Raj Rayon Industries Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENT

The Indian textile and apparel industry continues to be one of the most significant sectors of the Indian economy, contributing substantially to domestic consumption, industrial production, exports and employment generation. During FY 2025-26, the industry continued its gradual recovery and adaptation to evolving global and domestic market conditions. While demand conditions remained uneven across certain international markets, the sector demonstrated resilience, supported by improving domestic consumption, policy support and increasing focus on value-added and sustainable textile products.

India continues to be one of the worlds largest producers of textiles and apparel and remains a leading producer of cotton and man-made fibres. The textile industry plays a significant role in the Indian economy and is one of the largest sources of employment in the country, directly and indirectly supporting millions of people across the textile value chain, including fibre, yarn, fabric, garments and allied industries.

During FY 2025-26, domestic demand continued to be supported by increasing disposable incomes, urbanisation, changing consumer preferences, growing penetration of organised and branded apparel, and the continued expansion of e-commerce and digital retail platforms. The growing middle-income population and increasing preference for fashion-oriented and quality products are expected to continue supporting long-term growth in the domestic textile and apparel market.

On the international front, the Indian textile and apparel industry continued to explore opportunities arising from the diversification of global supply chains and increasing preference among international buyers for reliable and diversified sourcing destinations. The stabilisation of demand in certain developed markets, coupled with Indias strong manufacturing base and skilled workforce, is expected to support export growth over the medium to long term. Further, trade agreements and ongoing efforts to improve market access are expected to create additional opportunities for Indian textile manufacturers and exporters.

The Government of India continues to provide policy support to the textile sector through various initiatives, including the Production Linked Incentive (PLI) Scheme for Textiles, the development of PM MITRA Mega Textile Parks, and initiatives aimed at promoting technical textiles, technology upgradation, sustainability and value-added manufacturing. These measures are expected to strengthen the competitiveness of the Indian textile industry, encourage investments and promote the development of an integrated and globally competitive textile ecosystem.

The Indian textile and apparel market continues to offer significant long-term growth potential. The domestic textile and apparel market has witnessed steady growth over the years, supported by favourable demographics, rising consumption and increasing formalisation of the retail sector. The Ministry of Textiles has set ambitious targets for the growth of the domestic textile and apparel market, reflecting the significant opportunity available to industry participants.

Within the broader textile industry, the polyester and man-made fibre segment continues to hold significant importance, driven by its wide range of applications, durability, versatility and increasing use across apparel, home textiles and industrial applications. The relatively moderate pace of capacity additions in certain segments of the polyester yarn industry is expected to support a more balanced demand-supply environment over the medium term.

Indias home textiles market also continues to offer significant growth opportunities, supported by rising housing demand, increasing consumer spending, changing lifestyles and growing demand for quality home furnishing products. The increasing focus on sustainability, innovation and value- added products is expected to further support the growth of this segment.

Notwithstanding the positive long-term outlook, the industry continues to face certain challenges, including volatility in raw material prices, fluctuations in crude oil and other commodity prices, rising energy and logistics costs, intense competition from other textile-producing countries, and increasing regulatory and compliance requirements relating to sustainability and environmental standards.

Despite these challenges, the long-term outlook for the Indian textile industry remains positive. Indias strong raw material base, large domestic market, skilled workforce, growing manufacturing capabilities and continued policy support provide a strong foundation for sustainable growth. Increasing demand for man-made fibres, value-added textile products and sustainable manufacturing is expected to create further opportunities for the industry in the coming years.

OPPORTUNITIES & THREATS Opportunities

Strong Domestic Consumption - Rising disposable incomes, urbanization, and increasing preference for branded and organized retail are driving steady demand in the domestic market. The growth of e-commerce and digital retail channels is expanding the reach of textile products across Tier II and Tier III cities.

Export Growth Potential - With global buyers diversifying sourcing away from China, India is well- positioned to capture a larger share of international markets, particularly in the US and Europe. Pending Free Trade Agreements (FTAs) with the UK and EU are expected to provide a competitive edge to Indian exporters.

Government Support - Initiatives such as the PLI Scheme, PM MITRA Parks, and focus on Technical Textiles and Man-Made Fiber (MMF) segments are expected to modernize production capacities and improve cost efficiencies.

Shift Towards Sustainability - Increasing global demand for sustainable, organic, and eco-friendly fabrics presents new opportunities. Indian companies investing in green technologies and circular economy models can gain a competitive advantage.

Technical Textiles & Niche Segments - Rising applications of technical textiles in healthcare, infrastructure, automotive, and defense sectors provide significant growth avenues.

Threats

Raw Material Volatility - Prices of cotton, polyester, and other key raw materials remain unpredictable due to global supply-demand imbalances, weather conditions, and international trade dynamics.

Global Demand Fluctuations - The textile industry is heavily dependent on export markets. Any slowdown in the US, EU, or other major markets due to inflationary pressures or geopolitical instability directly impacts Indian exporters.

Intense Competition - Countries like Bangladesh, Vietnam, and Turkey continue to offer cost competitiveness in terms of labor and logistics, posing a challenge to Indian players.

Compliance & Sustainability Pressures - Increasing global focus on ESG norms, stricter labor standards, and environmental regulations require continuous investment in compliance, which may impact margins.

High Operational Costs - Rising energy, transportation, and financing costs put pressure on profitability, especially for small and medium enterprises in the fragmented textile ecosystem.

Labour force and employment:

The Textile Industry provides direct employment to over 50 million people. Even though the pandemic had disturbed the labour and employment situation, it is back on its feet with a renewed vigour and work from factory and office is back on the cards for most corporates.

Import & Exports of raw material and readymade garment:

The High sea freight costs have adversely impacted exports globally and Indian textile importers have turned to domestic suppliers, thereby increasing demand locally and digital platforms.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company operates in the segment of Manufacturing and Marketing of Synthetic Textiles Yarns. OUTLOOK

The outlook for the Indian textile industry remains positive, supported by a strong domestic market, favorable government policies, and improving export prospects. With rising consumer demand for fashion, home textiles, and technical textiles, the sector is expected to witness steady growth in the coming year.

The Governments continued focus on strengthening the textile ecosystem through initiatives such as PLI Scheme, PM MITRA Parks, and National Technical Textiles Mission will enhance competitiveness, attract investments, and accelerate technology adoption. The expected conclusion of Free Trade Agreements (FTAs) with key markets such as the UK and EU is likely to provide significant export opportunities and improve Indias global market share.

On the domestic front, demand is projected to rise owing to urbanization, increasing penetration of organized retail, and rapid growth of e-commerce platforms. Growing awareness around sustainability and eco-friendly products will encourage companies to adopt greener processes, thereby opening new product categories and premium market segments.

However, challenges relating to raw material price volatility, rising energy costs, global economic uncertainties, and compliance with evolving environmental and labor standards may continue to put pressure on margins. Companies with a strong focus on product innovation, operational efficiency, digital adoption, and sustainability practices will be better positioned to manage risks and capture emerging opportunities.

Overall, the Indian textile industry is poised for steady growth in FY 2025-26, and your Company is well-prepared to leverage its strengths, expand its market presence, and create long-term value for stakeholders.

INTERNAL CONTROLS SYSTEMS AND THEIR ADEQUACY.

• RRILs well-defined organisation structure, policy guidelines, predefined authority levels and an extensive system of internal controls, ensure optimal utilisation and protection of resources, IT security, accurate reporting of financial transactions and compliance with applicable laws and regulations.

• RRIL has adequate system of internal control in place to ensure that assets are safeguarded against loss from unauthorised use or disposition, and that transactions are authorised, recorded, and reported correctly.

• RRILs internal audit function is empowered to examine the adequacy, relevance and effectiveness of control systems, compliance with laws, regulations and policies, plans and statutory requirements.

• RRIL has a strong budgetary control system. Actual performance is reviewed with reference to the budget by the management on an ongoing basis.

• RRILs Audit Committee of the Board reviews the findings and recommendations of the internal auditor.

The system is improved and modified continuously to meet changes in business conditions, statutory and accounting requirements.

SUSTAINABILITY AT OUR PLANTS

Efficient Water Recycling and Treatment

We have installed a state-of-the-art Effluent Treatment Plant (ETP) with a Reverse Osmosis process for water recycling. Our aerobic ETP treats effluent water and generates significantly less 002 compared to traditional anaerobic ETPs

Energy Recovery and Utilization

Residual heat is recovered and utilized for preheating atmospheric air used in HTM heaters. This process ensures proper fuel combustion, reducing overall fuel consumption and C02 emissions

Innovative Cooling Solutions

Waste vapors from the system are converted into chilled water through vapor absorption chillers. This chilled water is used for air conditioning the plant, thereby significantly reducing the power requirements for cooling production areas

Power Saving Initiatives

Various power-saving methods are continuously implemented to minimize power consumption. This includes the purchase of energy-efficient motors and the installation of solar power panels

Sustainable Packaging Solutions

We have achieved a reduction in packing material requirements by recycling materials such as paper tubes, which are reused multiple times

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the financial year under review the Company has earned total revenue of Rs. 118,461.74 /- Lakhs as compared to the previous years revenue of Rs. 85,413.12/- Lakhs. The Company has earned a net profit of Rs. 3,399.28 /- Lakhs after considering exceptional items as compared to the previous years net profit of Rs. 1,380.61 /- Lakhs. Your directors are continuously looking for avenues for future growth of the company.

Research & Development:

The Company always strives to be innovative and cost competitive, aided by its fully equipped R & D facilities. It will gain support from its parent company by way of market feedback on demand and immediate feedback on the quality so that the company can develop product specifications and quality as per requirements of the market. Besides producing micro fibre and regular POY of Denier range fine to coarse, the Companys has the flexibility to produce various products like Full Dull, Semi Dull, Bright Yarns, Doped Dyed Yarn, recycled yarns, Fire Retardant and Anti Microbial yarns.

Quality Management:

RRIL gearing up to ensure that product quality is comparable to the best in the industry and quality improvement measures are being put in place to enhance quality of its various polyester yarns and polyester chips as per customer requirements.

Environment and Safety:

Being conscious of the need for environmentally clean and safe operations, the Company conducts its operations ensuring safety of all concerned, compliance of statutory and industrial requirements for environment protection and conservation of natural resources to the extent possible.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company recognises that human resource is considered as the most valuable of all resources available to the Company. The Companys focus is on developing the most superior work force so that the Company and individual employees can accomplish their work goals in service to customers. The Company continues to lay emphasis on building and sustaining an excellent organization climate based on human performance.

The Companys strategy for development of Human Resources is through providing a motivating work environment, recruiting the best talents, providing challenging goals and by creating a culture for learning and growth. Industrial relations remained cordial at the plants.

RISKS AND CONCERNS:

The textile industry operates in a dynamic environment influenced by global economic conditions, raw material availability, policy changes, and evolving consumer preferences. While the long-term outlook remains positive, the sector continues to face several risks and concerns that may impact business performance:

1. Raw Material Price Volatility

The Company remains exposed to fluctuations in cotton, polyester, and other fiber prices, which are influenced by international trade dynamics, weather conditions, and government policies. Sudden price spikes can affect cost structures and margins.

2. Global Economic Uncertainty

A significant portion of Indias textile output is export-oriented. Any slowdown in key markets such as the US and Europe, coupled with inflationary pressures and geopolitical tensions, may adversely affect demand for Indian textile products.

3. Foreign Exchange Risk

With considerable export revenues, the Company is exposed to currency fluctuations. Sharp movements in foreign exchange rates could impact profitability.

4. Competition

Indian manufacturers face intense competition from countries like Bangladesh, Vietnam, and Turkey, which enjoy cost advantages in labor and logistics. This increases pressure on pricing and profitability in international markets.

5. Regulatory and Compliance Challenges

Increasingly stringent global requirements on sustainability, environmental protection, and labor standards necessitate continuous investment in compliance. Failure to adapt may lead to loss of market access and reputational risk.

6. Operational Risks

Rising energy costs, logistics challenges, and dependence on migrant labor pose operational risks, especially for small and medium enterprises within the textile ecosystem.

7. Technological Obsolescence

Rapid technological changes in manufacturing, automation, and digital integration require continuous upgradation. Companies that lag behind may lose competitiveness.

KEY RATIOS:

In accordance with the SEBI (Listing Obligations and Disclosures Requirements) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in Key sector-specific financial ratios.

Ratios	2025- 26	2024-25	% change	Explanation for change in ratio for more than 25%
Current ratio (in times)	0.86	0.83	3%	-
Debt - Equity Ratio (In times)	1.42	1.94	-27%	Increase in profit.
Debt Service Coverage Ratio (In times)	1.95	1.16	68%	Increase in profit.
Return on Equity (%)	24.37%	21.65%	13%
Inventory Turnover (In times)	8.58	6.56	31%	Increase in Closing stock.
Trade receivables turnover ratio (In times)	40.14	26.18	53%	Increase in Revenue.
Trade payables turnover ratio (In times)	5.75	5.60	3%
Net profit ratio (%)	2.88%	1.63%	77%	Increase in Revenue and net profit.
Net capital turnover ratio (No.of days)	(29.57)	(23.60)	25%	Increase in Revenue.
Return on capital employed (%)	16.99%	8.86%	92%	Increase in profit.
Return on investment (%)	1.27%	0%	100%

FORWARD LOOKING STATEMENTS:

Statements in this 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 materially from those expressed or implied. Important factors that could make difference to the Companys operations include raw material availability and its prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, Tax regimes, economic developments within India and the countries in which the Company conducts business, if any and other ancillary factors.