Reliance Chemotex Industries Ltd Management Discussions

Outlook: The global economy has entered a period of uncertainty following the imposition of tariffs on products imported into the USA and some countries announcing reciprocal tariffs on US exports to their countries. This is likely to stagger global economic growth, the full outcome of which cannot be currently estimated. This risk is supplemented by risks related to conflicts, geopolitical tensions, trade restrictions and climate risks. In view of this, World Bank projected global economic growth at 2.7 per cent for 2025 and 2026, factoring the various economic uncertainties. (Source: IMF, United Nations)

The Indian economy grew at 6.5% in FY 2024-25, compared to a revised 9.2% in FY 2023-24. This represented a four-year low due to a moderate slowdown within the Indian economy (marked by slower manufacturing growth and a decline in net investments). Despite the slowdown, India retained its position as the worlds fifth-largest economy.

Indias nominal GDP (at current prices) was H330.68 trillion in FY 2024-25 (H301.23 trillion in FY 202324). The nominal GDP per capita increased from H2,15,936 in FY 2023-24 to H2,35,108 in FY 2024-25, reflecting the impact of an economic expansion.

The Indian rupee weakened 2.12% against the US dollar in FY 2024-25, closing at H85.47 on the last trading day of FY25. In March 2025, the rupee recorded the highest monthly appreciation since November 2018, rising 2.39% (due to a weakening US dollar).

Inflationary pressures eased, with CPI inflation averaging 4.63% in FY 2024-25, driven by moderating food inflation and stable global commodity prices. Retail inflation at 4.6% in FY 2024-25, was the lowest since the pandemic, catalysing savings creation.

Indias foreign exchange reserves stood at a high of $676 billion as of April 4, 2025. This was the fourth consecutive year when rating upgrades outpaced

downgrades on account of strong domestic growth, rural consumption, increased infrastructure investments and low corporate leverage (annualized rating upgrade rate 14.5% exceeded the decade-long average of 11%; downgrade rate was 5.3%, lower than the 10-year average of 6.5%).

Gross foreign direct investment (FDI) into India rose 13.6% to $81 billion during the last financial year, the fastest pace of expansion since 2019-20. The increase in the year was despite a contraction during the fourth quarter of 2024-25 when inflows on a gross basis declined 6% to $17.9 billion due to the uncertainty caused by Donald Trumps election and his assertions around getting investments back into the US.

Real GDP growth (%) :::::::H::8.7 7.2 9.2 6.5

(Source: Budget FY24; Economy Projections, RBI projections, Deccan Herald)

The banking sector continued its improvement, with gross non-performing assets (NPA) for scheduled commercial banks (SCBs) declining to 2.6% as of September 2024, down from 2.7% in March 2024. The capital-to-risk-weighted assets ratio for SCBs stood at 16.7% as of September 2024, reflecting a strong capital position.

Indias exports of goods and services reached $824.9 billion in FY 2024-25, up from $778 billion in the previous fiscal year. The Red Sea crisis impacted shipping costs, affecting price-sensitive exports. Merchandise exports grew 6% YoY, reaching $374.1 billion.

Indias net GST collections increased 8.6%, totalling H19.56 lakh crore in FY 2024-25. Gross GST collections in FY 2024-25 stood at H22.08 lakh crore, a 9.4% increase YoY.

On the supply side, real gross value added (GVA) was estimated to expand 6.4% in FY 2024-25. The industrial sector grew by 6.5%, supported by growth in construction activities, electricity, gas, water supply and other utility services.

Indias services sector grew at 8.9% in FY25 (9.0% in FY24), driven by public administration, defence and other services (expanded at 8.8% as in the previous year). In the infrastructure and utilities sector, electricity, gas, water supply and other utility services grew a projected 6.0% in FY25, compared to 8.6% in FY24. Meanwhile, the construction sector expanded at 9.4% in FY25, slowing from 10.4% in the previous year.

Manufacturing activity was subdued in FY25, with growth at 4.5%, which was lower than 12.3% in FY24.

Moreover, due to lower public spending in the early part of the year, government final consumption expenditure (GFCE) is anticipated to have slowed to 3.8% in FY25, compared to 8.1% in FY24.

The agriculture sector grew at 4.6% in 2024-25 (1.4% in 2023-24). Trade, hotel, transport, communication and services related to broadcasting segment were estimated to grow at 6.4% in 2024- 25 (6.3% in 202324).

From a demand perspective, the private final consumption expenditure (PFCE) exhibited robust growth, achieving 7.2% in FY 2024-25, surpassing the previous financial years rate of 5.6%.

The Nifty 50 and SENSEX recorded their weakest annual performances in FY 25 in two years, rising 5.3% and 7.5% during the year under review respectively. Gold rose 37.7% to a peak of $3,070 per ounce, the highest increase since FY 2007-08, indicating global uncertainties.

Total assets managed by the mutual fund (MF) industry jumped 23% or Rs 12.3 lakh crore in fiscal 2025 to settle at Rs 65.7 lakh crore. At close of FY25, the total number of folios had jumped to nearly 23.5 crore, an all-time peak. During last fiscal, average monthly systematic investment plan (SIP) contribution jumped 45% to Rs 24,113 crore.

Foreign portfolio investments (FPIs) in India experienced high volatility throughout 2024, with total inflows into capital markets reaching approximately $20 billion by year-end. However, there was significant selling pressure in the last quarter, influenced by new tariffs announced by the new US government on most countries (including India).

India is expected to remain the fastest-growing major economy. Initial Reserve Bank of India estimates have forecast Indias GDP growth downwards from 6.7% to 6.5% based on risks arising from US tariff levies on India and other countries. The following are some key growth catalysts for India in FY26.

Reduction in GST rates: The Government of India is moving towards a major rationalization of Goods and Services Tax (GST) rates under the proposed ‘GST 2.0 framework, with textiles among the key beneficiaries. Current rates on woven fabrics, apparel, hosiery, and blended textiles·which range between 12% and 18%·are expected to be brought down to a uniform 5%. This reduction will ease working capital pressures on manufacturers, resolve long-standing issues of inverted duty structure, improve affordability for consumers, and enhance the competitiveness of Indian textiles in both domestic and export markets. If approved at the upcoming GST Council meeting (September 2025), the move is expected to provide strong impetus to demand growth across the textile value chain.

Union Budget FY 2024-25: The Union Budget 202526 laid a strong foundation for Indias economic trajectory, emphasizing agriculture, MSMEs, investment, and exports as the four primary growth engines. With a fiscal deficit target of 4.4% of GDP, the government reinforced fiscal prudence while allocating H11.21 lakh crore for capital expenditure (3.1% of GDP) to drive infrastructure development. The February 2025 Budget marked a shift in approach, with the government proposing substantial personal tax cuts. Effective April 1, 2025, individuals earning up to H12 lakh annually will be fully exempt from income tax. Economists estimate that the resulting H1 lakh crore in tax savings could boost consumption by H3-3.5 lakh crore, potentially increasing the nominal private final consumption Expenditure (PFCE) by 1.52% of its current H200 lakh crore.

Free trade agreement: In a post-Balance Sheet development, India and the United Kingdom announced a free trade agreement to boost strategic and economic ties. This could lead to a significant increase in the export competitiveness of Indian shipments in the UK across the textiles, toys, leather, marine products, footwear, and gems & jewellery sectors. About 99% of Indian exports to UK will enjoy zero-duty access tariff cuts; India will cut tariffs on 90% of tariff lines and 85% could become fully dutyfree within 10 years.

Pay Commission impact: The 8^th Pay Commissions awards could lead to a significant salary revision for nearly ten million central government employees. Historically, Pay Commissions have granted substantial

pay hikes along with generous arrears. For instance, the 7^th Pay Commission more than tripled its monthly salaries, raising the range from H7,000 to H90,000 to H18,000 to H12.5 lakh, triggering a widespread ripple effect.

Monsoons: The India Meteorological Department predicted an ‘above normal monsoon in 2025. This augurs well for the countrys farm sector and a moderated food inflation outlook.

Indias consumer price index (CPI)-based retail inflation eased to 3.34% in March 2025, its lowest level since August 2019, reinforcing expectations of continued monetary easing. Reflecting this trend, the Monetary Policy Committee (MPC), in its February 2025 meeting, implemented a 25-basis-point rate cut, reducing the policy rate to 6%·its first move in FY2025-26. With CPI inflation forecasted at 4% for FY2025-26, prospects of deeper rate cuts remain on the horizon.

Lifting credit restrictions: In November 2023, the RBI increased risk weights on bank loans to retail borrowers and NBFCs, significantly tightening credit availability. This led to a sharp slowdown in retail credit growth from 20-30% to 9-13% between September 2023 and 2024. However, under its new leadership, the RBI has prioritized restoring credit flow. Recent policy shifts have removed restrictions on consumer credit, postponed higher liquidity requirements for banks, and are expected to rejuvenate retail lending.

The textile industry plays a vital role in the global economy, supplying essential materials for apparel, home furnishings, and a wide range of industrial applications.

In recent years, the global textile market has experienced robust expansion, growing from USD 640.43 billion in 2024 to an estimated USD 696.16 billion in 2025 at a CAGR of 8.7%. This momentum is expected to continue, with the market projected to reach USD 915.96 billion by 2029, representing a CAGR of 7.1% during the forecast period.

Future growth will be driven by ongoing urbanization, rising disposable incomes, the rapid proliferation of e-commerce, and changing consumer preferences including a growing demand for convenience, leisurewear, and sustainable fashion. Additionally, deeper internet penetration and increased smartphone usage are reshaping how consumers

interact with textile and apparel brands, driving greater digital engagement and online sales.

Key trends transforming the industry include the adoption of digital textile printing, a strong focus on sustainability through the use of eco-friendly fibers, and the integration of blockchain for enhanced transparency and traceability. The digitalization of supply chains, investments in robotics and automation, the development of smart fabrics in collaboration with technology firms, and the deployment of artificial

intelligence are further modernizing operations and enhancing competitiveness.

Asia-Pacific continues to dominate the global textile landscape, accounting for more than 50% of the market share. This regional strength is underpinned by the presence of major manufacturing hubs in countries such as China, India, and Bangladesh. Competitive labor costs, favorable government support, and well-established supply chain infrastructure have positioned the region as a global leader in textile production and exports.

Indias textile and apparel sector is one of the oldest industries in the country, with roots extending back several centuries. The industry is highly diverse, encompassing everything from hand-spun and hand-woven textiles at the grassroots level to advanced, capital-intensive mills at the upper end of the spectrum. This broad scope not only reflects the countrys cultural heritage but also underscores the sectors adaptability to modern manufacturing techniques and market dynamics.

A major strength of Indias textile industry lies in its abundant and varied raw material base. The country is a leading producer of both natural fibers such as cotton, jute, silk, and wool and synthetic/man-made fibers like polyester, viscose, nylon, and acrylic. This strong supply chain foundation supports a wide array of applications across apparel, home furnishings, industrial textiles, and more.

As of 2024, the Indian textile and apparel market was valued at USD 222.08 billion. Looking ahead, the market is projected to expand significantly, reaching USD 646.96 billion by 2033, at a compound annual growth rate of 11.98% from 2025 to 2033. Key drivers

of this growth include rising demand for high-end and smart textiles, increasing consumer preference for sustainable and ethically sourced products, and supportive government initiatives aimed at promoting indigenous weavers and manufacturers.

Reliance Chemotex Industries Limited (RCIL) stands as a proud tribute to the vision and unwavering pursuit of excellence by its founder, Shanker Lal Shroff. What began as a modest spinning mill serving the local apparel market has since evolved into a globally respected name in the production of synthetic and blended yarns, positively touching the lives of millions across the world.

RCILs rise to prominence has been the result of deliberate and strategic growth anchored in continuous innovation, consumer-centric marketing, and a people-first talent philosophy that values long-term commitment. At the heart of this journey lies a steadfast value system that has guided every milestone.

Incorporated on 23^rd August 1977 as spinning mill in Udaipur, Rajasthan. RCIL has steadily built its reputation as one of Indias most trusted synthetic yarn manufacturers through decades of dedication, adaptability, and responsible leadership.

The Company is exposed to multiple business risks, including fluctuations in interest rates, volatility in foreign exchange, and variations in the prices of petroleum and other raw materials. The regulatory risks·such as changes in government import and export policies·remain an area of concern. The Company actively monitors these risks and takes necessary measures to mitigate their potential impact.

One of the key cost components in textile spinning is electricity, which typically accounts for 13% to 15% of total manufacturing costs. To address this, the Company has installed solar panels on the roofs of its Udaipur production facilities. This initiative not only reduces the carbon footprint but also lowers operating expenses and provides a safeguard against fluctuations in industrial power tariffs. Following successful commissioning, 5.2 MW of solar capacity is already operational, and the Company plans to strategically expand this capacity to 9 MW in FY 2026-27.

The Companys ability to optimize manufacturing processes and maximize plant efficiency remains critical to its operational performance. However, any disruption in production, whether due to external or uncontrollable factors and it could temporarily impact business operations.

Since yarn is the Companys main business segment, no other segment-specific data is offered. The Company only exports yarn that is made in India; it does not engage in any other business.

To prevent asset loss, unlawful use, or disposal, the Company has implemented an appropriate internal control system that is in line with its size and kind of business. Every transaction has been duly approved, documented, and reported to management. In order to correctly maintain the books of accounts and report financial statements, the Company complies with all applicable accounting standards. The Companys internal auditor monitors and validates the internal control system in compliance with the policy that the Company has implemented. Corrective action is implemented in response to the internal audit findings, which are reported to the department heads, statutory auditor, and audit committee of the Board of Directors. The audit committee is presented with the audit observations and the managements

comments. The Company considers its internal financial control system to be well-designed and functioning as planned.

The Company recognises that its workforce is a critical driver of growth and long-term success. It is committed to attracting, retaining, and nurturing talented individuals who align with the organisations values and vision. Reflecting its belief in inclusive growth, the Company has structured its performance management system to align individual development with broader organisational goals.

This approach places a strong emphasis on multiskilling, job rotation, and continuous improvement. The Human Resources department plays an active role in fostering employee development by focusing on enhancing productivity, quality, and customer satisfaction. To maintain a future-ready and skilled workforce, the Company conducts regular inhouse training programs and also facilitates external training through reputed institutes and equipment manufacturers for specialised skill development.

Supporting this effort is a robust management information system (MIS), which provides timely, accurate data across all levels of management. Regular review of these insights enables data-driven decisions to enhance productivity, operational efficiency, and product quality.

In FY 2024-25, the Company employed 2241 individuals, comprising both skilled professionals and unskilled workers.

Statements in the Boards Report and the Management Discussion and Analysis describing the Companys objectives, expectations or predictions may be forward-looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Crucial factors that could influence the Companys operations include global and domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country and other factors that are material to the business operations of the Company.