R&B Denims Ltd Management Discussions

DISCLAIMER

Statements in the Directors Report & 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 and other ancillary factors.

1. INDUSTRY STRUCTURE AND DEVELOPMENTS: a) Global Denim Industry Structure

The denim jeans market is undergoing a significant transformation, propelled by sustainable innovation and digital transformation. A core driver is the industry-wide pivot to a circular economy, focusing on textile recycling and the use of low-impact fibers to reduce environmental footprints. This shift is not merely a response to regulatory pressure but a strategic move to mitigate risks from raw material scarcity. Concurrently, AI-powered personalization and the adoption of a direct-to-consumer model are reshaping the retail landscape. For instance, a business scenario involves leveraging a unified commerce environment where first-party data on consumer preferences for artisanal denim or specific sculptural silhouettes is used to optimize inventory and reduce waste, improving margins by over 5% compared to traditional wholesale models. However, the industry grapples with challenges like raw material price volatility and complex global supply chains. Success hinges on balancing heritage branding with technological advancement, creating a resilient and consumer-centric market. The integration of digital product passports and blockchain technology is becoming crucial for ensuring transparent supply chains and building consumer trust in an increasingly eco-conscious environment.

The denim jeans market size is valued to increase by USD 27.43 billion, at a CAGR of 6.7% from 2025 to 2030 . Sustainable innovation and circular economy will drive the denim jeans market.

The men segment is estimated to witness significant growth during the forecast period. The mens segment remains foundational, driven by a focus on durability and functional style. While classic fits are staples, there is growing interest in performance features like enhanced stretch. A key shift is toward a direct-to-consumer model, where a focus on a denim lifestyle yields significant returns, with some entities seeing organic net revenue growth of 7% in this category. Companies are leveraging this model for the premiumization of their offerings, using artisanal denim and eco-friendly materials. To appeal to eco-conscious consumers, brands are integrating waterless technology and low-impact fibers. This strategy, combined with celebrity influence and offerings on a second hand platform, helps capture market share and aligns with the trend of a slow fashion movement.

Market Dynamics

With 2025 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage. Understanding the impact of AI-powered personalization in retail is critical as companies navigate the global denim jeans market 2026-2030. The benefits of a circular economy in fashion are compelling firms to reconsider their entire value chain. However, the challenges of supply chain complexity in apparel persist, making the integration of blockchain for supply chain traceability a strategic priority. The role of digital product passports in transparency is becoming non-negotiable for brands aiming to build consumer trust. Strategies for brand revitalization through collaboration, particularly the influence of celebrity endorsements on denim sales, are proving effective. Consumer trends driving sustainable innovation in denim are pushing the demand for recycled fibers in textile manufacturing and the adoption of waterless technology in denim production. The premiumization trends in the global denim market are shifting focus to quality over quantity. The growth of direct-to-consumer models in apparel, where margins can be up to 15% higher than in wholesale channels, is fundamentally altering retail dynamics. Concurrently, firms are learning how virtual try-on tools reduce return rates and how to optimize inventory with unified commerce environments. Navigating regulatory compliance for sustainability standards and the impact of raw material price volatility on margins remain key boardroom conversations, pushing some to adopt nearshoring as a strategy to mitigate logistics disruption.

b) Indian Denim Industry Structure

Despite strong consumer demand, the supply base for denim in India remains fragmented and traditional. Bridging this gap through investment in modern manufacturing technology, efficient supply chains, and sustainable practices is increasingly vital for market leaders and challengers alike. Unlike mature global markets, the Indian denim industry in 2025 offers substantial room for expansion in volume and value, as evidenced by emerging trends. Womens denim wear, once a small segment, is now gaining prominence and driving growth. Meanwhile, Tier-2 and Tier-3 cities are fueling rising demand, benefiting from higher disposable incomes, greater digital access, and evolving lifestyle aspirations. Modernization and sustainability are no longer optional. The adoption of AI-based forecasting, automated finishing, sustainable materials, and water-efficient processes has become essential to maintaining competitiveness. Larger, well-capitalized firms are able to adapt, whereas smaller players continue to face the pressure of meeting new industry standards. Recent policy initiatives such as the Production Linked Incentive (PLI) scheme and new trade agreements are reshaping Indias competitive position, unlocking fresh opportunities for export and sectoral investment. As a result, the Indian denim market in 2025 is not only expanding in size, it is evolving. Driven by shifts in consumer demand, technology, sustainability, and supportive government policies,

Indias denim industry is steadily becoming more organized, modern, and globally competitive.

On the global stage, India plays a dual role: it is solidifying its position as both a key manufacturing hub and a critical growth market.

Manufacturing Power : India is the worlds second-largest denim fabric producer , with an installed capacity of 1,734 million meters per annum in 2024. This massive capacity services a domestic consumption of nearly one billion meters annually while also supporting a sizable export footprint.

The Strategic Gap : Despite its manufacturing scale, India has not yet established globally recognized indigenous denim brands. The country is a powerhouse supplier and manufacturer, but it is not yet a global brand originator or denim trendsetter.

Export Headwinds : The export market has faced recent pressure, with denim fabric exports contracting by ~21% from 2022 to 2024. This reflects a combination of global economic slowdowns, inflationary pressures, and geopolitical issues.

The next phase of Indias growth will depend on its ability to move up the value chain, evolving beyond production strength to build brand-led, innovation-driven leadership.

The 2025 Duality: Demand vs. Supply

The Indian denim market in 2025 is defined by this duality: robust, modernizing consumer demand on one side, and an uneven, traditional supply environment on the other. The companies most likely to succeed will be those that can build modern, agile, and technology-enabled supply chains capable of meeting this rising demand efficiently and profitably

Developments and Trends in Indian Denim Industry:

Growing demand for casual and lifestyle apparel across all age groups.

Increasing adoption of sustainable and eco-friendly denim manufacturing processes.

Rising preference for stretch, lightweight, and performance denim fabrics.

Expansion of organized retail and e-commerce channels.

Increased focus on premium and value-added denim products.

Growing export opportunities supported by global sourcing diversification.

Technological advancements in dyeing, finishing, and fabric processing.

2. OPPORTUNITIES AND THREATS: a) Opportunities:

China Plus One Sourcing Strategy

Global apparel brands are increasingly diversifying their sourcing base beyond China, creating significant opportunities for Indian denim manufacturers to strengthen their presence in international markets.

Growing Preference for Sustainable Denim

Rising consumer awareness regarding environmental sustainability is driving demand for eco-friendly denim fabrics manufactured through water-efficient, energy-efficient, and recycled material-based processes.

Premiumisation of Denim Products

Increasing disposable incomes and evolving fashion preferences are accelerating demand for premium, performance-based, and value-added denim fabrics, offering higher margin opportunities for manufacturers.

Expansion of Organized Retail and E-Commerce

The rapid growth of organized retail chains and digital commerce platforms is expanding market access and driving consumption of denim apparel across urban and semi-urban markets.

Favourable Demographic Profile

Indias young population, increasing urbanization, and rising fashion consciousness continue to support long-term growth in denim consumption.

Technical and Functional Denim Innovation

Growing demand for stretch, lightweight, moisture-management, and performance-oriented denim fabrics provides opportunities for product differentiation and innovation.

Government Support for Textile Sector

Various government initiatives, including Production Linked Incentive (PLI) schemes, PM MITRA Parks, and export promotion measures, are expected to enhance the competitiveness of the Indian textile industry.

Global Shift Towards Responsible Supply Chains

International brands are increasingly prioritizing suppliers with strong ESG credentials, traceability systems, and sustainable manufacturing practices, creating opportunities for compliant and responsible manufacturers.

Increasing Demand from Emerging Markets

Rising consumption of denim products in Asia, Africa, Latin America, and the Middle East presents new avenues for export growth and market diversification.

Value Chain Integration Opportunities

Enhanced integration across spinning, weaving, processing, and garmenting operations can improve operational efficiencies, strengthen margins, and create long-term competitive advantages.

Technology-Led Manufacturing Excellence

Adoption of automation, digital manufacturing systems, artificial intelligence, and data-driven production planning can significantly improve productivity, quality consistency, and cost competitiveness.

Import Substitution and Domestic Manufacturing Growth

Government emphasis on strengthening domestic manufacturing under initiatives such as Make in India is expected to create additional opportunities for domestic textile and denim producers.

b) Threats:

Volatility in Raw Material Prices

Fluctuations in the prices of cotton, yarn, dyes, chemicals, and other inputs may adversely impact production costs and operating margins.

Intense Global & Regional Competition

Indian mills face pricing pressure from low-cost producers like Bangladesh, Pakistan, and Vietnam. Pakistans lower labour costs and streamlined export policies present a tangible competitive threat. Despite looming U.S. tariffs on Bangladesh, the sustained price competition requires India to constantly optimize cost and efficiency.

Supply Chain Disruptions & Trade Slowdowns

Global disruptions such as the Red Sea shipping crisis spiked freight rates by up to 5× via the Suez Canal, squeezing timelines and increasing working capital cycles for Indian exporters. Softening demand in developed regions (e.g., Europe, Japan) during late 2023 and early 2024 weakened overall export volumes.

Regulatory and Labour Hindrances

Complex labour laws and high compliance burdens (e.g., licenses, shift restrictions, worker facilities) obstruct scalability and inflate operational costs. Cumbersome export-import processes and high duties on textile inputs (e.g., synthetic yarns) hinder competitiveness.

Environmental and Social Compliance Pressures

Denim manufacturing is under scrutiny for high water usage (-22,500 L per kg cotton), disruptive dyeing waste, fossil-fuel energy consumption, and chemical pollution. Failure to meet global ESG norms could result in lost business, especially from brands prioritizing sustainability certifications and low environmental footprints.

Domestic Demand Challenges

Despite rising aspirations, Indias discretionary consumer base is limited: only ~130 140 million Indians fall into the real consumer class, constraining growth in premium denim. Competitive threat from fast fashion entrants is intensifying price pressures in the value segment.

Counterfeiting & Intellectual Property Risks

The prevalence of counterfeit or unbranded denim erodes margins and brand equity for authentic players.

Customer Concentration and Demand Cyclicality

Dependence on specific markets, customers, or economic sectors may expose the business to fluctuations in demand and market conditions.

3. SEGMENT WISE OR PRODUCT-WISE PERFORMANCE PERFORMANCE:

The revenue performance is as under:

(Amount in lakhs)

F.Y.	Denim Fabric	Garment	Yarn	Services
2024-25	20012.68	-	935.22	2353.27
2025-26	24848.21	87.68	2681.23	1158.67

4. OUTLOOK:

The Indian denim industry is experiencing robust growth, projected to reach between $ 3.76 and $9 billion as the market expands at a 6% to 9% CAGR . This trajectory is driven by rising domestic disposable incomes, booming e-commerce, and a shift in demand from Tier II and III cities

Regional Dominance : Gujarat remains the undisputed powerhouse of Indian denim production, housing a vast majority of the countrys manufacturing capacity. India produces over 1.1 billion meters of denim fabric annually, making it a highly competitive global player.

Shift in Demographics: While mens denim historically dominated the market, womens and childrens segments are now the fastest-growing sectors. Younger millennials and Gen Z are driving demand for diverse fits (such as slim, relaxed, and stretchable fabrics).

Sustainability and Innovation: Manufacturers are shifting toward eco-friendly practices to meet both domestic demands and stringent international export standards. Key initiatives include water-saving dyeing techniques, laser distressing, and the use of recycled or organic fibers.

Low Domestic Penetration: Despite massive production capabilities, domestic consumption is only about 0.4 pairs of jeans per person annually. This presents immense long-term upside as urbanization and changing cultural norms position denim as everyday wear rather than just casual wear.

R & B Denims is well-positioned due to its capacity, sustainability initiatives, and improved profitability. The management plans to continue leveraging its integrated, eco-friendly model while expanding into higher-margin denim segments, so that the company can outperform peers in the evolving Indian denim landscape.

5. RISK AND CONCERNS:

The Companys operations are exposed to various risks including fluctuations in raw material prices, changing consumer preferences, competitive pressures, foreign exchange volatility, regulatory changes, and macroeconomic uncertainties. The management continuously evaluates these risks and implements suitable mitigation strategies through prudent procurement practices, cost optimization initiatives, diversified customer relationships, and efficient inventory management.

The list of the potential risks the industry is exposed to domestically/internationally is given below:

a. Raw Material Price Risk: The denim manufacturing industry is inherently dependent on key raw materials such as cotton, yarn, dyes, chemicals, and other inputs. Volatility in commodity prices arising from market imbalances, climatic conditions, or geopolitical developments may impact production costs and operating margins.

b. Global Economic and Market Risk: Macroeconomic uncertainties, inflationary pressures, geopolitical conflicts, and fluctuations in consumer spending patterns across major economies may influence demand for textile and apparel products, thereby affecting industry growth prospects.

c. Foreign Exchange Risk: Given the industrys exposure to international trade, fluctuations in foreign currency exchange rates may impact export realizations, import costs, and overall competitiveness in global markets.

d. Competitive Intensity Risk: The Indian textile sector competes with both domestic and international manufacturers. Increased competition from low-cost manufacturing countries and changing global sourcing patterns may exert pressure on pricing, market share, and profitability. e. Regulatory and Sustainability Compliance Risk: The increasing focus on environmental stewardship, social responsibility, and governance standards has led to stricter regulatory requirements globally. Compliance with evolving environmental, labour, and sustainability regulations may require continuous investments in technology, systems, and processes.

f. Supply Chain and Logistics Risk: The industry relies on efficient procurement and distribution networks. Disruptions arising from geopolitical tensions, transportation constraints, raw material shortages, or global trade disturbances may impact operational continuity and delivery schedules.

g. Energy and Utility Cost Risk: Manufacturing operations require significant consumption of power, fuel, water, and other utilities. Any substantial increase in utility costs may affect operational efficiency and cost competitiveness.

h. Financial Risk: It is the uncertainty associated with how firms finance its business like by issue of shares, debentures, taking loans from government / financial institutions etc. Such financial transactions also include risk of default in payment of interest, dividend or repayment of capital due to various internal or external factors like increase in credit days of debtors, inflation, interest rate fluctuations, change in government policies etc. It may lead to loss of liquidity, falling assets value, significant change in cash inflow and outflow etc.

i. Liquidity Risk: Liquidity Risk reflects the possibility/position that a party may have insufficient funds to settle an obligation for full value when due because of insufficient capital or difficulty in selling as asset or an investment to generate capital, but will have funds to cover settlement obligations on some unspecified date thereafter. In non-bankruptcy situations, the allowable methods to cover short positions are generally driven by local market conventions. As a result, liquidity could be adversely affected by prohibitions on transactions such as Repos, Reverse Repos, Securities Lending and other allied components.

j. Global Risk: Global risk refers to an uncertain event or condition that can cause significant negative impact to several countries or industries for a long period of time. India is still emerging in the market of textile industries. There is a tremendous competition around the world. Indian manufacturers will have to face a tough fight to sustain in the competition. Due to poor infrastructure facilities, the production and transaction cost remain high in India. Also, Indias logistic disadvantage due to its geographical location can give it a major thumb-down in global trade. As a result, high cost of shipments and longer lead time coupled with lack of infrastructure facility may prove to be a major hindrance. To overcome this problem, India needs to increase the size of its industrial infrastructure to capture the efficiencies of the economies of scale and it must cluster the textile production.

k. Political Risk: Political risk may be defined as the probability that a political event will impact adversely on a firms profit. It represents the financial risk that a countrys government will suddenly change its policies. A new law or a change in an existing could have a significant impact on an investment. Whatever laws the government passes today may be extinct tomorrow. This risk covers restriction on remittances in the buyers country or any government action which may block or delay payment to the exporter, war, revolution or civil commotion in the buyers country, cancellation or imposition of new export / import licensing restrictions in the buyers country, any other kind of loss occurring either in India or outside India which is not within the control of the exporter or the buyer.

l. Technology and Innovation Risk: Rapid advancements in manufacturing technologies, automation, and digitalization require continuous modernization and innovation. Failure to adopt emerging technologies may affect productivity, product quality, and competitive positioning.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has established adequate internal control systems commensurate with the size and nature of its business to ensure efficient operations, safeguarding of assets, accuracy of financial reporting, and compliance with applicable laws and regulations. These controls are regularly reviewed through internal audits to ensure their effectiveness and continuous improvement. The management believes that the internal control framework is adequate and operating effectively to support the Companys business objectives and governance standards.

7. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFOMRMANCE:

During the current year, your company recorded total revenue of Rs. 29,108.03 Lakhs against Rs. 23,613.76 Lakhs in the previous year, representing an increase of 23.26% during the year but Net Profit for the year 2025-26 stood at Rs. 1,444.15 Lakhs as compared to Rs. 2,091.85 Lakhs in financial year 2024-25 which has decrease by 30.96% (Standalone basis)

During the current year, your company recorded total revenue of Rs. 46,592.14 Lakhs against Rs. 36,678.27 Lakhs in the previous year, representing an increase of 27.03% during the year and Net Profit for the year 2025-26 stood at Rs. 2,476.18 Lakhs as compared to Rs. 2,747.40 Lakhs in financial year 2024-25 which has decrease by 9.87%. (Consolidated basis) To conserve resources for the companys future growth plans, no dividend is being recommended by the Directors for the year ended March 31, 2026.

8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES:

At R & B Denims Limited, employees are recognized as the cornerstone of the Companys success and sustainable growth. The Company remains committed to fostering a positive, inclusive, and performance-driven work environment that encourages continuous learning, innovation, and professional development. During the year under review, focused efforts were made towards skill enhancement, employee engagement, leadership development, and workplace safety through various training and development initiatives. The Company continues to promote a culture of collaboration, accountability, and operational excellence while ensuring employee well-being and welfare. Industrial relations remained cordial and harmonious throughout the year, reflecting the Companys commitment to maintaining a motivated and empowered workforce aligned with its long-term business objectives.

9. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIO:

Ratio	2025-26	2024-25	Variance
Debtor\u2019s Turnover Ratio	6.06	5.31	14.08%
Inventory Turnover Ratio	7.11	7.32	-2.93%
Interest Coverage Ratio	8.10	12.14	33.27%
Current Ratio	1.98	1.51	31.20%
Debt-Equity Ratio	0.19	0.26	-27.34%
Operating Profit Ratio	7.65%	12.92%	-40.77%
Net Profit Ratio	4.96%	8.86%	-43.99%

Explanation for Change in the Ratio by more than 25% as compared to previous year:

Current Ratio: The variance is due to substantial rise in Current assets. Interest Coverage Ratio: The variance is due to substantial decrease in debt. Debt-Equity Ratio: The variance is due to substantial decrease in debt.

Operating Profit Ratio : The variance is due to substantial rise in sales during the period. Net Profit Ratio: The variance is due to decrease in net profit.

10. RETURN ON NET WORTH AS COMPARE TO IMMEDIATELY PREVIOUS FINANCIAL YEARALONG

WITH A DETAILED EXPLANATION THEREOF:

Financial Year	2025-26	2024-25
Net Profit after tax	1,444.15	2,091.85
Average Shareholder\u2019s Equity	19,750.85	16,732.29
Return on Net Worth	07.31%	12.50%

There is a variance of -41.51% due to substantial decrease profit after tax during the period.

11. SUSTAINABLE DEVELOPMENT:

Sustainability has been deeply embedded into the Companys business and has become an integral part of its decision-making process while considering social, economic and environmental dimensions. During the year 2025-26, a Sustainable Development Strategy was developed with a focus on the following areas:

Water Pollution Control Measures

Our company is a member of Gujarat Eco-Textile Park (GETP) since 2014; The Park helps us to reduce water pollution. The company has made sure that it implements various measures across all its operations to control fugitive emissions from polluting our water bodies.

Air Pollution Control Measures

Initiatives have been taken to reduce air pollution which is caused due to production processes. Our company has obtained a license from Gujarat Pollution Control Board (GPCB) to ensure pollution control. Gujarat Pollution Control Board (GPCB) ensures that the pollution control limits are maintained by surprise inspections at the factory. These inspection samples are then tested in their own laboratory and report is issued. The Company has also installed Air Receiver in the weaving department to reduce and control on toxin emissions.

12. HEALTH & SAFETY:

The Company places the highest priority on the health, safety, and well-being of its employees. Adequate safety measures, including fire protection systems, first-aid facilities, proper ventilation, and workplace safety infrastructure, are maintained across its operations. Regular safety awareness and training programs are conducted to promote a safe working environment and ensure compliance with applicable health and safety standards. These initiatives contribute to employee well-being, operational efficiency, and sustainable business growth.

13. INFRASTRUCTURE:

The company is equipped with modern infrastructure facilities which assist in smooth production.

The companys manufacturing unit is outfitted with advanced machines and equipment and a trained staff, who have years of experience behind them. To sell products to the clients, the company has facilitated a smooth transportation mechanism through a strong base of transporters and traders.

14. CAUTIONARY STATEMENT:

The above Management Discussion and Analysis contain certain forward-looking statements within the meaning of applicable security laws and regulations. These pertain to the Companys future business prospects and business profitability, which are subject to several risks and uncertainties and the actual results could materially differ from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties, regarding a fluctuation in earnings, our ability to manage growth, competition, economic growth in India, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, government policies and actions with respect to investments, fiscal deficits, regulation etc. In accordance with the Code of Corporate Governance approved by the Securities and Exchange Board of India, shareholders and readers are cautioned that in the case of data and information external to the Company, no representation is made on its accuracy or comprehensiveness though the same are based on sources thought to be reliable. The company does not undertake to make any announcement in case any of these forward-looking statements become materially incorrect in future or update any forward-looking statements made from time to time on behalf of the company.

For and on behalf of the Board of Directors
R & B Denims Limited

Sd/-
Amit Dalmia
Chairman & Managing Director
DIN: 00034642

Date: July 11, 2026
Place: Surat