S P Apparels Ltd

Dear Shareholders,

I am pleased to report that FY25 has been a pivotal year for your Company. This year marks our first full year of consolidation following the acquisition of Young Brand Apparel. We continued to expand our presence in Sri Lanka, leveraging its geographical advantages and availability of skilled workforce. Our strategy focuses on ' ' acquiring customer-approved factories in Sri Lanka, enabling us to ramp up __ production quickly and reduce our gestation period. This strategy offers a clear advantage over establishing new factories in India, which typically takes about a year " to set up and stabilize.

The global economy faced significant challenges in 2025, with new U.S. tariffs and retaliatory measures leading to unprecedented effective tariff rates. In contrast, India remained the fastest growing economy.

The recent UK-India Free Trade Agreement positions India as a key player in global sourcing, offering a 10% duty advantage over China and increasing our attractiveness as a sourcing destination amid political uncertainties in Bangladesh. This agreement eliminates tariffs on nearly all Indian textile and apparel exports to the UK, facilitating expanded exports and trade. With government support, rising global demand, and competitive labour costs, India is poised to capture a larger share of the global apparel market. The FTA is expected to generate more business and orders for India, creating opportunities for manufacturing and sourcing. At S.P. Apparels, we are focused on forming partnerships with UK retailers to leverage these opportunities and drive growth.

In our Spinning and Dyeing division, your company have successfully navigated previous challenges related to fluctuating cotton prices. We experienced stability, with both cotton and yarn prices remaining steady. The dyeing unit is operating at full capacity, and we are also expanding our printing and embroidery capabilities to meet the evolving needs of our customers. By increasing our capacity through strategic factory acquisitions in Sri Lanka, we aim to achieve full utilization of our back-end facilities.

In the Garment division, we have made notable progress in improving utilization levels, achieving 85% in FY25, up from 76% in the previous year. Over the current year, we have added three factories and increased our overall capacity by 700 machines, with plans to add another 300 sewing machines by March 2026. Our current order book stands at Rs. 442 crores, positioning us well for future growth.

Our expansion into Sri Lanka presents significant opportunities, given the availability of operational factories and a skilled workforce. This move enhances our operational flexibility between Indian factories and Sri Lanka factories, allowing us to execute orders efficiently. Our strategy to acquire customer-approved factories will enable us to secure orders rapidly and enhance our production capabilities. We have already acquired a factory, and shipments are underway. Looking ahead, we plan to expand our capacity to around 2,000 machines within the next year.

On Young Brand Apparel, FY25 marks the first full year of consolidation post-acquisition, and I am pleased to report strong results. We plan to lease a facility near Salem with a capacity of 300 sewing machines, utilizing an asset-light model that leverages existing machinery. This initiative will increase our installed capacity with expectations to operate.

In our retail division, SP Retail Ventures reported revenue of INR 79.4 crores for FY25, compared to INR 82.9 crores in the previous year. The ongoing losses are primarily due to unfunded cash losses. We are expanding Angel & Rocket, a UK-based brand, and exploring equity fundraising options to support growth within our retail business. Following this, we anticipate the retail segment to turn profitable.

In conclusion, our strategic capacity expansions through the acquisition of operational factories position us for significant growth. We anticipate that the expansion in Sri Lanka and the addition of machines in our existing factories as well as integration of Young Brand Apparel will drive growth. Additionally, our SPUK and retail businesses are on the verge of breaking even on an EBITDA and operational basis, which will contribute to our overall growth. With all the integration and on-going capacity expansion we aspire to march towards achieving higher topline in future.

This progress is a result of the collective effort of many, and I extend my gratitude to my fellow Directors, our suppliers, partners, and dedicated employees. Most importantly, I thank our shareholders for your belief in our long-term vision; with your continued support, we are poised for sustained growth.

Sincerely,