Nahar Industrial Enterprises Ltd Management Discussions

The global economy in 2026 is expected to achieve growth of 3.4% compared to 3.3% in the preceding year. This momentum was sustained despite headwinds from escalating tariffs, heightened policy uncertainty and rising geopolitical frictions. The geopolitical risks reemerged as a dominant drag on late-2026 growth with the outbreak of conflict in West Asia in late February 2026 has introduced renewed volatility, casting uncertainty over global growth trajectories and inflation forecasts.

Defying global uncertainties, Indias GDP growth is estimated at 7.6 per cent for 2025- 26 up from 7.1 per cent in the previous year, supported by sustained growth across manufacturing, services and infrastructure sectors reflecting the economys ability to adapt to evolving global conditions. Although the imposition of US tariffs initially triggered concerns, their overall impact remained muted, with net exports exerting a modest drag of 0.1 percentage points on growth. With continued geopolitical tensions, inflation faces upside risks. The surging energy prices and disruptions in key shipping routes could intensify supply-side pressures (Source: Reserve Bank of India Annual Report 2025-26).

The industry outlook for FY27 remains uncertain, with growth drivers intact but near-term performance constrained by demand uncertainty, input cost volatility and geopolitical disruptions. A broad-based recovery will depend on revival in global consumption and export markets. Recent Free Trade Agreements (FTAs) with the EU and UK are likely to enhance market access and improve export competitiveness for Indian players. Against the backdrop of a moderate global growth, the outlook for the Indian economy in 2026-27 remains positive, supported by strong macroeconomic fundamentals, although a prolonged West Asia conflict may pose downside risk.

Indias textile industry features a versatile manufacturing capacity, capable of serving diverse domestic and global market segments. India is the 6th largest exporter of Textiles and Apparel in the world in 2024. The share of textile and apparel, including handicrafts, in Indias total exports stands at a significant 8.63% in 2024-25. India accounts for 4.1% of global trade in textiles and apparel. The USA and EU are the major export destinations, together contributing around 49.2% of Indias total textile and apparel exports. The sector is also significant from an employment perspective. It provides direct employment to around 45 million people and source of livelihood for over 100 million people indirectly, including a large number of women and rural population. The sector aligns perfectly with Government initiatives such as Make in India, Skill India, Women Empowerment and Rural Youth Employment. (Source: Ministry of Textile Annual report 2025-26)

The Government has introduced several initiatives to strengthen the sectors competitiveness, including PM Mega Integrated Textile Regions and Apparel (PM MITRA) Parks Scheme to create a modern, integrated, world class textile infrastructure; Production Linked Incentive (PLI) Scheme focusing on MMF Fabric, MMF Apparel and Technical Textiles to boost large scale manufacturing and enhancing competitiveness; National Technical Textiles Mission focusing on Research Innovation & Development, Promotion and Market Development; SAMARTH - Scheme for Capacity Building in Textile Sector with the objective providing demand driven, placement oriented, skilling program; Silk Samagra-2 for comprehensive development of sericulture value chain; National Handloom Development Program for end to end support for handloom sector.

Further, India has signed 16 Free Trade Agreements (FTAs), including the recently signed India-Oman FTA and has concluded FTA negotiations with New Zealand and the European Union. These FTAs aim to reduce tariff and non-tariff barriers, simplify trade procedures and address structural constraints thereby improving market access and making Indian exports more competitive in partner markets. Due to several reforms undertaken to enhance the competitiveness of the domestic textile and apparel industry, Indias import dependency in the Textile and Apparel sector, including Ready-Made Garments has reduced significantly. (Source: Press information Bureau)

Indias textile and garment industry faces critical challenges, including fluctuating raw material costs, geopolitical supply chain disruptions and intense competition from low-cost hubs, combined with a fragmented manufacturing base and tightening global sustainability requirements.

China remains the dominant global leader, while Bangladesh and Vietnam rapidly absorb global market share with greater economies of scale. Increased international oversight regarding labour and forced labour in supply chains puts Indian textile and spinning facilities under immense scrutiny. The proposal highlights growing pressure on exporters to prove transparent, risk-free sourcing in global value chains.

The depreciation of the Indian rupee is likely to create many economic challenges for the country in the future and will negatively affect all sectors of economic development. Ongoing geopolitical disturbances continue to disrupt key export markets, particularly in Western economies. The escalation of conflicts in the Middle East along with the prolonged Russia-Ukraine situation has led to volatility in energy prices, supply chains, and global trade flows. Due to the ongoing war in West Asia, crude oil prices are continuously rising. Increase in crude oil prices and disruptions in key shipping routes have elevated input and logistics costs and also weakening consumer sentiment across major markets. In addition, rising protectionist measures and trade restrictions across major economies are further impacting export opportunities, as countries prioritize domestic industries and impose stricter import regulations. The central government needs longterm economic planning to effectively address these challenges.

Cotton, which fuels over half of Indias textile economy, remains highly vulnerable to climate instability and erratic yields, leading to unpredictable pricing. Events like the West Asia conflict and Red Sea shipping disruptions have severely impacted timely exports to European and Middle Eastern markets.

Cotton is one of the most important cash crops of the country and is the major raw material for the domestic textile industry. It provides sustenance to millions of farmers and workers involved in the cotton industry, right from processing to trading of cotton. India has become one of the largest producers, consumers and exporters of cotton in the world. India has the largest acreage with 110.86 lakh hectares under cotton cultivation, i.e. around 36% of the worlds area of 304.14 lakh hectares. Approximately 62% of Indias Cotton is produced on rain-fed areas and 38% on irrigated lands. Apart from being the provider of a necessity of life i.e. clothing which is next only to food, cotton is also one contributors to Indias net foreign exchange by way of exports in the form of raw cotton, intermediate products such as yarn and fabrics to ultimate finished products in the form of garments, made ups and knitwear. Due to its economic importance in India, it is also termed as "White-Gold". Cotton plays a major role in sustaining the livelihood of an estimated 6 million cotton farmers and 50 million people engaged in related activities such as cotton processing and trade.

Cotton occupies a unique position in Indias agricultural and industrial economy. India ranks first globally in acreage and second in production and consumption. Cotton production stood at 290.91 lakh bales in 202526 (provisional). The sector contributes nearly 19 percent of global fibre production. Recent interventions of Government, focus on productivity, quality, market access and value addition. MSP operations continue to provide price support during market downturns. The Mission for Cotton Productivity aims to raise output to 498 lakh bales by 2031. Technology demonstrations, digital procurement and traceability initiatives are strengthening competitiveness. These efforts are enhancing productivity, improving quality and reinforcing Indias position in the global cotton economy. (Source: Ministry of Textile Annual report 2025-26 and Press Information Bureau)

The Government of India ensures availability of cotton to Textile Industry through a mechanism namely committee on cotton promotion and consumption (COCPC). Cotton Balance sheet for the cotton season 2025-26 (Provisional) as drawn by COCPC is as under:

Post-Covid demand of textile products surge, thereafter the textile sector faced a difficult period between FY 2022 and FY2026 due to high inflation, weak consumer spending, retailer inventory corrections, high freight costs and tariff-related uncertainties. However, in FY 2025-26, demand has gradually started stabilising, supported by inventory normalisation, easing inflation and lower tariffs aiding recovery across major textileexporting countries.

With India accounting for only around 4% of global apparel trade, substantial market share opportunities remain as global brands diversify sourcing beyond China. After the free trade agreement with EU and UK, Textile industry may get a duty advantage placing Indian exporters on a more level playing field with competitors such as Bangladesh and Vietnam.

Indias large spinning capacity, strong cotton availability, low-cost labour and growing base of large exporters make it an attractive sourcing destination for global retailers. Government initiatives such as the PM MITRA scheme, Production Linked Incentive (PLI) scheme and ATUFS are also supporting investments across the sector.

Favourable trade agreements, improving tariff competitiveness in key export markets and the China plus one sourcing shift are supporting a strong recovery in Indias textile industry. With household incomes rising, urbanisation expanding, and demand from sectors like housing, healthcare, and hospitality growing steadily, Indias textile and apparel market is projected to reach US$ 350 billion by 2030. This positions India not only to strengthen its domestic market but also to expand its global footprint in textiles and apparel. (Source: ibef.org/ news)

The ongoing West Asia crisis could have a mid-term impact on margins due to higher energy and logistics costs. We believe domestic players would be able to absorb future shocks too. The future of Indias textiles industry looks promising, supported by rising domestic demand, growing exports, and policy interventions that are strengthening competitiveness.

Sugar is Indias second largest agro-based industry after Textiles. Indian sugar industry is characterized by the coexistence of private, cooperative and public sector. It is rural centric and supports over 50 million farmers and their families. It has tremendous transformational opportunities to meet the countrys food, fuel and power needs in an eco-friendly manner and on a sustainable basis and finely fits into the Aatma Nirbhar Bharat mission of the Government of India.

The Government of India has undertaken a comprehensive review of the Sugar (Control) Order, 1966, leading to the formulation of the Sugar (Control) Order, 2025. This revision aims to simplify and streamline the regulatory framework governing the sugar sector in line with current industry dynamics and technological advancements. The Objective of the Sugar (Control) Order, 2025 is a step toward building a more efficient, transparent, and accountable sugar ecosystem, fostering both domestic stability and global competitiveness. As per ISMAs latest estimates, net sugar production at around 279 Lakh Metric Tonnes (LMT) against domestic consumption of 280-285 LMT with closing stock projected at around 35 LMT. (Source: Indian cooperative.com/news)

The Indian sugar industry faces challenges of climate risks, policy-driven economic challenges and production inefficiencies. Sugarcane yields heavily depend on monsoon patterns. Erratic rainfall, prolonged waterlogging, and El Nino-induced droughts significantly damage crop output and reduce sugar recovery rates. Indias sugarcane yield per hectare remains relatively low compared to global peers like Brazil, largely due to fragmented landholdings and lack of advanced farming technologies. Outbreaks and pest attacks continuously threaten crop acreage and quality. Short crushing seasons, outdated mill machinery and labour- Intensive harvesting methods drive up the overall cost of production. Sugarcane is an extremely water-intensive crop, leading to groundwater depletion in key cultivating states.

The mismatch between sugar prices and sugarcane costs affecting the performance of sugar industry. Sugar is a tightly controlled and rigorously regulated business, both by the Centre & State Governments. Mill owners grapple with paying government-mandated Fair and Remunerative Prices (FRP) to farmers, while the Minimum Support Price (MSP) for sugar has failed to keep pace with these escalating cultivation and production costs.

Indias sugar surplus is shrinking. This could keep India out of global sugar export markets. The government frequently imposes sugar export limits to prioritize domestic food security, which deprives mills of potentially lucrative global market margins.

Heavy reliance on monsoon rainfall, coupled with rising transportation costs, poses significant risks to sugarcane cultivation and supply stability. Excessive production without adequate export channels can depress sugar prices, reducing industry revenues. The sector remains highly susceptible to shifts in government regulations and policies, which can directly affect operations and and long- term planning.

The sugar industry is entering a new phase as it accelerates ethanol production, positioning itself at the centre of Indias renewable energy transition. Ethanol presents an elegant value chain for sugar industry.

Absorption of surplus cane through alternative route of direct ethanol production thus assumes added significance. The sector has ample room to expand into value- added products and by products, opening new revenue streams and reducing reliance on traditional sugar sales. With government-led renewable energy initiatives, the industry has significant scope to meet increasing demand for ethanol, strengthening both energy security and farmer incomes. Overall, the Indian sugar industry is evolving into a more diversified and resilient sector, balancing sugar production with bio-energy opportunities and emerging as both an agricultural and energy powerhouse. Cogeneration and Ethanol have turned significant value creators to soften the adverse fall out of sugar surplus.

Indias rising population continues to drive higher consumption of sugar, ensuring a strong and growing home market. India has a low per capita consumption of sugar with growing income. Its large domestic market provides a strong platform to leverage local production for capturing global market.

The company is having adequate internal financial control systems and procedures which commensurate with the size of the company. The Company is having internal audit department which ensures optional utilization and protection of companys resources. The internal Auditors monitor and evaluate the efficiency and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and also ensure that the internal control systems are properly followed by all concerned departments of the company. Significant audit observations and corrective actions taken thereon are presented to the Audit committee of the Board.

The company is of firm belief that human resources are the driving force that propels a company towards progress and success and the company is committed to the development of its people. Your company is committed towards building a safe work place with underling safe work practice. The total employees strength was 6066 as on 31.03.2026. The industrial relations were cordial and satisfactory.

Though the statement and view expressed in the said report are on the basis of certain assumptions and best judgment but actual results could differ from whatever is stated in the report. Important factors that could make a difference to the Companys operation include global demand-supply conditions, finished goods prices, raw material cost and availability, changes in government regulations and tax structure, economic development within India and the Countries with which the Company has business. The Company assumes no responsibility in respect of forward looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events.