Suryalakshmi Cotton Mills Ltd Management Discussions

Industry Structure & Developments

Economic Overview Global Economy¹

The global economy has shown remarkable strength despite persistent geopolitical tensions, changing trade patterns and adjustments in monetary policies, maintaining a growth rate of 3.3%. The US economy witnessed considerable growth. This growth was directed by a robust corporate sector and elevated employability. In contrast, the Europe faced stagnation, particularly in Germany, where economic growth was constrained by sluggish manufacturing and weak export performance. Heightened foreign investments and a robust domestic demand facilitated the growth in emerging markets, which outpaced the growth in developed economies, achieving a growth rate of 4.3% compared to 1.8% in advanced nations. The economy of China exhibited a 5.0% growth which was below expectations.

A key element contributing to global economic stability has been the notable reduction in inflation. Global inflation decreased from 6.6% in CY 2023 to 5.7 in CY 2024, stabilising prices and encouraging economic activity. This disinflation trend was supported by proactive monetary policies and stable energy supplies, which enhanced business confidence and maintained economic momentum.

The global economy is projected to sustain a growth rate of 2.8 % in CY 2025 and 3.0 in CY 2026, driven by continued accommodative monetary policies aimed at maintaining price stability, stimulating economic activity and enhancing employment. However, uncertainties stemming from reciprocal tariffs imposed by the US on its imports are disrupting global trade dynamics, leading to increased costs, supply chain disruptions and heightened risks of recession. In response, global leaders are actively engaging in diplomatic efforts, forming trade alliances and pursuing strategic negotiations to ease these tensions and stabilize international trade. As these uncertainties begin to subside, inflationary pressures are expected to moderate, with global headline inflation projected to decline to 4.2% in CY 2025 and further to 3.5% in CY 2026.

Indian Economy²

Indias economy remains a major contributor to global growth, registered a growth rate of 6.5% GDP in FY 2025.³ This strong performance was driven by rising rural demand, increasing foreign investments and supportive government policies that encouraged both consumption and investment. The services sector contributed significantly, supported by higher consumer activity, while manufacturing remained a key growth pillar. Inflation eased slightly, though elevated food prices continue to pressure household spending. The textile sector benefited from steady domestic consumption and resilient exports of Ready-Made Garments (RMG) and cotton yarn, despite global headwinds.

Indias textile exports including cotton yarn, fabrics and RMG have shown resilience amid global trade volatility. However, the sector faces hurdles from rising input costs and weak external demand. The governments Production-Linked Incentive (PLI) scheme has helped improve the industrys global competitiveness, offering necessary support to counter these challenges.

India is well-placed to maintain its growth trajectory, supported by cooling inflation, which is expected to revive consumer sentiment and boost spending. Continued infrastructure investments and capital expenditure by the government are expected to drive sectoral expansion. However, newly imposed U.S. tariffs may impact exports, especially given the $129.2 billion trade volume in 2024. While a trade deficit of $45.7 billion persists for the U.S., ongoing bilateral discussions signal optimism. Backed by strong foreign reserves, prudent fiscal measures and stable policy frameworks, India is set to enhance its position in the global economic landscape.

Industry Overview

Indian Textile Industry

In FY 2024-25, Indias textile and apparel exports, including handicrafts, grew by 7% during April-October 2024, reaching $21.358 billion, with ready-made garments contributing 41% of the total growth.⁴

The government has launched several initiatives aimed at enhancing the productivity and sustainability of the textile sector. Initiatives such as the PM MITRA Park Scheme, focus on the creation of integrated textile parks to streamline the value chain right from spinning to manufacturing. This scheme, with an outlay of _4,445 crore, aims to establish seven modern textile parks to facilitate technological advancements and improve infrastructure. These parks are expected to heighten innovation and attract investment, establishing India as a global hub for textile manufacturing. Further, the government has introduced the Production-Linked Incentive (PLI) Scheme to promote Man-Made fibre (MMF) apparels and technical textiles.

The Cotton Mission launched by the government is aimed at revitalising Indias cotton sector by boosting productivity and encouraging sustainable practices among farmers. Alongside, the revision in customs duties on imported fabrics aims to shield domestic manufacturers from cheap imports and promote local production. ⁵These policy changes are expected to support textile hubs across India and foster a competitive domestic market. As India aspires to become a global textile leader, continued collaboration between the government, industry stakeholders and farmers will be key to enhancing production and integrating sustainability and advanced technologies within the sector.

As India continues on its journey towards becoming a global leader in textiles, collaboration between government bodies, industry stakeholders and farmers will be crucial. The initiatives undertaken aim to augment production and elevate the integration of sustainability and advanced technologies within the sector.

Opportunities

Increased Government Allocation

The Indian government has raised its budget allocation for the textile industry to _4,417 crore for FY 2024-25, a 28.29% increase from the previous year. This funding is directed towards central schemes and projects, enhancing infrastructure and support for the sector.⁶

PM MITRA Parks Development

The establishment of seven PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks is underway, with an investment potential exceeding _18,500 crore. These parks will provide world-class infrastructure and are expected to enhance production efficiency and attract foreign investment.⁷

Focus on Technical Textiles

The demand for technical textiles is witnessing a rise owing to their application in various sectors such as healthcare and automotive. Government initiatives are promoting the development of engineered fabrics. This presents a lucrative opportunity for manufacturers to innovate and capitalise on the market demand.

Sustainability Initiatives

There is a growing emphasis on sustainability within the textile sector, with heightened demand for organic cotton and eco-conscious practices. This trend is bolstered by government policies encouraging the integration of sustainable production methods, which further enables companies to stay aligned with global sustainability objectives.

Digital Transformation

The textile industry is embracing advanced digital technologies such as Artificial Intelligence (AI) and heightening automation to optimise operational efficiency and quality control. This digital transformation presents opportunities to companies to innovate processes and elevate customer engagement through e-commerce platforms.

Challenges

Overdependence on Cotton

Indias textile sector has traditionally focused on cotton, whereas globally, Man Made Fibers (MMF) consumption is dominant, constituting 77% of global fibre consumption in 2024. This reliance on cotton limits Indias competitiveness in international markets, highlighting the need for India to diversify and enhance MMF production.

Industry Fragmentation and Scale Limitations

The dominance of Micro, Small and Medium Enterprises (MSMEs) in the textile sector restricts scalability and operational efficiency. This fragmentation leads to increased logistical costs and hinders the industrys ability to effectively compete on a global scale.

Limited Foreign Direct Investment (FDI) and Technological Constraints

The influx of Foreign Direct Investment (FDI) has been relatively low in the sector. This hampers technological advancements and results in a reliance on imported textile machinery. This dependence hinders modernisation of the sector and its ability to compete with technologically advanced global counterparts.

Regulatory and Policy Challenges

Complex bureaucratic procedures and pre-shipment inspection certificates hinder the growth of textile exports. These bureaucratic hurdles elevate costs and slow down logistics, creating further challenges for Indian exporters to compete with their global counterparts.

Indian Denim Industry

The Indian denim industry achieved notable expansion in recent years, directed by factors such as, rising disposable incomes, heightened fashion consciousness and rapid urbanisation.

SustainabilityhasbecomeadefiningtrendwithintheIndian denim sector. Consumers are increasingly prioritising eco-conscious products. This shift is prompting manufacturers to adopt practices such as, utilisation of organic cotton, recycled fibres and water-saving technologies. Brands are launching collections that emphasise reduced environmental impact and are aligned with the global movements towards conscious consumerism and the Indian Governments green initiatives. The premium and designer denim segments are witnessing notable growth, fuelled by a burgeoning middle class with higher disposable income and a fashion-conscious youth. Consumers are seeking high-quality, stylish denim products that offer both comfort and alignment with global fashion trends. This shift has led to increased traction for brands which offer innovative designs and superior quality, particularly in urban areas.

Despite its growth, the Indian denim industry faces multiple challenges, which include price sensitivity among consumers and competition from global brands. A Balance between quality and affordability remains crucial, especially in tier-2 and tier-3 cities where budget-conscious consumers dominate the market. Additionally, international brands entering the Indian market pose competitive risks, necessitating differentiation through unique designs, superior quality, or enhanced customer service.

Opportunities abound in the Indian denim market, particularly with the growing middle class and rapid urbanisation. As disposable incomes rise, more consumers are embracing denim as a fashion staple. The expansion of e-commerce further facilitates access to a broader consumer base, including those in remote areas, enhancing the markets reach and potential.

Innovation remains a foundation for the industrys future. Manufacturers are exploring advancements such as smart fabrics with UV protection and moisture-wicking properties, adopting automation and digitisation to streamline production. These technological advancements are poised to augment product quality and consumer experience and establish India as a competitive player in the global denim market.

By focusing on innovation, adopting eco-friendly practices and leveraging opportunities in both domestic and international markets, the industry can further solidify its position as a global leader in denim production and fashion.

Opportunities and Challenges

Opportunities

Sustainable Production Practices

With increasing global emphasis on environmental responsibility, Indian denim manufacturers are adopting eco-friendly methods, such as utilisation of organic cotton, eco-friendly dyes and water-saving technologies. This shift not only meets consumer demand for sustainable products but also positions India as a leader in green textile manufacturing.

Customisation and Personalisation

Theres a growing consumer preference for personalised denim products. Indian brands offering customisation options, such as tailored fits and unique designs, can cater to this demand, garnering customer loyalty and differentiating themselves in the market.

Expanding Export Markets

Indias textile sector is experiencing increased demand from international markets; particularly as global retailers seek alternatives due to disruptions in other manufacturing hubs. This trend opens avenues for Indian denim exporters to strengthen their presence globally.

Government Support and Policy Initiatives

The Indian government is implementing measures to boost the textile industry. These measures include financial support, tariff reductions on key inputs and incentives for local production. Such policies enhance the competitiveness of Indian denim manufacturers both domestically and internationally.

Challenges

Intense Competition

Indian denim manufacturers face stiff competition both domestically and internationally. Countries such as China, Bangladesh and Vietnam benefit from lower production costs and more structured manufacturing capabilities, posing significant challenges for Indian producers. To remain competitive, Indian manufacturers focus on innovation, pricing strategies and quality enhancement.

Fluctuating Raw Material Costs

Cotton, the primary raw material for denim, experiences price volatility due to factors such as weather conditions, pest infestations and global market fluctuations. These inconsistencies affect the final products pricing and can impact profitability for manufacturers.

Environmental Concerns

Denim production is resource-intensive, requiring substantial amounts of water, chemicals and energy. This leads to environmental issues like water depletion, soil contamination and high energy consumption. Adopting sustainable manufacturing practices is essential to mitigate these impacts and capitalise on the growing consumer demand for eco-friendly products.

Technological Limitations among Small Manufacturers

Smaller denim producers often lack access to advanced technology and automation, resulting in higher labour costs and lower production efficiency. This technological gap hinders their ability to compete with larger, more automated manufacturers, leading to challenges in meeting the demand and maintaining product quality.

Company Overview

Suryalakshmi Cotton stands as one of Indias premier integrated manufacturers, specialising in premium yarn and denim production. With a legacy spanning six decades, the Company has established itself as a key Original Denim Manufacturer (ODM) for renowned global and domestic brands, commanding a significant share in the premium denim segment. Equipped with state-of-the-art spinning technology, advanced design capabilities and fully integrated manufacturing facilities, it crafts high-quality yarn and denim for top private labels, fashion brands and retail chains across worldwide.

With presence across the entire value chain from yarn production to denim fabric manufacturing, the Company leverages insights to predict economic trends and industry shifts, enabling proactive decisions. Established in 1962, the Company has a vertically integrated business, leveraging decades of expertise in spinning and denim production. With a focus on automation, precision controls and future-ready technology drives sustainable, profitable growth aligned with responsible business practices. The company has developed over 3000 high-quality denim variants and ensures quick turnaround while maintaining strict sustainability and compliance standards.

As a key player in Indias ‘Make in India initiative, Suryalakshmi Cotton aims to position India as a global hub for denim manufacturing. Its spinning mills in Telangana and Maharashtra support fully integrated operations that ensure high sales realisations per meter through efficient forward and backward integration. With international design expertise and trend-focused offerings, the company continues to strengthen its dominance in premium yarn and ODM segments. It upholds high standards of health, safety and environmental regulations, demonstrating a firm commitment to ethical and sustainable practices.

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Countries worldwide presence.

Core Strengths

Certifications

The Company is dedicated to wining customer trust and loyalty by consistently delivering top-tier products that meet the clients expectation of value and performance. Through advanced and automated manufacturing facilities, along with specialised denim finishing processes, the company ensures superior product standards. By actively listening to and learning from customers, Suryalakshmi Cotton drives continuous improvements in its processes, products and services to maintain alignment with evolving customer needs.

The Companys manufacturing operations has earned Certifications in areas such as, quality, health and safety, environment and ethical areas.

Some of them are:

ISO 14001:2015 Certification

ISO 9001:2015 Certification

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

RegenagriChainofCustodyCriteria–TextilesVersion1.0

As part of the adherence protocols for USA and European clients such as VF Corporation and Levis, the Company guarantees compliance with social and environmental assessment audits conducted by third-party auditors.

Product Wise Performance

The Company collaborates extensively with global fashion brands to swiftly bring innovative yarns, denim and fabrics to the market. Working closely with design, sourcing and production teams of both international and local clients. It has developed 3000 specialised high-quality denim variants with rapid production turnaround times. Upholding high standards of innovation, design and service from yarn creation to denim fabric. The Company aligns with ‘Make in India initiative and aims to establish itself as a global leader in denim manufacturing.

Yarn

The Company specialises in producing high-performance cotton, polyester and blended yarns for both export and domestic markets, as well as its denim division. By leveraging advanced R&D capabilities and an in-depth understanding of raw materials, the company develops specialty and functional yarns with optimised properties. Utilising cutting-edge technology and machinery from global suppliers, it focuses on modernisation and automation to stay aligned to emerging trends in yarn technology and fashion.

The spinning operations are equipped with advanced machinery to produce a diverse range of yarns, including polyester cotton, synthetic and fancy yarns. These facilities utilise cutting-edge technologies such as Amsler Slub, Core Spun systems and Eli Twist for compact yarns, ensuring high-quality production tailored for denim manufacturing. The plants are strategically located in different regions and are designed to accommodate specialised processes for producing value-added yarns like Ring Spun, Open End, Core Spun, Slub and Compact varieties.

The infrastructure supports significant production capacity across multiple units, enabling efficient output of premium yarn products. These operations are complemented by stringent quality control measures and innovative spinning techniques to meet evolving industry demands while maintaining sustainability and adhering to environmental standards.

Denim

Over the last three decades, the Company has expanded into denim cloth manufacturing as part of its forward integration strategy. The company operates a state-of-the-art, fully integrated fabric production facility in Ramtek, Nagpur, Maharashtra, with an annual capacity of 40 million meters, enables it to achieve one of the highest per meter sales price realisations in the industry.

The Company fabric development process is customer-centric, focused on custom-engineering of extensive variety of finish chemistries to meet diverse fabric requirements. Equipped with advanced dyeing, weaving and finishing technologies, the company has delivered over 3000 specialty denim fabric varieties to customers worldwide.

Discussion on financial performance with respect to operational performance

(Rs. in Lakhs)

Particulars	FY 2024-25	FY 2023-24
Revenue From Operations	79,176.46	78,240.81
EBITDA	5,574.21	5,424.73
PBT	552.24	622.42
PAT	363.32	360.75

Key Ratios

			Reasons
Particulars	FY 2024-25	FY 2023-24	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)	4.35	4.84	-
Inventory turnover ratio (in times)	3.68	4.19	-
Interest coverage ratio (in times) (including Debt repayment)	1.33	0.88	Improved due to lower repayments during the current Financial Year.
Current ratio (in times)	1.27	1.25	-
			Reasons
Particulars	FY 2024-25	FY 2023-24	Details of significant changes (i.e. change of 25% or more as compared to the immediately previous Financial Year) in key financial ratios
Total debt equity ratio (in times)	1.05	0.85	-
Operational profit margin (in %)	4.74	4.62	-
Net profit margin (in %)	0.46	0.46	-
Return on net worth (in %)	1.35	1.36	-

Outlook

Considering the international scenario throwing up new challenges at regular intervals, the Company has been trying to partner with a couple of more European brands to spread the risks in future. The Company proposes to explore new markets like South America, Egypt, Indonesia, and South Korea while making every effort to increase business with existing brand leaders like WalMart, Levis, Kontoor, and Amazon. Further the Company relentlessly pursues the sustainability initiatives undertaken. The company continues to offer unique product mix and excellent service support as always.

Risk and Concerns

The Company places significant emphasis on risk management and recognises it as a critical component of its operations. A robust framework is in place to identify, assess and address risks across all business areas. This framework includes regular risk evaluations, monitoring of essential indicators and the development of strategies to mitigate identified risks. Additionally, a dedicated Risk Management Committee, comprising senior executives, supervises this framework. The committee regularly reviews policies and procedures while providing guidance to the management team on risk-related issues.

In line with sustainability objectives, the Company systematically assesses environmental, social and governance risks to ensure responsible and sustainable business practices. Through diligent risk management, the Company not only reduces potential negative impacts but also enhances its ability to achieve strategic goals.

Sustainable Practices

Suryalakshmi weaves sustainability practices into its day-to-day production processes by trying to conserve vital resources, reducing our reliance on chemicals, energy, and water while cutting down on maintenance requirements. The Companys integration of CleanKore technology, which not only allows for environmentally responsible dyeing but has also enabled us to roll out exciting new product lines that are gaining strong customer traction.

Under its responsible manufacturing initiatives, the Company incorporates sustainable practices that transform denim production. It prioritises minimised waste production throughout the denim manufacturing process and optimal use of natural resources. The goal is to recycle all feasible resources, including water and chemicals.

Following the 3 R Concept of Reduce, Replace and Recycle, the Company:

Conserves water and decrease the generation of chemical waste

Substitute harmful substances with eco-friendly options

Recycles all feasible resources, including water and chemicals.

Waste

The Company strives to minimise waste throughout the denim value chain. By implementing effective effluent management systems that achieve zero discharge the Company is dedicated to preventing hazardous substances from being released into the environment. Ultimately, the long-term goal is to produce denim fabrics and products with zero waste.

We are committed to sustainability by reutilizing waste in our products through the recycling of polyester and cotton, thereby offering our customers eco-friendly recycled products. Notably, we have transitioned all synthetic fabrics in our denim line to recycled polyester.

Water

Water stewardship is an essential part of responsible manufacturing strategy and working to design denim manufacturing and post-manufacturing value-added processes that require less water to reduce water-related impact.

We closely monitor our water usage and take proactive measures to reduce consumption in both the short and long term. As part of our commitment, we are actively engaged in the Indigood certification program, through which we have successfully reduced our freshwater usage by 50% and progressed from the Bronze to the Silver category.

Climate

Climate change poses a key challenge to the business, industry and planet today. The Company is working to reduce the carbon footprint by minimising greenhouse gas emissions across the denim operations.

As part of our efforts to monitor and reduce carbon emissions, we participate in the Higg audits. Consistent with previous years, we have continued to improve our Higg scores, ranking within the top 10% of the industry.

Energy

Saving electricity is a key priority for our Company, as it not only supports our sustainability goals but also helps in reducing costs. We continuously optimize energy consumption by investing in advanced technologies and re-engineering products to achieve higher efficiency. In line with our commitment to cleaner energy, we have significantly enhanced our solar capacity, increasing it from 3.5 MW to 6 MW.

Human Resources

The Company places utmost importance on safety, recognizing it as a fundamental responsibility of every manufacturing organization. Aligned with its broader vision, the Company is committed to fostering employee well-being by ensuring a safe, secure and comfortable work environment. Quality measures include maintaining a healthy and safe workplace, providing protective gear, implementing fire safety protocols and safeguarding against hazardous materials. Furthermore, the Company emphasizes employee welfare by cultivating an inclusive and empowering environment that enhances the lives of factory workers. Key initiatives supporting this commitment include health and hygiene programs, learning and development opportunities and facilities for women employees, reflecting a holistic approach to workforce and community development.

Internal Control

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.

ANNEXURE - VI Statement of particulars as per Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

(i) The ratio of the remuneration of each Director to the median remuneration of the employees of the company for the financial year ended 31^st March, 2025;

NAME OF THE DIRECTOR	RATIO OF THE REMUNERATION TO THE MEDIAN REMUNERATION OF THE EMPLOYEES
1. Sri L. N. Agarwal	36.75
2. Sri Paritosh Agarwal	33.07

(ii) The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year.

NAME OF THE DIRECTOR	PERCENTAGE OF INCREASE IN REMUNERATION
1. Sri L. N. Agarwal	NIL
2. Sri Paritosh Agarwal	NIL
3. Sri E. V. S. V. Sarma	6%
4. Sri B. M. Vijaya Kumar (upto 17/10/2024)	NIL
5. Sri Santosh Kumar Agarwal (from 01/01/2025)	6%

(iii) The percentage increase in the median remuneration of employees in the financial year;

9.3%

(iv) The number of permanent employees on the rolls of company;

There are 2274 employees on the rolls of the Company.

(v) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;

NOT APPLICABLE

(vi) Affirmation that the remuneration is as per the remuneration policy of the Company.

The remuneration paid to the Key Managerial Personnel is as per the Remuneration Policy of the Company.

	For and on behalf of the Board
	L. N. Agarwal
Place: Secunderabad	Chairman & Managing Director
Date: 27th May, 2025.	(DIN : 00008721)