Suryalakshmi Cotton Mills Ltd Management Discussions

N AND ANALYSIS

Industry structure and developments

Economic overview Global economy1

Global economic growth remained resilient in CY 2025 despite geopolitical tensions and trade-related uncertainty. Growth rate was supported by easing inflation and gradual improvement in supply chain conditions across major economies.

Inflation moderated across several regions during the year, although energy-related disruptions and supply- side pressures continued to affect select markets.

Growth trends remained uneven across sectors and regions amid changing trade patterns and supply chain adjustments.

Outlook

Global GDP growth is projected to grow at 3.1% in CY 2026 and 3.2% in CY 2027, supported by demand across emerging markets and gradual improvement in trade activity. However, geopolitical tensions, tariff-related developments and volatility in commodity prices may continue to affect inflation and global trade.

near-term disruptions are expected to ease gradually, although external uncertainties may continue to impact business sentiment.

Indian Economy

Indias GDP expanded by 7.7% in FY 2025-26, accelerating from the 7.1% growth recorded in FY 2024-252. This was supported by domestic demand and continued growth in the services sector. Consumer price inflation moderated to 3.4%3 towards the end of the year.

Government focus remained on infrastructure development, capital expenditure, fiscal discipline and manufacturing-led growth. Policy measures including GST reforms, expansion of the tax base and Production- Linked Incentive (PLI) schemes continued to support economic activity and formalisation.

External factors such as geopolitical developments, trade-related uncertainties, volatility in capital flows and fluctuations in energy prices may continue to influence Indias macroeconomic environment.

Outlook

India is expected to maintain healthy economic growth supported by domestic demand, infrastructure spending and improving "Ease of doing business” and policy- led investments. Continued focus on manufacturing, digitalisation, a general positive outlook for growth and infrastructure development is expected to support economic activity and capacity creation.

GDP growth for FY 2026-27 is projected at 6.6%, demonstrating a stable and broad-based growth outlook.4 Global uncertainties, including geopolitical tensions and supply chain disruptions, may continue to influence the external environment.

Industry Overview Indian Textile Industry5

In FY 2025-26, Indias textile exports, including handicrafts, grew by 2.1% to ^ 3,16,334.9 crores. Ready-made garments remained the largest contributor, increasing from ^ 1,35,427.6 crores to ^ 1,39,349.6 crores, registering growth of 2.9%.

Government initiatives such as PM mITRA, PLI for textiles, export support measures and cotton sector programmes continued to support investments, manufacturing and exports across the textile industry. Trade agreements and policy measures relating to domestic manufacturing and custom duties are also expected to support market access and industry competitiveness.

The textile sector continues to benefit from policy support aimed at improving manufacturing capacity, employment generation and export growth.

Opportunities6

Free Trade Agreements (FTAs)

The growing protectionism, tariff threats and geopolitical realignments have heightened the need for and hastened the conclusion of FTfis in the International Trading world. Some of the significant FTfis concluded by India are with UK, Europe Union, Qatar, Oman, new Zealand, etc. Equally important is the progress achieved in the tariff negotiations with USfi. These FTfis help the Indian exporters to manage global trade uncertainty by lowering tariffs, improving market access and reducing dependence on a single geography. The level playing field with Bangladesh, Vietnam, Cambodia is expected to accelerate sourcing shifts towards India especially for value-added categories. These in-turn are expected to result in a cascading effect on demand for downstream textile products through the supply chain.

Cotton Sector Reforms

The cotton ecosystem supports nearly 6 million farmers along with a large workforce across the value chain. Key initiatives include the Kapas Kisan mobile app for farmer registration and the Kasturi Cotton Bharat programme aimed at improving global acceptance. Furthermore, the governments complete withdrawal of the mandatory Quality Control Order (QCO) and BIS certification requirements for cotton bales brings significant relief to the domestic ginning industry from infrastructure and compliance costs.

Integrated Programme for the Textile Sector

The Union Budget 2026-27 introduced comprehensive measures to build self-reliance and promote environmental responsibility. fi primary component, the national Fibre Scheme, aims to expand domestic capacity across the natural and man-made fibre spectrum to reduce import dependencies. Concurrently, the newly launched Tex- Eco Initiative promotes environmentally sustainable manufacturing and apparel production, aligning directly with the industrys shift toward green energy.

Export and Liquidity Enhancements

To support industry exporters, the government has extended the export obligation period from six months to twelve months for manufacturers using duty-free imported inputs. Additionally, measures to enhance the Trade Receivables Discounting System (TReDS) have been introduced to improve liquidity access for textile mSmEs, enabling smoother cash flow operations and production cycles.

Sustainability and Circularity Initiatives

Collaborative programmes promoting circular practices and upcycled products are gaining traction. These initiatives aim to integrate sustainability into procurement and production processes.

Labour Reforms

Unified framework covering wages, working conditions, safety and social security. This is expected to streamline compliance and improve overall workforce conditions in the sector.

Goods and Services Tax (GST) 2.0

Rationalisation of GST in 2025 has contributed to cost efficiencies, provided relief to manufacturers and encouraged higher exports and employment.

Challenges

Dispersed Value Chain

Geographical dispersion across spinning, processing and garmenting operations continues to increase logistics costs and lead times.

Trade and Tariff Barriers

Elevated import duties in key export markets continue to affect competitiveness, prompting some manufacturers to consider alternative production locations.

Evolving Global Compliance Requirements

Stringent sustainability and traceability requirements in developed markets are increasing compliance costs, particularly for smaller enterprises.

Raw Material Availability

Variability in domestic cotton supply has led to firm input prices, creating cost pressures across the value chain.

Cost Competitiveness

Higher energy, logistics and production costs compared to competing countries continue to affect margins.

Indian Denim Industry

Indias denim industry continued to grow during FY 2025-26, supported by rising disposable incomes, urbanisation and increasing preference for casual wear. The market was valued at around USD 1.2 billion in 2025 and is projected to reach nearly USD 1.9 billion by 2034, indicating steady medium-term growth.

Demand continues to be supported by a young consumer base, expansion of organised retail and increasing penetration of e-commerce platforms across urban and semi-urban markets. Growing preference for premium products, differentiated finishes and improved fabric quality is also influencing product trends.

Manufacturers are focusing on product innovation, efficient processing technologies and recycling practices to address changing consumer preferences and regulatory requirements. The industry caters to mass, premium and luxury segments, with applications primarily concentrated in apparel.

Opportunities

Global Sourcing Diversification

Changes in sourcing strategies by global brands may create opportunities for India to expand its presence in textile and denim exports.

Strong Manufacturing Ecosystem

Presence across spinning, fabric and apparel manufacturing supports value addition and response to market requirements.

Value Addition through Forward Integration

Movement towards finished apparel manufacturing allows companies to capture higher value within the supply chain and expand their role beyond fabric supply.

Sustainability-Led Demand

Increasing preference for environmentally responsible products is supporting demand for resource-efficient manufacturing and certified supply chains.

Product Innovation and Premiumisation

Improvement in fabric quality, finishes and product offerings is supporting participation in premium segments and export markets.

Market Diversification

Diversification across export markets and growth in domestic consumption continue to support industry demand.

Domestic Demand Expansion

Rising consumption supported by changing fashion preferences and increasing adoption of denim as an everyday wear category provides a steady base for industry growth.

Technology and Process Upgradation

Adoption of automation, digital tools and modern processing technologies is improving operational efficiency and production capabilities.

Challenges

Volatility in Raw Material Costs

Fluctuations in cotton prices and input costs continue to affect cost structures and margins across the textile value chain.

Intense Export Competition

Competition from lower-cost manufacturing countries and duty-related factors in export markets continue to affect price competitiveness.

Environmental Compliance Requirements

Compliance with water management and effluent treatment requirements involves ongoing capital and operating expenditure.

Presence of Unorganised Segment

The fragmented unorganised sector continues to account for a large share of volumes, competing on price and affecting margins stability for organised players.

Technology and Product Evolution Constraints

Need for product diversification and adoption of advanced processing technologies remains important to address changing market requirements.

Company Overview

Suryalakshmi Cotton Mills Limited manufactures yarn and denim products for domestic and export markets. With over six decades of operations, the Company supplies products to fashion brands, private labels and retail chains across 29 countries. Its manufacturing facilities in Telangana and Maharashtra support yarn and denim production through spinning, processing and fabric manufacturing operations.

The Company operates as an Original Denim Manufacturer (ODM) and offers a portfolio of yarn and denim products across varied applications. Operations are supported by in-house product development, design capabilities and automated manufacturing processes. The Company has developed over 3,000+ denim variants and continues to focus on product development, operational efficiency and timely execution.

The Companys operations are aligned with the ‘Make in India initiative and applicable quality, safety and environmental requirements.

The Companys presence across yarn and denim fabric manufacturing enables greater control over quality, production efficiency and supply chain management.

Established Position in the Denim Business

A well-developed denim manufacturing ecosystem supports the Companys presence in domestic and international markets, catering to diverse customer requirements.

Diversified Product Portfolio

The Company offers a broad range of cotton, blended, and value-added yarns along with denim fabrics, supporting business resilience across market cycles.

Value-Added Product Capabilities

The Companys ability to manufacture specialized yarns and differentiated textile products enhances its market positioning and product mix.

Manufacturing Infrastructure and Operational Expertise

Decades of industry experience, supported by modern manufacturing facilities, state-of-art machineries, enable efficient operations and consistent product quality.

Certifications

The Companys manufacturing operations comply with recognised quality, environmental and product standards.

Key certifications include

• Better cotton chain of custody standard V1.0 Single Site Certification

• Sedex (SMETA) Version 7

• ISO 14001:2015

• ISO 9001:2015

• Global Organic Textile Standard (GOTS) Version 7.0

• Global Organic Textile Standard (GOTS) Version 7.0

• Global Recycled Standard (GRS Version 4.0).

• Organic Content Standard (OCS Version 3.0)

• Recycled Claim Standard (RCS Version 2.0)

• Oeko-Tex Standard 100

• Regenagri Chain of Custody

Criteria -Textiles Version 1.2

The Company also undergoes periodic social and environmental compliance audits by independent agencies in line with customer requirements across export markets, including the United States and Europe.

Product Wise Performance

The Company develops yarn and denim products for domestic and export markets based on customer requirements and market trends. Its portfolio includes over 3,000 denim variants supported by product development, design and manufacturing capabilities.

Operations cover yarn manufacturing and denim fabric production, supported by process controls and coordinated execution across sourcing, production and delivery functions. The Companys operations are aligned with the ‘Make in India initiative.

Yarn

The Companys Yarn business focuses on specialised, premium and value-added yarns catering to domestic and export markets. Supported by advanced spinning infrastructure and strong product customisation capabilities, it manufactures a wide range of cotton, polyester, blended and recycled fibre yarns, including speciality offerings such as slub, compact, core-spun and fancy yarns for diverse fashion and functional applications.

Raw materials are sourced through certified channels, while quality checks and monitoring systems across manufacturing stages help ensure product consistency and performance. Long-standing customer relationships and an increasing focus on sustainable yarn solutions continue to support the growth of the business.

Denim

The Company manufactures denim fabrics for domestic and export markets through an integrated manufacturing ecosystem encompassing dyeing, weaving and finishing operations. With decades of experience in denim manufacturing, it offers a diverse portfolio of rigid, stretch, coated, yarn-dyed and washed denim fabrics across varied weights, finishes and applications.

Fabric development is guided by evolving customer requirements, supported by advanced dyeing and finishing technologies, modern manufacturing facilities and resource-efficient processes. The integrated setup enables the Company to serve multiple product categories and market segments while delivering high-quality denim solutions that combine durability, comfort and style.

Discussion on Financial Performance with respect to Operational Performance

in Lakhs)

Particulars	FY 2025-26	FY 2024-25
Revenue From Operations	79,471.80	79,176.46
EBITDA	5,438.33	5,796.9
PBT	482.45	552.24
PAT	311.54	363.32

Key Ratios

Particulars	FY 2025-26	FY 2024-25	Reasons Details of significant changes (i.e. change of 25% or more as compared to the immediately previous Financial Year) in key financial ratios
Debtors turnover ratio (in times)	4.44	4.35	-
Inventory turnover ratio (in times)	3.67	3.68	-
Interest coverage ratio (in times) (including Debt repayment)	1.82	1.69	Improvement in operating profitability and reduction in finance cost
Current ratio (in times)	1.31	1.27	-
Total debt equity ratio (in times)	0.95	1.05	-
Operating profit margin (in %)	4.37	5.02	-
Net profit margin (in %)	0.39	0.46	-
Return on net worth (in %)	1.14	1.35	-

Outlook

The textile industry is expected to show a positive growth, supported by the growing demand for value- added products, increasing preference for sustainable textiles and expanding opportunities across domestic and international markets. Rising demand for premium denim fabrics, specialised yarns and faster product development cycles is expected to create opportunities for integrated manufacturers with strong operational and product development capabilities.

Going forward, Suryalakshmi will continue to focus on strengthening its portfolio of premium yarns and denim fabrics, enhancing manufacturing efficiencies and expanding its presence across key markets. Through investments in innovation, product development and sustainable manufacturing practices, the Company aims to drive long-term growth while delivering solutions aligned with evolving customer and industry requirements.

Risk and Concerns

The Company has a risk management framework for identification, assessment and monitoring of operational, financial, regulatory and business risks. The Risk Management Committee periodically reviews key risks, mitigation measures and related policies.

The framework includes periodic risk assessment, monitoring of critical business parameters and implementation of corrective measures, wherever required. The Company also evaluates environmental and social risks as part of its overall risk assessment process.

Sustainable Practices

Sustainability is integrated into the companys manufacturing approach, with a focus on balancing business growth with environmental responsibility. Through its integrated operations, the Company continues to improve resource efficiency, optimise energy and water usage and strengthen waste management practices. Guided by its 3R framework - Reduce, Replace and Recycle Suryalakshmi promotes responsible resource utilisation and cleaner production processes across the value chain.

The Company continues to focus on reducing greenhouse gas emissions, improving energy efficiency and adopting cleaner technologies to support lower-carbon operations. Water conservation initiatives, advanced effluent treatment systems and waste minimisation measures remain important areas of focus as the Company works towards building more sustainable manufacturing operations.

Human Resources

People remain central to the growth journey. The Company strives to provide a workplace built on respect, equal opportunity, safety and well-being while supporting continuous learning and professional development. Regular training programmes, skill development initiatives and employee engagement activities help strengthen workforce capabilities and preparedness.

Employee welfare is supported through health and hygiene programmes, transportation facilities, accommodation support for women employees and wellness initiatives such as yoga camps and sports participation. Alongside this, workplace safety measures, including protective equipment, fire safety systems and safe handling practices, contribute to a secure working environment. The Company also continues to encourage greater participation of women across its workforce, supporting a more inclusive workplace.

Internal Control Systems and their Adequacy

Suryalakshmi Cotton Mills has implemented a robust internal control system to ensure the efficiency and effectiveness of operations, accurate financial reporting and compliance with laws and regulations. The Company has established comprehensive policies and procedures for all major business processes, including management, human resources, procurement and inventory management. Regular audits are conducted by internal auditors to monitor compliance with these policies and procedures and to identify areas for improvement. The Company also maintains a system of checks and balances, including the segregation of duties and clear lines of authority and responsibility. Through these measures, Suryalakshmi Cotton Mills aims to minimise the risk of fraud, errors and other financial irregularities and to foster transparency and accountability throughout the organisation.

Cautionary Statement

This report on Management Discussion and Analysis includes forward-looking statements, which are predictions, expectations, projections or estimates about the Companys objectives. These statements are based on certain assumptions and expectations of future events. However, actual results may differ from these statements due to various factors such as changes in government regulations, tax laws and other statutes. Additionally, unforeseen events such as force majeure could affect the actual result. It is important for readers to understand the context in which these statements are made and that they may not reflect future outcomes accurately.

Disclosure of Accounting Treatment

The Company Financial Statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of Companies (Indian Accounting Standards) Rules, 2015 as amended and requirements of Regulation 33 of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 as amended.