United Cotfab Ltd Management Discussions

The management discussion and analysis report provide an over view of the financial activities for the fiscal year ended on 31^st March 2026, gives an overall sight of the spinning industry, opportunities and threats in the business and Companys strategy to deal with that. This report is designed to focus on current years activities, resulting changes and other known facts in conjunction to the financial and strategic position of the Company.

A. GLOBAL ECONOMY OUTLOOK/ ECONOMIC SCENARIO

The global economy remained subject to geopolitical tensions, trade-policy uncertainties, inflationary pressures and disruptions in international supply chains during FY 2025-26. These factors continued to create challenges for global trade and economic growth. The IMFs July 2026 outlook projects global growth at around 3.0% in 2026, reflecting the continuing impact of geopolitical and economic uncertainties. Despite the global challenges, India continued to demonstrate strong economic resilience. Indias real GDP was estimated to grow by 7.4% in FY 2025-26, according to the First Advance Estimates released by the Ministry of Statistics and Programme Implementation.

The countrys growth continues to be supported by domestic consumption, infrastructure development, policy reforms, digitalisation and increasing manufacturing activity. Government initiatives such as “Atmanirbhar Bharat” continue to encourage domestic manufacturing, innovation, entrepreneurship and technological development. Indias expanding trade partnerships and continued focus on infrastructure and ease of doing business are expected to provide further opportunities for sustainable economic growth. Overall, while global uncertainties may continue to pose challenges, Indias strong domestic fundamentals and resilient economic outlook provide a positive environment for long-term growth.

B. INDIAN ECONOMY

Indias textile and apparel sector continued to remain an important contributor to the country’s manufacturing and export economy during FY 2025-26. The sector demonstrated resilience amid global trade uncertainties and changing international demand.

During FY 2025-26, India’s exports of textiles and apparel, including handicrafts, stood at approximately USD 35.52 billion. Ready-Made Garments remained the largest segment with exports of approximately USD 15.77 billion, followed by Cotton Textiles at approximately USD 10.25 billion and Man-Made Textiles at approximately USD 5.23 billion.

Cotton Textiles (including yarn, fabrics, made-ups and handlooms): Cotton textiles continued to be a significant component of Indias textile exports during FY 2025-26, contributing approximately USD 10.25 billion, representing around 29% of total textile and apparel exports.

Economic Survey 2025-26

The Economic Survey 2025-26 highlights the continued importance of Indias textile sector and the opportunities arising from changing global demand. During April-September 2025-26, Indias textile and apparel exports remained broadly stable at around USD 18.2 billion, while the sector continued to face challenges relating to fragmented production, dependence on cotton, technology adoption and global competition.

The Government continued its efforts to strengthen the textile industry through initiatives such as PM-MITRA Parks, the Production Linked Incentive (PLI) Scheme for Textiles and the National Technical Textiles Mission. During FY 2025-26, the PLI Scheme was further expanded to include additional MMF and technical textile products and to facilitate greater participation by manufacturers.

HIGHLIGHT

Recognising the need to enhance Indias competitiveness in the global textile market, the Government continued to focus on modernisation, technology adoption, investment and export promotion.

The PLI Scheme for Textiles had an approved financial outlay of Rs.1,148 crore for FY 2025-26, with a focus on promoting MMF apparel, MMF fabrics and technical textiles, increasing production and generating employment.

The National Technical Textiles Mission, with an overall outlay of Rs.1,480 crore, continued to support research, innovation, market development and skill development in technical textiles. The Government also continued to promote PM-MITRA Parks for developing integrated and modern textile manufacturing infrastructure, with the objective of achieving economies of scale, reducing logistics costs and strengthening Indias position in global textile markets. These measures are expected to support the textile industrys transition towards higher value-added products, greater technological capabilities and increased global competitiveness, thereby creating opportunities for sustainable growth across the textile value chain.

C. INDUSTRY STRUCTURE AND DEVELOPMENT TEXTILE SECTOR

India is the world’s second-largest producer of textiles and garments. It is also the sixth-largest exporter of textiles spanning apparel, home and technical products. India has a 4.6% share of the global trade in textiles and apparel.

India is the worlds 3rd largest exporter of Textiles and Apparel.

The textiles and apparel industry contributes 2.3% to the country’s GDP, 13% to industrial production and 12% to exports.

The textile industry has around 45 million workers employed in the textiles sector, including 3.5 million handloom workers.

The textile industry has around 45 million workers employed in the textiles sector, including 3.5 million handloom workers.

India’s textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a 41% increase YoY.

The Indian textile industry has made a mark in the world with its innovative and attractive products. The Indian textile and apparel industry is expected to maintain a positive growth trajectory in the coming years, supported by rising domestic consumption, increasing export opportunities, technological advancement and continued Government support. The sector is expected to witness healthy growth during FY 2026-27, with increasing focus on value-added products, technical textiles and global market expansion.

POLICY SUPPORT

100% FDI (automatic route) is allowed in the Indian textile sector.

The Government continued its focus on strengthening the textile industry through initiatives such as the Production Linked Incentive (PLI) Scheme for Textiles, PM-MITRA Parks and the National Technical Textiles Mission, aimed at promoting investment, modernisation, innovation and global competitiveness. The PLI Scheme was further amended during FY 2025-26 and its application window was extended up to 31 March 2026.

The Mission for Cotton Productivity, announced as a five-year initiative, aims to improve cotton productivity and sustainability and promote extra-long staple cotton varieties. For the 2025-26 cotton season, the Government fixed the MSP at Rs.7,710 per quintal for medium-staple cotton and Rs.8,110 per quintal for long-staple cotton, supporting cotton farmers and providing stability to the textile value chain. These policy measures are expected to support domestic manufacturing, technological advancement, cotton productivity and export competitiveness of the Indian textile industry.

ROBUST DEMAND

The Indian technical textiles market is expected to expand to US$ 23.3 billion by 2027, driven by increased awareness of goods and higher disposable incomes.

Cotton production in India is projected to reach 7.2 million tonnes (~43 million bales of 170 kg each) by 2030, driven by increasing demand from consumers.

The market for Indian textiles and apparel is projected to grow at a 10% CAGRto reach US$ 350 billion by 2030, with exports expected to reach US$100 billion.

COMPETITIVE ADVANTAGE

India enjoys a comparative advantage in terms of skilled manpower and in cost of production, relative to major textile producers.

In June 2022, Union Minister of Commerce and Industry, Mr. Piyush Goyal, stated that the Indian government wants to establish 75 textile hubs in the country.

The sector provides employment to over 45 million people and produces about 22,000 million pieces of garments per year.

INCREASING INVESTMENTS

The Indian textile sector continues to attract investments supported by Government initiatives such as the PLI Scheme for Textiles, PM-MITRA Parks and the National Technical Textiles Mission, aimed at promoting modernisation, technology adoption and global competitiveness.

Total FDI inflows in the textiles sector stood at Rs.33,512.66 crore (US$5.07 billion) between April 2000 and March 2026, reflecting continued investor interest in Indias textile industry.

The PLI Scheme for Textiles has also supported significant investment, with approved applicants projecting investments of approximately Rs.41,533 crore, along with substantial employment and export generation.

EXEMPTION OF IMPORT DUTY ON COTTON IMPORTS

During FY 2025-26, the Government of India temporarily exempted customs duties on imports of raw cotton under tariff heading 5201 from 19 August 2025 to 31 December 2025, with the objective of ensuring adequate availability of cotton and moderating input costs for the domestic textile industry.

The measure was aimed at:

• Ensuring adequate availability of raw cotton;

• Moderating cotton and textile input costs;

• Supporting textile manufacturers, particularly MSMEs; and

• Strengthening the competitiveness of Indian textile products.

The Governments continued policy support, including measures relating to cotton availability, productivity and export competitiveness, is expected to provide a positive environment for the textile sector. The Management remains optimistic that these measures, together with improving market conditions, will support the Companys performance and sustainable growth in the coming years.

D. OPPORTUNITIES AND THREATS

a) Opportunities:

• Global Sourcing Shift from Bangladesh & China

US tariffs on Bangladesh (35%) and a political crisis in Bangladesh are prompting western brands to diversify sourcing to India, presenting an immediate export opportunity for garment makers. Indias apparel exports grew 11.3% YoY in May, signaling momentum from redirected orders.

• Enhanced Government Incentives

The PLI scheme expansion targets small textile firms, aiming to grow garment exports to USD 50 billion by 2030. The India-UK Free Trade Agreement (May 2025) eliminates duties on UK imports and boosts export potential with luxury labels. ^•

• Sustainability-Driven Differentiation

Rising consumer and brand demand for organic cotton, recycled materials, and water efficient dyeing enables premium positioning and access to niche eco-markets. Participation in circular fashion ecosystems?including take-back programs and recycled-content lines? enhances brand image and captures environmentally aware consumers.

• Technology-Led Value Creation

Adoption of laser finishing, digital printing, IoT quality controls, and AI-driven design-to production systems enhances efficiency, reduces waste, and supports customized offerings. Smart fabrics (e.g., UV-blocking, stretchable, moisture-wicking) cater to rising demand in performance and athleisure segments.

• Tier-2/3 & E-commerce Expansion

Rapid urbanization and internet retailing are opening new frontiers in smaller cities and rural India via platforms like Myntra, Flipkart, and brand D2C channels. This enables cost effective, scalable entry into emerging markets, bypassing traditional retail infrastructure challenges.

• Vertical Integration Momentum

Gujarat-based mills are expanding into garment manufacturing, encouraged by Gujarat Textile Policy 2024. This offers scope for end-to-end supply services, higher margins, and greater control in the value chain.

• Free Trade Agreements & Market Access

New and prospective FTAs with Australia, ASEAN, UK, EU allow duty-free or reduced tariffs for Indian exports, strengthening competitiveness.

THREATS

• High Raw-Material & Energy Costs

Cotton and input prices remain elevated compared to global benchmarks: Due to unpredictable Monsoon uneven rainfall the raw material cost remain high. spandex-30% costlier, polyester-25%, cotton>10% higher?significantly affecting manufacturing margins during FY 25-26. Denim production is energy-intensive, especially in dyeing and finishing, making margins vulnerable to energy price spikes.

• Intense Global & Regional Competition

Indian mills face pricing pressure from low-cost producers like Bangladesh, Pakistan, and Vietnam. Pakistan’s lower labour costs and streamlined export policies present a tangible competitive threat. Despite looming U.S. tariffs on Bangladesh, the sustained price competition requires India to constantly optimize cost and efficiency.

• Supply Chain Disruptions & Trade Slowdowns

Global disruptions such as the Red Sea shipping crisis spiked freight rates by up to 5* via the Suez Canal, squeezing timelines and increasing working capital cycles for Indian exporters.

Softening demand in developed regions (e.g., Europe, Japan) during late 2023 and early 2024 Made it difficult to have access and entry to the European and western countries Market

• Regulatory and Labor Hindrances

Complex labor laws and high compliance burdens (e.g., licenses, shift restrictions, worker facilities) obstruct scalability and inflate operational costs. Cumbersome export-import processes and high duties on textile inputs (e.g., synthetic yarns) hinder competitiveness.

• Environmental and Social Compliance Pressures

Denim manufacturing is under scrutiny for high water usage (-22,500 L per kg cotton), disruptive dyeing waste, fossil-fuel energy consumption, and chemical pollution. Failure to meet global ESG norms could result in lost business, especially from brands prioritizing sustainability certifications and low environmental footprints. ^•

• Domestic Demand Challenges

Despite rising aspirations, India’s discretionary consumer base is limited: only ~130-140 million Indians fall into the real consumer class, constraining growth in premium denim. Competitive threat from fast fashion entrants is intensifying price pressures in the value segment.

Further Threats are

a Any change in Government Policies.

b Low technology barrier which results into stiff competition and lower margins on product. c Low product differentiation.

E. SEGMENT WISE OR PRODUCT WISE PERFORMANCE

The Company operates within a singular segment, specifically in the manufacturing of Open End Cotton yarn (textiles). These external pressures, in conjunction with high cotton prices and a significant downturn in yarn prices, have compounded challenges for the spinning industry.

F. FUTURE OUTLOOK

Indias textile sector has always been more than an industry ? its been a civilizations signature. From the handlooms of Varanasi to the cotton fields of Gujarat, fabric has been currency, culture, and livelihood. But in 2026, the fabric of the industry is changing fast.

A new era is here. AI is shaping production. Climate change is rewriting supply chains. Consumers are choosing purpose over price. And India, home to the world’s second-largest textile manufacturing base, stands at a pivotal crossroads.

The future of textile industry in India hinges on digital transformation, sustainable practices, and up skilling its massive workforce.

Global supply chain shifts present new export opportunities ? but also risks due to material volatility and compliance pressures.

In the near term, it has formed a very good and abled Board, under whose guidance and abled support it is expected that Company will do well and will attain new targets and goals better than what it used to achieve when it was in full flow.

While the future remains uncertain, your management maintains a positive outlook. The anticipation is grounded in the expectation that an improvement in global demand and the moderation of raw cotton prices will collectively alleviate the challenges currently faced by the textile industry.

Amid this challenging landscape, your confidence is bolstered by the prospect of governmental support. The Spinning industrys vitality is deeply intertwined with favorable textile policies, incentives, and other benefits that can propel its future growth. Recognizing their paramount importance, the hope is that the government will extend this vital support to ensure the industrys resilience and thriving trajectory.

G. RISKS AND CONCERNS

In todays complex business environment, almost every business decision requires executives and managers to balance risk and reward.

No industry remains immune to the ordinary fluctuations and concerns inherent in the business realm. The Indian Textile Industry, in particular, contends with robust competition from smaller nations such as Bangladesh, Taiwan, Sri Lanka, and other emerging economies. The industrys competitive stance

is intrinsically tied to several pivotal factors including raw cotton prices, exchange rates, and the prevailing interest rate environment.

Effective risk management is therefore critical to an organizations success. Globalization, with increasing integration of markets, newer and more complex products & transactions and an increasingly stringent regulatory framework has exposed organizations to newer risks. As a result, todays operating environment demands a rigorous and integrated approach to risk management. Timely and effective risk management is of prime importance to our continued success. Increased competition and market volatility has enhanced the importance of risk management. The sustainability of the business is derived from the following:

a Identification of the diverse risks faced by the company.

b The evolution of appropriate systems and processes to measure and monitor them. c Risk management through appropriate mitigation strategies within the policy framework. d Monitoring the progress of the implementation of such strategies and subjecting them to periodical audit and review.

e Reporting these risk mitigation results to the appropriate managerial levels

H. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has adequate internal control systems and procedures which commensurate with the nature of its business and the size of its operations. The internal control system are adequate to ensure that all assets and resources of the company are safeguarded and protected against loss from unauthorized use or disposition and all transactions are authorized, recorded and reported correctly. The company also ensures compliance with all statutes and regulatory policies and guidelines. Further the company is also having internal audit department which carries out audit work throughout the year. The main objective of such audit is to test the adequacy and effectiveness of internal control systems laid down by the Management and to suggest improvement in the systems.

Besides, an audit committee consisting of three directors has been constituted. All the significant audit observation and follow up action thereon are taken care of by the audit committee. The audit committee met four times during the financial year under review.

I. ENVIRONMENT AND SAFETY

The need for environmentally clean and safe operations is companys key priority. The Company policy requires the conduct of all operations in such a manner so as to ensure the safety of all concerned, for environment protection and conservation of natural resources to the extent possible.

J. HUMAN RESOURCES AND INDUSTRIAL RELATION

The Company had cordial and harmonious industrial relations at all levels of organizations. The company believes that the industry has the tremendous potential to impact the society, nation and the world positively. Its employees are major stakeholders and their efforts have direct stake in the business prospectus of the organization. The employees have extended a very productive cooperation in the efforts of the management to carry the company to greater heights. The Company considers employees as their biggest competitive advantages. The Company takes initiative like training and development for its people to increase the performance. The Company has taken various steps to improve and enhance skill of its people. The industrial relations remained cordial in our plant. The Company has continued to give special attention to human resources and overall development. At present company has employed man power of around peoples including technical, non-technical, managerial and non- managerial, casual and contract labour.

K. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

The enumerated are the key financial ratio of United Cotfab Limited during current reporting period

i.e. 2025-26. The Management overview and analysis the company performance for the period 01.04.2025 to 31.03.2026.

Sr. .No. Ratios	Numerator	Denominator	Current Reporting Period
1 Current Ratio	7134.71	3,324.79	2.15%
2 Debt Equity Ratio	5,501.26	5,430.84	1.01%
3 Debt Service coverage ratio	1,197.90	746.34	1.61%
4 Return on Equity Ratio	373.59	5,244.04	7.12%
5 Inventory Turnover Ratio	13,639.88	2,345.83	5.81%
6 Trade Receivables turnover ratio	15,468.29	3,159.30	4.90%
7 Trade payables turnover ratio	13,759.22	1,344.44	10.23%
8 Net capital turnover ratio	15,468.29	3,809.92	4.06%
9 Net profit ratio	373.59	15,468.29	2.42%
10 Return on Capital employed	874.67	11,440.31	7.65%

L. CAUTIONARY STATEMENT

Certain statements presented in this report, encompassing the Companys objectives, projects, estimates, and expectations, may be considered forward-looking statements under applicable laws and regulations. Its important to acknowledge that the actual results may deviate from these expectations and forward-looking statements due to an array of risks and uncertainties. These factors include but are not limited to economic conditions influencing demand and supply, governmental regulations and tax laws, competitive dynamics existing at pertinent times, and the impact of natural disasters, among others.

The Company underscores that it assumes no obligation to publicly amend, modify, or revise any of these statements in response to subsequent developments, information, or events. This recognition reflects the inherent volatility and fluidity of the business landscape, where a myriad of factors could influence outcomes and alter expectations.

	For and on behalf of Board of Directors,
	United Cotfab Limited
	Sd/-
	Gagan Nirmalkumar Mittal
Place: Ahmedabad	Chairman and Managing Director
Date : September 07, 2026	DIN:00593377