Rubfila International Ltd Management Discussions

1. ECONOMIC REVIEW & OUTLOOK

The year 2024 was decisive for world political arena, with major electorate decisions in India, the United The year 2024 was decisive for world political arena, with major electorate decisions in India, the United States and Indonesia reshaping policy directions across the globe. Globally, 2024 witnessed an uneven recovery. Service sectors remained relatively strong, while manufacturing lagged, particularly in Europe and parts of Asia, due to supply chain disruptions and softer external demand. Geopolitical tensions, including the Russia-Ukraine war and Middle East conflicts, heightened uncertainty across financial and commodity markets. India continue to be a bright spot in the global economy, demonstrating resilience amidst persistent geopolitical tensions,tighteningglobalfinancialconditions, and raising trade uncertainties. According to the International Monitory Fund (IMF), India is projected to remain the fastest-growing major economy with GDP growth expected at 6.2% in 2025 and 6.3% in 2026.

2. SECTOR OVERVIEW

The global rubber industry experienced head winds during 2024-25 primarily driven by supply constraints, climatic factors, and evolving market dynamics. Notably, major producers like Indonesia and Vietnam faced stagnant output due to factors such as adverse weather conditions and shifts toward more profitable crops like palm oil. Adverse weather events, including excessive monsoon rains and typhoon damage, significantly reduced rubber output in key producing countries. Thailands rubber production was expected to decline by 10 15% due to prolonged wintering seasons and heavy rains, while China suffered substantial damage to rubber trees from Typhoon Yagi.

In 2024-25, the Indian rubber industry faced several challenges, primarily stemming from fluctuating weather patterns, increased global competition, and rising production costs. Prolonged dry spells followed by heavy rainfall and floodingimpacted natural rubber production, while rising input costs and a shortage of skilled labour further strained the industry. Additionally, the industry grappled with volatile global rubber prices and increased competition from synthetic rubber and imported rubber products. High import duties on raw rubber, while intended to protect domestic producers, can make imported finished more attractive to consumers, further impacting the local industry.

Despite all these bumps, the company could post a 21% growth in sales volume over the previous year. While domestic sales were at 36290.08 Lakhs, the exports sales touched the level of 10550.70 lakhs. Domestic sales grew by 20% whereas exports grew by 25% as compared to previous year. Total revenue from operations stood at 46,840.78 Lakhs as compared to 38,601.83 lakhs in the past year, an impressive feat considering the challenges the industry faced during the year.

Domestic demand for rubber threads remained sluggish with subdued demand situation in the textile market as well as garment exports. There has been a drop in the exports compared to the past year on account of the dip in demand in the international market. Turkey, one of the largest markets for the company, had initiated an anti-dumping investigation against Rubfila. While the original anti-dumping duty proposed was 3.4%, the local manufacturers appealed revising the duty to 12%. Your company further appealed against the decision and finally, the duty was fixed at 7% whereas imports from other companies in India were fixed at 12%. This has affected the business to Turkey with the prices becoming non-competitive. Other markets like Brazil, Morocco, and Bangladesh performed well and the demand from these markets has been stable during the year. Besides, the Company could add new countries like Indonesia, Colombia, Venezuela, Greece etc during the year.

3. OPPORTUNITIES & THREATS

Opportunities for the Company are:

1. The brand ‘Rubfil which has enjoyed the reputation in India as well as internationally remain as the strength for the company. This is helping the company to make inroads into more and more international markets which remain unexplored as of now.

2. Innerwear and garment industry to which the company cater to has a high resilience to withstand any slowdowns in the industry / economy.

Threats:

1. Imports from Malaysia and Thailand which enjoy lower duty regime under FTA with those countries remains as a perpetual threat.

2. Indian latex prices continue to rule at higher levels than international prices and this disparity is a major threat for the Indian companies to remain competitive.

3. Government policies restricting free imports of latex into the country making it difficult to be at par with the leading international players who have access to latex at lower prices.

4. Extreme climate situations are playing major havoc affecting the tapping cycles of rubber resulting in lower production, shortage and eventually higher prices.

5. With the rubber prices turning non-remunerative, growers in Kerala, the largest producer of rubber in India are turning towards other crops leading to drop in production. This could be a threat in sourcing the major raw material from a long term perspective.

6. Consumption of spandex, the alternate material used by the garment industry continues to grow and affect the growth of the rubber thread industry.

4. OUTLOOK

The tariffs imposed by America have led to major turbulence in the garment sector with all the exporting countries coming under the ambit of additional duties. With the duty on India at 50%, the country has become practically unviable as a sourcing destination for garments, particularly, other textile exporting countries like Vietnam and Bangladesh have much lower duties. USA accounts for about 25% of Indias garment exports and unless the issue of additional duty is taken care of, it is going to be a bumpy ride for the economy since the sector is one of the largest employers in the country. Rubber thread industry is sure to face the consequences since a major portion of the industry output goes into the garment sector.

Initially, when the duty proposed was 25%, the American buyers have been pressing the Indian exporters to reduce the prices to the extent of the additional tariffs placing the exporters in a precarious position. But with tariff at 50%, any room for negotiation is not there and exports are bound to move to other countries affecting millions of jobs in the country. FTAs have been signed with other countries and unless the country findsalternate destinations for its exports, it is going to be a major jolt for the economy. It may take some time before clarity emerges on how the supply chain is going to absorb the shocks from the higher tariff.

The future of the apparel industry is going to revolve around better quality garments that are built to last and can be recycled at their end-of-life. Indian manufacturers are taking a leading role in ensuring this future is not far by improving their product qualities and incorporating sustainable manufacturing practices.

Global players and their Indian counterparts of the textile industry are optimistic in regaining the glory by adapting to shiftingconsumer values, technological advances, by embracing smart textiles, circular production models and AI powered designs tools etc.

PREMIER TISSUES INDIA LTD (Wholly-owned Subsidiary):

The Indian has one of the lowest per capita consumption of paper tissue products in the world at about 250 gm. This is an opportunity for the industry since the head room to grow is huge and there are signs of this happening. A growth in per capita by another 250 gm will help the industry to double the size sooner. With hygiene being a major lifestyle factor, the industry is expected to grow at a healthy rate in the coming years.

Consumers are increasingly concerned about the environmental impact of products they purchase. Tissue paper manufacturers are responding to this trend by developing sustainable products, using renewable materials, and adopting eco-friendly production processes. The tissue paper industry faces the concerns regarding environmental factors since the major raw material of paper has linkages to wood and in turn deforestation. The industry is under pressure to reduce its environmental impact, particularly in relation to deforestation and waste management. A large portion of products are made of recycled paper and manufacturers are adopting sustainable practices to address these concerns.

Premier Tissues remains as the most respected brand in the industry. There had been a few challenges in reaching out to more and more retail points in various regional markets in the country. This has been more due to challenges in the manpower availability. Alternate options in the gig sector has made availability of manpower for field sales a major challenge and this has reflected in the aspirations of the company in reaching out to every corner of the country. But the company has never given up on this aim and steps to achieve this objective are implemented in a sustained manner. Company is seeing uptick in the institutional sales vertical too and this can become another major area of revenue sooner. Other segments like online ecommerce platforms and exports are also generating good business. Over all, the company is seeing a growth in top line, which is expected to be sustained in the future.

5. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has proper and adequate internal control systems to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded and reported correctly.

a) Segment-wise Financial Performances :

b) Key Financial Parameters :

Please refer Board Report on performance review and financial statements for detailed performance.

7. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT:

Rubfila is committed to maintain a professional environment to nurture and enable people to grow in their careers along with the company. The Companys HR philosophy is to establish and build a high performing organization, where each individual is motivated to perform to the fullest capacity to contribute to developing and achieving individual excellence and departmental objectives and continuously improve performance to realize the full potential of our personnel. Industrial relations are cordial and satisfactory. As on 31st March, 2025, the total number of employees of the company is 324 against 305 on

31st March, 2024.

8. RISK MANAGEMENT

The company has set up a robust risk management framework to identify, monitor and minimize risk and also to identify business opportunities. The Audit Committee functions as the Risk Management Committee too. The Committee assists the Board in its oversight of various risks, analyse risk exposure related to specific issues and review the risk profile.