Mihika Industries Ltd Management Discussions

A. Overview of the Global Economy:

In 2024, the global economy demonstrated a degree of stability despite navigating a complex environment shaped by numerous economic, geopolitical, and policy challenges. According to the World Economic Outlook by the International Monetary Fund (IMF), the growth of global Gross Domestic Product (GDP) slowed to 3.3%. There were notable differences in growth trends; while developed economies experienced a more gradual rate of expansion, emerging markets, particularly in Asia, continued to show a comparatively robust growth path

Geopolitical issues such as the ongoing conflict between Russia and Ukraine, disturbances in the Red Sea, ongoing supply chain disruptions, and trade tensions among major economies continued to challenge global economic stability. Additionally, the shifting landscape of climate change policies and regulations impacted investment decisions across various sectors.

The global economy is expected to maintain a steady growth trajectory, with projected expansion rates of 2.8% and 3.0% for 2025 and 2026, respectively. In the United States, growth is anticipated to fall to 1.8% in 2025 and 1.7% in 2026, influenced by changes in labor market conditions and a decline in consumer spending. The Eurozone is predicted to recover, with growth reaching 0.8% in 2025 and improving to 1.2% in 2026, driven by increased consumer spending and lower inflation rates.

Overall, while consumer demand and select regional growth offer resilience, risks such as prolonged trade wars, policy fragmentation, and financial volatility continue to weigh heavily on the global economy.

B. Overview of the Indian Economy:

Indias economy has exhibited steady growth and stability during FY 2024-25, reaffirming its position as one of the fastest-growing major economies globally. According to the Second Advanced Estimate (SAE) data from the National Statistical Office (NSO), the real Gross Domestic Product (GDP) grew by 6.5% for FY 2024-25, following an impressive 9.2% growth in the previous financial year. This ongoing growth trend highlights the nations solid economic foundations, beneficial government policies, a flourishing services sector, and robust domestic demand, all of which bolster confidence in Indias long-term growth trajectory.

C. Outlook:

Looking ahead, Mihika Industries Limited remains cautiously optimistic about its growth trajectory in the trading sector, particularly within commodities and fabrics. The company intends to broaden its product portfolio by diversifying into high-demand and value-added textile segments while also exploring opportunities in emerging commodity markets. With the increasing adoption of technology across supply chains, The Company aims to enhance its digital trading infrastructure to improve operational efficiency, transparency, and customer reach. The company also plans to strengthen its presence in Tier 2 and Tier 3 cities, where demand for quality fabrics is steadily rising, supported by the expansion of retail and garment manufacturing hubs.

D. Industry structure and development:

The domestic market is highly fragmented, with thousands of small and mid-sized traders linking farm-gate supply, APMCs, processors, and export channels. Price discovery increasingly occurs via electronic platforms (e-NAM) and commodity exchanges, while physical flows remain dependent on transporters, and warehouse networks (including WDRA-acknowledged facilities). The business is sensitive to monsoon outcomes, MSP policy, logistics costs, and global commodity cycles; textiles/fabrics trading additionally ties to cotton/jute dynamics and downstream mill demand.

Indias economic position continues to improve, now ranking as the fifth-largest economy in the world by nominal Gross Domestic Product (GDP) and the third-largest when measured by purchasing power parity (PPP). The nation has set ambitious goals to achieve a $5 trillion economy by FY 2027-28 and a $30 trillion economy by 2047. These objectives are to be realized.

E. Opportunities and Threats:

Opportunities:

1. Greater digitization (e-NAM integration, e-invoicing) and expanding agriculture infrastructure support scale, faster inventory turns, and reduced working-capital frictions.

2. Policy support to jute and broader textiles, plus import management, can create trading windows in raw jute/jute goods and certain fabric categories.

3. Improved warehousing and logistics under AIF can enable origin sourcing and quality-linked trading strategies.

Threats:

1. Weather variability and acreage shifts can affect primary supply and price volatility in agricultural commodities.

2. Policy changes (MSP revisions, import/export rules) may compress trading spreads or alter flows.

3. Downstream textile demand sensitive to export conditions, FX, and tariffs which can impact fabric turnover and inventory valuations.

F. Segment-wise or Product-wise performance:

The Company operates in One Primary Segment i.e. "Trading and Distribution ".

G. Future Outlook:

The future outlook for the Company remains positive, backed by a diversified trading portfolio that spans both commodities and fabrics which are two sectors that continue to offer growth opportunities despite global uncertainties. In the commodities segment, demand is expected to remain stable, driven by ongoing consumption needs, policy support for agricultural and essential commodities, and improved market accessibility through digital and physical infrastructure. The Company anticipates steady growth, especially as supply chain efficiencies improve and export opportunities expand in emerging markets. In the fabrics segment, rising consumer preference for quality textiles, increasing demand from the fashion and apparel industry, and the revival of retail activity post-pandemic are likely to support volume growth. With growing emphasis on sustainable and eco-friendly materials, the Company is exploring sourcing options that align with evolving market trends. While challenges such as price volatility, currency fluctuations, and regulatory changes persist, the Company remains focused on enhancing its procurement strategies, expanding its customer base, and leveraging technology to improve operational efficiency. Overall, a balanced approach across both business verticals positions the Company well to achieve consistent and profitable growth in the coming financial year.

H. Risks and concerns:

Being in the trading business, Mihika Industries Limited is exposed to various risks including market fluctuations, supply chain disruptions, and credit risks. The company constantly monitors market trends and adjusts its procurement strategy to mitigate these risks. Currency exposure in exports/imports is managed through hedging and careful negotiation of trade terms.

I. Internal control systems and their adequacy:

The company has a robust internal control system in place to ensure accurate financial reporting, compliance with applicable laws, and operational efficiency. Internal audits are conducted periodically and findings are reviewed by the Audit Committee. Controls are continuously reviewed and enhanced as required.

The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information. The company has internal audit and verification at regular intervals.

The requirement of having internal auditor compulsory by statue in case of listed and other classes of companies as prescribed shall further strengthen the internal control measures of company.

H. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2024-25 is described in the Directors Report of the Company.

I. Material developments in Human Resources / Industrial Relations front including number of people employed:

The cordial employer - employee relationship also continued during the year under the review. The Company has continued to give special attention to human resources.

J. Caution Statement:

Statements made in the Management Discussion and Analysis describing the various parts may be "forward looking statement" within the meaning of applicable securities laws and regulations. The actual results may differ from those expectations depending upon the economic conditions, changes in Govt. Regulations and amendments in tax laws and other internal and external factors.