Sanrhea Technical Textile Ltd Management Discussions

Industry Structure and Developments

India is on a growth path and our company forms part of the Core sector of the industry. The Infrastructure growth of India as driven by the current government directly and positively effects all core sector industry like Steel, Cement, Automobile, Tyres, and Engineering. Likewise the special importance given to becoming self sufficient in Defense, has opened doors to manufacturing of various specialized products for the Marine and Inflatable Industry. The government has also put in a major drive in not only increasing the national Rail network but also upgrade the locomotives in a major way. Specially engineered Fabrics are required in all the above sectors, and our company happens to be present in all the segments. The effect of war in the Mediterranean as well as between Russia Ukraine continues to keep the European markets weak and instable. This could bring a shift of industry into countries like India and open new opportunities and new associations of growth for the Indian Industry.

The growth of India and its captive consumption is the biggest opportunity for companies like ours. Not only are the volumes increasing in each sector, but development and growth of the industry is bringing in more and more opportunities. If the government policies continue to be growth oriented as of now, India with continue having an increased demand for the coming two decades at least. This consolidates and secures growth for all companies related to the core sector. The treats of course are the external ones. With the Global instability seen as of now, and the political instability in other countries on account of global wars have become never ending, continues to be a big threat. Also the uncertainty brought in by USA on global tariffs can be a major threat that can destabilize businesses.

CHAFER FABRICS : Chafer Fabrics continue to be the biggest product segment of the Companys product line. Not only have the volumes with the existing customers gone up, but we have been able to add a few new customers. Approvals are in process with some more reputed and valued tyre companies and we are confident that these will be established in the coming year. We are hopeful of increased overall volumes in the coming year in this segment.

BELTING FABRICS : Once a prime product category for the company, the company today has a minimum presence in this segment. This is primarily on account of cheap imports from China, making this segment unviable. However, the company is actively representing the matter along with various associations to the Textile Ministry and is hopeful that a policy change to restrict such imports shall be brought in place. This would immediately revive this segment, which we see as one with tremendous growth prospects within India itself.

SPECIALISED FABRICS : The company continues its thrust in the development and growth of specialized fabrics required by the Auto-Component, Marine Inflatable and Engineering Industry and sees very good growth prospects in this product category. The company has also installed certain value addition machines to cater to certain products that have been developed and are currently under approval with some reputed multinational corporate.

The Company is confident of a good and growth oriented future. The product profile and the companies drive to concentrate of specialized products, does slow down the pace of growth. However, it secures an established, remunerative and long term business. The company has also started efforts to establish its specialized products in the overseas markets and establish a presence outside India. This would strengthen the companys position to put up a full new line and double its output.

As you are aware bulk of the raw material of the company is imported, and there are still no stable and established sources of yarn available in India. Bulk of the raw material comes from China, which is the only globally competitive supplier. Our Governments relations with China and the policies established in purview of the same remain the single biggest risk. Also, the Textile Ministries lack of in-dept knowledge of the Technical Textile Industry and its critical need, is a major encumbrance while drafting policies that could truly help the industry surge.

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit (IA) function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Auditor places Internal Audit reports before the Board of Directors.

The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of Internal Auditor, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant Audit observations and corrective actions thereon are presented before the Board.

The companys Annual Sales have been Rs. 7,493.55 Lakhs. The Gross Profit of the year stood at Rs. 961.67 Lakhs as against a Gross profit of Rs. 873.24 lakhs, in the previous year. After providing Depreciation, Finance Charges and Taxation, the company has incurred Net Profit of Rs. 463.08 Lakh. As you would observe, though the tonnage volumes and revenue of the company have gone up, there has been substantial improvement in the profitability of the company. This has been primarily on account of the shift to higher value and specialized products.

Pursuant to amendment made in Schedule V to the SEBI Listing Regulations, details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios and any changes in Return on Net Worth of the Company (on standalone basis) including explanations there for are given below:

The operations of the company have been well on the line and growing. The company has leased two sheds in the nearby industrial estate with a view to have additional space for the ongoing and planned expansion. The shifting and required corrections/alterations in the plant, did disturb the operations a bit. However, this was required and in the interest of the onwards growth planned.

As over the past few years, the strategy of the company continues to concentrate on more and more specialized products. This not only brings in better revenues, but assures secured long term business association. The company continues its drive in reverse engineering and designing specialized fabrics for reputed companies in the Automobile and Marine product industry. Though this is a long process, the company sees a good outlook and is confident of a secure market in theses product categories. The Company simultaneously is looking at getting its products approved in the overseas markets and establishing a footing in foreign countries.

In the current year, the company has added a few machines as required to balance the process requirements so as to optimally utilize the plant and increase the volumes from the current set up. In the newly leased sheds, the company has installed some value addition machines required for certain high value products, currently under development and approval. The company has also started looking for land in the nearby area, with a view to putting up a full new plant in the coming year or two.

• Specialized Product Portfolio: Our core strength is our focused expertise in engineering and manufacturing high-value, difficult-to-make technical fabrics for critical industries, reducing reliance on imports.

• Integrated Certified Facilities: Our reinstated, fully integrated manufacturing plant, backed by ISO and quality certifications, provides us with a competitive edge in quality control and production reliability.

• Strategic Market Positioning: Our presence across key growth segments Tyre (Chafer), Automotive, Engineering, and emerging Defense sectors diversifies our revenue base and aligns perfectly with Indias infrastructure and self-reliance goals.

• Vulnerable Supply Chain: A critical dependency on imported raw materials, primarily from a single geographic region (China), exposes us to significant geopolitical, logistical, and pricing risks.

• Margin Pressure: Volatility in raw material and energy costs, coupled with high working capital expenses, continues to compress margins and challenge profitability.

• Unprecedented Domestic Demand: Indias massive investments in infrastructure (roads, rails, ports), defense indigenization, and core sectors (Steel, Cement, Auto) create a sustained, long-term demand tailwind for our entire product portfolio.

• Global Supply Chain Shift: Ongoing global instability presents a catalyst for companies to diversify sourcing away from traditional bases, opening doors for Indian manufacturers to capture export opportunities and form new international partnerships.

• Policy Support for Indigenous Manufacturing: Government initiatives like PLI schemes and potential anti-dumping duties on cheap imports (e.g., for Belting Fabrics) can directly benefit domestic producers.

• Geopolitical and Trade Policy Volatility: Fluctuating global trade policies, tariffs (e.g., from the USA), and unresolved international conflicts pose persistent risks to global economic stability and export markets.

• Intense Global Competition: The constant threat of subsidized, low-cost imports, particularly from China, threatens the viability of certain product segments (e.g., Belting Fabrics) and overall market pricing.

• Regulatory Hurdles: The pace and effectiveness of government policy formulation specific to the technical textiles industry remains a concern, potentially delaying crucial support measures.

The Company operates in a complex environment characterized by several material risks:

• Supply Chain Concentration Risk: Our heavy reliance on imported raw materials, with China as the primary source, represents our most significant vulnerability. This exposes us to price volatility, supply disruption, and geopolitical tensions.

• Governmental Policy Risk: The industry>s growth is highly sensitive to government policy. This includes both the positive opportunity of growth-oriented infrastructure spending and the risk of inadequate or slow policy support for technical textiles and protection against unfair trade practices.

• Competitive Risk: The pressure from cheap imports and the need to continuously innovate and enhance cost efficiency to maintain competitiveness is an ongoing challenge.

• Macroeconomic Risk: Global instability, currency (Rupee) fluctuations, and shifts in tariff regimes can destabilize markets and impact our cost structure and export competitiveness.

Mitigation Strategy: Our strategy to mitigate these risks involves diversifying our supplier base where possible, actively engaging with industry associations to advocate for supportive policies, relentlessly focusing on product specialization and quality to differentiate from low-cost competition, and prudently managing our working capital and operational costs.

As of March 31, 2025, our team consists of 100 full-time employees. This streamlined structure supports our growth journey by enhancing operational agility. Concurrently, we have strengthened our people strategy, implementing a robust Performance Management System and cultivating a transparent and participative organizational culture to empower our team."

This report contains forward-looking statements based on current expectations and projections about future events. These statements are subject to numerous risks, uncertainties, and assumptions that could cause actual results to differ materially. Key factors include, but are not limited to, domestic and global economic conditions, competitive pressures, raw material price volatility, currency exchange rate fluctuations, changes in government regulations, and the companys ability to manage growth and retain skilled personnel.

Sanrhea Technical Textiles Limited is an ISO 9001 and ISO 14001 Certified by DNV.