Nivaka Fashions Ltd Management Discussions

Indias retail market has crossed $1.1 trillion mark, with projections to cross USD $2.3 – $2.4 trillion trillion by 2035, supported by rapid urbanization, digital adoption, and rising disposable income. The sector is broadly divided into organized and unorganized segments, with the organized segment currently accounting for around 13%–15% of the market, expected to grow at a CAGR of 18%–20% in the coming years.

The sectors growth is primarily driven by Indias burgeoning middle class and the largely untapped retail market. This combination attracts global retail giants seeking new opportunities. The purchasing power of urban Indian consumers continues to rise, driving demand for branded goods like apparel, cosmetics, and more. According to the Boston Consulting Group, this shift is expected to elevate the Indian retail sectors value to an astounding $2.3 – $2.4 trillion between 2033 - 2035.

The countrys appeal is bolstered by its vast population, a growing middle-income class, urbanization trends, rising household incomes, and increasing consumer spending.

The momentum of retail growth extends beyond metropolitan cities, permeating smaller urban centers. Economic prosperity, changing demographics, higher disposable incomes, urbanization, and evolving consumer preferences collectively fuel the surge in organized retail within India.

The Indian government continues to implement policies to enhance the business climate and simplify foreign investment procedures, making India an even more inviting destination for retail companies looking to establish fully owned subsidiaries.

In conclusion, the Indian retail industrys journey remains one of rapid evolution and immense potential. It navigates the changing tides of consumer demands, technological shifts, and regulatory enhancements with an eye toward a robust, diverse, and exciting future.

E-commerce continues to drive transformation in consumer behaviour, especially among younger demographics. Indias digital retail penetration is accelerating, with e-commerce projected to touch USD 170–190 billion by 2030, growing at a rate of over 18% CAGR.

The Government of India has taken several initiatives to support the retail sector, including relaxation of FDI norms in single and multi-brand retail, promotion of digital payments, and the launch of schemes such as Digital India, Startup India, and Make in India. However, micro-cap and small-cap standalone textile players face severe margin squeezes due to rising compliance, inventory write-downs, and aggressive pricing wars from massive e-commerce and retail conglomerates.

Furthermore, the broader industry has had to navigate volatile global trade dynamics, such as shifting U.S. tariff structures, which have created ripple effects across international supply chains and heightened pressures on domestic manufacturing margins.

BUSINESS OUTLOOK:

The E-commerce sector maintains its growth trajectory by leveraging its convenience and pricing, which gives it an edge over traditional brick-and-mortar stores. This success has prompted physical retailers to adopt omnichannel strategies, aiming to provide a seamless shopping experience across both online and offline platforms. Government endorsement and support for digital commerce are adding to the positive outlook for e-retail. However, inflation remains a potential concern, influencing both consumers purchasing power and the profitability of retailers. Navigating these dynamics will be crucial for sustaining growth and profitability in the e-commerce sector.

OPERATIONAL REVIEW:

The financial year ending 31.03.2026 witnessed a decline in both topline and bottom-line figures for the company, reflecting the challenges faced during the year: a significant widening of bottom-line losses, highlighting intense operational and market challenges:

Total Income: Rs. 18.32 lakh (down sharply from Rs. 183.85 lakh in 2025)

Net Loss: Rs. (520.89) lakh (compared to a net loss of Rs. 50.37 lakh in 2025) The sharp contraction in our topline performance and the subsequent widening of net losses are directly attributable to a period of reduced operational activity. Management strategically moderated operational throughput as the business encountered severe operational challenges and intensified market pressures. Shifting global trade frameworks and heightened industry competition disrupted our near-term scaling efforts, making a temporary reduction in operational velocity necessary to mitigate risk and stabilize the business baseline.

CUSTOMER AND MARKETING OVERVIEW:

The companys marketing and promotional activities remained active throughout the year.

INTERNAL CONTROLS AND THEIR ADEQUACY:

The company continues to identify key risks and implement control processes for mitigation. An ongoing Enterprise Risk Management process aims to identify emerging risks and establish control mechanisms. The Internal Control Framework, encompassing financial reporting, organizational structure, documented procedures, and authorities, undergoes continuous review. The company remains committed to enhancing internal control systems, particularly strengthening backend system controls.

THE SWOT ANALYSIS:

Strengths

Despite the challenging operating environment and subdued business activity, the Company continues to maintain a prudent and risk-conscious approach to its operations. Management has demonstrated the ability to adapt to changing market conditions, particularly in view of evolving global trade frameworks and intensified industry competition.

The Companys strategic moderation of operational activities during the period enabled management to focus on preserving resources, managing risks and maintaining operational stability. This measured approach provides a stable foundation for the Company to recalibrate its business strategy and pursue sustainable growth opportunities as market conditions improve.

The Company also remains focused on strengthening its operational and financial position, addressing existing challenges and evaluating opportunities for revival and future growth in a disciplined manner.

Weaknesses

The Company experienced a severe drop in revenue and a heavily widened net loss, driven by an inventory adjustments surge and a sharp drop in operational throughput, primarily due to persistent operational challenges and increased market competition. These pressures were further compounded by broader global trade dynamics, including shifting U.S. tariff structures, which collectively impacted our planned scaling efforts and resulted in a period of reduced operational activity. Rising input costs and slower demand recovery in select segments impacted overall margins. Continued reliance on digital platforms for sales poses risks in case of platform disruptions or policy changes. Inventory management across diverse product lines remains complex, occasionally leading to inefficiencies. Efforts are ongoing to streamline operations and improve demand forecasting to address these issues effectively. While the Company is taking corrective actions to streamline operations, enhance forecasting accuracy, and optimize resource utilization, sustained improvements are expected to materialize progressively over the coming quarters.

Opportunities

The Company believes that the current challenging business environment also presents opportunities for strategic realignment and future growth. As global trade conditions stabilise and market dynamics evolve, the Company may evaluate opportunities to re-enter or expand its business activities based on commercially viable opportunities.

The Company intends to leverage its existing experience, business relationships and resources to identify suitable avenues for sustainable growth. Management will continue to monitor market conditions, changing customer requirements and industry trends and may explore new business opportunities, product segments and markets where commercially feasible.

Further, the Companys focus on rationalising operations, managing costs and strengthening its financial position provides an opportunity to build a more efficient and sustainable operating model for the future. Any expansion or revival of operations will be undertaken in a measured manner, based on market conditions, available resources and the overall risk-return profile.

Threats

However, several threats loom on the horizon. Rising inflation poses a significant risk by potentially affecting consumer purchasing power and retailer profitability. Intense competition from new players and global retail giants makes it challenging to maintain market share and profitability. Regulatory changes and shifts in government policies can impact operations, particularly concerning foreign investments and e-commerce practices. Broader economic conditions, such as a recession or economic slowdown, can negatively impact consumer spending and overall market growth, further complicating the business landscape for online retailers.

RISK AND CONCERNS:

The retail industry, particularly in the online sector, faces a variety of risks and concerns that can significantly impact its operations and profitability.

Economic and Market Risks

One of the primary risks is economic instability. Fluctuations in the broader economy, such as recessions or slowdowns, can adversely affect consumer spending. Rising inflation is a specific concern as it can reduce the purchasing power of consumers and increase the cost of goods, thereby squeezing profit margins. Additionally, changes in economic policies, both domestically and internationally, can create uncertainties that affect market conditions and business planning.

Competitive Pressure

The online retail sector is highly competitive, with both established players and new entrants vying for market share. This intense competition can lead to price wars, reduced margins, and increased marketing expenditures. Global retail giants entering the market add to this pressure, making it challenging for smaller or newer businesses to compete effectively.

Technological Risks

Dependence on technology is another significant risk. Online retailers rely heavily on digital platforms for sales, marketing, and customer engagement. Any disruption in these platforms, whether due to technical failures, cyber-attacks, or changes in platform policies, can severely impact operations. Ensuring data security and protecting customer information are critical, as breaches can lead to legal liabilities, loss of customer trust, and financial penalties.

Regulatory and Compliance Risks

The regulatory environment for online retail is continuously evolving. Changes in laws and regulations related to e-commerce, data protection, consumer rights, and foreign investment can impact business operations. Compliance with these regulations can be complex and costly. Failure to adhere to regulatory requirements can result in legal penalties, reputational damage, and operational disruptions.

Supply Chain and Operational Risks

The company operates in a dynamic apparel and e-commerce environment, which exposes it to supply chain and operational risks. Delays in procurement, fluctuations in raw material prices, or disruptions in logistics may affect product availability and cost efficiency. Dependence on third-party delivery partners and digital infrastructure also poses risks related to timely order fulfilment and data security. To mitigate these, the company focuses on strengthening vendor networks, optimizing inventory management, and investing in technology-driven solutions.

Market Trends and Consumer Behaviour

Keeping up with market trends and changing consumer behaviour is essential for online retailers. Rapid shifts in fashion trends can lead to unsold inventory and markdowns. Understanding and responding to consumer preferences require continuous market research and agility. Failing to adapt to these changes can result in loss of market relevance and customer base.

Financial Risks

Financial stability is another area of concern. Managing cash flow, securing funding for growth, and maintaining profitability are ongoing challenges. Fluctuations in currency exchange rates can also impact international transactions and profitability. Additionally, high marketing and promotional expenses, if not managed effectively, can strain financial resources.

Mitigation Strategies

To address these risks and concerns, online retailers should adopt comprehensive risk management strategies. This includes diversifying supply chains, investing in robust technology and cybersecurity measures, ensuring regulatory compliance, and maintaining financial prudence. Developing flexible business models that can adapt to market changes, leveraging data analytics for informed decision-making, and enhancing customer engagement through personalized experiences can also help mitigate risks. Building strong relationships with suppliers, adopting sustainable practices, and continuously monitoring the competitive landscape are crucial for long-term resilience and success.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT:

Human resources are critical to the companys success. During the year, several initiatives were undertaken to enhance employee engagement, training, and development. The company continues to foster a positive work environment, and industrial relations have remained harmonious.

The Company believes in people being the most crucial asset in running a successful business. The Company focuses on treating the employees with utmost fairness and are on a constant endeavour to align their personal goals with that of the organization. In doing so, the Company has focused on providing adequate opportunities for professional and personal growth of its employees, in addition to training and enhancing the skills and capabilities of the employees. The Company strives to create and maintain a safe, conducive, and engaging work environment to enhance employee morale and boost their productivity.

OUTLOOK:

Several factors are expected to drive growth and shape the future of this sector.

Technological Advancements

Advancements in technology will continue to play a crucial role in shaping the retail landscape. The use of artificial intelligence, machine learning, and data analytics can help online retailers personalize customer experiences, optimize inventory management, and enhance operational efficiency. Additionally, technologies like augmented reality (AR) and virtual reality (VR) can provide immersive shopping experiences, further boosting online sales.

Regulatory Support

Government policies aimed at enhancing the ease of doing business and promoting digital commerce will continue to support the growth of the retail industry. Simplified foreign investment procedures and initiatives to improve infrastructure and logistics will make it easier for online retailers to expand their operations and reach a broader audience.

Potential Challenges

While the outlook is largely positive, there are potential challenges that need to be addressed. Rising inflation could impact consumer spending and profitability. The competitive landscape will remain intense, requiring continuous innovation and strategic planning. Additionally, managing supply chain complexities and ensuring data security will be ongoing concerns that require robust solutions.

Strategic Initiatives

The Companys outlook remains focused on strengthening its financial and operational position and creating a sustainable foundation for future growth. Given the challenging market environment, intensified competition and evolving global trade conditions, the Company continues to adopt a cautious and measured approach towards its operations.

Management will continue to monitor market developments and evaluate commercially viable opportunities for revival and expansion of business activities. The Company intends to focus on efficient utilisation of available resources, cost optimisation and prudent financial management while addressing its existing obligations.

As market conditions improve and suitable business opportunities emerge, the Company may progressively scale up its operations based on commercial viability, available resources and prevailing market conditions. Management remains committed to taking appropriate strategic measures to enhance the Companys long-term sustainability and shareholder value.

SAFETY AND HEALTH:

Prioritizing the safety and well-being of employees, customers, and supply chain partners is essential for maintaining operational efficiency and building trust.

Employee safety begins with implementing comprehensive workplace safety protocols to prevent accidents and injuries. Regular safety training, clear communication of safety guidelines, and maintaining a clean and organized work environment are essential practices. In addition to physical safety, promoting health and wellness programs can significantly enhance employee well-being. Benefits such as health insurance, regular health check-ups, mental health support, and wellness activities contribute to improved overall health and productivity. Adhering to health regulations includes staying updated with changes in laws, undergoing regular audits, and ensuring all practices meet legal standards. Addressing environmental health concerns, such as reducing emissions, managing waste responsibly, and minimizing the carbon footprint, contributes to broader public health and aligns with sustainability goals. This proactive approach to regulatory compliance ensures that the business operates within legal frameworks and maintains a positive reputation.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS In accordance with SEBI guidelines, details of key financial ratios of the Company along with explanations for significant variances (i.e., change of 25% or more as compared to the immediately preceding financial year) are presented below:

Financial Ratio	FY 2025- 2026	FY 2024- 2025	Variance %	Detailed Explanation for Shift > 25%
Debtors Turnover	N.A	0.79	>25%	Core operational billing reduced to 1.65 Lakhs alongside provisioning adjustments on outstanding trade balances.
Inventory Turnover	N.A	0.13	>25%	The variation of more than 25% in the Inventory Turnover Ratio is due to clearance of all remaining stock-in-trade during the current financial year
Interest Coverage	-23.90	-1.49	-1,504.03%	Operating loss widened to - 501.85 Lakhs, rendering core inflows inadequate to safely cover fixed finance bills.
Current Ratio	0.32	2.26	-85.84%	Liquidity compressed due to a drop in short- term asset values alongside constant vendor payment lines.
Debt- Equity Ratio	0.26	0.07	271.43%	Leverage rose due to a reduction in the net equity base following the absorption of a 520.89 Lakh loss.
Operating Margin	(30,415.15%)	-20.18%	(150,619.28%)	Compressed sharply due to a structural drop in revenue against fixed operating/administrative overhead, following a period of reduced operational activity and disrupted scaling efforts.

Financial Ratio	FY 2025- 2026	FY 2024- 2025	Variance %	Detailed Explanation for Shift > 25%
Net Profit Margin	(31,569.09%)	-34.38%	(91,724.00%)	Net margin performance fell as a result of full-year net losses expanding alongside minimal trading turnover, driven by heightened competition and global trade tariff pressures that limited operational throughput.

Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Over recent periods, the business encountered operational challenges and market pressures, including heightened industry competition and broader global trade

Particulars	FY 2025-26	FY 2024-25	Change
RONW	(118.99)%	(5.25)%	Decline of 113.74 percentage points

dynamic such as shifting US tariff structures. These factors impacted our scaling efforts and led to a period of reduced operational activity, ultimately contributing to the reported losses.

DISCLAIMER:

Statements in management discussion and analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ from those either expressed or implied. Important factors that could make a difference to the Companys operation include among others, economic conditions affecting demand/supply and price conditions, variation in prices of raw materials, changes in governmental regulations, tax regimes, economic developments and other incidental factors.

The Management Discussion and Analysis Report provides an overview of the financial and operational performance of Nivaka Fashions Limited for the year ended 31st March 2026. The company remains focused on achieving sustainable growth and delivering value to its stakeholders.

CAUTIONARY STATEMENT:

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied.

Investors are advised to exercise due care and caution while interpreting these statements.

NIVAKA FASHIONS LIMITED

By order of the Board

Sd/-	Sd/-
Bhavin Shantilal Jain	Priyesh Shantilal Jain
Managing Director	Director
DIN- 00741604	DIN-00741595
Date:03.09.2026