Vishal Fabrics Ltd Management Discussions

Economic Overview

Global Economy

In CY 2026, the world economy faced several headwinds but still managed to grow steadily by 3.3%. This expansion was largely driven by emerging and developing markets, which grew by 4.3%, while advanced economies recorded more modest growth of 1.8%. The US economy grew by 2.8%, supported by strong consumer spending and a resilient labour market. In contrast, the European Union experienced a slower recovery, hindered by weak domestic demand and persistent structural issues. Chinas growth also decelerated, primarily due to ongoing stress in its property sector. Despite these challenges, global economic output reached approximately USD 110.5 trillion, or USD 196.1 trillion in

Purchasing Power Parity (PPP) terms, reflecting the resilience of the global economy. Inflation declined to 5.7% worldwide, with emerging markets showing signs of price stabilisation. Global trade volumes increased overall, although selective US tariffs caused disruptions in some sectors. Nevertheless major economies demonstrated adaptability, contributing to macroeconomic stability and moderate growth.

Outlook

Theres Huge Demand For Denim, Its a Forever Product

From its rugged beginnings as a workwear fabric in the late 1980s to becoming a wardrobe essential across generations, denim in India has undergone a remarkable transformation. In this candid conversation with Henry Dsouza, Associate Editor of Textile Insights, it is reflects on the industrys evolution, Gujarats dominance, the gaps in global competitiveness and why denim continues to thrive as a timeless, ever-relevant fashion category.

Denim in India has travelled a long road from being a rugged, workwear essential to becoming a universal fashion statement. Reflecting on this transformation, and it is notes that when denim first entered the Indian market in the late

1980s, it was perceived as a very heavy rugged fabric meant for miners and industrial workers, something durable not fashionable.

Over time, however, the category underwent a remarkable evolution. “Open-end yarns gave way to ring yarns and suddenly denim became softer, more wearable. Thats when the shift truly began,” he explains. The early efforts to build a denim ecosystem were equally critical. break. We had to train tailors across cities. That groundwork helped create the industry.

Despite periodic concerns about demand cycles, the company remains clear: “Denim is not going anywhere. There is still a huge demand. Its a forever product.”

Global inflation is expected to continue declining, reaching about 4.3% in CY 2025 and further down to 3.6% by CY 2026. This drop is mainly due to commodity price stabilisation and

Indian Economy

The Indian denim fabric manufacturing industry records an estimated turnover of Rs 20,000 crore, supported by manufacturing capacities exceeding one billion meters annually. Vertically integrated operations spanning spinning, dyeing, weaving and finishinghelp maintain consistent quality while ensuring cost competitiveness in global markets. India has carved a strong place for itself as a ‘global powerhouse in denim production, with an installed capacity of nearly 1,600 million meters. Backed by abundant cotton, skilled manufacturing and a fast-growing home market, the country has built a solid denim foundation over the years. Beyond scale, Indias denim rise is deeply rooted in its textile heritage, but it is modern manufacturing that has taken it global. Gujarat remains the backbone of this transformation, accounting for nearly 60 to 70 per cent of national production. Its proximity to cotton farms, strong processing ecosystem, and large integrated mills have helped the state emerge as the undisputed ‘Denim Capital of India. While China continues to lead in sheer volume, our nation has strengthened its position through value driven production, moving beyond fabric exports to finished, design-led garments aligned with international fashion and compliance standards. It is quickly emerging as a dependable partner for both quality and scale. Core areas such as manufacturing, agriculture and services showed good progress, contributing to rising rural and urban spending.

Inflation eased from 5.4% to 4.6%, strengthening consumer confidence and supporting a rebound in spending. To ensure sufficient liquidity in the financial system, the Reserve Bank of India (RBI) injected 1.5 trillion, thereby encouraging lending and economic activity. Rural consumption remained stable due to steady agricultural production and government support schemes, while urban areas benefitted from rising incomes and evolving consumption patterns. From advanced manufacturing hubs to retail networks all over, Indias presence continues to expand as the denim jeans market is projected to approach USD 3.9 billion by 2030, growing at nearly 8 per cent compound annual growth rate

(CAGR). Blending industrial strength with design evolution, Indian denim is gearing up to influence future global fashion demand.

. The

Outlook

Indias ascent to the fourth-largest economy reflects its resilience and social progress. Despite global challenges, the outlook remains positive, supported by strong domestic investments, expanding manufacturing activities and improvements in trade and finance. GDP growth is expected to stay steady at 6.5%, supported by supportive government policies and accommodative monetary conditions. Important reforms such as the revision of the income tax exemption limit to 12.75 lakh and the recommendations of the 8th Pay Commission are likely to boost disposable income and stimulate domestic consumption. The RBIs anticipated reduction in the repo rate will make borrowing cheaper, increase liquidity and improve market confidence.

Additionally, the government is pursuing cautious trade policies to safeguard national interests amid global uncertainty. The upcoming Free Trade Agreement (FTA) between India and the UK aims to reduce tariffs, streamline customs procedures and promote bilateral investments.

These developments, along with declining inflation, are expected to support consumer spending, ensure economic stability, broaden market access and contribute to Indias sustainable growth.

Industry Overview

Indian Textile Industry Textile Insights

1. A doption Of Smart Technologies Likely To Industry Headwinds

2. F rom Volume To Value: Recasting Indias

Story For A New Global Order

3. Homers Rocket Textile Printer Lands In India:

4. Ins tallations Power 75,000 LM/Day Output

5. India s Growth Seen At 6.4% In 2026, 6.6% In Indias textile industry is moving into a phase where scale is being strengthened by innovation and sector supports over 45 million livelihoods and is expected to see the domestic textile and apparel market reach nearly $225 billion by 2025, growing at a healthy 10–12 per cent annually, with exports rising alongside. Employing over 45 million people, the industry is one of the largest employment generators in the country after agriculture and it produces approximately 22,000 million pieces of garments annually. the focus shifts from manufacturing scale to design-led growth. Industry experts highlight the need for innovation, sustainability and technology to drive the next phase of global competitiveness. The industry itself is realising that

“the challenge today is no longer capacity; it is capability. The customers are demanding speed, traceability, sustainability, and consistency simultaneously. This is putting the existing manufacturing model to the test and making smart manufacturing a necessity for the global competitiveness of India.

Smart manufacturing integrates automation, data, and digital intelligence throughout the textile value chain, from fibre to finished products. This is not just another form of mechanisation, but a complete switch that digitally links machines, processes, and people to optimise performance. Major technologies that are leading this shift consist of the Industrial Internet of Things (IIoT), AI, automation and robotics, digital twins, and advanced analytics. Sensors embedded into the machinery are providing real-time information on speed, tension, energy consumption, and quality variations. When analysed, this information provided predictive maintenance, reduced downtime, and improved equipment effectiveness.

The first area where the impact of smart manufacturing is apparent is in ‘productivity and ‘efficiency. Digitally enabled factories report higher output stability, faster changeovers, and better utilisation of assets. Rather than pushing machines harder, smart systems focus on running them smarter, closer to optimal operating conditions. efficiencyand sustainability gains: Productivity,

The first area where the impact of smart manufacturing is apparent is in ‘productivity and ‘efficiency. Digitally enabled factories report higher output stability, faster changeovers, and better utilisation of assets. Rather than pushing machines harder, smart systems focus on running them smarter, closer to optimal operating conditions.

‘Sustainability is one of the most important results of smart manufacturing. With the textile industry under the spotlight for its use of water, energy, and chemicals, AI-managed energy solutions optimise energy use, and digitally controlled dyeing and finishingreduce water and chemical emissions. Waste reduction is now quantifiable and achievable due to smart factories that promote traceability, accurate reporting, and supply chain visibility.

Sustainability has moved from being a mere compliance requirement to becoming a major determinant of consumer choice, and Indian manufacturers can now align with global ESG standards.

Indian textile industry has a massive workforce and a rare opportunity to shift from labor-intensive to skill-intensive manufacturing. Skill development programs related to digital tools, machine interfaces, and data interpretation are becoming increasingly mandatory. With proper training, smart manufacturing can help develop shop-floorsafety, minimise fatigue, and help workers transition to more skilled jobs. The shift towards ‘Samarth 2.0 under Budget 2026 is in sync with the requirements of smart manufacturing, focusing on developing a workforce that is industry-ready and suitable for automation.

Branding efforts of Kasturi Cotton aim to position Indian cotton as a high-quality, globally recognised commodity. The sector is also undergoing a significant transformation through trends such as sustainable manufacturing, increased automation and digitisation often referred to as Textiles 4.0. These innovations, along with a growing emphasis on eco-friendly practices, are shaping the industry landscape.

Looking ahead, the Indian textile sector holds an optimistic outlook. Rapid urbanisation, rising disposable incomes, a young and skilled workforce and favourable policy frameworks are expected to accelerate both domestic consumption and exports. Notably, the Union Budget for 2025-26 has allocated 5,272 crores to the Ministry of Textiles, marking a 19% increase from the previous years budget estimate of 4417.03 crores. This increased funding is poised to support ongoing initiatives in modernisation, technical textiles and global market expansion. With continued government backing, a strong manufacturing base and growing focus on innovation and sustainability, India is well-positioned to reinforce its stature as a leading global hub for textiles and apparel.

Opportunities	Description
Rising Global Demand for Sustainable Textiles	Increasing demand for eco- friendly and ethically sourced textiles presents opportunities for diversification, of sustainable practices and compliance with evolving standards.
Government Support and Policy Incentives	Policies such as PLI schemes, interest subsidies and textile park development encourage industry expansion and improve global competitiveness.
Expansion in Technical and Functional Textiles	Growing applications in sectors such as healthcare, automotive, defence and construction create avenues for innovation, diversification and new revenue streams.
Digitisation and Automation	Embracing digital technologies enhances efficiency, reduces lead times and improves responsiveness to changing market trends.

 

Challenges Challenges	Description
Volatility in Raw Material Prices	Fluctuations in prices of cotton, dyes and energy affect margins and complicate cost forecasting and management.
Intense Competitive Pressure	Competition from unorganised domestic players and global manufacturers necessitates continuous innovation, cost optimisation and differentiation.
Geopolitical and Trade Risks	Trade policy shifts, tariffs and geopolitical uncertainties can disrupt supply chains and restrict access to export markets.
Strict Environmental and Compliance Norms	Increasing environmental and labour regulations raise compliance costs and require ongoing investment in processes and infrastructure upgrades.

Indian Denim Industry

Indias denim industry has emerged as a global powerhouse, currently ranking as the third-largest producer of denim worldwide. Driven by a steady annual growth rate of 8–9%, the market is projected to rise from USD 6.15 billion in FY2023 to USD 9.15 billion by FY2026. Gujarat spearheads the sector, producing up to 70% of the countrys denim fabric, earning its title of ‘Denim Capital of India. Rising disposable incomes, evolving fashion preferences among younger consumers and increasing demand from rural as well as urban centres fuel market expansion. However, the sector contends with challenges, including high raw material costs, particularly for cotton, spandex and polyester. The industry also faces the impact of volatile trade dynamics and rising buyer demands for faster production cycles. In response, the industry is undergoing a significant transformation. There is a marked shift toward sustainable manufacturing practices, along with increased emphasis on product innovation and investments in research and development. These initiatives are essential for maintaining competitiveadvantageandrespondingtoevolvingconsumer preferences. With global demand for denim rebounding and the industry embracing new technologies, India is well-positioned to consolidate and expand its leadership in denim manufacturing.

Key Trends in the Indian Denim Industry

Key Trend	Description
Preference for sustainability and eco- Friendly denim	Indian denim manufacturers are increasingly prioritising sustainability. They use organic cotton, adopt water saving production methods and recycle materials to reduce pollution and waste. This helps meet the growing demand for eco-friendly products.
Technology- driven manufacturing	Companies are adopting advanced technologies such as laser finishing for denim effects, Artificial Intelligence (AI) and automation machines. These help them manufacture quality products faster using fewer resources, thereby saving money and energy.
Rising domestic and rural demand	Growing incomes and rising popularity of denim across both urban and rural areas are driving increased demand. This trend is helping the denim industry to expand beyond metropolitan markets.
Premiumisation and customisation	Consumers, especially the youth, are seeking high quality denim with personalised fits and styles. Brands are responding with special washes, unique designs and personalised sizes to cater to this demand.
Export growth and global reach	Indian denim manufacturers are expanding their global footprint, exporting more to markets of the US and Europe. By adhering to international quality and sustainability standards, they are emerging as reliable suppliers worldwide.

Company Overview

Founded in 1985, Vishal Fabrics Limited (VFL) has evolved into a global leader in textile processing, with a clear mission to make denim an essential part of everyday style. As the flagship company of the Chiripal Group, VFL specialises in dyeing, printing and finishing a wide range of fabrics, pure cotton to sustainable blends such as modal and Tencel.

Headquartered in Gujarat, the Company operates advanced facilities with an impressive annual processing capacity of over 100 million metres. Its advanced infrastructure, including high-efficiency machinery and a 6MW captive power plant, supports sustainable and smart manufacturing practices that meet the evolving demands of global markets.

VFLs reach spans continents, with a growing presence in regions such as South Africa to Sri Lanka. Through a commitment to innovation, quality and inclusive fashion,

Vishal Fabrics goes beyond manufacturing to shape global textile trends that resonate across cultures and communities worldwide.

Manufacturing Capabilities

Vishal Fabrics Limited (VFL) operates an advanced manufacturing facility with an annual processing capacity of over 100 million metres of processed fabric. This includes an 80 Million Metres Per Annum (MMPA) denim fabric processing line and an additional 105 MMPA capacity for processing a diverse range of fabrics such as 100% cotton, cotton-spandex blends, polyester, modal and Tencel. The facility employs advanced technology including 464 weaving looms, multiple warping units, dyeing machines, singeing machines, mercerising units and finishingequipment. This comprehensive setup enables VFL to produce diverse products from shirting fabrics and dress materials to home furnishings and high demand stretch denim, appealing to consumers across age groups.

Committed to promoting sustainability, VFL integrates eco-friendly practices such as water recycling and operates a 6MW captive power plant to ensure energy efficient production.

Its skilled engineering team focuses on continuous innovation and process improvement, maintaining stringent quality benchmarks. VFLs quality management is certified to ISO 9001, with environmental compliance certified to ISO

14001. The Company also holds globally recognised textile certifications including OEKO-TEX, BCI and GOTS.

To ensure consistent quality, VFL conducts rigorous fabric testing at multiple stages of production. Its quality standards are comparable to those of international brands such as

Levis. By utilising an asset-light model and benefitting from vertical integration within the Chiripal Group, VFL sources up to 90% of its yarn from in-group spinning mills, ensuring superior consistency and quality. The Company caters to both domestic and international markets, supplying a broad client base including major fashion brands and e-commerce platforms. With its high production capacity, advanced infrastructure, eco-conscious operations, robust quality assurance and strategic market reach, Vishal Fabrics Limited continues to be a prominent player in the global textile industry.

Operational Performance

Financial Performance

(Rs. in Crores)

PARTICULARS	2025-26	2024-25
Net Revenue from Operations	1,602.11	1,519.83
Other Income	1.15	1.60
Total Revenue	1,603.26	1521.43
Less: Expenses excluding Depreciation	1,528.47	1,443.33
Profit before Depreciation & Tax	74.79	78.10
Less: Depreciation	31.63	33.20
Profit Before Tax	43.16	44.90
Less: Provision for Taxation (Including Deferred Tax)	10.98	21.07
Profit After Tax	32.18	23.84
Earnings Per Share (in )	1.37	1.21

During the year under review, your Company has achieved a Turnover of Rs. 1602.11 Crore as compared to Previous Year Rs. 1519.83 Crore. The Profit before depreciation and tax was 74.78 Crore as compared to Rs. 78.10 Crore in the Previous Year.

The profit after tax for the year Rs. 32.18 Crore as compared to Profit 23.83 Crore reported in the Previous Year. The Performance of the Company has been comprehensively discussed in the Management Discussion and Analysis Report (forming part of the Annual Report) based on the reports of the each of the units of Company.

Key Financial Ratio

Sr. No.	Ratio Name	Particulars	Ratio 2025-26	Ratio 2024-25	% of Variance	Reason For Variance
1	Current Ratio (in times)	current Asset current liability	2.37	1.94	22.07%	Due to discharge of creditors liability and increase in receivables.
2	Debt Service Coverage Ratio (in times)	EBIDITA (Interest+Repayment)	3.46	2.92	18.79%	NA
3	Inventory Turnover Ratio (in times)	Sales Average Investory	17.97	14.54	23.59%	Due to the lower Capacity utilization during the year comparing to previous financial year.
4	Trade Payable Turnover Ratio (in times)	Net Purchase Average Trade Payable	12.13	12.53	-3.21%	NA
5	Net Profit Ratio (in%)	Net Profit Net Sales	2.01	1.57	28.05%	Due to reversal of Deferred Tax Liability.
6	Debt-Equity Ratio (in times)	Total Debt Total Shareholder Equity	0.35	0.62	-42.72%	Due to payment of unsecured Loan.
7	Return On Equity Ratio (in%)	Net Income Average shareholders Equity	5.79	5.38	7.55%	NA
8	Trade Receivable Turnover Ratio (in times)	Net Sales Average Trade Receivable	2.73	2.93	-6.89%	NA
9	Net Capital Turnover Ratio (in times)	Net Sales Working Capital	3.67	4.59	-20.12%	Due to increase in working capital.
10	Return On Capital Employed Ratio (in %)	EBIT Capital Employed	9.33	10.78	-13.45%	NA
11	Return On Investment (in %)		48.71	19.84	145.50%	Due to the increase in the fair value of Investment.

Outlook

The Indian textile industry significantly contributes to the national economy, with its output including both domestic production and exports. The industrys output is a key factor in Indias GDP, industrial production, and employment. The textile sector is also a major contributor to export earnings, with significant exports of apparel, raw materials, and finished goods.

As per the analysis, the industry is expected to record positive growth in the coming years. The Indian Government is actively drafting strategies to improve the contribution of textiles in the export. Additionally, by 2030, the Indian textile industry is anticipated to reach a total production size of USD 250 billion and export of USD 100 bn8. This growth is projected to be driven by leveraging technology, enhancing product innovation, fostering strategic partnerships and utilising data-driven decision-making processes. Moreover, factors including increasing Government support, recovery in textile export, rising disposable income and a growing middle-economic population are expected to further support the growth of the industry in coming years.

Risk and Concerns

Risk Category	Description of Risk	Mitigation Strategy
Economic Risk	Fluctuations in inflation rates and trade terms may adversely affect operations, profitability and long-term sustainability.	The Company conducts systematic cost analyses, performs regular financial health assessments, diversifies markets and supply chains and secures long-term contracts to strengthen resilience.
Competition Risk	A highly competitive market can erode profitability, market share and return on capital.	The Company invests in strong R&D driven innovation, cultivates strategic partnerships and builds lasting client relationships to reinforce brand equity and market positioning.
Consumer Preference Risk	Rapid shifts in customer preferences may impact relevance and competitiveness.	The Company implements continuous market research, agile product strategies and engages consumers through personalised digital experiences.
Exchange Rate Risk	Volatility in foreign exchange rates may lead to financial instability.	The Company implements proactive currency monitoring and trading strategies to manage exposure to exchange rate variations.
Technology Risk	Lagging behind in technological advancement can weaken market	The Company conducts ongoing technology risk assessments, invests in process automation and adopts
.efficiency positionandoperational	emerging technologies to maintain market relevance and
		enhance productivity.
Procurement Risk	Raw material price volatility and supply disruptions can have a negative impact on profitability and operational continuity.	The Company optimises procurement planning, cultivates reliable supplier base and maintains flexible supply chain systems to ensure cost-effective and consistent material flow.
Environmental Risk	Activities leading to soil degradation, water depletion or pollution can harm the environment as well as tarnish brand reputation.	The Company adopts eco-friendly practices, reduces carbon emissions, adopts renewable energy, conducts regular environmental assessments and complies with all relevant environmental regulations and industry standards.

Human Resource

Vishal Fabrics Limited continues to regard its workforce as one of its most invaluable assets, recognising that sustained success is rooted in skilled, motivated and engaged employees. As of this year, the total workforce stands at 440, reflecting the Companys commitment to growth and talent acquisition.

To support continuous development, the Company offers targeted training and leadership development programmes aimed at enhancing professional capabilities and nurturing future leaders across all functions. These initiatives are strategically aligned with organisational objectives to ensure mutual growth.

In pursuit of a vibrant and performance-driven workplace culture, the Company has implemented structured employee engagement programmes that have proven instrumental in elevating productivity and strengthening morale. These efforts have amplified job satisfaction as well as played a significant role in talent retention.

Maintaining open and transparent communication remains a top priority. Through clearly defined channels, the Company encourages dialogue, collaboration and cross-functional synergy, enabling a workplace culture that thrives on trust and shared success.

Internal Control and Adequacy

Vishal Fabrics has established robust internal control systems that are proactively enhanced to align with evolving business dynamics and to comply with statutory and accounting standards. A sophisticated Management Information System forms the backbone of its control infrastructure, enabling precise and timely decision-making. Oversight by the Audit Committee of the Board of Directors ensures continuous evaluation of these systems efficacy and efficiency. Throughout the year, the internal controls underwent comprehensive testing, which confirmed their structural integrity and operational soundness, with identified. Strategic recommendations from the committee contribute to ongoing reinforcement no and optimisation.

Cautionary Statement

The MDA section contains forward-looking statements highlighting the Companys potential future prospects. These statements are subject to inherent risks and uncertainties, which may cause actual outcomes to differ significantly.

Furthermore, macro-environmental shifts and the unpredictable character of global events, such as the pandemic, pose unexpected obstacles to the Company and its operational environment. The information in the report is based on assumptions derived from both internal and external sources, which may vary over time, resulting in revisions to the estimations provided.

It is crucial to note that these forward-looking statements reflect the Companys current objectives, beliefs, or assumptions and are accurate as of the date they were made. The Company is under no responsibility to update or alter these statements in light of new information or future events unless required by relevant regulations.