True Colors Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

The global economy proved resilient through 2026, absorbing significant shocks even as growth eased from the pace of the preceding two years. World output is projected to expand by 3.0% in 2026 and 3.4% in 2027, down from the 3.5% average recorded across 2024 and 2025. Growth is being shaped by two opposing forces: the supply shock arising from conflict in the Middle East, which has weighed on energyimporting and vulnerable economies, and a demand-led upswing in the global technology cycle driven by investment in artificial intelligence.

Advanced economies are expected to record only modest expansion, while emerging market and developing economies are projected to grow by 3.8% in 2026, with India remaining among the fastest-growing major economies and Chinas momentum easing towards 4.6%. Global headline inflation is projected to edge up to 4.7% in 2026 as the earlier disinflation trend paused, keeping central banks cautious and slowing the pace of monetary easing across most jurisdictions. Trade policy has remained a central source of uncertainty, with shifting tariff regimes and wider geopolitical fragmentation influencing investment and supply-chain decisions worldwide. Persisting geopolitical tensions, elevated public debt and the risk of renewed trade frictions continue to temper the outlook, even as resilience in private consumption and services, together with easing financial conditions in several economies, lends a measure of stability.

Source: IMF, World Economic Outlook Update, July 2026

INDIAN ECONOMY

India retained its position as the fastest-growing major economy during the year under review, with real GDP estimated to have grown by 77% in FY2025-26 under the revised 2022-23 base-year series, up from 7.1% in FY2024-25, supported by a 7.8% expansion in the fourth quarter. Nominal GDP is estimated to have grown by close to 9%, with manufacturing and services acting as the principal drivers and private consumption and fixed investment each expanding by more than 7.5%. Growth was underpinned by resilient domestic demand, sustained government capital expenditure and easing inflation, even as global trade uncertainty and external tariff pressures posed headwinds. Retail inflation moderated over the course of the year, creating room for a more accommodative monetary stance and supporting household consumption. The external position remained broadly stable, while continued policy emphasis on infrastructure, domestic manufacturing and the formalisation of the economy lent further support to activity. Official estimates place growth for FY2026- 27 in a range of 6.8% to 7.2%, indicating continued, if moderating, momentum into the coming year.

Source: MoSPI, Provisional Estimates of Annual GDP FY2025- 26 (June 2026); RBI; Economic Survey 2025-26.

INDUSTRY OVERVIEW Global Digital Textile Printing

Digital textile printing remains one of the fastest-expanding segments of the wider textile printing industry, as brands and manufacturers move away from conventional screen and rotary printing towards on-demand, design-flexible and water-efficient production. The global market was valued at USD 3.89 billion in 2025 and is forecast to reach USD 14.13 billion by 2035, growing at a compound annual growth rate of 13.77%, with the market estimated at USD 4.45 billion in 2026. Growth is being propelled by the rise of mass customisation and fast fashion, shorter production cycles, and a pronounced shift towards sustainable, low-water printing methods. Technological progress has been rapid, with singlepass systems now operating at speeds of 90 to 100 linear metres per minute, compressing design-to-shelf lead times from weeks to days. By ink type, sublimation continues to account for the largest share of consumption, while direct- to-fabric remains the dominant printing process; apparel and home decor together represent the bulk of end-use demand. Asia-Pacific remains the centre of gravity for the industry, reflecting its concentration of textile manufacturing capacity and accelerating adoption of digital technologies.

Indian Digital Textile Printing

Within the Asia-Pacific region, India has emerged as a key growth market for digital textile printing, with the domestic market projected to expand at a compound annual growth rate of about 13% between 2023 and 2033, underpinned by the strength of the countrys textile sector and its established mill clusters. India already hosts over 1,000 digital fabric printing units, a base expected to widen considerably over the forecast period. The rapid adoption of dye-sublimation printing on polyester, at printing speeds of 15,000 to 20,000 square metres per day, has been a significant driver, supported by the technologys cost-efficiency, durability and quick turnaround relative to conventional methods. Demand is further reinforced by integrated textile hubs such as Surat, Tiruppur and Ludhiana, and by a younger, design-oriented consumer base favouring customised and fast-moving fashion. Direct- to-fabric leads the domestic printing-process mix, while the higher capital cost of digital machinery relative to traditional printing, and the need for skilled operators, remain adoption challenges that the industry is progressively addressing.

Source: Textile Insights, Indias Digital Textile Printing Market (2023-2033)

Digital Printing Inks Market Overview

Inks are a recurring consumable integral to the digital textile printing value chain, and the digital textile printing ink market has grown in step with printing adoption. The global market was valued at approximately USD 1.4 billion in 2025 and is projected to reach around USD 3.0 billion by 2032, at a compound annual growth rate of about 11%. Pigment inks account for the largest share of consumption, followed by reactive and sublimation inks, while water- based and eco-friendly formulations are gaining ground as regulatory pressure on emissions and effluent intensifies. Asia-Pacific is the fastest-growing regional market, led by China and India, reflecting the regions dominant textile manufacturing base and rising demand for customised and printed household and apparel textiles. A defining feature of the Indian market is its heavy reliance on imported inks, predominantly from China and Japan, which exposes domestic converters to currency and supply-chain volatility and has created a clear opportunity for import substitution through local manufacture. Pigment inks, which require no pre- or post-treatment of fabric, are increasingly favoured in home furnishing and technical-textile applications where heavier substrates are printed directly.

Source: Precision Business Insights, Digital Textile Printing Ink Market (2025-2032); Market Research Future.

Indian Textile and Apparel Industry

The digital textile printing sector draws its underlying demand from Indias broader textile and apparel industry, one of the largest contributors to the national economy and to employment. The industry was valued at approximately 116.66 lakh crore in FY2025-26 and is targeted to reach USD 350 billion by 2030, supported by rising domestic consumption, urbanisation and a growing export base.

Exports of textiles and apparel, including handicrafts, stood at about USD 35.5 billion in FY2025-26, with ready-made garments, cotton textiles and man-made textiles the leading contributors, while the technical-textiles segment is projected to reach USD 45 billion by 2026. Policy support remains substantial: 100% foreign direct investment is permitted under the automatic route; the Union Budget 2026-27 allocated about 15,279 crore to the Ministry of Textiles; and the Production-Linked Incentive Scheme for man-made-fibre apparel, fabrics and technical textiles carries an approved outlay of 110,683 crore, having drawn investment of over 18,100 crore across 170 approved companies by March 2026. Additional momentum is being provided by the PM MITRA mega textile parks, the India-UK Free Trade Agreement granting duty-free access to a large share of Indian textile exports, and continued support through schemes such as SAMARTH and the Amended Technology Upgradation Fund Scheme. Together, these factors are expanding the base of fabric production and printing on which digital textile printing demand ultimately rests.

Source: IBEF, Indian Textiles and Apparel Industry (February 2026); Ministry of Textiles; Union Budget 2026-27

Sublimation Paper

Sublimation paper is the transfer medium that carries dye-sublimation inks onto polyester fabrics and coated substrates, and its demand is closely tied to the growth of dye-sublimation printing. The global sublimation paper market was valued at about USD 1.4 billion in 2025 and is expected to reach around USD 2.17 billion by 2032, growing at a compound annual growth rate of roughly 6.4%, with the textile industry the single largest consumer and Asia-Pacific the fastest-growing region. Buyers increasingly assess paper on grammage, coating uniformity, ink-release efficiency and runnability, while lightweight, lower-GSM and recyclable grades are gaining share as converters seek to reduce cost and waste.

Source: Research and Markets, Sublimation Paper Market (2026-2032)

Digital Textile Printing Machinery and Equipment

Digital textile printers and associated hardware form the capital-equipment layer of the printing value chain. The broader digital printing machine market was estimated at around USD 1.4 billion in 2026 and is projected to reach about USD 2.55 billion by 2033 at a compound annual growth rate of close to 9%, with Asia-Pacific accounting for roughly half of global demand. Equipment development is being shaped by single-pass and high-speed roll-to-roll systems, tighter environmental standards on inks and effluent, and a steady transition from analog screen printing towards variable-data inkjet platforms, all of which are lowering the effective cost of digital adoption for textile manufacturers.

Source: Wenkh Research, Digital Printing Machine Market (2026); Mordor Intelligence.

COMPANY OVERVIEW

Built over more than thirteen years around a single integrated ecosystem, True Colors Limited brings together the distribution of high-end digital textile printing machines and compatible inks, the in-house manufacture of sublimation paper, and customised printing services and printed fabrics. Headquartered in Surat, we serve textile manufacturers, export houses, apparel brands and fabric traders across India, and act as authorised distributor for leading global printer brands including Konica Minolta, Hopetech, Itten, Pengda and Skyjet. The Company has built an installed base of over 900 active machines and a model in which every machine placement generates recurring demand for inks, sublimation paper, spares and service. During FY2025-26 the Company recorded revenue from operations of 1301.55 crore, EBITDA of 146.98 crore and profit after tax of 131.16 crore, having listed on the BSE SME platform in 2025 and advanced plans to bring ink manufacture in-house under the INKIA brand. This integrated, ecosystem-based approach positions True Colors as an end-to-end partner within Indias expanding digital textile printing landscape.

BUSINESS SEGMENT AND OPERATIONAL OVERVIEW

The Company operates across three business verticals: the distribution of digital textile printing machines and inks, the manufacture of sublimation paper, and digital textile printing services. These verticals are closely connected, as the sale of a printing machine creates continuing demand for inks and sublimation paper, while the wider consumables base also supports the Companys own printing operations. This integrated structure gives the business a sizeable recurring revenue stream and supports strong customer retention. During FY2025-26, the recurring portion of revenue, comprising inks, sublimation paper and spares, accounted for roughly half of total revenue, and the installed base of machines crossed 900 units. To this established structure, the Company is now adding in-house ink manufacture under the INKIA brand, which will operate as a fourth vertical over the coming periods. Performance across the verticals during the year is set out below.

Machinery and Ink Supply: Machine placements for the year totalled 109 units, up from 89 in the previous year, and although unit growth was moderate, revenue from this vertical grew by over 155% year-on-year on the back of a deliberate shift towards higher-value, higher-capacity installations. Ink volumes rose to 1,140 tonnes, an increase of about 19%, though a portion was strategically bundled with machine placements to deepen customer engagement, and average realisations softened during the year.

Sublimation Paper Manufacturing: Volumes grew to 12.45 crore metres, supported by the expansion of installed capacity to over 2 crore metres per month, of which about 52% was utilised during the year, leaving substantial headroom for growth without further capital deployment. Realisations declined as the average grammage of paper used moved from the 45 to 55 GSM range towards closer to 35 GSM, reflecting a shift in customer mix towards lower- GSM applications.

Digital Textile Printing Services: With in-house capacity of 75,000 metres per day, this vertical continued to contribute meaningfully to overall throughput, offering job-work printing and printed-fabric supply across sublimation, reactive, both-side, position, fluorescent and foil techniques on polyester, cotton, viscose and blended fabrics.

Ink manufacturing initiative

The most significant operational development of the year was the move to bring ink manufacture in-house under the INKIA brand, through a proposed merger with INKIA Inks Private Limited and a strategic partnership with Itaca of Spain for premium pigment inks, marking the Companys backward integration into its highest-margin consumable.

FINANCIAL OVERVIEW

FY2025-26 was a year of broad-based growth, with revenue from operations rising 29.22% to 1301.55 crore from 1233.37 crore in the previous year, supported by momentum across all three verticals and a higher contribution from high-end machine installations. EBITDA grew to 146.98 crore from 140.91 crore, while the EBITDA margin moderated to 15.58% from 17.48%, reflecting the larger share of standard-margin machinery in the revenue mix, softer consumable realisations and the shift towards lower-GSM sublimation paper. Profit after tax rose to 131.16 crore from 124.69 crore, with the PAT margin holding broadly steady at 10.33%. The year also strengthened the balance sheet, as the funds raised through the public issue improved liquidity and reduced leverage, positioning the Company to support its planned expansion. Operating cash flows were affected during the year by the transition of several MSME vendors to the mandated 45-day payment cycle and by the growing share of Konica Minolta inks supplied on advance-payment terms, both of which raised working-capital requirements; collections were strong in the early months of FY2026-27 and the position has since normalised.

FINANCIAL RATIOS

OUTLOOK

Looking ahead, the transition to in-house ink manufacture represents the most significant step in the Companys evolution towards a structurally more profitable business, with phased capacity additions planned under the INKIA brand, beginning with around 150 tonnes per month in FY2026-27 and scaling towards 500 tonnes per month by FY2027-28, and a longer-term target of 1,000 tonnes per month across sublimation, reactive, disperse and pigment inks. This backward integration, aimed at substituting imports and improving consumable margins, is expected to be funded through a combination of internal accruals and bank debt, with the land required already secured. Combined with rising utilisation of the expanded sublimation paper capacity and a compounding recurring-revenue base drawn from a growing installed network of machines, the Company believes it is well positioned to drive sustainable scale and long-term margin expansion, while remaining mindful of working-capital discipline, softer consumable realisations and the inherently lumpy nature of machinery sales.

RISKS AND CONCERNS

The Company operates in a competitive and evolving industry and is exposed to a range of external and internal risks. A risk-management framework is in place to identify, assess and address these risks on an ongoing basis. The principal risks and the corresponding mitigation measures are summarised below.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

People remain central to the Companys integrated model, which spans manufacturing, distribution, technical service and printing operations, and building a skilled, scalable and system-driven organisation is a continuing priority as the business expands across verticals and geographies. As on 31 March 2026, the Company employed 963 people across its operations. The Company has been decentralising operational command by giving vertical- specific business heads profit-and-loss ownership and standardised performance measures, so that each division functions as a self-sustaining, growth-oriented unit, while investment in training and digital tools is helping to reduce key-person dependency and support business continuity. Industrial relations remained cordial throughout the year, and we continue to focus on talent development and structured governance to underpin the next phase of growth.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains internal control systems commensurate with the size, scale and nature of its operations, designed to provide reasonable assurance regarding the reliability of financial reporting, the safeguarding of assets, compliance with applicable laws and regulations, and the efficient conduct of business. Policies and procedures are in place to ensure that transactions are properly authorised, recorded and reported, and that assets are protected against unauthorised use or disposition. As part of strengthening these systems, the Company has been investing in digital infrastructure, including production software at its sublimation paper unit and the progressive adoption of enterprise systems, to improve workflow visibility, resource planning and accountability across verticals. The adequacy and effectiveness of the internal controls are reviewed periodically, and observations, where any, are acted upon to further strengthen the control environment.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, expectations, estimates, projections and plans may constitute forwardlooking statements within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectations of future events, and actual results could differ materially from those expressed or implied. Important factors that could influence the Companys operations include economic and political conditions in India and overseas, movements in input costs and exchange rates, demand and supply conditions in the industries in which the Company operates, changes in government regulation and tax regimes, and other incidental factors. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances, and readers are advised to exercise their own judgement in assessing the risks associated with the Company.