Subhash Silk Mills Ltd Management Discussions

Indian Economic & Textile Industry overview The Indian economy has remained resilient amidst global uncertainties, maintaining its position as one of the fastest-growing major economies. Growth during FY 2024-25 was driven by robust domestic consumption, continued infrastructure development, and strong performance across key sectors. While global headwinds such as geopolitical tensions, inflationary pressures, and supply chain disruptions posed challenges, the overall outlook remains positive, supported by proactive policy measures and structural reforms. The Indian textile and apparel industry is one of the oldest and most important sectors of the Indian economy, contributing significantly to employment, export earnings, and industrial output. The industry contributes around 2% to Indias GDP and about 10% to the countrys total exports. During the year, the textile sector witnessed gradual recovery driven by improved domestic demand and growing export opportunities. However, challenges such as high raw material costs, volatility in cotton prices, and global economic slowdown impacted margins and order flows in certain segments.

Government initiatives such as the Production Linked Incentive (PLI) Scheme, PM MITRA Mega Textile Parks, and enhanced focus on sustainability and value-added products are expected to provide long-term growth momentum to the sector. With increasing global demand for sustainable and ethically sourced textiles, Indian manufacturers are well-positioned to leverage their competitive advantages in raw material availability, skilled labor, and integrated supply chains.

Opportunities & Threats

The Indian textile industry presents significant growth opportunities driven by increasing global demand for sustainable and value-added textile products. With shifting global supply chains and many international buyers seeking alternatives to traditional sourcing hubs, India is well-positioned to benefit due to its strong raw material base, skilled workforce, and integrated manufacturing capabilities. The Government of India continues to support the sector through various initiatives such as the Production Linked Incentive (PLI) Scheme, RoDTEP benefits, and the PM MITRA Mega Textile Parks, which aim to enhance infrastructure, boost exports, and attract investment. Additionally, rising domestic consumption, fueled by urbanization, increasing disposable income, and a growing fashion-conscious population, provides a strong demand base within the country. The industry is also witnessing growing interest in eco-friendly and organic textiles, aligning with global sustainability trends, which further enhances the export potential of Indian textile manufacturers.

However, the sector also faces several threats that may impact its growth trajectory. Volatility in raw material prices, particularly cotton and synthetic fibers, continues to be a significant concern, affecting cost structures and profitability. Global economic uncertainties and recessionary trends in key export markets may lead to subdued demand and order cancellations. Additionally, rising input costs, including energy and labor, pose challenges to maintaining competitive pricing, especially for small and medium enterprises. The industry also faces stiff competition from low-cost manufacturing countries such as Bangladesh, Vietnam, and China, which continue to offer competitive pricing and faster turnaround times. Moreover, changing international trade regulations, tariffs, and compliance norms in major export markets can create additional operational and financial pressures.

Financial Performance (Amount in Hundreds) - The Companys total income decreased to Rs. 2,44,698.85/- from Rs. 2,87,775.69/- in the previous year. The Company incurred a net loss after tax of Rs. 22,05,583/- in the previous financial year. Despite the challenges, the management remains optimistic about the future outlook, backed by strategic initiatives undertaken to improve efficiency, strengthen market presence, and streamline operations. Your Directors are confident that the performance will improve and the financial results will be more encouraging in the current financial year.

Risks & Concerns - The Company operates in a dynamic and competitive environment and remains exposed to several inherent risks that may affect its operational and financial performance. Volatility in raw material prices, particularly cotton and synthetic fibers, can influence cost structures. Labor-related challenges and increasing regulatory and environmental compliance obligations may also impact productivity and operational efficiency. The global textile market remains highly competitive, and failure to keep pace with technological advancements may hinder competitiveness. Additionally, foreign exchange fluctuations, supply chain disruptions, and evolving consumer preferences especially with a shift toward sustainability and digital engagement pose ongoing challenges. The Company also faces credit risk arising from delayed payments or defaults, which could affect cash flows and working capital.

Internal Control Systems - The Company has established a robust internal control system designed to ensure the accuracy and reliability of financial reporting, safeguard assets, and promote operational efficiency. These controls are aligned with the nature and scale of the textile business and are regularly reviewed and updated to address changing risks and compliance requirements. The internal audit function, conducted by an independent team, evaluates the adequacy and effectiveness of key controls and reports its findings to the Audit Committee. All significant observations are reviewed, and necessary corrective measures are implemented promptly. The management believes that the existing internal control systems are adequate and commensurate with the size and operations of the Company, ensuring compliance with applicable laws, regulations, and internal policies.

Employees: The Company has 5 employees on its payroll.