United Polyfab Gujarat Ltd Management Discussions

The Management Discussion and Analysis report presents a comprehensive review of United Polyfab Gujarat Limiteds financial performance for the fiscal year ended March 31, 2025, alongside an informed overview of the spinning industry. It highlights key trends shaping the sector, including Gujarats newly launched Textile Policy 2024, which introduces attractive incentives·such as capital subsidies (10-35% of eligible fixed capital investment), interest subsidies (5-7% over 5-8 years), power subsidies (Rs.1 per unit), and payroll assistance·aimed at encouraging modernization, sustainability, and value-chain integration.

A notable advancement under this policy is the inclusion of spinning units·previously excluded·bringing UPGL and similar manufacturers into the ambit of these benefits. Simultaneously, industry stakeholders face pressures such as rising raw material costs driven by increased cotton MSP, coupled with global headwinds like steep U.S. tariffs targeting textile exports.

Against this backdrop, UPGLs strategy emphasizes leveraging new state and central government incentives, enhancing operational efficiencies, and exploring non-U.S. markets to mitigate adverse macroeconomic effects. This section spotlights how the Company is responding to these developments, articulating its financial outcomes, strategic adaptations, and resilience amid evolving industry dynamics.

FINANCIAL HIGHLIGHTS FROM 2024-25 CONSOLIDATED FINANCIAL HIGHLIGHTS:

The Key Aspect of your companys consolidated financial performance during the financial year 2024-25 are as follows:

Operational Highlights: The consolidated revenue of the company from Sales is Rs. 60,221.77/- lakhs as compared to Rs. 90847.72/- lakhs in the previous year.

Financial Highlights: The consolidated profit of the company is Rs. 1768.91/- lakhs as compared to Profit of Rs. 660.85/- lakhs in the previous year.

STANDALONE FINANCIAL HIGHLIGHTS:

Operational Highlights: The standalone revenue of the company from Sales is Rs. 60,221.77/- lakhs as compared to Rs. 90,847.72/- lakhs in the previous year.

Financial Highlights: The standalone profit of the company is Rs. 1,769.21/-lakhs as compared to Rs. 660.92/- lakhs in the previous year.

KEY CHANGES IN SIGNIFICANT FINANCIAL RATIOS:

Details of significant changes in key financial ratios (i.e., change of 25% or more as compared to the immediately previous financial year):

REVENUE GROWTH:

Our revenue for FY25 stood at Rs. 60,221.77/- crores, representing decrease in sales of 33.7% YoY compared to Rs. 90,847.72/- crores in FY24.

EBITDA PERFORMANCE:

EBITDA for FY25 reached Rs.2,125.28/- crores, growing 72.61% YoY compared to Rs. 1,231.16/- crores in FY24. This reflects our continued focus on operational efficiency and profitability, even as we invest in new growth areas.

INDIAN ECONOMIC OVERVIEW:

Indias economy remained remarkably resilient in the face of global disruptions. Strong domestic consumption, higher government spending on infrastructure and an accommodative monetary policy powered this growth. Retail inflation eased to 4.6% in FY 2024-25, the lowest since FY 2018-19. This led the Reserve Bank of India (RBI) to implement its first rate cut in five years to 6%, thereby supporting continued growth.10 The financial services sector remained stable, supported by well-capitalised banks and a solid regulatory framework. Government initiatives, such as Make in India spurred domestic manufacturing growth, while long-term prospects in manufacturing and technology attracted strong foreign investment. The expansion of Indias digital economy, including e-commerce and digital payments, further boosted economic activity. Imported commodity prices in India eased in FY 2024-25, with the World Banks Commodity Markets Outlook projecting a 5.1% decline in 2025 driven largely by falling crude oil and metals prices, which kept domestic inflationary pressures anchored. Cotton prices in India averaged around INR 7,800 per quintal in FY 2024-25, supported by lower production and an INR 589 MSP increase in May 2025

that set prices at INR 7,710-8,110 per quintal.11 Indias manufacturing sector grew at 4.8% in FY 2024-25, up from 4.7% in FY 2023-24. This contributed to 7.4% GDP growth in the fourth quarter of FY 2024-25.12 The government increased budget allocations to support manufacturing, with FDI in the sector reaching USD 184 Billion·a 90.5% rise over the past decade·fueled by production-linked incentive schemes.13 Over the past six financial years, total FDI inflows amounted to USD 464.54 Billion.14 With robust physical and digital infrastructure, India is now well-positioned to expand the share of the manufacturing sector in the economy and strengthen its role in global supply chains.

INDIAN TEXTILE MARKET:

The textile and apparel (T&A) market in India has been on an upward trajectory, growing from USD 106 Billion in FY 2019-20 to USD 147 Billion in FY 2024-25, at a CAGR of 7%. With a contribution of approximately 2.3% to the national GDP in FY 2024-25 and accounting for 3.91% of global textile and apparel trade, India remains one of the worlds largest textile markets. Textile and apparel exports surged by 6%, reaching USD 36.6 billion in FY 2024-25, despite soft festive demand and competitive imports from Bangladesh. During the same period, exports of cotton-based products (yarn, fabrics, made-ups and handloom) grew by 3.19% to USD 12.056 Billion. Gujarat, Maharashtra, Tamil Nadu, Punjab, Uttar Pradesh and West Bengal continue to dominate Indias textile production. However, fluctuating cotton prices averaging INR 7,800 per quintal in FY 2024-25 added cost pressures, especially for spinners and weavers. Nevertheless, Indias abundant raw- material base with a cotton output of 301.75 lakh bales in FY 2024-25 provided a firm foundation for competitive manufacturing.2 To meet the Ministry of Textiles target of reaching USD 250 Billion by FY 203031, the market will need to grow at a CAGR of 9% onwards.

COMPANY OVERVIEW:

United Polyfab Gujarat Limited (UPGL) is a vertically integrated textile manufacturer based in Ahmedabad, Gujarat. With operations spanning spinning, weaving, and finishing, the Company delivers high-quality cotton yarn and fabrics across diverse applications.

• Spinning & Yarn: UPGL operates a backward-integrated spinning unit equipped with approximately 40,000 spindles, producing about 800 tonnes of yarn per month. Their yarn portfolio includes a wide range of counts from Ne 10/1 to Ne 40/1, covering 100% cotton carded, combed, combed compact, core-spun, Eli Twist, and doubling yarns for both weaving and knitting.

• Fabrics: The Company produces grey, dyed, and denim fabrics, leveraging advanced weaving capabilities and state-of-the-art technology to meet growing market demands.

UPGL emphasizes product quality, technological advancement, and customer-centric manufacturing. Their corporate values highlight transparency, competence, commitment, teamwork, and superior service. They advocate the business philosophy: "Produce the best, offer the right quality material at the right price."

OPPORTUNITIES AND THREATS:

Opportunities:

• Global Shift towards Sustainable Textiles: Increasing demand for eco-friendly and ethically produced products aligns with Tridents sustainability agenda

• Expansion into New Geographies: Growing opportunities in emerging markets for home textiles

• Government Incentives: Benefitting from Production Linked Incentive (PLI) schemes and textile parks under

Make in India

• Innovation in Functional Textiles: Scope to develop antimicrobial, organic, and smart fabrics

Green Energy Integration: Strengthening energy division with renewable projects enhances long-term cost savings and ESG positioning.

Threats:

• Global Market Volatility: Economic slowdowns, geopolitical tensions, and trade barriers can impact exports and input costs

• Intense Industry Competition: Price and quality pressures from global players, especially in textiles and paper

• Raw Material Price Fluctuations: Cotton, pulp, and chemicals are subject to price volatility, affecting margins

• Regulatory and Environmental Compliance Risks: Stricter norms, particularly in water-intensive sectors, can lead to cost and operational pressures

• Currency Fluctuations: Affects export competitiveness and profitability

RISKS AND CONCERNS:

United Polyfab Gujarat Limited operates in a dynamic and competitive textile landscape marked by several notable risks that could affect operational and financial stability

• Raw material related Risk: Raw material being a major cost of production, Companys operations and profitability are significantly dependent on price and timely availability of raw materials used in production process. The primary raw materials for our textile operations are raw cotton and spandex yarn.

¦ Cotton: Being an agricultural commodity, prices of cotton are affected by a range of factors like changes in weather conditions affecting sowing, government policies and regulations. Governing taxes, tariffs, duties, subsidies, import and export restrictions on agricultural commodities, overall supply situation in the world, etc. all these influence pricing and demand supply situation in this industry. The planting of certain crops versus other uses of agricultural resources, the location and size of crop production, volume and types of imports and exports, etc. determine availability of cotton.

The Company has an experienced team for procurement of raw cotton with a deep understanding of this natural fibre. As a Company, we have adopted various processes whereby we are expanding our sources across different supply chain intermediaries and other stake holders. Cotton being an international commodity, our focus remains optimizing domestic and international opportunities to create a competitive edge of sourcing based on landed cost.

¦ Market related Risk: The Companys performance is dependent upon the demand situation in individual business segments. A slowdown in demand may lead to decline in production/ sales and thus impact profitability. The market demand is also dependent on global economic and international trade dynamics. The USA reciprocal tariff being negotiated can have a major impact international trade directions and demand. This is likely to impact textile trade in a major way.

In the domestic market as well, the Company faces competition from organized big players and the unorganized small and fragmented players. The Company has developed a good reputation amongst the domestic traders, garment manufacturers and brands due to quality, design capabilities and cost. Further, the Company has started building relationships with large retailers (physical and online) to supply fabrics and garments. The Companys operations are now getting scaled up and it is fully prepared to meet larger volumes. The Company is confident that it would regain a preferred supplier status for big brands and retailers given the quality, design capability and the capacity to provide large volumes on a consistent basis

¦ Financial Risk: United Polyfab Gujarat Limited maintains structured banking facilities comprising a term loan from banks and working capital limits to support its operations. As part of its financial discipline, UPGL is required to periodically meet interest obligations on both the term loan and working capital facilities, while also adhering to the repayment schedule for the term loan as per the terms agreed with its lenders.

¦ Information Technology Risk: Information and Technology being the major backbone of Companys overall operation and data storage/ analysis, is another key risk area identified by the Company and several measures are being taken to strengthen the same and mitigate the risk associated with this.

Some of the improvements done during the financial year are:

• Old and obsolete IT systems are replaced with new systems. (Ongoing process)

• Network infrastructure is being hardened to mitigate security threats (ongoing process).

• Multi-factor Authentication and MAC address binding are enforced, as applicable.

• Implemented stronger password management system across applications and devices.

• Network bandwidth is continuously optimized to ensure seamless access to applications/database from all locations.

¦ Government Policies: The companys business also has a threat of sudden change in government policies like policies relating to export and import of certain products, change in customs duty structure, change in export incentives, change in GST rates, etc. Similarly other government policies such as policies relating to labour etc. also have their impact in overall competitiveness of the Company as compared to the competing countries in the international markets. The Company monitors the changes in government policies on day-to-day basis and forms appropriate strategies to mitigate the impact on the Company while ensuring adequate compliances.

INTERNAL CONTROL AND ADEQUACY

The Company has in place a well-established framework of internal control systems which are commensurate with the size and complexity of its business. These controls and protocols are designed to safeguard assets, enhance operational efficiency and ensure accuracy in both operational processes and financial disclosures. The Company has an independent internal audit in coordination with the Audit Committee, continuously monitors business activities and promptly notifies the Management Board of any discrepancies. Insights from these reviews inform the Companys risk-assessment strategies, which identify, evaluate and mitigate potential threats. These internal controls support regulatory compliance, deter fraud and maintain transparency factors that help attract investment, bolster stakeholder confidence and drive sustainable growth function covering major areas of operations and the same is carried out by an external Chartered Accountant firm engaged for this purpose.

CAUTIONARY STATEMENT

In this Management Discussion and Analysis, statements that reflect the Companys objectives, projections, estimates, and expectations are "forward-looking statements" under applicable laws and regulations. Such statements are based on managements current beliefs and projections and are typically identified by terms such as anticipate, expect, estimate, intend, plan, believe, project, or similar expressions. These forward-looking statements involve known and unknown risks, uncertainties, and other factors·including changes in economic, regulatory, or political conditions; litigation; labor relations; fluctuations in exchange rates; interest rate movements; and other cost pressures·that could cause actual outcomes to differ materially from those expressed or implied by these statements. While reasonable care has been taken in their preparation, there is no assurance that these statements will be realized. The Company undertakes no obligation to publicly update any forward-looking statement, whether due to new information, future events, or otherwise, except as mandated by law.