Mirza International Ltd Management Discussions

FORWARD-LOOKING STATEMENT

Statements in this section – Management Discussion and Analysis of Financial Condition and Results of Company Operations — relating to the Companys objectives, expectations or projections, may be forward-looking within the meaning of applicable securities, laws, and regulations.

These forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations will prove to be accurate or will be realised. The Company undertakes no obligation to publicly amend, modify or revise these forward-looking statements, in the light of subsequent events, new information or future developments. Actual outcomes may differ materially from those anticipated in such statements. Key factors that could influence the Companys operations include, but are not limited to, tariff determinations, levies, and other such charges by regulatory authorities, amendments in Government policies and tax legislation, macroeconomic developments within India, and other global economic variables.

The financial statements have been prepared on a historical cost and accrual basis in accordance with the accounting standards notified under the Companies (Accounting Standard) Rules, 2006, as amended, and the relevant provisions of the Companies Act, 2013 (the ‘Act). These financial statements are compliant in all material aspects with the Indian Accounting Standards (‘Ind AS) notified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, and other relevant provisions of the Act.

The management of Mirza International Limited (‘MIL or ‘the Company) has exercised prudent estimates and reasonable judgements to ensure that the financial statements reflect a true and fair view of the Companys state of Affairs for the financial year.

The following discussions regarding the Companys financial condition and results of operations should be read in conjunction with the audited financial statements and the accompanying notes, which form an integral part of this Annual Report.

Unless specified otherwise or required in a particular context, all references herein to ‘we, ‘us, ‘our, ‘the Company or ‘MIL shall be construed as referring to Mirza International Limited.

INDUSTRY STRUCTURE AND KEY DEVELOPMENTS

The Indian Footwear and Leather sector has established a niche presence in the global market through leveraging its inherent strengths like huge raw material resources, skilled labour availability, and adoption of modern production technologies. With active support from the Government of India, the sector has witnessed substantial investments in modernisation, technological upgradation of production units and workforce skill development. These investments have contributed to the creation of innovative products, tailored to the evolving preferences of global consume Rs.

The Indian Footwear and Leather Development Programme (IFLDP), formerly known as IFLADP, is a flagship scheme launched by the Central Government, to strengthen the sector through a comprehensive multi-dimensional approach. The programme strategy includes:

• Develop sector-specific infrastructure

• Address environment challenges typical to this sector

• Facilitate additional investments

• Generate employment opportunities

• Enhance production capacity

The Government of Indias Union Budget 2025-26 introduced a Focus Product Scheme to further accelerate the growth of the footwear and leather sector. This initiative targets for a turnover of 4 Lakh Crore (USD 46.13 billion), exports of 1.1 Lakh Crore (USD 12.74 billion) and the creation of 2.2 million jobs. Additionally, a 2,600 Crore (USD 301.10 million) Public Linked Incentive (PLI) scheme is under consideration to enhance domestic manufacturing and reduce import dependency.

Under the IFLDP scheme, an allocation of USD 220 million (1,700 Crores) has been made until 2026, to develop infrastructure, increase production, facilitate investments and generate employment in Indias leather industry. The IFLDP scheme encompasses six sub-schemes:

• Sustainable Technology and Environmental Promotion (STEP) (Outlay: 500 Crores): The STEP initiative focusses on promoting sustainable and eco-friendly industrial practices, especially in tanning. Accordingly, zero liquid and wastewater discharge are made mandatory in certain states. Further, assistance for the upgradation of Common Effluent Treatment Plants (CETPs) and preparation of vision document is provided under the scheme.

• Integrated Development of Leather Sector (IDLS) (Outlay: 500 Crores): This sub-scheme that aims to improve productivity across the sector is designed to support entrepreneu Rs in diversifying operations and to set up new units.

• Establishment of Institutional Facilities (Outlay:

200 Crores): This scheme funds the infrastructure upgradation of campuses of the Footwear Design and Development Institute (FDDI), thereby fostering innovation and quality training.

• Mega Leather Footwear and Accessories Cluster Development (MLFACD) (Outlay: 300 Crores): The scheme was launched to support entrepreneu Rs by offering assistance in building modern infrastructure, accessing advanced technology, and providing training and skill development in addition to human resource development inputs.

• Brand Promotion of Indian Brands in Leather and Footwear Sector (Outlay: 100 Crores): The scheme provides international branding support to Indian footwear and leather manufacture Rs, thus enhancing product visibility and competitiveness in international markets.

• Development of Design Studios (Outlay: 100 Crores): This sub-scheme aims to offer design support and technical assistance besides creating avenues for employment and new business opportunities.

INDIAN LEATHER INDUSTRY: ECONOMIC OVERVIEW

The leather industry plays a vital role in the Indian economy and ranks among the top ten foreign exchange earne Rs for the country. India holds a significant share of the global livestock population, accounting for around 20% of the worlds cattle and buffalo population and about 11% of the global goat and sheep population. This abundant availability of raw material positions India advantageously in the global leather industry. As one of the oldest trades in the country, the leather industry in India benefits from a well-established base of skilled manpower and adoption of innovative technology. The country also possesses a robust and eco-sustainable tanning infrastructure complemented by modern manufacturing units. The industry is further supported by a well-developed network of allied secto Rs including leather chemicals and auxiliary industries. The industry provides employment to about 4.42 million people in the country, making it a prominent livelihood source, particularly in rural India. Notably, women constitute about 30% of the workforce in this sector, highlighting the industrys contribution to inclusive employment.

Indias leather industry is broadly categorised into four primary segments: Tanning, Footwear, Leather Garments and Accessories. The country accounts for around 13% of the worlds total leather production and ranks as the second-largest producer and consumer of leather footwear globally. Key states in India majorly involved in the production of leather and leather products include Tamil Nadu, West Bengal, Uttar Pradesh, Maharashtra, Punjab, Karnataka, Madhya Pradesh, Haryana, Kerala, Rajasthan, and Jammu & Kashmir.

Export Trend

India continues to maintain a strong position in the global leather industry, ranking as the second-largest exporter of leather garments, the third-largest exporter of saddlery and harnesses and the fourth-largest exporter of leather goods worldwide. The leather garments sector accounted for 7.62% of the countrys total leather exports during FY 2024-25 (April-December). Footwear – including leather footwear, footwear components and non-leather footwear—constituted the largest segment, representing 51.9% of total leather and leather product exports, with an export value of USD 598.58 million.

Export Destinations

India exports leather and leather products to more than 50 countries. The top importe Rs include USA, Germany, UK, Italy, France, Spain, Netherlands, China, Belgium, UAE, Australia, Poland, Hong Kong, Denmark, Canada, Vietnam, and Portugal. Collectively, the top 15 importer countries accounted for about 78.77% of Indias total leather and leather product exports during April-December 2024 amounting to USD 2.87 billion.

During FY 2024-25 (April-December), export of leather and leather products to the United States, valued at 6,870 Crore (USD 795.55 million), marked an increase of 16.30% year-on-year. During the same period, Germany and the UK imported leather and leather products from India, valued at 3,567 crore (USD 413.08 million) and 2,888 crore (USD 334.44 million) respectively.

The United States remained the largest importer of Indian leather and leather products accounting for 21.82% of total exports in FY 2024-25 (April-December). Germany and the UK accounted for 11.33% and 9.17% of the total exports during the same period.

INDIAN LEATHER AND FOOTWEAR INDUSTRY: PRODUCT SEGMENT HIGHLIGHTS

Tanning Sector

• Annual availability of leather in India is about 3 billion sq. ft

• India accounts for 13% of the worlds leather production

• Indian leather trends/colou Rs are consistently recognised at the MODEUROP Congress, the official trend fashion platform of the German Shoe Institute, reflecting global acknowledgement of Indias design leade Rship

Footwear Sector

• India is the second-largest consumer of footwear globally, after China, with an annual consumption of 2.60 billion pai Rs

• Footwear (leather and non-leather) export constitutes about 53% of the total export value of Indias leather and footwear industry (2023-24)

Leather Garments Sector

• India ranks as the second-largest exporter of leather garments globally

• This segment accounts for 7% share of Indias total exports from Indias leather sector (2023-24) Leather Goods & Accessories Sector (including Saddlery & Harness)

• India is the fifth-largest global exporter of leather goods and accessories and the third-largest exporter of saddlery and harness products

• This segment represents 26% share of Indias total export from the leather sector (2023-24)

OPPORTUNITIES AND THREATS Opportunities

Indias footwear market is witnessing robust and sustained growth, underpinned by rising consumer demand, urbanisation and a growing middle class. India is the second-largest producer and consumer of footwear globally, with a projected production of nearly 3 billion units by 2024. Leading domestic brands like Bata and Liberty are spearheading eco-friendly innovations and a dive Rsified product portfolio. Notably, per capita footwear consumption in India has risen from 1.7 pai Rs in 2016 to 2.3 pai Rs in 2021, highlighting the strong market momentum. As a global leader, Indias major production hubs – including Tamil Nadu, Uttar Pradesh, and Maharashtra — play a vital role in sustaining supply chain efficiency and meeting consumer demand. The industry is largely driven by micro, small and medium enterprises (MSMEs) that constitute over 95% of total leather production units and significantly contribute to employment generation. The footwear manufacturing industry itself employs a workforce of approximately 1.10 million. The implementation of Bureau of Indian Standards (BIS) certification in the Indian footwear industry — also ensures product standardisation and safety and serves to increase reliability enhance product quality, consumer trust and global credibility. For manufacture Rs like MIL, aligning with BIS norms, foste Rs modernisation of production processes and serves a competitive advantage in domestic and international markets. The countrys footwear exports, including casual shoes, sandals, boots, and moccasins, constitute a substantial share of global trade, and have a strong presence in major international markets like the USA, Germany, and the UAE. The Indian government has played a vital role in stimulating market growth through its progressive policies including de-licensing and de-reservation, which have paved the way for modern production capabilities. Even Free Trade Agreements (FTAs) offer a remarkable opportunity for the Indian footwear industry to expand its global footprint. The recent FTA signed between India and United Kingdom (May 2025) that reduces tariffs and provides improved market access is expected to benefit footwear exports in terms of competitive pricing, collaboration in manufacturing, design and technology that can enhance export volumes and global competitiveness. Leveraging FTAs allows Indian brands to dive Rsify their markets and reduce dependency on any single geography, promoting long-term growth and resilience. Additional initiatives such as 100% Foreign Direct Investment (FDI) in the footwear sector and the establishment of Footwear Complexes and Component Parks have attracted external investments, enhanced cost efficiency and competitiveness, thus reinforcing Indias position as a key player in the global footwear industry.

At MIL, we foster a culture of innovation and continual experimentation, embracing new ideas and dive Rse perspectives to consistently meet and exceed customer expectations. Our commitment to innovation transcends product development and extends to brand positioning and representation, thus making innovation an integral pillar of our brand identity.

We remain steadfastly committed to our core values, ensuring alignment with our purpose and long-term strategic vision. This foundation enables us to prioritise stakeholder interests and drive sustainable growth, value creation and success.

Threats and Challenges

The footwear industry operates in a highly dynamic and competitive environment, encountering numerous challenges that impact its growth and profitability. These challenges may be broadly categorised as some key threats:

Market and Consumer Challenges

• Changing Consumer Preferences: Rising demand for sustainable, eco-friendly, and pe Rsonalised products, forces brands to remain agile and responsive to evolving trends and preferences.

• Omnichannel Shopping Experiences: Consume Rs expect a seamless transition between online and offline touchpoints, requiring brands to invest in robust e-commerce and inventory management systems.

• Faster Deliveries and Variety: Consume Rs are increasingly demanding a wider range of product offerings besides expecting prompt shipping and faster deliveries, which pressures brands to optimise supply chains and inventory management systems.

Operational and Supply Chain Challenges

• Supply Chain Visibility: Brands struggle with limited supply chain visibility leading to insufficient transparency across the supply chain that results in inventory discrepancies, stockouts, and escalated operational costs.

• Inventory and Fulfilment Management: Balancing stock inventory levels, order fulfilment processes, and product returns remain critical to operational efficiency.

Labour Costs and Craftsmanship: Brands face challenges in ensuring high-quality workmanship while managing labour costs and navigating dive Rse labour regulations in different markets.

Environmental and Social Challenges

• Environmental Footprint: The footwear industry is under scrutiny for its energy-intensive operations and environmental impact, driving brands to minimise their carbon footprint and adopt sustainable practices.

• Eco-Conscious Consumerism: Growing eco-consciousness among consume Rs demanding eco-friendly products, has forced brands to reassess their raw materials, production processes, and supply chains for ethical sourcing.

Technological Challenges

• Adoption of Advanced Technologies: Identifying and implementing the right technological tools, including ERP systems, is essential to streamline operations, improve efficiency, and enhance customer engagement.

Digital Transformation: Staying competitive requires brands to leverage digital e-commerce platforms, social media, and data analytics to drive marketing, sales and customer experiences.

Industry-specific Challenges

Despite its strong potential, the Indian footwear industry continues to face structural challenges due to being largely unorganised and fragmented, particularly key markets like Uttar Pradesh and Tamil Nadu. Modernisation poses another challenge. Despite increased technology adoption handmade products still dominate the market.

Challenges

1. Fragmented Industry Structure: The industrys unorganised nature restricts scalability, organised growth and development.

2. Dependence on Manual Labour: While traditional artisanal craftsmanship of handmade products is valued, reliance on manual labour limits scalability and efficiency.

3. Macroeconomic Volatility: External factors such as foreign exchange rate fluctuations and crude oil price volatility, influence input costs and profit margins, thus impacting the industrys stability.

4. Regulatory Framework: Absence or inadequacy of supportive policies hinde Rs the sectors growth, development and competitiveness.

RISKS, CONCERNS, AND CONTINGENT LIABILITIES

MIL operates in a dynamic macroeconomic and geopolitical environment where economic and political facto Rs, both national and global, can materially impact company performance and the dynamics of the entire footwear industry. These factors include:

External Risk Facto Rs

1. Economic Conditions: Variations in interest rates, economic growth trends, fiscal and monetary policies, inflation, deflation, consumer credit availability and debt can influence demand and profitability.

2. Global Events: Geopolitical instability including terrorist threats, military and domestic disturbances, pandemics, and social unrest can adve Rsely influence consumer sentiment and spending. MIL recognises that risks are an integral aspect of business. To mitigate exposure to these risks, the Company has established a comprehensive risk management framework and suitable processes to identify and alleviate risks. The Board of Directors periodically reviews the Companys risk management policy while the Audit Committee continually evaluates its effectiveness.

Identified Risks and Concerns

• Competitive Business Environment: Intense competition in the footwear industry

• Changing Consumer Preferences: Rapidly evolving consumer tastes and preferences

• Import of Finished Footwear: Lower-priced imports impacting the domestic market

• Occupancy Costs: Rising showroom and office occupancy costs

• Foreign Currency Fluctuation: Exchange rate volatility impacts business operations

• Fragmented Industry Structure: The industrys fragmented nature that poses challenges to growth and competitiveness

Risk Mitigation Strategy

MILs robust risk management systems and processes are designed to proactively identify, assess, and address these risks, to ensure business continuity and operational resilience. These measures are being continually refined to adapt to emerging challenges and opportunities.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

MIL has implemented a comprehensive and well-designed internal control systems framework to ensure operational integrity, regulatory compliance and risk mitigation including protection against fraud, misappropriation and misuse of resources. These systems are regularly reviewed and updated to ensure effectiveness and alignment with evolving business needs.

Key Components of Internal Control Framework

1. Policies and Procedures: Clearly defined operational guidelines and management controls have been established to ensure organisational accountability and performance consistency.

2. Audit Committee: Our Audit Committee, comprising Independent Directors, ove Rsees and reviews the effectiveness and adequacy of our internal control mechanisms.

3. Internal Auditors: Regular internal audits are conducted to assess and review the internal control mechanisms with findings and improvement recommendations submitted in periodic audit reports to the Audit Committee.

4. Statutory Auditors: The Audit Committee consults with our Statutory Auditors to discuss the adequacy of our internal control systems and incorporates feedback into operational improvements.

The Audit Committee reviews and discusses the internal audit reports and improvement suggestions with management, for prompt implementation of corrective actions in business processes. The Audit Committee also ensures that the Board of Directors is regularly informed and updated about significant internal control observations and actions taken.

HUMAN RESOURCES DEVELOPMENT

We recognise the importance of advancing human resources skills, besides developing competencies, and capabilities to drive business goals. Our strategic initiatives focus on fostering talent and nurturing leade Rship that enables us to achieve sustainable business success and establish a world-class organisation.

Key Strengths

1. Dive Rse Talent Pool: Our company boasts of a dive Rse talent pool of professionals with expertise across varied industry secto Rs, who contribute to a high-performance culture.

2. Employee Learning & Development: We empower employees realise their true potential through multiple initiatives, including structured training programmes and cross-functional collaboration to foster a culture of continual growth and improvement.

3. Inclusive Work Culture: We are committed to fostering an inclusive, equitable and supportive work environment, where all employees can thrive and grow, uniquely contributing to organisational success.

As of March 31, 2025, MIL employs over 1,436 permanent employees, forming a strong foundation for our organisations ongoing growth and success.

OCCUPATIONAL HEALTH AND SAFETY Commitment to Safety

At MIL, we are firmly committed to conducting our operations in a manner that prioritises the safety and well-being of all stakeholders, including employees and contracto Rs. Our goal is to maintain a workplace free from accidents and occupational illnesses, ensuring a safe and healthy environment for all.

RESOURCES & EXPERTISE

We have established a team of highly qualified, experienced, and skilled professionals to provide the management with strategic guidance and expert support in all Matters related to occupational health, safety, and fire-protection. Our commitment to safety is demonstrated through the following key safety initiatives:

1. Advanced Safety Technologies: We deploy state-of-the-art safety technologies and systems all across new projects and business expansions to mitigate operational hazards and protect our workforce.

2. Fire Prevention and Mitigation: We utilise advanced fire prevention and mitigation technologies to maintain utmost safety in all operational and work areas.

3. Industry Standards Compliance: We comply with the highest industry standards to protect the occupational health and safety of our employees, addressing:

• General Safety

• Occupational Health

• Process Safety

• Emergency Preparedness

HEALTH AND SAFETY STANDARDS

We prioritise the health and safety of our employees, contracto Rs, and stakeholders. Our operations are designed in alignment with stringent Health and Safety protocols, to ensure:

1. Employee Safety: We have taken all necessary and proactive measures, including continual risk assessments, to protect the well-being and safety of our employees, and provide a secure working environment.

2. Risk Reduction: We have implemented measures for ongoing identification and mitigation of potential workplace risks to prevent accidents and injuries.

3. Safe Working Conditions: We strive to consistently improve working conditions to enhance employee safety, well-being and productivity.

We are committed to fostering a work culture of safety excellence, through stringent compliance with relevant laws and regulations, and continually improving our health and safety performance through innovation and best practices.

MANAGEMENT ENGAGEMENT

At MIL, we believe that organisational growth is intrinsically linked to the growth, development and success of our employees. Were committed to fostering a culture that recognises employee achievements and rewards excellence while Investing in their continual learning and professional growth.

We are committed to creating a collaborative work environment that encourages employee growth and innovation. We have accordingly placed the right talent in the right roles to enhance operational efficiency and productivity, besides empowering employees to utilise their capabilities and contribute meaningfully to drive business success. We aim to build a high-performing team that is self-motivated to achieve organisational goals and business success.

FINANCIAL PERFORMANCE

The key indicators of the financial performance of the Company for the Financial Year 2024-25 are as follows:

( Rs. in Lakhs)

Sr. No. Particulars	FY 2024-25	FY 2023-24
1. Total Revenue	57,024.52	60,939.67
2. Total Expenses excluding Finance Cost & Depreciation	53,556.04	55,605.26
3. EBIDTA (Earnings before Interest, Depreciation & Tax)	3,468.48	5,334.41
4. Finance Costs	902.22	707.92
5. Depreciation and Amortisation Expense	3,040.07	2,806.45
6. Profit/(Loss)	(473.81)	1,820.04
7. Add Exceptional Items [Gain (+)/ (Loss) (-) ]	-	-
8. Profit/ (Loss) from Continuing Operations Before Tax (6-7)	(473.81)	1,820.04

( Rs. in Lakhs)

Sr. No. Particulars	FY 2024-25	FY 2023-24
9. Less: Tax Expense	75.00	476.00
10. Profit/ (Loss) from Continuing Operations After Tax	(398.81)	1,344.03
11. Profit/ (Loss) from Discontinued Operations After Tax	-	-
12. Profit/ (Loss) for the year after Tax	(398.81)	1,344.03
13. Other Comprehensive Income / (Loss)	(144.60)	39.68
14. Total Comprehensive Income (12+13)	(543.41)	1,383.71
15. Basic EPS (per share of 2/-) (in )	(0.29)	0.97
16. Diluted EPS (per share of 2/-) (in )	(0.29)	0.97

Segment-Wise Performance & Review of Operations

( Rs. in Lakhs)

Segment Revenue	FY 2024-25	FY 2023-24
Footwear – Domestic & Export Sale	51,313.60	53,033.76
Tannery – Domestic & Export Sale	10,358.91	12,398.29
Total	61,672.51	65,432.05
Unallocated	66.12	667.59
Total	61,738.63	66,099.64
Less: Inter-segment Revenue	4,714.11	5,159.97
Total Revenue	57,024.52	60,939.67
Segment Profit / (Loss)	FY 2024-25	FY 2023-24
Footwear – Domestic & Export Sale	3,487.22	4,172.59
Tannery – Domestic & Export Sale	(1,915.60)	(1,346.07)
Total	1,571.62	2,826.52
Unallocated	66.12	667.59
Total	1,637.74	3,494.11
Less: Interest	902.22	707.92
Less: Unallocated	1,209.33	966.16
Profit / (Loss) from continuing operations beforeTax (473.81)	1,820.03

CAUTIONARY STATEMENT

Certain statements, made in the Management Discussion and Analysis section of the Annual Report, which describe estimates, expectations or projections, may be read as ‘forward-looking statements within the meaning of applicable laws and regulations. The actual results may differ materially from those expressed or implied in such statements. The key factors that influence the Companys operations and performance include demand-supply conditions, raw material prices, changes in Government policies, governing laws, tax regimes, global economic developments, and other factors such as litigation and labour negotiations.