Shahlon Silk Industries Ltd Management Discussions

Global Economy:

The global economy continued to demonstrate steady progress despite operating within a challenging and uncertain environment. According to the IMF World Economic Outlook, April 2025, global GDP expanded by 3.3 percent in 2024 and is projected to grow by 2.8 percent and 3.0 percent in 2025 and 2026, respectively. While these projections indicate a degree of stability, they also underscore a moderation in growth compared to historical trends.

From a sectoral perspective, the global services sector maintained its expansionary momentum, whereas manufacturing exhibited signs of weakness, notably within Europe. Additionally, heightened trade policy uncertainty marked by an increase in protectionist measures by major economies poses a potential risk to global trade and investment flows should such measures persist.

Looking ahead, risks associated with geopolitical tensions and climate-related disruptions remain prevalent. In response to this evolving global landscape, businesses are increasingly prioritizing resilience, operational diversification, and the pursuit of sustainable long-term value creation.

Indian Economy:

Indias economy continued on a stable growth trajectory in FY 2024-25, exhibiting resilience in the face of global challenges and geopolitical uncertainties. According to the First Advance Estimates issued by the Ministry of Statistics & Programme Implementation (MoSPI), real GDP is anticipated to expand by 6.4 percent for the fiscal year, reinforcing Indias position as one of the worlds fastest- growing major economies.

The industrial sector recorded a robust growth rate of 6.2 percent, primarily driven by sustained infrastructure development and construction activities. The Manufacturing Purchasing Managers Index (PMI) remained firmly in expansionary territory, while Reserve Bank of India (RBI) surveys suggests strengthening order books and improving business sentiment in the coming quarters. During the first half of FY25, exports registered a growth of 5.6 percent, whereas imports remained broadly stable.

Notably, Indias economic performance has been underpinned by sound macroeconomic fundamentals, including contained inflation, a prudent fiscal position, and

a stable balance of payments. These factors have collectively enhanced the economys resilience and reinforced investor confidence.

Indian Textile Industry:

The market for Indian textiles and apparel is projected to grow at a 10% CAGR to reach US$ 350 billion by 2030.

Indias textile exports have already reached Rs. 3 lakh crore (US$ 35.14 billion), and the goal is to triple this to Rs. 9 lakh crore (US4 105.42 billion) by 2030 by strengthening domestic manufacturing and expanding global reach.

Global apparel market is expected to grow at a CAGR of around 8% to reach US$ 2.37 trillion by 2030 and the Global Textile & Apparel trade is expected to grow at a CAGR of 4% to reach US$ 1.2 trillion by 2030.

India is the worlds second-largest producer of textiles and garments. It is also the sixth-largest exporter of textiles spanning apparel, home and technical products. India has a 4.6% share of the global trade in textiles and apparel.

The textiles and apparel industry contributes 2.3% to the countrys GDP, 13% to industrial production and 12% to exports.

The textile sector is expected to play a significant role, with a target of US$ 100 billion in exports by FY30, up from Rs. 3,12,540 crore (US$ 36.61 billion) in FY25.

The amount of Rs. 10,683 crore (US$ 1.44 billion) PLI scheme is expected to be a major boost for textile manufacturers. The scheme proposes to incentivise MMF (man-made fibre) apparel, MMF fabrics and 10 segments of technical textiles products.

India ranks among the top five global exporters in several textile categories, with exports expected to reach US$ 65 billion by FY 2026.

India enjoys a comparative advantage such as Abundant availability of raw materials like cotton, wool, silk and jute and also in terms of skilled manpower and in cost of production relative to other major textile producers. In FY25, the total exports of textiles and apparels (incl. handicrafts) stood at Rs. 3,12,540 crore (US$ 36.61 billion).

100% FDI (automatic route) is allowed in the Indian textile sector, Cumulative FDI inflows in the textiles sector (including dyed and printed textiles) stood at Rs. 29,077 crore (US$ 4.56 billion) between April 2000-September 2024. Indian Government is taking initiatives to attract

foreign investment in the textile sector through promotional visits to countries such as Japan, Germany, Italy and France. According to the new Draft of the National Textile Policy, the Government is planning to attract foreign investment and creating employment opportunities for 35 million people.

Opportunities, Threats, Risk and concerns:

The Indian textile industry, one of the countrys oldest sectors, remains a cornerstone of its cultural legacy and industrial strength. Over the decades, it has evolved into a fully integrated, globally competitive value chain, spanning fiber production, advanced spinning and weaving technologies, sophisticated processing, garment manufacturing, and a resilient export infrastructure. Today, the sector represents a unique fusion of tradition, innovation, and international reach, offering a diverse range of products tailored for both domestic and global markets.

The sector is undergoing transformative change, propelled by rapid technological advancement, shifting consumer preferences, and rising disposable incomes. Technical textiles · serving healthcare, construction, automotive, and defense industries · are redefining the industrys scope and opening new frontiers of growth. Government initiative continues to support the textile sector, the Union Budget 2025-26 reaffirmed this commitment with an allocation of Rs. 5,272 Crores; a 19% year-on-year increase for the Ministry of Textiles. In parallel, the Governments focus on expanding bilateral and free trade agreements is expected to create substantial new opportunities.

Moreover, the growth of Indias middle class, with its rising purchasing power, is driving higher demand for quality textiles and apparel. The rapid rise of online shopping platforms and organised retail stores is significantly fuelling the industrys growth. As consumers increasingly seek ecofriendly and sustainable textile options, new market opportunities are emerging.

The primary threat stems from volatile raw material prices, particularly cotton, which is influenced by unpredictable weather conditions and global market dynamics. Additionally, increased competition from both domestic and international players poses a significant risk, pressuring profit margins. The company also faces challenges related to compliance with stringent environmental regulations and sustainability standards, which may lead to increased operational costs. Currency fluctuations and economic instability in key export markets further exacerbate financial risks. Concerns over potential disruptions in the supply chain, due to geopolitical tensions

or logistic issues, could also adversely affect production and delivery schedules. Lastly, the ongoing need for technological advancements and innovation to keep up with industry trends demands substantial investment, presenting both a risk and an opportunity for future growth.

The company has established network for marketing of its products, wide spread customer base, good market reputation and quality of the products, the company is in a position to pass on increase if any in cost to their customers.

Internal Control System and their adequacy:

The Company believes that Internal Control is one of the key pillars of governance, which provides freedom to the management within a framework of appropriate checks and balances. The Company has a robust internal control framework, which has been developed considering the nature, size and risks in the business.

The Company has adequate internal control systems in place and also has reasonable assurance on authorizing, recording and reporting transactions of its operations. The Company has well-placed, proper and adequate internal controls environment, commensurate with its size, scale and complexities of its operations. The Company had already developed and implemented a framework for ensuring internal controls over financial reporting. This framework includes entity level policies, processes and operating level standard operating procedures (SOP). Internal control systems are an integral part of your Companys Corporate Governance structure. Information Technology (IT) policies and processes also ensure that they mitigate the current business risks. The Company is successfully running ERP software system equipped with an audit trail (edit log) feature, supported by BI tools. The systems and processes are continuously improved by adopting best in class processes and automation and implementing the latest IT tools which help further for maintaining financial and commercial discipline. These have been designed to provide reasonable assurance with regard to credibility of data and compliances, inter-alia:

a) Recording and providing reliable financial and operational information;

b) Complying with the applicable statutes;

c) Safeguarding assets from unauthorized use;

d) Executing transactions with proper authorization, and ensuring compliance with corporate policies;

e) Prevention and detection of Frauds / errors;

f) Continuous updating of IT systems.

These are aimed at giving the Audit Committee a reasonable assurance on the reliability of financial reporting and statutory & regulatory compliances, effectiveness and efficiency of your Companys operations. The Internal Financial Control Systems are reviewed

periodically and revised to keep in tune with the changing business environment.

Statutory Auditors of the company has conducted audit of internal financial control system over financial reporting and operating effectiveness of such controls. Separate audit report on internal financial control is annexed to Auditors Report and forming part of this report.

Financial Performance:

The brief summary of financial statement is reproduced hereunder:

Particulars	FY2024-25	FY2023-24
Revenue from operation	25126.53	31139.09
Other Income	67.30	51.34
Total Revenue	25,193.83	31,139.09
Profit (loss) on sale of Assets/Investment	2950.24	32.69
EBITDA	38.27	2871.55
Operational EBITDA	2911.97	2838.86
PBT	592.38	611.49
PAT	349.86	398.16

During the year under review, your Company has achieved turnover of Rs. 25,193.83 lakh as against Rs. 31,139.09 lakh in the previous year, marginal decrease by 19.09% as compared to previous financial year. Despite the reduction in revenue, Earnings Before Interest, Depreciation, and Tax (EBITDA) remained robust at ?2,911.97 lakh, marginally higher than ?2,871.55 lakh recorded in the preceding year, reflecting an improvement in the operating margin of 1.41%. During the year under review, Profit before tax was Rs. 592.38 lakh as compared to profit of Rs. 611.49 lakh in the previous year. The Profit after tax for the financial year under review was Rs. 349.86 lakh as against Rs. 398.16 lakh for the previous year.

Outlook:

The Company expects the turnaround to sustain, accompanied by a reduction in fixed costs by improving manufacturing capacity utilisation, cash conservation and

non-core asset monetization. However the Company continues to closely monitor impending problems due to factors like inflation, and geopolitical risks, which could affect the business. The health and safety of employees, customers, suppliers and communities remain a priority. The Company is optimistic for revenue and margins growth in the medium term, strengthening business sustainability.

In the coming year, we are foreseeing increase in demand since few export customers have started shifting their orders from China to India. Indian Government also promotes the export and will provide incentive schemes for exports, which will increase the income and decrease the deficit.

Human Resource Development/Industrial Relations:

The industrial relations scenario continued to be largely positive across the manufacturing locations. Significant

emphasis was also laid towards raising awareness on health and wellness of employees through annual medical check-ups and health awareness activities.

Shahlon recognizes that its people are most valuable resources and therefore as a policy of nurturing talent and ensuring that there is growth and their capabilities grow in relation to the growth of the company. The human

resources function takes into account the capability, commitment and sincerity while evaluating talent within the company and suitable reward structure is in place to ensure maximum employee satisfaction. Regular training programs have been in place to improve the work capability at various levels in order to improve the competencies and skills.

Key Financial Ratios:

Particulars	FY 2024-25	FY 2023-24	% Change
Debtors Turnover	1.90	2.28	-16.57%
Inventory Turnover	2.64	4.17	-36.77%
Interest Coverage Ratio	1.39	1.49	-6.89 %
Current Ratio	2.02	1.45	39.85%
Debt Equity Ratio	1.26	1.29	-2.35%
Operating Profit Margin (%) *	9.02%	6.61%	36.50%
Net Profit Margin (%)	1.52%	1.32%	14.58%
details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof ##	3.31%	3.89%	-14.57%

* Inventory turnover ratio decreased due to increase in average inventory holding level even though decrease in revenue from operations.

** Current ratio is improved on account of significant reduction in trade payables.

# Operating Profit Margin reflecting healthy growth in the current financial year on account of reduction in manufacturing and other expenses and the company able to recover better sale price of its products.

## Return on Net worth has declined due to a decrease in Profit after tax against modest growth in Net Worth. The reduction in PAT was mainly due to decrease in revenue from operations, higher finance cost and tax outgo.

Forward Looking Statement - Cautionary Statement:

Certain matters discussed in this report may contain statements regarding the Companys market opportunity and business prospects that are individually and collectively forward-looking statements. Such forwardlooking statements are not guarantees of future

performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to, the performance of the Indian economy and of the economies of various international markets, the performance of the industry in India and world-wide, competition, the companys ability to successfully implement its strategy, the Companys future levels of growth and expansion, technological implementation, changes and advancements, changes in revenue, income or cash flows, the Companys market preferences and its exposure to market risks, as well as other risks. The Companys actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Management Discussion and Analysis. The Company assumes no obligation to update any forward-looking information contained in this Management Discussion and Analysis. Any forward-looking statements and projections made by third parties included in this Management Discussion and Analysis are not adopted by the Company and the Company is not responsible for such third party statements and projections.