Shantai Industries Ltd Management Discussions

This Report contains forward-looking statements that involve risks and uncertainties. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. This report should be read in conjunction with the included financial statements and the notes.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Global Economy and Outlook

The global economy remained resilient but faced an increasingly uncertain operating environment during the period under review. The International Monetary Fund, in its July 2026 World Economic Outlook Update, projects global output growth of 3.0% in 2026 and 3.4% in 2027, compared with an average growth rate of approximately 3.5% during 2024 and 2025. Growth remained uneven across economies, with advanced economies expanding at a relatively modest pace, while emerging market and developing economies, particularly in Asia, continued to record comparatively stronger growth.

The global operating environment was influenced by renewed geopolitical tensions and conflict in the Middle East, which affected trade flows, energy markets, business confidence and input costs. At the same time, continued investment in technology and the rapid adoption of artificial intelligence provided an offsetting source of momentum in several major economies.

Inflationary pressures moderated from their earlier peaks in several economies, although the global disinflation process remained uneven. Monetary policy also remained divergent across economies, with some central banks moving towards policy easing, while financing conditions continued to remain relatively tighter than those prevailing before the recent inflationary cycle.

For globally traded sectors such as textiles, the combination of subdued demand in certain developed markets, volatility in raw material and energy prices, geopolitical risks and the gradual reconfiguration of global supply chains continued to shape the operating environment. These factors had a direct bearing on the Company, particularly through movements in raw material prices and changes in global sourcing patterns, including the increasing opportunities for India in global textile and apparel supply chains.

Indian Economic Overview & Outlook

India continued to remain one of the fastest-growing major economies during the year. As per the provisional estimates released by the Ministry of Statistics and Programme Implementation (MoSPI), Indias real Gross Domestic Product (GDP) is estimated to have grown by approximately 7.7% in FY 2025-26, compared with approximately 7.1% in the previous year. Real Gross Value Added (GVA) in the manufacturing sector grew by approximately 10.7% during FY 2025-26.

Economic activity was supported by resilient domestic consumption, continued public investment in infrastructure, a stable financial system and relatively moderate inflationary pressures. These factors provided resilience to the Indian economy amid an uncertain global environment.

The Indian textile and apparel industry continues to be an important contributor to the countrys economy, exports and employment. As highlighted in the Economic Survey 2025-26, the Indian textile and apparel industry is estimated at approximately US$179 billion, contributing around 2% of Indias GDP and approximately 11% of manufacturing GVA. India is the worlds largest cultivator of cotton by acreage and the largest producer of jute, while remaining a major producer of silk and man-made fibres. India is also among the leading global producers of man-made fibres, including polyester and viscose.

For fabric and fashion manufacturers, domestic consumption remains an important driver of medium-term growth. Rising household incomes, increasing formalisation of retail, expanding e-commerce penetration and changing consumer preferences are supporting demand for value-added fabrics and garments. While regional disruptions and weather-related events affected local trade in certain markets during the year, the underlying trend in domestic consumption remained supportive. The Company expects Indias expanding consumer market and evolving retail landscape to continue providing opportunities for growth over the medium term.

Industry Outlook and Trends

India is the worlds second-largest producer of textiles and garments and remains one of the leading textile and apparel exporters globally. The sector accounts for approximately 2% of Indias GDP and around 11% of manufacturing GVA, while providing direct employment to more than 45 million people. The industry is expected to remain an important contributor to Indias manufacturing, employment and export ecosystem, with its contribution to the economy expected to increase over the coming years.

The domestic textile and apparel market is estimated at approximately US$225 billion in 2025 and is projected to reach approximately US$350 billion by 2030, representing an estimated annual growth rate of around 10% to 12%. Growth is expected to be supported by rising disposable incomes, increasing urbanisation, expanding e-commerce and organised retail, and evolving consumer preferences.

On the export front, Indias textile and apparel exports remained resilient despite subdued global demand. Ready-made garments continued to constitute the largest export segment, followed by cotton textiles and man-made textiles. The combination of a large domestic market, an established manufacturing base, a diversified textile ecosystem and the ongoing diversification of global sourcing provides a favourable medium-term environment for Indian textile manufacturers.

The Company believes that Indias increasing integration with global textile supply chains, together with the growth of the domestic market, presents opportunities for manufacturers to expand their product offerings, strengthen customer relationships and improve their competitive position.

Opportunities in 2026

The Company remains focused on sustainable and value-accretive growth by expanding its product portfolio, increasing the proportion of value-added offerings, diversifying its customer base, strengthening its market presence and improving operational efficiency.

The Company continues to focus on sustainability, renewable energy and responsible business practices. It remains attentive to developments in global economic conditions, trade policies, raw material prices, supply-chain dynamics and changing customer preferences.

The Company will continue to pursue opportunities arising from the growth of the domestic textile and apparel market and Indias increasing participation in global sourcing. Through prudent financial management, product innovation, operational excellence, supply-chain resilience and a customer-centric approach, the Company aims to manage emerging risks effectively while creating sustainable long-term value for its stakeholders.

Segment-Wise or Product-Wise Performance

Over the last few years, as a growth-oriented company we have focused on diversifying into finished products as we see a long run way for growth in sales of these products.

The total revenue of the company stood at INR 981. 20 Lacs which was INR 2024.96 Lacs in previous year.

Outlook

The Companys business remains cautiously positive, supported by Indias strong textile ecosystem, growing domestic demand, increasing global sourcing opportunities and policy support for man-made fibres and technical textiles.

The Company remains focused on strengthening its customer and supplier network, expanding its product portfolio, improving operational efficiency and exploring profitable domestic and international business opportunities while maintaining prudent financial and risk management practices.

Risks, Threats and Concerns

Raw Material Price Risk

Yarn and greige fabric prices moved sharply during the year on account of global conflict, affecting a meaningful part of the input cost base. The Company mitigates this through advance procurement, the higher in-house inventory that its integrated model naturally carries, and its ability to retain value across the chain, though volatility remains a risk that cannot be fully eliminated.

Competition and Margin Risk

The Company operates in a competitive market where intense competition, changing customer preferences and pricing pressures may affect margins and profitability. The Company focuses on product quality, cost efficiency, innovation, customer relationships and operational excellence to maintain competitiveness and support sustainable growth.

Working Capital Risk

Fluctuations in raw material prices, inventory levels and customer payment cycles may impact liquidity. The Company manages this risk through prudent cash flow, inventory and receivables management.

Demand and Macro Risk

Demand can fluctuate with consumer trends and the broader economy. The Companys spread across three routes to market and a wide product range provides some insulation against shifts in any single segment.

Cyber & Data Privacy Risk

Increasing cyberattacks; data breaches and evolving privacy requirements may create operational and reputational risks.

Consumer Behaviour Shifts

Rapid changes in fashion trends and customer preferences, especially in global markets, pose a risk of inventory obsolescence. The Company monitors market trends closely and maintains a flexible production model to respond to changing demand.

Climate and Natural Risks

Being dependent on agricultural inputs like cotton, the Company may be impacted by erratic weather patterns, droughts, or floods. These factors can affect both availability and cost of raw materials.

Material Developments in Hu man Resources / Industrial Relations Front, including number of people employed

Human resources remain an important contributor to the Companys growth and business execution. The Company seeks to maintain a professional, inclusive and performance-oriented work environment and focuses on employee capability, productivity and compliance with applicable employment laws.

The Company maintains cordial relations with its employees and workers, and continues to invest in skills and capability across design, printing, production, processing, procurement and merchandising.

Internal Control Systems and Their Adequacy

The Company continues to operate with a strong and well-structured internal control system that supports all areas of its business. This framework remains consistent with the previous year, ensuring operational efficiency, safeguarding of assets, accurate and transparent financial reporting, and compliance with applicable laws and regulations.

The Company conducts its business with integrity, high standards of ethical behaviour and in compliance with all applicable laws and regulations that govern its business. To maintain the integrity of our processes, the Company has established detailed management information systems, robust corporate policies, and clearly defined roles and responsibilities across departments. Qualified and experienced personnel oversee our internal processes, helping to prevent any unauthorized use of assets or misstatement of transactions.

Discussion on Financial Performance with respect to Operational Performance

During the FY 2025-26, company had placed adequate internal control in the company. The revenue from operations in FY 2025-26 was INR 981.20 Lacs as compared to INR 2024.96 Lacs in previous year.

Details of Significant Changes in Key Financial Ratios

The Significant ratios of the company are as follow: -

S. N. Ratio	2026	2025	Variance
1 Income from Operations (In Lakhs)	981.20	2024.96	-51.54%
2 Operating Profit Margin	-12.08%	1.61	-848.01%
3 Current Ratio	1196.95	3.62	32957.72%
4 Trade Receivables Turnover Ratio	1.11	2.98	-62.81%
5 Trade Payables Turnover Ratio	5.20	8.41	-38.18%
6 Net Profit Margin	NA	NA	NA
7 Return on Capital employed	-20.12%	4.24%	-574.48%

Reasons for significant variation in ratios:

The reasons for variation in excess of 25% in various ratios are explained as follows: -

1. Operating Profit Margin

During the year, the Company has incurred operating loss, whereas in the previous year, the Company had earned operating profit, resulting in a variation in the Operating Profit Margin.

2. Current Ratio

During the year, current liability of the company has increased significantly as compared to the current asset of the company and hence, there is a variation in current ratio.

3. Trade Receivables turnover ratio

During the year, the turnover and trade receivable of the company has increased significantly and thus, there is a variation in the Trade Receivable Turnover Ratio in the current year as compared to the earlier year

4. Trade payables turnover ratio

During the year, the purchase of the company has increased significantly and hence, there is a variation in the Trade Payable Turnover Ratio.

5. Return on Capital employed

During the year, the company have earned loss whereas in the earlier year the company has incurred profit and hence, there is a variation in the Return on Capital Employed Ratio.

Place: Surat	For the Board of Director
Date: August 27, 2026	Shantai Industries Limited
	Sd/-
	Harishbhai Fatandas Sawlani
	Chairman and Managing Director
	DIN: 00831848