Surbhi Industries Ltd Management Discussions

1. MANAGEMENT DISCUSSION:

i. INDUSTRY STRUCTURE AND DEVELOPMENTS

As per report of INDIA BRAND EQUITY FOUNDATION- Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. Cotton production in India is projected to reach 7.2 million tonnes (43 million bales of 170 kg each) by 2030, driven by increasing demand from consumers. India enjoys a comparative advantage in terms of skilled manpower and in cost of production, relative to major textile producers.

In current cotton season 2024-25, up to March 31, 2025, Government of India, through its nodal agency, the Cotton Corporation of India Ltd. (CCI) under Ministry of Textiles has successfully procured 525 lakh quintals of seed cotton, equivalent to 100 lakh bales, under Minimum Support Price (MSP) operations. This procurement accounts for 38% of the total cotton arrivals of 263 lakh bales and 34% of the estimated total cotton production of 294.25 lakh bales in the country.

The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector at the other end of the spectrum. The decentralized power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries. The Indian textile industry has the capacity to produce a wide variety of products suitable to different market segments, both within India and across the world.

ii. OPPORTUNITIES AND THREATS

The Indian government has come up with several export promotion policies for the textile sector. It has also allowed 100% FDI in the sector under the automatic route. The government is supporting the sector through funding and machinery sponsoring.

The Union Budget 2025-26 allocates Rs. 1,148 crore (US$ 133.1 million) for the PLI Scheme to boost domestic manufacturing and exports, and Rs. 635 crore (US$ 73.6 million) for the Amended Technology Upgradation Fund Scheme to modernize textile machinery.

The Indian composites market is expected to reach an estimated value of US$ 1.9 billion by 2026 with a CAGR of 16.3% from 2021 to 2026 and the Indian consumption of composite materials will touch 7,68,200 tonnes in 2027. Production of yarn grew to 5,481 million kgs in FY24 and 2,752 million kgs in FY25 (April-September). In order to attract private equity (PE) and employee more people, the government introduced various schemes such as the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS) and Mega Integrated Textile Region and Apparel (MITRA) Park scheme

Indias home textile sector is known for its rich traditions and craftsmanship, with various regions specializing in unique textile techniques and patterns. Gujarat is renowned for its vibrant and intricate embroidery, while Kashmir is famous for its luxurious woollen shawls and rugs. This diversity reflects Indias extensive heritage and expertise in textile production.

The government has allocated funds worth Rs. 17,822 crore (US$ 2.38 billion) between FY16- 22 for the ‘Amended Technology Up-gradation Fund Scheme (A-TUFS) to boost the Indian textile industry and enable ease of doing business.

However, the industry faces stiff competition from low-cost manufacturing countries, which can pressure margins and market share for producers in higher-cost regions. Prices of cotton, polyester, dyes, and chemicals are subject to fluctuations due to geopolitical issues, climate change, and supply chain disruptions, affecting production costs. Further, Geopolitical tensions, pandemics, or logistical challenges (e.g., shipping container shortages) can disrupt sourcing and distribution, impacting lead times and revenues. GST will impact most to the textile industry as the same is in most unorganized sector and implementation of GST will be seen as game changer to this industry.

iii. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Company is having only one segment and that is textile companys main products are yarn and grey falling in one category thus segment wise reporting is not given as the same is evident from financial figures.

iv. OUTLOOK

The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players into the Indian market. As a long-term planning strategy, company is planning to develop cotton-based technology. Company intend to launch new project in the field of textile particularly embroidery-based production.

The industrial textiles market is likely to increase at an 8% CAGR from US$ 2 billion in 2020 to US$ 3.3 billion in 2027. The overall Indian textiles market is expected to be worth more than US$ 209 billion by 2029.

v. RISKS AND CONCERNS:

Now a day due to industrial slow down and change in market purchasing pattern Indian Textile Industry witness setback and down trade. Tariff war may impact company adversely if no appropriate counter measures taken by the Government. Major fluctuations Rupee v/s dollar price corresponding to fluctuation in the raw material price and stringent market conditions can affect the companys performance. Goods and Service Tax Act will have major impact on the industry and the same cannot be assessed at this point of time. Overall supply chain is affected internationally, that may pose a sincere concern for the entire economy.

vi. INTERNAL CONTROL SYSTEM:

The Company has an adequate internal audit system commensurate with its size and the nature of its business towards achieving efficiency in the operation, optimum utilization of resources and effective monitoring thereof and compliance with applicable laws.

vii. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

During the financial year 2024-25, the Company recorded a significant improvement in its financial performance. Revenue increased from ^20,01,13,635 in the previous year to ^39,34,84,894.10, representing an impressive growth of approximately 96%. This growth was driven by improved operational efficiency and better market performance. The operational margins also showed a positive trend, reflecting enhanced cost management and productivity across key business segments.

viii. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED.

Textile segment mainly depend on labour and workmen, company always try to conserve the workforce. Training to work men and skill improvement programs were held periodically to improve the productivity. Details of employee are given above at ‘PARTICULARS OF EMPLOYEES hence not reproduce here.

Employees relations continue to be cordial. Training and development activities are identified, organizes and progress monitored as part of human resource development activities.

ix. DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS

COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR, INCLUDING

In the financial year 2023-24, the Company incurred a net loss of ?1,60,36,945. However, during the current financial year 2024-25, the Company achieved a significant turnaround, reporting a net profit of ?3,29,24,555. This substantial improvement reflects enhanced operational efficiency and strategic financial management.

Due to the shift from a loss to a profit position, many financial ratios for the current year are not directly comparable to the previous year. Nevertheless, notable improvements have been observed in key financial indicators such as the Inventory Turnover Ratio, Current Ratio, Debt Equity Ratio, and Return on Equity (ROE).

The details of these financial ratios are as follows:

Ratios are specifically explained in Note no. 5 to the Ind AS Financial Statements of Auditor report.

x. Details of any change in Return on Net Worth as compared to the immediately

previous financial year along with a detailed explanation thereof:

Return on Net worth has Increased during the year from 11.62% to 19.26% as compared to previous year due to decrease in year-on-year profit and lower Inventory turnover and increase in maintenance cost.

2. DISCLOSURE OF ACCOUNTING TREATMENT

Appropriate accounting standards were followed in preparation of annual accounts, there is no treatment different from that prescribed in Accounting Standard.

INITIATIVES

The Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector under the automatic route. The initiatives are being taken by the Company too, for improving the quality standards and reduction of costs at appropriate level. New machineries are imported to provide better result and to cope up with changing requirement of the industry. The employees at all levels are being made aware of the changing conditions and the challenges of the open market conditions and to train the personnel to tackle the difficult situations which will improve the overall productivity, profitability.

ANTI SEXUAL HARASSMENT POLICY

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints received regarding. All employees are covered under this policy. There were no complaints or cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

CAUTIONARY STATEMENT

Statements in the Directors Report & Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Companys operations include cyclical demand, changes in government regulations, tax regimes, economic development and other ancillary factors.

ACKNOWLEDGMENT:

The Directors sincerely express their appreciation to the employees at all levels, Bankers, customers, investors, Government of Gujarat and Ministry of Government for their sustained support and co-operation and hope that the same will continue in future.

Your Directors also wish to place on record their deep appreciation for the dedication and hard work put by the employees at all levels towards the growth of the Company. Last but not the least, the Board of Directors wish to thank the Investor/ Shareholders for their support, cooperation and faith in the Company.