Winsome Yarns Ltd Management Discussions

OVERALL REVIEW, INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian textile industry is one of the oldest and most significant industries in the Indian economy and continues to play an important role in employment generation, industrial production, exports and value creation. The industry has a diverse structure comprising traditional hand-spun and hand-woven segments, organised textile mills, power looms, hosiery, knitting, processing, garment manufacturing and technical textiles. The sector is closely linked with agriculture, particularly through the availability and pricing of cotton and other natural fibres, and is also influenced by evolving consumer preferences, global trade dynamics, technological developments and sustainability requirements.

India continues to possess significant capabilities across the textile value chain, enabling manufacturers to cater to diverse domestic and international markets. At the same time, the industry remains exposed to volatility in raw-material prices, availability of cotton and other fibres, energy costs, labour availability, global demand conditions, exchange-rate movements, international competition and changes in trade and regulatory policies.

REVIEW OF OPERATIONS

The financial year 2025-26 continued to remain challenging for the Company, primarily on account of the prolonged impact of the Corporate Insolvency Resolution Process ("CIRP"), subdued market conditions, limited working capital availability, operational constraints and changes in customer demand and preferences.

The Companys operations and financial performance were adversely affected during the year under review, resulting in a substantial reduction in revenue from operations as compared with the previous year.

The CIRP of the Company, initiated pursuant to the order dated 22 December 2023 of the Honble National Company Law Tribunal ("NCLT"), Chandigarh Bench, continued during FY 2025-26. The powers of the Board of Directors remained suspended during the CIRP and the affairs of the Company were managed in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016 ("IBC") and the applicable regulations.

A significant development subsequent to the end of the financial year was the approval of the Resolution Plan submitted by M/s Mohini Health & Hygiene Limited by the Honble NCLT, Chandigarh Bench, vide its order dated 16 April 2026. The Resolution Plan had earlier been approved by the Committee of Creditors ("CoC").

The approval of the Resolution Plan represents a significant milestone in the restructuring and revival of the Company and provides a framework for addressing the Companys financial liabilities, restoring operational viability and enabling the Company to pursue sustainable business operations under the new management.

OPPORTUNITIES AND THREATS:

The Company is engaged in the manufacturing and allied activities relating to textiles, including yarn, knitwear and related products. The textile industry continues to offer long-term growth opportunities; however, the Company operates in a highly competitive and rapidly evolving environment.

The principal opportunities and challenges relevant to the Company are set out below.

1. Government initiatives and policy support

The textile sector continues to benefit from various Government initiatives aimed at strengthening domestic manufacturing, improving technological capabilities, promoting technical textiles, enhancing employment and increasing Indias competitiveness in global markets.

Initiatives relating to technical textiles, skill development, technology upgradation, export promotion and capacity building provide opportunities for Indian textile manufacturers to modernise operations and improve productivity.

2. China-plus-one strategy

The global diversification of sourcing away from concentrated manufacturing bases provides Indian textile manufacturers with an opportunity to increase their participation in international supply chains. Indias integrated textile ecosystem, availability of skilled manpower and large domestic market provide a favourable platform for attracting additional textile and apparel manufacturing opportunities.

3. Growth in technical textiles

Technical textiles represent a high-value and technology-oriented segment with applications across healthcare, infrastructure, automotive, agriculture, defence, sports and other sectors. The growth of this segment provides opportunities for textile manufacturers to diversify their product portfolio and move towards higher-value-added products.

4. Growth of organised retail and e-commerce

The continuing expansion of organised retail and e-commerce is creating additional channels for textile and apparel products. Increasing digital penetration and changing consumer purchasing behaviour are expected to support long- term demand for differentiated textile and apparel products.

5. Rising domestic consumption

Increasing disposable incomes, urbanisation, changing lifestyles and greater awareness of branded and value-added products are expected to support domestic demand for textiles and apparel over the medium to long term.

6. Revival and restructuring pursuant to the Resolution Plan

The approval of the Resolution Plan by the Honble NCLT provides the Company with an opportunity to restructure its financial position, strengthen its operational platform, improve working-capital availability and revive its manufacturing activities.

The Resolution Plan provides, inter alia, for settlement of claims of various stakeholders, capital restructuring and infusion of funds for revival and working capital requirements. The implementation of the approved Resolution Plan is therefore expected to provide a foundation for the Company to restore operational stability and pursue long-term growth

THREATS AND CHALLENGES

1. Availability and cost of raw materials

Raw materials constitute a significant portion of the overall cost of textile manufacturing. Volatility in cotton and other fibre prices, variations in crop production, weather conditions, supply-chain disruptions and fluctuations in international commodity prices can materially affect production costs and operating margins.

The availability of suitable quality cotton, including long-staple varieties, remains an important consideration for the textile industry. Any significant increase in raw-material prices which cannot be passed on to customers may adversely affect profitability.

2. Technological obsolescence and productivity

The textile industry is highly competitive and increasingly technology-driven. Manufacturers that adopt modern machinery, automation, energy-efficient processes and advanced manufacturing practices are able to achieve better productivity, quality and cost efficiencies.

The Company therefore needs to continuously evaluate opportunities for technological upgradation and modernisation of its manufacturing facilities in order to remain competitive.

3. Competition

The Company faces competition from organised as well as unorganised manufacturers operating across various textile- producing regions in India and overseas. Competition may result in pressure on selling prices, margins, and customer retention and market share.

The increasing adoption of advanced technologies by competitors may further intensify competitive pressure on companies operating with older manufacturing infrastructure.

4. Labour availability and productivity

The textile industry remains labour-intensive in several stages of the manufacturing process. Availability of skilled and productive manpower, employee retention and wage costs continue to be important factors affecting operating efficiency.

5. Energy and infrastructure costs

T extile manufacturing is dependent upon reliable and cost-effective power and other utilities. Increases in electricity, fuel, transportation and logistics costs, together with infrastructure constraints or interruptions in power supply, may adversely affect manufacturing costs and profitability.

6. Changing customer preferences

The textile and apparel industry is influenced by rapidly changing fashion trends, consumer preferences, product designs, quality expectations and delivery requirements. The Company needs to remain responsive to such changes to maintain its competitiveness.

7. Global economic and geopolitical environment

The Companys industry is exposed to global economic conditions, international trade policies, geopolitical developments, foreign-exchange movements and changes in demand in key export markets. Any deterioration in global economic conditions may adversely affect export demand and overall industry growth.

INITIATION OF CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP) AND APPROVAL OF THE RESOLUTION PLAN:

The Corporate Insolvency Resolution Process ("CIRP") in the case of Winsome Yarns Limited ("Company/ Corporate Debtor") was initiated the Honble National Company Law Tribunal, Chandigarh Bench ("Adjudicating Authority") under Section 7 of the IB Code vide its order dated 22nd December 2023. The Adjudicating Authority vide the order of the same date appointed Mr. Sanjay Gupta having Registration No. IBBI/IPA-002/IP-N00982-C01/2017-2018/10354 as the Interim Resolution Professional ("IRP") to conduct the CIRP of the Corporate Debtor. Later, in the CoC Meeting of the Corporate Debtor held on 23 rd January, 2024, M/s. ARCK Resolution Professionals LLP, having Registration No. IBBI/IPE-0030/IPA- 1/2022-23/50013 was appointed as the Resolution Professional ("RP") to run the CIRP of the Corporate Debtor.

Interim Resolution Professional had issued invitation for Expression of Interest (hereinafter referred as ‘ EOI ) in FORM G on February 20, 2024 in compliance with Regulation 36A of CIRP Regulations, 2016 in the newspaper in English language for the submission of a resolution plan in accordance with the provision of the code.

As per the published FORM G, the last date for submission of EOI was stipulated as March 5, 2024, and last date stipulated for submission of resolution plan was April 20, 2024 which was later on extended till 31.03.2024.

The Resolution Professional received three Resolution plans which were duly opened in presence of the COC Members in its 6th COC Meeting. Due discussion and negotiation on all three resolutions plans were conducted by the COC. The members of the COC in its COC Meeting decided that another FORM G be published for exploring more potential bidders and for wealth maximization to all Stakeholders.

Thereafter, Resolution Professional had re-published invitation for Expression of Interest (hereinafter referred as ‘ EOI) in FORM G on July 18, 2024 in compliance with Regulation 36A of CIRP Regulations, 2016 in the newspaper in English and Vernacular (Punjabi) language for the submission of a resolution plan in accordance with the provision of the code.

As per the published FORM G, the last date for submission of EOI was stipulated as August 2, 2024 through Email and August 3, 2024 original in physical form at the office of the RP, and last date stipulated for submission of resolution plan was September 12, 2024, which was later on extended till 28.09.2024.

The Resolution Professional received four Resolution plans which were duly opened in presence of the COC Members in its 15th COC Meeting. The members of the COC duly discussed and negotiated in terms and clauses of the Resolution Plans including the financial bid and thereafter decided to go for inter-se bidding for challenge mechanism.

Pursuant to inter se bidding convened on 22.10.2024, final Resolution Plans were submitted by all 4 RAs. All 4 compliant Resolution Plans have duly been placed to e-voting before the members of the COC for their approval.

The Resolution Plan submitted in respect of M/s. Mohini Health & Hygiene Limited was approved by the Committee of Creditors (CoC) at its 18th meeting held on 12.11.2024. Subsequently, the Honble NCLT, Chandigarh Bench, vide order dated 16.04.2026 in IA(IBC)(PLAN)/1/(CH)/2025, approved the Resolution Plan.

SEGMENT WISE AND PRODUCT WISE PERFORMANCE

The Companys business activities falls within a single primary segment viz. Textiles (Yarn, Knitwear & related revenue). The Company does not have any other segment as of now. The products and dealings are closely related with textiles and its allied products.

COMPANY OUTLOOK:

The Resolution Plan for the Company, as approved by the Committee of Creditors (CoC), was subsequently approved by the Honble National Company Law Tribunal (NCLT), Chandigarh Bench, vide its order dated 16.04.2026. The approval of the Resolution Plan marks an important step towards the revival and restructuring of the Company and provides an opportunity for the Company to strengthen its operations and compete effectively with other players in the market under the supervision and guidance of the new management. The Company remains committed to implementing the approved Resolution Plan and is optimistic about improving its operational and financial performance in the forthcoming years.

FINANCIAL PERFORMANCE:

During the year ended 31.03.2026, the Company incurred a loss of Rs. 1255.24 lakhs in comparison to the loss of Rs. 1729.69 lakhs during the previous year ended 31.03.2025. Your Companys turnover of Rs.21.79 lakhs against the previous years turnover of Rs. 419.08 lakhs for the aforementioned reasons. The Company has since undertaken manufacturing for third parties on a job-work basis, and is able to recover variable costs and part of fixed costs.

RISKS AND CONCERNS:

The Companys operations are exposed to various business, operational, financial, market, regulatory and industry- specific risks. The Company seeks to identify, assess and manage these risks through appropriate internal controls, management oversight and periodic review.

The key risks relevant to the Company include the following:

• Volatility in prices and availability of cotton and other raw materials.

• Increased manufacturing, power, fuel and logistics costs.

• Intense competition from domestic and international textile manufacturers.

• Technological obsolescence and the need for continuous modernisation.

• Availability and productivity of skilled labour.

• Changes in customer preferences, fashion trends and product demand.

• Global economic slowdown and fluctuations in export demand.

• Foreign-exchange and international trade-related risks.

• Supply-chain disruptions and delays in procurement or delivery.

• Regulatory, taxation and compliance-related changes.

The management will continue to monitor these risks and take appropriate mitigation measures commensurate with the nature and magnitude of the risks involved.

The implementation of the Resolution Plan is expected to significantly alter the Companys financial and operational profile. Accordingly, the Company will focus on establishing appropriate systems for financial discipline, working- capital management, operational efficiency and compliance monitoring.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains an efficient internal control system commensurate with the size, nature and complexity of its business. The internal control system is responsible for addressing the evolving risks in the business, reliability of financial information, timely reporting of operational and financial transactions, safeguarding of assets and stringent adherence to the applicable laws and regulations. The internal auditors of the Company are responsible for

regular monitoring and review of these controls. The Company is committed to strengthening its internal control systems and processes as part of the implementation of the approved Resolution Plan and the revival of its operations.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company considers its employees as the most important asset and integral to its competitive position. It has a well-designed HR policy that promotes a conducive work environment, inclusive growth, equal opportunities, and competitiveness and aligns employees goals with the organisations growth vision. Its human resource division plays a crucial role in nurturing a strong and talented workforce. It provides opportunities for professional and personal development and implements comprehensive employee engagement and development programmes to enhance the productivity and skills of its employees. The Companys employee strength stood at 7 as on March 31, 2026. Further, industry relations remained peaceful and harmonious during the year.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE (Forms part of Directors Report)

MATERIAL DEVELOPMENT IN HUMAN RESOURCES/ INDUSTRIAL RELATION FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

The Company continues to recognise its employees as an important stakeholder group in its revival and growth process.

With the implementation of the approved Resolution Plan and restoration of normal business operations, the Company intends to progressively align its manpower requirements with the scale and nature of its operations.

The Company will continue to focus on employee engagement, productivity, skill development and maintaining a positive and harmonious relationship between employees and management.

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH THE COMPANYS CODE OF CONDUCT:

This is to confirm that the Company has adopted a Code of conduct for its employees including the director. It is confirmed that the Company has in respect of the financial Year ended 31st March, 2026, received from the Senior Management team of the Company and the members of the Board, a declaration of Compliance with the code of Conduct as applicable to them.

DETAILS OF CHANGE IN RETURN ON NET WORTH

The Return on Net Worth ("RoNW") of the Company for the financial year ended 31 March 2026 has been significantly influenced by the Companys financial and operational position during the Corporate Insolvency Resolution Process ("CIRP"), including the substantial decline in revenue from operations, continued operating constraints, limited working capital availability and the resultant losses incurred during the year.

The Companys Return on Net Worth for FY 2025-26 stood at 0.03 times, as compared to 0.04 in FY 2024-25, representing a change of -25% over the immediately preceding financial year.

The change in RoNW is primarily attributable to the significant reduction in the Companys revenue from operations and the loss incurred during the year under review. The Companys operations continued to be adversely affected by the constraints associated with the CIRP, subdued market conditions, reduced business activity and limited availability of working capital.

A significant development subsequent to the end of the financial year, the approval of the Resolution Plan is expected to provide a framework for financial restructuring and revival of the Companys operations.

Going forward, the Company will focus on implementation of the approved Resolution Plan, restoration of operational efficiency, optimum utilisation of manufacturing capacity, improvement in working-capital management, cost rationalisation and strengthening of its customer base. These measures are expected to support improvement in the Companys profitability and Return on Net Worth over the medium to long term.

MEDIUM-TERM AND LONG-TERM STRATEGY AND LONG-TERM PERFORMANCE METRICS

Following the approval of the Resolution Plan by the Honble National Company Law Tribunal ("NCLT"), Chandigarh Bench, the Company has entered into a phase focused on revival, restructuring and restoration of sustainable business operations. The Companys medium-term and long-term strategy is aimed at creating a financially stable, operationally efficient and competitive textile business.

The Companys strategic priorities, within the limits of its competitive position and subject to prevailing market conditions, are as follows:

Medium-Term Strategy

Over the medium term, the Company intends to focus on:

• Implementation of the approved Resolution Plan: Ensuring timely and effective implementation of the

Resolution Plan and compliance with the terms and conditions contained therein.

• Revival of manufacturing operations: Gradually restoring and strengthening manufacturing activities and improving utilisation of the Companys available manufacturing infrastructure.

• Strengthening working-capital management: Ensuring prudent deployment of funds, efficient working- capital management and disciplined financial planning to support the Companys operating requirements.

• Improvement in operational efficiency: Focusing on productivity improvement, cost optimisation, energy efficiency and better utilisation of available resources.

• Customer and market development: Rebuilding and strengthening relationships with existing customers while developing new customers and commercially viable market opportunities.

• Product and order optimisation: Focusing on products and orders that provide sustainable contribution margins and efficient utilisation of available manufacturing capacity.

• Technology and process improvement: Evaluating appropriate technological and process improvements to enhance productivity, product quality and competitiveness, subject to availability of funds and commercial viability.

Long-Term Strategy

Over the long term, the Company aims to establish a sustainable and competitive textile business with a focus on:

• achieving sustainable revenue growth and profitability;

• improving capacity utilisation and manufacturing productivity;

• strengthening the Companys presence in domestic and, where commercially viable, international markets;

• developing higher-value-added textile products;

• adopting appropriate technology and modern manufacturing practices;

• maintaining prudent financial and working-capital management;

• improving cost competitiveness and operating margins;

• strengthening customer relationships and diversifying the customer base; and

• Creating sustainable value for all stakeholders.

OTHER DISCLOSURES FINANCIAL STATEMENT

In accordance with SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is required to provide details of significant changes (a change of 25% or more as compared to the previous financial year) in key financial ratios, along with detailed explanations thereof. The key financial ratios are given below:

Key financial ratios	2025-26	2024-25	Difference (%)
Debtors turnover	00	103.19	100%
Inventory turnover	1.12	5.69	-80.32%
Interest coverage ratio	NA	NA	NA
Current ratio (in times)	0.62	0.63	-1.59%
Debt equity ratio (in times)	-1.24	-1.28	-3.13%
Operating Profit	-64.42	-4.33	1387.53%
Margin(times)
Net profit margin(in times)	-57.61	-4.12	1298.3%
Return on net worth(in times)	0.03	0.04	-25%

The change in Debtors Turnover, Inventory Turnover, Operating Profit Margin, Net Profit Margin and Return on Net Worth is more than 25% compared to the previous financial year. The variation is primarily attributable to the substantial decline in sales, adverse market conditions, changes in customer preferences and the impact of the CIRP process undertaken by the Company pursuant to the NCLT order dated 22 December 2023, which affected the marketability, operations and overall financial performance of the Company.