Sky Industries Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS Global Economy Outlook

The global economy continues to experience moderated growth and adjustments amid ongoing supply chain realignments and heightened geopolitical uncertainties. According to the International Monetary Fund, global growth is projected to remain subdued at 3.3% in both 2025 and 2026 below the historical average of 3.7% recorded between 2000 and 2019. This forecast reflects a stabilization at a slower pace, highlighting the persistence of global economic headwinds.

Global headline inflation is projected to decline from an annual average of 4.3% in 2025, reflecting easing interest rates in major economies like the U.S., Eurozone and Asia

Pacific Advanced economies are expected to return to their inflation targets sooner than emerging markets and developing economies, where inflation may remain elevated for a longer period.

In 2024, the global hook and loop fasteners market was valued at approximately USD 2.83 billion and is projected to reach USD 2.99 billion by 2025, reflecting a compound annual growth rate (CAGR) of 5.6% during this period. Inflationary Advancements in manufacturing techniques and materials science have led to the development of more durable, stronger, and versatile hook and loop fasteners. Additionally, a growing emphasis on sustainability, cost-effectiveness, and lightweight design in product development is driving market expansion. The combination of technological innovations, expanding applications, and increased focus on sustainability is poised to drive continued growth in the global hook and loop fasteners market through 2025 and beyond.

Indian Economy Outlook

Indias economic trajectory remains robust, with its GDP growth consistently surpassing the global average since FY 2005. In FY 2024–25, despite global economic uncertainties, the Indian economy demonstrated resilience, achieving a solid growth rate of 6.6%. This performance underscores Indias position as one of the fastest-growing major economies globally. The outlook remains positive, supported by strong domestic consumption, increased private and public investment, a revival in rural demand, sustained manufacturing growth, a youthful and expanding workforce, accelerating urbanization, and proactive government reforms.

Indias manufacturing sector demonstrated sustained expansion in FY 2024–25. The Purchasing Managers Index (PMI) for manufacturing remained robust, indicating continued growth in output and new orders. In February

2025, the PMI stood at 56.3, reflecting a solid expansion, albeit at a slightly slower pace compared to earlier months. India enters FY 2024–25 with a strong macroeconomic foundation, positioning itself as one of the third largest in the world by 2027. According to projections by the Reserve Bank of India and the International Monetary Fund, Indias GDP growth is expected to be in the range of 6.5% to 7.0%, supported by resilient domestic demand, robust infrastructure spending, and a stable financial sector.

Government-led initiatives under programs such as Make in India, PLI (Production Linked Incentive) schemes, and Atmanirbhar Bharat continue to enhance the competitiveness of the manufacturing sector, creating favourable conditions for industrial growth and job creation.

pressures, although moderating, remain a key factor to watch. The Reserve Bank of India is expected to maintain a balanced monetary policy approach, ensuring that inflation remains within the targeted range while supporting growth. A sustained focus on improving logistics, digital infrastructure, and ease of doing business is further enhancing Indias appeal as a global manufacturing hub. Additionally, rising foreign direct investment and a growing emphasis on green manufacturing and sustainability are aligning the Indian economy with global trends.

For the textile and fastening solutions industry, these macroeconomic developments present a significant opportunity. Increased government spending on infrastructure, rising consumer demand in Tier II and III cities, and the shift of global supply chains toward India are expected to boost domestic manufacturing. Companies like Sky Industries Limited, which are investing in expansion, innovation, and sustainable practices, are well-positioned to capitalize on Indias economic momentum and play a vital role in the countrys manufacturing-led growth story.

Industry Overview Textile Industry Outlook

The Indian textile industry is one of the oldest and most significant sectors in the country. The technical textile industry in India has gained significant traction in recent years and is poised for continued growth in the coming years This growth is driven by increasing demand for specialized textiles across industries such as automotive, healthcare, agriculture, construction, and defence, as well as strong government support. The production of technical textiles in India accounted for USD 19.49 billion, while imports stood at USD 2.46 billion. With the sector contributing significantly to both domestic production and exports, India is well on its way to strengthening its position as a global leader in technical textiles. The Indian Technical Textile market has a huge potential of a 10% growth rate, increased penetration level of 9-10% and is the 5th largest technical textiles market in the world.

As of the financial year 2024-25, Indias textile and apparel industry continues to play a pivotal role in the nations economy. It contributes approximately 2.3% to Indias Gross Domestic Product (GDP), 13% to industrial production, and 12% to total exports. Textile exports are projected to reach USD 65 billion, reflecting the sectors robust growth trajectory.

Company Review

Sky Industries Limited (SKY), established in 1989, is a leading manufacturer of high-quality Hook and Loop Tape

Fasteners. With a strong focus on innovation and excellence, the company also incorporates sustainable practices in its operations, reflecting its commitment to responsible manufacturing.

The company places a strong emphasis on quality, sustainability, and customer satisfaction, making it a trusted partner for both domestic and international clients. Through continuous research and development, Sky Industries remains at the forefront of innovation in the Hook and Loop tape fastener market, delivering durable, cost-effective, and high-performance products to meet the evolving needs of its customers.

The company has expanded its export operations to over 10 countries, including the USA and Europe. It now serves more than 800 domestic customers and over 20 export clients, leading to notable growth in the domestic market compared to the previous financial year.

During the financial year 2024-25, the company maintained steady growth, with revenues reaching Rs. 85.49 Crore compared to Rs. 83.16 Crore in the previous year. EBITDA improved to Rs. 10.66 Crore from Rs. 8.98 Crore, reflecting better operational efficiency.

OUTLOOK

Sky Industries Limited, a leader in the manufacturing of high-quality Hook and Loop Tape Fasteners since 1989, is well-positioned for sustained growth and success in the years ahead. Our commitment to innovation, operational excellence, and customer satisfaction forms the core of our business strategy, ensuring that we continue to lead in the fasteners industry, both domestically and globally all while maintaining a strong focus on environmental responsibility through the use of recycled materials.

Over the years, Sky has built a strong reputation for delivering reliable and durable fastening solutions across a diverse sector, such as footwear, automotive, orthopaedic, home furnishing, defense and consumer goods.

Innovation and continuous improvement are core drivers of our growth. We invest substantially in research and development to create new products and enhance existing ones, ensuring we remain at the forefront of the fasteners industry. Our R&D efforts are closely aligned with global sustainability goals, emphasizing the adoption of eco-friendly materials and greener manufacturing practices. Looking ahead, Sky Industries is poised to build on its legacy of excellence. By leveraging advanced technologies, sustainable business practices, and strategic global expansion, we aim to strengthen our market position, drive profitability, and meet the evolving needs of our customers. With a future-focused mindset, we are committed to delivering sustained growth and value in the years to come.

OPPORTUNITIES AND THREATS

Oppotunities

Pramiumization & Eco-Fasteners

Rising demand for sustainable and premium-quality fasteners—biodegradable, recyclable, or made from GRS-certified yarn can allow Shy to command higher margins and tap ESG-conscious global clients.

Localization Opportunities Through China Plus One Strategy

Global manufacturers diversifying away from China are looking to source from Indian suppliers. Sky can attract global OEMs and brands seeking alternative sourcing partners.

Defense & Aerospace Sector Expansion

With increasing government expenditure on indigenous defense manufacturing under initiatives like Atmanirbhar Bharat, Sky can strengthen its position as a supplier for military-grade fasteners.

Growth in E-Commerce Logistics & Reusable Packaging

The boom in e-commerce and logistics is increasing demand for reusable and durable fastening in packaging and shipping - an area where hook and loop fasteners are gaining traction.

Technical Textiles & Industrial Applications

Indias technical textile market is expanding rapidly, particularly in segments like automotive, defense, infrastructure, and sports. Sky can innovate fastening solutions tailored to these sectors

Threats

Global Compliance 4 ESG Pressures

Rising expectations from international buyers regarding sustainability, traceability, and ethical sourcing could impose compliance and operational challenges.

Geopolitical & Trade Policy Risks

Trade restrictions, tariffs, or tensions (e.g., India-China) may impact costs, sourcing, and exports,

Rising Labor Costs & Talent Shortage in Manufacturing

As the industry shifts toward automation and quality driven production, access to skilled labor and rising wages may strain operations if not proactively addressed.

intellectual Property Risks and Brand Erosion via Copycats

The risk of counterfeit or copycat products entering the market, especially from unregulated sources, can dilute brand credibility and pricing power

Technological Substitution Risk

Alternatives like magnetic, adhesive, or seamless fastening systems could replace traditional hook and loop products in key applications overtime.

SEGMENT–WISE PERFORMANCE

Sky Industries Limited focuses exclusively on providing innovative fastening solutions within the broader framework of narrow woven fabric products. Due to the companys singular line of business, the disclosure requirements of Accounting Standard (AS-17) pertaining to segment reporting are not applicable.

Throughout FY 2024–25, the company demonstrated operational resilience and steady performance, despite macro economic uncertainties and a moderated domestic demand environment. Its consistent focus on core strengths and responsiveness to evolving market needs contributed to a stable growth pattern.

The companys primary business vertical, hook and loop fasteners, remained central to operations, delivering reliable performance across a range of end-user sectors such as footwear, fashion, medical, textiles, defense, automotive interiors, and industrial packaging. Continued procurement from institutional customers, particularly in the healthcare and defence segments, provided predictable volume and revenue flows.

Efforts to enhance product value through technical improvements and customization have led to an increase in contribution from premium and niche applications, supporting better realization and strengthening the companys value proposition.

Domestically, the companys push toward greater localization in sourcing and leaner manufacturing practices has improved operational efficiency and reduced input dependency. These strategic initiatives have contributed to cost competitiveness and faster turn around capabilities, helping the company stay agile in a demanding market landscape. On the international front, exports retained a key role in revenue generation, with market share growth in both new and existing territories. The companys adherence to recognized global standards, along with its reputation for product reliability and customer responsiveness, has continued to support its expansion as a trusted supplier in overseas markets.

"Going forward, the company remains focused on deepening market penetration, enhancing product differentiation, and exploring opportunities in smart and sustainable fastening technologies to future-proof its segment leadership."

RISKS AND MITIGATION

Risk management is a crucial aspect of business operations, distinct from strategic management. Although risks cannot be completely eliminated, they can be effectively controlled. Sky has established a strong Risk Management Policy, providing a clear framework for identifying, assessing, addressing, and monitoring key risks within the organization.

Whilst Sky is positioned for long term growth, risks are completely monitored. The company continues to implement risk mitigation strategies, maintain a flexible supply chain, and explore new market segments to reduce its dependency on any single revenue stream.

	RISK	MITIGATION
Operational Risk
Raw Material Risk	• The availability and cost of key raw materials such as nylon and polyester are subject to global demand-supply dynamics, geopolitical disruptions, and environmental factors.	•Long-standing vendor relationships ensure continuity of supply.
		• Backward integration for key materials reduces external dependency.
		• Cost-plus pricing contracts help manage the impact of price fluctuations.
		• Diversification of sources and regular procurement reviews enhance supply chain resilience.
Employee Health, Safety & Industrial Risk	• Exposure to workplace accidents, equipment failures, and hazardous materials could	• A comprehensive HSE (Health, Safety, Environment) system aligned with best practices. result in injuries, liabilities, and operational downtime.
		• Regular safety audits, risk assessments, and employee training.
		• Strict adherence to legal safety regulations and protocols.
		• Emphasis on ergonomic work environments and employee wellness programs.
Strategic and Market Risk
Innovation & Technology Obsolescence Risk	• The risk of falling behind in product innovation or being displaced by alternative fastening technologies such as magnetic closures or adhesives.	• Proactive R&D investments aligned with global trends.
		• Customer co-creation and market scanning for emerging needs.
		• Focus on premiumization, eco-fasteners, and technical textile applications.
Reputational Risk	• Quality issues, customer dissatisfaction, regulatory violations, or ESG controversies may damage brand credibility.	• Quality assurance at every production stage.
		• Rapid grievance redressal and customer service processes.
		• Ethical business practices and corporate governance frameworks.
		• Crisis communication preparedness.

Financial Risk
Forex Risk	• Volatility in currency exchange rates may impact the companys export revenues or import costs.	• Reliance on natural hedging mechanisms
		• Alignment of receivables/payables in preferred currencies.
		• Monitoring of exchange rates and dynamic pricing strategies.
Liquidity and Interest Rate Risk	• Delays in receivables, unforeseen cash flow disruptions, or rising interest rates could strain financial performance and capital allocation.	• Active treasury management and daily cash flow monitoring.
		• Use of fixed-rate borrowings or interest rate swaps where appropriate.
		• Diversification of banking relationships and maintenance of credit lines.
		• Working capital optimization initiatives across business functions.
Compliance Risk
Regulatory Risk	• Non-compliance with domestic or international laws, including labor, tax, and environ- mental regulations, may lead to legal or financial penalties.	• Company-wide compliance framework with periodic internal audits.
		• Legal surveillance and proactive response to policy changes.
		• Timely renewal of licenses, certifications, and statutory filings.
		• Engagement with legal and regulatory advisors in key markets.
Technology Risk
Cybersecurity Risk	• Unauthorized access, cyber attacks, or data breaches may disrupt operations, lead to data loss, and harm reputation.	• Implementation of multi-layered cybersecurity protocols (firewalls, encryption, access control).
		• Regular penetration testing, vulnerability assessments, and IT audits.
		• Employee awareness and training on cyber hygiene.
		• Secure backup systems and incident response plans.
Climate Risk
Environmental Risk	• Climate-related events (e.g., floods, heatwaves) or tightening of environmental regulations may disrupt operations or increase costs.	• Commitment to eco-friendly manufacturing and GRS-certified products.
		• Energy-efficient equipment and waste reduction practices.
		• Monitoring of climate risk exposure across facilities.
		• Integration of sustainability into product development and compliance planning.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

For Sky, Internal Control System has been a key focus area. SKY has created well-organised internal control systems with comprehensive rules, guidelines, and processes that are appropriate for the size, complexity, and nature of the business it works in. According to the companys strategic growth goal, the internal control system is made to satisfy both present and future requirements. Regular reviews of policies and processes guarantee their applicability and thoroughness.

The comprehensive system implemented by Sky guarantees automated checks and balances, along with robust financial reporting. By strictly adhering to all relevant statutory compliance requirements, the company follows rigorous procedures to ensure accuracy in recording and delivering reliable financial and operational data. All business operations are closely monitored by both the internal team and the Audit Committee, who work together to design, implement, and maintain effective internal financial controls.

Sky takes full responsibility for safeguarding its assets, preventing fraud, detecting errors promptly, ensuring the accuracy and completeness of accounting records, and preparing timely and reliable financial reports.

Additionally, the company emphasizes continuous improvement of its internal control framework, which is regularly reviewed to adapt to changing regulations, emerging risks, and business needs. Regular training programs are conducted for employees to ensure adherence to internal policies and procedures, fostering a culture of transparency and accountability. This structured approach to internal control not only ensures business continuity but also strengthens stakeholder confidence in Skys financial integrity and operational reliability.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

To assess the long-term viability of the technical textile sector, its essential to analyse how effectively operational performance translates into financial results. This relationship provides valuable insight into the industrys efficiency, competitiveness, and resilience.

Key Points:

1. Revenue Growth Driven by Product Innovation:

Operational emphasis on R&D and the launch of high-performance or speciality textile goods frequently assist financial growth. Stronger revenue streams are typically observed by businesses that innovate operationally.

2. Capacity Utilization and Asset Productivity:

Key measures like ROA and ROCE are positively impacted by the efficient utilization of industrial facilities and machinery, which increases output at little additional expense.

3. Operational Risks Impacting Financial Stability:

Operations can be strained and financial performance adversely affected by disruptions like labour disputes, raw material shortages, or regulatory changes. Businesses with strong risk management are more resilient financially.

The summary of the operating performance is given below:

(Rs. In Lakhs)

Particulars	FY 2024-25	FY 2023-24	% of Change
Revenue from Operation	8408.51	8166.02	2.97%
Operating Profit (EBITDA)	1066.25	898.90	18.62%
Finance Cost	103.85	128.57	-19.23%
Depreciation Cost	135.67	128.66	5.45%
Profit Before Tax	780.75	595.69	31.07%
Profit After Tax	582.09	454.95	27.94%

MATERIAL DEVELOPMENTS IN HUMAN RESOURCE/ INDUSTRIAL RELATIONS INCLUDING NUMBER OF PEOPLE EMPLOYED

Your Companys closing headcount for F.Y. 2024-25 were 83. Sky believes that the greatest asset is its human capital, Sky is unwavering in its will to develop a workforce that is competent, driven, and committed to the companys goals. Accordingly, during the reporting year, all human resource strategies were guided by a people-first approach. Through the alignment of human resources practices with public service standards and the organizations overarching goals, the HRM department continues to concentrate on enhancing institutional capacity.

Your Company continues to invest significantly in professional development programmes. These initiatives were tailored to strengthen the employees current competencies while preparing them for future responsibilities. These efforts also contributed to building a resilient internal talent pipeline.

No major concerns remained unresolved during the year, and relations with all of the companys employees remained friendly. In order to facilitate seamless operations and cross-departmental cooperative problem-solving, a culture of respect for one another, cooperation, and open communication was maintained. A common goal and workplace harmony were further developed by regular worker involvement meetings and feedback systems. The management and board of directors would like to express their profound gratitude for each, tenacity employees commitment, and efforts. Their combined efforts played a crucial role in propelling the businesss performance and hitting significant benchmarks throughout the year.

Our core focus area includes:

Recruitment and Deployment Trust and Transparency Performance Management People centric culture Welfare and Staff Engagement

DETAILS OF SIGNIFICANT CHANGE IN KEY FINANCIAL RATIOS SHOWING FINANCIAL PERFORMANCE

According to the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, the following important financial ratios (i.e., changes of % or more from the immediately informationoutlinessignificant prior financial year):

Ratios	FY 2024-25	FY 2023-24	% of Change
Debtors Turnover (Days)	7.76	7.49	3.72%
Inventory Turnover (Days)	3.96%	3.98%	-0.42%
Interest Coverage Ratio	8.52:1	14.08:1	-39.48%
Current Ratio	2.27:1	2.13%	6.62%
Debt Equity Ratio	0.26:1	0.30:1	-14.99%
Operating Profit Margin (%)	6.96%	5.57%	24.91%
Net Profit Margin (%)	5.67%	5.67%	30.56%
Return on Net worth (%)	12.90%	11.33%	13.86%