Mahalaxmi Fabric Mills Ltd Management Discussions

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The domestic textile and apparel market was estimated at around USD 225 billion in 2025 and remained one of the largest contributors to Indias manufacturing economy. India retained its position as the worlds second-largest producer of textiles and garments and the sixth-largest textile exporter globally, with a 4.6% share in global textile and apparel trade4.

Indias textile exports demonstrated resilience during FY 2025-26 despite geopolitical disruptions and evolving tariff structures. Total textile exports, including handicrafts, increased by 2.1% to ?3.16 lakh crore, supported by growth across readymade garments, man-made textiles and value-added product categories. Export momentum remained broad-based across several international markets including the UAE, UK, Germany, Spain and Japan, while ongoing trade agreements with the UK, EU, EFTA and other regions are expected to further strengthen Indias access to global markets.

Indias home textile segment also maintained healthy growth momentum, supported by rising urbanization, premiumization trends, organized retail expansion and increasing consumer spending on home decor and lifestyle products. The Indian home textile market reached approximately USD 4.51 billion in 2025 and is projected to grow steadily over the long term, supported by strong demand across bed linen, bath linen and furnishing products.6

BUSINESS OVERVIEW:

The Company has continued to suffer its overall performance during the Financial Year 2025-26. The Company experienced a decline in the performance as compared to previous years, primarily due to a significant increase in the cost of raw materials, power and fuel, and logistics and other costs. In addition to these challenges, a major fire broke out in previous year 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 which affected overall business of the company. The Company has now gradually recommenced productions.

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.

In order to achieve the greatest level of customer satisfaction and excellent business relations, continuous infrastructure upgradations are made. There is a special focus on adopting sustainable business processes that add value for the stakeholders. The Companys dedicated team, with rich industry experience, remains committed to sourcing and delivering high-quality cotton fabric that meets stringent quality standards.

Your Company reported at Standalone level, the total income of the Company is Rs. 5543.26 Lakhs as against Rs. 6488.96 Lakhs in the previous year. The Profit before Tax amounted to Rs. (1233.37) Lakhs as against Rs. 483.53 Lakhs in the previous year. The net profit after tax amounted to Rs. (1016.94) Lakhs as against Rs. 361.59 Lakhs in the previous year.

Your Company has reported on a Consolidated basis, Income from Operations & other Income Rs. 13905.68 Lakhs as against Rs. 15518.98 Lakhs in the previous year, Net Profit before Tax Rs. (6.07) Lakhs as against Rs. 1057.04 Lakhs in the previous year, Net Profit after Tax Rs. (2.39) Lakhs as against Rs. 791.07 Lakhs in previous year.

INDUSTRY STRUCTURE AND DEVELOPMENT:

Your Company 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 enables your company 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 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.

The Indian textile industry continues to benefit from strong fundamentals, including abundant availability of raw materials, a large skilled workforce, an integrated textile value chain, and a growing domestic as well as global market. Government initiatives such as the Production Linked Incentive (PLI) Scheme, PM MITRA Parks, Cotton Sector Reforms, Bharat Tex 2026, the National Technical Textiles Mission, ATUFS, and export promotion schemes are supporting modernization, infrastructure development, technological advancement, and export competitiveness. These factors provide significant opportunities for industry growth, innovation, and long-term value creation.

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. India expanded its global trade integration during FY2025-26 through ongoing agreements and negotiations with regions including the UK, EU, EFTA, Oman and New Zealand. These developments are expected to improve preferential market access, diversify export opportunities and improve Indias positioning within global textile supply chains. Export promotion measures such as the RoSCTL and RoDTEP schemes also supported cost competitiveness for Indian textile exporters amid evolving global trade dynamics.

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.

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 FY25-26, 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.

Financial Year 2025-26 remained a challenging and volatile period for businesses across most industries, with only a few sectors demonstrating resilience. The global business environment was significantly impacted by persistent geopolitical tensions, including the Russia-Ukraine conflict and the escalating conflict involving the United States and Iran, which disrupted global supply chains and energy markets. These developments, coupled with volatility in crude oil prices, inflationary pressures, elevated logistics costs and continued uncertainty in international trade, posed significant challenges to business operations and profitability.

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 industry also faces intense competition from low-cost manufacturing countries such as Bangladesh, Vietnam, and China, while its heavy dependence on exports makes it vulnerable to global economic slowdowns, changing trade policies, and currency fluctuations. Additionally, supply chain disruptions, limited technology adoption, and financial constraints among small and medium enterprises can reduce productivity and operational efficiency. Growing environmental regulations, sustainability expectations, and compliance with ESG standards require significant investment in cleaner production methods and ethical sourcing. Climate change further threatens cotton production and water availability, while rapidly changing consumer preferences demand faster innovation and greater product customization. Addressing these challenges through modernization, sustainable practices, workforce development, and market diversification is essential for ensuring the industrys resilience and continued growth.

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 and ongoing middle east 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 control framework has been developed in line with the provisions of the Companies Act, 2013 and the Guidance Note on Audit of Internal Financial Controls issued by the Institute of Chartered Accountants of India.

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 them 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 Company has continued to suffer its overall performance during the Financial Year 2025-26 as compared to previous years, primarily due to major fire incident occurred in previous year 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.

During FY 2025-26 the market remained exposed to intermittent bouts of volatility due to international wars as well as uncertainty surrounding the evolution of global financial markets which impacted the market sentiments and liquidity conditions significantly.

Particulars	2025-26	2024-25	% change
Debtor Turnover (Times)	7.05	3.88	81.82
Inventory Turnover (Times)	42.59	41.40	2.88
Debt Service Coverage Ratio	0.12	3.82	-96.83
Current Ratio (Times)	0.76	1.26	-39.22
Debt Equity Ratio (Times)	0.27	0.05	470.70
Operating Profit Margin (%)	-20.55	9.94	-30.49
Net Profit Margin (%)	-0.19	0.06	436.35

During the current Financial Year there has been decrease in Operating Profit and Net Profit Margin mainly due to effect of fire incident in the Company premises as mentioned above.

As of March 31, 2026, the Companys Net Worth stood at Rs. 7669.42 lakhs, which includes the impact of the exceptional item previously mentioned. The Return on Net Worth (RoNW) for the year 2025-26 showed a marked decline to 13.18% from 4.61% recorded in 2024-25.

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 up gradation of employees 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 elevators 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 workers, staff 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 build 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:

This Management Discussion and Analysis Report may contain forward-looking statements such as goals, estimates, projections and expectations of the Company as defined under applicable laws and regulations. Actual results may differ materially from those expressed or implied in such statements due to various factors including but not limited to changes in governmental regulations, tax laws, foreign exchange fluctuations, raw-material availability and pricing, cyclical demand and pricing in key markets and broader economic conditions in India and other jurisdictions where the Company operates. These factors should be carefully considered and readers are cautioned not to place undue reliance on forward looking statements. The Company assumes no obligation to update any forward-looking statements, except as required by law.

FOR, MAHALAXMI FABRIC MILLS LIMITED
SD/-
SHRI JEETMAL B. PAREKH
CHAIRMAN
(DIN:- 00512415)