Shree Karni Fabcom Ltd Management Discussions

Management discussion and analysis report

GLOBAL ECONOMY

The global economy entered FY2025 amid heightened policy uncertainty and evolving trade dynamics. Global growth is projected to decline after a period of steady but underwhelming performance, amid policy shifts and new uncertainties. Global headline inflation is expected to decline further, notwithstanding upward revisions in some countries. Risks to the outlook are tilted to the downside.

Global growth is projected at 3.3% both in 2025 and 2026, below the historical (2000-19) average of 3.7%. The year witnessed significant trade policy shifts, particularly with the implementation of reciprocal tariffs by major economies, creating both challenges and opportunities for global trade flows.

The strongest recovery among major economies has been in the United States, where GDP in 2023 is estimated to exceed its prepandemic levels. The euro area has recovered, though less strongly - with output still 2.2% below prepandemic projections, reflecting greater exposure to the war in Ukraine and the associated adverse terms-of-trade shock, as well as a spike in imported energy prices.

WORLD ECONOMIC OUTLOOK, APRIL 2025

GROWTH PROJECTIONS (REAL GDP GROWTH, ANNUAL PERCENT CHANGE)

Economy	2024 (Actuals)	2025 (Projected)	2026 (Projected)
Global Economy	32	28	30
Advanced Economies	18	14	15
Emerging Market & Developing Economies	43	37	39

Source: IMF World Economic Outlook, April 2025

INDIAN ECONOMY

India continued to demonstrate economic resilience during FY2025, maintaining its position as one of the fastest-growing major economies globally. Indias economy expanded by 6.5% in the full fiscal year 2025, in line with the governments February estimate. The growth outlook in Asias third-largest economy has remained relatively robust, thanks to strong domestic consumption and a relatively lower dependence on exports, cushioning the blow from U.S. President Donald Trumps erratic trade policy. The International Monetary Fund projects Indias economy will reach $4.187 trillion in 2025, modestly overtaking Japans $4.186 trillion and potentially making it the worlds fourth-largest economy. This achievement reflects Indias sustained economic momentum despite global headwinds.

Key Economic Indicators:

. GDP Growth: 6.5% in FY2025

• Expected to become 4th largest economy globally

• Strong domestic consumption driving growth

• Monetary policy support through rate cuts

GDP Growth Projections for 2025

According to various international agencies:

IMF: 6.2% in 2025

• ADB: 6.5% in fiscal year 2025

Indias economic strength is underpinned by robust domestic demand, government infrastructure spending, and the resilience of its services sector. The countrys demographic dividend, with a median age of 28 years, continues to support consumption- led growth.

THE TEXTILE SECTOR

INDUSTRY PROJECTIONS

The Indian textile industry is on a strong growth trajectory, driven by innovations, government support, and increasing global demand. India is expected to be a major player not only in textiles but also in the emerging markets of smart and technical textiles. The market for Indian textiles and apparel is projected to reach US$ 250 billion by 2030, with exports expected to reach US$100 billion.

Indias textile sector has demonstrated remarkable resilience and growth potential during FY2025, establishing itself as a critical pillar of the nations manufacturing landscape.

TECHNICAL TEXTILES: THE GROWTH ENGINE

Technical textile accounts for approximately 13% of Indias total textile and apparel market

Technical textiles have emerged as a high-growth segment within Indias textile ecosystem. The Indian Technical Textiles market is the 5th largest in the world. Projections place the global market size at an impressive US$ 300 billion by 2047.

CONSUMPTION OF TECHNICAL TEXTILE: INDIA VERSUS THE WORLD

The central government has set a target to export Rs. 87,450 crore (US$ 10 billion) worth of technical textiles under its National Technical Textiles Mission

Government Initiatives (India)

1. PRODUCTION LINKED INCENTIVE (PLI) SCHEME

Notification: Announced September 2021, aimed at MMF (man-made fibre) apparel, MMF fabrics, and Technical Textiles.

Support: Incentives of 3-11% on incremental sales over a 5-year period.

Recent update: In Aug/Sep 2025, Govt. reopened the PLI application window until 30 Sept 2025 to attract more proposals, especially in Technical Textiles where uptake was modest initially.

Objective: Scale domestic manufacturing, reduce import dependence, and enable India to compete with China/ASEAN in MMF and technical fabrics.

2. NATIONAL TECHNICAL TEXTILES MISSION (NTTM)

Budget & Duration: Outlay of Rs.1,480 crore (FY20-FY26).

Focus Areas:

R&D: Already cleared 168 projects across indigenisation of carbon fibre, aramid, nylon, UHMWPE, composites.

Market Development: Awareness programs, exhibitions, buyer-seller meets.

Skilling: Dedicated courses and training modules rolled out.

Standards: Coordinating with BIS for QCO (mandatory standards).

Impact so far: Catalyzed startup and academic participation; created a pipeline of prototypes in geo, agri, defence textiles. Govt. notes mission is "critical to move India up the value chain."

3. PM-MITRA PARKS SCHEME

Seven mega parks sanctioned to create integrated textile value chains.

Technical textiles and MMF are explicitly prioritized categories.

Benefit: Common infrastructure, plug-and- play facilities, and scale efficiencies for investors.

Investor interest: Several states (Tamil Nadu, Gujarat, UP, Maharashtra, etc.) actively courting technical textile units within these parks.

4. QUALITY CONTROL ORDERS (QCOS) & STANDARDS

Geo Textiles & Protective Textiles QCOs: Enforced Apr 2023.

Medical Textiles QCO: Effective Oct 1, 2024, covering PPE kits, surgical gowns, etc. Dashboard: Ministry maintains a live QCO tracker, ensuring industry compliance. Strategic role: Mandatory BIS certification helps address sub-standard imports and raises global credibility for Indian exporters.

5. HSN CODIFICATION & TRADE FACILITATION

Since 2019, Govt. allocated 207 dedicated HSN codes for technical textiles.

Outcome: Enables clear tracking of trade flows, policy benefits, and targeted incentives.

Helps industry visibility in trade stats and export promotion councils.

6. USAGE MANDATES IN PUBLIC WORKS & AGRI INFRASTRUCTURE

MoRTH/IRC guidelines recommend use of geotextiles, geogrids, geocells in highways. PMGSY (rural roads) mandates partial use of coir/jute geotextiles for soil stabilization. Agriculture:

NHB/MIDH schemes subsidise shade nets, crop covers, hail nets to boost protected cultivation.

Impact: Creates steady domestic demand in GeoTech and AgroTech categories, where private demand cycles can be uneven.

7. EXPORT PROMOTION & MARKET ACCESS

Dedicated export promotion council (EPC): Recently carved out from Texprocil.

Incentives: Access to RoDTEP, duty-drawback, and FTA benefits.

Export momentum: FY25 exports touched Rs.24,733 crore (US$2.97B), up ~15% YoY. Govt. is targeting high-tech product exports (ProTech, MedTech, MobilTech) under this framework.

COMPANY

OVERVIEW

Shree Karni Fabcom Limited (SKFL) stands as a pioneering force in Indias technical textile landscape, embodying the theme of "Growth in Motion" that defines our FY2025 journey. As a leading B2B manufacturer of specialized technical textiles, we have successfully transformed from a traditional textile player to a comprehensive, vertically integrated manufacturer serving diverse industries globally.

Our Heritage and Evolution

With over 50 years of legacy in textiles and more than two decades of focused expertise in technical textiles, SKFL has established itself as a trusted partner for global brands. Operating under the SKFL brand, we excel across multiple product categories including Woven Fabrics, Knitted Fabrics, Coated Fabrics, and 100% polyester materials.

Product Portfolio

• Our comprehensive product range includes:

• PU Coated Fabrics - High-performance waterproof solutions

• EVA Coated Fabrics - Flexible and durable applications

• Inter Lining Fabrics - Structural support materials

• Rain Proof Fabrics - Weather-resistant solutions

• Air Mesh Fabrics - Breathable technical textiles

• Armed Forces Fabrics - Defense-grade materials

• Recycled Fabrics - Sustainable textile solutions

• Luggage & Backpack Fabrics - Travel industry specialization

• Specialty Custom Fabrics - Tailored solutions

OPERATIONS & STRATEGIC EXPANSION

• FY2025 marked a transformative year for SKFL as we executed our ambitious expansion and integration strategy, truly embodying "Growth in Motion."

Manufacturing Infrastructure Current Installed Capacity:

Weaving: 18,000 meters per day • Knitting: 4,320 kg per day (increasing to 33,600 kg per day)

Coating: 15,358 meters per day (expanding to 27,883 meters per day)

EVA Lamination: 25,000 meters per day

Global Brand Partnerships

SKFL serves an impressive roster of global brands, includin Bata, VIP, Samsonite, and many others, demonstrating our capability to meet international quality standards and 0 delivery requirements.

1. In-House Dyeing Unit (Operational Q4 FY25)

Our backward integration initiative with the commissioning of an in-house dyeing unit represents a significant milestone. This facility enhances our bottom-line profitability by 2-3% while enabling the production of highly specialized products. The dyeing unit allows us to:

• Reduce dependency on external vendors

• Improve quality control

• Enhance margin optimization

• Expand our fabric portfolio beyond polyester to include Nylon and Cotton

2. Expanded Finished Goods Manufacturing Surat Facility Expansion: The company has successfully extended its existing manufacturing facility in Surat, which has become operational as of January 31st, 2025. The new end to end manufacturing facility, equipped with 200 advanced machines, has enabled the commencement of commercial production and manufacturing of bags, covering the entire process from start to finish.

Rs. Noida Facility: Our new facility at Noida, Gautam Buddha Nagar has commenced commercial production as of June 27, 2025.

• Machine Capacity Expansion:

• FY24-beginning: 200 machines

• June 2025: 700 machines

STRATEGIC INTEGRATIONS

Backward Integration Benefits:

Cost Optimization: Reduced raw material costs and lead times Quality Enhancement: Better control over entire production process Flexibility: Ability to customize products according to client specifications Margin Improvement: 2-3% improvement in overall margins

Forward Integration Advantages:

Value Addition: Transition from raw material supplier to finished goods manufacturer Customer Penetration: Deeper engagement with existing clients Premium Prig: Ability to command higher margins for finished products Market Expansion: Access to new customer segments

Sustainability Initiatives

SKFL is committed to ESG compliance and sustainable manufacturing:

Solar Integration: 2MW solar capacity already installed with additional 2MW planned

Water Recycling: Implementation of water conservation systems R-PET Yarn: Contributing 20% to fabric production

Carbon Neutrality Goals: Long-term commitment to environmental sustainability

Quality Certifications and Recognitions

During FY2025, we achieved several critical certifications:

WRAP Certification: Workplace responsibility standards

MNC Brand Audits: Successfully cleared audit processes for major global brands Walmart Vendor Approval: Our Company has successfully cleared the audit conducted by Walmart. Leveraging this audit clearance, we are now an approved vendor for Walmart in India, which will expand our global reach, by deepening engagement with Walmarts extensive international network

FINANCIAL PERFORMANCE

	Numbers in lacs INR
PARTICULARS	FY23	FY24	FY25
Net Sales	12,694.7	13,079.8	16,571.0
- Fabric	12,694.7	13,079.8	16,392.01
- Bag Pack		-	179.02
Growth %	52%	57%	27%
Expenditure	11,184.4	10,992.0	14229.7
- COGS	10,355.7	10,108.7	12969.7
- Operating Expenses	828.6	883.2	1259.9
EBIDTA	1,510.3	2,087.9	2341.2
EBIDTA Margin	12%	16%	14%
Other Income	9.4	38.8	177.9
Depreciation	291.9	152.7	251.6
Interest	515.8	277.6	218.2
PBT	712.0	1,696.4	2049.2
Tax	185.13	395.2	538.6
PAT	526.9	1,301.2	1510.6
PAT Margin	4%	10%	9%

PERFORMANCE

DRIVERS

REVENUE GROWTH FACTORS:

• Strong demand in existing product segments

• Successful launch of new backpack segment

• Timely execution and delivery

• Expanded customer base

MARGIN ENHANCEMENT:

• Operational efficiency improvements

• Better product mix

• Cost optimization initiatives

• Backward and forward integration benefits

INVESTMENT IN GROWTH

• During FY25, the company made strategic investments:

• Approximately Rs.2 Crores in backpack capacity expansion

• Rs.1 Crore in certifications (SEDEX and WRAP)

• Infrastructure development for ESG compliance

• Technology upgrades and automation

OUTLOOK AND OPPORTUNITIES

1. Technical Textiles Growth

Smart textiles, which can respond to external stimuli such as heat, light, or moisture, are expected to be a major trend by 2025. These textiles can be used in medical, sports, and fashion applications, such as garments that monitor health parameters or adapt to environmental conditions.

2. Import Substitution

With our advanced R&D capabilities and localized innovation approach, we are well- positioned to substitute imports, particularly from China, with high-quality, cost- effective domestic alternatives.

3. Defense and Security Sector

Expanding into high-growth sectors such as defense fabrics, security jackets, and parachutes presents significant margin improvement opportunities.

4. Sustainable Textiles

Sustainability will remain a key focus, and companies that embrace eco-friendly practices will lead the way in the global market.

> 1. Technology Leadership

• Investment in state-of-the-art quality testing tools

• Dedicated in-house R&D team

• Advanced manufacturing technologies

> 2. Capacity Expansion

• Dyeing unit operational by Q4 FY25

• 700 machines by Q1 FY26

• Solar capacity enhancement

> 3. Market Diversification

• Reduced dependency on single markets

• Geographic expansion

• Product portfolio diversification

> 4. Customer Partnership Deepening

• Higher wallet share with existing clients

• New product development collaboration

• Premium product positioning

CHALLENGES AND MITIGATION STRATEGIES

GLOBAL TRADE UNCERTAINTIES

Challenge: US tariff implications and trade policy volatility

Mitigation:

Market diversification strategy Enhanced competitiveness through integration Strong government policy support Raw Material Cost Fluctuations

Challenge: Volatile input costs affecting margins

Mitigation:

Backward integration redug dependency Long-term supplier partnerships Cost pass-through mechanisms Competition from Low-Cost Producers

Challenge: Price pressure from competing countries

Mitigation:

Value-added product focus Quality differentiation Customer partnership deepening Infrastructure and Skill Gaps

Challenge: Need for skilled workforce and infrastructure

Mitigation:

Investment in training and development Technology adoption Strategic location advantages

RISK MANAGEMENT

Operational Risks

Raw Material Supply: Diversified supplier base and backward integration Quality Control: Comprehensive testing facilities and quality systems Capacity Utilization: Demand forecasting and flexible manufacturing

Market Risks

Demand Fluctuation: Product and market diversification Competition: Innovation and quality differentiation

Regulatory Changes: Compliance monitoring and adaptation

Financial Risks

Foreign Exchange: Natural hedging through export-import matching Credit Risk: Established customer relationships and credit policies Interest Rate: Optimal debt-equity mix and financial planning

HUMAN RESOURCES

Our human capital remains our most valuable asset, with over 200 dedicated professionals driving our growth.

Key initiatives include:

I Talent Development

• Technical training programs

• Leadership development

• Skill enhancement initiatives

Employee Engagement

• Performance-based incentives

• Career growth opportunities

• Safe and sustainable workplace

Organizational Culture

• Innovation-focused environment

• Quality-driven mindset

• Customer-centric approach

FUTURE OUTLOOK

As we look ahead, SKFL is positioned to capitalize on the significant opportunities in Indias technical textile sector. Our strategic theme of "Growth in Motion" will continue to guide our expansion and innovation efforts.

Near-term Priorities (FY26)

• Operational Excellence: Full utilization of expanded capacities

• Market Expansion: Leveraging new certifications and capabilities

• Product Innovation: R&D-driven new product development

• Sustainability: ESG compliance and green manufacturing

Medium-term Vision (3-5 years)

• Market Leadership: Establishing dominant position in technical textiles

• Global Expansion: Expanding geographical footprint

• Technology Leadership: Advanced manufacturing capabilities

• Sustainable Growth: Carbon-neutral operations

Long-term Aspiration (10 years)

• Global Recognition: World-class technical textile manufacturer

• Innovation Hub: R&D center of excellence

• Sustainable Manufacturing: Industry benchmark for ESG practices

• Stakeholder Value: Consistent superior returns

CONCLUSION

FY2025 has been a transformative year for Shree Karni Fabcom Limited, truly exemplifying our theme of "Growth in Motion." Through strategic expansions, operational excellence, and customer-focused innovations, we have positioned ourselves to capture the immense opportunities in Indias growing technical textile sector.

Our successful backward and forward integration, combined with strong financial performance and strategic partnerships, provides a solid foundation for sustained growth. As India emerges as a global textile manufacturing hub, SKFL is well- positioned to lead this transformation with our commitment to quality, innovation, and sustainability.

The road ahead is filled with opportunities, and we are confident that our strategic investments, capable team, and customer-centric approach will continue to drive superior value creation for all stakeholders.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis report describing the Companys objectives, projections, estimates, expectations, or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand-supply conditions, raw material prices, finished goods prices, cyclical demand and prig in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and countries with which the Company conducts business, and other factors such as litigation and labor negotiations.