RLF Ltd Management Discussions

BUSINESS SEGMENT- TEXTILES

The Management of RLF LIMITED present its analysis report covering performance and outlook of the Company. The report has been prepared in compliance as laid down in the Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The management accepts responsibility for the Integrity and objectivity of the financial statement However, investors and readers are cautioned that this discussion contains certain forward-looking statements that involve risk and uncertainties.

INDUSTRY SCENARIO

The Indian embroidery industry is a vibrant and culturally rich sector of the textile market. Known for its deep-rooted traditions and evolving contemporary designs, embroidery remains a vital value-addition process within the textile and apparel industry. The global surge in demand for embroidered fabrics, driven by growing fashion consciousness, customization trends, and premium textile consumption, has positioned embroidery as a high-potential segment worldwide. This report provides an analysis of our embroidery businesss current performance, market trends, strategic positioning, and future outlook.

As embroidery continues to be the Company?s core competency, future growth strategies are being planned, focusing on market expansion, product diversification, and operational efficiency. The rising growth of the textile and apparel industry led to a surge in the demand for embroidery, is acting as a driving factor for the market growth. The global embroidery market size is expected to gain momentum owing to the flourishing growth of the textile and apparel industry during the forecast period. Embroidery is exhibiting a robust presence in large part of the world over the years as it is widely utilized in multiple types of fabric products.

The sports and fitness sector in India and globally has seen increased interest, particularly post-pandemic, with a growing emphasis on physical well-being, structured training, and youth sports development. The Sports sector in India is experiencing rapid growth, supported by increasing awareness of fitness, youth interest in sports, and government initiatives like Khelo India. Recognizing this opportunity, the Company has launched a new business vertical a Sports Academy, focused on nurturing athletic talent and promoting physical well-being through structured training, modern facilities, and certified coaching programs. Though at an early stage, this venture aligns with long-term societal trends and has the potential to contribute significantly to the Company?s growth in the coming years.

GOVERNMENT POLICES

The Indian embroidery industry, an integral part of the textile sector, is projected to grow at a CAGR of 8-10% over the next five years. The sectors expansion is driven by rising consumer demand for both traditional and contemporary embroidered products. The company during the year continued its effort to sustain and retain its presence in the Textile Sector with running of the embroidery machines. The past few years was challenging for the company due to COVID-19 pandemic; the whole global market was been affected; however, the company has made efforts and proved its survival and growth again.

There are the various policies and schemes as provided by the government to upgrade the business of embroidery such as Textile Upgradation Fund Scheme (TUFS) Provides subsidies for technological upgrades and modernization, National Handloom Development Programme (NHDP) Supports handloom weavers and promotes traditional crafts, Merchandise Exports from India Scheme (MEIS) Offers incentives for exports of embroidered textiles, Sustainability and Compliance Regulations Government regulations on environmental sustainability, such as waste management and water conservation, are becoming more stringent. Compliance with these regulations is crucial for maintaining operational licenses and avoiding penalties.

In the sports domain, government support through initiatives like Fit India Movement, Khelo India Scheme, and Infrastructure Development Grants is helping create a strong ecosystem for private players. These policies encourage sports education, talent scouting, and infrastructure creation directly benefiting ventures like our Sports Academy.

FUTURE OUTLOOK

The Indian embroidery business is poised for significant growth, driven by rising disposable incomes, urbanization, and increasing global demand for unique, artisanal textiles. We plan to capitalize on this potential through strategic expansion into emerging markets, diversification into home d?cor and accessories, and a stronger online presence. Investing in advanced embroidery technology and sustainable practices will enhance efficiency and align with consumer preferences for eco-friendly products. Proactively managing risks, such as economic fluctuations and raw material volatility, alongside leveraging government incentives and maintaining regulatory compliance, will ensure resilience. Financially, we expect steady revenue growth and improved profit margins, supported by strategic investments in infrastructure and technology. Our long-term vision is to establish ourselves as a global leader in the embroidery sector, emphasizing brand strength and international market presence.

The sports vertical, though currently in a development phase, offers substantial long-term potential. The vision is to establish a chain of quality-driven academies focused on holistic athletic development and become a recognized name in the Indian sports training landscape. The Sports Academy division is projected to achieve operational breakeven within the next few years, with plans to expand to multiple locations and introduce specialized training modules.

OPPORTUNITIES:

Increased global demand for unique and embroidered textiles presents opportunities for expansion into new international markets. The rise of e-commerce platforms offers a significant opportunity to reach a wider customer base and increase sales through online channels. Collaborations with fashion designers and brands can enhance product visibility and drive higher sales through exclusive and high-profile collections. Emerging technologies, can create new possibilities for innovative embroidery designs and production techniques. Growing public and private investment in the sports sector. Digital sports training and performance analytics

THREATS:

Economic downturns can impact consumer spending and reduce demand for non-essential products, including embroidered textiles. Fluctuations in the prices of raw materials, such as threads and fabrics, can affect profitability and operational costs. The highly competitive market with numerous players poses a threat to market share and pricing power. Dependency on specific suppliers and logistics can lead to disruptions, impacting production and delivery schedules. Sports need Capital-intensive setup with long gestation period. Delay in regulatory approvals for sports infrastructure. Competitive pressure in both embroidery and sports sectors.

RISK & CONCERN:

The embroidery business faces several key risks that need careful management. Economic fluctuations can lead to reduced consumer spending, impacting demand for non-essential items like embroidered products. To mitigate this, flexible pricing strategies and market diversification are essential. Volatility in raw material prices, such as threads and fabrics, can affect production costs and profitability; thus, securing multiple suppliers and exploring alternative materials can help manage these risks. Intense competition within the industry may impact market share and pricing power, making it crucial to focus on unique products, superior quality, and strong branding. Supply chain disruptions pose risks to production and delivery schedules, so developing a resilient supply chain and reliable logistics partnerships is vital. Technological dependencies require regular maintenance and updates to avoid efficiency losses and ensure quality. Staying abreast of regulatory changes and investing in compliance measures will help navigate evolving environmental and labor regulations. Additionally, shifts in consumer preferences towards sustainability and customization necessitate ongoing adaptation of product offerings. Proactively addressing these risks will help ensure the business remains resilient and well-positioned to handle potential challenges. Operational challenges in maintaining facility standards and ROI in sports.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has proper and adequate internal control systems to ensure that all activities are monitored and controlled against any unauthorized use or disposition of assets, misappropriation of funds and to ensure that all the transactions are authorized, recorded, reported and monitored correctly. The Company has adequate working infrastructure having computerization in all its operations including accounts and MIS.

The Company has continued its efforts to align all its processes and controls with leading practices. The Audit Committee also meet the Companys Statutory Auditors to ascertain their views on the financial statements, including the financial reporting system, compliance to accounting policies and procedures, the adequacy and effectiveness of the internal control and systems followed by the Company. The Management acted upon the observations and suggestions of the Audit Committee. Further, the Company has continued its efforts to align its processes and controls with best practices and has put in place a process wise internal control framework across the Company

HUMAN RESOURCE DEVELOPMENT/ INDUSTRIAL RELATION

HR function is at the core of the Company and plays a major role in nurturing, enhancing and retaining talent through job satisfaction, management development program, etc. The Company has an induction process and Goals/Deliverables are in place for employees based on which appraisals are done.

The primary objective of RLF ("the Company") is to bring about organizational effectiveness by helping employees achieve their personal goals in a manner that enhances the overall performance of the Company.

The fundamental driver of any Company is its people and Industry, there has always been extended focus on the Management of Human Resources. It is widely recognized that the Company?s employees are the most valuable asset to the organization and will play a pivotal role in helping the business overcome its present challenges. The belief is that with a well-motivated and energized work force, nothing is impossible.

The Company continues to invest in employee training and capacity building across both divisions. Special focus has been given to hiring experienced professionals for the Sports Academy to ensure high-quality coaching and facility management.

KEY FINANCIAL RATIOS

During the financial year ended March 31, 2025, the Company has witnessed notable fluctuations across several financial ratios when compared to the previous fiscal year. Below is a detailed analysis of key ratios and their implications:

1. Current Ratio decreased from 0.86 to 0.72, reflecting a 16% decline, indicating reduced short-term liquidity.

2. Debt-Equity Ratio remained stable at 0.13, with a negligible variance of 5%.

3. Debt Service Coverage Ratio (DSCR) improved from 1.69 to 1.82, an 8% increase.

4. Return on Equity (ROE) declined sharply from 0.16% to -0.83%, a significant drop of 616%, primarily due to change in Share Capital from Previous year.

5. Inventory Turnover Ratio declined by 8%, from 1.28 to 1.18.

6. Debtors Turnover Ratio improved from 1.67 to 1.85, showing an 11% increase.

7. Trade Payables Turnover Ratio decreased significantly by 38%, from 4.32 to 2.67, primarily due to better collections

8. Net Capital Turnover Ratio improved from -3.20 to -0.87, showing a 73% positive change, although still negative primarily due to decline in trade receivables

9. Net Profit Margin fell drastically from 2% to -21%, marking a 983% decline, due to loss in current year 10. Return on Capital Employed (ROCE) increased from 0.22% to 0.43%, a 93% improvement, primarily due to change in Share Capital from Previous year. 11. Return on Investment (ROI) remained unchanged, with no reported figures for either year.

CAUTIONARY STATEMENT

Readers are cautioned that the Statements in this Management Discussions and Analysis Report describing the Company objectives, projections, estimates, expectations or predictions may be ‘forward looking statement ?within the meaning of applicable security laws or regulations. These statements are based on reasonable assumptions and expectations of future events. Actual results could however, differ materially from those expressed or implied. Factors that could make a difference to the Company?s operations include market price both domestic and overseas availability and cost of raw materials, change in Government regulations and tax structure, economic conditions affecting demand/supplies and other factors over which the Company does not have any control. The Company takes no responsibility for any consequence of decisions made based on such statements and holds no obligation to update these in future.

APPRECIATIONS AND ACKNOWLEDGEMENTS

Your directors place on records their deep appreciation to employees at all levels for their hard work, dedication and commitment, in particular during this unprecedented year. The Directors place on record their special gratitude toward the front-line employees who were working in our factories and in the market to ensure that the Company?s products reach to the consumers.