Shree Bhavya Fabrics Ltd Management Discussions

Your Directors have pleasure in presenting the management discussion and analysis report for the year ended on March 31^st, 2025.

1. GLOBAL ECONOMIC OUTLOOK:

Despite operating in a complex and unpredictable global landscape, the world economy maintained a steady upward trajectory. According to the April 2025 edition of the IMFs World Economic Outlook, global

GDP expanded by 3.3% in 2024. Projections for 2025 and 2026 suggest growth rates of 2.8% and 3.0%, respectively. Although these figures indicate continued progress, they also point to a more tempered pace compared to previous years.

From a sectoral perspective, the international services industry remained robust, showing consistent growth. In contrast, manufacturing activity weakened, particularly across European markets, where industrial output faced mounting challenges. Trade policy uncertainty remains elevated, as leading economies increasingly adopt protectionist stances. If this trend persists, it could dampen cross-border investment and disrupt global trade flows.

Looking ahead, the global economy faces persistent risks stemming from geopolitical instability and climate-related disruptions. In response to these evolving dynamics, businesses are placing greater emphasis on building resilience, diversifying operations, and focusing on sustainable, long-term value creation.

2. INDIAN ECONOMY OVERVIEW:

India sustained a solid growth momentum in FY 2024 25, showcasing its economic strength amid global volatility and geopolitical challenges. According to preliminary estimates released by the Ministry of Statistics and Programme Implementation (MoSPI), real GDP is anticipated to rise by 6.4% for the fiscal year underscoring Indias role as a leading growth engine among major economies.

The industrial sector saw a 6.2% increase, driven primarily by infrastructure development and construction activity. The Manufacturing Purchasing Managers Index (PMI) remained in positive territory, and sentiment surveys from the Reserve Bank of India (RBI) suggest improving demand conditions and a more optimistic business outlook in the coming quarters. Exports climbed 5.6% in the first half of FY25, while import volumes showed minimal change.

Indias economic resilience has been anchored by strong macroeconomic fundamentals low inflation, a disciplined fiscal stance, and a stable external sector. These elements have helped fortify the domestic economy and enhance investor confidence. At Shree Bhavya Fabrics Limited, we are closely tracking these macroeconomic shifts. Despite ongoing uncertainties, we see emerging prospects and are strategically positioned to leverage them.

3. INDIAN TEXTILE INDUSTRY:

• Global Textile Industry Overview

Since 2018, the global textile sector has maintained a steady upward trajectory, with the exception of 2020, when the COVID-19 pandemic disrupted operations and demand. By 2024, the industry had reached an estimated market size of USD 988 billion. Looking forward, the sector is anticipated to expand at an annual rate of 3 4%, propelled by growing demand in the apparel segment, the rise of fast fashion, and the increasing influence of digital retail platforms. However, trade-related tariffs continue to pose a risk to sustained growth.

• Indias Strategic Position in Textiles

India ranks as the second-largest cotton producer globally, giving it a distinct advantage in textile manufacturing. The textile industry plays a vital role in the Indian economy, being the second-largest source of employment after agriculture. It supports approximately 45 million workers directly and another 60 million through related sectors.

Indias textile landscape is highly varied, encompassing everything from artisanal handwoven fabrics to technologically advanced textile mills. The country benefits from a fully integrated value chain spanning raw material cultivation, yarn production, fabric creation, and garment manufacturing which enhances its competitiveness on the international stage.

• Industry Growth Trends (FY2019 FY2024)

Between fiscal years 2019 and 2024, Indias textile and apparel industry recorded a compound annual growth rate (CAGR) of 4.5%. The domestic market outpaced exports, growing at 5.8% CAGR, while exports saw a more modest rise of 2.1% CAGR.

• Yarn Manufacturing Insights

Yarn production involves converting raw fibers into yarn through spinning, followed by weaving or knitting to produce fabric. Yarns are made from either natural fibers like cotton and wool or synthetic alternatives such as polyester, viscose, nylon, acrylic, and polypropylene.

Cotton yarn holds a dominant position in Indias textile yarn market, contributing over half of the total share. From FY2019 to FY2024, the cotton yarn segment grew at a CAGR of 1.5%, reaching 960 billion. Man-made fibers (MMF) accounted for around 40% of the market in FY2024.

• Future Outlook

Indias textile and apparel sector is poised for further expansion, driven by rising consumer spending, urbanization, and the growing popularity of online shopping. Additional growth drivers include the shift from cotton to synthetic fibers, the acceleration of fast fashion, and the emergence of technical textiles.

As global manufacturers seek alternatives to China, India is well-positioned to capture a larger share of export markets. Bangladesh, the second-largest exporter of ready-made garments, faced socio-political unrest in 2024, prompting a shift in orders to India a trend that could continue and benefit Indian exporters.

The cotton yarn segment is projected to grow at a CAGR of 4.5 5.5% between FY2024 and FY2028, supported by a recovery in international trade.

• Challenges Ahead

Despite its strengths, Indias textile industry faces headwinds due to ongoing tariff policies from the United States. These measures may lead to market instability, reduced export volumes, and disruptions in supply chains. Nevertheless, India could gain a relative advantage, as competing nations face even steeper tariff barriers.

4. REVIEW & FUTURE OUTLOOK OF THE COMPANY

• Review of FY 2024 25

Shree Bhavya Fabrics Limited demonstrated a year of steady growth and operational resilience in FY 2024 25. The companys total income rose to 185.05 crore, marking an increase of over 14 crore compared to the previous year. This growth was primarily driven by higher revenue from operations, which climbed to 184.68 crore, reflecting strong demand and improved sales performance. On the profitability front, the company recorded a profit before tax of 3 crore, up from 2.54 crore in FY 2023 24. Net profit after tax stood at 2.35 crore, showing a healthy year-on-year increase of nearly 22%. This improvement was also reflected in the earnings per share, which rose from 2.03 to 2.47, indicating better returns for shareholders. Operationally, the company managed its expenses effectively. While the cost of materials consumed increased in line with revenue, other key expenses such as employee benefits and finance costs remained stable. Notably, the company benefited from a positive change in inventory valuation, which contributed to its overall profitability. Despite these gains, there were some areas of concern. Finance costs remained relatively high, and the company will need to continue managing its borrowings carefully. Additionally, while profitability improved, the overall margins remain modest, suggesting room for further efficiency enhancements.

• Future Outlook for FY 2025 26

Looking ahead, Shree Bhavya Fabrics is well-positioned to build on its current momentum. The textile industry in India is expected to grow steadily, supported by rising domestic consumption, increased export opportunities, and favorable government policies. As global buyers continue to diversify their sourcing away from China, Indian textile manufacturers like Shree Bhavya stand to benefit.

The companys consistent revenue growth and improving profitability suggest that it has the operational foundation to scale further. If it continues to manage costs effectively and strengthens its cash flow position, it could enhance its margins and overall financial health. However, the company must remain vigilant about external risks such as raw material price volatility, competitive pressures, and global economic uncertainties. Strategic investments in technology, product innovation, and market expansion will be key to sustaining growth.

• Conclusion

FY 2024 25 was a positive year for Shree Bhavya Fabrics Limited, marked by revenue growth, improved profitability, and stronger shareholder returns. With a stable operational base and favorable industry trends, the company has a promising outlook for FY 2025 26. Continued focus on financial discipline, innovation, and strategic expansion will be essential to unlocking its full potential in the years ahead.

5. OPPORTUNITIES & THREATS:

• STRENGTHS

• Consistent Revenue Growth: FY 2024 25 saw an 8% increase in revenue, reflecting strong demand and operational stability. • Improved Profitability: Net profit rose by nearly 22%, with EPS increasing from 2.03 to 2.47.

• Experienced Management: Led by seasoned professionals with deep industry knowledge.

• Diversified Product Portfolio: Offers a range of woven and home textiles, catering to both domestic and export markets.

• WEAKNESSES

• Modest Profit Margins: Despite growth, margins remain relatively thin, limiting reinvestment capacity. • High Finance Costs: Interest expenses continue to weigh on profitability, indicating reliance on debt. • Declining Cash Flow: Operating cash flow has been on a downward trend, which could affect liquidity.

• OPPORTUNITIES

• Export Expansion: Global buyers are shifting away from China, creating new opportunities for Indian textile firms. • Domestic Market Growth: Rising fashion awareness, e-commerce, and urbanization are boosting textile consumption. • Government Support: Incentives under schemes like PLI (Production Linked Incentive) can enhance competitiveness. • Technical Textiles: Emerging demand for performance fabrics and industrial textiles offers new growth avenues.

• THREATS

• Raw Material Volatility: Cotton price fluctuations can impact cost structures and margins.

• Intense Competition: The textile sector is highly fragmented, with pressure on pricing and innovation. • Global Economic Uncertainty: Export demand may be affected by geopolitical tensions or recessionary trends. • Regulatory Risks: Changes in trade policies or environmental regulations could impact operations.

6. SEGMENT-WISE PERFORMANCE:

The Companys main business activity is textile and its related activities which fall under single reportable segment i.e. ‘Textiles. The Company has majorly focused on quality and production.

7. OUTLOOK:

The Company continues to explore the possibilities of expansion and will make the necessary investments when attractive opportunities arise.

8. RISK & CONCERNS:

Operating in the textiles sector, your Company is subject to a wide range of influences stemming from both domestic and international economic developments. Global events whether financial, political, or environmental can have a direct or ripple effect on business performance and capital movement. To navigate this complex landscape, the Company has broadened its revenue base across diverse business segments. This strategic diversification helps reduce dependency on any single market or product line, enhancing stability and unlocking new growth avenues.

The Company has established a well-defined and integrated risk management framework that supports informed decision-making and long-term resilience. Key components include:

• Systematic Risk Monitoring: Early detection and reporting of potential threats. • Rigorous Control Systems: Ensuring compliance and operational integrity.

• Balanced Decision-Making: Evaluating both risks and opportunities to drive sustainable value.

Every decision within the organization is made with careful consideration of its potential impact, guided by a culture of accountability and strategic foresight.

9. INTERNAL CONTROL SYSTEMS & THEIR ADEQUEACY:

Internal Control comprises of the plan of organization and all the coordinate methods and measures adopted within a business to safeguard its assets; check the accuracy and reliability of its accounting data and completeness of accounting records; promote operational efficiency; to encourage adherence to the prescribed managerial policies, to assist in achieving the orderly and efficient conduct of business; prevention and detection of fraud and errors and timely preparation of financial statements. Our Internal Control System is fully equipped with necessary checks and balances ensuring that the transactions are adequately authorized and reported correctly. The Directors have appointed M/s. Kamal M. Shah & Co, Chartered Accountants as the Internal Auditors of the Company for the Financial Year 2024-25. The Internal Auditor conducts regular Audits of various departments and Units to ensure that necessary controls are in place. The Audit Committee while reviewing the system and the Internal Audit Report, call for comments of Auditors on internal control systems and discuss any related issues with the Auditors and the Management of the company before submission to the Board. The Independent Directors also satisfy themselves on the integrity of financial information and ensure that financial controls including Signature controls. Budget Controls, Data control and systems of risk management are in place. The systems and procedures are documented by way of Manual.

10. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL

PERFORMANCE:

"In FY 2024 25, Shree Bhavya Fabrics Limited recorded a revenue of 185.05 crore, marking an 8.2% increase over the previous year, while net profit rose by 21.8% to 2.35 crore, reflecting improved operational efficiency and sustained growth momentum."

11. HUMAN RESOURCE DEVELOPMENT:

In Shree Bhavya Fabrics Limited we are really proud of our "HUMAN RESOURCES". We believe that our employees make a key difference to our business success. Employees are one of our five key stakeholders and needless to mention that managing our human capital has been our key strength and pride. It is our firm belief that nurturing and strengthening the human resource capital is of utmost importance to run the organization effectively and smoothly. This contributes to our unique corporate identity in our journey towards high performance Coaching & Mentoring culture. Good human resource management is vital for the success of any business, therefore Shree Bhavya Fabrics Limited continues to run an in-house training program held at regular intervals and aimed at updating their knowledge about issues. Company considers its Human Resources as a very important asset and a key in achieving operational performance. Company continues to provide them with a safe and comfortable working environment. During the difficult pandemic times, the company has taken numerous precautions to protect its staff and workers. The company regularly complies with all stipulated environmental and safety norms.

12. CAUTIONERY STATEMENT:

Statements in the Boards Report and the management discussion and analysis containing the objectives, expectations or predictions of the company may be forward-looking within the meaning of securities laws and regulations. Actual results may differ materially from those expressed in the statement. The operations of the Company could be influenced by various factors such as domestic and global demand and supply conditions affecting sales volumes and selling prices of finished goods, input availability and cost, government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.

PLACE: AHMEDABAD	For and on behalf of the Board of Directors
DATE: 14.08.2025	of SHREE BHAVYA FABRICS LIMITED
	SD/-
	[PURUSHOTTAM R. AGARWAL]
	Chairman & Managing Director
	DIN: 00396869