Supertex Industries Ltd Management Discussions

GLOBAL-ECONOMIC OVERVIEW

The global economy demonstrated resilience in 2024, stabilizing at a 3.2% growth rate, aligning with 2023 figures despite prevailing macroeconomic challenges. Emerging economies faced a slowdown, with growth dipping from 4.4% in 2023 to 4.1% in 2024, largely due to prolonged monetary tightening and weakened consumer demand. While inflationary pressures have eased, geopolitical risks, trade realignments, and sectoral disruptions continue to shape the near- term outlook. With financial conditions stabilizing and supply chain resilience improving, 2025 presents a cautiously optimistic trajectory, albeit with persistent risks requiring strategic adaptability.

INDIA - ECONOMIC OVERVIEW

Despite global macroeconomic headwinds, Indias economy has remained resilient, consistently outperforming the global average, driven by robust domestic demand, structural reforms, and strong policy measures. The country has managed economic stability even in the face of external challenges, including supply chain disruptions and inflationary pressures. In 202324, Indias real GDP is estimated at Rs. 172.90 lakh crore (US$ 2 trillion), reflecting the sustained expansion of key sectors such as manufacturing, services, and infrastructure. Meanwhile, the nominal GDP has reached Rs. 293.9 lakh crore (US$ 3.5 trillion), highlighting the countrys growing economic influence on the global stage. This growth trajectory, with a strong 9.2% expansion in 2023-24 compared to 7% as of September 2024, Indias overall index of Industrial Production (IIP) indicated stabilization in manufacturing, despite persistent challenges in global trade. The textile and apparel sectors, however, witnessed a notable slowdown, with textile manufacturing increasing only marginally from 108.4 to 109.6 in September 2024, while apparel manufacturing remained same from 102.4 to 102.5 in the same period. This reflects reduced export demand from key markets like the US and Europe, where brands focused on inventory rationalization amid economic uncertainty.

Domestically, affordable and mass-market apparel segments showed resilience, but the premium and discretionary categories struggled due to cautious consumer spending. Elevated raw material costs, labour expenses, and energy prices further constrained profitability for manufacturers.

Manufacturers are increasingly focusing on automation, digital supply chains, and sustainable production practices to enhance competitiveness. With inflationary pressures easing and global demand expected to stabilize, textile and apparel production is likely to witness a moderate revival in the coming year.

TEXTILE INDUSTRY SCENARIO

Indias textile and apparel market is estimated to be worth US$ 184 Bn in 2024-25. This market has demonstrated consistent growth over time, driven primarily by strong domestic demand. Anticipated future growth is projected to be sustained by ongoing expansion in the domestic market and significant potential potential for growth in exports.

Indias domestic textile and apparel (T&A) market has expanded from US$ 106 billion in 2019-20 to an estimated US$ 147 billion in 2024-25, reflecting a CAGR of 7%. Apparel dominates, contributing US$ 108 billion, while home textiles (US$ 11 billion) and technical textiles (US$ 28 billion) are steadily growing.

The domestic T&A market is expected to grow at a CAGR of 9% from 2024-25 onwards and reach US$ 250 Bn by 2030-31. Technical textiles are expected to be the fastest- growing segment, reaching US$ 54 billion by 2030-31, while home textiles will expand to US$ 16 billion. Apparel will remain the largest segment at US$ 180 billion, driven by consumer demand, increasing urbanization, and government initiatives supporting domestic manufacturing and innovation.

OPPORTUNITIES AND THREATS

The growth of Indias middle class, with its rising purchasing power, is driving higher demand of quality textiles and apparel. Indias strategic position offers an advantage for global companies looking to move sourcing away from China, supported by trade agreements like CEPAs and FTAs.

Government initiatives such as PM Mitra Parks are attracting substantial investment and creating an integrated textile value chain, which is helping generate employment. The widespread use of digital technology is shaping consumer demand for branded apparel.

The Textile sector in India requires significant capital investment, which affects its ability to compete on a global scale. Poor coordination and communication within the textile production chain causes delays, increases costs, and leads to missed opportunities.

The Textile Industry faces fierce competition from international players, which threatens Indias textile and apparel. Domestic companies need to contend with global fashion brands. Shifting consumer preferences and fluctuating demand for textiles and apparel affects the business. Slow market demand and rapidly changing trends leads to excess inventory, low production, and declining exports.

Rising labour costs due to a shortage of skilled labour, as well as fluctuations in Raw Material ands transportation prices, have the capability to disrupt business operations.

COMPANY REVIEW

The production of the Company was lower during the year as exports activity continued to be hit by the political conditions. The realizations were slightly better during the year even though the rising cost continued to cause concern.

The Company continued innovations which is at the core of its growth strategy. Several new products, including geo textiles, technical textiles and high performance yarns catering to the evolving needs of our customers were developed during the year. Our research and development team continues to focus on developing sustainable products that align with global trends.

FUTURE OUTLOOK

The market conditions are expected to improve and the company is hopeful of better performance in the coming year due to increased capacity utilization and cost cutting. The company plans to lower its manufacturing costs by better financial management and debottlenecking its production line.

The demand for polyester and nylon yarns is expected to improve, driven by the increasing adoption of synthetic fibers in various industries and the preference of India over several rival nations by the international buyers. The growing preference for durable, lightweight, and cost-effective materials, coupled with the rising consumer awareness about sustainability, presents significant growth opportunities. However, the industry faces challenges such as cheaper imports, fluctuating raw material prices, stringent environmental regulations, and increasing competition.

To mitigate these challenges, the company is focused on diversifying its raw material sources, investing in sustainable manufacturing practices, and expanding its presence in high-growth markets.

SEGMENT-WISE PERFORMANCE

RISK MANAGEMENT

The Company is exposed to various risks which include factors such as rising competition in the market on the domestic and export fronts, duty free access to competing countries in US and European markets, uncertain business environment including conflict between Russia and Ukraine, rupee fluctuation, volatility in raw material prices and its availability, slowdown in demand, possibility of increase in interest rates etc.

Besides this the Company is also exposed to factors such as the change in government policies, duties & taxes, availability of power from the grid, availability of labour etc. The Company tries to mitigate these risks by taking quick actions and proactive initiatives to minimize the impact of these risks to the extent possible.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCE AND INDUSTRIAL RELATIONS

As on March 31,2025 the Company had 62 employees at its manufacturing plants and administrative offices. The Company recognises the importance of Human Resource as a key asset instrumental in its growth. The Company focused on harmonizing employee benefits and streamlining policies to reward teamwork. The Company remains committed to fostering a dynamic and engaging work environment that empowers people and drives performance excellence.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an internal control system in place which is commensurate with the size and nature of the business. The internal controls are aligned with statutory requirements and designed to safeguard the assets of the Company. The Management reviews and strengthens the controls periodically. Apart from self monitoring of the internal controls, there is an independent internal auditor of the Companys operations. The Statutory Auditors present their observations to the Audit Committee on financial statements including the financial reporting system. The Audit Committee takes due cognisance of the observations made by the auditors and gives their suggestions for improvement. The suggestions of the Audit Committee further ensure the quality and adequacy of the control systems.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Significant Changes in Key Financial Ratios:

During the year, there was significant change in the following key financial ratio as compared to the previous year:

Forward Looking Statements

Certain statements in this report on "Management Discussions and Analysis" may be forward looking statements within the meaning of applicable securities laws and regulations. There are several factors, which would be beyond the control of the management, and as such, actual results could differ materially from those expressed or implied.