Sanrhea Technical Textile Ltd Management Discussions

Industry Structure and Developments

The Indian industry continues to remain on a strong and sustainable growth trajectory. Despite ongoing global uncertainties and geopolitical developments, the Indian economy has demonstrated resilience and continues to emerge as a stable, balanced and attractive destination for global businesses and investments. The increasing interest of foreign companies in India is expected to create new business opportunities and further strengthen domestic economic activity.

The Governments continued focus on "Make in India", self- reliance and domestic manufacturing has opened up significant opportunities across various sectors. In addition, increased defence procurement, greater emphasis on indigenous defence production and the implementation of large- scale infrastructure projects have provided strong impetus to industrial growth across the country.

With supportive government policies, improving economic fundamentals and sustained investments in infrastructure, manufacturing and defence, we believe that the Indian industry is well positioned for continued growth in the coming years. Accordingly, we remain optimistic about the overall industry outlook and foresee strong and sustainable opportunities for businesses operating within the Indian market.

The continued expansion of Indias manufacturing and infrastructure sectors presents significant and growing opportunities for the technical textile industry. Rising domestic consumption, increasing industrial activity, greater emphasis on indigenous manufacturing and the growing preference for locally produced and engineered products are expected to support sustained demand for specialised technical textiles and high- performance fabrics.

We believe that opportunities for a focused and growth- oriented company are extensive. India is increasingly positioned to emerge as a global sourcing and manufacturing hub for a wide range of finished as well as intermediate products. The Governments continued emphasis on "Make in India", self- reliance, domestic manufacturing and infrastructure development, together with Indias expanding global trade relationships and emerging international partnerships, is expected to create new avenues for Indian manufacturers to access both domestic and international markets.

The Company believes that its presence across diverse industrial segments provides a strong platform to capitalise on these opportunities. This is an important phase for the Company to strengthen its capabilities, expand its product portfolio, develop new applications and deepen its presence across existing and emerging markets.

At the same time, the global business environment continues to present challenges. Geopolitical tensions, including ongoing conflicts in Ukraine and the Gulf region, changes in international trade policies, tariffs, supply- chain disruptions, fluctuations in raw material prices and global economic uncertainties may adversely affect demand, costs and export markets. Nevertheless, the fundamental need for industrial products and infrastructure remains strong, and the Company believes that India is well positioned to benefit from the continuing shift towards diversified and reliable global supply chains.

The Company will continue to closely monitor these developments and focus on operational efficiency, product innovation, customer diversification, market expansion and prudent risk management to address emerging challenges and convert available opportunities into sustainable and long- term growth.

CHAFER FABRICS : Chafer Fabrics continue to remain the Companys largest product segment. During the year, the sales volumes of the Company to its tyre customers have increased, resulting in an overall increase in volumes in this segment. The Company has further initiated supplies to newer customers, where it expects gradual growth in volumes. Further approvals are underway, and the Company expects more tyre industry customers to be added in the coming period. The Company is very bullish on this segment as every tyre company is either increasing its capacity or setting up additional plants.

BELTING FABRICS : Belting Fabrics continue to face challenges in the domestic market, primarily due to the availability of imported RFL dipped fabrics at competitive prices. The Company continues to maintain its presence in this segment and is also exploring opportunities in overseas markets. At the same time, the Company continues to engage with industry associations and relevant authorities regarding issues affecting the domestic technical textile industry. The Company believes that favourable changes in import- related policies could provide an opportunity for the segment to revive and achieve its potential. The domestic market in this segment continues to be non- remunerative, primarily on account of the dumping of ready RFL dipped fabrics into India, rendering the production of these fabrics non- lucrative. The Company has a small presence in this segment among select customers and is also reaching out to customers overseas in the Conveyor Belting Industry. However, the Company does not intend to write off or exit this sector, as it is confident that Government policies on imports will be amended, thereby reopening this segment, which has a huge volume requirement in India.

SPECIALISED FABRICS : The Company continues to focus on the development and commercialisation of specialised fabrics for the Auto- Component, Marine Inflatable and Engineering Industries. During the year, the Company has continued to strengthen its capabilities in value- added and application- specific products and is pursuing opportunities with reputed customers. The Company believes that the increasing demand for specialised products and the approvals obtained for certain applications will provide opportunities for commercial volume growth in this segment. The Companys concentration continues in this segment and is confident that the specialized fabrics it has developed and obtained approvals for in certain critical applications will now see commercial volume sales.

The Company continues to pursue a growth- oriented strategy with a focus on specialised and value- added products. While the development and approval process for such products may require time, the Company believes that these products can provide established, remunerative and long- term business opportunities. The Company is also exploring opportunities in overseas markets to diversify its customer base and strengthen its presence beyond India. These initiatives are expected to support the Companys future growth and provide a platform for expanding its production capacity.

The Company continues to see a strong and growth- oriented outlook. With the increase in the automobile industry in the country, all the product segments of the Company see promising prospects. India seems to be becoming a hub for the automobile industry, and more and more automobile companies are setting up plants here. This assures growth for a company like ours.

A significant portion of the Companys raw material requirements continues to be sourced from overseas, as stable and competitive domestic sources for specialised yarns are still developing. A substantial portion of these requirements is sourced from China, making the Company sensitive to changes in trade policies, import regulations, duties, logistics costs and India- China relations. The availability and cost of imported raw materials therefore remain important factors affecting the Companys operations. Also, the Textile Ministrys lack of in- depth knowledge of the Technical Textile Industry and its critical requirements is a major constraint while drafting policies that could truly help the industry grow. This remains one of the major concerns for the industry. Over and above this, the Governments policies on imports, when influenced by the vested interests of large players in this segment, can greatly hamper the prospects for the development and growth of midsized and small players in the field of technical textiles.

The Company has an adequate internal control system commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function are defined in the Internal Audit Charter. The Internal Auditor maintains independence and objectivity and places the Internal Audit reports before the Board of Directors.

The Internal Auditor periodically reviews and evaluates the effectiveness and adequacy of the internal control systems of the Company, including compliance with operating processes, accounting procedures and applicable policies. Based on the observations and recommendations of the Internal Auditor, the respective process owners undertake corrective actions, wherever required, to strengthen the internal control framework. Significant audit observations and the status of corrective actions are placed before the Board of Directors for its review.

The companys Annual Sales have been 8044.53 Lakhs. The EBITDA of the year stood at 1115.51 Lakhs as against a EBITDA of 961.67 lakhs, in the previous year. After providing Depreciation, Finance Charges and Taxation, the company has incurred Net Profit of 568.40 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 in Note no. 40 of the Financial Statements.

The Companys operations have remained on track and continued to grow during the year. To support ongoing operations and planned expansion, the Company has leased two additional sheds in the nearby industrial estate. The shifting of certain operations and the related corrections and alterations required at the plant caused some temporary disruption to operations. However, these measures were necessary to create additional space and infrastructure in line with the Companys planned future growth. The Company has been operating at optimum levels during the year and has achieved its highest- ever output. The Company has reached a stage where it needs to undertake capacity expansion immediately to meet the growing demand for its products.

Over the past few years, the Companys strategy has continued to focus on developing and increasing the share of specialised products. This not only generates better revenues but also helps secure long- term business associations. Simultaneously, the Company is focused on increasing volumes with each of its existing customers as well as adding new customers across each segment. The Company is also pursuing approvals for its products in overseas markets and working towards establishing a presence in international markets.

The Company actively mitigates these risks by focusing on high- value products, expanding into international markets, maintaining working capital discipline, engaging regulatory bodies via industry associations, and executing capacity expansion plans.

The Company has taken up its growth and expansion plans on a war- footing basis. It has initiated the process of identifying suitable land in the nearby areas for setting up a new manufacturing unit with more than double the existing capacity. The Company plans to finalise the land within the next few months and targets to have the new plant operational by the end of 2027. This expansion is expected to more than double the Companys production capacity and enable it to enter additional segments of the technical textile product range for which the existing facility is not equipped.

- Specialised Product Portfolio: Core expertise in developing technically demanding fabrics for tyre, automotive, engineering, and marine applications, enabling long-term customer partnerships.

- Quality & Manufacturing Infrastructure: Robust quality management systems and certifications (ISO 9001 and ISO 14001 by DNV) that ensure consistent product standards across diverse industrial applications.

- Diversified Segment Base: Presence across multiple end-use applications reduces operational reliance on any single market segment.

- 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.

In the preparation of the financial statements, the Company has followed the applicable Indian Accounting Standards. The significant accounting policies applied in the preparation and presentation of financial statements have been set out in Note No. 1 of the Notes forming part of the financial statements for the financial year ended on March 31, 2026.

As of March 31, 2026, the Company had 113 full- time employees. The Company recognises that its employees are an important part of its growth and continues to focus on developing a positive, transparent and participative work environment. The Company also remains focused on performance, employee development and operational effectiveness to support its business and expansion plans.

This Annual Report contains certain forward- looking statements based on the Companys current expectations, estimates and projections regarding its business and future performance. These statements are subject to various risks, uncertainties and assumptions, including changes in domestic and global economic conditions, market and competitive conditions, raw material prices and availability, currency fluctuations, Government policies and regulations, geopolitical developments and the Companys ability to execute its growth and expansion plans. Actual results may differ materially from those expressed or implied in such forward- looking statements. The Company undertakes no obligation to publicly update or revise any forward- looking statements, except as may be required under applicable laws and regulations.

Sanrhea Technical Textiles Limited is an ISO 9001, ISO 14001 and ISO 45001:2018 certified Company, demonstrating its continued commitment to maintaining high standards of quality, environmental management, occupational health and safety across its operations.