Nilkamal Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY STRUCTURE AND DEVELOPMENT OPPORTUNITIES, THREATS, RISKS, CONCERNS AND OUTLOOK

India emerged as the fastest-growing major economy globally during FY 2024-25, with an estimated real GDP growth of 6.5%. This robust performance was primarily driven by strong momentum in the construction, trade, and financial services sectors.

Looking ahead, the Indian economy is projected to sustain its growth trajectory, with a real GDP growth forecast of 6.5% for FY 2025-26. Rural demand is expected to remain resilient, supported by favorable agricultural output. Additionally, improved business sentiment and higher capacity utilization are anticipated to catalyse increased investments in the manufacturing sector. However, global economic uncertainties pose a potential risk to the overall outlook.

India continues to present a compelling long-term growth opportunity, underpinned by strong macroeconomic fundamentals and a large domestic market.

Overview

During the financial year 2024-25, your company recorded revenue from operations of Rs.3,239 crores marking a 3.35 % growth compared to Rs.3,134 crores in the previous year. The Company invested Rs.280 crores in capital expenditure across various business initiatives including a greenfield project in Hosur for manufacture foam, modular furniture and sofa etc, production of rigid packing products at its Puducherry and Noida Plant, Bubble guard production at Hosur, and investment in injection moulding machines and moulds for crates, pallets & plastics furniture etc.

The Nilkamal Sleep business grew by 32% while Nilkamal Edge recorded a 10% increase. Growth is expected to continue in the years ahead. The Sleep vertical, supported by a new foam production line, is anticipated to boost revenue, while the Modular Furniture line is expected to improve the bottom line through reduced imports, inhouse production and better margin capture. The foam production served as a backward integration for mattress and sofa manufacturing and also support the production of technical foam for the automotive, power generators, footwear and inner-garments industry.

The Moulded Furniture segment focused on launching and strategically positioning its value-added offerings. Meanwhile, Nilkamal EDGE will cater to the specific furniture needs of educational institutions, ranging from nursery to post-graduate levels. Additionally, the division will target corporate clients with office furniture solutions across India and served hospital chains with a comprehensive range of medical furniture, including ICU beds, trolleys, stretchers, wheelchairs, storage units, waiting area seating, and executive chairs.

Over the following years, Nilkamal planned to invest in brand building targeting the next generation and emphasizing Nilkamal as a "Thoughtfully Designed Furniture Solutions" Company.

During the FY 2024-25, the Material handling and moulded furniture business grew by 4 % and 2 % respectively. The Company processed and sold more than 1,25,000 MT, during the year.

The moulded furniture business exhibited a muted performance amid persistent competitive pressure from both unorganised local players and organised industry counterparts. Intense price competition in the entry and mid-range segments posed significant challenges. In response, the Company strategically shifted its focus toward value-added and premium product offerings, aligning with the evolving preferences of the discerning Indian consumer. Simultaneously, we adopted competitive pricing strategies in the entry-level category to safeguard our market share.

To further strengthen our market positioning, we launched innovative schemes to actively engage our channel partners. Significant progress was also made in enhancing operational efficiency, particularly in inventory and delivery management. We are now equipped to dispatch material within 24 hours to our channel partners across the country, a key milestone in service excellence.

Driven by deep market insights, we introduced several premium and innovative products to align with evolving consumer preferences. A standout achievement was the launch of Indias first-ever three-colour chair, complemented by a refreshed palette of colours and designs across various categories.

To boost awareness of our product range, we participated in Kumbh Mela and other exhibitions while maintaining strong visibility in trade outlets and on social media platforms.

Looking ahead to FY 2025-26, we planned to launch a diverse and innovation-driven product portfolio. This includes wooden-look sofa sets and centre tables, patio furniture, premium moulded furniture, and entry-level offerings aimed at driving volume growth. Focused placement and promotion of these new products had already generated strong traction and elevated brand recall.

In the Ready Furniture segment (modular furniture - non plastics furniture), we launched a new modular bedroom series offering multiple options in design, size, and storage. We also introduced a range of sofas and recliners that blends aesthetics, functionality, and affordability receiving an overwhelmingly positive response from the market.

Building on this momentum, we will plan to further expand our portfolio in the coming fiscal year to include additional ranges in sofas, bedrooms, dining, utility, and office furniture. Additionally, we plan to indigenise a significant portion of our sourced products, bringing them under the purview of BIS compliance to reinforce quality assurance and strengthen supply chain resilience.

Despite a challenging competitive environment, we remained optimistic about achieving sustainable growth in the moulded furniture segment in FY 2025-26. Furthermore, we are targeting for high double-digit growth in our Ready Furniture category driven by our focused strategic initiatives, continued product innovation, and brand activation.

Retail & E-commerce

The retailing of furniture & home solutions was delivered through mix of Company-Owned Company-Operated (COCO) and Franchisee-Owned Franchisee-Operated (FOFO) stores. These stores were thoughtfully designed to reflect "The Joy of Well-Made Things" fulfilling consumer needs, while harmonising product aesthetics, functionality and quality.

During the year, the company successfully executed its plans to restructure and rebrand the retail vertical by merging the Lifestyle Furniture division @Home and Nilkamal Furniture Ideas under a unified identity under the name "Nilkamal Homes" which was officially launched on October 02, 2024.

Under the Nilkamal Homes brand, the business experienced both volume and value growth in second half of FY 202425 compared to the same period in the previous year. This growth was driven by the introduction of more premium furniture offerings and expanding into new locations. The company also invested significantly in advertisements and branding to build awareness for the new brand.

Looking ahead, Nilkamal Homes planned to continue expanding through the FOFO model. Branding efforts were set to continue across print and digital platforms to establish Nilkamal Homes as a design-led destination for home furniture and decor solutions.

Nilkamal Online sustained its growth trajectory by combining its Direct-to-Consumer (D2C) channel with strategic partnerships across major marketplaces. In financial year 2024-25, Nilkamal Online achieved sales of Rs.157.5 crores, reflecting a 10% increase over the previous year. A key driver of this success was the expansion of delivery and installation network, which grew by 22% and covers 19,500 PIN codes across India.

The Company also continued leveraging technology to create business differentiators, such as WhatsApp-based sales bots and video call-based sales assistance. This digital journey was set to continue with the implementation of AI tools aimed at reducing customer acquisition costs and enhance content for improved customer engagement. Your Company remained committed to building a truly sustainable digital business model.

Mattress

Throughout the financial year, our mattress category has made great progress. We added 400 new channel partners, and expanded our team by hiring over 150 experienced professionals. Our rebranding to "Nilkamal Sleep" and introduction of a celebrity ambassador shows our focus on innovation and growth. We also updated our product range to meet different consumer needs, including new features like Bounce Foam.

Nilkamal Sleep Solutions launched a thoughtfully designed range of mattresses such as Luxuria, Couple Pro, Health Pro, Deep Sleep, and Comfort, catering to peoples unique sleep needs.

We are excited to share that we have invested in a new PU foam plant which has been specially designed and developed by leading European company. This plant will help us offer a wide variety of flexible PU foam solutions, both for our customers and for captive consumption in mattress and furniture.

Our manufacturing plants in Hosur, Bhiwandi, Gurgaon, and Barjora are strategically located to serve all four regions of India efficiently. With 30 depots and 4 regional warehouses, we ensure timely delivery to our customers.

BubbleGUARD

Nilkamal BubbleGUARD achieved a 20% year-on-year growth, driven by sustained demand for sustainable and cost- effective packaging solutions. With the category expected to grow further in FY26. This year, we have increased our production capacity through capital investment of new machinery. Despite a challenging, price-driven competitive landscape, we successfully enhanced our value realization by offering highly customized and fabricated solutions, leveraging the existing strengths of the broader Nilkamal ecosystem.

Looking ahead, we anticipate continued growth in both value and volume, supported by our expansion into new industrial verticals and ongoing growth of our existing customer base.

The Material Handling Division demonstrated a resilient performance in FY 2024-25, achieving approximately 7% volume growth and 4% value growth. This was accomplished despite a subdued first quarter, which was impacted by election-related disruptions. This reflects underscore the divisions strategic emphasis on market penetration, product diversification, and operational excellence even amid a challenging macroeconomic environment.

The division offers a comprehensive portfolio that includers bins and crates, pallets, material handling equipment, shelving and racking systems, insulated boxes, waste management solutions, road safety barriers for infrastructure management, hospitality sector products for commercial food preparation and service. These solutions are designed to ensure efficient storage, protection, retrieval and movement of goods in industrial and warehousing environments. The portfolio caters to a wide array of industries including food and beverages, logistics, retail, automotive, e-commerce and quick commerce, pharmaceuticals, construction, electronics, chemicals, engineering, hospitality, and waste management.

We remain committed to delivering innovative, customized, timely that are tailored to meet the evolving material handling needs of our customers.

The steel racking business recorded an 8% increase in volume and a 4% growth in value during the fiscal year. However, lower raw material prices for steel led to reduced average realizations. Additionally, projects deferrals in logistics and retail sectors impacted overall volumes. These projects are expected to resume in FY 2025-26, driven by increasing demand in quick commerce, manufacturing and logistics sectors, presenting significant growth opportunities.

Our hospitality joint venture, Cambro Nilkamal Private Ltd., delivered robust revenue growth of 14%, supported by increased traction in quick service restaurants (QSRs) and institutional kitchens.

Operationally, Nilkamal processed over 125,000 unique orders and served more than 30,000 customers, highlighting our expanding market reach and growing customer confidence.

Expansion into Rigid Plastic Packaging

Leveraging its core expertise in reusable secondary packaging, Nilkamal has strategically diversified into the primary rigid plastic packaging segment. The operations have commenced at Puducherry facility and two additional plants are in pipeline to enhance production capacity and broaden geographic reach. This expansion capitalises on synergies in material science and manufacturing technologies, with a strong emphasis on sustainability. The initiative incorporates Post-Consumer Recycled (PCR) resins, aligning with Extended Producer Responsibility (EPR) mandates and advancing circular economy objectives.

Digital Transformation and Customer Centricity

To enhance scalability and elevate service excellence, Nilkamal is implementing Salesforce Service CRM and digitizing internal workflow processes to improve responsiveness, streamline case tracking, and deepen customer insights. These initiatives aim to strengthen customer experience and operational agility, critical for sustaining competitive advantage in a dynamic market. With a robust customer base and a strong market presence, Material Handling business is perfectly poised to capitalise on growth opportunities originating from the performance of industry at large and capital investments by both the Government and Private Sector aimed at boosting manufacturing output in the coming years.

The Company continues to invest in Nilkamal brand depicting the wide range of material handling, home & furniture solutions. Significant resources are being allocated towards brand engagement, development, and product innovation a key contributor to the growth across Nilkamal Homes, Nilkamal Sleep and E-commerce business. The brands outreach strategy employs a balanced mix of digital, print, and broadcast media, including celebrity-led endorsements, to maximize customer engagement and visibility.

With a robust infrastructure comprising 13 manufacturing plants, a supply chain network of 42 warehouses and depots, and 80 retail stores provides the Company the ability to reach where the Customer is and offering the products it requires. The new Hosur facility is set to further enhance manufacturing capabilities and capacity, reinforcing the companys ability to meet growing market demand efficiently.

Sustainability

We consumed over 48,520 Gigajoules of electricity sourced from renewable wind and solar energy. Plans are underway to significantly increase this share in the coming year.

The Company efforts have been recognized with prestigious certifications and memberships, including the Green-Pro, GRIHA Green Co Gold award from CII, CE Certification, IGBC Membership, acknowledging the Companys environmental friendliness in their operations covering a wide spectrum of parameters such as resource conservation, promoting renewable resources, green building etc. in entire product life cycle.

As a step towards green future, in continuation to tree plantation drive started last year, more than 8,700 trees were planted in this financial year too within and around our manufacturing facilities. Educative & Fun Picnics were organized around the Tree Plantation Drive, for the family & children of the employees. Involving the children & teaching the importance of sustainability was very well appreciated by the families.

To reduce packaging scrap Sales, recycling of packing material was initiated and over 100 tonnes of packing material was recycled. Necessary infrastructure is being set up to further enhance the recycling content.

Financial Review

Key Financial Ratios	Particulars	Financial Year 2024-25	Financial Year 2023-24	Variance (%)	Reason for Variance for more than
					25%
	Standalone	9.79	12.06	-19%	-
Interest Coverage Ratio	Consolidated	11.67	14.74	-21%	-
Debt-Equity Ratio	Standalone	0.27	0.19	44%	Due to Increase
	Consolidated	0.25	0.18	43%
Current Ratio	Standalone	2.23	2.72	-18%	-
	Consolidated	2.29	2.79	-18%
Debtors Turnover (days)	Standalone	43.40	43.57	0%	-
	Consolidated	51.01	51.22	0%	-
	Standalone	71.90	72.64	-1%	-
Inventory Turnover	Consolidated	70.76	71.48	-1%	-
Operating Profit Margin (%)	Standalone	8.22%	8.89%	-8%	-
	Consolidated	5.48%	6.18%	-11%
Net Profit Margin (%)	Standalone	2.83%	3.43%	-18%	-
	Consolidated	3.22%	3.83%	-16%	-
Return on Capital Employed (%)	Standalone	8.51	10.64	-20%	-
	Consolidated	9.21	11.26	-18%	-
Return on Net Worth (%)	Standalone	6.71	8.31	-19%	-
	Consolidated	7.37	8.99	-18%	"

Risk Management

The risk is inherent to the business and your Company is committed to managing the same in a proactive and efficient manner. The Company periodically assesses risks in the internal and external environment across all its locations and functions.

Product quality and services, Health, Safety, Security - Human, Technology and of other resources, external Environment, Geographical locations are critical risk for the Company. The Company has a mitigation plan in place to identify risks and its management through continuous monitoring and mitigating actions. This ensures business continuity and value creation on sustainable basis.

Reputation, product quality and safety

Our Products go through rigorous quality testing, certifications, ISO process and compliances with the international standards which ensures the safety of our customers and timely resolutions of customer complaints enhances our brand image.

Geographical Risk

The companys manufacturing units are located across different locations to mitigate the risk of geographic concentration and diversify the manufacturing network footprint.

Human Resource

Leadership and Succession Planning as a process has been put in place to review, identify and develop talent for leadership roles with the objective of ensuring continuity. The Company has adopted a approach for developing, retaining, and recruiting key talent and to mitigate talent risks.

Technology

By undertaking investment in requisite technology infrastructure, Company ensures that its operations are resilient to technological risks. Additionally, it also has a disaster recovery and business continuity plan in place to minimise the impact of any technological disruptions.

Foreign Exchange Risk and Hedging Activities

The Companys activities expose it to the risk of fluctuations in foreign currency exchange rate. The Company has in place a risk management framework for monitoring and mitigation of the risk of fluctuations in the currency exchange rates. Such risks are monitored regularly and necessary actions are taken to mitigate them in line with the Risk Management Policy of the Company. The Company enters into forward foreign exchange contracts to hedge the exchange rate risk. The Company does not enter into any derivative instruments for trading or speculative purposes.

Internal Control System and their Adequacy

The Company have placed internal financial controls in the form of procedures and policies. The Companys ERP, system infrastructure and checks are integral parts of the internal control system which commensurate with the nature of its business and the size and complexity of its operations.

The annual audit plan duly approved by Audit Committee aims to evaluate the efficacy and adequacy of said internal controls placed by the Company and its compliance(s) across all the locations. Internal Audit department with the help of the external professional agencies carries out the said responsibility.

The Company remains committed for minimising identified risks through internal audit reports, its continuous monitoring and mitigating actions. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. During the year under review, no material or serious observation has been received from the Internal Auditors of the Company for inefficiency or inadequacy of such controls.

Human Resources and Industrial Relations

Your Companys industrial relations continued to be harmonious during the year under review. The employee strength of your Company is currently 3556.

Cautionary Statement

The Management Discussions and Analysis Statement made above are on the basis of available data as well as certain assumptions as to the economic conditions, various factors affecting raw material prices, selling prices, trend and consumer demand and preference, governing and applicable laws and other economic and political factors. The management cannot guarantee the accuracy of the assumptions and projected performance of the Company in future. It is therefore, cautioned that the actual results may differ from those expressed and implied therein.