NAPS Global India Ltd Management Discussions

BUSINESS OVERVIEW

Our Company is a wholesale importer of textile products and acts as a well-established player in the garment manufacturing supply chain in Maharashtra, India. We primarily import cotton and man-made fabrics from manufacturers in China and Hongkong in bulk quantities and provide timely supply to vendors of garment manufacturing companies in Maharashtra, India.

Our Company s proficiency lies in understanding the specific requirement of our customers and based on which we procure fabrics with trendy colour combination, designs, clothing material and quality. Our business is predominantly conducted on a business-to-business model basis. We contend that our efforts to provide a one-stop shop for all of our customers needs in our product line, together with our competitive pricing derived from our understanding of the local market, thoughtful product selection, efficient supply chain management and timely delivery, have contributed to our expansion and success.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Over the course of FY 2025-26, the apparel and textile industry has sat at the intersection of rapid technological change, evolving consumer preferences and heightened global trade uncertainty. Innovation, sustainability and ethical sourcing remained defining themes of the year, but the period was shaped decisively by a sharp escalation and subsequent partial rollback of United States import tariffs on Indian textiles and apparel, which pushed exporters to accelerate market diversification and value addition.

Understanding these shifts remains critical for stakeholders across the value chain - designers, manufacturers, retailers and policymakers alike. Staying ahead of these trends is no longer only about competitiveness; it is about building resilience against external shocks while continuing to capture opportunities in sustainability-led and digitally enabled growth.

The industrys shift towards circular fashion, resale platforms and responsible consumption has continued to gather pace during the year, supported by regulatory developments overseas (such as the European Unions move towards mandatory digital product passports for textiles) and growing domestic consumer awareness. At the same time, Indian exporters have had to recalibrate sourcing and market strategies in response to the changed US tariff environment, reinforcing the case for diversification, backward integration and higher value addition.

INDIAN MARKET

India is among the top garment-manufacturing countries in the world. Indian textiles and apparel products have a history of fine craftsmanship across the entire value chain from fiber, yarn, and fabric to apparel with high global appeal. India s cotton, silk, and denim are highly popular in other countries, and Indian apparel too has found success across fashion centres around the world. India s textile and apparel industry is a large, diverse, and globally significant sector, playing a vital role in economic growth, employment generation, and export earnings. As one of the world s leading textile exporters, it contributes substantially to merchandise exports, supported by a strong domestic market and an extensive MSME base. The sector has demonstrated resilience despite global challenges, with exports spanning over 111 countries and steady growth in key segments such as ready-made garments and jute. Government initiatives focused on value addition, market diversification, and global integration, under programmes such as Make in India and Aatmanirbhar Bharat, continue to strengthen its long-term growth potential.

India is among the top garment-manufacturing countries in the world. Indian textiles and apparel products have a history of fine craftsmanship across the entire value chain from fiber, yarn, and fabric to apparel with high global appeal. India s cotton, silk, and denim are highly popular in other countries, and Indian apparel too has found success across fashion centres around the world. The country is a leading producer and consumer of cotton, with the largest acreage under cultivation globally, estimated at around 12.5 million hectares, accounting for nearly 38% of the global cotton area. Alongside this, India has strong capabilities in silk and denim production.

The apparel industry is one of the biggest contributors to the economy with a 2% contribution to the gross domestic product (GDP). It is also the second largest employer after agriculture, providing direct employment to more than 45 million people. Andhra Pradesh, Telangana, Haryana, Jharkhand, and Gujarat are the top textile and clothing manufacturing states in India.

GLOBAL MARKET

The global textile market was valued at approximately US$ 1,104 billion in 2025 and is projected to reach around US$ 1,508 billion by 2034, growing at a CAGR of roughly 3.5% during 2026-2034, according to industry estimates. Growth continues to be underpinned by rising population and disposable incomes in emerging markets, increasing preference for eco-friendly, organic and functional textiles, and continued technological advancement across the value chain.

Automation, digital printing and smart/functional textiles continue to reshape manufacturing, improving efficiency, enabling faster customisation and supporting new product categories such as technical and industrial textiles, which are now growing faster than traditional apparel and fashion segments in several markets. At the same time, the global industry in FY 2025-26 has had to contend with elevated trade-policy uncertainty, particularly arising from changes in US tariff policy, which has prompted realignment of global sourcing patterns away from some Asian suppliers and towards markets offering tariff advantages.

MACRO-ECONOMIC OVERVIEW

During the year under review, 2025-2026, India remained among the leading global textile and apparel exporters. Indias textile and apparel exports, including handicrafts, are estimated at approximately 3,25,339 crore (around US$ 33.5-37 billion) for FY 2025-26, a growth of about 1.8% over 3,19,573.2 crore in FY 2024-25, with export growth recorded across more than 100 countries during the year.

Ready-made garments (RMG) remained the largest export segment during the year, rising from approximately 1,35,427.6 crore to 1,39,349.6 crore (up about 2.9%). Cotton yarn, fabrics, made-ups and handloom products grew modestly by about 0.4% to reach approximately 1,02,399.7 crore, while man-made yarn, fabrics and made-ups grew a stronger 3.6% to about 42,687.8 crore during the year. Handicrafts (excluding hand-made carpets) recorded the strongest growth among major categories, rising by around 6.1% to approximately 15,855.1 crore. The United States remained Indias single largest export destination for textiles and apparel during FY 2025-26, accounting for exports of roughly 85,910 crore, followed by Bangladesh, the UAE, the UK and Germany.

The defining macro-economic development of the year under review was the sharp increase in US import tariffs on Indian textiles and apparel, which rose in stages from April 2025 to as high as 50% by late August 2025, before a bilateral trade framework announced on February 2, 2026 brought the applicable tariff down to around 18% both developments falling within FY 2025-26. The intervening months saw order pauses and shipment holds by several large US retailers, exporter margin pressure and job-loss concerns in export-oriented clusters, particularly in ready-made garments and home textiles, given that the US market has historically accounted for roughly 28-29% of Indias textile and apparel exports. The subsequent tariff reduction, together with continuing duty-free access under the India-UK Comprehensive Economic and Trade Agreement (CETA) and progress on an India-EU free trade agreement, is expected to support recovery and further diversification of export markets in the year ahead.

In direct response to these disruptions, the Government of India temporarily exempted all varieties of cotton from the 11% import duty with effect from August 19, 2025 (initially till September 30, 2025, later extended till December 31, 2025) to ease input costs for domestic mills a measure that ran its full course within FY 2025-26. The Government also launched a new Resilience and Logistics Intervention for Export Facilitation (RELIEF) initiative on March 19, 2026, under the Export Promotion Mission, to support exporters affected by disruptions linked to the West Asia/Middle East conflict, and announced during the year that the RoSCTL and RoDTEP export-remission schemes would be extended beyond their scheduled March 31, 2026 expiry. The Governments roadmap targeting US$ 250 billion in textiles production and US$ 100 billion in exports by 2030 continued to guide policy through the year, supported by a renewed outreach strategy covering around 40 priority export markets.

OPPORTUNITIES

Market and trade diversification

The India-UK Comprehensive Economic and Trade Agreement (CETA), the concluded India-EU FTA negotiations, and the reduction in US tariffs to around 18% following the February 2026 trade framework, together open up meaningful scope for exporters to rebuild and diversify their export base beyond the US, while the Governments outreach strategy covering around 40 priority markets supports faster market entry into the UK, EU and Middle East.

AI-led manufacturing and smart factories

Adoption of AI-driven quality control, computer-vision defect detection, predictive maintenance and robotic cutting is accelerating among larger Indian manufacturers during 2026, reducing material waste and improving productivity. Digital catalogue and virtual try-on tools are also helping smaller fabric sellers and exporters reach buyers faster and more cost-effectively, narrowing the digital gap between large and small players.

PM MITRA parks and integrated infrastructure

The PM Mega Integrated Textile Region and Apparel (PM MITRA) parks, including sites in Tamil Nadu, Telangana and Madhya Pradesh, are now moving from planning to commercial operation, offering ready-to-use infrastructure such as common effluent treatment plants, power and logistics hubs. This is beginning to draw large-scale investment interest and offers an opportunity for the industry to move from historically fragmented, small-scale manufacturing towards greater integration and scale.

Technical textiles, sustainability and circularity

Technical and industrial textiles continue to grow faster than traditional apparel and fashion segments, supported by the National Technical Textiles Mission. Demand also continues to build for organic, recycled and traceable fabrics, and exporters that invest early in compliance with emerging sustainability requirements such as the EUs digital product passport are better placed to retain and grow access to key export markets, alongside continued growth in circular business models such as rental, resale and repair.

THREATS

Tariff and trade-policy uncertainty

Although US tariffs on Indian textiles and apparel eased from a peak of 50% in 2025 to around 18% under the February 2026 trade framework, continuing uncertainty around global trade policy remains the most significant external risk for the sector, with the possibility of further changes affecting order flows, pricing and buyer confidence.

Intensifying competition from rival sourcing hubs

Competing origins such as Bangladesh and Vietnam, which faced comparatively lower US tariffs through parts of the year, gained a competitive edge in price-sensitive categories. At the same time, some Western brands continue to explore nearshoring options such as Mexico and Turkey for faster turnaround, adding further competitive pressure on Indian exporters even as tariff differentials narrow.

Rising compliance and sustainability costs

Emerging regulatory requirements in key export markets, including the EUs digital product passport and other ESG-linked disclosure norms, are increasing compliance costs for exporters, particularly smaller and mid-sized units that have limited capital to invest in traceability and certification systems.

Input costs and geopolitical disruption

Volatility in raw material prices continues to affect operating costs, while disruptions linked to the West Asia/Middle East conflict have added freight and logistics-cost pressure on export shipments during the year. Frequent changes in domestic policy at the national and state level continue to add planning uncertainty.

Structural and workforce challenges

Other continuing challenges include a shortage of skilled workers even as automation adoption grows, the need to reskill labour for AI-enabled manufacturing, unsustainable resource consumption and waste generation in parts of the value chain, limited value addition and low productivity in fragmented segments, and a continuing gap in investment in technology upgradation and R&D relative to leading competing nations.

BUSINESS PERFORMANCE

1) Review of Operations

The Total Income of the Company stood at 12,270.36 Lakhs for the year ended March 31, 2026, as against 7,151.38 Lakhs in the previous year, an increase of approximately 71.6%. The Company made a net profit of 154.71 Lakhs for the year ended March 31, 2026, as compared to a net profit of 196.03 Lakhs in the previous year, a decline of approximately 21.1%, notwithstanding the sharp increase in Total Income.

The decline in profitability despite significantly higher revenue was primarily on account of a disproportionate increase in operating expenses relative to turnover, as reflected in the decline in the Net Profit Ratio from 2.79% to 1.26% (a fall of approximately 55%, refer Section 6 below), together with a higher cost of borrowed working capital reflected in the increase in the Debt-Equity Ratio from 0.52 to 0.73. The increase in current liabilities during the year, funding the higher scale of trading operations, also resulted in the Current Ratio moderating from 3.02 to 2.22. Management believes this reflects the working-capital intensity typically associated with a period of rapid revenue growth in the wholesale trading business, and will continue to monitor the cost structure and financing mix in the year ahead.

2) Segment-wise / Product-wise Performance

The Company is engaged in the wholesale import and trading of textile products and operates through a single reportable business segment in accordance with the applicable Accounting Standard on segment reporting. The Companys product portfolio principally comprises

(i) cotton fabrics,

(ii) man-made / synthetic fabrics including knitted, velvet, linen and jacquard varieties and

(iii) a smaller, complementary range of ready-made garments (womens tops, mens shirts and T-shirts, kids wear and jeans), sourced in bulk from manufacturers in China and Hong Kong and supplied to garment-manufacturing vendors across Maharashtra. Cotton and man-made fabrics together continue to account for the substantial majority of revenue, consistent with the Companys positioning as a bulk fabric importer, with man-made textiles representing a structurally growing share of Indias textile import basket during the year.

3) Internal Control Systems and Their Adequacy

The Company continues to maintain an Internal Control System commensurate with the nature and scale of its operations, designed to safeguard the Companys assets and interests. The adequacy and effectiveness of internal controls across various activities, and compliance with established policies and systems, continue to be monitored comprehensively and frequently by management at all levels of the organisation. The Company maintains well-defined policies and processes covering all major activities, including authority for approvals, with appropriate monetary limits and authorisation matrices in place.

The Companys internal controls continue to be structured to provide reasonable assurance regarding the reliability of financial and operational reporting, compliance with applicable statutes, safeguarding of assets from unauthorised use or loss, proper authorisation of transactions, and compliance with corporate policies, laws and accounting standards. The Audit Committee of the Board of Directors continues to review audit procedures and internal control systems on an ongoing basis, taking into account the Companys requirements, growth prospects and the evolving business environment, and follows up on the implementation of corrective actions arising from internal audit findings.

4) Risks and Concern

FY 2025-26 was a year of significant external disruption for the textile and apparel industry. The sharp rise in US import tariffs on Indian textiles and apparel, reaching as high as 50% by late August 2025 before easing to around 18% following the February 2, 2026 India-US trade framework, created order cancellations, shipment delays and margin pressure across export-oriented segments for an extended part of the year. Disruptions linked to the West Asia/Middle East conflict added further logistics and freight-cost pressure on export shipments during the year.

Risk continues to be an integral part of the business, and the Company aims to deliver superior shareholder value by achieving an appropriate balance between risk and return. The industry remains subject to a continuously evolving legislative, regulatory and international-trade environment, driven by increasing globalisation, integration of world markets, evolving product and transaction complexity, and a more stringent regulatory framework, including new sustainability-related disclosure requirements emerging in key export markets such as the European Union.

Senior management continues to identify and monitor risks on an ongoing basis and to evolve processes and systems to contain them to acceptable levels. Periodic monitoring helps identify risks at an early stage, and risk-event update reports continue to be placed before the Board of Directors as required.

5) Risk Management

For Naps Global India Limited, an effective risk management policy continues to lie at the core of the Companys business philosophy, centered on delivering higher and better returns to all stakeholders. Given the volatility and fluctuations inherent in the industry in which the Company operates, including the trade-policy volatility experienced during FY 2025-26, the Company is exposed to a range of risks and uncertainties in the normal course of business, and continues to accord high priority to risk management to limit deviations in operating and financial results.

6) Key Ratios (Standalone Basis)

REASONS FOR MORE THAN 25% VARIANCE

7) Return on Net Worth

In terms of Schedule V (Part B) to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, details of any change in Return on Net Worth (Return on Equity) as compared to the immediately previous financial year, along with an explanation therefor, are set out below

Return on Net Worth (Return on Equity), on a standalone basis, declined to approximately 9% in FY 2025-26 from approximately 19% in FY 2024-25, a decline of approximately 53%. This decline was primarily on account of the fall in Net Profit to 154.71 Lakhs (FY 2024-25: 196.03 Lakhs) combined with an increase in the Companys equity base during the year, both of which reduced the return generated per rupee of shareholders funds. The Company continues to focus on improving operating margins and working-capital efficiency to restore Return on Net Worth to previous levels.

8) Human Resources

Naps Global India Limited continues to be part of a dynamic and progressive group that actively fosters a challenging work environment and encourages entrepreneurship. Trust remains central to the Companys business philosophy, with strong emphasis placed on integrity, teamwork, innovation, performance and partnership. The Companys professional staff, drawn from diverse backgrounds, continue to bring varied talent, knowledge and experience that help the Group remain competitive and achieve new milestones. The management team and Board of Directors remain committed to acting in the best interests of shareholders, clients and associates.

The Company continues to recruit for skill, experience, right attitude, commitment and diversity, with entrepreneurship remaining a common trait encouraged across the workforce. Employees continue to be encouraged to act as owners, partners and managers of their individual functions, within an environment conducive to creativity and productivity.

9) Government Initiatives

The textile industry remains crucial to Indias growth, and the Government of India continued to implement and expand a range of schemes to support production and ease of trade throughout FY 2025-26. These include the continuation of the PM Mega Integrated Textile Region and Apparel (PM MITRA) parks, the Production Linked Incentive (PLI) scheme for technical textiles, the National Technical Textiles Mission (NTTM, valid until March 2026), the SAMARTH scheme for capacity building in the textile sector, and various components of the Export Promotion Mission, including market access support and interest subvention.

During the year, in direct response to the US tariff escalation, the Government temporarily exempted cotton imports from the 11% import duty from August 19, 2025 to December 31, 2025, to ease input costs for domestic mills, and announced the extension of the RoSCTL and RoDTEP export-remission schemes beyond their scheduled expiry of March 31, 2026. The Government also launched the RELIEF (Resilience and Logistics Intervention for Export Facilitation) initiative on March 19, 2026, to support exporters affected by disruptions linked to the West Asia/Middle East conflict. Sixteen free trade agreements were in force by the end of the year, including the India-UK CETA, alongside concluded negotiations with the European Union and New Zealand, widening market access for Indian textile and apparel exporters.

10) Outlook

The outlook for Indias textile and apparel industry remains constructive over the medium term, notwithstanding the trade-policy volatility experienced during FY 2025-26. With US tariffs having eased from a peak of 50% to around 18% following the February 2026 trade framework, and with continuing diversification support from the India-UK CETA and progress on an India-EU FTA, exporters are expected to gradually rebuild market share in the US while expanding presence in the UK, EU and Middle East markets. The Governments roadmap targeting US$ 250 billion in textile production and US$ 100 billion in exports by 2030 continues to anchor long-term policy support, with continued investment expected in PM MITRA parks, technical textiles and capacity-building schemes. Growth is expected to be underpinned by rising domestic consumption, increasing disposable incomes, growing demand for sustainable and technical textiles, and continued digitisation of the value chain, even as the sector navigates near-term headwinds from global trade uncertainty and input-cost volatility.

11) Disclosure of Accounting Treatment

In the preparation of the financial statements for FY 2025-26, the Company has followed the recognition and measurement principles laid down in the applicable Accounting Standards notified under Section 133 of the Companies Act, 2013 read with the relevant rules made thereunder, as amended. No treatment different from that prescribed in the applicable Accounting Standards has been followed in the preparation of the financial statements for the year under review.

12) Safe Harbour

This document contains statements about expected future events, financial and operating results of the businesses, which are forward-looking. By their nature, forward-looking statements require the businesses to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements, as a number of factors could cause actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and is qualified in its entirety by the assumptions, qualifications and risk factors referred to in the Managements Discussion and Analysis forming part of Naps Global India Limiteds Annual Report for FY 2025-26.