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 2025, 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 Prevailing Geo political uncertainties, ongoing conflict between Ukraine & Russia, strained relation among several countries and inflationary pressure, have impacted the economies of the World. The imposition of Tariff plus Penalty by the United States, on exports of several countries has impacted Global Trade and World Economies are going to witness a downward trend. As per World Economic Outlook (issue April, 2025), Global Growth is projected to drop to 3 percent in 2026. Inspite of several Global Challenges, India, worlds fourth largest Economy, has emerged as the fastest growing economy, projected to grow at 6.50 % for FY 2026 (as per RBI). PM vision of Atmanirbhar Bharat has promoted Innovation, Entrepreneurship and New Technology, which will help Indian Economy to grow at a faster rate in comparison to the other large economies of the world, which are facing difficult times. India is on the track to become the Third largest economy by 2030.

To put the Indian economy on the faster pace of growth and sustainability development, Government introduced several path breaking initiatives and policies in the area of Infrastructure, Social Welfare and Health Care sector to support the economic activities. Moreover, India has already Signed Free Trade Agreement (FTAs) or Comprehensive Economic Partnership Agreements (CEPAs) with several countries like United Kingdom, Sri Lanka, Nepal, Bhutan, Maldives, Thailand, Singapore, Malaysia, Japan, South Korea, Mauritius, United Arab Emirates (UAE), Australia, ASEAN bloc (10 nations under goods / services / investment FTA), which will help the country to boost its exports to these countries. The negotiation with the European Union, Canada and others are still going on and we are hopeful that agreement will be finalized shortly and will benefit the Indian Economy to grow at much faster rate

B. INDIAN ECONOMY

Indias textile and apparel sector has continued to demonstrate resilience in July 2025, recording a steady growth trajectory. As per quick estimates released by the Directorate General of Commercial Intelligence & Statistics (DGCIS), exports of major textile commodities in July 2025 reached USD 3.10 billion, marking a 5.37% year-on-year growth compared to USD 2.94 billion in July 2024.

For the period April-July 2025, cumulative textile exports stood at USD 12.18 billion, reflecting a growth of 3.87% over the same period last year (USD 11.73 billion).

Cotton Textiles (including yarn, fabrics, made-ups, and handlooms):Cotton exports reached USD 1.02 billion in July 2025, compared to USD 970.5 million in July 2024 (5.17% growth ). Cumulative exports April-July 2025 stood at USD 3.88 billion, nearly unchanged from USD 3.89 billion last year.

Economic Survey 2024-25

Union Minister for Finance, Ms. Nirmala Sitharaman, presented the Economic Survey the Union Budget 2025-26 seeks to address these challenges and propel the industry forward. Rising from INR 4,417.03 Cr in 2024-25 to INR 5,272 Cr—registering a 19% increase in allocation to the Textile Ministry—the budget reflects the governments commitment to addressing long-standing challenges and unlocking new opportunities for growth.

HIGHLIGHT

Recognizing the importance of MSMEs in the textile sector, the budget introduces initiatives such as enhanced credit access, export promotion measures and the creation of the Bharat T rade Net. This digital platform will streamline trade documentation, facilitate smoother global integration and ease market access for small and medium textile enterprises.

Additionally, INR 1,148 Cr has been allocated for the PLI Scheme to boost domestic manufacturing and exports, while INR 635 Cr for the Amended Technology Upgradation Fund Scheme (ATUFS) supports modernisation and efficiency in textile machinery.

The Union Budget is not just a financial plan but a visionary blueprint for the future of Indias textile industry. By addressing critical areas such as cotton productivity, technical textiles, export promotion and handicrafts, it aims to create a more sustainable, innovative and globally competitive sector.

For stakeholders across the value chain—from farmers and artisans to MSMEs and exporters— this budget is a clarion call to embrace transformation and unlock the full potential of Indias textile industry. As the sector gears up for this new year, the focus must now shift to effective implementation and collaboration between the government, industry and artisans

C. INDUSTRY STRUCTURE AND DEVELOPMENT

TEXTILE SECTOR

India is the worlds 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 countrys 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.

Indias 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. Total textile exports are expected to reach US$ 65 billion by FY26. The Indian textile and apparel industry is expected to grow at 10%

POLICY SUPPORT

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

The Union Budget 2025-26 allocated Rs. 5,272 crore (US$ 607 million) for the Ministry of Textiles, a 19% increase from the previous year. It also introduced a five-year Cotton Mission to boost cotton productivity, reduce import dependence, and enhance MSME-driven textile competitiveness.

In current cotton season 2024-25, up to March 31, 2025, Government of India, through its nodal agency, the Cotton Corporation of India Ltd. (CCI) under Ministry of Textiles has successfully procured 525 lakh quintals of seed cotton, equivalent to 100 lakh bales, under Minimum Support Price (MSP) operations. This procurement accounts for 38% of the total cotton arrivals of 263 lakh bales and 34% of the estimated total cotton production of 294.25 lakh bales in the country.

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% CAGR to 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

In order to attract private equity (PE) and employee more people, the government introduced various schemes such as the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS) and Mega Integrated Textile Region and Apparel (MITRA) Park scheme.

Total FDI inflows in the textiles sector stood at Rs. 29,291.05 crore (US$ 4.59 billion) between April 2000-December 2024.

EXEMPTION OF IMPORT DUTY ON COTTON IMPORTS

In a move aimed at stabilizing domestic cotton prices and supporting the textile industry, the Government of India has exempted all customs duties on the import of raw cotton with effect from 19th August 2025 until 30th September 2025. This includes the removal of both the 5% Basic Customs Duty (BCD), the 5% Agriculture Infrastructure and Development Cess (AIDC), and a 10% Social Welfare Surcharge on both, cumulatively in an 11% import duty on cotton.

By temporarily waiving these duties, the Government aims to:

• Enhance the availability of raw cotton in the domestic market,

• Stabilize cotton prices, thereby reducing inflationary pressure on finished textile products,

• Support export competitiveness of Indian textile products by lowering production costs.

• Protect small and medium enterprises (SMEs) in the textile sector, which are more vulnerable to price fluctuations.

Your Management is of the opinion that things will start improving performance with the support of Government and its favourable Policies and initiatives, it will be able to meet the challenges of survival and record reasonable growth in the coming periods.

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, signalling 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 24-25. 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. Pakistans 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, Indias 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 2025, 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 worlds 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. 2024-25. The Management overview and analysis the company performance for the period 01.04.2024 to 31.03.2025.

Sr. .No. Ratios	Numerator	Denominator	Current Reporting Period
1 Current Ratio	6137.77	2500.30	2.45%
2 Debt Equity Ratio	3799.30	5057.25	0.75%
3 Debt Service coverage ratio	1045.18	802.93	1.30%
4 Return on Equity Ratio	274.60	5057.25	5.43%
5 Inventory Turnover Ratio	10,378.00	1837.14	5.65%
6 Trade Receivables turnover ratio	12530.48	2257.05	5.55%
7 Trade payables turnover ratio	11,268.98	1,343.10	8.39%
8 Net capital turnover ratio	12,530.48	3,637.47	3.44%
9 Net profit ratio	274.60	12,530.48	2.19%
10 Return on Capital employed	742.45	9,238.33	8.04%

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 (Formerly Known as United Cotfab Private Limited)
	Sd/-
Place: Ahmedabad	Gagan Nirmalkumar Mittal Chairman and Managing Director
Date : September 05, 2025	DIN:00593377