Simplex Mills Company Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

Indian Economy

Amidst a challenging and uncertain global macroeconomic environment, the Indian economy continues to demonstrate resilience, optimism, and growth momentum. Real GDP growth was estimated at 7.3% for FY 2023 24 and is expected to remain resilient at 7% in FY 2024 25, with continued momentum projected into FY 2025 26, supported by strong domestic demand, rising private capital expenditure, and infrastructure push.India remains the fastest-growing major economy globally and has now emerged as the fifth-largest economy in nominal terms and third-largest in purchasing power parity (PPP) terms. According to the International Monetary Fund (IMF), Indias contribution to global growth is expected to rise from the current 16% to 18% by 2028. Inflation is projected to moderate to 4.5% in FY 2025, providing a stable economic environment for industrial growth.

The Indian textile industry is one of the oldest and most diverse sectors of the economy, ranging from handlooms and handicrafts to capital-intensive modern mills. Its strong raw material base comprising natural fibres (cotton, jute, silk, wool) and synthetic fibres (polyester, viscose, nylon) supports a wide spectrum of textile and apparel production.

The sector is closely intertwined with agriculture and cultural heritage, while also playing a critical economic role by contributing to employment, exports, and industrial output. Government initiatives like the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS), and Mega Integrated Textile Region and Apparel (MITRA) parks are aimed at enhancing infrastructure, scale, and competitiveness.

India is currently the second-largest producer of textiles and garments and ranks third globally in textile and apparel exports. The sectors economic footprint includes:

Contribution of 2.3% to GDP

12% share in export earnings

13% of industrial production

Direct employment to over 45 million people, including 3.5 million handloom workers

Indian textiles and apparel market projected to grow at a CAGR of 10%, reaching USD 350 billion by 2030

Exports expected to touch USD 100 billion by 2030

Global apparel market forecast to grow at 8% CAGR to reach USD 2.37 trillion by 2030

Indian Technical Textiles market poised for 10% CAGR growth, with India ranked fifth globally in this segment

The Manufacturing of Textiles Index stood at 112.4 in December 2023, signaling a sustained revival in textile output

Indias demographic advantage, increasing disposable incomes, fashion awareness, and emphasis on sustainability are expected to further drive domestic and global demand for Indian textiles. The Company is well-positioned to capitalise on these opportunities through diversified product offerings, export market penetration, and quality-led manufacturing.

The textile sector faces a variety of structural and external threats, including:

Duty-free access granted to competitor countries in key markets like the US and Europe

Volatile raw material prices and uncertainty in availability, especially for cotton and synthetic fibres

Exchange rate fluctuations and rising interest rates impacting cost of capital and pricing

Changing global fashion trends, consumer preferences, and demand cycles

Technological gaps and limited adoption of automation and smart manufacturing

Tariff and non-tariff trade barriers, along with quota systems affecting global competitiveness

Dependence on uninterrupted power supply, skilled labour availability, and consistent policy support

Despite these challenges, the Indian textile sector is evolving through consolidation, digitisation, and quality benchmarking, with an aim to build scale and competitiveness.

The Company maintains a positive outlook for FY 2025 26, driven by:

Anticipated rise in domestic consumption and fashion-conscious customer base

Expanding global markets and diversification in export geographies

Enhanced focus on value-added products, including technical textiles and sustainable fabrics

Strategic investments in capacity expansion, automation, and green energy adoption

Stronger focus on supply chain integration, digital transformation, and customer-centric product development

With a commitment to innovation, operational excellence, and responsible manufacturing, the Company aims to strengthen its leadership position in the textile industry while contributing meaningfully to Indias economic growth story.

In todays challenging and competitive environment, risks are inherent in all businesses. The Companys risk management strategy encompasses the proper and in-depth identification, assessment and prioritization of risks, followed by speedy mobilization of resources to minimize, monitor and control the probability of unfortunate events.

The Company has proper and adequate system of internal control system to ensure maintenance of proper accounting records, their accuracy and that all the assets are safeguarded from loss or damages.

The Company has reported total income of Rs. 7, 856.81 thousands as compared to Rs. 6,110.63 thousands in the previous year. The Company has reported a net loss of Rs. 317.25 thousands as compare to Rs. 1,408.73 thousands in the previous year.

The Key Financial Ratios for the financial year ended 31st March, 2025 are as under:

Return on net worth, profit margin, Interest coverage and EBITDA margin was improved due to decrease in loss after tax in current year. There was no change in the inventory. There were no debtors in the previous year.

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results, could, however differ materially from those expressed or implied.