Sarla Performance Fibers Ltd

Dear Shareholders,

It is with immense pride and a deep sense of responsibility that I present our company's 32nd Annual Report, outlining the progress and performance of FY 2024-25, a year defined by significant challenges and emerging opportunities. I am pleased toshare that your company responded with agility, innovation, and a steadfast commitment to sustainable and inclusive growth.

The global economic environment remained unpredictable throughout the year, shaped by persistent inflationary pressures and elevated political activity. Despite these challenges, major economies avoided recession, and India stood out with its economic resilience. Supportive government policies, including tax reductions, played a significant role in stimulating domestic demand and reinforcing India's position as a global growth engine.

The textile industry began to show signs of recovery. Export demand gained traction, particularly from the United States and European markets, driven by inventory replenishment and seasonal festive demand. At the same time, shifting global trade dynamics, especially tariff escalations, prompted international brands to diversify their sourcing. India, with its stable political environment and integrated manufacturing capabilities, is emerging as a preferred sourcing destination.

Although the export market faced headwinds due to domestic cotton prices being 10-15% higher than international prices and subdued demand from China, India's domestic textile market remained resilient. The drop in Chinese demand was partially offset by increased sourcing from Bangladesh, where

political uncertainties encouraged buyers to explore alternatives. In the synthetic yarn segment, intense price competition from Chinese manufacturers disrupted the market. However, the Government of India continued to support the domestic industry through protective tariffs, an extended minimum import price regime, and duty exemptions on essential machinery, all of which have strengthened local competitiveness.

The imposition of higher tariffs by the United States on a broad range of textile and apparel imports, including those from India, presented short-term challenges but also led to a reconfiguration of global sourcing patterns. Compared to peers such as China and Bangladesh, India maintained a relative advantage due to its more favorable tariff structure. Additionally, the anticipated finalization of the India and United Kingdom Free Trade Agreement is expected to offer an average 12 percent duty advantage over Chinese products and align Indian exporters with Bangladeshi counterparts, further boosting India's export potential.

Amid these evolving global conditions, our company remained focused on innovation, operational excellence, and value creation. During FY 2024-25, we invested INR 16 crore in technological upgrades and proudly introduced COMFILO, India's first barre free nylon yarn. This product effectively addresses common issues in circular knitting by eliminating fabric bareness and enhancing dye uniformity. Our emphasis on value-added products remains a cornerstone of our strategy, backed by cumulative investments of INR 100 crore over the past five years in expanding capacities for high tenacity yarns, Nylon 6, and Nylon 66. These strategic initiatives are beginning to yield visible results.

In the domestic market, we continue to observe a shift in consumer preferences,

with more Indian consumers willing to pay a premium for superior quality and performance. Currently, value-added products contribute 50 percent of our revenue, a share we expect to grow further as we align with evolving consumer expectations. This trend is perfectly in sync with our long-term vision of driving leadership through innovation and quality.

On the Standalone financial front, we reported a revenue of INR 424 crore for FY 2024-25, reflecting an 11% YoY growth primarily driven by volume expansion. While price realizations remained steady, our EBITDA margin improved to 24.9% from 20.6% in the previous year, supported by lower freight costs and enhanced operational efficiencies. Our commitment to maintaining EBITDA margins above 20% remains firm, guided by a strategic product mix and disciplined cost management.

Our balance sheet continues to be strong, with a healthy debt to equity ratio of 0.33x. Even with ongoing investments in capacity enhancement and modernization, we are firmly on track to becoming a gross debt- free company. Our relentless customercentric approach has enabled us to maintain a 100 percent customer retention rate while steadily growing our client base, a testament to our reliability and strong industry reputation.

Looking ahead, we are confident that our strategic investments, innovation-driven mindset, and sound financial management will help us unlock our full potential and achieve peak revenue exceeding INR 600 crore. On behalf of the Board and the leadership team, I extend my sincere gratitude to our shareholders, employees, partners, and customers for your continued trust and support.