contributor of textiles industry at ~38-40% share in FY2027

From FY2018-FY2023, cotton continued to dominate the textile market, accounting for around 39% of total textile sales. The high demand for cotton can be attributed to its exceptional qualities like strength, absorbency, and color retention. Its share is expected to remain in similar range (38-40%) in FY2027 as well. Man-made textiles had the second largest market share between FY2018-FY2023 and is expected to remain in similar range in FY2027 as well due to easy availability of raw materials, growing population and increasing demand of apparels in various textures and designs.

Global textile sales by raw material (value)

(Bar chart showing sales by raw material from CY2018 to CY2027F)

On volume basis also, cotton and man-made textiles had the highest share with 38% and 37% respectively between FY2018-2023. Overall, on volume basis, the industry is expected to register a CAGR of 2.0-3.0% in between FY2023- FY2027 compared to a CAGR of ~2.4% between FY2018-FY2023.

Indian textile and apparel market projected to grow at 6-7% CAGR between fiscal 2025-26 and 2028

Indian textile and apparel industry is projected to grow at a CAGR of 6.0-7.0% between fiscal 2024 and fiscal 2028, reaching a value of Rs. 12,400-12,500 billion in fiscal 2028. During this period, exports are expected to grow at a CAGR of 4.5-5.5% while domestic industry is expected to grow at slightly higher pace of 7.0-8.0%.

Between fiscals 2019 to fiscal 2024, the total Indian textile and apparel industry had grown at a CAGR of 4.5%. Within the total industry, the domestic Indian textile and apparel industry had grown at a higher pace of 5.8%, while exports have grown at a CAGR of 2.1%. The slower growth in exports is majorly due to decline in fiscal 2020 as a result of global slowdown which was further compounded by the Covid-19 pandemic leading to disruptions in supply chain and demand causing order cancellations. Also, high export tariffs levied on Indian exporters in countries like European Union (EU) when compared to zero import duty for other exporting countries such as Bangladesh have further dampened the export performance.

The future growth in Indian textile and apparel market will be led by various economic factors such as increase in discretionary income, rising urban population. Further, the demand is poised by increase in online retailing, shift from cotton to man-made fiber, robust growth of technical textiles segment. Additionally, global industry expanding outside of China would aid the Indian export markets in the growth trajectory.

Trend and outlook of Indian textile and apparel market

(Bar chart showing market size and CAGR from FY19 to FY28P)

Note: Domestic Indian textile industry consists of Ready-Made garments, Unstitched Fabric, Technical textiles, and Home textiles

P indicates for projected

Source: Ministry of textiles, DGCI&S, CRISIL, Wazir

Raw Material

(Image of cotton bolls)

Cotton is one of the most important cash crops and accounts for around 25% of the total global fibre production. In the raw material consumption basket of the Indian textile industry, the proportion of cotton is around 60%.

This has forced the manufacturers across the textile value chain – from spinning mills and weaving units to garment makers –to seek the abolition of an import duty on cotton (effectively to the tune of 11%, including cesses) and the creation of a strategic reserve of about 10-15% of market supplies by the government to help stabilize prices.

Rising raw material costs have also created inter-segmental conflicts in the industry. "There is a continuous spike in cotton yarn prices. The government should step in to bring stability to raw material prices.

The India cotton market continues to evolve amid shifting agricultural dynamics and policy interventions designed to enhance productivity and quality. The Union Budget 2025-26 allocated INR 5,272 crore to the Ministry of Textiles, representing a 19% increase from the previous year, signaling strong governmental commitment to sector development. The launch of a multi-year Cotton Productivity Mission aims to significantly enhance cotton yields, moving toward global production benchmarks and improving overall farm efficiency. Initiatives like Kasturi Cotton, supported by blockchain-enabled traceability platforms, are positioning Indian cotton to compete with premium international varieties, boosting its appeal in global markets. Private sector investments in expanding cotton ginning and processing capacity reflect strong investor confidence in the sectors growth prospects. Together, these government programs and industry initiatives are strengthening the supply chain, enhancing quality, and supporting the long-term development and competitiveness of Indias cotton market.

India Cotton Market Trends:

Rising Adoption of Sustainable and Traceable Cotton Production

The India cotton market is witnessing accelerated adoption of sustainable farming practices and traceability systems. For instance, the Kasturi Cotton Bharat initiative, implemented through public-private partnership between the Government of India, trade bodies, and industry, provides blockchain-based QR code traceability from farm to finished product. At World Cotton Day 2025 celebrations in New Delhi, Union Minister of Textiles announced the governments goal of achieving carbon-neutral textiles by 2030 while targeting USD 100 billion in exports. Multiple MoUs were signed under the Kasturi Cotton initiative with leading textile organizations to promote sustainable cotton production and enhance Indias global cotton footprint.

Shift Toward Value-Added Manufacturing and Export Diversification

Indian cotton is increasingly being diverted to value-added manufacturing rather than raw fiber exports. Cotton yarn exports demonstrated a positive trajectory in early 2025, growing approximately 16%, fueled by rising demand from key markets including Bangladesh, Vietnam, and China. Cotton exports in July 2025 totaled USD 1.02 billion, up from USD 970.5 million in the same month the previous year, reflecting a growth of 5.17%. This trend highlights the industrys focus on enhancing competitiveness and capturing higher value in international markets through processed cotton products.

Digital Transformation and Technology-Driven Farming Practices

The cotton sector is embracing digital transformation through precision agriculture technologies and smart farming tools. The Central Institute of Cotton Research has deployed AI-powered pheromone traps in Punjabs cotton belt regions including Bathinda, Mansa, and Muktsar, providing hourly pest data to farmers via mobile applications for precise and timely pest management interventions. For instance, the Cott-Ally mobile application launched by the Ministry of Textiles delivers real-time information on minimum support prices, procurement centers, payment status, and best agricultural practices directly to cotton farmers. Drip and sprinkler irrigation systems are gaining rapid traction in Maharashtra and Madhya Pradesh, enabling water savings, while ensuring stable growth during erratic monsoon conditions.

Market Outlook 2026-2034:

The India cotton market is set for steady growth, supported by the expansion of the textile industry, government initiatives aimed at enhancing productivity, and rising global demand for sustainably produced cotton. Programs like the Cotton Productivity Mission are driving improvements in cultivation practices, including advanced seed technology, optimized planting methods, and better pest management. As the textile sector continues to grow, domestic cotton consumption is expected to rise significantly, creating opportunities for manufacturers and farmers while strengthening Indias position in both domestic and international cotton markets. The market generated a revenue of USD 6.9 Billion in 2025 and is projected to reach a revenue of USD 9.6 Billion by 2034, growing at a compound annual growth rate of 3.59% from 2026-2034.

Regional Insights:

- North India

- South India

- East India

- West India

West India, encompassing the Central Zone states of Gujarat, Maharashtra, and Madhya Pradesh, maintains market leadership as the region produces approximately two-thirds of Indias total cotton output. Gujarat is the largest cotton-producing state, contributing 90.60 lakh bales in 2023-24, with the Saurashtra region accounting for approximately 70% of the states production. Key cotton districts including Amreli, Bhavnagar, Junagadh, and Rajkot benefit from favorable black soil conditions and established agricultural infrastructure. The state has achieved success through drip irrigation adoption, precision farming techniques, and government-backed farmer-producer organizations, improving marketing and export linkages.

Maharashtra, the second-largest producer with 89.09 lakh bales according to 2024-25 estimates, cultivates cotton primarily in the Vidarbha, Marathwada, and Khandesh regions. The state is working on climate-resilient agriculture, crop insurance, and organic cotton production for the global markets. There is a tremendous expansion of spinning capacity in the region, and new FAS travel reveals that more spinning facilities are being opened to satisfy the growing demand for local fibers. The government efforts, such as direct market access and value-added processing programs, are assisting in stabilizing the farmers income and also enhancing the quality and marketability of cotton grown in the area.

Market Dynamics:

Why is the India Cotton Market Growing?

Strong Government Policy Support and Investment Initiatives

The India cotton market is witnessing strong growth, supported by proactive government policies and increased focus on sector development. Initiatives such as the Cotton Productivity Mission are driving improvements in cultivation through advanced seed technology, high-density planting, and scientific farming practices, aiming to enhance yields and align productivity with global standards. Consistent efforts to provide minimum support prices are helping ensure price stability and income security for farmers. Together, these measures are strengthening the cotton supply chain, encouraging investment, and creating a favorable environment for sustained growth in Indias cotton production and related industries.

Expanding Textile Industry and Rising Export Demand

The India cotton market benefits substantially from the expanding domestic textile industry and growing international demand for Indian textile products. The India textile market size was valued at USD 152.40 Billion in 2025 and is projected to reach USD 213.75 Billion by 2034, growing at a compound annual growth rate of 3.83% from 2026-2034. The textile sector is a major employment generator in India, with cotton textiles ranking just after agriculture in terms of workforce contribution. Growing demand from key international markets, including Bangladesh, Vietnam, Peru, and Egypt, has driven a steady increase in cotton yarn exports. This trend has strengthened Indias position in the global textile trade, with significant volumes of cotton yarn being exported to major importing countries, highlighting the sectors importance for both employment and foreign exchange earnings.

Growing Demand for Sustainable and Premium Quality Cotton

Rising global demand for sustainably produced and traceable cotton is driving significant changes in Indias cotton cultivation and processing practices. Initiatives promoting premium, certified cotton are establishing Indian cotton as a high-quality, globally recognized brand, supported by blockchain-based traceability systems that track the product throughout the supply chain. International buyers increasingly require suppliers to uphold strong labor practices, environmental sustainability, and transparent operations. This shift is encouraging producers to adopt eco-friendly farming methods, implement rigorous quality standards, and enhance traceability, reflecting a broader industry commitment to sustainability, responsible production, and meeting evolving global market expectations.

Market Restraints:

What Challenges the India Cotton Market is Facing?

Pink Bollworm Infestation and Pest Resistance Challenges

The pink bollworm has become a persistent problem in the India cotton market and has decreased the pest resistance of Bt cotton. The pest has, over time, developed resistance to the Bt proteins, leading to great losses in the yields of major cotton-producing areas. This continuous menace lowers productivity, interferes with farm activities, and puts pressure on the growers to find alternative ways of managing the pests to maintain cotton production.

Water Scarcity and Climate Variability

Water shortage and unpredictable weather conditions have a great influence on cotton farming. The reliance on seasonal rainfall exposes the yields to sporadic precipitation, early withdrawal of monsoons, and temperature extremes. Over-precipitation may lead to waterlogging and pest infestations, whereas drought means that crops will not grow and the fibers will not be so fine. Such environmental problems establish unpredictability and risks among cotton farmers.

Competition from Alternative Crops and Market Price Volatility

Cotton farming faces stiff competition from alternative crops that offer lower risks and higher returns. Farmers are increasingly switching to crops with shorter maturity periods and reduced input costs. Combined with fluctuating cotton prices and gaps between domestic and international markets, these factors create uncertainty, discouraging expansion of cotton acreage and impacting overall production stability.

Competitive Landscape:

The India cotton market features a fragmented competitive landscape with numerous stakeholders, including farmers, ginning units, traders, spinning mills, and textile manufacturers. Government agencies play a key role in ensuring price support and stabilizing market operations, providing a foundation for consistent supply. Market participants are increasingly focusing on quality improvement, sustainable production practices, and adoption of advanced technologies to enhance efficiency and competitiveness. Initiatives promoting premium, traceable cotton are driving differentiation, while ongoing investments in ginning and processing infrastructure are enabling companies to capture greater value along the cotton-to-textile value chain, supporting long-term growth and market development.

Government Support and Notable Trends in Textile Sector

- Technology Up-gradation and Modernization:

o Amended Technology Upgradation Fund Scheme (ATUFS) to provide credit-linked Capital Investment Subsidies (CIS) to textile units for purchasing benchmarked machinery, helping mills modernize and reduce their environmental footprint.

o Spinning Mill Modernization Schemes: State-specific initiatives, such as those in Tamil Nadu, offer interest subsidies for replacing machinery older than five years.

o Mini Textile Park Schemes: Subsidies for developing infrastructure, buildings, and machinery for smaller units.

2

- Raw Material Supply and Price Stabilization:

o Cotton Corporation of India (CCI) Support: The government directs CCI to sell cotton stocks purchased under the Minimum Support Price (MSP) directly to MSME-category spinning mills to ensure availability.

o Special Sales/Discounts: CCI offers discounts (e.g., Rs. 300/- per candy) to MSME mills, cooperative sector mills, and Khadi industries to boost competitiveness.

o Yarn Supply Scheme (YSS): Ensures availability of raw materials at mill gate prices to handloom weavers, indirectly supporting steady demand for yarn.

o Kasturi Cotton Initiative: Focuses on branding, traceability, and certification to promote Indian cotton quality, benefiting the entire supply chain from farm to mill.

3

- Financial Assistance and Incentives:

o Production Linked Incentive (PLI) Scheme: Encourages production of high-value Man-Made Fiber (MMF) fabrics and technical textiles, attracting investment and promoting eco-friendly manufacturing.

o Rebate of State and Central Taxes and Levies (RoSCTL): Provides tax rebates on exported garments and made-ups, boosting downstream demand for yarn.

o Interest Equalization Schemes: Increased rates for pre- and post-shipment credit to support MSME exporters.

o Special Package for Textiles (2016): Included measures like additional production subsidies under ATUFS, EPF contribution support, and tax concessions.

4

- Infrastructure Development:

o PM MITRA Parks: Establishment of 7 mega integrated Textile Parks and Apparel Parks with world-class, plug and play facilities to reduce logistics costs and improve efficiency.

o Integrated Processing Development Scheme (IPDS): Supports new and upgraded Common Effluent Treatment Plants (CETPs) to help mills meet environmental standards.

5

- SAMARTH Scheme: Scheme for Capacity Building in Textile Sector:

Aims to provide skill development, promote innovation, improve governance and infrastructure in the sector.

Other Government Schemes & Policies

SAATHI Scheme

- The Ministry of Textiles, Government of India, along with Energy Efficiency Services Ltd. (EESL), has launched a technology upgradation scheme called SAATHI (Sustainable and Accelerated Adoption of Efficient Textile Technologies to Help Small Industries) for reviving the power loom sector of India.

Remission of Duties or Taxes on Export Product (RoDTEP)

- The government of India introduced a new scheme, named RoDTEP, in September 2019 and released a budget allocation of Rs. 500 billion, in a move to replace MEIS and RoSL (only refunds state taxes). The new scheme is in terms with the conditions of the WTO, where incentives cannot be provided, but the taxes incurred during the process can be refunded. Hence, the government plans to refund all state (RoSL) and Central government taxes incurred by the export players during the manufacturing process of RMG.

- According to the government, this new scheme would "adequately compensate" for the current 6% (4% MEIS and 2% RMG) benefits being availed of by the RMG exporters and help them stay competitive enough in the international trade market.

Merchandise Exports from India Scheme

- The Directorate General of Foreign Trade (DGFT) has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for two subsectors of textiles Industry - readymade garments and made-ups - from 2% to 4%.

Scheme for Integrated Textile Parks (SITP):

- The setting up of integrated textile parks is one of the flagship schemes of the Ministry of Textiles primarily setup to assist small and medium entrepreneurs in the textile industry to clustered investments in textile parks by providing financial support for world class infrastructure in the parks.

- SITP has majorly boosted Indian textile industry. A total of 59 textile parks have been sanctioned under SITP by the Ministry of Textiles out of which 22 textile parks have been finalized and rest are under various stages of construction. While 13 textile parks will receive a grant of Rs. 520 crores from the Government for infrastructure development, they are estimated to bring in private sector investment of about Rs. 3,240 crores. This scheme is a true game changer as the financial aid provided to companies seeking to setup manufacturing units but unable to do so due to the sky high prices of land has caused many new entrants to enter this sector. Furthermore, the easing of the red-tape with the plug and play setup in these parks has made India a hotspot not only for domestic but also international players seeking to enter the domain of textiles and apparel.

- This scheme provides textile units infrastructure, including power, water, roads, and drainage system, and assistance to meet environmental norms. It is expected to attract considerable investments to set up huge integrated textile facilities. This is a positive step towards making India a hub for textile products. As per union budget 2021-22, the government has allocated Rs 800 million (budgeted estimate) under SITP.

COMPETITION IN FOREIGN MARKETS

(Image of world map with text "COMPETING GLOBALLY. DELIVERING INDIAN QUALITY.")

The Indian cotton textile industry has been facing increasing competition in world markets. This is largely due to high cost of production and consequently high prices of cotton. It is paradoxical in a country where wages are low and cotton is internally available.

- Availability of quality cotton in required volume can be made achievable through framing Government Policies for increasing the productivity of cotton on par with international producers.

- Though the mandatory compliance of BIS Standard for several textile products including MMF Fibre, Yarn, Technical Textile products, etc., by way of issuing

- Quality Control Orders (QCO) is a welcome move and would encourage Atma Nirbhar Bharat, it lacks workable standards. Also, the initial investment towards establishment of lab and its connected mandates is beyond the capacity of the growing MSME sector that accounts over 85% of the entire textile value chain. The industry, industry Associations and the government are actively involved in addressing the issues in complying the QCOs. The Government is in the process of bringing more than 100 QCOs covering the entire textile value chain.

- Indias textile and apparel industry can be labelled as that rocket which zoomed off to the skies but lost its fizz somewhere in between. Despite being the second-largest exporter of textiles and accounting for 5% of the global share of textiles and apparel, Indias first runners up crown face stiff chances of being taken away by smaller countries like Vietnam and Bangladesh.

- The principles of sustainability, traceability and circularity have begun to rule the export market. The domestic manufacturers are also working towards incorporating the same in the manufacturing process. However, the cost of certification to prove the same is already on higher side and still escalating.

Threads of Growth

(Image of a spool of yarn with text "THREADS OF GROWTH")

- India is the second largest producer of cotton with the largest area under cotton cultivation in the world. It has an edge in low-cost cotton sourcing compared to other countries.

- Presence of entire value chains

- Competitive manufacturing costs Strong Domestic Textile Demand

- Export-Oriented Textile Manufacturing

- Sustainability and Natural Fiber Preference

- Availability of skilled manpower

- Large and growing domestic market

- Rising per capita income, higher disposable incomes and preferences for brands

- India has gathered experience in terms of working with global brands and this should benefit Indian vendors.

- China losing its competitive edge to India

STRATEGIES:

(Image of a hand pointing at a word cloud with the word "STRATEGY" in the center)

- Focused on Innovation & Technology

- Exploring existing potential and new product development

- Building value around the commodity

- Product development for immediate market needs

- Lean Manufacturing- to minimise waste and create more value-oriented products

- Assets Reliability- adopting smart machineries and incorporate artificial intelligence

- Organisational Alignment- clear assignment of duties towards every management personnel for smooth and efficient operations

- Energy- sustainable manufacturing and use of energy efficient machinery

OPPORTUNITIES AND THREATS

Opportunities

The yarn manufacturing industry in 2026 is experiencing a significant shift toward high-value, sustainable production driven by a rebound in global demand. One of the primary opportunities lies in the surging demand for sustainable and organic yarn, as consumers and major brands prioritize eco-friendly materials and circular economy principles. Furthermore, government initiatives like the Mission for Cotton Productivity are helping manufacturers improve yields and reduce dependence on expensive imports. The integration of quality checks and advanced spinning technologies also allows companies to enhance precision and cater to the high-margin technical textiles market, which serves sectors like healthcare and automotive.

? Rising Demand for Sustainable Textiles: Growing consumer preference for natural fibers over synthetics, particularly with eco-friendly standards like GOTS, provides a niche market.

? Export Potential & Trade Deals: New market access via trade agreements (e.g., India-UAE/Australia) and recovery in demand from China.

? Capacity Expansion & Upgradation: Government support through initiatives like Indias Technology Upgradation Fund Scheme (TUFS) and the expansion of integrated textile parks to improve efficiency.

? Value Addition: Opportunities exist in manufacturing specialized yarn, organic cotton, and enhanced, branded yarn products

Threat

? Raw cotton availability

Fluctuations in domestic cotton production directly influence yarn output and export volumes.

? Price competitiveness

Global cotton prices and spinning costs impact Indias ability to compete with other yarn-exporting countries.

? Global textile demand

Demand from international apparel and fabric manufacturers plays a key role in determining export performance.

? Exchange rate movements

Currency fluctuations affect export pricing and profitability for Indian yarn exporters.

? Trade policies and regulations

Changes in export incentives, duties, and compliance requirements can influence shipment volumes and market access.

? Market Demand

The demand for cotton based textiles is supported by Indias growing population, rising incomes, and urbanization, but the industry must adapt to changing consumer preferences and market dynamics.

? Sustainability

The industry is increasingly focused on sustainability, which presents a challenge as it requires investment in technology and practices that align with global sourcing requirements.

? Trade Regulations

The enforcement of trade regulations, such as the Cotton Bales (Quality Control) Order, can create barriers for Indian cotton in the global market.

SEGMENT ANALYSIS

Yarn is the core of all fabrics- be it garments or home furnishings. The Company Produces Cotton Yarn using Cotton as raw material. We can call it a Sustainable Yarn production because it has been manufactured keeping environment, humans and the economy in balance. Our yarns do not deplete the earths resources or cause carbon footprints. They are organically grown or manufactured by recycling.

As the Company is manufacturing only the one product i.e. Cotton Yarn, Therefore, segment/product-wise details are not applicable.

COMPANY OVERVIEW

The manufacturing facility of The Company (LSL) is situated at A 51-53, RIICO Growth Centre, Hamirgarh of Bhilwara District in the Rajasthan State and spreads over 48,263 square meters. The Company has an installed capacity of 1,920 rotors in open-end segment, 25536 spindles in ring spinning segment and 41,472 spindles in Compact Ring Spinning segment for cotton yarn having capacity to produce approx. 69.45 tons per day of high-quality yarn.

During the year 2023-24, the company successfully commissioned the expansion project of 41,472 spindles of compact cotton yarn at a cost of Rs. 218 Cr., two months ahead of schedule, i.e., on 31st January 2024, without any time or cost overruns. The plant is equipped with modern, automatic machinery. The level of technological advancement directly influences the productivity of both machines and labor, which in turn affects production, operating costs and profitability. Our technical team in spinning is highly skilled, utilizing modern spinning technologies and processing techniques that ensure the production of high-quality yarn. Thanks to the enhanced capacity resulting from the expansion project, your company has exceeded the estimated turnover.

Lagnam Spintex is currently exporting cotton yarns to countries such as Portugal, Bangladesh, Poland, Peru, South Korea, Morocco, Egypt, Greece, Argentina, Turkey, Spain, Indonesia, Bulgaria, USA, and others. The products are widely used in industries such as apparel and garment manufacturing, industrial fabrics, towels, denims, and more.

FINANCIAL PERFORMANCE

The Company has recorded total revenue from operations during the Financial year 2025-26 of Rs. 60498.05 Lacs against the total revenue of Rs. 60556.46 Lacs in the previous financial year 2024-25.

The Total expenses of the Company during the financial year 2025-26 is Rs. 58541.40 Lacs against the expenses of Rs. 58790.17 Lacs in the previous financial year 2024-25.

The EBITDA for the financial year 2025-26 is Rs. 6708.83 Lacs, compared to Rs. 6554.28 Lacs in the previous financial year 2024-25.

The Profit after tax is Rs. 1438.98 Lacs for the financial year 2025-26 as compare to Rs. 1285.47 Lacs in the previous financial year 2024-25.

RISK & CONCERNS

No industry is free from normal business risk and concerns. Indian Textile Industry continues to face stiff competition from Bangladesh, Taiwan and other emerging economies. The relative competitiveness of Industry is dependent upon the raw cotton prices, exchange rates and prevalent interest rates regime. The primary raw material for the manufacturing of yarn is cotton which is an agriculture produce. Its supply and quality are subject to forces of nature i.e. Monsoon. Any increase in the prices of raw cotton will make the things difficult for the Textile Industry resulting weak demand and thin margins. Thus availability of raw cotton at the reasonable prices is crucial for the spinning industry. Any significant change in the raw cotton prices can affect the performance of the Industry.

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The high rate of interest is affecting the financial performance of the Textile Industry. The Spinning industry being more capital intensive requires huge funds, long term as well as short-term in the form of working capital for its operations. The Government must support the industry by providing cheap finance so that the industry remains financially viable. Though Government has taken some remedial measures in this regard but still a lot more is required so that the Textile Industry could meet the challenges ahead. Some of the primary risks and concerns for the Industry are as under:

1. External Trade and Tariff Pressures

? US Tariff Hike: The US imposed a 50% effective tariff on Indian apparel exports in August 2025, which has a trickle-down effect on the demand for Indian cotton yarn. Indian exporters are offering discounts to maintain market share, which narrows margins for spinners.

? Reduced Export Incentives: Export rebates under the RoDTEP scheme have been cut from 3.4% to 1.7% of the FOB value, directly impacting export profitability.

? Competition: Indian spinners face stiff competition from countries with lower tariff rates.

2. Raw Material and Supply Risks

? High Import Dependency: Due to low local output, reliance on imported cotton is rising (up 85% YoY in 5M FY2026), increasing costs for manufacturers.

? Crop Damage & Acreage Shift: Untimely rainfall in major producing states (Maharashtra, Gujarat, Andhra Pradesh, Telangana) has damaged crops. Farmers are shifting to more profitable crops, reducing the overall cultivated area.

3. Financial and Operational Concerns

? Margin Contraction: Spinners margins are expected to contract by 50-100 basis points in FY2026, particularly in the second half of the year.

? Declining Contribution Levels: Average cotton yarn contributions dropped from Rs. 103/kg in H1 FY2026 to Rs. 96/kg in November 2025.

? Weakened Export to China: Although a recovery in exports to China is expected early in the year, fluctuations in their demand remain a constant risk factor.

4. Other Key Risks

Geopolitical Issues: Geopolitical instability in neighboring markets like Bangladesh has disrupted trade, challenging the growth in export volumes.

Synthetic Competition: Increasing availability of cheaper synthetic alternatives (polyester/nylon) continues to threaten the demand for cotton-based products.

Key Mitigation Factors:

? CCI Procurement: Significant procurement by the Cotton Corporation of India (CCI) helps secure steady supply.

? Import Duty Exemption: A temporary exemption on import duties for cotton, valid until December 2025, helps manage raw material costs.

? Sustainability Focus: Indian mills are strengthening their practices to meet rising international demand for certified, eco-friendly cotton.

INFORMATION TECHNOLOGY

In todays global marketplace change is inevitable and to keep ahead of this any organization must use Information Technology to drive Innovation which is the path to quick business decisions. Lagnam is a firm believer that without IT no organization can function, therefore our end-to-end Business Process Management tool based on Infor LX ERP platform went live along with our COD in 2019. After making significant investment in its IT infrastructure and solutions, Lagnam would be one of the very few manufacturing companies that has significant budget allocated for IT upgradation to adopt to ever evolving technological solutions.

As our systems are maturing, we are immensely proud to use the full potential of technology in various day to day activities:

? We have a centralized single network infrastructure secured by a robust Firewall monitored and managed by our team on regular basis. On this network all our manufacturing machines as well as user computers are connected for ease of access

? All our end user machines and servers are protected by McAfee Enterprise level End Point Security system to safeguard any virus attacks on our network

? The management and operational team have easy access to all the operational data of various machines on the tip of their fingers at all the time for a quick proactive action.

? We have a complete HRMS and Payroll system to fully utilize our human resource potential.

? We recently invested in a customized Cotton Bale Management system to keep our product quality consistent.

? We have developed in house Open source email server to support our BPM system to send out reports by department to everyone at the end of the day to take corrective actions as and when required.

? Use of collaborative tools for easy information sharing across various departments.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has implemented proper system for safeguarding the operations/ business of the Company, through which the assets are verified and frauds, errors are reduced and accounts, information connected to it are maintained such, so as to timely completion of the statements. The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information.

The Audit Committee of Board of Directors reviews the efficiency and effectiveness of internal control systems and suggests the solution to improve and strengthen. The Internal control system were tested during the year and no material weakness in design or operation were observed. The requirement of having internal auditor compulsory by statue in case of listed and other classes of companies as prescribed shall further strengthen the internal control measures of Company.

HUMAN RESOURCES AND INDUSTRIAL RELATION

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The Company had cordial and harmonious industrial relations at all levels of organizations. The company believes that the industry has the tremendous potential to impact the society, nation and the world positively. Its employees are major stakeholder sand their efforts have direct stake in the business prospectus of the organization. The employees have extended a very productive cooperation in the efforts of the management to carry the company to greater heights. The Company considers employees as their biggest competitive advantages. The Company takes initiative like training and development for its people to increase the performance. The Company has taken various steps to improve and enhance skill of its people. The industrial relations remained cordial in our plant. The Company has continued to give special attention to human resources and overall development. At present company has employed man power of around 800+ peoples including technical, non-technical, managerial and non- managerial, casual and contract labour.

ENVIRONMENT AND SAFETY

The Company remains committed to environmentally responsible and safe operations as a core priority. All activities are carried out in strict adherence to applicable statutory and industry regulations, with due emphasis on safeguarding the health and safety of all stakeholders. The Company continues to promote environmental protection and the conservation of natural resources, integrating sustainable practices across its operations to the extent feasible.

CHANGE IN FINANCIAL RATIOS:

Ratios having movement of more than 25% are as follows:

Ratio	25-26	24-25	Reason for Change
Net Capital Turnover ratio	85.67	44.79	Due to improved efficiency in net capital management
Trade Payables Turnover Ratio	29.31	81.76	Due to utilization of M-1 exchange credit to take advantage of lower ROI.

CAUTIONARY STATEMENT

Statements made in this Management Discussion and Analysis Report may contain certain forward-looking statements based on various assumptions on the Companys present and future business strategies and the environment in which we operate. Actual results may differ substantially or materially from those expressed or implied due to risk and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India and abroad, volatility in interest rates and in the securities market, new regulations and Government policies that may impact the Companys businesses as well as the ability to implement its strategies. The information contained herein is as of the date referenced and the Company does not undertake any obligation to update these statements. The Company has obtained all market data and other information from sources believed to be reliable or its internal estimates, although its accuracy or completeness cannot be guaranteed.