Swaraj Suiting Ltd Management Discussions

ECONOMIC OVERVIEW

Global Economy

The global economy entered 2026 amid elevated geopolitical and trade uncertainty, uneven growth across regions and renewed pressure from energy and commodity markets. According to the International Monetary Funds July 2026 World Economic Outlook Update, global growth is projected at 3.0% in 2026 and 3.4% in 2027, compared with an average of 3.5% during 2024- 25. Growth in advanced economies is projected at 1.7% in 2026, while global headline inflation is expected to rise to 4.7% in 2026 before easing in 2027.

For manufacturing and export- oriented businesses, the operating environment remains sensitive to energy costs, freight, currency movements and changes in trade policy. These conditions increase the importance of cost efficiency, supply- chain resilience and market diversification.

Source: International Monetary Fund, World Economic Outlook Update, July 2026.

India remained one of the faster- growing major economies during FY 2025- 26. According to the Ministry of Statistics and Programme Implementations Provisional Estimates, real GDP grew by 7.7% in FY 2025- 26 compared with 7.1% in FY 2024- 25, while real GDP growth in Q4 FY26 stood at 7.8%.

Growth was supported by domestic demand, investment activity and expansion across the industrial and services sectors. Indias large consumer market, infrastructure investment and established manufacturing base provide a supportive medium- term environment for industrial businesses, including textiles.

Source: MoSPI Provisional Estimates of Annual GDP for FY 2025- 26, released 5 June 2026.

The global textile and apparel industry continues to evolve amid changing sourcing patterns, geopolitical uncertainty, consumer preference shifts and increasing emphasis on sustainability, traceability and technology. Manufacturers are responding through automation, process optimisation, product innovation and greater supply- chain integration.

There is continued expansion in the global apparel and textile market, as important themes surrounding quality, sustainability, innovation and supply- chain diversification continue to influence customer expectations. These trends favour manufacturers that combine manufacturing depth with consistent quality and the ability to develop differentiated products.

Source: Swaraj Suiting Limited, Q4 & FY26 Investor Presentation, May 2026; underlying industry sources cited therein include IBEF, PIB and third- party market research.

Indias textile and apparel industry remains an important part of the national economy, supported by a diversified raw- material base, skilled manpower and capabilities across fibre, yarn, fabrics, processing and apparel. Government publications cite the sector as contributing around 2.3% to GDP, 13% to industrial production and nearly 12% to Indias export earnings.

The industry demonstrated resilience in FY 2025- 26. Indias exports of textiles and apparel, including handicrafts, stood at approximately 3,25,339 crore, registering growth of 1.8% over FY 2024- 25. Cotton textiles accounted for approximately 1,02,427 crore of exports during the year. Government initiatives including PM MITRA, the PLI Scheme for Textiles and the National Technical Textiles Mission continue to support investment, value addition and competitiveness across the sector.

Source: Ministry of Textiles / Press Information Bureau releases dated 21 July 2026 and 28 July 2026; Government of India textile sector overview.

The denim industry continues to evolve with changing fashion preferences, demand for differentiated finishes, increasing product variety and greater emphasis on responsible manufacturing practices. In yarn, integration into spinning can provide manufacturers with greater control over quality, procurement, production planning and product development. Sustainability trends, preference for natural fibres and technological advancements in cotton processing also continue to shape the industry. Indian denim market is estimated to grow at a CAGR of about 8.1% during 2025- 2032, compared with an estimated 7.5% CAGR for the global denim market during 2025- 2030.

Demand drivers include rising disposable incomes, urbanisation, expansion of organised retail and e commerce, brand collaborations and a growing focus on sustainable production practices. In cotton and yarn, India benefits from an established rawmaterial ecosystem and broad manufacturing capabilities, although profitability remains sensitive to cotton availability and prices, energy and freight costs, downstream demand and export- market conditions.

Source: Source: IBEF, PIB, imarc, Grand View Research, MarkNtel, Mordor Intelligence, Data Intel, Bonafide Research, Denimshow

The following SWOT analysis is based on the Companys operating model, FY26 Investor Presentation, audited financial statements and credit- rating rationale. It focuses on factors that are directly relevant to Swaraj Suitings current business profile and growth strategy.

Swaraj Suiting Limited ("Swaraj", "SSL" or "the Company") was incorporated in 2003 and has evolved into an integrated textile manufacturing company engaged in Denim and Cotton finished fabrics and Cotton Yarn. The Company operates across multiple stages of the textile value chain, including spinning, warping, yarn dyeing, weaving, fabric processing and finishing, with manufacturing operations in Bhilwara, Rajasthan and Neemuch, Madhya Pradesh.

The Companys strategy has progressively focused on increasing manufacturing depth, strengthening backward integration and improving control over quality, product development and production planning. The Cotton Spinning Division commenced commercial operations in March 2025 and the Cotton Processing Plant commenced operations in July 2025, further strengthening the integrated manufacturing platform.

Strengthen control across the textile value chain through spinning, processing and backward integration, with a focus on quality consistency, production planning and operating efficiency.

Progressively ramp up recently commissioned capacities and improve utilisation across the manufacturing platform.

Increase participation in differentiated fabrics, value- added yarn and specialised textile applications through product development and process capability.

Advance the proposed spinning expansion and the Advanced Material pilot project to broaden the product mix across conventional and high- performance yarn categories.

FY 2025- 26 marked an important phase in the Companys transition towards a more integrated textile manufacturing model. The ramp- up of spinning and cotton- processing capabilities increased the Companys participation across the value chain and supported a broader product mix.

The Company reported that FY26 performance was supported by improved operational efficiencies, better product mix and strategic cotton procurement. The manufacturing platform continues to be supported by advanced weaving, spinning, dyeing, finishing and testing infrastructure.

The Company delivered strong growth in revenue and profitability during FY 2025- 26. Revenue from operations increased by 38.5% to 576.74 crore from 416.57 crore. EBITDA increased by 52.7% to 111.54 crore, with EBITDA margin improving by 180 basis points to 19.3%. Profit after tax increased by 58.0% to 52.37 crore and net profit margin improved to 9.1%.

Employee benefit expenses increased to 31.67 crore from 16.27 crore, finance cost increased to 30.41 crore from 19.06 crore and depreciation and amortisation increased to 22.51 crore from 11.36 crore, reflecting the larger operating and asset base.

The increase in operating scale was accompanied by higher working- capital deployment. Inventories increased to approximately 235.77 crore from 139.51 crore, primarily due to strategic raw- material procurement and new facility ramp- up. Trade receivables increased to approximately 123.95 crore from 100.86 crore, driven by sales growth, business expansion and strategic credit policy.

CRISIL has characterised the Companys operations as working- capital intensive and has linked elevated inventory requirements partly to the ramp- up of the spinning and cotton- fabric divisions.

The audited financial statements attribute the reduction in the Debt- Equity Ratio to lower dependence on external funds and repayment of loans during the year. The reduction in Net Capital Turnover Ratio is attributed to lower sales in comparison with the level of working capital employed during the year.

During FY 2025- 26, CRISIL Ratings upgraded the rating on the Companys 340 crore bank loan facilities to CRISIL BBB+/Stable from CRISIL BBB/Stable. The rating rationale recognised the improvement in operating performance and expected strengthening of the financial risk profile, while also highlighting working- capital intensity, cotton- price volatility and execution risk relating to upcoming capital expenditure.

The Company recognises that expansion of its manufacturing platform must be supported by capable people, technical skills and operating discipline. As operations have expanded across spinning, weaving, processing and supporting functions, the Company has continued to strengthen capabilities across manufacturing, finance, marketing, compliance and administration.

Employee benefit expenses increased to approximately 31.67 crore during FY26 from 16.27 crore in FY25, reflecting the increase in operating scale.

The textile industry enters FY 2026- 27 with a combination of structural opportunity and nearterm uncertainty. Indias manufacturing depth, domestic consumption, export- market diversification and increasing demand for differentiated and value- added textile products provide a supportive medium- term backdrop. At the same time, cotton and energy prices, freight costs, global demand and geopolitical developments will remain important monitorables.

Swaraj enters this phase with a broader integrated manufacturing platform spanning spinning, yarn dyeing, weaving, fabric processing and finishing.

The Companys priorities are to improve utilisation of recently commissioned capacities, strengthen operating efficiencies, deepen backward integration and increase participation in higher- value product categories.

The proposed spinning expansion, including the Advanced Material pilot project, represents the next step in this strategy and is intended to broaden the product mix across conventional and specialised yarn categories. Growth will continue to be pursued with emphasis on project execution, working- capital discipline and prudent capital allocation.

Statements in this Management Discussion and Analysis describing the Companys objectives, expectations, estimates, outlook, plans or projections may constitute forward- looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to economic conditions, commodity and raw- material prices, market demand, competition, exchange- rate movements, geopolitical developments, regulatory changes, climatic conditions, supply- chain disruptions and other factors beyond the Companys control. The Company assumes no obligation to publicly revise any forward- looking statement except as required under applicable law.