Nahar Spinning Mills Ltd Management Discussions

The Prevailing Geo political uncertainties, ongoing conflict between Ukraine & Russia, strained relation among several countries and inflationary pressure, have impacted the economies of the World. The imposition of Tariff plus Penalty by the United States, on exports of several countries has impacted Global Trade and World Economies are going to witness a downward trend. As per World Economic Outlook (issue April, 2025), Global Growth is projected to drop to 3 percent in 2026. Inspite of several Global Challenges, India, worlds fourth largest Economy, has emerged as the fastest growing economy, projected to grow at 6.50 % for FY 2026 (as per RBI). PM vision of Atmanirbhar Bharat has promoted Innovation, Entrepreneurship and New Technology, which will help Indian Economy to grow at a faster rate in comparison to the other large economies of the world, which are facing difficult times. India is on the track to become the Third largest economy by 2030.

To put the Indian economy on the faster pace of growth and sustainability development, Government introduced several path breaking initiatives and policies in the area of Infrastructure, Social Welfare and Health Care sector to support the economic activities.

Moreover, India has already Signed Free Trade Agreement (FTAs) or Comprehensive Economic Partnership Agreements (CEPAs) with several countries like United Kingdom, Sri Lanka, Nepal, Bhutan, Maldives, Thailand, Singapore, Malaysia, Japan, South Korea, Mauritius, United Arab Emirates (UAE), Australia, ASEAN bloc (10 nations under goods / services / investment FTA), which will help the country to boost its exports to these countries. The negotiation with the European Union, Canada and others are still going on and we are hopeful that agreement will be finalized shortly and will benefit the Indian Economy to grow at much faster rate.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Despite global uncertainties, Indias textile and apparel sector demonstrated resilience and adaptability, maintaining competitiveness on a global scale. India is the worlds 3rd largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$100 billion by FY 2030.

The Textile Industry continues to play a dominant role in the economic growth of the country. Its importance is evident from the fact that it is the largest contributor towards employment generation employing 4.5 Crores workers directly & indirectly, contributing 13% to Industrial Output and 12% to Export earnings. The textiles and apparel industry also contribute 2.3% to the countrys GDP. The textile industry in India is projected to double its contribution to the GDP, rising from 2.3% to approximately 5% by the end of this decade. The market for Indian textiles and apparel is projected to grow at Compound Annual Growth Rate (CAGR) of 10% to reach U S $ 3 5 0 b i l l i o n b y 2 0 3 0 . ( S o u r c e : https://www.ibef.org/industry/textiles)

The Government is also conscious of the importance of the Textile Industry and has introduced several schemes to enhance textile production, boost investments and promote exports. The Union Budget announced an outlay of Rs. 5,272 Crores for the Ministry of Textiles for 2025-26. This is an increase of 19% over budget estimates of 2024-25 (Rs. 4,417.03 Crores) and will help the Textile industry favorably. Bharat Tex 2025, Indias largest global textile event, was successfully organized from 12-15 February, 2025 at India Expo Centre and Mart, Greater Noida and from 14th to 17th February, 2025, at Bharat Mandapam, New Delhi. Bharat Tex 2025 served as a platform to accelerate the governments "Farm to Fibre, Fabric, Fashion and Foreign Markets" vision. The event demonstrated Indias leadership in the textile sector and its commitment to innovation, sustainability and global collaboration.

We are hopeful that the Government through its monetary and other policy initiatives will also support the industry in their difficult times so that it could meet the challenges and emerge as a winner.

In line with the global trends and to remain competitive, your company is also going in for modernization of its spinning units at various locations, by adding ultra-modern machineries at a capital outlay of Rs. 325 Crores (approx.). The company is also putting up 11 M.W. Solar PV System at a capital outlay of Rs. 25 Crores, for its own consumption. This will help the company in improving quality as well as operational efficiencies and will enable the company to diversify and increase its exports to quality conscious markets of U.S. and European Union.

OPPORTUNITIES AND THREATS

The textile industry faces a mix of challenges as well as opportunities. The industry has the opportunity for growth through various Free Trade Agreement (FTAs )/ Comprehensive Economic Partnership Agreements (CEPAs) with several countries which will help the country to increase its exports.

The rapid growth of retail sector and with the entry of several international & domestic players like GAP, Mark & Spencer, Amazon, Reliance Retail etc. in the Indian markets is going to boost the domestic markets. Moreover, the growing consumerism and household income will also add to the fortunes of the textile industry.

Presently, China is a major exporting country to the World Economies and has 30% share of Global Textile Market. Because of strained relations between U.S. and China, importing buyers are interested in reducing their dependence on one country and they have started following China plus One Policy. Thus, China plus One is a Golden opportunity to the textile industry. India should capitalize on this opportunity and present itself as a credible alternative. India certainly has an edge to be an alternative manufacturing hub for global players as two major things required to run textile Industry are cotton and skilled work force and they are abundantly available in the country. The Government is also providing supportive environment to further enhance and modernize capabilities and establish India as a global Market Hub for International Buyers.

Though the future of textile is bright but the industry also faces some challenges too. The key challenge is the recently imposed Trade Tariff of 25% plus penalty by the U.S. on Indias exports. This is going to affect countrys exports of textile products to U.S. We hope that India will renegotiate the trade deal with the U.S. and the matter will be resolved in the coming periods. We feel that trade tariff is likely to act as short-term deterrent rather than a structural disruption in the Global Trade. To mitigate the impact of High Trade Tariffs industry must diversify into alternative export markets such as Latin America, Africa and South East Asia so that the negative impact on exports is nullified.

The other key challenge is to focus on the manufacturing excellence. The textile industry is a fragmented industry and is not spending required capital on R&D and ultra-modern machinery so that it can produce highly quality products and ensure cost effective production. The industry must make investment in product innovation and R&D which will help the industry to export its products to quality conscious markets of U.S. and European Union.

We are of the opinion that India continues to offer several advantages - availability of good quality raw cotton, skilled and cost effective manpower, stable policy environment, diverse textile offering which would continue to attract Global companies to shift their manufacturing base to India.

FUTURE OUTLOOK

The future of the Textile industry seems to be good. Though there are some short term set back in the form of

U.S. Tariffs of 25% plus penalty on Indias export to U.S. which will make Indias export costlier as compared to Bangladesh, Vietnam, and Indonesia etc. as they are having lower tariff on their exports. We are hopeful that things will settle shortly and industry will establish itself as a global manufacturing hub for the International buyers.

Besides, Free Trade Agreement (FTA)/Comprehensive Economic Partnership Agreements (CEPAs) with several countries which will play an important role in increasing the textile export to these countries. Your management is looking at the future with optimism and expects improvement in global scenario in coming periods, which will give relief to the Textile Industry. We expect that in this challenging period, Government will support the Spinning industry in the form of favorable Textile policies, incentives and other benefits which are of paramount importance for the future growth of the Industry.

RISK AND CONCERNS

No industry is free from normal business risk and concerns. Indian Textile Industry continues to face stiff competition from small countries like: Bangladesh, Taiwan, Vietnam and other emerging economies. The recently imposed Trade Tariff by the U.S.A on Indian exports is a serious setback for the Industry. This is going to affect Indias exports of textile product to U.S. We hope that India will renegotiate the trade deal with the U.S.A and the matter will be resolved shortly. We feel that the trade tariff is likely to act as short-term deterrent rather than a structural disruption. The country must also diversify and increase its exports to other countries so that it can meet the challenges.

The relative competitiveness of Industry is dependent upon the raw cotton prices, exchange rates and prevalent interest rates regime. The primary raw material for the manufacturing of yarn is cotton which is an agriculture produce. Its supply and quality are subject to forces of nature i.e. Monsoon. Any significant increase in the prices of raw cotton will make things difficult for the Textile Industry resulting weak demand and thin margins. So availability of raw cotton at the reasonable prices is crucial for the spinning industry. Any significant change in the raw cotton prices can affect the performance of the Industry.

The high rate of interest and electricity cost are affecting the financial performance of the Textile Industry. The Spinning industry being more capital intensive requires huge funds, long term as well as short term in the form of working capital for its running. The Government must support the industry by providing finance at lower interest rates so that the industry remains financially viable. Likewise the government should also provide the

Electricity at concessional rate to the industry so that it can compete in the global markets.

The prevailing geo political situations coupled with Trade Tariff by U.S. has caused supply chain disturbance and has affected global trade. The future is still uncertain and no one knows where it will lead to us? Thus, your Company considers it a possible risk and concern to the Industry.

In addition to the above, the other concerns like higher transaction costs, increasing labour cost and prices of raw material are posing risks to the growth of Indian Textile Industry. The Government should extend a helping hand to the existing Textile Units so that they can become globally competitive and contribute towards the growth of the country.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company is maintaining an efficient and effective system of Internal Financial Control for facilitation of speedy and accurate compilations of financial statements. The Companys Internal Financial Control System is designed to ensure operational efficiency, protection and conservation of resources, accuracy and promptness in financial reporting and compliances with procedures, laws and regulations. The Companys Internal Control System commensurate with the nature of its business and size of its operations. In order to further strength the Internal Control System and to automate the various processes of the business, Company is making use of SAP S4 HANA application, which is based on SAP HANA database. It keeps all the data in memory which results in data processing that is magnitude faster than that of disk based system, allowing for advanced, real time analytics.

The Company has appointed M/s. Raj Gupta & Co., Chartered Accountants, as Internal Auditors of the Company. The company is also having internal audit department to test the adequacy and effectiveness of Internal Control Systems laid down by the Management and suggests improvement in the systems. Internal Audit Reports are discussed with the Management and are reviewed by the Audit Committee of the Board. During the year under review, companys Internal Controls were tested and no reportable weakness in the system was observed.

Apart from the above, an Audit Committee consisting of three Non Executive Directors has been constituted. All the significant audit observations and follow up Actions thereon are taken care by the Audit Committee. The Audit Committee also oversees and reviews the adequacy and effectiveness of Internal Controls in the company. The

Audit Committee met four times during the financial year under review. The company has also established a Vigil Mechanism as per Section 177(9) of Companies Act, 2013 read with Rule 7 of the Companies (Meeting of Board and its Powers) Rules, 2014.

SEGMENT WISE OR PRODUCT WISE FINANCIAL OPERATION AND PERFORMANCE

The Company is operating in single segment only i.e. Textile. Inspite of prevailing Geo-Political situations and Global Challenges, your Company has been able to improve its performance during the year under review. The Company achieved a total income from operations of Rs. 3318.91 Crores showing an increase of 8.26% over the previous year. Likewise, the export at Rs. 1634.53 Crores has also shown an increase of 0.58% when compared with the previous year. The profitability of the Company has substantially improved and it earned EBITDA of Rs. 195.79 Crores as against of Rs. 99.11 Crores in the previous year. After providing depreciation of Rs. 95.22 Crores and finance cost of Rs. 74.20 Crores, company earned a profit of Rs. 26.37 Crores as against a loss in the previous year. After providing tax expense (including deferred tax charge) of Rs. 8.78 Crores and CSR expenses of Rs. 5.24 Crores, the net profit comes to Rs. 12.35 Crores.

The detailed performance has already been discussed in the Directors Report under the column Operational Review and State of Affair.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS

Beyond Balance Sheet lies Companys singly biggest Asset Human Resources. The Company is of firm belief that the Human Resources are the driving force that propels a Company towards progress and success. The Company continued its policy of attracting and recruiting the best available talent so that it can face business challenges ahead. The Company also offers attractive compensation packages to retain and motivate the professionals so that they can give their best.

The total permanent employees strength of the Company was 10497 as on 31st March, 2025. The industrial relation continued to remain cordial during the year.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

The SEBI (LODR) Regulations, 2015 has mandated that Company should provide detail of Significant Changes in Key Sector Financial ratios. We would like to inform you that in the following key financial ratios, there have been Significant Change as compared to the last year:

Particulars	Financial Year 2024-25	Financial Year 2023-24
INTEREST COVERAGE RATIO	1.22	0.90
NET PROFIT MARGIN RATIO	0.38	-1.67
RETURN ON CAPITAL EMPLOYED	0.03	0.00
RETURN ON EQUITY RATIO	0.01	-0.03
TRADE PAYABLE TURNOVER RATIO	81.55	43.50

The company has been able to put up reasonably good performance during the year under review. The Interest coverage ratio, Net Profit Margin Ratio, Return on Capital Employed and Return on Equity Ratio have improved due to better profitability as compared to the previous year. Likewise increase in Trade Payable Turnover Ratio is because of decrease in purchases.

Your management is quite optimistic that with the recovery in the Global Trade company will be able to perform better in the coming periods.

CAUTIONARY STATEMENT

Though the statement and views expressed in the above said report are on the basis of best judgment but the actual future results might differ from whatever is stated in the report.

For and on behalf of the Board of Directors
	Jawahar Lal Oswal
Place: Ludhiana	(Chairman)
Dated: 31 July, 2025	Din: 00463866