Lux Industries Ltd Management Discussions

ANNEXURE ‘B TO DIRECTORS REPORT

Overview: In 2024, the global economy demonstrated resilience in the face of complex challenges. While growth moderated and supply chains adjusted to evolving geopolitical dynamics, the services sector remained a pillar of strength, supporting overall stability. Encouragingly, inflationary pressures eased, reflecting the effectiveness of stabilizing economic policies. Despite some geopolitical recalibrations—particularly in U.S. trade strategy—global markets continued to adapt, underscoring the agility and interconnectedness of the world economy.

Global economic growth declined marginally from 3.3% in 2023 to an estimated 3.2% in 2024. This was marked by a slowdown in global manufacturing, particularly in Europe and parts of Asia coupled with supply chain disruption and weak consumer sentiment. In contrast, the services sector performed more creditably. The growth in advanced economies remained steady at 1.7% from 2023 to 2024 as the emerging cum developing economies witnessed a growth decline at 4.2% in 2024 (4.3% in 2023).

On the positive side, global inflation was expected to decline from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025. This decline was attributed to the declining impact of erstwhile economic shocks, and labour supply improvements. The monetary policies announced by governments the world over helped keep inflation in check as well.

(Source: IMF, KPMG, Press Information Bureau, BBC, India Today)

Performance of the major economies

(Source: CNBC, China Briefing, ons.gov.uk, Trading Economics, Reuters)

Outlook: The global economy has entered a period of uncertainty following the imposition of tariffs of products imported into the USA and some countries announcing reciprocal tariffs on US exports to their countries. However, industries that are driven by a strong domestic consumption such as textile and apparel, FMCG, healthcare etc. are expected to be insulated by the global dynamics. This is likely to stagger global economic growth, the full outcome of which cannot be currently estimated. This risk is supplemented by risks related to conflicts, geopolitical tensions, trade restrictions and climate risks. In view of this, World Bank projected global economic growth at 2.3 per cent for 2025 and 2026, factoring the various economic uncertainties.

(Source: IMF, United Nations)

Overview

The Indian economy was projected to grow at 6.5% in FY 2024-25, compared to a revised 9.2% in FY 2023-24. This represented a four-year low due to a moderate slowdown within the Indian economy (marked by slower manufacturing growth and a decline in net investments). Despite the slowdown, India retained its position as the worlds fi_h-largest economy.

Indias nominal GDP (at current prices) was Rs.331 trillion in FY 2024-25 (_301.23 trillion in FY 2023-24). The nominal GDP per capita increased from Rs.2,15,936 in FY 2023-24 to Rs.2,35,108 in FY 2024-25, reflecting the impact of an economic expansion. The Indian rupee weakened 2.12% against the US dollar in FY 2024-25, closing at Rs.85.47 on the last trading day of FY25. In March 2025, the rupee recorded the highest monthly appreciation since November 2018, rising 2.39% (arising out a weakening US dollar).

Inflationary pressures eased, with CPI inflation averaging 4.63% in FY 2024-25, driven by moderating food inflation and stable global commodity prices. Retail inflation at 4.6% in FY 2024-25, was the lowest since the pandemic, catalysing savings creation.

Growth of the Indian Economy -

E: Estimated

(Source: MoSPI, Financial Express)

Indias exports of goods and services are projected to reach US$824.9 billion in FY 2024-25, up from US$ 778 billion in the previous fiscal year. The Red Sea crisis impacted shipping costs, affecting price-sensitive exports. Merchandise exports were expected to grow 2.2% YoY, reaching $446.5 billion. During FY 2024-25, merchandise exports rose to US$ 437.42 billion, growing by 2.2% YoY.

Indias net GST collections increased 8.6%, totalling Rs.19.56 lakh crore in FY 2024-25. Gross GST collections in FY 2024-25 stood at Rs.22.08 lakh crore, a 9.4% increase YoY.

Manufacturing activity was subdued in FY25, with growth projected at 4.3%, which was lower than 12.3% in FY24. Moreover, due to lower public spending in the early part of the year, government final consumption expenditure (GFCE) is anticipated to have slowed to 3.8% in FY25, compared to 8.1% in FY24.

The Ni_y 50 and SENSEX recorded their weakest annual performances in FY 25 in two years, rising 5.3% and 7.5% during the year under review respectively. Gold rose 37.7% to a peak of $3,070 per ounce, the highest increase since FY 2007-08, indicating global uncertainties. Foreign portfolio investments (FPIs) in India experienced high volatility throughout 2024, with total inflows into capital markets reaching approximately $20 billion by year-end. However, there was significant selling pressure in the last quarter, influenced by new tariffs announced by the new US government on most countries (including India).

Outlook

India is expected to remain the fastest-growing major economy. Initial Reserve Bank of India estimates have forecast Indias GDP growth downwards from 6.7% to 6.5% based on risks arising from US tari_ levies on India and other countries. The following are some key growth catalysts for India in FY26.

Tari_-based competitiveness: India identified at least 10 sectors such as apparel and clothing accessories, chemicals, plastics and rubber where the US high tariffs give New Delhi a competitive advantage in the American market over other suppliers. While India faced a 10% tari_ after the US suspended the 26% additional duties for 90 days, the levy remained at 145% on China, the biggest exporter to the US. Chinas share of apparel imports into the US was 25%, compared with Indias 3.8%, a large opportunity to address differential (Source: Niti Aayog).

Union Budget FY 2025-26: The Union Budget 2025-26 laid a strong foundation for Indias economic trajectory, emphasizing agriculture, MSMEs, investment, and exports as the four primary growth engines. With a fiscal deficit target of 4.4% of GDP, the government reinforced fiscal prudence while allocating Rs.11.21 lakh crore for capital expenditure (3.1% of GDP) to drive infrastructure development. The February 2025 Budget marked a shi_ in approach, with the government proposing substantial personal tax cuts. Effective April

1, 2025, individuals earning up to Rs.12 lakh annually will be fully exempt from income tax. Economists estimate that the resulting Rs.1 lakh crore in tax savings could boost consumption by Rs.3-3.5 lakh crore, potentially increasing the nominal private final consumption Expenditure (PFCE) by 1.5-2% of its current Rs.200 lakh crore.

Monsoons: The India Meteorological Department predicted an ‘above normal monsoon in 2025. This augurs well for the countrys farm sector and a moderated food inflation outlook. Easing inflation: Indias consumer price index-based retail inflation in March 2025 eased to 3.34 %, the lowest since August 2019, raising hopes of further repo rate cuts by the Reserve Bank of India.

(Source: CNBC, Press Information Bureau, Business Standard, Economic Times, World Gold Council, Indian Express, Ministry of External Affairs, Times of India, Business Today, Hindustan Times, Statistics Times)

Textile: The global textile market reached a size of US$ 1,065.6 Billion in 2024 and is expected to grow to US$ 1,484.7 billion by 2033, reflecting a compound annual growth rate (CAGR) of 3.57% from 2025 to 2033. This growth is attributed by factors such as shi_ing consumer preferences, rapid population growth, a rising demand for eco-friendly, organic, and functional textiles, advancements in technology and supportive government policies and regulations. A major factor fueling market expansion is the evolving consumer demand for comfort, sustainability, and style. As consumers increasingly prioritize eco-friendly fabrics, organic materials, and textiles with enhanced functionality, the demand for these products has surged. The global population growth also plays a pivotal role, especially in emerging markets like India and China, where rising income levels have led to increased spending on textiles. Technological innovations in textile manufacturing—such as automation, digital printing and the development of smart fabrics—are transforming the industry by improving efficiencyand enabling greater customization and sustainability. Government initiatives that encourage domestic textile production or support trade agreements also contribute to shaping the market landscape. The natural fibers market has experienced significant growth in recent years. It is projected to increase from $73.74 billion in 2024 to $77.89 billion in 2025, with a compound annual growth rate (CAGR) of 5.6%. The growth observed in recent years can be attributed to factors such as cultural heritage and tradition, the evolution of the textile industry, the influence of the industrial revolution, cyclical demand trends, and the dominance of cotton.

Meanwhile, the global polyester fiber market is expected to reach $153.5 billion by 2030, growing at a CAGR of 7.5% from 2022 to 2030. This anticipated growth is largely driven by factors like global population growth and urbanization, the rapid expansion of e-commerce, increased consumer spending on leisure activities, greater retail access, and rising internet penetration.

Apparel: In 2023, the global apparel market was valued at US$ 1,709.76 billion. The market is forecast to grow from US$ 1,774.56 billion in 2024 to US$ 2,263.98 billion by 2030, with a compound annual growth rate (CAGR) of 4.1% from 2024 to 2030. This growth is driven by factors such as the rise of social media and e-commerce, as well as an increasing demand for sportswear. Key trends shaping the market include the use of blockchain for supply chain security, AI for trend forecasting, recycling efforts to reduce waste, IoT innovations, and the integration of VR and AR technologies to enhance shopping experiences.

In 2025, the global apparel market is expected to generate a remarkable US$ 1.84 trillion in revenue. Within the sector, womens apparel stands out as the largest segment, forecasted to reach a market volume of US$ 963.39 billion in 2025.

By 2025, it is expected that 94% of sales in the global apparel market will come from the non-luxury segment, reflecting its dominant share. At the same time, Chinas apparel market is witnessing a notable rise in demand for luxury brands, as consumers increasingly show a willingness to pay premium prices for high-quality, branded products.

(Source: IMARC, KBV research, Precedence research, Mordor intelligence, Statista)

Indian textile and apparel industry overview

Indias textile and apparel sector is a vital component of its economy, with its market size which is valued at US$ 222.08 Billion in 2024. Indias textile and apparel (T&A) exports registered a 6.32% growth, reaching US$36.61 billion in FY25. Within this, apparel exports rose by 10.03% to US$15.99 billion, while textile exports increased by 3.61% to US$20.62 billion.

On an annual basis, apparel exports grew from US$14.53 billion in FY24 to US$15.99 billion in FY25, while textile exports rose from US$19.90 billion to US$20.62 billion, underscoring a steady performance across both segments. As one of the most labor-intensive industries, it also includes around 3.5 million handloom workers. India stands as the second-largest global producer of textiles and garments, and it ranks among the top five exporters worldwide, capturing a 4.6% share of global textile trade. The sector is expected to experience strong growth, with forecasts suggesting a 10% annual increase, reaching US$ 646.96 billion by 2033 at CAGR of 11.98% from 2025-2033, and exports growing to US$ 100 billion. This growth is expected to be driven by factors such as rising demand for high-quality clothing, government initiatives supporting weavers, and a shi_ towards sustainable and ethically sourced materials.

(Source: ibef.org, Textile Today, Fibre to Fashion)

E-commerce growth: Indias e-commerce sector is projected to grow from INR 4,416.68 billion in 2024 to INR 7,591.94 billion by 2029, with an annual growth rate of 11.45%. By 2029, the number of e-commerce users is expected to reach 501.6 million. This rapid e-commerce expansion is driving growth in the textile industry by increasing online sales and expanding market access.

Urbanization and demographic shi_s: Indias middle-class population surged from 14% in 2004–05 to 31% in 2022–23, leading to increased consumer spending on packaged goods. Urbanization has also expanded organized retail, where demand for apparel is steadily rising, benefiting the apparel and textile industry.

Economic growth and rising consumption: Indias GDP is projected to grow at 6.2% in FY26, supporting the growing demand for apparel products.

Robust demand: As the most populous country in the world with disposable income that is expected to grow to US$ 2190, the demand for textiles across various categories, ranging from basic apparel to high-end fashion and technical textiles.

Export target: As a part of its Vision 2030, the government set a target of achieving US$ 350 billion in textile production by 2030, with apparel exports contributing US$ 40 billion. Cotton production is projected to reach 7.2 million tons by 2030 to meet this demand. The textile sector is also expected to significantly increase its contribution to Indias GDP, from 2.3% to nearly 5% by the end of the 2030.

Conducive policies: Government initiatives such as the Amended Technology Upgradation Fund Scheme (ATUFS) and others, designed to enhance infrastructure, promote exports, and support skill development within the textile sector, have created a favorable environment for growth.

Innovation: The adoption of advanced technologies like automation, digital printing and sustainable manufacturing practices will help improve efficiencyand product quality, enhancing Indias competitiveness in the global market.

Rising retail penetration: The expansion of retail networks in tier II and III cities, alongside growing urbanization, is broadening the market reach for textile products.

Presence of skilled professionals: India is home to prestigious textile institutes and universities, including the National Institute of Fashion Technology (NIFT) and the Indian Institutes of Technology (IITs). These institutions offer specialized courses in textile engineering, fashion technology, and related fields, annually producing a large number of qualified professionals who contribute to the growth and development of the industry.

(Source: IBEF, Business Standard, Financial Express, The Hindu, Economic Times, Forbes)

Government budget allocation: The Union Budget 2025-26 allocated H5,272 crores to the textile sector, a 19% increase over the budget estimates of 2024-25 (H4417.03 crore), to boost growth. Textile parks/PM MITRA: To boost growth in the textile industry, the Government has launched the PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks Scheme to develop world class infrastructure including plug and play facility with a funding of Rs.4,445 Crores for a period up to 2027-28.

PLI Scheme: The Government has enhanced the Production Linked Incentive (PLI) Scheme for Textiles with an approved outlay of Rs.10,683 Crores over five years to promote the textile sector to achieve size and scale and to become competitive.

RoSCTL scheme: The RoSCTL (Rebate of State and Central Taxes and Levies) scheme is a government initiative aimed at promoting the textile sector by refunding taxes and levies on textile exports. This helps reduce the cost of production for exporters and boosts competitiveness in global markets. The scheme has seen an improved allocation to Rs.9,246 Crores in the budget this year.

(Source: PIB, Business Standard)

Indian hosiery market overview

The Indian hosiery market is on a steady growth trajectory, fueled by evolving consumer preferences, expanding export opportunities, and a resilient domestic demand landscape. As key economic and industry factors align, the sector is poised for sustained expansion and profitability in the coming years.

The Indian hosiery market was valued at Rs.36,520 crore in 2024 and is projected to grow at a CAGR of 6.9% from 2025 to 2034, reaching Rs.67,230 crore by 2034.

Shi_s in lifestyles and demographics are changing demand trends, with urban demand expected to remain stable. Favorable monsoon conditions and potential moderation in inflation are expected to boost rural demand, potentially increasing volumes by 35-40%. Growing export opportunities, especially to Gulf countries, are also contributing to the markets expansion. The Indian hosiery market is witnessing rapid growth within the textile sector, driven by rising demand for affordable and comfortable socks, stockings, and undergarments.

In FY25, the sector is projected to grow 10–12% YoY, supported by a recovery in rural demand, rising export volumes, and strong traction in modern trade. A CRISIL Ratings analysis of key industry players projects an improvement of 150–200 basis points in operating margins, aided by soffer input prices, stable yarn rates, and improved capacity utilization. Stronger cash accruals and shorter inventory cycles are expected to improve liquidity and reduce working capital requirements. Additionally, a cautious approach to capital expenditure is likely to support financial discipline.

Hosiery sales typically see a seasonal spike toward the end of the fiscal year, as channel partners stock inventory ahead of the summer season. This trend is expected to continue, with stable yarn prices and a 1–2% reduction in selling prices further encouraging o ake by trade partners.

(Source: Expert Market Research, Ken Research, zee biz)

Company overview

Founded in 1995, Lux Industries Limited has become a prominent player in Indias hosiery market, holding a ~15% market share in mens innerwear. As the largest domestic hosiery company in India, Lux offers a diverse product portfolio, including over 100+ items across 10+ well-established brands and more than 5000+ SKUs to meet various customer needs. With nine strategically located manufacturing plants in West Bengal, Punjab, Tamil Nadu, and

Uttar Pradesh, Lux boasts an annual production capacity of 34+ crores garment pieces. Its products are available through over 2 lakhs + retail outlets across India, and the company also has a global footprint, operating in more than 46+ countries.

Outlook

Lux Industries Limited foresees sustained growth, driven by its multi brands and multi products segment, as exemplified by its reported turnover of H2583.06 Crores for the FY 2024-25. This strategic vision is substantiated by key focal points including strengthening production capacities in West Bengal, Punjab, Tamil Nadu and Uttar Pradesh, adapting product offerings to evolving market trends and consumer preferences, amplifying omni-channel capabilities, fostering sustainable growth for enduring stakeholder value, and diversifying the product portfolio to encompass womens wear and kids categories.

Our strengths Experienced leadership: With promoters bringing over six decades of expertise, Lux Industries has established itself as a leading innerwear brand. Rooted in innovation and strategic partnerships, the companys dedication to quality and expansion aligns with the promoters vision of offering affordable, high-quality products while ensuring eco-friendly processes that contribute to socio-economic development.

Strong brand equity: Lux Industries allocates around 8% of its turnover to brand investment, ensuring that all its products are marketed under the prominent Lux brand.

Product diversification: Lux boasts an extensive range of over 100+ products across 10+ strong brands, offering approximately 5000+ SKUs under its flagship brand. It caters to a wide range of market segments, from the mass market with Lux Venus and Lux Parker to the mid premium segment with Lux Cozi, Lux Nitro, Lyra and Pynk and the premium segment with ONN.

Robust distribution network: The Companys success is driven by a vast geographic reach and long-standing relationships with over

1170+ dealers, with impressively low churn rates. Lux is committed to expanding its presence through exclusive brand stores, increasing customer access. The company is enhancing its online presence through partnerships with major e-commerce platforms, ensuring the availability of its products even in remote areas, supporting continuous growth and market dominance.

Commitment to Sustainability: The Company prioritizes environmentally responsible manufacturing practices, implementing eco-friendly initiatives that reduce carbon footprint while ensuring ethical sourcing of materials. Lux remains dedicated to sustainable growth that aligns with global environmental standards.

Technological Advancements: Investments in automation and advanced manufacturing technology enable Lux Industries to maintain high-quality standards and optimize production e_iciency. The company also leverages data-driven strategies for market insights, improving customer engagement and overall business performance.

Customer-Centric Approach: Lux Industries places customer satisfaction at the heart of its operations. With continuous innovation in design, quality, and comfort, the company strives to meet evolving consumer preferences. It maintains feedback mechanisms and personalized services, ensuring that customer needs drive product development and service enhancements. Global reach: Lux Industries has a strong foothold in North, East, and West India, contributing to 76% of its turnover. The company has also made significant investments in information technology to optimize distribution and gain valuable market insights. Exports account for about 7% of the companys turnover, with key markets in the Middle East, Africa and South Asia.

Segment-wise performance: Disclosure of segment-wise performance reporting with details of all three verticals are provided in Note no. 33 to the Consolidated Financial Statements forming part of this annual report.

Our financial performance

*Includes Other Income

Key financial ratios and numbers

The Company during the period reported revenue increase of 11.4%. The EBITDA margins in FY25 stood at 10.16% compared to 9.14% over the same period in the previous year.

As of March 31, 2025, the Companys working capital cycle stood at 181 days as against 161 days in FY24. As of March 31, 2025, the Companys gross cash and cash equivalents stood at H29.02 Crores.

Detail of significant changes in key financial ratios: -

Debt Equity Ratio: The increase in the debt-equity ratio during the current period is primarily attributable to short term borrowings undertaken to augment enhanced working capital requirements. RONW (%): The improvement in RONW from 8.09% in the previous year to 9.6% in the current year is primarily due to a substantial increase in profit.

Internal control systems and their adequacy

Lux Industries has a robust internal control system to ensure e_icient, transparent and regulatory-compliant business processes. To achieve this, the Company has established well-defined procedures for procurement, IT controls, HR, finance and accounts, inventory management and logistics. Adequate digital capabilities, such as automation and data analytics, have been implemented to minimize manual interventions, reduce errors and increase transparency. Furthermore, Lux Industries ensures that its internal control system is adequate to manage risks associated with various business processes. This involves setting up adequate checks and balances, ensuring proper segregation of duties, and implementing regular audits and reviews to identify and mitigate potential risks. By establishing this robust internal control system, Lux Industries has achieved better accountability, compliance and e_iciency, contributing to improved financial performance and long-term success.

At Lux Industries, our employees are at the heart of everything we do. As an organization, we recognize that our strength lies in fostering a work environment that is inclusive, growth-oriented and aligned with the companys long-term vision. By prioritizing employee development, well-being and engagement, we create synergy between business excellence and individual aspirations.

Our Human Resource framework is designed to nurture talent, ensure equal opportunities, and enhance competitiveness, allowing employees to thrive professionally. We continuously strive to make Lux a place where people can bring their best selves to work, grow in their careers and feel valued.

In FY 2024-2025, we conducted development programs aimed at enhancing employee capabilities and creating a culture of continuous learning. Employee wellness remains a core focus, with various initiatives designed to enrich lives and strengthen the overall value proposition.

With a dedicated workforce of 4000+ employees as of March 31, 2025, our industrial relations remained highly positive across all manufacturing units, playing a crucial role in the companys sustained growth and operational e_iciency.

Cautionary statement

This statement made in this section describes the Companys objectives, projections, expectations and estimations which may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Forward–looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized by the Company. Actual results could differ materially from those expressed in the statement or implied due to the influence of external factors which are beyond the control of the Company. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent development, information or events.