Vardhman Polytex Ltd Management Discussions

ECONOMIC OVERVIEW Global Economy

The global economic expansion steadily continued in 2024, although growth was uneven amidst geopolitical tensions, geoeconomic fragmentation, heightened trade tensions and elevated public debt. Global gross domestic product (GDP) grew 3.3% in 2024, as compared to 3.5% a year ago. Global inflation eased to 5.7% in 2024 from 6.6% a year ago as the effect of monetary tightening took hold along with the easing of supply chain pressures; however, it was still above the pre-pandemic average, with elevated services inflation persisting in some major advanced economies. (Source: RBI Annual Report 2024-25)

The global environment has been tough, with tariffs creating a great deal of uncertainty. Uncertainty regarding the evolution of trade tariff policies could lead to volatility in global financial markets.

Indian Economy

The Indian economy remained resilient during 2024-25, supported by robust macroeconomic fundamentals, proactive policy measures and sustained government capital expenditure. Although real gross domestic product (GDP) growth moderated to 6.5 per cent in 2024-25, India remained the fastest growing major economy. Economic activity was supported by an improvement in consumption demand and net exports on the expenditure side, and buoyant services sector and recovery in agricultural production on the supply side.

The Indian economy is poised to sustain its position as the fastest growing major economy during 2025-26, supported by pickup in private consumption, healthy balance sheets of banks and corporates, easing financial conditions and the governments continued thrust on capital expenditure. The easing of supply chain pressures, softening of global commodity prices and higher agricultural production on the back of a likely abovenormal south-west monsoon augur well for the inflation outlook in 2025-26. Financial markets may exhibit sporadic episodes of volatility triggered by turbulent global financial markets in the wake of heightened uncertainty regarding the evolution of trade tariff policies, among others. Export sector is also expected to encounter some headwinds from rising geopolitical tensions, inward-looking policies and risk of potential tariff-war among major economies. However, Indias participation in 14 free trade agreements (FTAs) and six preferential trade greements (PTAs), along with the new trade deals under negotiation with the US, Oman, Peru and the European Union (EU) may support growth in trade. (Source: RBI Annual Report 2024-25)

INDUSTRY STRUCTURE & DEVELOPMENTS

Global Textile Industry

The global textile industry is a large and complex market and the global textile market size is calculated at USD 2,123.72 billion in 2025 and is forecasted to reach around USD 4,016.50 billion by 2034, accelerating at a CAGR of 7.35% from 2025 to 2034. Key drivers for projected continued growth include increasing apparel demand, the rise of e-commerce, and the expansion of the automotive industry, which relies on textiles for various components. Asia-Pacific, particularly China and India, dominates the global textile market. The textile market is segmented by raw material (e.g., cotton, chemical fibers), product type (e.g., natural fibers, polyesters), application (e.g., household, technical), and

region. Key trends include the increasing demand for sustainable and innovative textile solutions, automation in textile machinery, and the rise of e-commerce platforms for textile sales. The high initial capital investment required for modern textile machinery can be a challenge for smaller businesses. The textile industry faces growing pressure to address environmental concerns, such as waste management and the use of sustainable materials. Low wages for garment workers in developing countries are a persistent issue, with organizations working to improve working conditions and fair wages.

Indian Textiles Industry

Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The Indian textile industry is a major global player, renowned for its diverse production, significant export contributions, and large workforce. It contributes to 2.3% Indias GDP, 13% to industrial production, and 12% to exports, while also providing employment for millions, including women and rural populations. It employs over 45 million people, making it a major source of jobs, particularly in rural areas. The industry produces a wide range of textiles, from natural fibers like cotton, silk, and wool to synthetic fibers like polyester and nylon. India is a significant producer of handloom fabrics and handicrafts, which are known for their unique designs and patterns.

The market for Indian textiles and apparel is projected to grow at a 10% CAGR to reach US$ 350 billion by 2030. Moreover, India is the worlds 3rd largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories, with exports expected to reach US$100 billion. (Source: https://www.ibef.org/industry/textiles)

Opportunities & Threats

The Indian textile industry faces both significant opportunities and substantial threats. Opportunities include a growing domestic market, rising global demand, and government initiatives to boost exports and investment. A larger middle class, e-commerce penetration, and evolving consumer preferences are driving demand for textiles within India. Shifting global supply chains and increasing global interest in Indian textiles present opportunities for export growth.

However, threats include intense global competition, fluctuating raw material costs, infrastructure limitations, and the need to adapt to sustainability and environmental regulations. The rise of fast fashion and the associated waste pose a challenge for Indias textile industry, though there are also opportunities in the recycling and circular economy. The industrys fragmented supply chains can also hinder efficiency and competitiveness. A growing focus on textile recycling and circular economy creates opportunities for green jobs.

COMPANY OVERVIEW & ROLE

Vardhman Polytex Limited manufactures yarns that are synonymous with the highest quality. Its range of Cotton Yarns (Carded, Combed, Organic, BCI), Cotton Polyester Yarns and Value Added Yarns (Grey and Dyed) in variable counts, hold a place of pride in the industry. Using the finest raw materials and cutting edge technology for production, each yarn confirms to highest global standards. The company endeavors to put forth fresh products through constant innovation and synchronization with trends.

Presently, the company has production facility located at Nalagarh, Himachal Pradesh.

Bathinda Unit:

During FY 2023-24, operations at manufacturing unit located at Badal Road, Bathinda were closed due to non-viability due to deteriorating condition of machines, high operational cost and operational losses. Later, it was planned to monetize the land situated at Bathinda Unit to augment funds. The company has received approval from Bathinda Development Authority (BDA) stating its No Objection to establish a Residential Colony subject to other regulatory approvals from Municipal Corporation and other Departments. However, pending these approvals, the land situated at Bathinda unit has been reclassified from fixed assets to inventory in December, 2024 and is valued at fair value, based on the Bathinda Tehsils collector rate list for agricultural land. This initial fair value assessment uses agricultural land rates. A full fair market valuation will be determined after the saleable area is precisely ascertained.

Ludhiana Unit:

In March 2025, the company has closed the operations at manufacturing unit located at Focal Point, Ludhiana to explore various avenues for the monetization of real estate potential of the land and streamlining the cash flows of the organization.

Segment-wise/Product-wise Performance

The company operates in two segments i.e Textiles and Real Estate.

Product-wise sale details are as under:

Outlook

The company will primarily focus on implementing cost-cutting measures, enhancing productivity, minimizing waste, elevating product quality, and improving operational efficiency to make offerings more cost-competitive. Additionally, efforts will be directed toward reducing debt-related costs. The company is optimistic about the generation of revenue from real estate segment by monetization of lands situated at Bathinda and Ludhiana. Despite the challenges, the company remains optimistic about a strong recovery. These are testing times for all of us, but with our strong brand reputation and established market network, we are confident of getting back on track soon.

Management perception of Risk & Concerns

Textile industry faces numerous challenges, including rising raw material costs, infrastructure bottlenecks, competition from other countries, and the need for greater technological adoption and sustainability practices. Additionally, fragmentation and lack of scale hinder competitiveness.

In todays challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans

of the Company are imperative. Mitigating risks in the textile industry requires a multifaceted approach, including focusing on raw material supply, financial stability, operational efficiency, and environmental sustainability. This involves developing diverse sourcing strategies, strengthening creditworthiness and implementing robust safety protocols.

The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Audit Committee also evaluates risk management system of the Company periodically. The company has very agile corporate team of professionals keeping tab on business developments and working efficiently to mitigate the various risks.

Internal Control System & their adequacy:

The Company has a well-established framework of internal controls in all areas of its operations, including suitable monitoring procedures and competent personnel. In addition to statutory audit, the financial controls of the Company at various locations are reviewed by the Internal Auditors, who report their findings to the Audit Committee of the Board. The Audit Committee is headed by an Independent Director and this ensures independence of functions and transparency of the process of supervision. The Committee meets on a regular basis to review the progress of the internal audit initiatives, significant audit observations and planning and implementation of the follow-up action required. The Company conducts its business with integrity and high standards of ethical behavior and in compliance with the all applicable laws and regulations that govern its business.

Discussion on Financial Performance with respect to Operational Performance

Earlier, the company had three production facilities located at Nalagarh (Himachal Pradesh), Ludhiana (Punjab) and Bathinda (Punjab) for the manufacturing of yarns. Currently, the production facility at Ludhiana only is operational. The company has closed the operations at manufacturing units located at Bathinda and Focal Point, Ludhiana due to non-viability on account of deteriorating condition of machines, high operational cost and also to explore various avenues for the monetization of the land.

During FY 2024-25, Revenue from operations is Rs.28,498.24 Lakhs which has come down by 23.11% from Rs.37,063.81 Lakhs in FY 2023-24. The major reasons for reduction in revenue were closure of operations of Bathinda Unit and the lower/irregular production activities of manufacturing unit at Ludhiana during the year and thereafter, its closure. There is PBT of Rs.1492.40 Lakhs during FY 2024-25 as compared to last years loss of Rs.2675.98 Lakh.

The past few years have posed significant challenges for the company, demanding both resilience and adaptability. Liquidity position of the company was also under pressure, which has affected our operations. The company is exploring various avenues for the monetization of real estate potential of the lands situated at Bathinda and Ludhiana which will streamline the cash flows of the organization. Management remains confident that the company will recover from its current downturn, paving the way for renewed growth and profitability.

Resource utilization:

The gross fixed assets as at 31^st March, 2025 were Rs.35,697.77 lakh as against Rs.38,487.73 lakh in the previous year. The Net block of assets as on 31st March, 2025 was Rs.11,334.10 lakh as compared to Rs.12,887.95 lakh in the previous year.

Inventory levels as at 31^st March, 2025 were Rs.4,376.34 lakh as against Rs.1,681.23 lakh in the previous year. The trade receivable as at 31^st March, 2025 were Rs.422.28 lakh as against Rs.3.57 lakh in the previous year.

Financial condition & liquidity:

Human Resources Development:

The total number of employees as on 31^st March, 2025 were 639. The industrial relations in all units of the Company continue to be cordial. Your Company believes that its employees are its core strength and development of people is a key priority for the organization to drive business objectives and goals. Robust HR policies are in place which enables building a stronger performance culture.

Health & Safety Measures:

As a conscientious and caring employer, the Company actively pursues safety and health measures continuously. We believe in good health of our employees. Modern occupational health and medical services are accessible to all employees.

The Company has always considered safety as one of its key focus areas and strives to make continuous improvement on this front. The Company is committed to complying with all relevant regulations and ensure safer plants by conducting safety audits, risk assessments and periodic safety awareness campaigns and training to employees.

Significant key financial ratios

Cautionary Statement:

Statements in this report on Management Discussion and Analysis, describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include finished goods prices, raw materials costs and availability, global and domestic demand-supply conditions, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts. The Company assumes no responsibility in respect of the forward looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events.