Spenta International Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

GLOBAL ECONOMY OVERVIEW

The global macro-economic scenario during the financial year 2025-26 was another period of subdued growth marked by high inflation and interest rates, geo-political tensions, concerns of recession and supply chain constraints. In spite of these challenges and risks, the global economic growth expectations can be viewed with cautious optimism. Global growth was projected at 3.0 percent for 2026 and 3.4 percent for 2027, broadly unchanged cumulatively from the April 2026.

In spite of global economic risks, emerging India is poised to be the fastest growing economy for the next few years and a preferred market for investments. India has gained a strong presence in various global diplomatic and trade forums and made progress towards achieving its goal to be a global manufacturing hub. As global supply chains seek to diversify, India stands to gain as a stable destination for manufacturing and business. The Indian economy, bolstered by strong macro fundamentals, retained its growth momentum primarily driven by government investments in infrastructure, invitation to global and local players to boost local production and manufacturing in India. Global and regional Gross Domestic Product (GDP) estimates show highly diverse growth trajectories for 2026, with India leading major economies at a 7.7% Real GDP growth rate.

India showed a remarkable performance, closing 2023 with a GDP of US$ 3.73 trillion. With a projected GDP growth rate of 6.3 percent, India is geared to become a US$ 5 trillion economy by 2027*.

According to RBIs latest State of the Economy report, The recovery in foreign direct investment (FDI) and foreign portfolio investment (FPI) in recent months reflects renewed confidence in the Indian economy, which continues to remain among the fastest-growing major economies despite global uncertainties.

Another key focus of the Government has been on sustainability and green growth. All these measures had a cascading effect on capacity utilization, and with the strong corporate balance sheet, private sector is at the threshold of resurgent investment cycle.

INDIAN ECONOMIC OVERVIEW

India is primarily a domestic demand-driven economy, with consumption and investments contributing to 70% of the economic activity. With Indias economy showing resilient growth, supported by strong domestic demand, policy reforms, and a healthy investment pipeline, several new projects and developments are underway across key sectors. According to World Bank, India must continue to prioritise lowering inequality while also putting growth-oriented policies into place to boost the economy.

The manufacturing sector currently contributes approximately 16-17% of Indias GDP. The sector remains central to Indias medium-term goal of raising manufacturing to 25% of GDP. This target is part of the "Make in India" initiative, which aims to boost domestic manufacturing and transform India into a global manufacturing hub.

Indian Textile Industry

The textile and apparel industry contributes 2.3% to our GDP, 13% to industrial production, and 12% to exports. India exported textile items worth US$ 34.4 billion in 2023-24, with apparel constituting 42% of the export basket, followed by raw materials/semi-finished materials at 34% and finished non-apparel goods at 30%. It is also the second largest employment generators, after agriculture, with over 45 million people employed directly, including many women and the rural population. As further evidence of the inclusive nature of this industry, nearly 80% of its capacity is spread across Micro, Small and Medium Enterprises (MSME) clusters in the country.

The sector also has perfect alignment with the Governments overall objectives of Make in India, Skill India, Womens Empowerment, Rural Youth Employment and inclusive growth. The industry produces about 22,000 million pieces of garments per year, with the market size projected to reach US$ 350 billion by 2030, from the current $174 billion.

Recently, the Ministry of Textiles reported a 7% increase in textile and apparel exports, including handicrafts, from April to December 2024, compared to the same period the previous year. In line with the growth roadmap, the Indian textile market currently ranks fifth globally, and the government is actively working to accelerate this growth to a rate of 15-20% over the next five years.

Union Budget Allocations for Ministry of Textiles

In the Union Budget 2026-27, the Ministry of Textiles has been allocated a total gross amount of Rs5,279.01 crore. This is structured primarily as Rs5,269.52 crore for revenue expenditure and Rs9.49 crore for capital expenditure. The allocation marks a continuous focus on scaling up domestic manufacturing, cluster modernization, and artisan welfare.

INDUSTRY STRUCTURE AND DEVELOPMENT

The socks industry forms an important segment of the textile and apparel sector, catering to diverse consumer needs across casual, formal, sports, medical, and fashion categories. Demand for socks is driven by increasing consumer awareness of comfort, hygiene, functionality, and evolving fashion trends. The industry has witnessed a gradual shift towards premium products featuring innovative materials, enhanced comfort, moisture management, and sustainable manufacturing practices.

The Indian socks market continues to grow, supported by rising disposable incomes, increasing urbanization, expansion of organized retail, and the rapid growth of e-commerce platforms. Export opportunities also remain encouraging, with Indian manufacturers leveraging their cost competitiveness, manufacturing capabilities, and adherence to international quality standards.

The industry faces challenges such as fluctuations in raw material prices, rising input costs, and global competition. However, increasing demand for premium, functional, and sustainable products, along with growing export opportunities, is expected to support the long-term growth of the industry.

OPPORTUNITIES AND THREATS

The textile and sock industries face a mix of opportunities and threats.

Key opportunities include growing global demand, particularly for sustainable and functional products, and the potential for technological advancements like AI-powered production and smart textiles.

However, threats include economic volatility, price competition, supply chain disruptions, and the need to address environmental concerns and waste management.

SEGMENT-WISE OR PRODUCT WISE PERFORMANCE

The Company has one segment activity namely socks, in line with the definition of "segment" as per Accounting Standard 17 issued by the Institute of Chartered Accountants of India. The performance of the Company is discussed separately in the Directors Report.

OUTLOOK

Coming year will be challenging with respect to pricing. Due to constant investment in latest machinery your company is able to target a vast audience, enhancing product quality, improving delivery schedules and giving superior customer service. Expectations are high, prospects are bright, but capitalizing on the new emerging opportunities will be a challenge for the socks manufacturing Companies.

The Companys Socks Division is optimistic of growth through continued network expansion and innovation. The Business will continue to focus on increasing the premium and fashion quotient of its offerings on the basis of a deep understanding of consumer preferences and delivering products of worldclass quality.

RISKS AND CONCERNS

The major challenge that the textile, apparel and hosiery industry faces is of ever-increasing production costs arising out of rising wages, power and other overheads.

The sock industry faces risks related to intense competition, changing market trends, and fluctuating demand due to weather and consumer behaviour. Additionally, concerns exist about material quality, potential skin irritation from synthetic fibres, and moisture control issues, particularly in cheaper socks. Environmental impact and the complexities of custom sock sourcing are also notable challenges.

In these circumstances, the ability to successfully navigate cost pressures would have a significant bearing on the overall performance of your Company. Diminishing purchasing power and demand due to the economic circumstances could result in fundamental shifts in consumer behaviours and adversely impact the market for textiles and apparel.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company maintains adequate and effective Internal Control Systems commensurate with its size and complexity. It believes that these systems provide, among other things, a reasonable assurance that transactions are executed with management authorization. It also ensures that they are recorded in all material respect to permit preparation of financial statements in conformity with established accounting principles along with the assets of the Company being adequately safeguarded against significant loss or misuse. An independent Internal Audit function is an important element of Companys Internal Control System. This is supplemented through an extensive internal audit program and periodic review by the management and the Audit Committee of Board.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the year under review, the total production of the socks was steady but margin was better due to decrease in input costs. The Profit before tax recorded during the year was Rs. 153.43 Lakhs as against Profit of Rs. 145.98 Lakhs in the previous financial year.

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

At Spenta, we are committed to sustainable work practices and a transparent work culture. The year gone by brought many challenges owing to Covid led disruptions which posed serious threats to the entire mankind. Amidst all these thought-provoking scenarios, we leveraged use of digital assets to connect with various stakeholders, including our employees. IT tools were optimally utilised for skills enhancement and training of employees when most of the business activities were standstill everywhere.

Maintaining balance between safety of employees and business continuity, Work from Home (WFH) facility was accorded to people immediately post lockdown. As the things started to ease, proactive measures for employees were undertaken like, workplace SOPs, awareness sessions, etc. Similarly, our factories resumed operations with robust hygiene norms and considering all the social-distancing regulations.

As always, people development continues to be an extremely important area in your Company. Anchoring developmental conversations at every level and ensuring that all managers are skilled in holding developmental conversations has been an area of focus. The industrial relations remained cordial throughout the year. The employees of the Company have extended a very productive cooperation in the efforts of the management to carry the Company to greater heights.

The Company had on rolls total of 79 permanent employees as on 31st March, 2026 excluding employees on contract basis and job workers.

RATIO ANALYSIS

Particulars	2025 2026	2024-2025	Change
Debtors Turnover Ratio	3.85	4.31	-0.46
Inventory Turnover Ratio	2.57	1.63	-0.6
Interest coverage Ratio	0.70	2.26	-1.56
Current Ratio	1.67	1.74	-0.07
Debt Equity Ratio	0.77	0.77	0
Operating Profit Margin Ratio (%)	0.89%	7.33%	-6.44%
Net Profit Margin Ratio (%)	-3.16%	2.55%	-5.71%
Return on Net worth (%)	-4.70%	4.17%	-8.87%

> Debtors Turnover Ratio: Slight Change due to slow collections and non-payment of debts by a major group.

> Inventory Turnover Ratio: Slight Change due to increase in unsold inventory and weaker customer demand.

> Interest Coverage Ratio: Significant change due to drop in operating profits.

> Current Ratio: No material Change is observed.

> Debt Equity Ratio: No material Change is observed.

> Operating Profit Margin: Significant Change due to increase in direct costs and decreased revenue.

> Net Profit Margin: Significant change due to increase in production costs and weak pricing to achieve sales targets.

> Return On Net Worth: Significant change due to fall in net profit, lower sales and rising operating costs.