Sunil Industries Ltd Management Discussions

• Reduced tariffs
• Better market access
• Increased competitiveness of Indian garments

Indias growth continues to be resilient despite some signs of moderation in growth, says the World Bank in its latest India Development Update, the World Bank Indias biannual flagship publication. The textile and apparel industry is a cornerstone of the Indian economy, deeply integrated with both rural livelihoods and industrial growth. It contributes significantly to:

• GDP: ~2.3% of Indias total GDP
• Industrial Output: ~13% of total manufacturing production
• Employment: ~45 million direct jobs and ~100 million indirect jobs
• Exports: ~10% of Indias total merchandise exports

• Cotton Textiles - India is the worlds largest producer of cotton
• Man-Made Fibres (MMF) - Fast-growing due to global demand
• Handlooms & Handicrafts - Major rural employer; strong export potential
• Technical Textiles - High-potential, industrial-use segment
• Readymade Garments (RMG) - Major contributor to exports

Despite heightened global trade tensions in FY26, India remained the fastest-growing major economy, with growth accelerating to 7.6 percent, up from 7.1 percent in FY25. The current account deficit stood at 1 percent of GDP, and fiscal consolidation continued, bringing the general government deficit to 7.4 percent of GDP. Employment rates remained stable, and formal job creation strengthened. In FY27, growth is projected at 6.6 percent, reflecting headwinds from the Middle East conflict. While Indias strong macroeconomic buffers offer some protection against downside risks, the conflict underscores the importance of energy diversification, prudent fiscal management, and trade diversification. A technical Annex of this update discusses Indias February 2026 GDP rebasing, which updated the base year to 2022-23. This process led to a downward revision of nominal GDP levels, reflecting a reassessment of the size of the informal economy. The Indian textile industry remains a pillar of economic strength, with a unique combination of traditional artisanship and modern industrial production. With rising domestic demand, policy support, and a push for export competitiveness, the sector is poised for robust and inclusive growth in the coming decade.

The Indian textile and apparel industry continues to be one of the countrys largest manufacturing sectors, contributing significantly to employment generation, industrial production, exports, and economic growth. The industry encompasses the complete value chain, ranging from fibre and yarn to fabrics, garments, technical textiles, and value-added textile products. Increasing domestic consumption, expanding export opportunities, government policy support, and growing emphasis on sustainable manufacturing continue to strengthen the long-term growth prospects of the sector.

During FY 2025-26, the industry benefited from improving global demand, diversification of international sourcing under the "China Plus One" strategy, and enhanced focus on quality, sustainability, and supply chain resilience. Government initiatives such as the Production Linked Incentive (PLI) Scheme, PM MITRA Parks, and the National Technical Textiles Mission have further strengthened the competitiveness of the Indian textile industry by encouraging investment, technology adoption, infrastructure development, and export growth.

The industry is witnessing increasing adoption of advanced manufacturing technologies, automation, digitalisation, and environmentally sustainable production practices to meet evolving customer requirements and international quality standards. Growing demand for high-performance fabrics, specialised textiles, uniforms, and value-added textile products has created new opportunities for integrated textile manufacturers.

Sunil Industries Limited, an ISO 9001 and ISO 14001 certified company, is well positioned to leverage these opportunities through its fully integrated manufacturing operations. Having commenced operations in 1976 as a small textile processing unit, the Company has evolved into a composite textile manufacturer with in-house capabilities spanning spinning, weaving, knitting, processing, stitching, and the manufacture of finished textile products. This integrated manufacturing model enables the Company to maintain stringent quality standards, optimise production efficiencies, ensure timely deliveries, and offer customised textile solutions to its customers.

The Company continues to serve several Central and State Government departments and institutions, which reflects the confidence reposed in its manufacturing capabilities, product quality, and operational reliability. Continuous investment in modern technology, quality management systems, and environmentally responsible manufacturing processes enables the Company to manufacture a wide range of fabrics in various colours, camouflage prints, and specialised applications, catering to the diverse requirements of institutional and industrial customers.

Going forward, the Company remains focused on enhancing operational efficiency, expanding its product portfolio, strengthening customer relationships, and adopting innovative manufacturing technologies to sustain its competitive position in the evolving textile industry.

The textile industry being majorly an unorganized and fragmented sector the entire industry size and figures cannot be estimated. The textiles market in India has grown tremendously over the decade. Indian textile industry is maturing and with urban population evolving, demand for casuals, sports and fashion textiles is picking up. Millennials are very brand conscious and demand for branded wear is on the rise. There is growth in the industry in tier I and II markets and brand awareness is growing significantly.

Accelerated reopening of activities have re-opened opportunities for the textile market which were quiet for a long time. Further, China plus one policy by USA and Europe will lead to increase in demand for the Indian Market. With an added advantage of high-quality standards and globally renowned accreditations, our Company will be forging ahead with its sustainability vision to build potential so as to grab opportunities coming its way.

The demand for clothing in India and other countries is on the rise. The flow of orders has been progressively increasing for last few years. Your Company is well poised to seize opportunities available in the textile industry on account of its state-of-the-art production facilities, technical expertise, good quality culture and emphasis on product innovation and growth potential.

Market is shifting towards Branded Garment. Your Company has been ahead in making investment in plant and machinery to meet the growth and meet the huge demand creation in the market. We are constantly experimenting products made from innovative yarns and eco-friendly chemicals for manufacturing most comfortable clothing. These technically innovative products are much in demand by international brands. Given the unrelenting spread of the second wave of pandemic and the large-scale impact on the lives of the people, the near-term outlook for the Indian economy is uncertain impacting the growth prospects, the threat of slow demand for few quarters is possible.

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 textile manufacturing Companies.

The Company 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 world-class quality.

The Indian economy continued to demonstrate resilience during FY 2025-26, supported by strong domestic demand, stable macroeconomic fundamentals, sustained public capital expenditure, and continued policy reforms. India remained one of the fastest-growing major economies globally, despite geopolitical uncertainties, evolving global trade dynamics, and volatility in commodity and energy prices. According to the World Banks India Development Update (April 2026), Indias economy recorded an estimated growth of 7.6% during FY 2025-26 and is expected to maintain a healthy growth trajectory in the coming years, supported by robust domestic consumption, manufacturing expansion, and infrastructure development.

The textile and apparel industry is expected to continue benefiting from increasing domestic consumption, rising demand for quality and value-added textile products, favourable government initiatives, and diversification of global sourcing under the "China Plus One" strategy. Policy measures such as the Production Linked Incentive (PLI) Scheme, PM MITRA Parks, and continued focus on manufacturing competitiveness are expected to further strengthen Indias position as a preferred global textile manufacturing hub. At the same time, the industry will continue to monitor global economic conditions, trade policies, foreign exchange movements, and fluctuations in raw material and energy costs, which may influence demand and operating margins.

Sunil Industries Limited is well positioned to capitalize on these opportunities through its integrated manufacturing capabilities encompassing spinning, weaving, knitting, processing, stitching, and the manufacture of finished textile products. The Companys long-standing relationships with Central and State Government departments and institutions, together with its emphasis on quality, timely delivery, technological advancement, and environmentally responsible manufacturing practices, continue to strengthen its competitive position.

Going forward, the Company will continue to focus on operational excellence, capacity utilization, product innovation, quality enhancement, cost optimization, and sustainable manufacturing practices. Leveraging its integrated operations and strong customer relationships, the Company remains confident of creating long-term value for its stakeholders while maintaining sustainable and profitable growth.

The company has only one segment i.e., Manufacturing of Textiles, therefore the requirement of segment-wise reporting is not applicable to the Company.

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.

During the Financial Year 2025-26, the Company recorded a total revenue of 22,628.76 lakhs as against 17,219.22 lakhs in the previous financial year, reflecting a growth of approximately 31.42%. Revenue from operations stood at 22,604.18 lakhs compared to 17,184.35 lakhs in FY 2024-25, while other income amounted to 24.58 lakhs against 34.87 lakhs in the previous year. The Companys Profit Before Tax (before interest, depreciation and tax) increased to 601.75 lakhs from 482.95 lakhs in the preceding year. After providing for tax expenses of 141.66 lakhs (Previous Year: 92.86 lakhs), the Profit After Tax for the year stood at 460.09 lakhs as compared to 390.09 lakhs in FY 2024-25, registering a growth of approximately 17.94%. The Company reported Other Comprehensive Income of 7.32 lakhs against 1.90 lakhs in the previous year, resulting in a Total Comprehensive Income of 467.41 lakhs for FY 2025-26 as against 392.00 lakhs in FY 2024-25. There was no share of Non-Controlling Interest during the year. The financial performance reflects the Companys continued operational efficiency, improved business volumes and sustained profitability during the year under review.

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations, or predictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include finished goods prices, raw materials costs and availability, global and domestic demand supply conditions, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts. The Company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future based on subsequent developments, information, or events.

Your company considers its human resources as its most valuable assets, among all other assets of the Company. It has been the policy of the company to actuate the talent by providing opportunities to develop themselves within the organization. The company continued to have maintained very cordial & harmonious relations with its employees.

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.

Inflation is expected to remain elevated for the foreseeable future, driven by war-induced commodity price increases and broadening price pressures. In addition, the anticipated increase in interest rates by Central Banks in the coming year are also expected to lower growth and exert pressure on economies particularly those in emerging markets.

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.

Deterioration in supply chain and demand due to pandemic such as COVID-19 have emerged as a significant business risk. Strong supply chain system with robust digitization and interlinking of various divisions is the need of the hour to tackle similar situations in future.

The Company is following India accounting standards (IND-AS) for financial year 2025-2026 as notified by the Central Government of India under the Companies (Accounting Standards) Rules under section 133 of the Companies Act, 2013 and as per guideline of the institute of chartered accountants of India in the preparation of financial statements and has not adopted a treatment different from that prescribed in any accounting standard.