Mahalaxmi Fabric Mills Ltd Management Discussions

ECONOMIC OVERVIEW & OUTLOOK GLOBAL ECONOMY:

Growth & Inflation Outlook*

The global economy is still grappling with major challenges. Slower growth, stubborn inflation, and increasing geopolitical instability are all contributing factors. Leading economic organizations recently predicted a decline in worldwide economic activity, with the United States and China being particularly affected. Higher US tariffs are likely to affect the global economy by increasing inflation and slowing growth, though a worldwide recession isnt expected. The global economy seems to be settling into a low-growth pattern, which wont be enough to support long-term economic development. To boost growth and development, global and national policies are needed to improve the external economic environment, enhance macroeconomic stability, ease structural limitations, and address climate change. Global economic growth forecasts for 2025 are looking grim, with major organizations predicting a significant slowdown. The United Nations Conference on Trade and Development (UNCTAD) projects a low 2.3% growth, attributing it to escalating trade tensions and ongoing uncertainties. The International Monetary Fund (IMF) has also cut its 2025 forecast sharply to 2.8% from an earlier 3.3%. Similarly, the Peterson Institute for International Economics (PIIE) expects global GDP growth to slow to 2.7% in 2025, with only a slight improvement to 2.8% in 2026, a notable drop from 2024s 3.2% growth.

ECONOMIC OVERVIEW & OUTLOOK GLOBAL ECONOMY

The global economy is at a critical juncture, with significant internal and external imbalances and vulnerabilities. Major policy shifts are underway, generating a new wave of uncertainties with potentially significant implications for the functioning of the global economy. The global economic outlook for 2025 is characterized by slower growth, with the US trade policy playing a significant role in shaping the landscape. The average US duties remain historically elevated, continuing to exert a drag on global trade and activity. This uncertainty surrounding US trade policy is expected to contribute to slower global growth, with advanced economies projected to grow by only 1.2%. The ongoing war situations in Russia and Ukraine and escalating war situation in middle east countries can present significant risk of oil price surges, straining public finances and raising inflation. Disruption of trade routes can lead to higher shipping and insurance costs and volatility in financial markets which may lead to investors shift towards safe-haven assets. The emerging geopolitical landscape presents a cautious and complex picture of the global economy for the year 2025. Escalating trade tensions and policy uncertainty and escalating war situations are major drivers for the economic outlook. The divergent and swiftly changing policy positions and deteriorating sentiment could lead to tighter global financial conditions.

Demographic shifts threaten fiscal sustainability, while the recent cost-of-living crisis may reignite social unrest. The financial market landscape is marked by increased uncertainty and market volatility, against the backdrop of stretched valuations within many segments of financial markets. Global growth is projected to decline, following a period of steady but underwhelming performance. As per the IMF report of April 2025, the global growth is expected to decline to 2.8% in 2025 and 3% in 2026, down from 3.3% in both 2024 and 2023. Advanced economies are projected to grow at 1.4% in 2025, with the US slowing to 1.8% and the Europe at 0.8% and emerging market and developing economies are expected to slow down to 3.7% in 2025 and 3.9% in 2026. **

INDIAN ECONOMY:

India is projected to continue its lead as the fastest growing major economy in 2025, with a 6.5% growth rate, according to reports from both the World Bank and UNCTAD. This growth will likely be fueled by sustained momentum in the services sector and an acceleration in manufacturing activity, thanks to government efforts in improving logistics infrastructure and implementing tax reforms. India stands out among countries driving global growth through increased government spending and supportive monetary policies. While robust domestic demand, a shrinking trade deficit, and controlled inflation are bolstering its economy, persistent weak global demand continues to pose trade challenges. Although the risk of foreign investor outflows remains, a rise in domestic investment offers a significant buffer. The Reserve Bank of Indias (RBI) proactive policies have also been instrumental in stabilizing liquidity and managing inflation expectations. Overall, Indias economic outlook is strong, but global market uncertainties, financial volatility, and trade disruptions remain key risks. Continued policy support and domestic resilience will be vital to maintaining this economic momentum.

TEXTILE INDUSTRY GLOBAL TEXTILE INDUSTRY:

The Indian textile and apparel industry, a cornerstone of the national economy, contributes significantly to GDP, industrial output, and employment. The industry is undergoing a significant transformation, driven by evolving consumer behavior, technological advancements, and a greater focus on sustainability. Key developments include a noticeable shift from unbranded to branded products, the rapid growth of e-commerce and omnichannel retail, and increasing demand for casual wear and specialized product categories like ethnic wear. Government support through initiatives like the Production-Linked Incentive (PLI) scheme continues to encourage domestic manufacturing and investment in the sector.

INDIAN TEXTILE INDUSTRY:

The Indian textile and apparel industry, a cornerstone of the national economy, contributes significantly to GDP, industrial output, and employment. The industry is undergoing a significant transformation, driven by evolving consumer behavior, technological advancements, and a greater focus on sustainability. Key developments include a noticeable shift from unbranded to branded products, the rapid growth of e-commerce and omnichannel retail, and increasing demand for casual wear and specialized product categories like ethnic wear.

*Source: IMF World Economic Outlook 2025 and ** IMF World Economic Outlook 2025/ critical juncture and amid policy shifts

Government support through initiatives like the Production-Linked Incentive (PLI) scheme continues to encourage domestic manufacturing and investment in the sector.

The Indian textile and apparel industry, a vital pillar of the national economy, plays a significant role in contributing to GDP, industrial output, and employment. Traditionally rooted in rich craftsmanship and cultural diversity, the industry is currently experiencing a dynamic transformation driven by changing consumer preferences, technological advancements, and a heightened focus on sustainability. One of the most notable shifts is the movement from unbranded to branded products, reflecting rising consumer awareness and demand for quality. The rapid growth of e-commerce and the adoption of omnichannel retail strategies are reshaping the market landscape, offering broader reach and convenience for both consumers and businesses. Additionally, there is a growing preference for casual wear and specialized product categories such as ethnic wear and athleisure, influenced by evolving lifestyles and fashion trends. Technological innovations, including automation, digital tools, and sustainable production methods, are further enhancing efficiency and product differentiation. Supporting this transformation, government initiatives like the Production-Linked Incentive (PLI) scheme are encouraging domestic manufacturing, attracting investments, and strengthening the industrys global competitiveness.

Traditional sectors like handloom and small-scale power loom units are the biggest source of employment for millions of rural and semiurban artisans and weavers. It provides direct and indirect employment and a source of livelihood to millions of Indians, including a large number of rural women and youth. Make in India, Skill India, Women Empowerment, and Rural Youth Employment are all significant government programs that the sector is aligned with perfectly. The governments focus has been on increasing textile manufacturing by building best-in-class manufacturing infrastructure, upgrading technology, fostering innovation, and enhancing skills and traditional strengths in the sector for making Indias development inclusive and participative.

BUSINESS OVERVIEW

The Company has continued to sustain its overall performance during the Financial Year 2024-25, supported by stable business operations. However, the Traditional Textiles Processing Division experienced a decline compared to previous years, primarily due to a significant increase in the cost of raw materials, coal-based power and fuel, and logistics. In addition to these challenges, on 24th November 2024, a major fire broke out at the Companys factory premises, causing extensive damage to buildings, plant and machinery, furniture, equipment, and inventories, including third-party goods received for job work. This unforeseen incident resulted in a substantial loss of assets and temporarily impacted production activities and operational efficiency. The estimated loss has been accounted for in the books, and an insurance claim has been filed with the insurer. The survey process is ongoing, and the Company is confident of recovering the claimed amount.

Despite these setbacks, the Board of Directors has continued to make strong efforts across all operational areas, including marketing, finance, and cost control, which have started delivering positive outcomes. The outlook for the Companys products remains promising, and management is confident of achieving improved operational performance in the coming months.

To ensure maximum customer satisfaction and strengthen business relationships, the Company is continuously upgrading its infrastructure. Special focus is placed on adopting sustainable and value-driven business practices that benefit all stakeholders. The Companys dedicated team, with deep industry experience, remains committed to sourcing and delivering high-quality cotton fabric that meets stringent quality standards.

Your Company has reported on a Standalone basis, Income from Operations & other Income 6488.96 Lakhs as against 9025.02 Lakhs in the previous year, Profit before Tax 483.53 (this profit is inclusive of exceptional item of 1284.88 Lakhs as against Loss of (234.59) Lakhs in the previous year, Net Profit after Tax 361.59 Lakhs as against Loss of (191.83).

And your Company has reported on a Consolidated basis, Income from Operations & other Income 15518.98 Lakhs as against 17036.77 Lakhs in the previous year, Net Profit before Tax 1057.04 Lakhs as against 213.27 Lakhs in the previous year, Net Profit after Tax 791.07 Lakhs as against 142.27 Lakhs in previous year.

INDUSTRY STRUCTURE AND DEVELOPMENT:

Pursuant to the Scheme, First Demerged Undertaking i.e. Traditional Textiles Processing Division along with Wind power division of MRT has been transferred to MFML. In the Traditional Textiles Processing Division, it mainly engaged in bleaching, dyeing, printing and finishing and at the end of the chain, its fabric range goes into apparels and home textiles, catering to Domestic as well as Global Market. The company has end-to-end complete facility of processing various types of fabrics such as cotton, polyester, Bottom-weight and other blends.

This strategic restructuring enables MFML to operate as a vertically integrated textile player, supported by captive wind power and robust manufacturing infrastructure. The streamlined focus on its core processing capabilities is expected to enhance operational efficiency, drive economies of scale, strengthen margins, and offer more focused leadership and management attention to the textile business

STRENGTH AND WEAKNESS:

The Indian Textile Industry has long been a cornerstone of the Indian economy, contributing significantly to both employment and exports. From the historic Charkha Movement led by Mahatma Gandhi to the contemporary Vocal for Local campaign championed by the Prime Minister, this sector has remained at the forefront of national economic and cultural identity. The essential nature of textiles is embedded in the Indian ethos, as reflected in the phrase "Roti, Kapda aur Makaan"—underscoring the fundamental human need for clothing and the sectors intrinsic value. India enjoys a competitive advantage in textiles due to the abundant availability of skilled yet cost-effective labor and its position as the worlds third-largest cotton producer. The industry is largely autonomous, managing everything from raw material procurement to final product delivery. This vertical integration, along with robust entrepreneurial activity, has positioned India as a key player in the global textile value chain.

Recent years have witnessed transformative changes in the Indian textile landscape. Rising aspirations and growing brand consciousness among Indian consumers are fueling premiumization and casualization trends. Demand is shifting toward higher-quality, versatile casual wear, particularly among urban youth and middle-class consumers. Simultaneously, the rapid expansion of organized retail infrastructure, including in Tier 2 and Tier 3 cities, is opening new markets and increasing brand visibility for domestic and global players alike.

The Government of India, through the Ministry of Textiles, has implemented several initiatives aimed at strengthening the sector. Programs like the Technology Upgradation Fund Scheme (TUFS) and the Production-Linked Incentive (PLI) Scheme are designed to facilitate modernization, promote domestic manufacturing—especially in man-made fibers (MMF) and technical textiles—and enhance global competitiveness. These initiatives seek to boost value addition, improve technology depth, and drive export growth.

Despite these strengths, the Indian textile industry continues to face significant challenges. Many segments, particularly spinning and processing, suffer from technological obsolescence, which leads to higher production costs and reduced competitiveness—especially against low-cost imports. Rapidly evolving consumer preferences, intensified global competition, and a dynamic industrial environment add further risk and uncertainty.

However, the global China Plus One strategy—where brands seek to diversify their manufacturing base beyond China—offers a timely opportunity for India to expand its share in global textile and apparel exports. Potential Free Trade Agreements (FTAs), such as those under negotiation with the UK and the EU, could further enhance Indias export potential and integration into global supply chains.

In summary, the Indian textile industry is at a pivotal moment. While legacy issues around outdated infrastructure persist, strategic government support, rising domestic demand for premium and casual products, growing retail penetration, and global shifts in sourcing provide a strong foundation for sustainable growth and global relevance.

OPPORTUNITIES AND THREATS:

The Indian textile and apparel industry is witnessing a dynamic transformation driven by emerging consumption patterns and strategic global realignments. Premiumization and casualization are key trends, fueled by an aspirational consumer base and increasing brand consciousness, resulting in rising demand for premium products and versatile, everyday casual wear. Simultaneously, the expansion of organized retail, particularly in Tier 2 and Tier 3 cities, is unlocking new avenues for growth, deeper market penetration, and enhanced brand visibility. Government initiatives such as the Production-Linked Incentive (PLI) scheme are further strengthening the domestic textile manufacturing ecosystem, with a focused push on man-made fibers (MMF) and technical textiles to boost innovation and value addition. In the global arena, the China Plus One strategy—adopted by many international brands to reduce reliance on Chinese manufacturing— presents a significant opportunity for Indian exporters to expand their global footprint. Prospective Free Trade Agreements (FTAs), including one with the United Kingdom, could further enhance Indias export competitiveness and support its ambition to emerge as a key sourcing and manufacturing hub

Despite its vast potential, the Indian textile industry continues to grapple with several structural and external challenges. Intense competition from low-cost manufacturing hubs such as Bangladesh and Vietnam poses a significant threat, as these countries benefit from superior cost efficiencies and economies of scale. Moreover, the sector is vulnerable to input cost volatility, particularly in the pricing of raw materials like cotton, which directly impacts profitability and pricing flexibility. The situation has been further exacerbated by subdued consumer demand, as observed in FY25, where weak spending trends across both domestic and key international markets constrained volume growth. In addition, the growing global emphasis on sustainability and regulatory compliance has brought Environmental, Social, and Governance (ESG) considerations to the forefront. Meeting these expectations requires substantial investment in eco-friendly processes, waste reduction, and supply chain transparency—posing both a challenge and an opportunity for forward-looking firms within the industry.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT KEY RISKS & CONCERNS

The Textile industry is always subject to facing crisis in a cyclical way. Timely action is needed to overcome this situation by taking corrective and proactive steps, then and there.

The Textile business, like other businesses, is susceptible to various risks. The primary risk factor is raw material prices, mainly cotton and the biggest component of cost. Cotton prices are increasing regularly as are other input costs including power, fuel and logistics. Since cotton is an agricultural produce, it suffers from climatic and seasonal volatility. Whereas such volatility in case of a product higher in the textile value chain is generally passed through an increase in value added products in the basket provides insulation against such volatilities.

The Company monitors price fluctuations and follows inventory management and responsive procurement policy to ensure timely procurement of raw materials at competitive prices. It also engages in contracts with clients and tries to pass on variations in the prices of raw materials to them to protect margins.

The ongoing geopolitical conflicts in the Middle East and Europe, particularly the Russia-Ukraine war, have severely disrupted global supply chains, adversely affecting trade flows and increasing volatility across markets. As a company with a predominantly export-oriented business model, such disruptions—coupled with persistently high container shipping costs, limited availability, and frequent delays—pose serious operational challenges. Domestically, inadequate and inefficient logistics infrastructure continues to contribute to longer transit times and elevated costs, further impacting competitiveness.

In parallel, the global economic slowdown, heightened inflationary pressures, and the threat of a looming recession in key markets such as the US and Europe have led to demand compression both at home and abroad. Moreover, escalating tariff barriers imposed by the US on several imported goods—part of its ongoing trade policy shift—have created additional hurdles for Indian exporters. The prolonged Russia- Ukraine conflict has not only strained energy prices and global freight movement but also contributed to elevated uncertainty in export destinations, weakening consumer sentiment. These compounded factors collectively threaten to reduce the Companys business volumes and profitability in the near to medium term.

The Company is susceptible to disasters and crises such as , cyclones, earthquakes, geopolitical instability, fire hazards, etc. which may cause operational disruption, shutdown or production cuts, project delays, supply chain hurdles, and increased construction costs. Compliance issues with the environmental norms and regulations and supply chain challenges continue to be issues of concern.

INTERNAL CONTROL SYSTEM:

The Company has an adequate system of internal control implemented by the Management towards achieving efficiency in operations, optimum utilization of resources and effective monitoring thereof and compliance with applicable laws. The internal control is supplemented by an extensive programme of Internal Audits.

The Internal Audit programme is finalized in consultation with the Internal Auditors and the Audit Committee of the Board. The Audit Committee is briefed on the findings by the Internal Auditors, every quarter, along with the remedial actions that have been recommended or have been taken by the Management to plug systemic weaknesses. The audit committee of the Board meets periodically to review various aspects of the performance of the Company and also review the adequacy and effectiveness of the internal control system and suggests improvement for strengthening then from time to time.

The Company maintains an efficient internal control system commensurate with the size, nature and complexity of its business. The internal control system is responsible for addressing the evolving risks in the business, reliability of financial information, timely reporting of operational and financial transactions, safeguarding of assets and stringent adherence to the applicable laws and regulations. The internal auditors of the Company are responsible for regular monitoring and review of these controls. The Audit Committee periodically reviews the audit reports and ensures correction of any variance, as may be required. Key observations are communicated to the management who undertakes prompt corrective actions.

FINANCIAL AND OPERATIONAL PERFORMANCE:

The The Company continues to sustain its overall performance in the Financial Year 2024-25 driven by the average performance in the business. The Traditional Textiles processing division performance is continue plunged to some extent as compared to the previous years due to a significant increase in the cost of raw materials, cost of coal power-fuel and logistics.

During FY 2024-25, the company faced significant challenges, including a major fire incident. Additionally, the market experienced intermittent bouts of volatility driven by domestic developments and ongoing uncertainty regarding the evolution of global financial markets. These factors collectively had a substantial impact on market sentiment and liquidity conditions.

During the current Financial Year there has been marginally decrease in Operating Profit and Net Profit Margin mainly due to volatility in market globally of Textile Products in which your Company operates.

As of March 31, 2025, the Companys Net Worth stood at 8,680.37 lakhs, which includes the impact of the exceptional item previously mentioned. The Return on Net Worth (RoNW) for the year 2024-25 showed a marked improvement, rising to 4.86% from -2.14% recorded in 2023-24.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT:

Your Company continues to have cordial and harmonious relations with its employees at all levels during the period under review. The Company also puts emphasis on formal training and development programmes to operators and workers, as a core activity and provides continuous training, both internally and externally, for the upgradation of employee skills. The operations of the Company across functions have been strengthened through the induction of appropriately qualified and experienced manpower.

Management identifies the potential of each employee and endeavors by providing them right opportunity to grow. Management of your Company strongly focuses on the performance of the managers. The Board acknowledges its thanks to all the works floor personnel and other employees for making significant contribution to your Company.

The Company considers its employees as the most important asset and integral to its competitive position. It has a well designed HR policy that promotes a conducive work environment, inclusive growth, equal opportunities and competitiveness and aligns employees goals with the organisations growth vision. Its human resource division plays a crucial role to build a strong and talented workforce. It provides opportunities for professional and personal development and implements comprehensive employee engagement and development programmes to enhance the productivity and skills of its employees

Our positive approach to competency, development and retention allows attracting, retaining and built the best team. The Company attaches priority to human resource development, with focus on regular up-gradation of the knowledge and skills of our employees and equipping them with the necessary expertise to meet the challenges of change and growth successfully. Industrial Relations were cordial and satisfactory.

RESEARCH & DEVELOPMENT:

Increased globalization has made the sale of products and retaining of customers highly competitive. To overcome a significant volatility in the market, the need of the hour is high customer satisfaction and value for money from the product. Keeping the above objective as paramount, the research and development activities were focused into attending major customer complaints/suggestions in order to improve customer satisfaction. Your Directors are pleased to inform that the above efforts have lead to considerable reduction of customer complaints. Your Company has successfully launched products of better quality with new aesthetic look as per customer requirements. Further your Company also plans to make new investments for upgrading and modernizing their R & D facilities.

CAUTIONARY STATEMENT:

Comments in this Management Discussion and Analysis outlining the Companys strategies and objectives are believed by the Management to be true and to the best of its knowledge but at the time of preparation actual results may differ materially from those expressed or implied and hence the Company and the Management shall not be held responsible for any loss which may arise as a result of any action taken on the basis of information contained herein.

Important factors that could influence the Companys operations include global and domestic supply and demand conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and outside the country and other factors such as litigation and industrial relations.