Acme Universal Safezone 9 Ltd Management Discussions

OPERATIONS

You should read the following discussion of our financial condition and results of operations together with our Restated Financial Statements which is included in the Draft Red Herring Prospectus. Our Restated Financial Information differ in certain material respects from IFRS, U.S. GAAP and GAAP in other countries, and our assessment of the factors that may affect our prospects and performance in future periods. Accordingly, the degree to which our Restated Financial Information will provide meaningful information to a prospective investor in countries other than India is entirely dependent on the readers level of familiarity with IGAAP. These regulations may also vary with ICDS, which may be material to an investors assessment of our results of operations and financial condition.

Some of the information in the following discussion, including information with respect to our plans and strategies, contain forward-looking statements that involve risks and uncertainties. You should read the section "Forward-Looking Statements" on page 19 of the Draft Red Herring Prospectus for a discussion of the risks and uncertainties related to those statements. Our actual results may differ materially from those expressed in or implied by these forward-looking statements as a result ofvarious factors, including those described below and elsewhere in the Draft Red Herring Prospectus.

Our Fiscal ends on March 31 of each year. Accordingly, all references to a particular Fiscal are to the 12 months ended March 31 of that year. Unless otherwise indicated, the financial information included herein is based on our Restated Financial Information included in the Draft Red Herring Prospectus. For further details, see "Financial Information " on page 185 of the Draft Red Herring Prospectus.

References to the "Company", "we", "us" and "our" in this chapter refer to "Acme universal Safezone 9 Limited", as applicable in the relevant fiscal period, unless otherwise stated.

BACKGROUND OF THE BUSINESS

The Company operates in the Personal Protective Equipment (PPE) segment, specifically in the industrial safety footwear subsegment. Safety footwear use is mandated under applicable occupational health and safety regulations across sectors including construction, oil and gas, mining, heavy engineering, automotive, pharmaceuticals, chemical processing, foundry, and power generation. The Company serves end users across all these sectors through 15 product lines covering EVA-rubber, Nitrile Rubber, and PVC sole types, addressing hazard categories including impact and compression protection, penetration resistance, electrical shock resistance, anti-static protection, heat and fire resistance, chemical resistance and slip resistance.

We collect data from the customers, analyse the data and then design a customized product which cater to the needs of our customers. We undertake manufacturing and supply of finished products for our customers depending upon the demand of Product. Design and visualisation are carried out using ICad3D technology. The Company has implemented SAP S/4 HANA for enterprise resource planning across its manufacturing units, covering finance, operations, and logistics. CRM systems are used for customer management and HRMS platforms for workforce management and employee data analytics.

As on the date of this Draft Red Herring Prospectus, the Company operates five manufacturing facilities, located in the state Madhya Pradesh and Uttar Pradesh.

The Company distributes its products through direct institutional sales, regional distributors & dealers and digital & e-commerce channels with channel-partner warehousing at more than 40 locations across India covering cities including New Delhi, Mumbai, Pune, Hyderabad, Bengaluru, Chennai, Kolkata, Ahmedabad, Indore and Bhopal among others. Export sales are made to the United Arab Emirates, Bahrain, Saudi Arabia, Nigeria, Israel, Netherlands, Hong Kong, Cameroon, Mauritius and other markets. For the financial year ended March 31, 2025, the Company reported Revenue from Operations of Rs. 18,802.75 lakhs, EBITDA of Rs. 1,102.66 lakhs (5.86%) and PAT of Rs. 468.74 lakhs (2.49%).

PRESENTATION OF FINANCIAL STATEMENTS

Unless stated or the context requires otherwise, the financial information in the Draft Red Herring Prospectus is derived from our Restated Financial Information, which have been prepared in terms of the requirements of Section 26 of the Companies Act, the SEBI ICDR Regulations, as amended from time to time, and the Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by the ICAI. For further information on our Companys financial information, see "Financial Information " on page 185 of the Draft Red Herring Prospectus.

In the Draft Red Herring Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. All figures in decimals have been rounded off to the second decimal and all percentage figures have been rounded off to two decimal places. In certain instances, (i) the sum or percentage change of such numbers may not conform exactly to the total figure given; and (ii) the sum of the numbers in a column or row in certain tables may not conform exactly

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to the total figure given for that column or row. Further, any figures sourced from third party industry sources may be rounded off to other than to the second decimal to conform to their respective sources.

Our Companys financial year commences on April 1 and ends on March 31 of the next year. Accordingly, all references to a particular financial year, unless stated otherwise, are to the 12-month period ended on March 31 of that year. Unless stated otherwise, or the context requires otherwise, all references to a "year" in the Draft Red Herring Prospectus are to a calendar year.

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION

We believe that the following risks and uncertainties, including those discussed and detailed in the section titled " Risk Factors " beginning on page 26 of the Draft Red Herring Prospectus, have significantly affected our results of operations and financial condition during the periods under review, and may continue to affect our results of operations and financial condition in the future:

1. General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies.

2. Failure to successfully upgrade our service offerings, from time to time.

3. Any change in government policies resulting in increases in taxes payable by us;

4. Increased competition in the industry in which we operate.

5. Our ability to grow our business.

6. Factors affecting the Solar industry

7. Our ability to retain our key managements persons and other employees.

8. Changes in laws and regulations that apply to the industries in which we operate.

9. Companys ability to successfully implement its growth strategy and expansion plans.

10. Any adverse outcome in the legal proceedings in which we are involved.

SIGNIFICANT ACCOUNTING POLICIES UNDER INDIAN GAAP

For Significant accounting policies please refer " Significant Accounting Policies to the Restated Financial Statements ", under Chapter titled "Financial information " beginning on page 185 of the Draft Red Herring Prospectus.

PRINCIPAL COMPONENTS OF REVENUE AND EXPENDITURE:

Income

Our total income comprises (i) Revenue from operations; and (ii) other income.

Revenue from operations

Revenue from operations comprises Revenue from (i) Domestic Sales; (ii) Export Sales and (iii) Sales to SEZ Other income

Other income includes (i) Interest on deposits with banks; (ii) Interest on Income Tax Refund; (iii) Profit on sale of fixed assets; (iv) Duty drawback; (v) Discount received; (vi) ROTDEP Incentive; (vii) Government Grant income; (viii) Foreign exchange gain (net) and (ix) insurance claim received

Expenses

Our expenses comprise (i) Cost of materials consumed; (ii) Changes in inventories of finished goods and work-in-progress;

(iii) Employee benefits expense; (iv) Depreciation and amortization expense; (v) Finance costs and (vi) Other expenses.

Cost of materials consumed

Cost of materials consumed comprises (i) Consumption of raw material and (ii) Freight inwards.

Changes in inventories of finished goods and work-in-progress

Changes in inventories of finished goods and work-in-progress comprises (i) Change in inventory of Finished Goods and (ii) Change in inventory of work-in-progress.

Employee benefits expense

Employee benefits expense comprises (i) Salaries and wages, including bonus; (ii) contribution to provident and other funds; (iii) staff welfare expenses; and (iv) Gratuity expense.

Depreciation and amortization expense

Depreciation and amortization expense on property, plant and equipment.

Finance costs

Finance costs expense comprises (i) interest on loans; (ii) commission on bank guarantee; (iii) interest on MSME vendor and (iv) bank charges.

Other expenses

Other expenses include amongst others (i) power and fuel; (ii) rent expense; (iii) freight outwards; (iv) advertising and promotional expense; (v) sales commission; (vi) professional and consultancy charges; (vii) sample sales and replacement expenses; (viii) repair and maintenance; (ix) insurance expenses and (x) clearing charges.

RESULTS OF OPERATIONS

RESULTS OF OPERA TIONS FOR THE HALF YEAR ENDED SEPTEMBER 30, 2025

The following table sets forth certain information with respect to our results of operations, on a Restated Standalone Financial basis as indicated below:

(Rs. in Lakhs)

Particulars	For the half year ended September 30, 2025	% of total revenue
Revenue from operation	10,331.12	98.11%
Other income	198.78	1.89%
Total Income	10,529.90	100.00%
Cost of material consumed	7,301.19	69.34%
Changes in inventories	(24.81)	(0.24) %
Employee benefits expense	1,558.28	14.80%
Other expenses	652.11	6.19%
Total Expenses	9,486.77	90.09%
Earnings before Interest, Tax and Depreciation (EBITDA)	1,043.13	9.91%
Finance costs	150.96	1.43%
Depreciation and amortization expenses	431.14	4.09%
Profit before Tax (PBT)	461.03	4.38%
Tax Expenses	95.01	0.90%
Net Profit after tax (PAT)	366.02	3.48%
PAT margin (PAT / Revenue from operations)	3.54%

Total Income

Total income for the period starting from April 01, 2025 to September 30, 2025, stood at t10,529.90 Lakhs. The total income consists of revenue from operations and other income.

Revenue from Operations

During the half year ended September 30, 2025, the Companys net revenue from operations amounted to t10,331.12 lakhs, comprising domestic sales of safety footwear of t9,519.14 lakhs (92.14%), export sales of t803.72 lakhs (7.78%), and SEZ sales of t8.26 lakhs (0.08%).

Other Income

During the half year ended September 30, 2025, the Companys other income amounted to t198.78 lakhs, primarily comprising discount received on purchase of raw materials of t94.79 lakhs, duty drawback income of t49.48 lakhs, government grant income of t17.82 lakhs, and interest income on bank deposits of t17.52 lakhs.

Cost of material consumed

During the half year ended September 30, 2025, the Companys cost of materials consumed was t7,301.19 lakhs includes freight charges, constituting 69.43% of revenue from operations, primarily due to the raw material-intensive nature of safety footwear manufacturing.

Employee benefits expense

During the half year ended September 30, 2025, the Companys employee benefits expense amounted to t1,558.28 lakhs, comprising salaries, wages and bonus of t1,437.03 lakhs (including director remuneration of t126.00 lakhs), contribution to provident and other funds of t56.34 lakhs, gratuity expense of t37.52 lakhs, and staff welfare expenses of U27.39 lakhs.

Depreciation and Amortization Expenses

During the half year ended September 30, 2025, the Depreciation and amortization charges of our Company stood at Rs.431.44 Lakhs.

Finance costs

Our finance costs were Rs.150.96 lakhs for the half year ended September 30, 2025 comprising interest on loans and loan processing fees.

Other Expenses

For the half year ended September 30, 2025, the Companys other expenses amounted to Rs.652.11 lakhs, primarily comprising power and fuel charges of Rs.224.95 lakhs, freight and outward expenses of Rs.59.93 lakhs, rent of Rs.54.72 lakhs, sales commission of Rs.35.16 lakhs, advertisement and promotional expenses of Rs.33.65 lakhs, professional and consultancy charges of Rs.31.51 lakhs, and sample sales and replacement expenses of Rs.25.60 lakhs.

Restated profit after tax

As a result of the above factors, our restated profit after tax for the half year ended September 30, 2025, was Rs.366.02 Lakhs (PAT margin of 3.54%).

RESULTS OF OPERATIONS FOR THE FINANCIAL YEARS ENDED MARCH 31, 2025, MARCH 31, 2024 AND MARCH 31, 2023

The following table sets forth certain information with respect to our results of operations, on a Restated Standalone Financial basis as indicated below:

(Rs. in Lakhs)

	For the financial year ended March 31
Particulars	2025	% of total revenue	2024	% of total revenue	2023	% of total revenue
Revenue from operation	18,735.58	97.93%	17,894.40	98.50%	15,770.96	98.44%
Other income	395.80	2.07%	272.21	1.50%	250.47	1.56%
Total Income	19,131.38	100.00%	18,166.61	100.00%	16,021.43	100.00%
Cost of material consumed	13,959.85	72.97%	12,637.65	69.57%	11,984.66	74.80%
Changes in inventories	(203.73)	(1.06) %	184.50	1.02%	(544.05)	(3.40) %
Employee benefits expense	2,678.31	14.00%	2,391.49	13.16%	2,208.06	13.78%
Other expenses	1,316.26	6.88%	1,225.68	6.75%	1,216.73	7.59%
Total Expenses	17,750.69	92.78%	16,439.32	90.49%	14,865.40	92.78%
Earnings before Interest, Tax and Depreciation (EBITDA)	1,380.69	7.22%	1,727.29	9.51%	1,156.03	7.22%
Finance costs	315.59	1.65%	253.51	1.40%	176.73	1.10%
Depreciation and amortization expenses	754.57	3.94%	463.77	2.55%	501.72	3.13%
Profit before Tax (PBT)	310.53	1.62%	1,010.01	5.56%	477.58	2.98%
Tax Expenses	230.11	1.20%	253.53	1.40%	176.96	1.10%
Net Profit after tax (PAT)	80.42	0.42%	756.48	4.16%	300.62	1.88%
PAT margin (PAT / Revenue from operations)		0.43%		4.23%		1.91%

Financial year ended March 31, 2023 vs. Financial year ended March 31, 2024

The PAT margin of our Company increased from 1.91% in the financial year ended March 31, 2023 to 4.23% in the financial year ended March 31, 2024. This improvement is primarily attributable to enhanced operating efficiencies and scale-up of operations, as explained below:

Cost of materials consumed: The cost of materials consumed decreased from 74.80% of total revenue in the financial year ended March 31, 2023 to 69.57% in the financial year ended March 31, 2024. This reduction is primarily attributable to improved procurement efficiencies, better vendor negotiations, optimized raw material utilization driven by a low-wastage policy, and economies of scale in safety footwear manufacturing.  

Employee benefits expense: Employee benefits expense remained largely stable as a proportion of total revenue, decreasing marginally from 13.78% in the financial year ended March 31, 2023 to 13.16% in the financial year ended March 31, 2024, reflecting efficient utilization of a predominantly labour-intensive workforce in safety footwear manufacturing, despite the increase in scale of operations.

Other expenses: Other expenses increased marginally from Rs.1,216.73 lakhs in the financial year ended March 31, 2023 to Rs.1,225.68 lakhs in the financial year ended March 31, 2024; however, as a percentage of total revenue, they decreased from 7.59% to 6.75%, indicating improved cost efficiency with scale. The decrease is primarily attributable to:

Reduction in clearing charges from Rs.73.62 lakhs to Rs.30.75 lakhs due to streamlined logistics and supply chain efficiencies;

Decrease in sales commission from Rs.110.02 lakhs to Rs.65.02 lakhs on account of higher direct sales;

Absence of provision for doubtful debts as compared to Rs.38.61 lakhs in the previous year; and

Decrease in repair and maintenance expenses by Rs.13.84 lakhs due to improved maintenance and utilization of manufacturing facilities.

Finance costs and depreciation: Finance costs and depreciation remained negligible and stable, and did not have a material impact on profitability.

Tax expenses: Tax expenses increased in line with improved profitability during the financial year ended March 31, 2024.

Overall impact: The above factors, particularly the significant reduction in cost of materials consumed, resulted in improvement in EBITDA margin from 5.74% to 8.13%, which in turn led to a substantial increase in PAT margin from 1.91% to 4.23%.

Financial year ended March 31, 2024 vs. Financial year ended March 31, 2025

The PAT margin of the Company declined from 4.23% in FY 2024 to 0.43% in FY 2025, mainly due to increase in raw material costs and higher operating and fixed expenses, as detailed below:

Cost of materials consumed: The cost of materials consumed increased from 69.57% in the financial year ended March 31, 2024 to 72.97% in the financial year ended March 31, 2025 of total revenue, due to rise in prices of key raw materials such as leather, rubber and other components, along with limited ability to pass on the increase to customers, which reduced gross margins.

Changes in inventories: Changes in inventories moved from 1.02% in the financial year ended March 31, 2024 to (1.06%) in the financial year ended March 31, 2025, due to higher consumption and inventory adjustments during the year, leading to increased cost charged to the statement of profit and loss.

Employee benefits expense: Employee benefits expense increased from 13.16% of total revenue in the financial year ended March 31, 2024 to 14.00% of total revenue in the financial year ended March 31, 2025, due to higher labour costs, increment in wages and increase in workforce to support higher production in a labour-intensive manufacturing setup.

Other expenses: Other expenses increased from Rs.1,225.68 lakhs in FY 2024 to Rs.1,316.26 lakhs in FY 2025, contributing to the decline in profitability, as detailed below:

Increase in power and fuel expenses to Rs.368.59 lakhs due to higher production levels and rise in energy costs in manufacturing operations;

Increase in professional and consultancy charges to Rs.107.20 lakhs due to higher engagement of technical, compliance and process improvement consultants with expansion of manufacturing operations;

Increase in sample sales and replacement cost to Rs.75.78 lakhs due to higher product sampling for new customer acquisition and increased replacement costs in line with higher sales volumes and quality assurance requirements.

Increase in insurance expenses to Rs.54.82 lakhs due to higher insurance coverage of plant and machinery, inventory and overall business operations, in line with expansion of manufacturing capacity and increase in scale of operations and revenue.

Finance costs: Finance costs increased from 1.40% in financial year ended March 31, 2024 to 1.65% of total revenue in financial year ended March 31, 2025, due to higher utilization of working capital facilities.

Depreciation and amortization: Depreciation increased from 2.55% to 3.94% of total revenue, due to addition of new plant and machinery and expansion of manufacturing capacity.

Tax expenses: Tax expenses adjusted in line with profitability during the financial year ended March 31, 2025.

Overall impact:

Due to the above factors, EBITDA margin decreased from 8.13% to 5.26%, which resulted in a decline in PAT margin from 4.23% to 0.43% during FY 2025.

FISCAL 2025 COMPARED WITH FISCAL 2024

Set forth below is a discussion of our results of operations for financial year ended March 31, 2025, over March 31, 2024 Revenue from operations

Revenue from operations increased from Rs.17,894.40 lakhs in the year ended March 31, 2024 to Rs.18,735.58 lakhs in the year ended March 31, 2025, representing a growth of 4.70%. The increase was primarily driven by higher domestic sales, supported by addition of new customers and repeat orders from existing clients. Increased product sampling, improved distribution reach and consistent demand for safety footwear from industrial and institutional customers also contributed to the growth in revenue.

Other Income

Other income increased from Rs.272.21 lakhs in the year ended March 31, 2024 to Rs.395.80 lakhs in the year ended March 31, 2025, with its contribution to total revenue rising from 1.50% to 2.07%. The increase is primarily attributable to:

- Higher discount received (Rs.116.40 lakhs to Rs.187.67 lakhs) due to improved procurement terms and bulk purchasing of raw materials;

- Increase in duty drawback income (Rs.132.30 lakhs to Rs.132.99 lakhs) in line with export sales of safety footwear;

- Recognition of RODTEP incentive (Rs.15.99 lakhs) during FY 2025;

- Increase in interest income (Rs.15.83 lakhs to Rs.36.42 lakhs) due to higher surplus funds deployed in bank deposits;

- Increase in other miscellaneous income (Rs.0.40 lakhs to Rs.10.76 lakhs).

This was partially offset by lower foreign exchange gain (Rs.7.02 lakhs to Rs.2.69 lakhs) during the year.

Cost of materials consumed

Cost of materials consumed increased from Rs.12,637.65 lakhs in the year ended March 31, 2024 to Rs.13,959.85 lakhs in the year ended March 31, 2025, primarily due to higher purchases (Rs.12,725.31 lakhs to Rs.13,797.94 lakhs) driven by increased production and sales volume of safety footwear, along with an increase in freight inwards (Rs.126.61 lakhs to Rs.137.00 lakhs) on account of higher procurement and transportation costs of raw materials.

Employee benefits expense

Employee benefits expense increased from Rs.2,391.49 lakhs in the year ended March 31, 2024 to Rs.2,678.31 lakhs in the year ended March 31, 2025, with a marginal increase in proportion to total income from 13.16% to 14.00%. The increase is not significant and is primarily due to higher salaries and wages on account of annual increments and slight increase in workforce in a labour-intensive manufacturing setup. Contribution to provident and other funds also increased in line with employee costs. Overall, the change is in line with scale of operations.

Finance costs

The increase in finance cost from Rs.253.51 lakhs in the year ended March 31, 2024 to Rs.315.59 lakhs in the year ended March 31, 2025, is primarily due to additional borrowings undertaken for capital expenditure, including purchase of machinery, construction of building, and installation of related equipment. These investments were necessary to expand production capacity and support business growth.

Further, as per prevailing market conditions, interest rates remained relatively elevated during the year, which increased the overall cost of borrowing. The combined impact of higher loan utilization for capex and increased market interest rates led to the rise in finance cost.

Depreciation and Amortization Expenses

Depreciation and amortization increased from Rs.463.77 lakhs in the year ended March 31, 2024 to Rs.754.57 lakhs in the year ended March 31, 2025, representing a growth of 62.70%. The increase is primarily attributable to the capitalization of a new manufacturing facility, including building and related infrastructure, amounting to Rs.1,557.34 lakhs. This expansion was undertaken to scale up production capacity in response to growing demand in the safety footwear segment. Additionally, the commissioning of new plant and machinery and production equipment, which typically carry higher depreciation rates in manufacturing operations, further contributed to the increase in depreciation expense.

Other Expenses

Other expenses increased from Rs.1,225.68 lakhs in year ended March 31, 2024 to Rs.1,316.26 lakhs in year ended March 31, 2025, reflecting a 7.39% increase in absolute terms. The movement is explained below:

- Professional and Consultancy charges increased by Rs.43.97 lakhs on account of expansion activities , including factory setup, technical advisory, and regulatory compliance support.

- Sample sales and replacement cost increased by Rs.33.10 lakhs primarily due to higher product sampling for new customer acquisition and increased replacement costs in line with higher sales volumes and quality assurance requirements.

- Insurance expenses increased by Rs.25.75 lakhs primarily due to enhanced insurance coverage taken for plant and machinery, buildings, inventory, and both domestic and export operations, along with higher premium rates.

Restated profit after tax

Net Profit after Tax (PAT) decreased by 89.37% from Rs.756.48 lakhs in FY 2024 to Rs.80.42 lakhs in FY 2025, with margins deteriorating from 4.23% to 0.43%. According to the above explanations, the decrease in PAT margin is primarily driven by disproportionate increase in costs compared to revenue growth. While revenue from operations grew modestly by 4.70%, the Company incurred significantly higher depreciation and finance costs on account of capital expenditure towards new manufacturing facilities and machinery. Additionally, increased raw material consumption and higher operating expenses such as consultancy, sampling, and insurance further impacted margins. As a result, the overall rise in expenses outpaced the growth in income, leading to a reduction in profitability.

FISCAL 2024 COMPARED WITH FISCAL 2023

Set forth below is a discussion of our results of operations for financial year ended March 31, 2024, over March 31, 2023 Revenue from operations

Revenue from operations increased by 13.46%from Rs.15,770.96 lakhs in year ended March 31, 2023 to Rs.17,894.40 lakhs in year ended March 31, 2024, primarily supported by expanded domestic market penetration through a strengthened distribution network and improved customer relationships, leading to new and repeat orders. Additionally, enhanced product quality and innovation increased demand from industrial and institutional customers, contributing to overall sales growth across segments.

Other Income

Other Income increased from Rs.250.47 lakhs in year ended March 31, 2023 to Rs.272.21 lakhs in year ended March 31, 2024, primarily due to higher duty drawback received in case of export sales amounting Rs.132.30 lakhs and discount received on bulk purchase of raw materials from repeated vendors amounting to Rs.132.30 lakhs 116.40. However, as a percentage of revenue, it remained approximately constant (1.56% to 1.50%).

Cost of materials consumed

Cost of materials consumed increased from Rs.11,984.66 lakhs in the financial year ended March 31, 2023 to Rs.12,637.65 lakhs in the financial year ended March 31, 2024, primarily due to higher procurement of raw materials and components in line with increased production volumes in the safety shoe manufacturing segment. The increase is also attributable to a rise in freight by Rs.82.60 lakhs, driven by higher movement of goods and elevated logistics expenses during the year.

Employee benefits expense

Employee benefit expenses increased from Rs.2,208.06 lakhs in the financial year ended March 31, 2023 to Rs.2,391.49 lakhs in the financial year ended March 31, 2024. However, as a percentage of revenue, it declined from 13.78% to 13.16%, indicating improved operational efficiency. The increase of 8.31% is primarily attributable to higher deployment of labour to support increased production volumes in a labour-intensive shoe manufacturing process, along with a corresponding rise in statutory contributions such as provident fund and other employee-related benefits.

Finance costs

Finance costs increased from Rs.253.51 lakhs in the financial year ended March 31, 2023 to Rs.315.59 lakhs in the financial year ended March 31, 2024, primarily due to higher utilization of working capital facilities such as overdraft and cash credit, along with availing of term loans. This led to an increase in interest expenses and associated loan processing charges. However, finance costs remained broadly stable as a proportion of revenue, increasing marginally from 1.10% to 1.40%, reflecting a proportionate rise in borrowings in line with business growth.

Depreciation and Amortization Expenses

Depreciation and amortization expense decreased from Rs.501.72 lakhs in the financial year ended March 31, 2023 to Rs.463.77 lakhs in the financial year ended March 31, 2024, primarily due to certain assets having reached the end of their useful lives and therefore no longer being subject to depreciation. The decline is also reflective of a relatively lower addition of new depreciable assets during the year compared to the previous period.

Other Expenses

Other expenses increased marginally from t1,216.73 lakhs in the financial year ended March 31, 2023 to t1,225.68 lakhs in the financial year ended March 31, 2024, primarily due to the following:

- Increase in advertisement and promotional expenses by t71.22 lakhs, driven by higher brand-building and marketing initiatives to support sales growth in the competitive shoe manufacturing industry.

- Increase in power and fuel expenses by t36.16 lakhs, attributable to higher production activity and machine utilization for production.

- Increase in professional and consultancy charges by U22.90 lakhs, on account of availing external expertise for business expansion, ROC related matters, compliance requirements, and operational support services.

Overall, the increase in other expenses remained minimal at 0.74%, indicating controlled overheads despite higher operational scale during the year.

Restated profit after tax

Net Profit after Tax (PAT) increased significantly from t300.62 lakhs in the financial year ended March 31, 2023 to t756.48 lakhs in the financial year ended March 31, 2024, with margins improving from 1.91% to 4.23%. This growth is primarily driven by a strong increase in revenue from operations supported by higher sales volumes and improved market penetration.

Further, the improvement in profitability is attributable to better operating leverage, as key cost components such as employ ee benefits and other expenses were effectively controlled as a percentage of revenue. Additionally, optimized procurement and stable material cost ratios, along with a reduction in depreciation expenses due to certain assets reaching the end of their useful lives, contributed to margin expansion. Overall, the combined effect of revenue growth and improved cost efficiencies led to a significant increase in PAT.

LIQUIDITY AND CAPITAL RESOURCES

We operate in a working capital-intensive industry, that is, we require large amounts of funds in the normal course of business to continue providing the services and hence our principal liquidity requirement has been to finance our working capital needs. Our normal operating cycle ranges between two to three months.

For more details regarding our operating cycle and working capital requirements, please refer "Objects of the Issue ", chapter beginning on page 71 of the Draft Red Herring Prospectus.

To fund these costs, we have historically relied on raising short term and long-term borrowings, including working capital financing, loans from related parties and others combined with the cash generated from operating activities. Our short-term liquidity requirements relate to servicing our borrowings and financing our working capital requirements. Our long-term liquidity requirements include capital expenditures required to expand and maintain our operations.

We expect to meet our working capital requirements for the next 12 months primarily from the cash flows of our business operations, net IPO proceeds and other available financial means. As on September 30, 2025, March 31, 2025, March 31, 2024 and March 31, 2023, we had cash and bank balances of t 297.65 lakhs, t 255.54 lakhs, t 227.32 lakhs and t 271.38 lakhs respectively. Cash and bank balances consist of cash on hand, balances with banks in current accounts, margin money deposits.

CASH FLOWS

The following table sets forth certain information relating to our cash flows in the periods indicated:

(in Rs. lakhs)

Particulars	For half year ended		For the year ended March 31,
	September 30, 2025	2025	2024	2023
Net cash generated from/ (used in) operating activities	429.87	1,253.21	1,087.72	53.22
Net cash (used in) investing activities	(600.38)	(1,845.56)	(1,529.09)	(697.26)
Net cash (used in)/ generated from financing activities	210.21	613.24	394.46	648.32
Net increase / (decrease) in cash and bank balances	39.70	20.90	(46.91)	4.28
Cash and Bank balances at the beginning	25.37	4.47	51.39	47.10
Cash and Bank balances at the end	65.08	25.37	4.47	51.39

OPERATING ACTIVITIES

For Half Year Ended September 30, 2025

Net cash generated from operating activities was Rs. 429.87 lakhs in September 30, 2025. Profit before tax was Rs.461.03 lakhs in September 30, 2025. Adjustments primarily consisted of depreciation of Rs. 431.14 lakhs, interest expenses of Rs.150.96 lakhs, provision from gratuity of Rs.37.52 lakhs, and interest income on term deposits of Rs.17.52 lakhs.

Our operating cash flow before working capital adjustments was Rs.1,058.56 lakhs in September 30, 2025. The working capital adjustments in September 30, 2025 included increase in other current liabilities of Rs.3.90 lakhs, increase in trade payables o f Rs.231.96 lakhs, and increase in non-current liabilities of Rs.4.46 lakhs. This was offset by increase in inventories of Rs.377.61 lakhs, increase in trade receivables of Rs.342.26 lakhs, increase in loans and advances of Rs.92.71 lakhs, decrease in other current ass ets of Rs.69.51 lakhs, and decrease in non-current assets by Rs.10.70 lakhs.

Taxes paid during the year, net of refunds, is Rs.128.84 Lakhs.

For Financial Year Ended March 31, 2025

Net cash generated from operating activities was Rs. 1,253.21 lakhs in March 31, 2025. Profit before tax was Rs.310.59 lakhs in March 31, 2025. Adjustments primarily consisted of depreciation of Rs. 754.57 lakhs, interest expenses of Rs.315.59 lakhs, provision from gratuity of Rs.75.19 lakhs, and interest income on term deposits of Rs.36.42 lakhs.

Our operating cash flow before working capital adjustments was Rs. 1,434.19 lakhs in March 31, 2025. The working capital adjustments in March 31, 2025 included increase in other current liabilities of Rs.34.80 lakhs, increase in trade payables of Rs. 93.52 lakhs, and increase in non-current liabilities of Rs.303.45 lakhs. This was offset by increase in inventories of Rs.178.88 lakhs, increase in trade receivables of Rs.206.67 lakhs, decrease in loans and advances of Rs.65.44 lakhs, decrease in other current ass ets Rs.32.35 lakhs, and increase in non-current assets by Rs.8.98 lakhs.

Taxes paid during the year, net of refunds, is Rs.316.01 Lakhs.

For Financial Year Ended March 31, 2024

Net cash generated from operating activities was Rs. 1,087.72 lakhs in March 31, 2024. Profit before tax was Rs.1,010.01 lakhs in March 31, 2024. Adjustments primarily consisted of depreciation of Rs. 463.77 lakhs, interest expenses of Rs.253.51 lakhs, provision from gratuity of Rs.78.26 lakhs, and interest income on term deposits of Rs.15.83 lakhs.

Our operating cash flow before working capital adjustments was Rs. 1,800.26 lakhs in March 31, 2024. The working capital adjustments in March 31, 2024 included decrease in other current liabilities of Rs.17.33 lakhs and decrease in trade payables o f Rs.330.21 lakhs. This was offset by increase in inventories of Rs.29.70 lakhs, decrease in trade receivables of Rs.31.34 lakhs, increase in loans and advances of Rs.96.62 lakhs, increase in other current asset Rs.16.35 lakhs, and increase in non-current assets of Rs.7.37 lakhs.

Taxes paid during the year, net of refunds, is Rs.246.30 Lakhs.

For Financial Year Ended March 31, 2023

Net cash generated from operating activities was Rs. 53.22 lakhs in March 31, 2023. Profit before tax was Rs.477.58 lakhs in Marc h 31, 2023. Adjustments primarily consisted of depreciation of Rs. 501.72 lakhs, interest expenses on loans of Rs.176.73 lakhs, pro fit on sale of asset of Rs.31.22 lakhs, interest income on term deposit of Rs.13.44 lakhs, and provision for gratuity of Rs.56.58 lakhs.

Our operating cash flow before working capital adjustments was Rs. 1,182.89 lakhs in March 31, 2023. The working capital adjustments in March 31, 2023 included decrease in other liabilities of Rs.48.27 lakhs, decrease in trade payable of Rs.290.29 lakhs, and increase in non-current liabilities of Rs.35.68 lakhs. This was offset by increase in inventories of Rs.491.13 lakhs, increase in trade receivables of Rs.195.90 lakhs, decrease in loans and advances of Rs.769.83 lakhs, increase in other current assets of Rs.650.13 lakhs, and increase in non-current assets of Rs.58.50 lakhs.

Taxes paid during the year, net of refunds, is Rs.200.96 Lakhs.

INVESTING ACTIVITIES

For Half Year Ended September 30, 2025

Net cash used in investing activities for the year ended September 30, 2025, was Rs.600.38 lakhs primarily due to the capital expenditure of Rs.638.62 lakhs, sale of fixed assets of Rs.26.61 lakhs, outflow of fixed deposits of Rs.2.40 lakhs and interest inc ome on term deposits of Rs.14.03 lakhs during the year.

For Financial Year Ended March 31, 2025

Net cash used in investing activities for the year ended March 31, 2025, was 1,845.46 lakhs primarily due to the capital expenditure of t1,880.94 lakhs, sale of fixed assets of t12.22 lakhs, outflow of fixed deposits of t7.32 lakhs, and interest income on term deposits of t30.48 lakhs during the year.

For Financial Year Ended March 31, 2024

Net cash used in investing activities for the year ended March 31, 2024, was t1,529.09 lakhs primarily due to the capital expenditure of t1,537.41 lakhs, sale of fixed assets of t2.68 lakhs, outflow of fixed deposits of t2.86 lakhs, and interest income on term deposits of t8.54 lakhs during the year.

For Financial Year Ended March 31, 2023

Net cash used in investing activities for the year ended March 31, 2023, was t697.26 lakhs primarily due to the capital expenditure of t863.93 lakhs, sale of fixed assets of t99.45 lakhs, inflow of fixed deposits of t60.57 lakhs, and interest in come on term deposits of t6.65 lakhs during the year.

FINANCING ACTIVITIES

For Half Year Ended September 30, 2025

Net cash generate from financing activities in September 30, 2025 was t 210.21 lakhs. This was on account of interest paid of t150.96 lakhs, proceeds from borrowings of t433.62 lakhs, and repayment of borrowings of t72.45 lakhs.

For Financial Year Ended March 31, 2025

Net cash generated from financing activities in March 31, 2025 was t 613.24 lakhs. This was on account of interest paid of Rs.315.59 lakhs, proceeds from issue of share capital (including securities premium and reserve adjustment) t415.00 lakhs, and proceeds from borrowings of Rs.513.83 lakhs.

For Financial Year Ended March 31, 2024

Net cash generate from financing activities in March 31, 2024 was t 394.46 lakhs. This was on account of interest paid of t253.51 lakh and proceeds from borrowings of t647.97 lakhs.

For Financial Year Ended March 31, 2023

Net cash generate from financing activities in March 31, 2023 was t 648.32 lakhs. This was on account of interest paid of t176.73 lakhs, proceeds from borrowings of t2,683.10 lakhs, and repayment of borrowings of t1,858.05 lakhs.

INDEBTEDNESS

As of September 30, 2025, we had long-term borrowings of t 1,451.51 lakhs and short-term borrowings of t 3,874.46 lakhs which includes secured and unsecured loans. The following table sets forth certain information relating to our outstanding indebtedness as of September 30, 2025, and our repayment obligations in the periods indicated:

(in Rs. lakhs)

	As at September 30, 2025
Total Borrowings	Short term* (less than 1 year)	Long term (more than 1 year)
Secured (A)	2,535.39	1,451.51
Unsecured (B)	1,339.07	-
Total Borrowings (A + B)	3,874.46	1,451.51

*Short term borrowings include the current maturities of long-term borrowings payable within 1 year.

CAPITALIZATION OF BUILDING AND PLANT AND MACHINERY

Building

During the financial year ended March 31, 2023, the Company commenced construction of a manufacturing facility at Kanpur to support its growing operations in the safety shoes segment. The project was undertaken in line with increasing order volumes and capacity constraints at existing units. The construction activity was carried out over a period of approximately two years, with further additions and enhancements made during the financial year ended March 31, 2024.

The facility was completed during the financial year ended March 31, 2025 and the costs incurred during such construction amounting to t 1,557.34 Lakhs have been capitalized in accordance with AS 10 - Property, Plant and Equipment, including all costs directly attributable to bringing the asset to its operational condition.

The capitalization was carried out upon the facility becoming operational and ready for its intended use. The new plant has improved production capacity, streamlined manufacturing processes, and supported in efficient handling of higher volumes. Additionally, the available space and infrastructure provide scope for future expansion and installation of additional machinery as and when required.

Details of Building capitalized during the stub period and past three financial years is provided below:

	For the year ended
Particulars	September 30, 2025	March 31, 2025	March 31, 2024	March 31, 2023
Opening Balance	-	1,557.34	638.68	-
Add: Addition	-	-	918.66	638.68
Less: Capitalized during the year	-	(1,557.34)	-	-
Closing Balance	-	-	1,557.34	638.68

Plant and Machinery

In connection with the development of the new manufacturing facility, the Company has also undertaken phased procurement of plant and machinery to operationalize and enhance the production capabilities of the unit.

The capitalization of these assets has been carried out in phases, as and when the respective machines were installed and became operational and ready for their intended use, in accordance with AS 10 - Property, Plant and Equipment. Accordingly, a portion of the plant and machinery was capitalized during the financial year ended March 31, 2025, while the remaining assets were capitalized during the stub period ended September 30, 2025.

These assets were acquired to support various stages of the manufacturing process and to improve efficiency, consistency, and output quality. The machinery installed at the facility includes, inter alia, cutting machines, stitching machines, sole attaching and moulding machines, finishing and polishing equipment, as well as material handling systems. The integration of these machineries with the newly constructed facility enables streamlined production flow, reduction in manual intervention, and better capacity utilization. Collectively, the investment in plant and machinery complements the new building infrastructure and is expected to support higher production volumes and operational efficiency going forward.

Details of Plant and Machinery capitalized during the stub period and past three financial years is provided below:

	For the year ended
Particulars	September 30, 2025	March 31, 2025	March 31, 2024	March 31, 2023
Opening	171.94	240.25	-	-
Add: Addition	-	466.14	240.25	-
Less: Capitalized during the year	(171.94)	(534.45)	-	-
Closing Value	-	171.94	240.25	-

CONTINGENT LIABILITIES AND COMMITMENTS

For information relating to our contingent liabilities and commitments, please refer to Note 3 3 of the Restated Financial Statements in the "Financial Information " chapter on page 185 of the Draft Red Herring Prospectus.

OFF BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

We do not have any off-balance sheet arrangements, derivative instruments, swap transactions or relationships with standalone entities or financial partnerships that would have been established for the purpose of facilitating off-balance sheet arrangements.

RELATED PARTY TRANSACTIONS

We enter into various transactions with related parties in the ordinary course of business. For further information relating to our related party transactions, see Note 31 of the Restated Financial Statements in the "Financial Information " chapter on page 185 of the Draft Red Herring Prospectus.

CHANGES IN ACCOUNTING POLICIES

As on the date of the Draft Red Herring Prospectus, there are no changes in our accounting policies in the last three financial years and stub period.

UNUSUAL OR INFREQUENT EVENTS OR TRANSACTIONS

There have been no events or transactions to our knowledge which may be described as "unusual" or "infrequent".

SIGNIFICANT ECONOMIC CHANGES

There are no significant economic changes that may materially affect or are likely to affect income from continuing operations.

KNOWN TRENDS OR UNCERTAINTIES

Apart from the risks as disclosed under Section "Risk Factors " beginning on page 26 of the Draft Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

FUTURE RELATIONSHIPS BETWEEN COSTS AND INCOME

Other than as described "Risk Factors ", "Our Business " and "Managements Discussion and Analysis of Financial Position and Results of Operations " on pages 26, 130 and 190 respectively of the Draft Red Herring Prospectus, to our knowledge, no future relationship between expenditure and income is expected to have a material adverse impact on our operations and finances.

NEW PRODUCTS OR NEW BUSINESS SEGMENTS

Except as set out in the Draft Red Herring Prospectus, we have not announced and do not expect to announce in the near future any new products or new business segments.

SEASONALITY OF BUSINESS

Our business is not seasonal in nature.

SIGNIFICANT DEPENDENCE ON A SINGLE OR FEW CUSTOMERS

The following table sets forth the details of revenue from operations from our top customers:

(Rs. in Lakhs, unless otherwise stated)

	September 30, 2025		March 31, 2025		March 31 2024		March 31 , 2023
	Amount	%*	Amount	%*	Amount	%*	Amount	%*
Top 1 customers	1,483.09	14.36	1,979.15	10.56	1,995.11	11.15	1,790.43	11.35
Top 3 customers	2,455.76	23.77	3,832.23	20.45	3,803.32	21.25	3,262.40	20.69
Top 5 customers	3,380.80	32.72	5,388.84	28.76	5,286.05	29.54	4,525.82	28.70
Top 10 customers	5,017.40	48.57	8584.76	48.82	8,059.54	45.04	7,039.20	44.63

*As a percentage of revenue from operations

SIGNIFICANT DEPENDENCE ON A SINGLE OR FEW SUPPLIERS

The following table sets forth the details of revenue from operations from our top suppliers:

(Rs. in Lakhs, unless otherwise stated)

	September 30, 2025		March 31, 2025		March 31, 2024		March 31 , 2023
	Amount	%*	Amount	%*	Amount	%*	Amount	%*
Top 1 supplier	1,125.53	14.83	1,815.70	13.44	1,543.42	12.10	1,528.92	13.38
Top 3 suppliers	2,167.59	28.56	3,810.48	28.20	3,397.13	26.62	3,131.86	27.42
Top 5 suppliers	2,836.69	37.37	5,270.12	39.01	4,844.73	37.97	4,343.50	38.02
Top 10 suppliers	4,007.59	52.80	7,484.74	55.40	7,138.50	55.95	6,258.80	54.79

*As a percentage of purchases

COMPETITIVE CONDITIONS

We expect competition in our industry from existing and potential competitors to intensify. For details, please refer to the discussions of our competition in "Our Business ", "Industry Overview " and "Risk Factors " on pages 130, 97 and 26 respectively of the Draft Red Herring Prospectus.

DETAILS OF MATERIAL DEVELOPMENTS AFTER THE DATE OF LAST BALANCE SHEET

Except as stated below, there are no material developments after the date of last balance sheet i.e., September 30, 2025:

Pursuant to a resolution passed by our Board on October 28, 2025 and a special resolution passed at the Extra-Ordinary General Meeting of Shareholders on October 31, 2025, each equity share of face value of Rs.100 each has been sub -divided into Equity Shares of face value of Rs.10 each. Consequently, the issued and paid-up capital was subdivided from 4,67,754 equity shares of face value of Rs.100 each to 46,77,540 Equity Shares of face value of Rs.10 each.

On February 20, 2026, the Company issued bonus equity shares in the ratio of 2:1, i.e., two (2) bonus equity shares for every one (1) existing equity share held by the shareholders as on the record date, pursuant to which the total number of equity shares increased from 46,77,540 to 93,55,080.

For further details, please refer to the section titled " Capital Structure " on page 57 of this Draft Red Herring Prospectus.