Sreeleathers Ltd Management Discussions

Your Directors have pleasure in presenting the management discussion and analysis report for the year ended on March 31,2026

(A) INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian leather and footwear industry is a critical pillar of national manufacturing, foreign exchange earnings, and industrial employment.

I Global Production Base. India firmly maintains its position as the second-largest producer of footwear and leather garments globally, backed by a skilled operational workforce of approximately 4.42 million people.

Regulatory and Fiscal Support. Under the Indian Footwear and Leather Development Programme (IFLDP), structural capital and environmental subsidies have stabilized the domestic supply chain. Furthermore, policy continuity remains strong as the central government transitions towards a New Focus Product Scheme for the Footwear and Leather Sectors, expanding the systemic infrastructure laid out by the Ministry of Commerce and Industry.

Raw Material Infrastructure. The country possesses structural advantages in raw material availability, commanding 11% of the global goat and sheep population alongside 33% of the worlds cattle and buffalo population. This provides a deep, localized reservoir of hides and skins for industrial tanning operations.

(B) OPPORTUNITIES, THREATS AND CONCERNS

The Company continues to benefit from increasing consumer preference for branded products, growth in e- commerce and expansion into newer markets. Flowever, intense competition, price pressures, evolving consumer preferences and supply chain disruptions remain key challenges.

(C) OUTLOOK

The outlook for the footwear and accessories industry remains positive. Growing consumer demand, increasing penetration of organized retail and continued economic growth are expected to support the long-term prospects of the industry.

The Company remains focused on strengthening its market presence through customer-centric initiatives, product diversification, operational efficiency and improved shopping experience. With its strong brand recognition and extensive retail network, the Company is confident of sustaining growth and creating long-term value for its stakeholders.

(D) ON PREMIUMISATION

The industry believes the Indian footwear market is moving toward premiumisation, and that the market is ripe for it. Their reasoning follows a simple logic: the Indian middle class is growing, disposable incomes are rising, and customers will naturally trade up. We respectfully disagree.

We believe value is not just a function of what a customer can afford. Its inherent to how a large part of India shops, a cultural instinct that runs deeper than income alone. Thats why we remain committed to our value-focused strategy, and we believe it will keep paying dividends well into the future.

(E) DECENTRALIZED ASSORTMENT PLANNING

Some players have moved to decentralized assortment planning, and we believe it to be prudent. At the category level, we see meaningfully different demand patterns from region to region, which reinforces a decision we made from the very inception of Sreeleathers: to decentralize assortment planning. Rather than forcing a single national assortment across every store, we plan inventory locally, so that whats on our shelves actually reflects what a given region wants to buy.

(F) OUR STANCE ON DISCOUNTING

Sreeleathers does not sell at a discount.

Instead, we hold consistent prices on the same SKU throughout the year. That gives customers real confidence: whenever they walk into a Sreeleathers store, they know theyre getting our best price, not a price timed around a sale calendar. It also reduces cyclicality in our business. Customers dont wait for season-end sales to visit us, which improves our conversion ratios and makes inventory planning meaningfully easier. As supply-side constraints add more pressure to drive sales when inventory is available, we find it imperative to keep discounting out of our stores.

(G) MATERIAL SCIENCE AND PRODUCT INNOVATION

It is clear that consumer preferences are shifting more and more towards athletic footwear. What has allowed us to serve this need is venturing well beyond plain EVA midsoles — actively promoting ETPU midsoles, and experimenting with supercritical foams and carbon plate construction — so that every kind of customer, gets exactly what they came for without compromising on value.

(H) TECHNOLOGY, AI, AND OUR NEW ERP

Part of serving our customers well means being obsessive about how quickly we adopt new technology. We have implemented GenAI across the business, from our IT team using it in in-house software development, to our design team using it to build low-cost preliminary prototypes and wireframes.

Were especially proud of successfully integrating a world-class ERP, Microsoft Dynamics, into our backend. It gives us a system built to sustain the growth were planning for, with full statutory and operational compliance built in from the ground up.

(I) DESIGN DEPTH

We currently run roughly 5,500 active designs, translating to close to 25,000 SKUs across our stores, compared with contemporaries who operate with 1,000 designs or fewer. Managing that scale of variety is nearly impossible without being a technology-enabled company. Its also one of the clearest ways we stay competitive.

Depth of that kind only compounds when it is matched by discipline. Because we plan assortments region by region and hold prices steady through the year, a wider catalogue does not translate into slower stock. It is the reason our inventory turned 22.11 times in FY 2025-26 while we carried the broadest range in our history.

(J) CORPORATE VALUES

Hardly a few companies can claim the position that our company has won for itself in the hearts of millions of consumers, with its corporate values of Excellence, Quality and Trust.

Excellence we believe in achieving excellence in all we do. Be it crafting world-class quality products, implementing best industry practices or delivering delightful service experience, the quest for excellence is integral to the Company.

Your Company has always been recognized for its high quality product offerings. The testimony to success is its loyal consumer base spanning domestic markets.

Having stayed relevant for over decades, the trust bestowed on company by our consumers has enabled us to become an iconic name. Being one of Indias most trusted name, we believe that conducting business in a fair, transparent and ethical manner is pivotal in building strong relationships.

Legacy Having enjoyed the patronage of millions of consumers, we have been consistently delivering world class quality products and services to its consumers since the past decades. A name that has earned the trust and respect of its consumers, employees, business partners and all relevant stakeholders throughout its journey is a manifestation of the organizational values of Excellence, Quality & Trust. Having created world-class pioneering innovations, Company have not just stayed relevant but has consistently commanded a leadership position. Over the decades, company have spread its wings from a single-product focus into a multiproduct business comprising Footwear, Accessories (Belt, Wallet & Bags), etc.

(K) INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has engaged the services of an independent Chartered Accountant Firm to carry out the internal audit and ensure that recording and reporting are adequate and proper, the internal controls exist in the system and that sufficient measures are taken to update the internal control system. The system also ensures that all transactions are appropriately authorized, recorded and reported.

Exercises for safe-guarding assets and protection against unauthorized use are undertaken from time to time.

All these measures are continuously reviewed by the management and as and when necessary improvements are effected.

(L) RISKS AND CONCERNS AND CONTINGENT LIABILITIES

The Indian retail landscape continues to offer significant growth opportunities, supported by favourable demographics, expanding organised retail, and growing digital adoption. Sreeleathers is well positioned to capitalise on these opportunities through its trusted brand, retail network, diverse product portfolio, and unwavering commitment to quality and affordability.

(L) RISKS AND CONCERNS AND CONTINGENT LIABILITIES continued

While the business environment presents opportunities for growth, it also brings emerging challenges. We continuously navigate inflationary pressures and supply chain uncertainties — most notably our reliance on petroleum derivative products, primarily used in our shoe soles, which exposes us to commodity price volatility. That exposure was visible this year: gross margin eased 74 bps to 23.16% even as revenue grew 12.40%. Furthermore, changing consumer preferences and the rapid emergence of tech-agile competitors have intensified market dynamics, setting new industry standards for speed and convenience.

We view the pressure from tech-forward competitors not as a threat, but as a catalyst to modernize. It presents a clear opportunity to leverage our physical footprint and build sophisticated capabilities around our existing supply chain. By investing in ship-from-store operations, Buy-Online-Return-In-Store (BORIS) frameworks, and real-time inventory visibility, we are transitioning Sreeleathers into a truly omnichannel business.

The Company has established adequate systems and processes for identifying, monitoring and managing various business risks. Changes in economic conditions, consumer preferences, market competition, input costs and regulatory requirements may have an impact on business performance. The management continuously reviews these risks and undertakes suitable measures to mitigate their impact.

On the legal front, the year closed cleanly. The two matters that made up our contingent liabilities — a Central Excise appeal and an Income-tax appeal, together carrying an exposure of ¥1.20 Cr — were both decided in the Companys favour. Contingent liabilities accordingly stand at nil as at 31 March 2026, against ¥1.20 Cr a year earlier. No provision is required, and the Company carries no unresolved claims of a material nature into FY 2026-27. The contingent liabilities of the Company as on March 31, 2026 are disclosed in the Notes to the Financial Statements.

. j. Contingent liabilities at year end, from ¥1.20 Cr —the Central Excise appeal and the Income-tax appeal were both resolved ^ in the Companys favour.

(M) OUTLOOK FOR FY 2026-27

The Company expects demand in the value segment to hold. GST 2.0 has lowered the tax on footwear priced up to ¥2,500 a pair to 5%, the band Sreeleathers has sold in since inception, and the continuing shift of trade from unorganised to organised retail favours a network of the kind we operate. Growth in the year ahead is expected to come from new stores in Central and North India, from deepening the e-commerce channel, and from the warehousing capacity now being added.

(N) CORPORATE SOCIAL RESPONSIBILITY

The management of your company is of the opinion that the companys contribution to the society should be the top priority of the company. Flence, the company has contributed funds in accordance with Schedule VII of the Companies Act, 2013 and the Companys CSR policy. The details have been provided in the Annual Report on CSR Activities as attached to the Boards Report. Also, the Corporate Social Responsibility committee formed by the Board is continuously looking forward for projects in which your company can make a contribution.

(O) FORWARD-LOOKING STATEMENT

The statements made in this Management Discussion and Analysis Report regarding the Companys objectives, projections, estimates, expectations, or predictions may constitute forward-looking statements as defined by applicable securities laws and regulations. Its important to note that actual results could vary significantly from those expressed or implied in these statements. Several crucial factors could impact the Companys operations, including the availability and pricing of raw materials, cyclical demand and pricing trends in its primary markets, alterations in government regulations and tax regimes, economic developments in India and other related factors.

(P) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial performance during the year under reference is satisfactory in terms of sales. Revenue from operations grew 12.40% to Rs. 24,840.43 lakh, and the operating profit before exceptional item and tax rose to Rs. 3,826.62 lakh from Rs. 3,190.10 lakh. Profit before tax was higher year on year; substantially all of that increase, however, arose in other income — mutual fund gains and interest — and other income was not arrived at on the same basis in the prior year. Revenue growth, gross margin and the operating ratios are therefore the measures on which the Companys trading performance should be read. A five-year view of the financial performance appears on page 09.

(Q) DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

In compliance with the requirement of the Listing Regulations, the key financial ratios of the Company along with explanation for significant changes (i.e., for change of 25% or more as compared to the immediately previous financial year will be termed as significant changes), has been provided hereunder:

SL. No. Particulars	2025-26	2024-25	Changes in Percentage
i Debtors to Sales (in days)	0.67	0.68	(1.68)%
ii Inventory to Turnover Ratio (in times)	22.11	15.48	42.83% *
iii Interest Coverage Ratio	-	-	**
iv Current Ratio	1.12	1.54	(27.52)%*
v Debt Equity Ratio	0.00	0.01	(19.75)%
vi Operating Profit Margin (%)	15.40	14.70	4.81%
vii Net Profit Margin (%)	11.57	10.21	13.32%
viii Return on Net worth (%)	7.91	9.84	(19.65)%

# due to better inventory management • due to better capital management • ** Company does not have any loan. • Note: Leases has been considered as debts.

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

As on March 31, 2026, the company had 87 employees at its showroom, godown and administrative office.

The company recognizes the importance of human value and ensures that proper encouragement both moral and financial is extended to employees to motivate them. The company takes initiative for training the employees at regular interval. The company enjoyed excellent relationship with workers and staff during the last year.