M K Exim (India) Ltd Management Discussions

Indias textile sector, renowned for its heritage and skilled workforce, remains a crucial driver of the Nations economy. While a dip in exports was seen in FY24 due to global factors, having said that, the industry is poised for growth in CY25 due to a strong domestic market, potential export rebounds, and lower cotton prices. Sustainability is a growing focus, with manufacturers embracing ecofriendly materials and cleaner processes. Technological advancements in areas like digital printing and supply chain management are also propelling the sector forward. Additionally, recent FTAs like the one with EFTA and potential deals with the UK and Canada offer promising avenues for export growth.

India has a 4.6% share of the global trade in textiles and apparel. Moreover, India is the worlds 3rd largest exporter of Textiles and

Apparels worldwide, after Germany and China. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$ 65 billion by FY 2026. Additionally, the industry stands to benefit from global demand diversification away from China. The Indian Technical Textile market has a huge potential of a 10% growth rate, increased penetration level of 9-10% and is the 5th largest technical textiles market in the world. Indias Spartech industry is estimated around US$ 1.17 million in 2022-23. The global textile market is poised for steady growth between CY2023 and CY2027, driven by several key factors. Despite facing challenges during the COVID-19 pandemic, the industry rebounded in CY2021 and continued its upward trajectory in CY2022 and CY2023. Anticipated growth is fueled by increasing demand for apparel, particularly from the fashion sector, along with the expanding influence of e-commerce platforms. Moreover, the enduring popularity of cotton, valued for its strength, absorbency, and color retention, is expected to sustain its dominance in the market. Similarly, man-made textiles are set to maintain their significant market share, supported by factors such as easy access to raw materials, population growth, and the evolving preferences for varied textile textures and designs.

OPPORTUNITIES AND THREATS

Indias textile sector thrives on a strong foundation of resources and a growing domestic market. The abundant availability of raw materials like cotton and jute, along with a complete textile value chain, makes India a major player. A large, skilled workforce keeps production costs competitive, and rising disposable incomes within the country fuel demand for textiles. Government initiatives promoting technical textiles for new applications further diversify and strengthen this key driver of the Indian economy. India, as a major player in the global textile market, stands to benefit from increasing globalization and cross-border trade agreements, which provide expanded market access for its textile products. Additionally, the rising per capita income in India and globally suggests a growing domestic and international demand for textiles and apparel. Also, Indias consumer base and demand are set to strengthen further due to factors like a growing population, rising urbanization, and a youthful demographic profile. Also, Indias urban population is expected to continue to rise on the back of economic growth. The share of urban population is projected to increase to nearly 40% by 2030, according to a UN report on urbanization. could impact the companys business operations and financial performance.Itiscrucialtoaddressseveralsignificant

Geopolitical tensions, including trade wars between major economies and restrictive trade policies, pose substantial threats, potentially disrupting supply chains and market access. Sharp fluctuations in currency exchange rates further exacerbate these challenges, creating an unpredictable business environment. Additionally, persistent inflation, driven by rising commodity prices, is expected to exert pressure on profit margins. This inflationary trend could also lead to reduced purchasing power among consumers, resulting in notable shifts in consumer behavior that might negatively affect the textile market. Furthermore, the volatility in raw material prices adds another layer of threat, potentially impacting production costs and overall profitability. Your Company remains vigilant and proactive in mitigating these threats through strategic planning and robust risk management practices.

Despite significant threats your Company delivered strong performance in the previous year across businesses. The Company does not anticipate any challenges in its ability to continue as going concern or meeting its financial obligations.

1. Financial Performance

The following are relevant financial performance details with respect to the operational performance of the Company. Salient features relating to the Profit & Loss Account:

( In Lakhs)

Particulars	Year ended 31.03.24
Revenue from Operations	9,237.75
Other Income	195.38
Total Income	9,433.13
Profit Before Financial expenses & Depreciation	2,146.41
Less: Depreciation & Amortization Expenses	57.97
Less: Finance Costs	24.57
Profit before tax	2,063.87
Taxation	532.07
Profit after tax	1,531.80

During the year the Company has achieved a total turnover of 9,433.13 Lakhs and earns profit before Tax [PBT] of 2,063.87 Lakhs and profit after taxes of 1,531.80 Lakhs. The Segment wise performance has been given in financial statements in the Report. The report of the Board of Directors may be referred to for financial performance.

KEY RATIOS:

Particulars	As at March 31, 2024	As at March 31, 2023	% change from March 31, 2023 to March 31, 2024
Current Ratio	36.63	6.32	479.88
Debt-Equity Ratio	0.01	0.03	(78.61)
Debt Service Coverage Ratio	28.92	8.87	225.96
Return on Equity Ratio	19.94%	27.52%	(27.54)
Inventory turnover ratio	12.00	9.28	29.33
Trade Receivables turnover ratio	4.72	5.38	(12.28)
Trade payables turnover ratio	49.36	30.19	63.49
Net capital turnover ratio	1.32	1.80	(26.82)
Net profit ratio	0.17	0.16	5.06
Return on Capital employed	0.25	0.31	(21.76)
Return on investment	-	0.05	(100.00)

Outlook Textile Industry

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, with the capital-intensive sophisticated mills sector at the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of fiber/ yarns from natural fibers like cotton, jute, silk and wool, to synthetic/man-made polyester fiberslike , viscose, nylon and acrylic.

The decentralized power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. Indias textiles industry has a capacity to produce a wide variety of products suitable for different market segments, both within India and across the world.

Indias textiles industry has around 4.5 Crore employed workers including 35.22 lakhs handloom workers across the country. Exports for 247 technical textile items stood at Rs. 5,946 crore (US$715.48 million) between April-June (2023-24).

After agriculture, textile in India is the largest industry which generates the highest employment, both skilled and unskilled. The sector contributes ~5% to the countrys GDP, 7% of industry output in value terms and 12% of the countrys export earnings. India is the 6th largest exporter of textiles and apparel in the world. These points to one reality... the textile industry is critical for Indias growth. The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190 billion by 2025-26. India has a 4% share of the global trade in textiles and apparel.

Challenges: There appears to be a considerable promise for the sustained growth of the sector owing to a plethora of opportunities on the horizon. Likewise, there are challenges too. They are:

The huge spike in raw cotton prices could dent Indias competitiveness in the global market despite being the largest producer of cotton in the world

Lack of scale and restricted access to key markets.

The Amended Technical Upgradation Funds (ATUF) scheme, which provides a capital investment subsidy of 10-15% to textile manufacturers, is about to expire. The industry does not have any clarity on the possibility of its extension

In the fiscal year 2023-24, exports amounted to $34.4 billion, marking a decline of over $1 billion (3%) compared to the previous fiscal 16.3% compared to the fiscal year 2021-22, when the country reported exports year.Additionally,exportssawasignificant worth $41 billion Read more at:

Government impetus: The Government is aware of the position of the textile industry and the promise it affords in accelerating the wheels of the economy. It has made important announcements that can draw considerable investments in this sector.

Government allowed 100% FDI in textiles under automatic route.

The Government of India has introduced various schemes for modernization and infrastructure development. Additionally, budget allocation to the Ministry of Textiles for fiscal 2025 has been raised by about 28%, amounting to 44 billion. The government has also launched initiatives like The Scheme for Capacity Building in Textiles Sector (SAMARTH) and Free Trade Agreement to enhance the textile sectors economies of scale, export potential, and competitiveness.

1. The Scheme for Capacity Building in Textiles Sector (SAMARTH) is dedicated to enhancing the skills of the workforce in the textile industry. Implemented through a network of Implementing Partners comprising Textile Industry/Industry Associations, State Government agencies, and Sectoral Organizations of the Ministry of Textiles, SAMARTH aims to empower individuals with the necessary skills and knowledge to thrive in the evolving textile landscape.

2. Free Trade Agreement: Opportunity in European Union (EU) India seeking Free trade agreement (FTA) with EU, combined with the possibility that Bangladesh could lose Most favoured-nation (MFN) status after graduating from LDC (Least developed

Countries) in 2026, which could lead to an increase in exports from India to EU.

India is working on getting an FTA with both the United Kingdom (UK) and European Union (EU). However, the FTA between

Vietnam and the EU, which went into effect in August 2020, has strengthened Vietnams position in the EU market and may prove to be a competitive barrier for Indian exports in the EU region.

FMCG

M.K. Exim (India) Limited is part of the Fast-Moving Consumer Goods (FMCG) industry which continues to be one of the biggest long-term sustainable business opportunities that our country offers. Despite being one of the fastest growing markets globally for FMCG products, Indias per capita FMCG consumption is still amongst the lowest in the world. Rural markets account for more than 60% of for growth. Rising ourcountrys population and contribute to justabout30% offeringsignificant FMCGconsumption;thus, affluence, large working population, nuclear family structures, urbanization and rapidly increasing adoption of technology will positively impact the growth of FMCG industry in the country. The operating environment this year continued to remain volatile and challenging.

India witnessed a devastating second wave of Covid-19 duringtheyear2019to2022with significanthumanitarian and economic impact. Due to the disruption in global supply chains, inflation in many key commodities like crude oil derivatives and packaging rose to historic highs. The latter half of the year witnessed a marked moderation in the FMCG market growth with volumes being impacted due to high inflation. As we gradually emerged from the challenging phase of the pandemic, the consumption of hygiene products moderated. Consumers are also increasingly choosing brands which they see as making a positive impact on the world. India is undergoing rapid digital transformation, new-age technologies are transforming the landscape of consumer goods market, bringing opportunities for brands, consumers, and customers alike. E-Commerce continues to gain traction as more consumers shop online and with more digital-first brands entering the market. With a technology-focused approach, retailers are reinventing their business models to stay more connected in the digital world. The two years of pandemic and Russia and Ukrain war has made us a stronger, better business which is much more resilient and responsive. As the economy, consumer and channel landscapes rapidly evolve, we continue to be agile to leverage our strengths, capture opportunities and navigate through the challenges. Our strategy is constantly evolving in line with the trends and forces shaping our markets and impacting our multi-stakeholders We remain committed to delivering 4G growth - growth that is consistent, competitive, profitable, and responsible.

We are growing our core business by investing in our purposeful brands and delivering superior products. India is a diverse country

- with different climatic conditions, varied skin and hair types and even differing philosophy of designing for India and Winning in Many Indias (WiMI).

We have a long-standing relationship with our customers that are based on trust and mutuality of interest. We continue to work with all our partners to serve the evolving needs of our shoppers Our Endeavour is and has always been to ensure that our brands are easily available wherever shoppers choose to shop. Partnering for growth: As the customer landscape continues to evolve, we have been taking several steps to ensure that our partners and distributors remain future-fit. challenging with continued pressure from Covid-19 and unprecedented cost inflation.Thisfinancial As global supply chains were disrupted, firstly, due to the pandemic and then later due to the geopolitical crisis, inflation commodities like crude oil derivatives, vegetable oils, packaging, etc. rose to historic highs resulting in significant High inflation also resulted in a marked moderation in FMCG market growth with volumes declining in second half of the year.

Our performance in a challenging environment, we have shown resilience and agility to deliver strong all-round performance. We have gained market shares in all our divisions, across price segments and across regions. In Hair Care and personal care division performing well on a strong base comparator. Our dynamic financialmanagement, a strong savings programme and calibrated pricing actions helped protect our business model against rising input costs.

Risks and Concerns

Risk management is integral to your Companys strategy and to the achievement of Companys long-term goals. Our success as an organization depends on our ability to identify and leverage the opportunities generated by our business and the markets we operate in. In doing this we take an embedded approach to risk management which puts risk and opportunity assessment at the core of the Boards agenda, which is where we believe it should be. Companys appetite for risk is driven by the following: • Our and responsible; Our actions on issues such as plastic and climate change growthshouldbe consistent,competitive,profitable, must reflect their urgency, and not be constrained by the uncertainty of potential impacts; Our behaviours must be in line with our Code of Business Principles (Code) and Code Policies; Our ambition to continuously improve our operational efficiency and effectiveness. Our approach to risk management is designed to provide reasonable, but not absolute, assurance that our assets are safeguarded, the risks facing the business are being assessed and mitigated and all information that may be required to be disclosed is reported to Senior Management and Board & Board Committees including, where appropriate, the Chief Executive Officer and

Managing Director, Audit Committee. For each of our principal risks we have a risk management framework detailing the internal controls we have in place and who is responsible for managing both the overall risk and the individual controls mitigating that risk.

Our assessment of risk considers short and long term as well as internal and external risks including financial, operational, sectoral, sustainability (particularly Environment, Social and Governance related risks), information, legal & compliance and any other risks as may be determined by the Company Leadership teams.

The both textile and FMCG industries are facing the issues of lack of skilled labour, inflexible labour laws, lack of modernization and infrastructure bottlenecks. Due to fragmented nature of the industry, there are higher logistic costs, higher lead time and lack of

56 economies of scale. Also, global volatility can put any business to the risk of unforeseen inflationary pressures and affect demand for its products. Disturbances in geopolitics can affect the operation of supply chains and cost of other factors of production. Your company has a systematic process of material procurement and has a robust framework for continuous monitoring, identification and redressal to meet unforeseen challenges.

Human Capital

The Companys Industrial relations at all the levels remained cordial throughout the year. The Company provides to its employees favourable work environment conducive to good performance with customer focus while adhering to quality and integrity.

Internal Control Systems and their adequacy

The Companys internal control systems and procedures commensurate with the size and nature of its operations. The Company has adequate system of Internal Controls to ensure that the resources of the Company are used efficiently and effectively, all assets safeguarded and protected against loss from unauthorized use and the transactions are authorized, recorded and reported correctly.

Financial and other data are reliable for preparing financial information and other data and for maintaining accountability of assets. The management periodically reviews the internal control systems and procedures for efficient conduct of the Companys business.

Internal Audit is conducted by independent Chartered Accountants, on quarterly basis. To maintain its objectivity and independence, the Internal Auditors report directly to the Audit Committee of the Board. The Audit Committee reviews the Internal Audit Reports required, the corrective actions are taken and the controls strengthened. The and

Company maintains a system of well-established policies and procedures for internal control of operations and activities. The

Company continuously strives to integrate the entire organization - from strategic support functions like finance, and regulatory affairs to core operations like research, manufacturing and supply chain management. The internal audit function is further strengthened in consultation with statutory auditors for monitoring statutory and operational issues. The Company adheres to standard operating practices in its manufacturing and operating activities. The Company has appointed independent agencies as internal auditors The prime objective of this audit is to test the adequacy and effectiveness of all internal control systems and suggest improvements. Significant issues are brought to the attention of the audit committee for periodical review.

Cautionary Statement

Statements in this Management Discussions and Analysis Report describing the Company objectives, projections, estimates, expectations or predictions may be ‘forward looking statements within the meaning of applicable security laws or regulations.

These statements are based on reasonable assumptions and expectations of future events. Actual results could however, differ materially from those expressed or implied. Factors that could make a difference to the Companys operations include market price both domestic and overseas availability and cost of raw materials, change in Government regulations and tax structure, economic conditions affecting demand / supplies and other factors over which the Company does not have any control. The Company takes no responsibility for any consequence of decisions made based on such statements and holds no obligation to update these in future. Important factors such as economic developments within the country, demand and supply conditions of the industry, input prices, changes in Government regulations, tax laws and other factors such as litigation and industrial relations, influence the Companys operations. This may lead to the Companys projections and approximate estimates to dispose them as "forward looking statements".

Though, these qualitative aspects are usually set in the framework meaning of applicable securities laws and regulations. The actual results may sometimes materially differ from those expressed or implied.