S D Retail Ltd Management Discussions

Global Economy Overview

TAs per the IMFs July 2025 World Economic Outlook Update, the global economy continues to show tenuous resilience amid persistent uncertainty. Global growth is projected at 3.0% in 2025 and 3.1% in 2026, slightly higher than earlier forecasts, supported by easing financial conditions, a weaker US dollar, and fiscal expansion in major economies. Inflation to decline, though variations remain across regions, with the US projected to face above-target inflation while other large economies see more subdued trends.

Despite this resilience, the global outlook remains clouded by risks. Trade policy uncertainties, fiscal vulnerabilities, and geopolitical tensions continue to pose downside pressures. The IMF highlights the need for confidence-building measures, predictable policy frameworks, and structural reforms to sustain growth and enhance long-term resilience

Indian Economy Overview

As per the Press Information Bureau (PIB) release June 2025, India has firmly established itself as the worlds fourth-largest economy and the fastest-growing major economy, with real GDP growth of 6.5% in FY25. Over the last decade, nominal GDP has more than tripled, exports have surged and services exports have more than doubled. Robust domestic demand, large-scale digital adoption, and sustained reforms have positioned India as a global growth engine.

The transformation is underpinned by the vision of Aatmanirbhar Bharat, which promotes innovation, self-reliance, and global competitiveness. Initiatives such as the Production Linked Incentive (PLI) schemes, MSME revitalisation, and a strengthened digital and financial ecosystem have driven growth across sectors. With stable inflation, rising foreign investments, and an expanding role in global trade, India is advancing towards becoming the worlds third-largest economy by 2030, shaping its economic future as a resilient and inclusive powerhouse.

Sleepwear Market Size

The sleepwear market in India is experiencing strong growth and gaining importance within the broader Western apparel segment. Driven by changing consumer lifestyles, a growing preference for comfort-led clothing, and the influence of digital retail, sleepwear is evolving from a functional category to one of style and self-expression.

Women form the largest consumer base for sleepwear in

India, often opting for stylish, comfortable sleepwear like coordinated sets, nighties, and gowns. While men and kids contribute smaller shares, they represent untapped segments with significant toward basic and functional pieces, while kids sleepwear is driven by playful designs and character-led themes.

The product mix is shifting from traditional one-piece nightgowns to coordinated sets. Modern consumers are increasingly purchasing individual pieces to suit their personal comfort and aesthetic preferences.

Cotton remains the dominant fabric due to its breathability and cultural relevance, though materials like rayon, modal, and expected polyester are gaining ground in premium and performance-driven segments.

Retail formats are rapidly evolving. While physical stores continue to hold a strong presence, online channels are the fastest-growing, especially in smaller cities. Direct-to-consumer and digital-first brands are playing a key role in reshaping how consumers discover and purchase sleepwear. Overall, the category is underpenetrated despite high usage, with notable room for expansion in non-womens segments and across emerging digital platforms.

Category Leader: Pioneering a New Habit

Company Overview

S D Retail the parent company of the Sweet Dreams brand, has evolved into one of Indias leading players in the organized sleepwear segment. With over three decades of experience, the Company has transitioned from a wholesale-led model to a direct-to-consumer business with a growing network of EBO, supported by digital platforms and a nationwide presence across Multi-Brand Outlets (MBOs). This strategic pivot is enabling the Company to capture higher margins, build customer loyalty, and establish a stronger brand identity in a largely unorganized category.

The Company addresses a significant sleepwear, despite accounting for nearly 42% of weekly wear-time, receives minimal attention in wardrobe and spending priorities. Leveraging data-led design, regionally tuned collections, and a sharply focused product architecture, S D Retail is not only expanding its footprint but also shaping consumer behavior around nighttime apparel. With investments in premium EBO formats, customer experience, and omnichannel capabilities, the Company is well-positioned to drive profitablegrowth and category leadership in the years ahead.

FY25 marked a turning point in S D Retails growth strategy, with EBO revenue nearly doubling year-on-year and contributing meaningfully to margin expansion. The Company continued to rationalize low-yield channels and reinvest in scalable, brand-led formats, while its growing design-to-retail ecosystem enabled faster product cycles and localized assortment planning. As Indias sleepwear market matures, S D Retail is set to capitalize on its early-mover advantage and expand its both urban and emerging consumption centres. growth potential. Mens preferences lean

Key Facts – FY25

• Revenue: 17304.32 Lakhs

• PAT: 855.17 Lakhs

• EBITDA Margin: 8.26%

• PAT Margin: 4.94%

• Gross Margin: 51.11%

• EBO Revenue Growth: 95% YoY

• EBO Count: 51 stores

• Sales per Sq. Ft.: 15,998

• Average Bill Value: 3,770

• Average Selling Price (ASP): 1,794

• SSSG (EBO): 11.85%

• EBO Retail Area: 22,867 sq. ft.

• Retail Touchpoints: 2,500+ (MBOs)

• Brand Focus: Sweet Dreams (sleepwear & loungewear)

• Wear-Time Target: 8 PM 8 AM lifestyle positioning

Operational Highlights

Retail Expansion

S D Retail scaled its EBO network to 51 stores across malls, high streets, and airports, covering 22,867 sq. ft. of retail space. The EBO channel reported 95% revenue growth year-on-year, supported by healthy same-store sales growth of 11.85% and annualized productivity of 15,998 per sq. ft.

Channel Performance

EBOscontributed12.74%oftotalrevenue, up from 6.94% in the market gap where previous year, reflecting a successful shift toward premium, brand-led formats. Multi-Brand Outlets (MBOs) remained the largest channel with steady performance, while the Company consciously exited underperforming Large Format Store (LFS) counters to optimize margins.

Digital & D2C Initiatives

The Companys owned e-commerce platform recorded 40% growth in revenue year-on-year. Marketplace growth remained moderate, prompting a sharper focus on CRM deployment and omnichannel integrations to improve D2C efficiency.

Operational Efficiency

Gross margin improved by 458 basis points during the year, aided by a favorable channel mix and input cost management. Net cash flow from operating activities turned positive reflecting improved working capital discipline.

Organizational Readiness across

Investments were made in expanding talent, enhancing technology infrastructure, and building backend systems to support scalable retail operations and upcoming EBO growth in newer geographies.

Geographical Revenue Distribution and Market Presence

Core Markets – North & West India

These regions contribute ~80% of total revenue, driven by strong brand recall, dense EBO and MBO presence, and higher consumer spend. They remain the Companys most mature and profitable markets.

Emerging Focus – South India

South India is a strategic expansion zone. Recent EBO launches have shown encouraging traction, with region-specific collections and formats being well-received.

Retail Format Mix

S D Retail is present across 36 malls, 10 high streets, and 5 airports enhancing visibility among urban aspirational consumers.

Digital Reach

The Companys e-commerce platform, along with presence on Myntra, Flipkart, Amazon, Nykaa, and Zepto, ensures pan-India accessibility, complementing its offline network.

Localized Strategy

Using Indias largest sleepwear preference dataset, S D Retail tailors fit, fabric, and design to regional tastes maximizing relevance and conversion across markets.

Financial Highlights

In Lakhs

Particulars	FY25	FY24	% Change (YoY)
Net Sales	17,304.32	16,255.89	6.4%
Total Expenditure	15,874.27	14,875.19	6.7%
EBITDA	1,430.05	1,380.70	3.6%
Profit After Tax (PAT)	855.57	769.22	11.3%

S D Retail reported a resilient financial performance in FY25, marked by revenue growth, margin expansion, and improved operating cash flow. The Company continued its shift toward higher-margin, brand-led retail channels, which positively impacted profitabilityand efficiency metrics.

• Revenue Growth: Net sales increased by 6.45% YoY to 17304.32 Lakhs, driven primarily by a 95% increase in EBO revenue and steady performance in MBO and digital channels.

• Margin Expansion: Gross margin improved by 458 basis points to 51.11%, supported by a richer product mix and reduced exposure to low-margin formats.

• Profitability: PAT stood at 855.57 Lakhs, up 11.3% YoY, reflecting stronger operating leverage despite higher investments in talent and technology.

• Operational Cash Flow: The Company turned around its cash flow from operations to 155.07 Lakhs, compared to negative capital management.

Ratio Analysis

Key Financial Ratios (FY25)

Ratio	FY25	FY24
Current Ratio (In Times)	2.48	1.42
Debt Equity Ratio (In Times)	0.30	1.05
Trade Receivables Turnover Ratio (In Times)	2.15	2.43
Trade payable Turnover Ratio (In Times)	5.24	4.32
Net Profit Ratio (In %)	4.95	4.73

Profitability Ratios

S D Retail reported a PAT margin of 4.94% and an EBITDA margin of 8.26% for FY25. Margin expansion was supported by a 458 basis point improvement in gross margin to 51.11%, driven by a favorable shift toward high-margin EBOs and improved channel efficiency.

Operating Efficiency

The Company demonstrated strong operating leverage, with EBOs delivering 15,998 in annualized sales per sq. ft. and same-store sales growth of 11.85%. Cost structures remained stable despite higher investment in talent and digital systems.

Liquidity & Working Capital

Net cash flow from operating activities stood at 155.07 Lakhs in FY25, marking a positive shift from the previous year.

While Q4 saw seasonal working capital pressures, these are expected to normalize early in the following fiscal

Leverage Position

The Company maintained a conservative capital structure with no material debt obligations. Expansion continues to be supported through internal accruals and pre-IPO equity funding.

Opportunities & Threats

Opportunities

Category Formalization

The sleepwear segment in India remains largely unorganized despite high wear-time. As consumer preferences evolve, S D Retail is well-positioned to lead formalization through branded, fashion-led offerings.

Omnichannel Expansion

With a scalable EBO model and improving D2C infrastructure, the Company can deepen its presence in premium urban locations while expanding access through digital platforms.

Regional Customization

The use of region-specific consumer data allows for tailored product development, improving conversion rates and brand relevance across diverse Indian markets.

Underpenetrated Geographies

South India presents a significant traction from recent EBO launches supports further retail expansion.

Lifestyle Shifts

Post-pandemic lifestyle changes have accelerated demand for comfort-first, at-home apparel, expanding the addressable market for sleepwear and loungewear.

Threats

Seasonality & Working Capital Cycles

The business remains exposed to season-driven billing patterns and Q4-heavy sales cycles, creating temporary pressures on inventory and receivables.

Channel Profitability Risk

Fluctuations in marketplace performance and dependency on external platforms can affect online margins and scalability.

Competitive Intensity

Entry of larger apparel players into the loungewear and sleepwear segment may intensify pricing and promotional pressure.

Retail Cost Inflation

Rising rental and manpower costs, particularly in malls and urban centers, could impact retail store-level profitability not offset by productivity gains.

Risk Management

S D Retail follows a proactive risk management framework to identify, assess, and mitigate key business and operational risks. The Company regularly monitors internal and external factors that may impact performance and adapts its strategies accordingly.

Seasonal Revenue Concentration

A significant portion of revenue is concentrated in the fourth quarter due to MBO billing cycles and festive season demand.

The Company mitigates this risk through early planning, staggered production, and tight inventory control.

Channel Dependence

While MBOs remain the largest revenue contributor, the Company is consciously diversifying through EBOs and D2C platforms to reduce overdependence on any single channel.

Retail Operating Cost Risk

Increased cost of retail operations particularly rentals and manpower poses a threat to store-level margins. S D Retail addresses this by adopting a mix of franchise-owned and company-owned models and optimizing store formats.

Supply Chain Disruptions

As a design-to-retail business, any disruption in sourcing or logistics can affect product availability. The Company growth runway, where early mitigates this through multi-vendor sourcing, inventory buffers, and integrated supply chain planning.

Digital Platform Reliance

Marketplace dynamics, algorithm changes, or policy shifts can affect visibility and margins in online sales. S D Retail is reducing this risk by building its own e-commerce and CRM capabilities.

Competitive Landscape

Entry of large players in the sleepwear segment may increase pressure on pricing and customer retention. The Company counters this through brand differentiation, customer insights, and curated product architecture.

Outlook

S D Retail enters FY26 with a focused strategy to scale its brand-led, omnichannel retail model. Building on the momentum of FY25, the Company plans to deepen its presence in urban consumption centers through continued expansion of EBOs and enhanced digital engagement. if EBOs will remain the Companys primary growth driver, with new store additions planned across metros and Tier-II cities. North India is identifiedas a priority market, where early signs of traction support a larger rollout supported by localized collections and region-specific marketing. Expansion will continue to follow an asset-light, franchise-led model to optimize capital efficiency.

Digitally, the Company will scale its direct-to-consumer (D2C) platform through investments in CRM, customer analytics, and integrated shopping experiences. These initiatives aim to increase brand loyalty, deepen customer relationships, and build a more profitableonline business independent of third-party marketplaces.

The broader sleepwear and loungewear category is undergoing a shift from functional to lifestyle-led consumption. With its focused product positioning around the 8 PM 8 AM wear-time and data-driven merchandising approach, SD Retail is well-positioned to capture this transition. The Company will continue launching climate-tuned, mood-based collections to meet regional and seasonal demand.

Profitability improvement remains a key focus. The Company expects further gains through mix enrichment, store productivity, and operating leverage, while selectively investing in capabilities that support scalable and sustainable growth.

Internal Control Systems & Their Adequacy

S D Retail has established robust internal control systems that ensure operational efficiency, safeguard assets, and support regulatory compliance across all facets of the business. These systems are designed to detect and mitigate risks, ensure accuracy in financial reporting, and promote disciplined governance practices.

Key components of the internal control framework include:

• Policy-Driven Protocols: All critical business processes—procurement, inventory, are governed by well-defined policies and standard operating procedures, reducing ambiguity and enhancing accountability.

• Compliance Monitoring: Dedicated review mechanisms are in place to monitor adherence to internal norms and statutory requirements. Periodic audits and internal checks ensure that deviations, if any, are promptly addressed.

• Continuous Evaluation: Management regularly evaluates the adequacy of controls and updates systems in response to changing regulatory and operational requirements.

Human Resources Development

S D Retail considers its people the cornerstone of its success. The Human Resource Development strategy is centred on fostering a performance-driven culture, ensuring talent alignment with business goals, and promoting holistic employee development.

Highlights of HR initiatives during the year:

• Talent Acquisition & Retention: Strategic hiring based on future capability needs and retention efforts, including career progression planning, have strengthened organizational depth.

• Structured Learning & Upskilling: Customized training programs were conducted across departments, with a focus on functional excellence, leadership development, and compliance awareness.

• Performance & Recognition: A transparent appraisal system continues to drive meritocracy, with outstanding performers recognized through reward mechanisms that reflect their contributions.

The Company continues to foster a work environment anchored in growth, inclusivity, and meaningful contribution.

As on March 31, 2025, S D Retail employed 226 permanent team members across its operations. Each individual plays a vital role in cultivating the dynamic and collaborative culture that drives the Companys sustained progress.

Cautionary Statement

The statement provided in this section outlines the Companys objectives, projections, expectations, and estimations, which may be deemed ‘forward-looking statements as per applicable securities laws and regulations. These ‘forward-looking statements are based on certain assumptions and anticipations of future events. However, its important to note that the Company cannot guarantee the accuracy or realisation of these assumptions and expectations. The Company assumes no responsibility to publicly amend, modify, or revise any ‘forward-looking statements based on subsequent developments. It is essential for stakeholders to exercise caution and consider the inherent uncertainties associated with forward-looking statements when making decisions based on such information.