Suryaamba Spinning Mills Ltd Management Discussions

ECONOMIC OVERVIEW GLOBAL ECONOMIC SCENARIO

The global economy continues to face significant headwinds, driven by slowing growth, persistent inflationary pressures and escalating geopolitical uncertainties. Recent forecasts from major economic institutions indicate a downturn in global economic activities, particularly impacting major economies like the United States and China.

Labour markets remained relatively robust, with unemployment rates hovering near historic lows, although there were signs of slight softening. Strong nominal wage increases, coupled with declining inflationary pressures, led to an improvement in real household incomes.

Nevertheless, private consumption stayed muted, reflecting cautious consumer sentiment and persistent uncertainty.

Geopolitical tensions, especially in Eastern Europe and the Middle East-intensified, contributing to global instability. These developments disrupted trade, investment flows, and financial markets, continuing to weigh on business confidence and longterm investment planning.

GLOBAL ECONOMIC SCENARIO

The International Monetary Fund (IMF) has notably revised downwards its global growth forecast to 2.8% for 2025, a sharp reduction from the previous estimate of 3.3%. The United Nations Conference on Trade and Development (UNCTAD) has projected an even lower growth rate of 2.3%, citing intensified trade tensions and lingering uncertainties as primary drivers of this recessionary trajectory.

The Peterson Institute for International Economics (PIIE) similarly forecasts a slowdown, estimating global GDP growth at 2.7% in 2025 and marginally improving to 2.8% in 2026, compared to 3.2% growth experienced in

INDIAN ECONOMIC SCENARIO Economic Growth Outlook

The World Bank has lowered Indias GDP growth estimate to 6.5% for FY 25 and further reduced it to 6.3% for FY26, primarily due to global economic weaknesses, slow private investment growth and public capital expenditure falling short of government targets. Concurrently, the IMF has adjusted Indias GDP growth projection downward to6.2% for 2025 from an earlier forecast of 6.5%.

Inflation and Monetary Policy

In its 54th meeting on 9th April, 2025 the Monetary Policy Committee (MPC) unanimously decided to reduce the policy repo rate by 25 basis points, bringing it down to 6% with immediate effect.

Indias headline inflation has moderated notably, reaching 3.34% in March 2025, down significantly from 6.2% in October 2024. The Reserve Bank of India (RBI) is aiming to maintain inflation within its targeted range of 2 - 6%.

The RBI projects CPI inflation for FY 26 at 4%, demonstrating controlled inflation dynamics and allowing monetary easing to support economic activity. Retail inflation in India has shown a consistent decline over the past three financial years, easing from 6.7% in 2022-23 to 5.4% 2023-24 and further to 4.6% in 2024-25.

Meanwhile, the annual inflation rate based on the All-India Wholesale Price Index (WPI) stood at 2.05% (provisional) for March 2025, compared to March 2024.

Rupee and Exchange rate

Geopolitical tensions led to volatility in currency markets, with the Indian rupee closing at 84.29 per dollar on 5^th May, 2025, marginally weaker due to ongoing geopolitical concerns. The exchange rate has seen wide fluctuation during the last one year from a high at 87.997 in February 2025 to a low at 82.95 in June 2024 and average being at 84.639.

GROWTH OF THE INDIAN ECONOMY

GROWTH OF THE INDIAN ECONOMY QUARTER BY QUARTER, FY 2024-25

Outlook: India is expected to remain the fastest-growing major economy. The services sector is likely to sustain its momentum, manufacturing activity is expected to accelerate (driven by government initiatives to enhance logistics infrastructure and tax reforms).

STRUCTURE AND DEVELOPMENT OF THE MMF INDUSTRY

The Man-Made Fibre ("MMF") industry is witnessing steady global growth, driven by rising demand for synthetic and sustainable fibres, though growth rates vary across regions. MMF is mainly of two types, synthetic and cellulosic fibres. The synthetic fibres include polyester, nylon, acrylic, polypropylene and aramids, and the cellulosic fibres consist of viscose fibre and modal, etc.

The demand for MMF is increasing rapidly as a substitute for cotton amid changes in global fashion trends. Currently, MMF dominates the global textile fibre consumption, holding 79% of the global share, and the remaining is cotton, as per the International Cotton Association data. The share of MMF has been steadily increasing due to the inherent limitations of the growth of cotton and other natural fibres. Global fibre demand is expected to reach 149 million tons in 2030.

The MMF industry in India is self-reliant across producer of both polyester and viscose globally. The textile and apparel industry is one of the largest contributors to Indias economy, providing employment to millions and generating substantial foreign exchange earnings. With strong policy support, infrastructure development and a skilled workforce, India has emerged as a preferred investment destination in the global textile sector.

Government Support and Initiatives

The government has introduced multiple schemes to enhance textile production, boost investments and promote exports, including:

a) Production Linked Incentive (PLI) Scheme for Textiles: To increase manufacturing in man-made fibre (MMF) and technical textiles.

b) PM MITRA (Mega Integrated Textile Region and Apparel) Parks: To develop world- class industrial infrastructure for textile manufacturing. A total of 7 parks have been established in states of Gujarat, Maharashtra, Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh and Telangana.

c) Amended Technology Upgradation Fund Scheme (ATUFS): To incentivise credit flow for benchmark credit linked technology upgradation.

d) Samarth (Scheme for Capacity Building in Textile Sector): To provide skill training to workers in the textile industry, in partnership with the Ministry of Skill Development & Entrepreneurship.

e) Textile Cluster Development Scheme (TCDS): To create an integrated workspace and linkages based ecosystem for existing as well as potential textile units/clusters to make them operationally and financially viable.

f) National Technical Textiles Mission (NTTM): To boost Technical Textiles in the country.

g) The Union Budget announced an outlay of Rs. 5,272 crores for the Ministry of Textiles for 2025-26. This is an increase of 19% over budget estimates of 2024-25

(Rs. 4,417.03 crore).

h) Bharat Tex 2025, Indias largest global textile event, was successfully organized from 14th to 17th February, 2025, at Bharat Mandapam, New Delhi. Bharat Tex 2025

OPPORTUNITIES

• Rising global demand and geopolitical shifts are creating favourable supply chain opportunities, positioning India better than China, Vietnam, and Bangladesh

• Indias expanding domestic market, fuelled by a growing middle class, e- commerce growth, and Gen Z consumption trends, is driving strong demand

• Government initiatives like PM MITRA Parks, the PLI Scheme, and RoSCTL are boosting investment and expansion in the textile sector

• Indias textile exports could grow from USD 45 billion to USD 100 billion, creating up to one million jobs annually through 2030

Recent state policies in the Uttar Pradesh, Bihar, Odisha & Madhya Pradesh offer substantial incentives, including capital subsidies, employment support, and tax exemptions, in order to encourage the establishment of textile units lead to job creation

• Indias growing emphasis on textile recycling and the circular economy offers a chance to promote sustainable manufacturing and generate green jobs

• The UK imports USD 20 billion in textiles, with India holding a 5% share. The FTA strengthens Indias position against Bangladesh and Vietnam

THREATS

• Indias export competitiveness remains low, trailing China, Vietnam, and Bangladesh due to high production costs, lower labour efficiency, fragmented supply chains, and weak vertical integration

• India faces supply chain and cost challenges, with a fragmented cotton supply raising logistics costs and high raw material prices making man-made fibres like polyester and viscose costlier than in China

Complex regulations and trade barriers, including burdensome export procedures and limited FTAs, disadvantage India against competitors like Vietnam in major markets

• Rising sustainability norms, led by global brands and strict EU regulations, challenge Indian MSMEs, especially in meeting demands for green sourcing, renewable energy, and recycling

• Fast fashion and rising textile waste pose growing concerns, with Indias recycling market still small despite expected growth amid global waste projections for 2030

• Labour issues like increasing minimum wages, high attrition and migrant worker challenges cause workforce instability, with shortages in textile hubs and underutilized surplus in other states

• Sustainability compliance costs are rising as global regulations demand stricter environmental and labour standards, increasing production expenses

COMPANY PERFORMANCE

The overall journey of FY25 was marked by dynamism, turbulence, and constant flux, shaped by early-year industrial action and the national general elections, disruptions in neighbouring countries, followed by strategic shifts in product mix and the recent imposition of tariffs.

RISKS & CONCERNS

The Company has a robust Enterprise Risk Management framework for timely and effective identification, assessment, and mitigation of key business and operational risks. The key risks and their corresponding mitigation measures are described below:

Raw Material Risk:

The volatility in prices of raw materials such as specialty fibres and yarns, glass roving, specialty chemicals, and resins increases the input costs which adversely impacts the Companys profitability. Further, many raw materials used in AMD correlates with crude oil prices and volatility in crude oil prices may weaken AMD margins.

The Company monitors price fluctuations and follows inventory management and responsive procurement policy to ensure timely procurement of raw materials at competitive prices. It also engages in contracts with clients and tries to pass on variations in the prices of raw materials to them to protect margins.

Economic Risk:

The geopolitical turmoil, global economic slowdown, high inflation and the threat of a looming recession in key markets like the US and Europe have led to a slowdown in the export market. Demand compression could reduce the Companys export business. The macroeconomic environment in the US/EU markets has started to improve though the export demand continues to remain uncertain. However, the domestic market will continue to provide sizeable business opportunities for the Company.

Exchange Rate Volatility Risk:

Since a significant portion of the Companys revenue is in foreign currency and a major part of the costs are in Indian Rupees, any movement in currency rates would impact the Companys performance.

Exposures on foreign currency sales are managed through the Companys hedging policy, which is reviewed periodically to ensure that the results from fluctuating currency exchange rates are appropriately managed. The Company strives to achieve asset-liability offset of foreign currency exposures and only the net position is hedged. The Company also uses forward contracts and foreign exchange options towards hedging risk resulting from changes and fluctuations in foreign currency exchange rates.

Logistics Risk:

The ongoing Russia-Ukraine war has adversely impacted the global supply chain network. Since majority of the Companys business is export-oriented and depends on the supply chain for exporting final products, any kind of disruptions in the supply chain, rising container shipping costs, availability and delays pose severe challenges for the business. Further, inadequate and inefficient logistics in India lead to delays and high costs of logistics.

The Company has strengthened its supply chain network and developed strong relationships with suppliers and vendors for smooth operations.

Disaster Risk:

The Company is susceptible to disasters and crises such as pandemics, earthquakes, geopolitical instability, fire hazards, etc. which may cause operational disruptions, shutdowns or production cuts, project delays, supply chain hurdles, and increased construction costs.

The Company prioritizes the safety of its stakeholder community and ensures business survival during unpredictable crises. It has a well-designed safety management policy that eliminates/reduces the risk of workplace incidents. Its proper implementation and updation enable effective prevention besides equipping the employees to handle unforeseen incidents. To reduce exposure to fire-related hazards, it has placed pressurized fire protection and related systems at strategic locations to deal with fire- related incidents.

Technology Risk:

There is a constant requirement for technology upgradation and regular R&D to enhance efficiency and productivity. Failure to use the latest and sustainable technologies to cater to the changing requirements of the global market may lead to loss of business. The Company gives utmost importance to technology and proactively invests in R&D, modern and sustainable technologies, machinery and equipment for improving the Integrated manufacturing process, and quality and strengthening its product portfolio to cater to emerging market trends.

While the medium-term future looks more certain than ever, the near-term headwinds persist on multiple counts. We are in the middle of two volatile geopolitical conflicts, multiple geographies undergoing election season, interest rates fatigue continues to be high adding to deflationary pressure resulting in oscillating consumer demand. While the global trade showed resilience in past twelve month, we will continue to be watchful of the said risks to take possible timely mitigating action.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has established comprehensive internal control systems and processes designed to align with its unique business operations and complexities. By implementing strong policies and procedures, it ensures business integrity, asset protection, accurate financial reporting and fraud prevention. These systems undergo regular evaluations to enhance their effectiveness and drive continuous improvement.

HUMAN RESOURCES

The Company values its dedicated and motivated employees as its greatest asset. It maintains a healthy work environment, offers competitive compensation and acknowledges employee contributions through a structured reward and recognition program.

To support professional growth, the Company encourages employees to participate in voluntary projects beyond their core responsibilities, promoting creativity and continuous learning. As of 31st March, 2025, the Company had a workforce of 1050.

Corporate Strengths

• Proven Legacy, Nationwide Accessibility

• Cost-effective Operations

• Best-in-class Quality and Processes

• Technological Expertise

• Global Presence

• Enduring Client Relationships

• Dependable Parentage

OUR FINANCIAL AND OPERATIONAL PERFORMANCE FINANCIAL PERFORMANCE

KEY RATIOS

Cautionary Statement

The Companys Management is responsible for the financial statements in this report, which follow Indias accounting principles. Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward-looking statements within the meaning of applicable securities laws and regulations. The management has attempted to identify such statements using phrases, like, anticipate, estimate, expect, project, intend, plan, and believe. However, such statements are subject to known and unknown risks, and actual results may differ due to changes in the political and economic environment, tax laws, litigation, and other factors. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulation, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors. The management has attempted to identify such statements using phrases, like, anticipate, estimate, expect, project, intend, plan, and believe. However, such statements are subject to known and unknown risks, and actual results may differ due to changes in the political and economic environment, tax laws, litigation, and other factors.