Vaxtex Cotfab Ltd Management Discussions

A. INDUSTRY STRUCTURE AND DEVELOPMENTS:

The Indian textile industry continues to navigate a dynamic and challenging environment influenced by global macroeconomic conditions, supply chain disruptions, and rising input costs. Despite these headwinds, the sector is witnessing a structural transformation driven by sustainability, innovation, and digital integration.

Vaxtex Cotfab Limited operates within the Indian textile manufacturing sector, primarily engaged in the processing and trading of suiting, shirting, and denim fabrics. The textile industry remains a vital contributor to Indias manufacturing output and employment, with strong linkages to the fashion, retail, and export sectors. The company offers a diverse product portfolio, including cotton, polyester blends, and specialized finishes such as pigment and reactive dyeing, supported by an installed manufacturing capacity of approximately 12 lakh meters per month.

The sector is witnessing a significant shift toward sustainable and eco-friendly textiles, driven by growing consumer awareness and demand for products made from renewable raw materials and through cleaner manufacturing processes. This sustainability focus is encouraging manufacturers to invest in green technologies and innovative production techniques to reduce environmental impact.

Technological advancements are also transforming the industry. The adoption of digital tools such as 3D modeling, virtual sampling, and AI-based design solutions is helping manufacturers improve product customization, accelerate development timelines, and minimize waste, thereby enhancing overall operational efficiency.

Government initiatives, including the Production Linked Incentive (PLI) scheme and the establishment of PM MITRA Parks, are fostering modernization and capacity expansion in the textile sector. Additionally, the global “China Plus One” sourcing strategy has opened up new export opportunities for Indian manufacturers, despite ongoing challenges related to geopolitical tensions and raw material price fluctuations.

Small and mid-sized enterprises, including Vaxtex Cotfab, continue to face pressures from tightening working capital, compliance requirements, and intense competition. Nevertheless, the medium- to long-term outlook for the Indian textile industry remains positive, supported by sustainability trends, digital innovation, growing domestic demand, and a supportive policy environment.

B. Financial Performance:

Revenue Analysis: The company experienced steady revenue growth, driven by strong demand in both domestic and export markets. Key segments such as suiting and shirting fabrics contributed notably, while emerging channels like e-commerce and direct-to-consumer platforms gained momentum.

Cost Structure: Rising input costs due to higher raw material prices, labor wages, and logistics expenses impacted overall costs. However, efficient procurement and strict operational controls helped contain the cost increase.

Profitability: Gross and operating margins remained stable, supported by effective pricing strategies and volume growth. Net profit improved compared to the previous year despite inflationary pressures and currency fluctuations.

Capital Expenditure: Investments were made toward modernizing manufacturing facilities, enhancing automation, and strengthening research and development capabilities. These initiatives aim to improve efficiency and support future expansion.

Product Development: The company focused on innovation by introducing sustainable and high-quality textile products aligned with global trends, catering to evolving customer preferences.

Sales and Marketing: Digital marketing, influencer partnerships, and enhanced customer engagement strategies boosted brand visibility and contributed to improved sales performance.

Supply Chain Management: The company addressed global supply chain challenges through supplier diversification and optimized inventory planning. Adoption of digital tools improved logistics tracking and overall supply chain resilience.

C. Challenges and Opportunities:

A. Environmental and Regulatory Challenges:

The textile industry, including Vaxtex Cotfab, faces increasing pressure to manage water usage, chemical consumption, and waste effectively. Stricter environmental regulations in India and key export markets require ongoing investments in cleaner production processes and sustainable technologies. Compliance with these evolving standards is critical to maintain market access and corporate responsibility.

B. Global Competition:

Indian textile manufacturers encounter intense competition from low-cost producers in countries such as China, Vietnam, and Bangladesh. To maintain and enhance competitiveness, companies must focus on improving product quality, embracing design innovation, and strengthening brand identity globally. Additionally, there is a growing market for sustainable and ethically produced textiles, presenting an opportunity for Indian firms to differentiate themselves and capture premium segments.

C. Technological Advancements:

Adoption of automation, digital design tools, and advanced manufacturing technologies is key to improving operational efficiency and reducing dependency on manual labor. Investments in technology not only help optimize costs but also ensure compliance with rising quality and environmental benchmarks. Furthermore, leveraging e-commerce and direct-to-consumer channels can expand market reach and enhance customer engagement in both domestic and international markets.

D. Government Support and Initiatives:

A. Policy Initiatives:

The Government of India has launched several focused programs to bolster the textile sector, including schemes to enhance production capacity, upgrade infrastructure, and promote sustainable manufacturing practices. Initiatives such as the Production Linked Incentive (PLI) scheme and the establishment of PM MITRA Parks aim to boost domestic manufacturing and increase export competitiveness. Export incentives, duty drawback schemes, and other financial support mechanisms continue to provide critical assistance to textile exporters.

B. Skill Development:

To address workforce challenges in the textile industry, various skill development programs have been implemented, focusing on upskilling workers in modern manufacturing techniques, sustainability, and digital tools. These efforts help improve productivity, product quality, and ensure the workforce remains adaptable to evolving industry requirements.

C. Investment Promotion:

The textile sector benefits from liberalized Foreign Direct Investment (FDI) policies that encourage capital inflows and technology transfers. The PLI scheme further incentivizes new investments aimed at capacity expansion, modernization, and innovation, positioning India as a global hub for textile production.

E. Future Outlook:

A. Growth Prospects:

The Indian leather sector is expected to witness steady expansion, fueled by increasing domestic consumption and growing demand in international markets. Embracing eco-conscious and ethical manufacturing practices will be essential for unlocking new business opportunities.

As global markets recover from the disruptions caused by the COVID-19 pandemic, the leather goods segment is likely to see renewed demand offering a favourable environment for Indian exporters to regain momentum.

B. Strategic Focus Areas:

Sustainability: With growing pressure from both regulators and consumers, sustainability is no longer optional. The adoption of water-efficient dyeing processes, use of recycled fibers, and eco-certified inputs will be critical for long-term growth and global market acceptance.

Technology and Innovation: The future of textile manufacturing lies in digitalization and automation. Investments in smart machinery, real-time quality monitoring systems, and AI-driven design platforms will enhance product quality, efficiency, and responsiveness to market trends.

Market Diversification: While the European Union and the United States remain key export markets, Indian textile companies are increasingly exploring newer geographies such as Latin America, the Middle East, and Southeast Asia. Diversification will reduce regional dependency and broaden the revenue base.

Value Addition: Emphasis is shifting toward value-added textiles, such as performance fabrics, functional finishes, and fashion-forward designs. These segments offer higher margins and align well with shifting global preferences.

C. Strategic Focus Areas:

Sustainability: Environmental responsibility is becoming a central focus, with manufacturers adopting green tanning techniques, improving waste management, and integrating recycling processes. Companies aligning with these sustainable practices will be better positioned in eco-sensitive global markets.

Innovation and Technology: Future success will heavily depend on the industrys ability to modernize. Investing in R&D and upgrading to advanced production systems will enable better product quality, faster turnaround, and the ability to cater to changing consumer trends in both design and material use.

Market Diversification: While traditional markets like the European Union and the United States remain crucial, Indian leather exporters are actively exploring emerging regions such as Latin America, Africa, and Southeast Asia. Expanding into these markets will reduce dependence on a few regions and spread business risk more effectively.

F. Risks and concerns:

The textile industry faces continued pressure from low-cost competitors such as China, Bangladesh, and Vietnam, which impacts pricing and export competitiveness. Changing consumer preferences and rising demand for synthetic or alternative fabrics present additional market risks.

Technology obsolescence remains a concern, as outdated systems can reduce efficiency and hinder innovation. Regulatory shifts, trade policy changes, and global economic uncertainties further contribute to operational challenges.

Maintaining product quality while remaining cost-competitive is critical for sustaining market share and long-term growth.

G. Internal control systems and their adequacy:

The Company has in place a comprehensive internal control system commensurate with the size and nature of its operations. These controls are designed to safeguard assets, ensure the accuracy and reliability of financial reporting, and promote compliance with applicable laws and regulations. The internal control framework covers all key operational and financial functions and is periodically reviewed to address emerging risks and maintain its effectiveness. Regular monitoring and oversight by the management help ensure transparency, accountability, and operational efficiency across the organization.

H. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the financial year 2024 25 has been discussed in detail in the Board of Directors Report, which forms an integral part of this Annual Report. It reflects the operational outcomes and key business developments achieved during the year.

I. Material developments in Human Resources / Industrial Relations front including number of people employed:

The Company adheres to a people-centric HR philosophy that fosters a high-performance culture and encourages employees to realize their full potential. A robust performance management system aligns individual objectives with organizational goals, promoting continuous improvement and accountability. The work environment supports personal growth, teamwork, and collaboration. During the year, industrial relations remained positive and harmonious, reflecting the Companys commitment to maintaining a motivated and efficient workforce.

J. Segment-wise or Product-wise performance:

The Company operates in single Segment i.e. Trading and Manufacturing in Textiles.

K. Key Financial Ratios:

In accordance with the SEBI (Listing Obligations and Disclosures Requirements) Regulations 2018 (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in Key sector specific financial ratios. In this regard, the Company has no significant changes in any key sector specific financial ratios to report.

L. Cautionary Statement:

This Management Discussion and Analysis may contain certain forward-looking statements relating to the Companys objectives, plans, projections, and expectations, as defined under applicable laws and regulations. These statements are based on current assumptions and estimates, and actual results may differ materially due to various known and unknown risks and uncertainties. Factors such as economic conditions, regulatory changes, tax policies, political developments, and natural disasters, many of which are beyond the Companys control and that may significantly impact operational performance and outcomes.

Registered Office:	By the Order of the Board
J-03 (GF to 4th Floor) Tejendra Arcade,	Vaxtex Cotfab Limited
Nr. Ganjifarak Mill Compound,
Nr. Rakhial Char Rasta, Rakhial,
Ahmedabad, Gujarat, India 380 023
Sd/-	Sd/-
Devi Singh	Aakash Rajeshbhai Thakor
Place: Ahmedabad
Director	Managing Director
Date: 5th August, 2025
DIN: 09528536	DIN: 07960192