Nahar Spinning Mills Ltd Management Discussions

ECONOMIC SCENARIO

The prevailing geopolitical situation, ongoing West Asia and Russia-Ukraine conflict and U.S-Tariff on imports from several countries has affected the economies of the world . The advanced economies growth, remained subdued whereas emerging economies continues to drive global growth supported by steady domestic demand and increased expenditure on infrastructure. Overall, the Global outlook, remain uncertain as evolving trade policies, inflationary pressures and slower economic activity in several major economies are affecting investment decisions and overall business sentiment. Rising protectionist measures and tariff-related developments has created additional challenges for export-oriented industries, including textiles.

Inspite of Global challenges and risks, Indian economy continued to demonstrate resilience and remained one of the fastest-growing major economy in the world. India has strengthened its position as one of the largest economies globally and continues to progress towards becoming the third-largest economy by 2030. According to the Reserve Bank of India (RBI), the Indian economy is projected to grow at around 6.5% during FY 2025 26, supported by strong domestic demand, infrastructure development, favourable demographics and policy reforms.

The Government of India continues to focus on strengthening economic growth through initiatives aimed at improving infrastructure, manufacturing capabilities and make ATAM NIRBHAR BHARAT. Initiatives such as PM Gati Shakti, which promotes integrated infrastructure development and improved logistics connectivity, and National Manufacturing Mission, aimed at enhancing manufacturing competitiveness, technology adoption and investment, are expected to provide further momentum to industrial growth. These measures are likely to improve supply chain efficiency, reduce logistics costs and support Indias manufacturing and export sectors. The Government also continues to promote exports through various policy measures, including trade facilitation, export promotion schemes and initiatives to enhance global competitiveness. India remains well positioned to navigate global uncertainties and achieve sustainable economic growth in the coming period.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian textile and apparel industry continued to demonstrate resilience and strengthen its position in the global textile value chain during FY 2025 26. India remains one of the worlds largest textile producers and among the leading exporters of textiles and apparel, supported by its integrated manufacturing ecosystem, strong raw material availability, skilled workforce and established presence across the entire textile value chain.

The Indian textile and apparel industry is estimated to have reached a market size of around US$190 billion during FY 2025 26 and is expected to grow to approximately US$350 billion by 2030, representing a growth trajectory of around 10% CAGR. The Governments vision is to enhance Indias textile and apparel exports, supported by increasing global sourcing opportunities, technological advancement, sustainable manufacturing practices and policy support.

To achieve these objectives and enhance the competitiveness of the textile sector, the Government of India continued to undertake various initiatives including the Production Linked Incentive (PLI) Scheme for Textiles, which aims to promote investments. PM Mega Integrated Textile Regions and Apparel (PM MITRA) Parks Scheme, which focuses on developing integrated textile manufacturing ecosystems with modern infrastructure and efficient logistics and the National Technical Textiles Mission, which promotes research, innovation and development of high-performance textile products. These initiatives are expected to encourage investments, improve productivity, enhance value addition and strengthen Indias position in global textile markets.

In line with industry trend and to remain globally competitive, company continues to focus on modernization, technological upgradation and sustainable manufacturing practices. The Company has undertaken modernization of its spinning units at various locations by adding ultra-modern machines with a capital outlay of approximately 325 Crores . The Company has already spent Rs. 170 crores on the modernization programme and the work is progressing as per schedule and it is expected to be completed by financial year 2027-2028. This will help the company in improving product quality, enhancing operational efficiencies, optimising resource utilisation and strengthening the Companys competitiveness in domestic as well as international markets. During the year, Company has also put up Roof Top Solar System with the capacity of 6.60 MW, thereby increasing its total capacity to 19.874 M.W . This will not only provide clean and green energy but will also help in reducing dependence on conventional energy sources, lower carbon footprint and contribute towards the Companys long-term sustainability objectives.

OPPORTUNITIES AND THREATS

The Indian textile industry witnessed a gradual recovery during FY 2025 26, supported by improving domestic and export demand. A key structural development during the year was the rationalisation of the domestic spinning sector, with nearly 10 12 million older, unorganised spindles (around 20% of the installed capacity) being phased out due to financial stress, cyclical challenges and rising electricity costs. This has improved the demand-supply balance, strengthened pricing discipline and created favourable opportunities for organised and integrated manufacturers.

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. The FTA agreement with United Kingdom has become operational with effect of 15 July, 2026, which has lifted quota for the textile products and this will lead to increase in exports to United Kingdom.

In spite of favourable climate for textile industry, there are some threats in view of US fresh tariffs ranging from 10-12% on imports from about 60 trading partners, including India, citing inadequate enforcement of bans on goods produced using forced labour. India has been placed in lower tariff category of 10%. The earlier temporary 10% surcharge imposed by U.S. on most Indian goods has already expired on 24 July, 2026 and thus India has not been handed a fresh tariff of 10% shock but it has not received any relief either. One levy of the 10% has been replaced another levy and thus the immediate rate is broadly where it was earlier .The real challenge lies in the fact that how long the tariff could last and how India is treated against competing countries which are exporting to U.S. India is in the process of negotiating trade agreement with the U.S. and it is expected to finalise the same shortly. We are hopeful that the concern of 10% tariff will be taken care of by the government while finalising trade agreement with the U.S.

Further, the threat of increasing import duties, trade tariffs or other trade restrictions are also posing threat to the Textile Industry. This will reduce the competitiveness of Indian textile products by increasing their landed cost in international markets, leading to lower export demand, diversion of orders to competing countries, pressure on pricing and margins. The industry also continues to face pressure from rising electricity tariffs, labour costs, logistics expenses and other conversion costs which in return impacting operating margins. Further, uncertainties relating to global economic conditions, geopolitical developments and changes in trade policies or procurement patterns by key importing countries may affect export demand and pricing. The Company continues to mitigate these risks through operational efficiencies, product diversification, prudent working capital management and an increased focus on value-added products.

FUTURE OUTLOOK

Inspite of prevailing Geopolitical situation, West Asia and Russia-Ukraine conflict, the future outlook of the Indian textile industry remains positive, supported by increasing domestic consumption, technological advancement, modernization of manufacturing facilities, and growing demand for sustainable and value-added textile products. Though the industry may face short-term challenges due to global economic uncertainties, fluctuations in cotton prices, evolving trade policies, and competitive pressures but the long-term growth prospects remain encouraging.

The Government initiatives aimed at strengthening textile manufacturing, promoting investments, and enhancing export competitiveness are expected to provide further support to the sector. The Company remains optimistic about the future prospects of the industry and continues to focus on modernization, operational efficiency, sustainability, and quality enhancement initiatives to strengthen its position in domestic as well as international markets. Notably, the industrys prospects are significantly bolstered by several strategic trade agreements signed during FY 2025 26, including the India-UK CETA (signed July 2025; operative July 15, 2026), India-Oman CEPA (signed December 2025; effective June 2026), India-EU FTA (signed January 2026), India-New Zealand FTA (signed April 2026), and the framework for an interim trade agreement with the United States (delivered February 2026). These trade agreements are expected to enable the industry to avail better global opportunities and contribute to the growth of the industry. Though the expected future Scenario for textile industry is positive nevertheless the adverse effect of West Asia War and Russia Ukraine War cannot be ruled out.

RISK AND CONCERNS

No industry is free from normal business risks and uncertainties. The Indian textile industry continues to face intense competition from major textile exporting countries such as Vietnam, Bangladesh, Pakistan and other emerging economies, which have competitive manufacturing costs and established export capabilities. This competitive environment puts pressure on Indian textile manufacturers to continuously improve productivity, enhance quality, adopt advanced technologies and focus on cost efficiency to maintain competitiveness in global markets.

The evolving global trade environment, including tariff-related developments and changing policies in major export markets, remains a key concern for the industry. Such factors may impact export competitiveness, pricing and order flows in the short term. The spinning industry also remains exposed to volatility in raw cotton prices, which are influenced by monsoon conditions, crop output and global demand-supply dynamics. Any significant increase in cotton prices may impact production costs and margins. Other challenges include high financing costs, rising electricity and labour expenses, increasing compliance requirements and global economic uncertainties.

To address these concerns, the industry needs to focus on continuous modernization, adoption of advanced technologies, improvement in productivity and diversification of export markets. The Companies should enhance operational efficiency, invest in sustainable manufacturing practices and develop value-added products to remain competitive in global markets. The Governments continued support through favourable policies, incentives, affordable financing, improved infrastructure and measures to reduce input costs will play an important role in strengthening the competitiveness and long-term growth of the textile industry.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an effective and robust Internal Financial Control System commensurate with the nature, size and complexity of its operations. The internal control framework is designed to ensure operational efficiency, protection and optimum utilization of resources, accuracy and reliability of financial reporting, and compliance with applicable laws, regulations and internal policies.

To strengthen and automate business processes, the Company continues to leverage technology through the SAP S/4 HANA application, enabling faster data processing, real-time reporting, improved monitoring and enhanced decision-making capabilities. The Company has established adequate systems and procedures to identify, assess and mitigate operational and financial risks.

The Company has appointed M/s. Raj Gupta & Co., Chartered Accountants, as Internal Auditors. The Internal Audit function regularly reviews the adequacy and effectiveness of internal controls, evaluates compliance and suggests improvements wherever required. The Internal Audit Reports are reviewed by the Management and significant observations are placed before the Audit Committee of the Board for review and necessary action. During the year under review, the Companys internal controls were tested and no material weakness 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 a single segment only i.e. Textile. Despite prevailing global challenges and uncertainties, the Company continued to maintain its operational performance during the year under review. The Company achieved a total income of Rs. 3233.11 Crores against Rs.3318.91 Crores in the previous year. The exports stood at Rs.1699.37 Crores, showing an increase of 3.97% as compared with the previous year.

The punitive tariff of 50% by United States in August 2025, which continued till February 2026, not only affected the Companys exports but also its profitability too. The Company has to offer deep discounts to retain its overseas customers which affected company profitability. In spite of above, Company improved its Financial performance earned a profit before tax of Rs. 26.04 Crores as against Rs. 21.13 Crore in the previous year. After providing tax expense (including deferred tax charge) of Rs. 4.22 Crores, the net profit comes to Rs. 21.82 Crores.

The detailed performance of the Company has already been discussed in the Directors Report under the column

Operational Review and State of Affairs .

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

Beyond the Balance Sheet lies the Companys most valuable asset its Human Resources. The Company firmly believes that its employees are the driving force behind its growth, progress and success. The Company continued its focus on attracting, developing and retaining skilled talent to effectively address evolving business challenges. The Company also provides competitive compensation packages and a conducive work environment to motivate employees and encourage them to contribute towards achieving organizational goals.

The total permanent employee strength of the Company was 9863 employees as on 31st March, 2026. The industrial relations continued to remain cordial during the year under review.

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 2025-26	Financial Year 2024-25
INTEREST COVERAGE RATIO	1.86	1.22
NET PROFIT MARGIN RATIO	0.68	0.38
RETURN ON CAPITAL EMPLOYED	3.18	0.03
RETURN ON EQUITY RATIO	1.45	0.01
TRADE PAYABLE TURNOVER RATIO	70.21	81.55

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)
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Dated: 5	August, 2026	Din: 00463866