M K Exim (India) Ltd Management Discussions

INTRODUCTION

Our Company M.K. Exim (India) Limited operates across two dynamic and essential sectors·Textiles and Fast-Moving Consumer Goods (FMCG)· each playing a critical role in our diversified business model. These sectors collectively cater to essential and lifestyle needs, serving a broad consumer base across domestic and international markets. The textile segment comprises manufacturing and distribution of fabrics, garments, and home textiles, while our FMCG division spans a diverse portfolio of everyday consumer products including personal care, hygiene, and food items.

In FY 2024-25, both sectors have witnessed a complex interplay of supply chain recalibration, evolving consumer preferences, sustainability imperatives, and digitization. The companys strategic focus remains on operational efficiency, innovation, sustainability, and expanding market presence across key geographies. With macroeconomic indicators showing signs of recovery and consumer sentiment improving, we are positioned to leverage sectoral growth trends while navigating emerging risks proactively.

OPPORTUNITIES

• Rising Consumer Demand in Emerging Markets

Urbanization, a growing middle class, and increasing disposable incomes in emerging economies are driving demand for both textiles and FMCG products. Our diversified portfolio positions us well to tap into these growth opportunities, particularly in South Asia, Africa, and parts of Southeast Asia.

• Digital and E-commerce Expansion

The digital transformation in retail and the growing penetration of e-commerce platforms present opportunities to directly reach consumers and enhance brand engagement. Investment in omni-channel strategies and digital marketing is expected to improve margins and customer loyalty.

• Sustainability and Ethical Consumption

The increasing global emphasis on eco-friendly and ethically produced goods has opened up new avenues for innovation in sustainable textiles and green FMCG products. Our commitment to sustainable sourcing and environmentally responsible practices strengthens our brand and aligns with evolving consumer values.

• Government Initiatives and Export Incentives

Policy support in the form of Production-Linked Incentives (PLI), export incentives, and reduced compliance burdens·particularly in India and other Asian manufacturing hubs·offers financial and operational advantages for scaling textile and FMCG operations.

• Innovation and Product Diversification

Continuous innovation in functional textiles, health and hygiene FMCG segments, and premium product lines provides room for diversification and premiumization, supporting higher margins and competitive differentiation.

THREATS

• Volatile Raw Material Prices

Fluctuations in the prices of key raw materials such as cotton, synthetic fibers, and packaging materials can adversely impact input costs, thereby affecting profitability in both textile and FMCG divisions.

• Geopolitical and Trade Uncertainties

Tensions in global trade dynamics, changes in tariff structures, and disruptions in international shipping channels pose a risk to export-driven business lines and raw material imports.

• Intense Market Competition

Both sectors are characterized by high competition, with global and local players vying for market share. Aggressive pricing, innovation races, and marketing wars require continual investment in brand building and R&D.

• Regulatory Compliance and ESG Pressures

Increasing regulatory requirements in areas such as labor, environment, and product safety·especially for exports·demand rigorous compliance, which may raise operational costs and complexity.

• Climate Change and Supply Chain Disruptions

Extreme weather events and disruptions in global supply chains, especially in textile manufacturing clusters, have highlighted vulnerabilities in sourcing and logistics that require adaptive strategies.

FINANCIAL PERFORMANCE OVERVIEW

During the Financial Year ended March 31, 2025, your Company demonstrated resilient performance amid a complex macroeconomic landscape marked by inflationary pressures, fluctuating raw material costs, and evolving consumer behavior. Despite these challenges, we maintained a balanced trajectory across both the Textile and FMCG segments, leveraging operational efficiencies, strategic cost management, and innovation-led product initiatives.

Key Financial Highlights:

(Rs in Lakhs)

During the year, the Company has achieved a total turnover of Rs 9,494.93 Lakhs and earns profit before Tax [PBT] of Rs 2,460.88 Lakhs and profit after taxes of Rs 1,798.71 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:

INDUSTRY OVERVIEW

Textile Industry

The Indian textile sector boasts a rich heritage, deeply intertwined with the countrys cultural identity. The industry extends far beyond just vibrant silks and intricate weaves. Indias textile industry stands as a cornerstone of its manufacturing sector, contributing approximately 2.3% to the nations GDP, 13% to industrial production, and 12% to exports. As of 2025, the sector is poised for significant growth, with projections indicating a market value reaching $350 billion by 2030, driven by robust domestic demand and expanding global market share.

Indias textile exports have witnessed a substantial uptick, with apparel exports increasing by 11.3% year-on-year in May 2025. This growth is attributed to a strategic shift by Western buyers seeking alternatives to traditional sourcing countries like China and Bangladesh. Indias reputation for quality, coupled with its competitive manufacturing costs, positions it as a preferred sourcing destination.

The industry is embracing digital transformation through the adoption of automation, artificial intelligence (AI), and the Internet of Things (IoT). These technologies are enhancing production efficiency, quality control, and supply chain management. Additionally, the integration of smart textiles and digital printing methods is gaining momentum, aligning with global trends towards sustainability and innovation.

Sustainability is becoming a central focus, with manufacturers adopting eco-friendly practices such as waterless dyeing, recycling, and the use of organic and recycled materials. The governments support for circular fashion initiatives and the promotion of Geographical Indication (GI)-tagged products further reinforces Indias commitment to sustainable practices.

Challenges:

• Raw Material Price Volatility

Fluctuations in the prices of key raw materials, particularly cotton and synthetic fibre, pose challenges to cost stability. The governments introduction of Quality Control Orders (QCO) has impacted the availability of certain materials, necessitating strategic sourcing and inventory management practices.

• Labor and Skill Development

Despite a large workforce, there is a shortage of skilled labor in advanced textile manufacturing processes. Initiatives like the SAMARTH Scheme aim to address this gap by providing training and capacity-building programs, ensuring a workforce equipped to meet modern industry demands.

• Infrastructure and Supply Chain Efficiency

The fragmented nature of the industry, with over 80% of units being micro, small, and medium enterprises (MSMEs), leads to challenges in scalability and competitiveness. The establishment of MITRA parks is a strategic move to consolidate production units, improve infrastructure, and enhance supply chain efficiency.

• Environmental Compliance and Global Standards

Adherence to stringent environmental regulations is crucial. The adoption of zero-liquid discharge (ZLD) systems, renewable energy sources, and compliance with global certifications like GOTS and OEKO-TEX are essential steps towards meeting international sustainability standards.

Government Initiatives and Policy Support:

The Indian government has introduced several initiatives to bolster the textile sector:

• Production Linked Incentive (PLI) Scheme: Allocated Rs 10,683 crore to enhance the production of man-made fibre (MMF) apparel and technical textiles, attracting investments and fostering innovation.

• Mega Integrated Textile Region and Apparel (MITRA) Parks: Establishment of seven integrated textile parks to provide world-class infrastructure, streamline production processes, and reduce logistics costs.

• Amended Technology Upgradation Fund Scheme (ATUFS): Provision of Rs 900 crore to encourage modernization and technological advancements in textile units.

The Indian textile industry is on a growth trajectory, supported by favorable government policies, technological advancements, and a focus on sustainability. To capitalize on these opportunities, the following strategic initiatives are recommended:

• Enhance Technological Integration: Invest in advanced manufacturing technologies and digital platforms to improve efficiency and product quality.

• Strengthen Skill Development Programs: Expand training initiatives to bridge the skill gap and ensure a workforce adept in modern textile manufacturing techniques.

• Optimize Supply Chain Management: Leverage data analytics and automation to streamline supply chains, reduce lead times, and mitigate risks associated with raw material price volatility.

• Commit to Sustainable Practices: Adopt circular economy principles, invest in renewable energy, and pursue certifications to meet global environmental standards.

By focusing on these strategic areas, the Indian textile industry can strengthen its position as a global leader, driving economic growth and sustainable development.

Fast-Moving Consumer Goods (FMCG) Sector

M.K. Exim (India) Limited is part of the Fast-Moving Consumer Goods (FMCG) sector in India which remains a cornerstone of the economy, contributing significantly to GDP and employment. In F.Y. 25, the industry is projected to reach USD 1,108.48 billion by 2033, with a compound annual growth rate (CAGR) of 17.33% from 2025 to 2033. This growth is driven by evolving consumer preferences, digital transformation, and strategic shifts toward premiumization.

Rural markets, accounting for 35-40% of FMCG sales, are experiencing robust growth. In Q4 FY 24, rural consumption rose by 7.6%, surpassing urban growth of 5.7%. This resurgence is attributed to improved agricultural productivity and increased disposable income, bolstered by government welfare schemes. E-commerce has become a significant sales channel, contributing approximately 8% to total FMCG sales, with expectations to rise to 15% by 2025. Quick commerce platforms are redefining consumer expectations with rapid delivery models. Companies are leveraging AI and data analytics to optimize supply chains and personalize marketing strategies. There is a discernible shift towards premium and health-focused products. Categories such as organic skincare, immunity-boosting foods, and ready-to-eat meals are gaining traction. The health and wellness food market are projected to reach Rs 1.5 trillion by 2025. Urban lifestyles are driving demand for convenience-oriented products.

Challenges and Strategic Considerations:

• Inflation and Input Cost Pressures

Rising raw material costs, including crude oil, palm oil, and sugar, are impacting production expenses. Companies face the challenge of balancing price adjustments with maintaining consumer demand. Strategies such as shrinkflation·reducing product sizes while maintaining prices·are being employed cautiously to preserve margins without alienating price-sensitive consumers.

• Urban Market Dynamics

While rural markets show strong growth, urban consumption remains subdued due to factors like inflation and reduced disposable incomes. Companies are focusing on premium offerings to stimulate demand in urban areas, targeting consumers seeking quality and convenience despite economic pressures.

• Competitive Landscape and Channel Conflicts

The rise of direct-to-consumer (D2C) brands and digital-first platforms is intensifying competition. Traditional distributors are experiencing friction as eB2B and quick commerce models gain prominence. Companies must navigate these dynamics to maintain effective distribution channels and market share .

Outlook and Strategic Focus:

The FMCG sector in FY25 presents a landscape of both opportunities and challenges. Key strategies for growth include:

• Enhancing Rural Penetration: Expanding reach in rural and semi-urban markets through targeted marketing and distribution strategies.

• Leveraging Digital Platforms: Investing in e-commerce and quick commerce channels to meet the demand for convenience and instant delivery.

• Focusing on Premiumization: Developing and promoting premium products that cater to health-conscious and affluent consumers.

• Optimizing Supply Chains: Utilizing AI and data analytics to streamline operations and respond agilely to market changes.

By aligning with these trends and addressing emerging challenges, companies can position themselves for sustained growth in the evolving FMCG landscape.

We are growing our core business by investing in our purposeful brands and delivering superior products. We have a long-standing relationship with our customers that is 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 has always been to ensure that our brands are easily available wherever shoppers choose to shop. As the customer landscape continues to evolve, we have been taking several steps to ensure that our partners and distributors remain future-fit. Our performance in a challenging environment, 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. Our Hair Care and personal care division is performing well on a strong base comparator. Our dynamic financial management, a strong savings programme and calibrated pricing actions has always helped us in protecting our business model against rising input costs.

RISK MANAGEMENT

The Company has implemented a robust and well-defined process for conducting comprehensive risk assessments, mitigating potential risks and managing any identified risks. To ensure continuous improvement and alignment with organisational goals, periodic reviews are conducted by the Risk Management Committee with the utmost confidence and thereafter laid before the Board for its review. Risk management is an integral part of Companys strategy and for 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. We have a risk management framework detailing the internal controls placed in responsible for managing 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 identified.

Our business impacted due to Israel-Palestine conflict. Many retailers/importers in Gulf countries (UAE, Saudi Arabia, etc.) became cautious with procurement due to: Fear of war spillover, Unstable local economies due to rising defense budgets and oil market fluctuations. Boycotts of Israeli- linked goods or companies perceived as supporting either side affected bilateral trade and even neutral exporters. Middle Eastern customs authorities increase scrutiny on shipments from or associated with certain entities.

Indian businesses exporting to the Middle East faced - Logistics and Shipping Delays (UAE ports remain operational, but shipping lines have rerouted vessels. As a result, Shipping costs up 30-50%, delivery times delayed by 7-14 days on some routes. Less container availability and higher freight insurance costs, especially if using routes near conflict zones. Cancellations / Postponements of orders, Cost escalations due to freight, warehousing, and insurance issues, Risk of reputational damage if associated with controversial markets or clients.

HUMAN RESOURCE

Human resource management is an essential foundation for an organisations success. Human capital management is crucial in defining organisational culture, performance and growth trajectories within the complexity of corporate undertakings. In line with this belief, the Company invests in its human capital, enhancing its capacity, honing its skills and fostering a leadership culture, all of which combine to position our Company as a hub for learning and delivery. The Companys Industrial relations at all the levels remained cordial throughout the year. The Company provides to its employees favorable work environment conducive to good performance with customer focus while adhering to quality and integrity.

INTERNAL CONTROL AND ITS ADEQUACY

The Company acknowledges the fundamental importance of robust control mechanisms within the organisation. Consequently, it maintains a comprehensive framework of established policies and procedures to oversee internal operations and activities. The Company remains committed to integrating all components of its operations, spanning strategic support functions such as finance, human resources and regulatory compliance to core operational domains, including research, manufacturing and supply chain management.

The Company has adequate system of Internal Controls to ensure that the resources of the Company are used efficiently and effectively, all assets are 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. To reinforce its internal oversight mechanisms, the Company consistently strengthens its internal audit function in consultation with statutory auditors on quarterly basis, focusing on statutory compliance and operational efficacy. The Company adheres rigorously to standardised practices in its manufacturing and operational endeavours. The appointment of independent agencies as internal auditors ensures impartial assessment and evaluation of internal controls.

The primary objective of this audit initiative is to assess the adequacy and efficacy of all internal control systems while proactively recommending enhancements. Significant findings and concerns are promptly escalated to the audit committee for periodic review and strategic intervention.

CAUTIONARY STATEMENT

Statements in this Management Discussion 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.