Surbhi Industries Ltd Management Discussions

1. MANAGEMENT DISCUSSION AND ANALYSIS

i. INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian textile and apparel industry continues to be one of the key sectors of the Indian economy, with a diversified value chain encompassing fibre, yarn, fabric, apparel, home textiles and technical textiles. India has established a strong position in the global textile industry on the back of its large raw-material base, skilled manpower, established manufacturing capabilities and significant domestic market.

According to the India Brand Equity Foundation (IBEF) - Textiles and Apparel Industry Report, May 2026, India is the worlds second-largest producer of textiles and garments and the third-largest exporter. The sector covers apparel, home textiles and technical textile products and has a 4.6% share of global textile and apparel trade. The industry contributes approximately 2% of Indias GDP and around 11% of manufacturing GVA and provides employment to more than 45 million people.

The industry is also an important contributor to Indias merchandise exports and continues to benefit from increasing domestic consumption, expanding global sourcing opportunities and Government initiatives aimed at strengthening Indias textile manufacturing ecosystem.

INDUSTRY PERFORMANCE - FY 2025-26: During FY 2025-26, the Indian textile and apparel industry operated in a mixed global environment. While domestic demand remained supportive, the industry continued to experience volatility arising from global economic conditions, raw-material prices, geopolitical developments, international trade policies and competitive pressures. As per IBEF, Indias total exports of textiles and apparel, including handicrafts, stood at approximately US$35.52 billion in FY 2025-26.

The principal components of these exports were:

Ready-Made Garments: US$15.77 billion, representing approximately 44% of total exports;
Cotton Textiles: US$10.25 billion, representing approximately 29% and
Man-Made Textiles: US$5.23 billion, representing approximately 15%

These figures demonstrate the continued importance of ready-made garments and cotton textiles in Indias export basket, while also highlighting the growing relevance of man-made textile products. For FY 2025-26, IBEF reports that Indias textile and apparel imports were approximately US$8.49 billion.

DOMESTIC MARKET: The domestic textile and apparel market continues to provide a strong foundation for industry growth. IBEF estimates the Indian domestic textile and apparel market at approximately US$225 billion in 2025, with the market growing at around 10-12% CAGR. The market is projected to reach approximately US$350 billion by 2030.

The growth is expected to be supported by rising incomes, urbanization, increasing penetration of e-commerce, expansion of organized retail and evolving consumer preferences.

India is also actively pursuing diversification of its export markets, including greater engagement with the European Union and other emerging markets.

The India-UK Free Trade Agreement, signed on 24 July 2025, is expected to provide additional opportunities for Indian textile exporters. According to IBEF, the agreement provides duty-free access to 99% of Indias textile exports to the UK and is expected to strengthen Indias competitive position in the UK market.

ii. OPPORTUNITIES AND THREATS

The Government of India continues to undertake measures to strengthen the textile sector, enhance competitiveness, encourage investment and increase Indias share in global textile and apparel trade. According to IBEF, the allocation to the Ministry of Textiles increased from ?5,272 crore in FY 2025-26 to ?5,279.01 crore in FY 2026-27.

The Union Budget 2026-27 also provides ?405 crore for the Production Linked Incentive (PLI) Scheme for textiles, supporting domestic manufacturing and exports in man-made fibre apparel, man-made fibre fabrics and technical textiles. The Governments broader PLI scheme for textiles has an outlay of approximately ?10,683 crore and is intended to promote manufacturing in man-made fibre apparel, man-made fibre fabrics and specified technical textile products. The Government is also developing PM Mega Integrated Textile Regions and Apparel (PM MITRA) Parks to create integrated textile manufacturing ecosystems with modern infrastructure and common facilities. IBEF reports that seven PM MITRA Parks were under development as of February 2026. In May 2026, the countrys first operational PM MITRA Park was inaugurated at Warangal, Telangana.

INVESTMENT AND FDI

The textile industry continues to attract investment, supported by Indias manufacturing capabilities and long-term growth prospects. According to IBEF, cumulative FDI inflows into the textiles sector, including dyed and printed textiles, stood at approximately ?33,512.66 crore (US$5.07 billion) between April 2000 and March 2026. The Government permits 100% FDI in the textile sector under the automatic route, providing additional opportunities for domestic and international investment.

OPPORTUNITIES

The principal opportunities for the Indian textile industry include:

• Expansion of the domestic textile and apparel market.
• Growth of organized retail and e-commerce.
• Diversification of global sourcing.
• Increasing demand for value-added textile products.
• Growth in man-made fibre products.
• Rapid development of technical textiles.
• Expansion of sustainable and environmentally responsible textile products.
• Increasing integration with global textile and apparel supply chains.
• Government support through PLI, PM MITRA and other sector-specific initiatives.
• Increasing investment in technology, modernization and manufacturing capabilities.

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: FY 2026-27

The outlook for the Indian textile and apparel industry remains positive over the medium and long term. IBEF projects the domestic textile and apparel market to reach approximately US$350 billion by 2030, while the Government is targeting US$100 billion of textile and apparel exports by 2030. The industry is expected to benefit from Indias strong domestic demand, availability of raw materials, skilled workforce, established manufacturing ecosystem and opportunities arising from diversification of global supply chains.

Overall, the Indian textile industry has strong medium- and long-term growth potential. Companies with efficient manufacturing operations, strong customer relationships, diversified markets, technological capabilities and a focus on value-added products are expected to be better positioned to benefit from the emerging opportunities.

MANAGEMENT OUTLOOK

The management believes that the structural growth drivers of the Indian textile industry remain intact. Indias large domestic market, growing consumer base, competitive manufacturing capabilities and increasing integration with global textile supply chains provide a favourable platform for sustainable growth. The industry is expected to progressively move towards higher-value products, technical textiles, man-made fibres, sustainability and technology-driven manufacturing.

The Company will continue to monitor developments in domestic and international markets and evaluate opportunities in line with its business capabilities, market conditions and long-term objectives. 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 US2billionin2020toUS2billionin2020toUS 3.3 billion in 2027. The overall Indian textiles market is expected to be worth more than US$ 209 billion by 2029.

1. RISKS AND CONCERNS

Despite favorable medium- and long-term prospects, the industry remains exposed to a number of risks. Volatility in cotton and other raw material prices, energy costs, logistics expenses and currency movements can affect operating margins. The industry also faces intense competition from other major textile-producing countries. Changes in international trade policies, tariffs, geopolitical developments and global economic conditions may influence export demand and competitiveness.

Increasing sustainability and environmental requirements are also requiring textile manufacturers to focus on resource efficiency, energy consumption, water management, waste reduction, recycling and responsible sourcing.

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 2025-26, the Company faced strict challenges and recorded a decrease in its financial performance. Revenue decreased from 39,34,84,894.10 in the previous year to 3,38,00,745/- representing an tough period in the market due middle east disturbance. This growth of previous year was washed away by the unstability and energy crisis. The operational margins also showed a hairline cut 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

During the year under review, the company had total revenue of Rs.33.80 Crores representing a significant decrease approximately 14.09% compared to the previous years revenue of 39.34 Crores. The company achieved profit after tax of Rs. 1,98,71,988 as against a profit of Rs 3,29,24,555 in the previous financial year. This was primarily driven by decreased turnover, along with an increase in proportionate finance costs and depreciation expenses.

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:

PARTICULARS	YEAR ENDED 31.03.2026	YEAR ENDED 31.03.2025
Current Ratio	2.14	1.32
Debt Equity Ratio	1.00	0.84
Return on Equity Ratio	0.10	0.19
inventory Turnover Ratio	3.05	4.37
Trade Receivables Ratio	7.88	11.79
Trade payables Turnover Ratio	8.91	12.47
Net Capital Turnover Ratio	4.18	10.93
Return on Capital Employed	0.21	0.28
Net Profit Ratio	9.16%	9.16%
Return on Investment	19.26%	19.26%

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.

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, co-operation and faith in the Company.

For and on behalf of the Board of Directors of Surbhi Industries Limited

Date: 05.09.2026

Place: Surat

Registered Office: SURBHI INDUSTRIES LIMITED "Surbhi House", 2nd Floor, PF NO 206, B/h

Old Sub Jail, Ring Road, Khatodara, Surat - 395002.

Sd/- BIPINBHAI JASMATBHAI PATEL (DIN: 00023447) Chairman

SURBHI INDUSTRIES LIMITED