Mirza International Ltd Management Discussions

FORWARD-LOOKING STATEMENT

The statements in 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, anchored in its inherent strengths such as 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 up-gradation of production units, and workforce skill development. These investments have contributed to the creation of innovative products, tailored to the evolving preferences of global consumers.

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:

• Developing sector-specific infrastructure

• Addressing the environment challenges typical to this sector

• Facilitating additional investments

• Generating employment opportunities

• Enhancing production capacity

The Union Budget 2025-26 introduced Focus Product Scheme to boost the footwear and leather sector, with an ambitious target of achieving a turnover of 4 Lakh Crore (USD 46.13 Billion) and exports of 1.1 Lakh Crore (USD 12.74 Billion), generating 2.2 Million jobs. A 2,600 Crores (USD 301.10 Million) Public Linked Incentive (PLI) scheme is also under discussion to enhance domestic manufacturing and reduce imports.

An allocation of USD 220 Million ( 1,700 Crores) has been made under IFLDP scheme through 2026 to strengthen the leather and Indian footwear industry. The six sub-schemes under IFLDP are stated as below:

• Sustainable Technology and Environmental Promotion (STEP): The STEP initiative is aimed at promoting sustainable and environment-friendly industrial and tanning activities, particularly linked to environmental concerns. Considering the environmental issues, zero liquid and wastewater discharge has been made mandatory in some states under this scheme. The scheme also provides assistance for the upgradation of Common Effluent Treatment Plants (CETPs) and preparation of vision documents.

• Integrated Development of Leather Sector (IDLS):

The primary objective of this scheme is to encourage entrepreneurs to diversify and set up new units, leading to better productivity.

• Establishment of Institutional Facilities: The scheme aims to support the infrastructure upgradation of campuses of the Footwear Design and Development Institute (FDDI).

• Mega Leather Footwear and Accessories Cluster Development (MLFACD): The scheme was launched to assist entrepreneurs by providing them with modern infrastructure, technology, training, and inputs related to skill and human resource development.

• Brand Promotion of Indian Brands in Leather and Footwear Sector: The scheme aims to provide international branding support to Indian footwear and leather manufacturers, enabling better product visibility.

• Development of Design Studios: This scheme provides design support, technical assistance, and opportunities for employment and business.

READY FOR THE NEXT PHASE OF GROWTH

By 2030, the footwear sector has the potential to grow up to USD 80 Billion, representing eight times its present size. The unprecedented growth can translate into a source of livelihood for more than 3 Million people. Considering that setting up a production unit in the footwear industry, which is also a green sector, takes as little as six months, including 4-6 weeks of skill development and training, the industry presents significant opportunities for entrepreneurs in the SME segment. With annual demand projected to exceed 10 Billion pairs of footwear by 2040, new entrants can gain immediate traction and scale quickly in a large and expanding market.

Nevertheless, the sector faces its own set of challenges, one of the most significant being the stagnation in production capacity, which stands at ~2.2 Billion pairs of footwear today. A key reason for this is policy focus on Small and Medium businesses, coupled with the tax burden borne by the organised sector, constraining industry growth. This can evolve into a serious issue for the exchequer, considering that India currently lacks the capacity to meet demand beyond the present demand levels. As Indias footwear demand rises, this will result in a significant dependence on imports, particularly from China whose large organised footwear sector is well-known for its abundant production capacity and low cost of production.

As per estimates, if Indias per capita demand for footwear rises to match the current average footwear demand across developed markets by 2030, only 25% of the countrys footwear demand will be met through domestic production at current capacity levels, resulting in significant imports and an annual forex loss of ~USD 55 Billion.

Export Destinations

India exports leather to more than 50 countries. The USA, Germany, the UK, Italy, France, Spain, the Netherlands, China, Belgium, the UAE, Australia, Poland, Hong Kong, Denmark, Canada, Vietnam, and Portugal are among the top importers of leather and leather products from India. The top 15 countries together accounted for about 78.72% of Indias total leather and leather products export during April-June 2025, with an export value of USD 947.46 Million.

During FY 2025-26 (April-June), the USA was the largest importer of leather and leather products from India, accounting for 21.56% of the countrys total leather exports. Exports to the USA were valued at USD 259.47 Million, an increase of 7.96% YoY. During the same period, Germany and the UK imported leather and leather products worth USD 136.93 Million and USD 108.65 Million, respectively, from India, accounting for 11.38% and 9.03% of the countrys total leather exports.

Indias country-wise share of leather and leather products exports in FY 2025-26 (April-June)

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/colours are consistently recognised at the MODEUROP Congress

Footwear Sector

• India is the second-largest footwear producer after China, with an annual production of 3 Billion pairs

• India is also the second-largest consumer of footwear after China, with a consumption of 2.86 Billion pairs (2024)

• Footwear (leather and non-leather) exports accounted for about 40.5% of the Indian leather and footwear industrys total exports in 2024-25

Leather Garments Sector

• India is the second-largest global exporter of Leather Garments

• Leather garment exports accounted for 6.34% of Indias total leather sector exports in 2024-25

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

• The segment represented 23.66% of Indias total leather sector exports in 2024-25

OPPORTUNITIES AND THREATS Opportunities

The Indian footwear market has been witnessing robust growth, driven by a rising urban demand and increasing middle class. India is the second-largest producer and consumer of footwear globally, with a projected production of nearly 3 billion units by 2024. Footwear consumption per capita has increased from 1.7 pairs in 2016 to 2.3 pairs in 2021, reflecting a growing demand.

Indias major production hubs, including Tamil Nadu, Uttar Pradesh, and Maharashtra, ensure a steady supply to meet the demand. The MSMEs account for over 95% of production units, contributing significantly to employment. With a workforce of approximately 1.10 Million people employed in the footwear manufacturing industry, India is well positioned to emerge as a global leader. The countrys footwear exports, including casual shoes, sandals, boots, and moccasins, constitute a large share of global trade, with major markets in the USA, Germany, and the UAE.

The Indian government is also playing a crucial role in stimulating market growth through policies like de-licensing and de-reservation, paving the way for modern production capabilities. Additionally, initiatives such as 100% Foreign Direct Investment (FDI) in the footwear sector and the establishment of Footwear Complexes and Component Parks have bolstered competitiveness, attracting external investments and enhancing the countrys cost advantage.

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

Our core values are deeply embedded across our decision-making and operations, ensuring alignment with our purpose and long-term strategic vision. This foundation enables us to prioritise stakeholder interests while driving sustainable growth and value creation.

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 the following key threats:

Market and Consumer Challenges

• Changing Consumer Preferences: Rising demand for sustainable, eco-friendly, and personalised products force brands to remain agile and responsive to evolving trends and preferences

• Omnichannel Shopping Experiences: Consumers 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: Consumers are increasingly demanding a wider range of product offerings besides expecting prompt shipping and faster deliveries, pressurising 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 are challenged by the need to ensure high-quality workmanship while managing labour costs and navigating diverse labour regulations across different markets

Environmental and Social Challenges

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

• Eco-Conscious Consumerism: Growing eco-consciousness among consumers has led to an increase in demand for eco-friendly products, forcing 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 boost marketing, sales and customer experiences

Industry-specific Challenges

Despite its strong potential, the Indian footwear industry continues to face structural challenges on account of being largely unorganised and fragmented, particularly in key markets like Uttar Pradesh and Tamil Nadu. Modernisation poses another challenge, as despite a rapid industry-wise rise in technology adoption, handmade products continue to dominate the market.

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

• Dependence on Manual Labour: While traditional artisanal craftsmanship and handmade products are deeply valued, reliance on manual labour limits scalability and efficiency

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

• Regulatory Framework: Absence or inadequacy of supportive policies hinders the sectors growth, development and competitiveness

Risk Factors, Concerns and Mitigation Measures

The Company operates in a dynamic macroeconomic, regulatory and geopolitical environment where various external and industry-specific factors may materially impact business performance and the overall footwear industry. Key risks and concerns identified by the Company include:

Economic and Market Risks

• Changes in economic growth trends, inflation, interest rates, fiscal and monetary policies, consumer credit availability and consumer spending patterns may adversely affect demand and profitability

• Geopolitical developments, pandemics, social unrest, military conflicts, terrorist activities and other global disruptions may impact consumer sentiment, supply chains and business operations

Industry and Business Risks

• Intense competition within the footwear industry and the presence of a highly fragmented market structure may affect market share and margins.

• Rapidly changing consumer preferences and fashion trends may impact product demand and inventory management.

• Increasing imports of lower-priced finished footwear may exert pricing pressure on domestic manufacturers.

• Rising occupancy costs for retail stores, warehouses and offices may impact operational profitability.

• Fluctuations in foreign exchange rates may affect the cost of imports, exports and overall financial performance.

The Company recognises that risk is an inherent part of business and has established a comprehensive risk management framework to identify, assess, monitor and mitigate potential risks. The framework is supported by structured processes and internal controls aimed at ensuring business continuity, operational resilience and sustainable growth. The Board of Directors periodically reviews the risk management framework and policies, while the Audit Committee continuously evaluates their adequacy and effectiveness. The Company regularly strengthens and refines its risk management practices to address evolving business challenges and emerging opportunities.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

A comprehensive and well-designed internal control systems framework at MIL ensures 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 the evolving business needs.

Key Components of Internal Control Framework

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

• Audit Committee: Our Audit Committee, comprising Independent Directors, oversees and reviews the effectiveness and adequacy of our internal control mechanisms

• 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

• Statutory Auditors: The Audit Committee consults with our Statutory Auditors and discusses the adequacy of our internal control systems, incorporating feedback to optimise operational efficiency

Internal audit reports are reviewed and discussed by the Audit Committee with the management and suggestions for improvement are made, initiating prompt implementation of corrective actions in business processes. The Audit Committee also ensures that the Board of Directors is regularly informed about significant internal control observations and relevant actions are taken.

HUMAN RESOURCES DEVELOPMENT

We recognise the importance of advancing human resources skills, besides developing competencies and capabilities, to drive business goals. Initiatives that foster talent and nurture leadership are therefore a part of our strategic focus to achieve sustainable business success and uphold our reputation as a world-class organisation.

Key Strengths

• Diverse Talent Pool: We take pride in our diverse talent pool and expertise across varied industry sectors, contributing to MILs high-performance culture

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

• 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 the organisational success

As of March 31, 2026, MIL employs over 1,288 permanent employees, forming a strong foundation for the 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 contractors. Our goal is to maintain a workplace free from accidents and occupational illnesses, ensuring a safe and healthy environment for all.

Resources & Expertise

A team of highly qualified, experienced, and skilled professionals provide the management with strategic guidance and expert support in all matters related to occupational health, safety, and fire-protection. The following initiatives demonstrate our commitment to safety:

• Advanced Safety Technologies: State-of-the-art safety technologies and systems are deployed across all new projects and business expansions to mitigate operational hazards and protect our workforce

• Fire Prevention and Mitigation: Advanced fire prevention and mitigation technologies are implemented to maintain utmost safety across all operational and work areas

• Industry Standards Compliance: Occupational health and safety of our employees is ensured through compliance with highest industry standards, addressing: o General Safety o Occupational Health o Process Safety o Emergency Preparedness

Health & Safety Standards

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

• Employee Safety: We take 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

• Risk Reduction: Measures for ongoing identification and mitigation of potential workplace risks have been implemented to prevent accidents and injuries

• Safe Working Conditions: Consistent emphasis is placed on improving our working conditions to enhance employee safety, well-being and productivity

MANAGEMENT ENGAGEMENT

At MIL, we believe that organisational growth is intrinsically linked to the growth, development and success of its people. Aligned with this philosophy, we are committed to fostering a culture that recognises employee achievements and rewards excellence, while Investing in their continual learning and professional growth.

We are also dedicated to creating a collaborative work environment that encourages employee growth and innovation. Accordingly, right talent is mapped to the right role, enhancing operational efficiency and productivity, besides motivating and empowering employees to utilise their capabilities and contribute meaningfully to business goals.

FINANCIAL PERFORMANCE

Key indicators of the financial performance of MIL for the Financial Year 2025-26 are as follows:

(Rs. in Lakh)

Sr. Particulars	FY 2025-26	FY 2024-25
No.
1. Total Revenue	51,730.91	57,024.52
2. Total Expenses excluding Finance Cost & Depreciation	49,563.70	53,556.04
3. EBIDTA (Earnings before Interest, Depreciation & Tax)	2,167.21	3,468.48
4. Finance Costs	674.02	902.22
5. Depreciation and Amortisation Expense	3,091.56	3,040.07
6. Profit/ (Loss) before Exceptional items (3-4-5)	(1,598.36)	(473.81)
7. Add: Exceptional Items [Gain (+)/ (Loss) (-) ]	1,861.45	-
8. Profit/ (Loss) from Continuing Operations Before Tax (6-7)	263.09	(473.81)
9. Less: Tax Expense	(50.00)	75.00
10. Profit/ (Loss) from Continuing Operations After Tax	213.09	(398.81)
11. Profit/ (Loss) from Discontinued Operations After Tax	-	-
12. Profit/ (Loss) for the year after Tax	213.09	(398.81)
13. Other Comprehensive Income / (Loss)	(115.90)	(144.60)
14. Total Comprehensive Income (12+13)	97.19	(543.41)
15. Basic EPS (per share of _2/-) (in )	0.15	(0.29)
16. Diluted EPS (per share of _2/-) (in )	0.15	(0.29)

Segment-wise Performance & Review of Operations

(Rs. in Lakh)

Segment Revenue	FY 2025-26	FY 2024-25
a. Footwear – Domestic & Export Sale	44,477.59	51,313.60
b. Tannery – Domestic & Export Sale	11,140.47	10,358.91
Total	55,618.06	61,672.51
Unallocated	1,969.67	66.12
Total	57,587.73	61,738.63
Less: Inter-segment Revenue	3,995.37	4,714.11
Total Revenue	53,592.36	57,024.52

(Rs. in Lakh)

Segment Profit / (Loss)	FY 2025-26	FY 2024-25
a. Footwear – Domestic & Export Sale	1,079.79	3,487.22
b. Tannery – Domestic & Export Sale	(1,010.16)	(1,915.60)
Total	69.63	1,571.62
Unallocated	1,969.67	66.12
Total	2,039.30	1,637.74
Less: Interest	674.86	902.22
Less: Unallocated	1,101.35	1,209.33
Profit / (Loss)from continuing operations before Tax	263.09	(473.81)

Details of significant changes in key financial ratios along with explanation

Change of 25% or more in the key financial ratios of the Company for financial year 2025-26 as compared to financial year 2024-25, is mentioned below along with the explanation:

Details	FY 2025-26	FY 2024-25	Variation (in %)	Explanation
Interest Coverage Ratio	1.39	0.47	195.74%	Due to reduction in borrowings during the year interest payment has been reduced which impacted the ratio positively.
Current Ratio	4.06	2.51	61.75%	The variation in Current Ratio as compared with previous year is mainly on account of increase in current assets during the _nancial year.
Debt Equity Ratio	0.00	0.09	100.00%	The Debt-Equity Ratio has varied by 100% during FY 2025-26 as compared to FY 2024-25 primarily due to signi_cant reduction in debt levels during the year. Pro_tability improved signi_cantly due to exceptional / extraordinary income recognised during the year, which materially impacted the margins and return ratios.
Operating Pro_t Margin (%)	1.82	0.75	142.67%
Net Pro_t Margin (%)	0.41	-0.70	158.57%
Return on Net Worth	0.45	-0.86	152.33%

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.