VIP Clothing Ltd Management Discussions

CAUTIONARY STATEMENT

This Management Discussion and Analysis contains statements concerning the Companys objectives, strategies, expectations, estimates and outlook that may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to, among other factors, changes in economic conditions, consumer demand, raw-material and energy prices, competitive intensity, government policies, taxation, regulation, supply-chain conditions, technology and cybersecurity risks, and other factors beyond the Companys control. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to update them except as required by law.

1. Industry Structure and Developments Global textile and apparel industry

The global textile and apparel industry remained exposed during FY 2025-26 to uneven consumer demand, geopolitical uncertainty, trade-policy changes, shipping disruptions and volatility in raw-material and energy costs. At the same time, brands and manufacturers continued to invest in supply-chain diversification, automation, data-led planning, digital commerce and more resource-efficient manufacturing. Demand trends increasingly favoured comfort, functionality, athleisure, intimate wear and products supported by credible sustainability attributes.

For manufacturers and branded apparel businesses, competitiveness increasingly depends on product innovation, speed to market, quality consistency, inventory discipline, omnichannel reach and responsible sourcing. These developments create opportunities for organised players, while also increasing compliance, technology and execution requirements.

Key factors influencing the global textile industry

Global economic conditions: Moderate economic growth and easing inflation in certain markets supported consumer spending, although demand remained cautious in several export markets.

Raw-material and energy volatility: Movements in cotton, synthetic fibre, crude-oil and energy prices continued to affect manufacturing costs and margins, increasing the importance of procurement and inventory discipline.

Geopolitical developments and supply-chain diversification: Conflicts, shipping disruption and evolving trade policies encouraged brands to diversify sourcing and reduce geographic concentration.

Sustainability and responsible sourcing: Regulatory and customer expectations continued to encourage resource-efficient manufacturing, traceability, recycled inputs and circular-economy practices.

Digitalisation and technological innovation: Automation, artificial intelligence, advanced analytics and smart manufacturing continued to improve quality, planning, productivity and customer responsiveness.

Changing consumer preferences: Demand increasingly favoured comfort, fit, functionality, premiumisation, personalisation and credible sustainability attributes.

E-commerce and omnichannel retail: Digital commerce broadened market access and enabled brands to integrate online and offline consumer journeys.

Technical and functional textiles: Applications across healthcare, mobility, infrastructure, defence, sports and industry continued to support investment and product innovation.

Indian textile, apparel and intimate-wear industry

India has an integrated textile value chain, a large domestic consumer market and a significant manufacturing and employment base. According to a Government of India release dated 1 April 2025, the textile and apparel industry contributes approximately 2.3% to Indias GDP, 13% to industrial production and 12% to exports, and directly employs more than 45 million people. The sector continues to benefit from domestic consumption, organised retail, e-commerce and policy support, while facing pressure from input-cost volatility, international competition, logistics costs and changing trade conditions.

Sources: https://www.pib.gov.in/PressReleasePage.aspxRsPRID=2117470; https://texmin.nic.in

Source: https://www.pib.gov.in/PressReleasePage.aspxRsPRID=2117470

Within apparel, the intimate-wear market is progressively shifting from unorganised, function-led consumption towards branded offerings distinguished by fit, comfort, fabric quality, design and value addition. Organised retail, online marketplaces and direct-to-consumer channels have widened consumer access, including in Tier II and Tier III markets. Mens, womens and childrens innerwear, athleisure and adjacent comfortwear categories offer growth potential; however, competition, discounting, product obsolescence and inventory complexity remain material industry considerations.

Sources: https://www.ibef.org/industry/textiles; https://www.investindia.gov.in/sector/textiles-apparel; https://www.imarcgroup.com/india-innerwear-market

Indian economy and structural advantages of the textile sector

Indias textile and apparel sector benefits from a large consumer base, capabilities across much of the textile value chain, availability of natural and man-made fibres, an established manufacturing ecosystem and a substantial skilled workforce. Rising incomes, urbanisation, organised retail and e-commerce continue to support domestic demand, while global sourcing diversification may create export opportunities for competitive Indian manufacturers.

The sector also faces structural challenges, including dependence on key raw materials, cost volatility, infrastructure and logistics constraints in certain clusters, fragmented production, evolving labour and environmental compliance requirements and strong competition from other textile-exporting countries. Investment in technology, design, skills, quality, scale and sustainable production will remain important to long-term competitiveness.

Domestic intimate-wear industry

The domestic intimate-wear market has evolved from a predominantly need-based category towards a branded, design- and innovation-led segment. Consumers increasingly evaluate products on comfort, fit, fabric quality, durability, hygiene, functionality, style and value. Premiumisation, formalisation of retail and increased digital discovery have broadened the addressable market for organised brands.

Product development is increasingly focused on breathable and stretchable fabrics, moisture management, improved construction, enhanced sizing and fit, and more responsible materials and packaging. These trends create opportunities, but new product claims and sustainability attributes should be supported by appropriate technical, quality and sourcing evidence.

Sources: https://www.ibef.org/industry/textiles; https://www.imarcgroup.com/india-innerwear-market; https://www.grandviewresearch.com/industry-analysis/underwear-market.

Category trends

Mens innerwear: The category continues to benefit from rising brand awareness and consumer emphasis on comfort, fit, quality and functionality. Organised retail and e-commerce have increased access to premium and differentiated offerings, including in emerging cities.

Womens innerwear and comfortwear: Growing awareness of fit, comfort and personal well-being, wider product choice, digital discovery and increasing participation in the workforce support the shift towards branded products. Demand spans innerwear as well as adjacent comfortwear categories, creating scope for better sizing, product education, innovation and omnichannel engagement.

Sources: https://www.imarcgroup.com/india-womens-innerwear-market

Childrens innerwear: Parents increasingly prioritise skin-friendly fabrics, comfort, hygiene, quality, durability and product safety. Organised retail and online channels have improved access, while product design must remain sensitive to age-appropriate fit, quality and value.

Sources: https://www.imarcgroup.com/india-kids-apparel-market

Athleisure and adjacent categories: The convergence of comfort, casualisation, fitness and lifestyle apparel supports opportunities in athleisure, sleepwear, thermals, shapewear and other functional or comfort-led categories, subject to disciplined category selection and inventory management.

Sources: https://www.ibef.org/industry/textiles https://www.grandviewresearch.com/ industry-analysis/underwear-market

Manufacturing and retail perspective

From a manufacturing perspective, the industry is investing in automation, quality systems, product engineering, advanced fabrics, resource efficiency and supply-chain visibility. Capabilities in research and development, design, technical skills, vendor development and consistent quality are increasingly important as consumer expectations rise and product cycles shorten.

From a retail perspective, general trade, modern trade, exclusive outlets, multi-brand outlets, marketplaces and direct-to-consumer channels together form an increasingly interconnected ecosystem. E-commerce, smartphones, digital payments and improving logistics have expanded category access beyond metropolitan markets. Successful omnichannel execution requires consistent product information, pricing discipline, inventory visibility, reliable fulfilment and effective returns management.

Government measures supporting the textile industry

Government initiatives relevant to the textile and apparel ecosystem include the Production Linked Incentive Scheme for Textiles, PM Mega Integrated Textile Region and Apparel Parks, the National Technical Textiles Mission, the Samarth skill-development scheme, RoDTEP, RoSCTL and broader Make in India measures. These programmes seek to support manufacturing scale, infrastructure, skills, exports, value addition, investment and technology adoption. The availability and benefit of any scheme remain subject to its applicable eligibility conditions, approvals and operating guidelines.

Sources: https://texmin.nic.in; https://pmmitra.texmin.gov.in.

2. Opportunities and Threats Opportunities

Premiumisation and increasing preference for branded, comfortable and functional innerwear.

Expansion of e-commerce, direct-to-consumer and omnichannel distribution, including deeper reach in Tier II and Tier III markets.

Growth opportunities in womens innerwear and comfortwear, childrens innerwear, athleisure and other adjacent categories.

Product innovation through improved fabrics, fit, performance characteristics, design and packaging.

Government support for domestic manufacturing and textile infrastructure through initiatives such as PLI for Textiles, PM MITRA Parks and the National Technical Textiles Mission.

Operational improvements through automation, enterprise systems, analytics and disciplined working-capital management.

Threats

Volatility in cotton, yarn, fabric, chemicals, packaging, energy and logistics costs.

Intense competition from organised brands, regional players, unorganised manufacturers, private labels and digital-first entrants.

Demand volatility, discount-led selling, fashion and product-cycle risk, and changes in consumer preferences.

Supply-chain disruption, vendor concentration, quality failures and inventory ageing or obsolescence.

Increasing regulatory, labour, environmental, product-quality and data-protection compliance requirements.

Cybersecurity, system availability and data-integrity risks as operations become more digitally integrated.

3. Company Overview and Business Performance

VIP Clothing Limited is engaged in the innerwear and apparel business through a portfolio of brands that includes VIP, Frenchie, Frenchie X, Feelings, Leader, Rivolta and Yuwa Series. The portfolio serves mens, womens and childrens innerwear and related apparel categories across general trade, modern trade and digital channels.

During FY 2025-26, the Company continued to focus on product and brand development, channel expansion, manufacturing and supply-chain efficiency, inventory discipline, digital enablement and cost management. Revenue from operations increased by 7% to 25,382.85 lakh from 23,688.69 lakh in FY 2024-25. Profit before tax increased by 78.08% to 1,250.61 lakh, while profit after tax increased by 79.77% to 980.96 lakh. Net cash generated from operating activities was 2,022.99 lakh, compared with net cash used in operating activities of 3,736.09 lakh in the previous year.

During the year, India Ratings and Research upgraded the Companys long-term bank-loan rating to IND BBB- with a Stable Outlook from IND BB+, and its short-term bank-loan rating to IND A3 from IND A4+. The rating action should be read together with the rating agencys detailed rationale and qualifications.

Sources: https://www.vipclothing.in/investor_relation/OutcomeOfBmMay272026Signed.pdf; https://www.vipclothing.in/investor_relation/credit-rating/CoveringLetterCreditRatingDecember2025 Revised.pdf

Financial Year 2025-26 marked an important milestone in the Companys transformation journey, characterised by stronger operational execution, continued brand premiumisation, enhanced distribution capabilities, improved profitability and disciplined financial management. Despite a dynamic and competitive business environment, the Company remained focused on strengthening its core brands, improving operational efficiency and creating long-term value for stakeholders.

The Company continued to reinforce its position in the organised innerwear and apparel market through investments in product innovation, brand development, channel expansion and digital transformation. Its portfolio comprises VIP, Frenchie, Frenchie X, Feelings, Leader, Rivolta and Yuwa Series, serving mens, womens and childrens innerwear and related apparel categories.

During the year, the Company expanded Frenchie X, its premium mens innerwear range, strengthening its presence in the premium segment. The launch and expansion of the Yuwa Series for children received encouraging customer response, particularly in key southern markets. These initiatives reflect the Companys focus on product quality, comfort, contemporary design and evolving consumer preferences.

The Company also strengthened its digital and omnichannel presence across e-commerce and quick-commerce platforms, including Blinkit, Swiggy Instamart and Zepto. This expanded product accessibility, supported last-mile fulfilment and complemented the Companys general trade, modern trade and organised retail network across metropolitan and emerging markets.

Operational priorities during the year included product premiumisation, improvement in product mix, supply-chain optimisation, inventory discipline and cost management. Revenue from operations increased by 7% to 25,382.85 lakh, profit before tax increased by 78.08% to 1,250.61 lakh and profit after tax increased by 79.77% to 980.96 lakh. Net cash generated from operating activities was 2,022.99 lakh, compared with net cash used in operating activities of 3,736.09 lakh in FY 2024-25.

The Companys credit profile also improved during the year. India Ratings and Research upgraded the long-term bank-loan rating to IND BBB- with a Stable Outlook from IND BB+, and the short-term bank-loan rating to IND A3 from IND A4+. The rating action reflected the rating agencys assessment and should be read together with its detailed rationale and qualifications.

The Company continued to participate in industry exhibitions, retailer and distributor engagement programmes and trade forums, providing opportunities to showcase its portfolio and strengthen relationships with channel partners. Brand building, product innovation, technology adoption, distribution expansion and customer-centric execution remain central to the Companys growth strategy.

4. Segment-wise or Product-wise Performance

The Company is engaged in the business of Hosiery and Others and has one reportable segment under Ind AS 108, Operating Segments. Accordingly, separate segment-wise financial information is not applicable. Product- and brand-level performance is monitored internally as part of the Companys operational review and resource-allocation processes.

5. Outlook

The long-term outlook for organised innerwear and related apparel remains favourable, supported by Indias demographics, rising brand consciousness, premiumisation, expanding organised retail and increasing digital adoption. The Company intends to pursue growth through brand investment, product innovation, expansion in mens, womens, childrens and athleisure categories, wider omnichannel distribution, manufacturing and supply-chain efficiency, and disciplined working-capital management.

The near-term environment may remain sensitive to consumer demand, competitive discounting, input-cost movements and supply-chain conditions. The Companys ability to convert industry opportunities into profitable growth will depend on execution, product acceptance, channel productivity, inventory control and cost discipline. Accordingly, the outlook should be read together with the risks and uncertainties described in this report.

6. Risks and Concerns

Raw-material and cost risk: Changes in prices and availability of yarn, fabric, chemicals, packaging, energy and freight may affect gross margins. The Company seeks to mitigate this through supplier diversification, procurement planning, product-mix management and cost controls.

Market and competition risk: The business operates in a competitive market with organised, unorganised and digital-first participants. Brand investment, product quality, innovation, distribution reach and consumer engagement remain central mitigants.

Demand, product and inventory risk: Changes in consumer preferences, seasonality, discounting and inaccurate demand forecasts may lead to lost sales or ageing inventory. The Company uses sales and inventory monitoring, portfolio reviews and channel planning to manage this exposure.

Credit and channel risk: The Companys distribution model may expose it to receivable delays, counterparty stress and channel inventory. Credit controls, ageing reviews, collection monitoring and distributor evaluation are used to manage the risk.

Operational and supply-chain risk: Manufacturing interruption, vendor failure, logistics disruption or quality issues may affect availability and customer service. Preventive maintenance, quality controls, alternate sourcing and business-continuity practices support mitigation.

Technology and cybersecurity risk: Greater reliance on enterprise and digital systems increases exposure to outages, cyber incidents and loss or misuse of data. Access controls, backups, monitoring, security practices and incident-response processes require continuous strengthening.

Regulatory and compliance risk: The Company is subject to corporate, securities, tax, labour, environmental, consumer, product and data-related requirements. Policies, reviews, training and oversight mechanisms are used to support compliance.

People and execution risk: Growth depends on attracting, developing and retaining skilled employees and executing strategic initiatives effectively. Performance management, capability development, succession planning and employee engagement are important mitigants.

7. Internal Control Systems and Their Adequacy

The Company has an internal-control framework commensurate with the size and nature of its operations. The framework is designed to safeguard assets, support reliable financial reporting, promote operational efficiency and facilitate compliance with applicable laws and policies. It includes documented processes, authorisation controls, segregation of duties, periodic reconciliations, management reviews and technology-enabled controls across key business processes.

Internal audits are carried out in accordance with an approved audit plan. Significant observations and the status of corrective actions are reviewed by management and the Audit Committee. The framework is reviewed periodically and strengthened in response to business changes, audit observations and evolving risks. Based on the reviews carried out during the year, the management considers the Companys internal-control systems to be adequate and operating effectively.

8. Financial Performance with Respect to Operational Performance

Particulars	2025-26	2024-25
Revenue from operation	25,382.85	23,688.69
Profit before Interest & finance charge, Depreciation & Income Tax	2,392.74	1,800.88
Less : Finance Cost	879.10	804.65
Less : Depreciation	263.03	293.95
Add : Other Income	103.87	136.03
Profit/(Loss) Before exceptional item and Tax	1,250.61	702.28
Profit /(Loss) for the year (excluding OCI)	980.96	545.65
Profit/(Loss) for the year (including OCI)	981.12	540.15

Revenue growth, a favourable cost and product mix, lower employee-benefit expense and lower processing and other expenses contributed to the improvement in profitability, partly offset by higher finance costs. Profit after tax grew faster than revenue, resulting in an improvement in the net profit margin. The audited statement of cash flows also reflects a material improvement in cash generated from operations during the year.

9. Key Financial Ratios

Ratio	FY 2025-26	FY 2024-25	Change
Return on Net Worth (%)	5.05%	2.93%	72.35%
Return on Capital Employed (%)	10.15%	7.56%	34.26%
Basic EPS (after exceptional items) in	1.09	0.63	73.02%
Debtors Turnover	2.61	3.02	(13.58%)
Inventory Turnover	1.90	1.65	15.15%
Interest Coverage Ratio	2.42	1.87	29.41%
Current Ratio	1.83	1.66	10.24%
Debt Equity Ratio	0.34	0.42	(19.05%)
Operating Profit Margin (%)	9.43%	7.60%	24.08%
Net Profit Margin (%)	3.86%	2.30%	67.83%

10. Change in Return on Net Worth

Financial year	2025-26	2024-25
Return on net worth (%)	5.05%	2.93%

Change in Return on Net Worth as compared to the immediately previous financial year is due to Increase in net profit during the year.

11. Human Resources and Industrial Relations

Human resources continue to be among the Companys most valuable assets and a key driver of sustainable business growth. The Company remains committed to providing a safe, inclusive, performance-oriented and engaging work environment that supports employee development, innovation and organisational excellence. As at 31st March 2026, the Company had 555 employees and workers across its manufacturing facilities, corporate office and sales operations.

The Company continued to invest in capability development through structured learning and development programmes, leadership initiatives, technical training, safety awareness and employee-wellness programmes. It also seeks to foster a culture of integrity, collaboration, diversity, equal opportunity and continuous improvement, while maintaining systems designed to support compliance with applicable labour and occupational health and safety requirements. Industrial relations at the manufacturing locations remained cordial throughout the year. The commitment and dedication of the workforce supported operational stability, productivity and execution of the Companys strategic priorities. The Company remains focused on strengthening employee engagement, enhancing organisational capabilities and building a high-performance culture that supports long-term sustainable growth.