S P Apparels Ltd Management Discussions

GLOBAL ECONOMY AND OUTLOOK

In 2025, the global economy faces heightened uncertainty amid escalating trade tensions and policy shifts. As per International Monetary Fund Growth is projected to slow to 2.8%, down from 3.3% in 2024, with advanced economies growing at just 1.4%. The US and China are particularly impacted by tariff escalations, disrupting global supply chains and dampening investment. Inflation remains elevated in some regions, while financial markets show signs of volatility. Despite these challenges, opportunities exist through policy coordination, technological innovation, and structural reforms. A stable trade environment

Source: International Monetary Fund

INDIAN ECONOMIC OVERVIEW & OUTLOOK

The Indian economy remains a key driver of global growth, supported by strong domestic demand, sound macroeconomic fundamentals, and prudent policies. Despite global uncertainties and trade disruptions, India maintained its position as the fastest-growing major economy in 2024-25. Inflation outlook is benign, and financial stability is reinforced by resilient banks and non-bank financial institutions with robust capital buffers and low non-performing loans. Corporate balance sheets are healthy, and stress tests confirm the systems ability to withstand adverse shocks. Continued regulatory vigilance and innovation are fostering a stable, inclusive, and efficient financial ecosystem.

TEXTILES

Global Textile Industry

According to The Business Research Company the global textile market was valued at USD 620 billion In 2024. The Per capita consumption stood at USD 77.8, with the market contributing 0.56% to global GDP. Growth was driven by rising disposable incomes in emerging economies, expanding e-commerce, and steady global economic performance. Online platforms enhanced market reach, especially for traditional garments. Forecasted GDP growth and recovering commodity prices are expected to boost investments and demand in end-user markets. These trends position the textile industry for continued expansion in the coming years, according to The Business Research Company.

Indian Textile Industry

Indias textile industry is a key pillar of the economy, contributing 2.3% to GDP, 13% to industrial output, and 12% to exports. It is the second-largest global producer of textiles and garments and a major employment generator, supporting over 45 million people. The domestic market is projected to grow at a CAGR of 10%, reaching USD 250-350 billion by 2030. The Government initiatives like the ^10,683 crore PLI scheme and PM MITRA parks are enhancing infrastructure and competitiveness. With 100% FDI permitted under the automatic route, rising global demand, and a strong sustainability focus, the sector is poised for robust expansion.

Source: INDIA BRAND EQUITY FOUNDATION (IBEF)

Exports

Indias textile industry is on a robust growth path, with exports projected to reach USD 65 billion by FY2026. In FY2025 (April- October), exports stood at USD 21.36 billion, led by ReadyMade Garments (41%), Cotton Textiles (33%), and Man-Made Textiles (15%). The sector holds a 3.9% share in global trade, with RMG exports expected to surpass USD 30 billion by 2027. Government schemes like RoSCTL and targeted support for handlooms aim to boost competitiveness. Furthermore, the UK-India Free Trade Agreement marks a transformative milestone for Indias textile industry, eliminating tariffs on 99% of exports to the UK. This boosts competitiveness and is expected to nearly double garment exports by 2030. Ready-Made Garments, home textiles, and technical textiles will benefit significantly. Indian exporters gain a ~10% cost advantage, encouraging investment and product diversification. With the UK being a major apparel importer,

the FTA opens new opportunities for trade, innovation, and collaboration.

Source: INDIA BRAND EQUITY FOUNDATION (IBEF), F2F Apparel & Retail

Global Industry

As per The Business Research Company the global apparel market reached USD 693.6 billion in 2024, accounting for 63.9% of the broader apparel and leather products sector. It is projected to grow at a CAGR of 7.09%, reaching USD 976.7 billion by 2029. Key growth drivers include rising disposable incomes in emerging markets, technological advancements such as robotics and smart fabrics, and increased demand for man-made fibres. Womens wear dominated the market in 2024 with a 52.13% share, followed by mens wear (32.25%) and kids wear (15.62%). Regionally, Western Europe led with USD 238.5 billion, followed by Asia Pacific (USD 2 01.98 billion). E-commerce expansion, relaxed FDI norms, and growing demand for performance wear are expected to further accelerate growth. However, challenges such as raw material scarcity, counterfeit products, and environmental concerns may restrain market performance.

Source: Global Apparel Market Briefing 2025, The Business Research Company

Indian Market

In FY25, Indias textile industry demonstrated resilience amid global uncertainties. Total textile exports reached ^1.84 lakh crore (USD 21.36 billion) by October 2024, led by Ready-Made Garments, Cotton Textiles, and Man-Made Textiles. Domestic demand surged, supported by a normal

monsoon, easing inflation, and festive season spending. The organized retail apparel sector grew 8-10%, driven by affordable fashion trends. Looking ahead, the industry is projected to double its GDP contribution to 5% by 2030, with market size expected to reach USD 350 billion. Government initiatives like the T10,683 crore PLI scheme and PM MITRA parks will further boost competitiveness and exports.

Source: INDIA BRAND EQUITY FOUNDATION (IBEF)

Company Overview

S.P. Apparels Limited (SPAL) is a leading manufacturer and exporter of knitted garments, with a strong focus on sustainability and operational excellence. The company operates a robust manufacturing and supply chain network, serving global clients in the childrens wear segment and expanding its domestic presence through the ‘Crocodile menswear brand. In FY25, SPAL acquired Young Brand Apparels, enabling entry into the womens intimate wear export segment, particularly in the USA. This strategic move enhances SPALs product portfolio and global reach, positioning it for long-term growth across diverse apparel categories and international markets.

Employee Welfare

SPAL is committed to promoting employee well-being, continuous learning, and workplace diversity. The company supports personal and professional growth through structured upskilling programs and wellness initiatives. By fostering an entrepreneurial culture, SPAL empowers employees to take ownership, drive innovation, and contribute meaningfully to organizational success.

Risks and Concerns

Raw Materials Risks:

India is one of the largest producers of cotton yarn in the world. The margins of the Indian textile industry are impacted by the fluctuations in cotton prices. In 2023-24 margins improved because of gain in cotton price movement, although average realization may decline due to deflation in raw material cost.

Inflation risk:

India has seen variable inflation trends historically. While fluctuations in inflation rates can present challenges in forecasting and managing our costs, they also encourage us to enhance our financial strategies and cost management practices. If there is an uptick in the cost of raw materials due to inflationary trends, or a rise in employee benefit payments driven by inflation in India, we are committed to implementing innovative measures to absorb these costs effectively. Our goal is to minimize the impact on our customers and maintain the integrity of our business operations.

Safety risk:

Ensuring a safe and healthy working environment for everyone is vital for boosting productivity and nurturing organisational development. We at SPAL equip the workplace with the necessary safety equipment and keep all the machinery in good working order through regular maintenance and safety inspections.

Finance and credit risk:

We evaluate and manage credit risk on the basis of assumptions and factors influenced by market conditions. To mitigate credit risk, we diligently track the creditworthiness of debtors through internal systems that are configured to define credit limits of customers.

Exchange risk:

S.P. Apparels faces exposure to foreign exchange rate fluctuations as considerable portion of its revenue is from other countries. To mitigate the risks associated with foreign exchange fluctuations that affect our commercial dealings and recognized foreign currency assets and liabilities, we strategically employ forward contracts and engage in hedging activities as needed. Additionally, we have a skilled team of professionals for managing forex concerns, ensuring that our approach to foreign exchange risk is both effective and informed.

Regulatory Changes:

Adjustments to regulations and government incentives present opportunities for the company to adapt and innovate, potentially enhancing its business and profitability. The Indian government has historically supported the textile sector with incentives such as RoSCTL and EPCG fostering production and export growth. While these incentives may evolve, the company is poised to leverage its operational strength to maintain and improve its market position.

Financial Performance

Performance on a Standalone basis:

In FY 2024-25 your company has recorded a consolidated total revenue of Rs. 9,890.1 Mn as against Rs. 9,639.8 Mn in FY 2023-24. EBITDA stood as Rs. 1,688.4 Mn as against Rs. 1,838.7 Mn in the previous year. PAT was Rs. 835.3 Mn as against Rs 1,037.6 Mn in FY 2023-24. EPS for FY 2024-25 was Rs. 33.3 as against Rs. 41.4 in the previous year.

Performance on a consolidated basis:

In FY 2024-25 your company has recorded a consolidated total revenue of Rs. 14,073.3 Mn as against Rs. 11,036.7 Mn in FY 2023-24. EBITDA stood as Rs. 2,000.0 Mn as against Rs.

1.740.9 Mn in the previous year. PAT was Rs. 951.0 Mn as against Rs 896.2 Mn in FY 2023-24. EPS for FY 2024-25 was Rs.

37.9 as against Rs. 35.7 in the previous year.

Internal control system and adequacy

The companys internal control systems for financial reporting are robust and are commensurate with its size and its industry sectors. These systems ensure efficiency and productivity at all levels, while safeguarding your companys assets. Stringent procedures are in place to ensure high accuracy in recording and providing consistent financial and operational support. Business operations are closely monitored by the internal team and the Management. The Board is promptly notified in case of any deviations. To ensure seamless growth, risk identification & assessment and mitigation strategies are designed and continuously recalibrated on the basis of these findings.

Material Developments in Human Resources / Industrial Relations Front

During the year under review, industrial relations at our plant locations remained harmonious. Your Company emphasizes on the safety of people working in its premises. Structured safety meetings were held and safety programs were organized for them throughout the year.

Key Ratios

As per provisions of SEBI Listing Regulations, 2015, the significant financial ratios (calculated on standalone basis) are given below:

Ratio	FY 2024-25	FY 2023-24	% Variance	Remarks
Debtors Turnover	10.44	15.00	-30.40%	Due to increase in debtors because of business acquisition
Inventory Turnover	1.27	1.53	-16.99%	-
Current Ratio	1.47	2.26	-34.96%	Due to increase in working capital loans
Interest Coverage Ratio	6.59	11.35	-41.94%	Due to availing New Term Loan
Debt equity ratio	0.30	0.16	82.00%	Due to increase in long term borrowings and working capital loans
Operating Profit Margin (%)	0.13	0.16	-18.75%	-
Net Profit Margin (%)	0.09	0.11	- 18.18%	-