Mafatlal Industries Ltd Management Discussions

ANNEXURE I TO DIRECTORS REPORT

OVERVIEW OF THE ECONOMY

The global economy entered 2025-26 amid signs of cautious stabilization. However, shiftssector, continues in trade policy during the year, particularly the tariff actions initiated by the United States, continued to influence growth expectations, trade flows and business sentiment across major economies. After witnessing higher trade barriers during the year, the global economy faced a major challenge with the outbreak of war in the Middle East by the end of the year. Absent the war, the headwinds faced by emerging economies from shifting trade policies were being offset by technology-led investment, fiscal and monetary support, accommodative financial conditions and private sector adaptability.

In its April 2026 World Economic Outlook Update, the International Monetary Fund (IMF) projected global growth at 3.1% in 2026 and 3.2% in 2027 considering the impact of Middle East conflict on commodity markets, inflation expectations, and financial conditions.

According to the IMF, the conflict in the Middle East has a varied impact on growth given differential exposure through geographic proximity, financial flows, remittances, and energy dependencies. Overall, it has a larger net impact on growth in emerging market and developing economies compared with advanced economies.

Notably, Indias growth forecast has been revised upward by the IMF to 6.5%, led by positive contributionsposition in global trade. India is from the carryover of the strong 2025 outturn and the decline in additional US tariffs on Indian goods from 50% to 10%, which outweigh the adverse impact of the Middle East conflict. Growth for 2027 is projected to stay at 6.5%.

India remained among the fastest-growing major economies in 2025-26, supported by public capex, manufacturing policy support, digital adoption and sustained emphasis on welfare-led delivery. Real GDP growth for the year has been estimated at 7.4% in the Economic Survey 2025-26, while the Second Advance Estimates released by Ministry of Statistics and Programme Implementation (MoSPI) in February 2026 revised 2025-26 growth upward to 7.6%.

OVERVIEW OF THE SECTOR AND OPPORTUNITIES

The Indian textile and apparel industry, one of the countrys oldest and most significant to play a pivotal role in the national economy, contributing meaningfully to GDP, industrial output, exports, and employment generation. The sector has established a strong presence across the entire value chain, spanning fibre and yarn to fabric and garments, and is supported by a diversified base that includes traditional textiles, apparel, technical textiles, and handicrafts.

The industry contributes approximately 2.3% to Indias GDP, 13% to industrial production, and 12% to total exports, while accounting for nearly 9% of employment across major industries. As the second-largest employer after agriculture, the sector provides direct employment to more than 45 Million people and supports the livelihoods of over 100 Million people indirectly.

Within the broader textile industry, the uniform and institutional apparel segment remains a key growth driver, supported by large-scale government procurement of school uniforms and the expanding corporate and industrial workwear market. Indias large student base of more than 250 Million and the increasing formalization of the workforce continue to provide strong and sustained demand visibility.

Beyond its domestic significance, the sector also retained a significant the sixth-largest exporter of textiles and apparel, with a ~4.1% share in global trade. Despite a challenging global environment, textile and apparel exports rose to about USD 37.8 Billion in 2024-25, registering ~5% growth. In parallel, the Governments focus on expanding bilateral and free trade agreements with advanced economies is expected to create substantial new opportunities. The digital infrastructure segment is also gaining increasing relevance within the public education and skill development ecosystem, supported by the growing integration of technology into learning delivery and school administration. This transition is supported by sustained government focus and budgetary allocation.

Key allocations toward welfare schemes under Union Budget 2026-27:

- Go vernment initiatives continue to the textile sector, the Union Budget 2026-27 reaffirmed this commitment with an allocation of

5,279 Crores for the Ministry of Textiles

- The Budget provides approximately Rs. 1.39 Lakh Crores for education (up ~8% year-on-year), including Rs. 83,562 Crores for school education and Rs. 55,727 Crores for higher education

- The allocation toward school education a focused allocation for key schemes such as Samagra Shiksha ( 42,100 Crores allocation) and PM SHRI ( 7,500 Crores allocation) to support the digitisation, capability building and focused implementation of NEP 2020

- The allocation toward higher education includes specific allocation for Digital India e-learning with an allocation of Rs. 670 Crores mainly toward education through ICT (Information and Communication Technology)

COMPANY OVERVIEW

Mafatlal Industries Limited is one of Indias most enduring and trusted names in textiles, with a distinguished legacy of over 121 years. Over the decades, therevenue growth of 37.14%, driven by the Company has built a strong reputation founded on trust, quality, excellence, and long-standing relationships with customers, vendors, and other stakeholders.

Today, MIL operates across three business segments: textile and related products, digital infrastructure, and consumer durables and others.

Over the past several years, the Company has evolved from a predominantly textile-led enterprise into a diversified, customer-centric, and product-agnostic institution, serving consumers across all stages of life. This transformation, supported by deep market understanding, operational agility, and responsiveness, enables MIL to effectively cater to a wide range of market segments. Backed by a robust pan-India supply chain, the Company is well-positioned to meet the evolving needs of Indias rapidly expanding middle-income consumer base.

MILs distribution network is strategically structured across three key channels:

Dealer and Distributor Network: Serving the apparel needs of retail consumers and providing uniforms to students, workers and blue-collar professionals also

Dir ect-to-Business Channel: Catering to corporate demand for uniforms, workwear, and specialized clothing solutions

Go vernment and Institutional Procurement:

Supplying clothing, livelihood essentials, uniforms, personal hygiene products, and EdTech infrastructure and services for various state governments and public sector initiatives During the year under review, the Company recorded significant successful execution of large-scale public procurement orders, continued strengthening of its leadership in the uniform segment, expansion of its product portfolio, and further enhancement of its nationwide supply chain capabilities.

PERFORMANCE REVIEW

The Company recorded total income of Rs. 3,902.15 Crores in 2025-26, a 37.14% increase over Rs. 2,845.30 Crores in 2024-25. EBITDA for the year stood at Rs. 124.85 Crores, compared to Rs. 106.53 Crores in 2024-25.

REVENUE FROM OPERATIONS AND OTHER INCOME

The Company recorded a 37.87% increase in revenue from operations in 2025-26 compared to 2024-25. Similar to 2024-25, the year reflects a more broad-based expansion across textiles, digital infrastructure, and consumer durables, supported by improved order pipeline visibility and deeper institutional participation.

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA)

The Company reported EBITDA of Rs. 124.85 Crores in 2025-26, compared to Rs. 106.53 Crores in 2024-25. The improvement reflects operating leverage driven by product mix, higher institutional order volumes and continued focus on cost optimization.

PROFIT BEFORE TAX (PBT)

The Company reported PBT of Rs. 96.70 Crores in 2025-26, 29.73% change over Rs. 74.54 Crores in 2024-25. The movement reflects the combined effect of revenue growth, operating performance and lower finance costs arising from continued debt reduction.

DEBT MANAGEMENT

Long-term borrowings have declined from Rs. 82.28 Crores in 2020-21 to Rs. 39.87 Crores in 2025-26, in line with the Companys asset-light business model. During 2025-26, the Company repaid Rs. 14.26 Crores of long-term borrowings in line with its scheduled commitments. Short-term borrowings stood at

20.90 Crores, maintained at levels commensurate with working capital requirements for large-scale executions.

FINANCE COST

Finance costs for 2025-26 stood at Rs. 8.65 Crores, compared to Rs. 10.96 Crores in 2024-25. The movement reflects the continued reduction in long-term debt outstanding and optimized utilization of working-capital facilities through the year.

DEPRECIATION

Depreciation and amortisation expense for 2025-26 stood at Rs. 16.63 Crores, compared to Rs. 15.03 Crores in 2024-25. The movement in depreciation is mainly driven by investments in information technology-based (software and applications) intangible assets.

RISK AND CONCERNS

The evolving business landscape requires the Company to continuously review and to ensure long-term resilience and sustainability. In response to this dynamic environment, the Company remains focused on strengthening its risk management practices to effectively anticipate, assess, and mitigate key business risks.

The Companys risk management strategy enables the timely identification and evaluation of emerging and existing risks, supported by appropriate mitigation measures. This approach is underpinned by strong governance mechanisms, a well-defined delegation of authority, established standard operating procedures, and robust management information systems, which together facilitate effective oversight, operational discipline, and informed decision-making across the organization.

OVERVIEW OF SEGMENT-WISE PERFORMANCE

MIL has a diversified presence across segments including textiles and related products, digital infrastructure, and consumer durables and others. With these segments, the Company is serving four primary consumer segments: school children, workers and blue-collar professionals, low-income households, and aspiring retail consumers.

Textiles and Related Products

Building on its longstanding textile legacy, the Company continues to play an important role in serving the fabric and apparel requirements of public and private institutions, public purchasing as well as select retail-linked markets. Its portfolio includes school and corporate uniforms, shirting, and suiting fabrics, rubia and white woven fabrics, and a growing range of health and hygiene products including sanitary napkins, baby diapers, adult diapers, medical disposables and non-woven hygiene products.

Along with a distribution network of over 1,000 dealers across India, the Company has widened its institutional buyers umbrella spanning over aviation, hospitality, automobiles, construction, pharmaceuticals, petroleum, security services, and healthcare.

The textile segment reported revenue of Rs. 1,494.18 Crores in 2025-26 with year-on-year growth of 22.73%, and EBIT its strategic approach of Rs. 75.74 Crores in 2025-26 with year-on-year growth of 29.87%. The revenue and EBIT expansion for the Company is backed by a sustained position as a trusted uniform and workwear partner across organized industry.

Digital Infrastructure

The Company is broadening its presence in the digital infrastructure business and has now transitioned from a mere hardware-only supplier to an integrated solution provider, offering complete solutions equipped with

AI-enabled interactive software and applications for establishing digital classrooms, STEM labs, robotic labs and ICT infrastructure along with after-sales service support.

During the year, Company further strengthened its presence in the segment by enabling 847 classrooms across the states of Tripura and Odisha with its software, services and hardware solutions. Digital Infrastructure segment reported revenue of Rs. 62.34 Crores in 2025-26 with EBIT of Rs. 6.29 Crores.

Consumer Durables and Others

Consumer Durables segment for the Company is guided by its participation in various public-welfare schemes related procurement activities which enhances quality of life for low-income households across the nation. The Company has a well-established large supply chain network established across the country which supports the execution at a scale. Consumer Durables segment reported revenue of Rs. 2,313.92 Crores in 2025-26 with EBIT of Rs. 32.44 Crores.

INTERNAL FINANCIAL CONTROLS AND SYSTEMS

The Company has a well-established framework of

Internal Financial Controls (IFCs), which are adequate and commensurate with the size, nature, and complexity of its operations and business processes. As part of this framework, the Company uses accounting software equipped with an audit trail (edit log) feature to maintain its books of account. In addition, the Company has also implemented practices for daily backups of the entire database and application in remote locations.

Further, the internal audit function is carried out by an independent audit firm, appointed under Section 138 of the Companies Act, which ensures exhaustive reviews and a robust control framework across financial and operational aspects of the business.

HUMAN RESOURCES

MILs people strategy for 2025-26 was shaped by its strong focus on employee well-being, capability building, and cultural alignment. The Company has a well-structured HR policy that fosters a positive work environment, inclusive growth, equal opportunity, and competitiveness, while aligning employee goals with the organizations broader growth vision.

The Human Resources function plays a vital role in building a strong and capable workforce. It creates opportunities for both professional and personal development and implements comprehensive employee engagement and learning initiatives to strengthen employee productivity and skills. As of March 31, 2026, the Company had 1,060 permanent employees.

OUTLOOK

Looking ahead, the Company remains confident in its ability to build stronger and more focused business models across the Uniforms and Digital Infrastructure categories, supporting its operating margin growth trajectory. Key structural drivers expected to support this growth include rising demand for institutional uniforms, public procurement opportunities, targeted spending on education infrastructure, and increasing hygiene awareness.

Amid potential macroeconomic risks arising from global uncertainties, which may create inflationary pressure and affect GDP growth, the Company remains vigilant and continues to closely monitor external factors such as inflation, credit growth, and geopolitical developments to mitigate potential challenges. Nevertheless, despite the complexities of the business environment, the outlook for operating margin growth over the medium-term remains optimistic.