Sky Industries Ltd Management Discussions

SKY INDUSTRIES LIMITED

The Textiles Industry continues to evolve with changing consumer preferences, technological advancements and increasing demand for value-added products. In this dynamic environment, Sky Industries Limited has continued to strengthen its position as a trusted manufacturer of Narrow Fabrics and Textile serving diverse end-use industries.

Backed by strong manufacturing capabilities, a diversified product portfolio and a commitment to quality and innovation, the Company remains well positioned to capitalize on emerging opportunities and create sustainable value for all stakeholders.

During the year, the Company remained focused on enhancing operational efficiencies, expanding its product offerings and strengthening customer relationships. A key strategic initiative was the acquisition of land in Gujarat for the development of a new Manufacturing Facility, which is expected to support future capacity expansion and long- term growth objectives. The Company has already signed a Memorandum of Understanding (MoU) with the Government of Gujarat, reaffirming its commitment to establishing a world class manufacturing facility in the state.

1. Global Economic Overview

The Global Economy remained resilient during FY 2025-26 despite geopolitical uncertainties, inflationary pressures and volatility in commodity prices. As per the International Monetary Fund (IMF), Global Growth is projected at around 3.1% in 2026, while inflation is expected to moderate to approximately 4.4%, reflecting gradual stabilization in global economic conditions.

Emerging economies continued to drive Global Growth, supported by strong domestic demand and improving industrial activity. India remained one of the fastest- growing major economies, with GDP growth estimated at around 6.5%, driven by robust consumption, infrastructure development and manufacturing-led expansion.

Within the Textile and Manufacturing Ecosystem, the Hook and Loop Fasteners Market is estimated at approximately USD 4 billion (^36,000 crore) globally and is expected to grow at a steady 5-6% CAGR. Growth is being supported by increasing applications across Apparel, Footwear, Medical Textiles, Automotive Interiors, Sportswear and Industrial Uses along with rising demand for lightweight, reusable and durable fastening solutions.

The Textile and Manufacturing Sectors are also benefiting from supply chain diversification, increasing focus on value-added products and growing emphasis on sustainability. While challenges such as raw material price volatility and global trade uncertainties persist, the long-term outlook for the industry remains positive,

supported by evolving consumer preferences and expansion in Technical Textile applications.

2. Indian Economic Overview

India continued to demonstrate strong Economic Resilience during FY 2025-26, supported by steady Domestic Consumption, Sustained Infrastructure Development and a continued policy focus on manufacturing-led growth. The Economy is estimated to have grown at around 6.5%, reflecting stable macroeconomic fundamentals and broad-based industrial expansion.

Within this growth environment, the Technical Textiles Sector is emerging as a key area of Industrial Development in India, supported by government initiatives such as the National Technical Textiles Mission (NTTM), increasing investment in high-performance materials and rising adoption across Infrastructure, Healthcare, Automotive and Industrial Applications. Indias Technical Textiles Market is estimated at approximately USD 25-30 billion (^2.0-2.5 lakh crore) and is expected to grow at a healthy ~10% CAGR, driven by increasing demand for value- added and performance oriented Textile Products.

The Hook and Loop Fasteners segment, a specialized component within Technical Textiles, is also witnessing steady growth in India, estimated at around USD 200- 300 million (^1,600-2,500 crore). Demand is being driven by expanding applications in Apparel, Footwear, Medical Textiles, Automotive Interiors, Sportswear and Industrial Usage. The shift toward functional, reusable and lightweight fastening solutions continues to support market expansion.

Against this backdrop, Indias growing positioning as a Global Manufacturing Hub, coupled with increasing integration into global supply chains, presents significant opportunities for Technical Textile manufacturers. In this evolving landscape, Sky Industries Limited remain focused on enhancing manufacturing capabilities, improving efficiency and leveraging growth opportunities in specialized textile segments.

3. Industry Structure and Developments

The textile industry continues to transition towards technical and performance-based textile solutions, driven by increasing industrial applications and demand for functional efficiency. This shift has strengthened the role of technical textiles across global supply chains, particularly in engineered components and specialty textile accessories.

Technical textiles are now deeply integrated across Mobility, Healthcare and Infrastructure Industrial applications, with growing emphasis on lightweight construction, durability and application-specific performance.

From a trade perspective, Global Technical Textiles remain highly integrated into International Supply Chains. Indias Technical Textile Exports are estimated at around USD 2.8-3.2 billion annually (^23,000-26,000 crore), while Imports are estimated at approximately USD 4-5 billion (^33,000-41,000 crore), reflecting demand for specialized and high-precision textile inputs that are not fully domestically substituted.

Within this segment, Hook and Loop Fasteners represent a niche but steadily growing category. Indias trade in hook and loop products is estimated at approximately USD 150-250 million (^1,200-2,000 crore) combined Import-Export Value, with imports accounting for a larger share due to demand for specialized grades, industrial applications and customized technical specifications. Exports, on the other hand, are gradually expanding, supported by growing acceptance of Indian- manufactured textile accessories in apparel, footwear and industrial supply chains.

Globally, trade flows in this category are shaped by fragmented manufacturing bases, with production concentrated in select Asian and European hubs, while consumption remains widely distributed across developed and emerging markets. This results in continuous cross-border movement of both raw inputs and finished fastening systems.

4. Business Overview

Sky Industries Limited, a pioneer in the manufacturing of Narrow Fabrics and Fastening Solutions, has established itself as a trusted name in the Textile Industry over the past Three decades. The Company specializes in Hook and Loop Fasteners, Webbings, Elastics, Straps and other value-added textile accessories, catering to diverse sectors such as Apparel, Footwear, Medical, Automotive, Sports and Industrial applications.

Leveraging its state-of-the-art manufacturing facilities, robust quality management systems and a customer centric approach, the Company has built enduring relationships across domestic and international markets. Its commitment to global standards, supported by certifications such as ISO, GRS, IATF, OEKO-TEX, BIS, ensures consistent delivery of high quality and reliable solutions.

With a strong focus on innovation, operational excellence and sustainable growth, Sky Industries continues to expand its product portfolio, explore new markets and adopt advanced technologies to enhance efficiency and product performance. As part of its forward-looking growth strategy, the Company is also setting up a new, future-ready manufacturing facility in Gujarat, designed to significantly strengthen production capabilities, improve scalability and support long-term expansion in both domestic and global markets.

Through strategic investments, process optimization and a skilled workforce, Sky Industries Limited remains well positioned to capitalize on emerging opportunities in the technical textiles and narrow fabric segments, while continuing its journey towards sustainable value creation for all stakeholders.

SEGMENT WISE PERFORMANCE

During FY 2025-26, the Company maintained steady operational momentum, supported by its focused presence in specialized textile accessory solutions and disciplined execution across its business operations. Despite a mixed demand environment in certain domestic markets, the Company ensured consistent production planning and efficient order fulfilment across its key product categories. The Hook and Loop Fasteners segment continued to remain the primary contributor to overall performance. This segment catered to a wide range of applications including footwear, apparel, medical support products, automotive interiors, sports goods and industrial usage. Sustained demand from established institutional customers helped maintain stable business volumes and ensured continuity in core operations throughout the year.

During the year, the Company placed increased emphasis on value added and application specific products, resulting in a gradual shift towards a more diversified and quality-driven product mix. Focus on customization, improved product specifications and enhanced end-use suitability further strengthened the Companys positioning in specialized market segments.

On the domestic front, the Company continued to strengthen operational efficiency through better Production Planning, Process Optimization and Improved Resource Utilization. These initiatives supported timely delivery, improved responsiveness to customer requirements and strengthened overall execution capabilities.

Export markets continued to remain an important part of the Companys business profile, with sustained demand from existing international customers and selective expansion into new regions. The Companys consistent quality standards and reliable supply performance supported its acceptance in global supply chains and reinforced long-standing customer relationships.

As part of its Strategic Expansion plan, the Company has acquired land in Gujarat and is in the process of establishing a new manufacturing facility. This upcoming facility is expected to significantly enhance production capacity, improve operational scalability and strengthen the Companys ability to efficiently meet growing demand from both Domestic and International Markets. This development is expected to act as a strong enabler for the Companys future growth trajectory.

Going forward, the Company remains focused on strengthening its presence in specialized fastening solutions through continued product innovation, operational excellence and expansion into higher-value applications within the Technical Textiles Segment.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

During the Financial Year 2025-26, the Companys workforce comprised 85 permanent employees and about 210 contractual employees, deployed across its Production Facilities and Administrative Offices. The Company continued to maintain harmonious and cordial employee relations throughout the year under review.

The Company recognizes that its people are the driving force behind the organizations sustained growth and long-term success. In line with this philosophy, the Company continues to make consistent and meaningful investments in human capital to support its strategic objectives and future expansion plans.

The Companys operations are guided by a dedicated and experienced leadership team that remains committed to strengthening the Companys market presence and operational excellence. During the year under review, there were no significant employee-related issues or disputes that remained unresolved, reflecting the Companys commitment to maintaining a positive and collaborative work environment. The Company is committed to fostering a culture of continuous learning, professional development, and employee empowerment. It actively supports employees in realizing their full potential by enhancing their operational, behavioral and functional competencies through structured engagement and development initiatives.

The Management and the Board of Directors would like to place on record their sincere appreciation for the dedication, commitment and valuable contributions of all employees, which continue to play a critical role in the Companys overall performance and progress.

The Company firmly believes that its ability to attract, nurture and retain talented individuals with the right skills, capabilities and values will remain a key determinant of its long-term success. The organization maintains strict adherence to its internal codes of conduct and ethical standards, while upholding a zero-tolerance policy towards any form of discrimination or unfair practices.

Regular performance dialogues, transparent communication and real-time feedback mechanisms remain integral to the Companys employee engagement framework, enabling continuous improvement, collaboration and alignment with organizational goals.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Sky Industries Limited places strong emphasis on maintaining a sound and effective internal control environment as an integral part of its governance framework. The Company has established structured internal control mechanisms supported by well-defined policies, procedures and operational guidelines that are aligned with the size, nature and complexity of its business operations.

The internal control framework is designed to support both the Companys current operational needs and its future growth strategy. Management undertakes periodic reviews of key policies, systems and processes to ensure their continued relevance, efficiency and compliance with evolving business requirements and regulatory expectations.

The Company has implemented a comprehensive control architecture that integrates systematic checks and balances along with reliable financial reporting practices. By maintaining strict adherence to applicable statutory and regulatory requirements, the Company ensures accuracy in the recording of transactions and the preparation of dependable financial and operational information.

Operational activities and Financial processes are regularly monitored by the management, internal audit function and the Audit Committee of the Board. These oversight mechanisms work collectively to evaluate and strengthen the effectiveness of internal financial controls and risk management processes. Sky Industries Limited remains committed to protecting its assets, minimizing operational risks, preventing fraud and ensuring the integrity and completeness of accounting records. The Company also focuses on the continuous enhancement of its internal control framework to address emerging risks, regulatory changes and evolving business dynamics.

Furthermore, the Company promotes employee awareness and accountability through periodic training and guidance on internal policies and compliance practices. This structured

approach reinforces a culture of transparency, responsibility and strong corporate governance across the organization.

Through these initiatives, the Company aims to ensure operational efficiency, maintain the reliability of financial reporting and strengthen stakeholder confidence in its management and control processes.

OUTLOOK

Sky Industries Limited remains optimistic about its long-term growth prospects and its ability to create sustainable value for stakeholders. The Companys outlook is supported by its strong manufacturing capabilities, continuous improvement initiatives and a focused approach toward innovation and product development.

The Company continues to invest in research and development initiatives aimed at strengthening its product portfolio and addressing evolving customer requirements across industries. Participation in global exhibitions and industry platforms enables the Company to stay aligned with emerging market trends, technological advancements and changing customer preferences while also expanding its international presence and customer base.

In line with its strategic priorities, the Company is progressively adopting advanced technologies, automation and digital solutions to enhance operational efficiency, improve process control and support sustainable manufacturing practices. The integration of modern machinery and technology- driven systems is expected to further enhance productivity, consistency and overall operational agility. The ongoing emphasis on process optimization and lean manufacturing practices is also expected to strengthen cost competitiveness and execution capabilities.

Looking ahead, the Company aims to build upon its leadership in the Narrow Woven Fabrics segment by maintaining strong performance in its existing product categories while also exploring opportunities for diversification into new and emerging application areas. The continued growth of the narrow woven fabrics market, coupled with increasing opportunities through collaborations, strategic partnerships and enhanced marketing initiatives, is expected to support the Companys expansion plans.

As part of its forward-looking growth strategy, the Company is also setting up a new, future-ready manufacturing facility in Gujarat, equipped with advanced automation systems and modern production technologies. This facility is expected to significantly enhance production capacity, improve scalability and enable higher efficiency and precision in manufacturing, thereby strengthening the Companys ability to serve both domestic and international markets more effectively.

With a clear strategic direction and a commitment to innovation, quality and customer satisfaction, the Company remains well positioned to capitalize on future opportunities and drive sustainable long-term growth.

DISCUSSION ON FINANCIAL PERFORMANCE WITH OPERATIONAL PERFORMANCE

Evaluating the long-term sustainability of the Technical Textile Industry requires a clear understanding of how operational effectiveness translates into financial outcomes. This linkage serves as a critical indicator of the sectors efficiency, competitive strength and ability to withstand external pressures.

Key Aspects:

1. Operational Efficiency and Profitability

The Company continued to focus on process optimization, resource utilization and cost management initiatives during the year. Improved operational efficiencies supported stable production performance and contributed towards maintaining profitability despite fluctuations in input costs and market conditions.

2. Product Mix and Revenue Growth

A continued emphasis on value-added and specialized products enabled the Company to strengthen its market positioning and improve product realizations. The diversified product portfolio and ability to cater to multiple end-use industries supported revenue generation and business resilience.

3. Capacity Expansion and Future Growth

Strategic investments in manufacturing infrastructure, including the development of a new manufacturing facility in Gujarat, are expected to enhance production capabilities and operational scalability. These initiatives are aimed at supporting future growth opportunities, improving efficiency and creating long-term value for stakeholders.

The summary of Operating Performance is given below:

(Rs. in Lakhs)

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

information outlines significant changes in important financial ratios (i.e., changes of % or more from the immediately prior Financial Year):