Stovec Industries Ltd Management Discussions

GLOBAL ECONOMY

According to World Economic Outlook, global growth for the year has been resilient but is also projected to be moderate. Furthermore, Global GDP growth is projected to ease from 3.2% in 2025 to 2.9% in 2026 and then strengthen slightly to 3.1% in 2027.

Increased trade barriers and policy uncertainty contribute to a broad-based growth slowdown, mainly with regard to trade relations in most of the worlds economies. Tariffs affect demand and continue to weigh on trade volumes as announced tariffs come into full effect. This may further affect the estimated effective tariff rate, reducing the divergence with collected duties. The global economic outlook remains resilient but increasingly fragile, shaped by a complex interplay of moderating growth, persistent inflation risks, and heightened geopolitical uncertainty.

While baseline global growth is holding around 3%, the recent surge in oil prices—driven by Middle East tensions and potential supply disruptions—has reintroduced inflationary pressures just as central banks were nearing the end of their tightening cycles. At the same time, elevated tariff regimes and ongoing trade fragmentation continue to act as a structural drag on global trade efficiency and investment sentiment.

This has placed policymakers in a difficult position, with limited room to either stimulate growth or tighten further, reinforcing a "higher-for-longer" interest rate environment.

Consequently, the global economy is navigating a narrow path characterized by modest growth, sticky inflation, and heightened vulnerability to external shocks, with energy markets and geopolitical developments emerging as the key variables to watch.

While headline inflation may continue for some time, it is projected to stabilize by 2027 in almost all major economies.

It is anticipated that growth becomes firm later in 2026 as the impact of tariffs fades, financial conditions improve and lower inflation supports demand, with emerging Asian economies remaining the key contributors to global growth.

(Source: OECD, World Economic Outlook)

Commodity prices declined sharply in early April amid weakening global growth prospects. Commodity prices are currently also being driven by a mix of cyclical shocks and structural shifts, with energy markets leading the volatility. Crude oil has surged on geopolitical tensions and supply risks, while natural gas and downstream inputs are reflecting similar tightness, feeding into broader inflation.

Industrial commodities such as metals remain range-bound but sensitive to Chinas uneven recovery and global manufacturing demand, whereas agricultural prices are seeing intermittent spikes due to climate disruptions and supply chain constraints. In the long run, the commodity cycle is likely to remain structurally firm rather than sharply inflationary, supported by energy transition investments (increasing demand for copper, lithium, and critical minerals), underinvestment in traditional fossil fuel capacity, and ongoing geopolitical fragmentation that keeps supply chains less efficient.

As a result, while near-term volatility will persist, the longer-term outlook points to a higher floor for commodity prices, with periodic spikes driven by changes rather than a sustained supercycle.

INDIAN ECONOMY

According to CRISILs latest outlook, Indias economy continues to demonstrate resilience and strong growth momentum. India is expected to remain the fastest- growing major economy, with GDP growth at 7.1% in FY27, following a 7.6% growth in FY26. This is mainly supported by robust demand both in the domestic and international markets. Moreover, improved consumer consumption, awareness, and positive investment trends enhance the growth inclination.

Despite global headwinds, including trade uncertainties, private consumption and government capex remain important drivers for sustained momentum. CRISIL also notes that inflationary pressures have eased and normal monsoon conditions are expected to bolster demand, further supporting economic activity across sectors.

KPMGs analysis similarly underscores steady growth prospects, underpinned by strong domestic demand, infrastructure development, and supportive government initiatives, policies and regulations. Continued declines in inflation and a shrinking fiscal deficit reflect a positive macroeconomic development, while noting structural reforms aimed at enhancing competitiveness and attracting investment. The report further states that "Indias strong economic performance presents an opportunity for the country to implement essential structural reforms to realise the ambition of becoming an advanced economy by 2047."

Policy measures such as streamlined business approvals and initiatives to boost economy are viewed as reinforcing economic stability and investor confidence. These combined trends paint a robust macroeconomic picture, balancing resilient growth with reforms that support long-term development. (Source: CRISIL, KPMG)

TEXTILE INDUSTRY

The textile industry is one of the oldest and most renowned industries of India. It is concerned with designing, production and distribution of cloth with the use of natural raw materials and the sector has made significant contributions in terms of forex earnings and employment opportunities.

Dominated by small and medium enterprises (SMEs), the Indian economys dependence on the textile manufacturing industries is noteworthy. The evolution of fabrics like nylon, satin, chiffon, and more has created a wider scope in market of textile industries. This has also led to the discovery of new sources of natural fiber.

With the advent of modern technologies, better transportation and communication, It has become simpler to share and trade local skills and textile art with other countries. Additionally, the growth of e-retail and consumer preferences are shortening fashion cycles and Increasing demand for rapid design- to-market execution. Hybrid production models combining rotary and digital textile printing are gaining traction, creating opportunities for technology providers offering scalable and flexible printing solutions.

PERFORMANCE IN 2025

The Union Budget 2025-26 has allocated 5,272 crore (US$ 607 million) to the Ministry of Textiles, marking a 19% increase over the previous years allocation. The budget also announced the launch of a five-year Cotton Mission aimed at improving cotton productivity, reducing import dependence, and strengthening the competitiveness of MSME-driven textile manufacturing.

Union Minister of Commerce and Industry, Piyush Goyal, highlighted that the India-United Kingdom Free Trade Agreement is expected to create significant growth opportunities for the textiles, leather, and footwear sectors, strengthening their competitiveness and expanding their presence in the UK market.

India is the worlds largest producer of cotton. In FY25, the production of cotton in India stood at 29.42 million bales. A report from India Brand Equity Foundation (IBEF) states that Indias domestic market is valued at US$ 225 billion in 2025 and is growing at a brisk pace of 10-12% CAGR. Rising incomes, e-commerce penetration, and evolving consumer preferences are expected to push the market size to US$ 350 billion by 2030. This expansion will be further supported by Indias rising per capita income, which is projected to increase from US$ 1,379 in FY25 to US$ 4,000 by FY30.

The IBEF report also mentions that India is actively diversifying its textile export destinations by strengthening trade engagement with regions such as the European Union and other emerging markets. This strategy aims to mitigate global trade uncertainties, including recent tariff measures imposed by the United States.

In a significant development, the India- United Kingdom Free Trade Agreement, signed on July 24, 2025, provides dutyfree access for nearly 99% of Indias textile exports to the UK, effectively eliminating the 10-12% tariff disadvantage previously faced against competing nations. The agreement is expected to significantly expand Indias textile exports to the UK, currently valued at US$ 1.79 billion, with potential to grow to approximately US$ 5 billion. It is also anticipated to support growth in major textile hubs such as Tirupur, encourage joint ventures, strengthen traditional manufacturing clusters, and contribute to the broader objective of doubling bilateral trade between India and the UK to US$ 112 billion by 2030.

Indias home textile sector reflects a rich legacy of craftsmanship and regional specialisation, with different parts of the country known for distinctive textile techniques and designs. Gujarat is celebrated for its vibrant and intricate embroidery traditions, while Kashmir is renowned for its premium woollen shawls and handcrafted rugs. This regional diversity highlights Indias deep-rooted heritage and long-standing expertise in textile production.

(Source: Scribd)

GOVERNMENT INITIATIVES

The Government of India has undertaken several policy measures to enhance the competitiveness and growth potential of the textile industry. The administration led by Narendra Modi has focused on removing key operational barriers and introducing supportive reforms across the sector. These include initiatives related to quality standards such as Quality Control Orders (QCO), enhanced export incentives through schemes like RoDTEP (Remission of Duties and Taxes on Exported Products) and RoSCTL (Rebate of State and Central Taxes and Levies), temporary reductions in certain import duties, and efforts to correct the inverted duty structure.

Collectively, these measures aim to improve cost competitiveness, streamline industry operations, and support the expansion of Indias textile manufacturing and export capabilities.

Some initiatives led by the Government of India are as below: -

Waste Management in Printing:

The Indian government provides support for setting up Effluent Treatment Plants (ETP) and using sustainable, energy-efficient technologies.

PM MITRA Parks:

Integrated textile parks are being developed by the Government of India in seven states namely Tamil Nadu, Telangana, Gujarat, Karnataka, Madhya Pradesh, Uttar Pradesh, and Maharashtra, etc. to house digital textile printing units for faster sampling and flexible water-efficient production.

Production Linked Incentive (PLI) Scheme:

The PLI scheme for Textiles Is mainly designed to promote large-scale Investment and modernization in manufacturing infrastructure. It also facilitates the Integration of high-speed and energy-efficient digital printers.

National Technical Textiles Mission:

This Initiative focuses on upgrading printing units with advanced printing machines and water-frugal technology.

Indias textile industry is at a pivotal juncture, where strong policy support, rapid digital innovation, and an increasing focus on sustainability are converging to reshape textile production and exports. This alignment presents a significant opportunity to transform printing processes, enhance efficiency, and strengthen global competitiveness.

GROWTH DRIVERS

Indias textile industry continues to be a key contributor to manufacturing, exports, and employment, supported by multiple structural and demand- led growth drivers. Strong domestic consumption, driven by rising disposable incomes, urbanization and changing lifestyle preferences, has increased demand for apparel, home textiles, and value-added products.

Moreover, the rapid growth of Indias e-retail ecosystem has boosted demand across mass, mid-premium, and niche segments, including ethnic wear and home textiles. Globally e-commerce has accelerated demand for faster production cycles, shorter runs, customizations, and trend-responsive manufacturing, benefitting suppliers capable of agile and digital printing solutions.

Impact of E-Retail on Textile Sales

Aspect	Global Textile Sales - Impact of E-Retail	Domestic Textile Sales (India) - Impact of E-Retail
Market Expansion	Expansion of global e-commerce platforms increasing textile and apparel demand	Rapid growth of online retail driving apparel and home textile consumption
Production Cycles	Shift towards shorter production cycles and smaller batch sizes	Increased demand for faster turnaround times and flexible manufacturing
Customization	Growing need for customization and rapid design- to-market execution	Higher focus on visual differentiation and design innovation
Inventory Management	Reduced inventory risk for brands through online demand testing	Improved demand forecasting through online sales data
Technology Adoption	Increased adoption of digital and flexible printing technologies	Greater emphasis on speed, responsiveness, and technology-driven processes
Competitive Landscape	Faster response required to global fashion trends	Intensified competition across urban and semi-urban markets

1. Asia-Pacific as a Global Textile Manufacturing Hub

The Asia-Pacific region continues to dominate global textile production, driven by export demand, expanding manufacturing capacity, and supply-chain diversification. This sustains demand for high-volume rotary printing solutions while simultaneously creating opportunities for digital printing to support flexible and short-run production.

2. Indias strengthening Manufacturing Capabilities

Indias integrated textile value chain, availability of raw materials, skilled workforce, and government initiative such as PLI and PM MITRA parks are accelerating investments in modern printing technologies. This environment supports both rotary printing for scale efficiency and digital printing for value-added and customized applications.

3. Rising Consumer Awareness and Demand for Sustainability

Increasing consumer awareness around sustainability, traceability, and responsible sourcing is driving demand for low-water and low-waste printing processes and solutions. Digital textile printing, along with optimized rotary technologies, is well-positioned to address these expectations through improved efficiency and reduced environmental impact.

KEY INDUSTRY TRENDS

1. Rapid Growth in Digital Printing & Customization

The printing industry is gradually shifting from traditional methods to digital and on-demand printing, driven by demand for short runs, fast turnaround times, and cost efficiencies. Digital printing allows for easier customization and personalization of products — a major competitive advantage in both consumer and business markets.

2. Sustainability and Eco-Friendly Practices

Environmental consciousness is shaping market expectations. Printers are adopting eco-friendly inks, energy-efficient equipment, reduced waste technologies, and recyclable materials to meet consumer preferences and regulatory requirements. This aligns with broader ESG priorities and is becoming a key differentiator.

3. E-commerce Driven Demand for Packaging & Print Solutions

The rise of e-commerce has boosted the need for innovative, durable, and visually appealing packaging printing — critical for branding and customer experience. Customized packaging with QR codes and security features is increasingly important.

4. Technology Integration (AI, Hybrid Systems & Automation)

Advances such as AI in print workflows, predictive quality control, cloud printing technologies, and hybrid printing systems are improving productivity and consistency. These technologies help optimize operations and reduce manual interventions.

5. Expansion of Digital Textile Printing

In the textile and apparel segment, digital fabric printing is showing strong growth as part of the broader digital transformation, supported by e-commerce demand, sustainable practices, and faster production cycles.

6. Localized Production & Market Adaptation

Brands are increasingly adopting localized and flexible printing models that reduce lead times and better respond to regional demand, particularly in Asia-Pacific markets.

OPPORTUNITIES FOR ROTARY AND DIGITAL TEXTILE PRINTING

The global textile industry is characterised by strong growth opportunities for both rotary and digital textile printing. Digital textile printing is witnessing accelerated adoption owing to its ability to support shorter production runs, faster design- to-market cycles, and customization. Increasing focus on sustainability, reduced water consumption, and lower waste generation further strengthens the case for digital technologies.

The printing industry has undergone a paradigm shift with the integration of digital printing technologies into mainstream operations. Innovations such as inkjet and laser printing now enable high-resolution outputs characterized by vibrant colours and durable finishes. Consequently, digital printing is gradually supplanting conventional printing across various sectors, including commercial printing, packaging, labels, and promotional materials.

The markets growth is further propelled by the increasing adoption of digital printing within the textile and apparel industries, that highly value customization and short production runs.

The digital printing services market is projected to experience significant growth, fueled by continuous technological advancements and shifting consumer preferences. A key trend involves the increasing integration of digital printing with automation, artificial intelligence, and the Internet of Things (IoT). This integration is set to boost operational efficiency, minimize waste, and facilitate real-time quality control.

Such innovations are anticipated to decrease production costs and enable the creation of more intricate, high-quality outputs, thereby broadening the range of applications for digital printing.

Similarly, rotary printing remains relevant for large-scale and high-speed production; offering consistency, cost-efficiency, and scalability for long production runs. In emerging markets, investments in textile manufacturing capacity and export-oriented production are sustaining demand, thereby creating a peak need for reliable rotary printing solutions.

Brands and organisations at large respond to evolving customer preferences and e-commerce-driven demand, hybrid production models that blend rotary and digital printing. This helps in gaining traction, creating opportunities for solution providers offering a comprehensive product portfolio.

KEY OPPORTUNITY DRIVERS

? Growing textile manufacturing capacity across the globe

? A paradigm shift towards quicker turnaround and customised production

? Expansion of fashion, home textile, and technical textile segments

? Emergence of hybrid rotary-digital production models

? Rising demand for technology upgrades and process optimization

CHALLENGES

1. Volatility in Global and Asia- Pacific Market Conditions

The Asia-Pacific region, while being a key growth market for textile and printing technologies, continues to face demand fluctuations driven by global economic uncertainty, inflationary pressures, and changing trade dynamics. Variations in customer investment cycles and export-oriented manufacturing activity may impact order visibility and capital expenditure decisions.

2. Rapid Technological Evolution and Competitive Intensity

The industry is experiencing accelerated innovation in digital, sustainable, and automated printing solutions. Companies must continuously invest in technology upgrades to remain competitive, while also managing pricing pressures from regional and low- cost players, particularly in Asia- Pacific markets.

3. Supply Chain Disruptions and Input Cost Pressures

Ongoing geopolitical developments, logistics constraints, and fluctuations in raw material and energy costs present challenges in maintaining stable supply chains. These factors may affect production timelines, cost structures, and margins, especially for companies operating across multiple international markets.

RISKS AND CONCERNS

1. Technological Disruption and Rapid Change

The pace of technological innovation such as digital printing, automation, and AI-enabled workflows continues to accelerate. Companies may struggle to keep up with investments in the latest equipment and software, risking obsolescence or loss of competitive advantage.

2. Rising Input Costs

Fluctuating prices of raw materials (paper, inks, chemicals, textiles), and increases in energy and transportation costs can compress margins, especially when customers resist price increases.

3. Supply Chain Vulnerabilities

Global disruptions such as geopolitical tensions, port delays, or shortages of critical components can affect production timelines and inventory availability, leading to service delays or higher costs.

4. Talent Shortage and Skill Gaps

Advanced digital and hybrid systems require skilled operators and technicians. A shortage of trained personnel or slow upskilling can impact productivity and quality.

5. Sustainability and Regulatory Pressure

Increasing focus on environmental impact and regulatory compliance (e.g. waste management, emissions, chemical restrictions) requires ongoing investment. Failing to meet evolving sustainability standards may harm reputation and market access.

6. Competitive Pricing and Market Fragmentation

The industry faces intense price competition from regional players and low-cost providers, potentially eroding long-term contracts and profitability.

7. Changing Customer Expectations

Customers now expect faster turnaround times, highly customized products, and integrated digital-to-physical solutions. Failure to meet these evolving demands can result in client attrition.

8. E-commerce and Digital Alternatives

While e-commerce drives demand for packaging and labels, digital alternatives in document management and marketing (e.g., digital ads replacing print collateral) pose substitution risk.

9. Cybersecurity and Data Risks

As workflows become more digitized and connected, cybersecurity threats (data breaches, ransomware) pose operational and reputational risks.

COMPANY OVERVIEW

A global leader in industrial and textile printing technologies, Stovec Industries is a part of the esteemed SPGPrints Group based in Boxmeer, Netherlands. The company is an established name globally. Boasting of an international network of competence centers and a strong distribution foothold, the company develops, manufactures, and supplies printing systems, machinery, consumables, and printing solutions used in textile and label production as well as other industrial printing applications.

Stovec is a holistic printing solutions provider that offers a product portfolio covering capital & consumables range of products for the textile printing industry. Stovecs excellence in engineering and innovation has made us a key international player in the textile printing industry.

Stovecs ability to stay ahead of the curve, while mastering the production of rotary printing machines and screens, digital printing equipment, inks, engraving systems, and prepress technology facilitates the company to serve customers around the world with advanced, high-performance printing technology and support.

The company has been a pioneer in printing innovations, including launching the first digital textile printer and providing sustainable, efficient solutions for large-scale production environments.

FINANCIAL PERFORMANCE

Changes in financial ratios over last year

Financial ratios	2025	2024	Change(%)	Remarks
Debtor Turnover (in times)	5.59	7.06	-20.82%	--
Inventory Turnover (in times)	2.23	2.68	-16.79%	--
Current Ratio (in times)	3.86	3.49	10.60%	--
Operating Profit Margin (%)	3.77%	6.66%	-43.45%	Weak demand leading to lower sales and profitability, additional provision for gratuity and leave encashment as per the New Labour Code, 2025.
Net Profit Margin (%)	3.48%	5.53%	-36.98%	Weak demand leading to lower sales and profitability, additional provision for gratuity and leave encashment as per the New Labour Code, 2025.
Return on Net Worth (%)	5.37%	9.78%	-45.06%	Downward movement resulting from lower profitability compared to last year and a lower net worth position.
Creditor Turnover Ratio (in times)	8.19	5.64	45.21%	A slowdown in business operations resulted in lower purchases and a corresponding decrease in trade payables compared to the prior year.
Net Capital Turnover Ratio (in times)	2.05	2.72	-24.63%	Reduction driven by higher working capital (inventory) and lower revenue from operations.
Return on Investment (%)	6.48%	6.25%	3.68%	--

Segment-wise performance

The Companys segment-wise revenue performances are as follows:

Particulars	2025	2024
Textile consumables & machinery	1,888.78	2,230.50
Graphic products	92.33	115.20

MARKET ENGAGEMENT THROUGH INDUSTRY EVENTS AND EXHIBITIONS

Stovec actively participated in exhibitions focused on the textile and label markets, showcasing the latest advancements and innovations within the industry. These platforms provided valuable opportunities for networking, knowledge exchange, and strengthening of longterm relationships with customers, industry veterans, start-ups, experts, and investors.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

For proper financial management and circumventing fraud, the Company maintains an effective internal control system at par with its size and operations. Internal Control Systems, comprising policies and procedures, are designed to ensure orderly and efficient conduct of business, safeguard the assets of the business, prevent and detect fraud, ensure the completeness and accuracy of accounting records, and timely preparation of financial information.

Furthermore, the system is reviewed and updated continually based on the recommendations made by the Statutory Auditors, Internal Auditors, and the I ndependent Audit Committee of the Board of Directors, of the Company.

HUMAN RESOURCES & INTERNAL MANAGEMENT

Human resources continue to be a critical pillar supporting Stovecs operational efficiency, innovation capability, and long-term growth. During the year, the Company focused on strengthening its workforce through skill development, cross-functional collaboration, and continuous learning, particularly in areas related to digital technologies, process optimization, and customer-centric solutions. Given the evolving nature of printing and textile technologies, emphasis was placed on upskilling employees to adapt to new systems, automation, and advanced production techniques.

Stovec fosters a collaborative and inclusive work environment that encourages knowledge sharing, accountability, and continuous improvement across functions. Internal processes were further streamlined to enhance coordination between technical, commercial, and support teams, enabling faster decision-making and improved responsiveness to customer requirements.

The Company also prioritizes employee engagement, workplace safety, and adherence to ethical and compliance standards. Management believes that sustained investment in people, systems, and internal governance will remain essential to maintaining operational excellence and supporting Stovecs strategic objectives in a competitive and rapidly evolving industry.

CAUTIONARY STATEMENT

The information and opinion expressed in this report as well as the Boards Report describing the Companys objectives, projections, estimates, and expectations may be forward looking statements within the meaning of applicable laws and regulations.

Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the spend by the Government in agriculture and infrastructure, significant changes in political and economic environment in India, volatility in the prices of major raw materials and its availability, taxation laws, exchange rate fluctuations, interest, and other costs.