AIA Engineering Ltd Management Discussions

CAVEAT

Shareholders are cautioned that certain data and information external to the Company is included in this section. Though these data and information are based on sources believed to be reliable, no representation is made on their accuracy or comprehensiveness. Further, though utmost care has been taken to ensure that the opinions expressed by the management herein contain their perceptions on most of the important trends having a material impact on the Companys operations, no representation is made that the following presents an exhaustive coverage on and of all issues related to the same. The opinions expressed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic and increasingly fraught with risks and uncertainties. Actual results, performances, achievements or sequence of events may be materially different from the views expressed herein. Shareholders are hence cautioned not to place undue reliance on these statements and are advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regard to their own specific objectives. Further, the discussion following herein reflects the perceptions on major issues as on date and the opinions expressed here are subject to change without notice. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this section, consequent to new information, future events, or otherwise.

NOTE

Except stated otherwise, all figures, percentages, analysis, views and opinions are on consolidated financial statements of AIA Engineering Limited and its wholly owned subsidiaries (jointly referred as AIA or Company, hereinafter). Financial information presented in various sections of the Management Discussion and Analysis is classifiedunder suitable heads, which may be different from the classification reported under the Consolidated Financial Statements. Some additional financial information is also downside included in this section, which may not be readily available fromtheConsolidatedFinancialStatements.Previousyears figures have been regrouped, wherever necessary, to make it comparable with the current year.

GLOBAL ECONOMY

The global economic outlook for the 2026-27 fiscal period is one of cautious resilience, overshadowed by significant headwinds, primarily stemming from the Iran-US conflict and resulting geopolitical fragmentation.

As per IMF Baseline estimates, Global growth is projected to slow below pre-pandemic averages- and is expected to be less than 3%, while inflation is expected to remain elevated- Global headline Inflation likely to be around 4.4%- due to commodity market pressures and uncertainty. The US GDP growth, as per IMF estimates is likely to be around 2%, while Eurozone GDP growth is estimated to be practically Flat.

Assuming the Iran-US conflict remains limited in duration and scope, the war has already introduced a drag on global activity and heightened inflation, leading to downgraded growth forecasts. If the conflict is prolonged or expands, a "severe scenario" could push global growth down to 2% in 2027.

The conflict has caused acute supply shortages and currency volatility, echoing the 1970s energy crisis. Brent crude surged to around USD 80–82 per barrel in March 2026 and was recently around USD 104 per barrel. The effective closure or major disruption of the Strait of Hormuz is a critical risk, impacting Global supplies- Over 20% of the worlds LNG, 45% of global Sulphur exports (affecting fertilisers and mining), and 30% of global Methanol production.

The world is facing a severe inflationary and Fiscal pressure.

High crude prices and geopolitical uncertainty are cited as top worries for financial stability. Defense spending increases prompted by geopolitical tensions will boost short-term activity but also bring inflationary pressures, weaken fiscal sustainability, and risk crowding out social spending. Central banks, including the European Central Bank (ECB) and the Bank of Japan (BOJ), are facing mounting inflationary fears and tightening policy, with the

ECB postponing planned interest rate reductions.

Further, elevated tariff barriers—particularly those introduced since 2025, which pushed average tariff rates to their highest levels in decades—continue to distort trade flows and fragment global supply chains. Despite some gradual adjustment, these trade frictions have redirected trade patterns and weakened export momentum across several economies. At the same time, the ongoing conflict involving Iran has introduced significant to global growth. Disruptions in key energy transit routes such as the Strait of Hormuz have constrained oil supply, raised transportation and production costs, and dampened industrial activity worldwide.

Despite these challenges, Advanced economies are likely to experience only a gradual recovery, reflecting still-tight financial conditions and heightened uncertainty. In contrast, emerging market and developing economies are expected to continue driving global growth, supported by relatively resilient domestic demand and partial reorientation of trade flows.

INDIAN ECONOMY

Growth in India is projected to moderate to 6.5 % in 2025, following a downward revision by the Reserve Bank of

India, reflecting heightened external risks, particularly from trade tensions owing to Geopolitical uncertainties,

Iran-US Conflict and tariff-related uncertainties linked to policies associated with Mr. Donald Trump. These factors are expected to weigh on export performance and overall economic activity, even as domestic demand remains relatively resilient. savings

Growth is expected to be domestically driven and structurally supported by strong Domestic Demand led by private consumption, continued Public and Private Investments, Continued Impetus on Manufacturing and Services, Increasing Export focus and Financial resilience. The Key challenges and Downside Risks remain in the form of an extended West Asia Conflict resulting into Spiraling Oil prices- increasing inflation and weakening Rupee.

However, we remain cautiously optimistic that in spite of all these external adversities, Indian Economy should still manage to grow at over 6 % in FY 2026-27.

OUTLOOK AND PROSPECTUS

Company manufactures a range of Hi-chrome consumable wear parts like Grinding Media, Mill Liners, and Castings -collectively referred to as "Mill internals" that are used in the process of Crushing and Grinding in Cement, Mining and Thermal Power industries.

With a strong foundation in areas of engineering, metallurgy and comminution technology, the Company has since last few years focused on Mining Industries as a pillar of growth. The Serviceable Addressable market opportunity is in excess of 2 million tonnes per annum in the segments of Gold, Copper and Iron Ore Mining where the Company is focused on- and the penetration of High Chrome mill internals is not more than 25-30%, which offers a significant headroom for conversion of Mines into High Chrome based solutions offered by the Company. However, since last few years, the Company increase in the Demand for Power expected has been facing several challenges in the form of competition from local Players, trade barriers like Anti-dumping duties and general resistance to change without substantial value addition in milling process. To overcome these challenges, the Company is in the process of making transformative efforts over last few years to change its approach to induce the Mines in converting to the Companys solutions.

Companys solutions contemplate to enhance grinding efficiency, operational reliability, recovery of metal, resulting in total value of performance for Mining Industries worldwide where grinding capacity is severely constrained due to deteriorating quality of ore bodies both in terms of metal content and grindability due to higher hardness.

Companys core strength lies in designing application-specific grinding solutions, tailored to customers unique operating conditions and performance objectives, which require high reliability and process improvement capability focused on increase in output, recovery and energy saving. The Company is now offering a complete package of tailor-madesolutionsforSAGmillsandBallMills-primarilyinvolving designing and supplying a combination of Mill Liners along with a Unique New Generation Discharge System, with a focus on strong improvement in the operating efficiencies of in thethe Mills, which should result in a significant

Power costs and improvement in the recoveries of metals.

The Company has, over last 3 years, successfully modified grinding mills in iron ore, copper and gold in more than 12 small to medium sized mills located in mines in different geographies. The Company now is conducting similar trials in some of the largest Copper and Gold Mines in Chile, Peru and Ghana, which, if successful, should establish the uniqueness of the solutions offered by the Company on the Global Mining map. The Companys Key differentiators vis-?-vis the competition will be Ability to offer total solution for Mill Grinding Efficiency and Reliability; a Comprehensive

Product portfolio including Mill Liners, New Generation Discharge System, and Grinding Media, Manufacturing Excellence, Global Supply Chain & Execution, and a Global Service Network.

The cement industry continues to be closely aligned with global infrastructure development trends. In several developed economies, infrastructure spending has largely plateaued, leading to relatively stable cement production levels and, consequently, steady demand for the Companys products. However, high-growth markets such as India continue to witness significant government-led investments in infrastructure, which are expected to drive higher cement consumptionandincreaseddemandfortheCompanyswear parts and related solutions. The Company also continues to enjoy its dominant position in the Thermal Power Industry in India, which is also now poised to grow, given the impetus on this sector as well now being considered in wake of duesignificant to massive investment planned in the Data Centers in India.

The Company remains confident of its long-term growth prospects, supported by continued customer acquisition and increasing opportunities within the mining segment. The Company believes that its differentiated product portfolio, efficient manufacturing facilities in India, strong global sales and technical service network, international office and warehouse infrastructure, and ongoing product development initiatives collectively provide a distinct competitive advantage. These capabilities position the Company well to achieve sustained growth and further strengthen its presence in global markets.

SEGMENTWISE PERFORMANCE:

The Company primarily operates in only one Segment i.e. Manufacturing of High Chrome Mill Internals. In Fiscal Year 2025-26, 64.45% of its Total Sales came from outside India while balance 35.55 % came from within India.

CAPEX PLAN:

Our robust liquidity framework enables us to maintain

. financial flexibility

Despite challenges such as disturbed geo political scenario, we have consistently focused on generating net cash flow from operations. In FY26, we generated net cash of 612.54 Crore from operations ensuring adequate resources to fund reinvestments and mitigate financial risks. Our internal accruals supports strategic investments and sustainable expansion.

The Companys current capacity stands at 4,36,000 MT per annum (After Closure of Welcast Plant at Bangalore). Company is reviewing implementation of manufacturing plants at China and Ghana in phased Manner since last one year. However, considering current Geo Political Scenario, Company is acting cautiously on subject matter. Same process would be expedited in second half of FY 2026-27 hoping overall Geo Political scenario will normalise. Company has taken up ambitious Green Energy project of

30 Crores during FY 2025-26. Said project consists of hybrid 33 MW which includes Wind Power and Solar power was expected to start in second half of the fiscal 2025-26 however same will become operational from beginning 2nd

Quarter of fiscal 2026-27. With these new hybrid project overall green energy will increased by 30% to 40% of overall energy requirement during the year. In fiscal year 2026-27 from Second Half, it is estimated that 60% to 70% of total power consumed will come from Green Energy.

Company is planning to provide flexibility commissioned Rubber and Composite Liners manufacturing plant by investing 25 Crores in FY 2026- 27.

RISKS AND CONCERNS:

Key risks that the Company faces are around stability in the mining market particularly copper and gold, financial risks,

Trade Barriers by various Countries, disruption in supply chain and disruption and uncertainty in business due to volatile Geo-Political scenarios.

Financial Risks: The Company operates across the globe and risks associated with fluctuation and tax landscape of respective foreign countries may impact the Companys operations.

Presence in different geographies exposes the Company to high volatility in currencies of different countries due to higher export in turnover and import of raw material. Given the increase in oil prices due to war like scenario, the Dollar remained strong against most currencies through out the year.

The Company has potential tax exposure resulting from application of varying laws and interpretations in relation to various business transactions. Although the Company carries out cross-border affiliates transactions between on the basis of internationally accepted practices, tax authorities in various jurisdictions may have different views or interpretations and subsequently challenge the amount of profits taxed in their jurisdiction, resulting in increased tax liability, including interest and penalties, that may drive up the tax expense of the Company.

Proactive and Adoptive Hedging Policy which is aligned with market best practices and Dynamic Pricing Mechanism are in place to limit impact of exchange volatility on receivables, payables and forecasted revenue. The Company has also taken adequate measures to ensure compliance to the laws of respective countries.

Credit Risk on Investment Portfolio: Company deploys its investible surplus in Government securities, State Government securities, AAA Corporate bonds, Commercial Papers, Fixed Deposits and Debt mutual funds. Corporate bonds and Debt Mutual Fund investments bear credit risk. Direct investments are restricted to Board approved select AAA rated corporates. Debt Mutual Fund investments are managed and monitored based on a Internal Risk Management Framework.

Geopolitical Risks: Since the Company operates across the globe, dynamic changes in geopolitical situations of countries may adversely impact operations of the Company. There could be possibilities of war, terror attacks, political unrest and government default in some of the geographies in which the Company has operations. Recently, the Company witnessed situations like war in IRAN -USA-Israel, the middle-east, US trade policy changes and supply chain disruptions. These may have an adverse impact on the operations of the Company. It may impact the Companys growth, delay its cash inflows, increase procurement costs and increase foreign currency volatility. The Company manages risk through continuous evaluation of economic developments in such geographies, securing receivables through LCs / Bank Guarantee, hedging foreign currencies and entering into contracts with price adjustment. Overall, the Company keeps the exposure to such geographies to a minimum level. Company has taken up comprehensive credit insurance policy to mitigate risks around financial conditions of export customers.

To mitigate disruption in supply chain, Company is planning production well in advance to compensate delay in logistic, maintaininghigherinventoryatwarehouseofcountryhaving disrupted supply chain. Logistic team is putting efforts on midterm contract with shipping line to keep cost under cap.

Sales team is also working with Customers to fix contract on FOB Plus Actual Freight.

Compliance Risks:

The Company operates in different geographies, each having its own regulatory landscape, which continuously evolves, changes, and undergoes increased scrutiny from the regulators. Any non-compliance with regulations or scrutiny process can result in dilution of financial position or jeopardise Companys reputation.

Regulatory risks are managed through a strong governance mechanism based on the philosophy of ‘zero tolerance to non-compliance. This is implemented through: cyber

• Assessment of regulatory and compliance requirements on regular basis.

• Robust internal controls.

Environmental, Social and Governance Risks:

Commercial activities may cause adverse impact on the environment and thereby impact society at large. Climate-related events such as weather pattern changes, rising sea water levels may cause disruption in manufacturing and supply chain cycles, resulting in financial losses. To sustain growth in a continuously evolving global ecosystem with unpredicted externalities, it is important to implement ESG measures. Failure to limit our environmental impact may have negative consequences on our reputation, operations and long-term sustainability of our Companys performance. Sustainable value creation can no longer be agnostic of ESG risks, which has now evolved as a new yardstick in addition toprofitabilityandcapitalefficiency returns. The Company has developed a structured ESG framework and strategy, based on international standards. The Company has designed a multi-fold strategy, with four core ESG pillars, i.e. Responsible Consumption, Responsible Practices, ResponsibleCommunicationandResponsibleSupplyChain, that will enable it to navigate its growth in a manner that maximises stakeholder value, consistently and sustainably.

Cyber Security and Data Privacy Risk

The Corporate sector continues to be targeted by cyber criminals which may cause significant operations. The Company depends upon complex and interdependent information technology systems, including internet and cloud-based systems, to support business processes. Moreover, there are dependencies on outsourced and collaborative systems, which require exchanging data and information. The size, complexity and interconnectivity of our computer systems make them potentially vulnerable to breakdown, malicious intrusion, computer viruses and other cyber-attacks. Failure to protect personal data and comply with data privacy regulations of countries in which the Company operates may attract financial penalties, intervention by regulators and reputational loss.

The Company has recognised framework, which includes Information security policy, secured IT system, robust access control and restricted administrator privilege to restrict unauthorised access. Adequate e-mails protection, multi-factorauthentications,andlaptopencryptionsarealso implemented. Independent vulnerability assessment and penetration tests (VAPT) are performed yearly to identify gaps in controlled framework and enhance effectiveness of controls.

An IT disaster recovery plan is also in place for our key applications. It aims to minimise impacts from any unanticipated events and breakdowns. The Company continuously invests in information technology to reduce risks and has also opted for significant insurance cover.

Business Continuity Risks

Potential disruption or failure of the Companys operations due to unexpected events including natural disasters, supply chain disruptions, security breaches or cyberattacks, financial crisis, regulatory changes or pandemics may lead to business continuity risks. It can have significant impacts on a companys financial performance, reputation and ability to continue operations. The Company has identified key business, operational, strategic business continuity risks and have instituted various measures including alternate sourcing strategies, carrying adequate inventories, digital interventions, periodic review BCP (Business Continuity Plan) and DRP (Disaster Recovery Plan), training on Emergency Response Plan etc. to ensure timely availability and management of operations in times of disruptions.

Trade Barriers in various Countries:

Major portion of the sales is exports in number of the Countries. Competitors having capacity to manufacture either high chrome ball or forged ball in those countries are filing applications for Anti Dumping duty against our imports in the Countries. This is hampering our volume of the Business in those countries and finally our overall volume. There is major shift in over all global scenario. Instead of Free Trade between Countries Globally now many of the Countries have started protecting their local industries. Countries like Mexico and United State of America has imposed import duty on imports our products. However, to overcome these threats Company has engaged resources to offer to its customers a solution based approach with mill internals as explained above under "Outlook and Prospectus".

We continuously defend our position with support of local Consultants. We continuously following fair price and fair margin policy on our products to avoid Ant-Dumping measures, which has helped us in Brazil and CANADA. However, many a time Local Government protect local manufacturer and we are losing our market share in those Countries.

INTERNAL CONTROL SYSTEM AND THE ADEQUACY:

The Company has a robust system of internal controls comprising authority levels and powers, supervision, checks and balances, policies and procedures. The system is reviewed and updated on an on-going basis. The Company continuously upgrades its internal control systems by taking measures such as strengthening of IT infrastructure and use of external management assurance services. The Company has in place a well-defined internal audit system whereby the internal audit is performed across locations of the

Company and the results of the audit findings are reviewed by the audit committee.

FINANCIAL PERFORMANCE REVIEW:

The financial performance of the Company as a whole (on

Consolidated basis) is as under:-

I. Consolidated Performance:

An analysis of the Consolidated performance of the Company is given below:

Physical Production:

The production achieved is as under:

Key Performance Indicators:

An analysis of the key indicators as percentage to Revenue is given below:

Particulars	2025-26	2024-25
1 Revenue from Operations	441,986.40	428,744.39
2 Cost of Materials Consumed (Including change in Inventories)	169,529.79	173,770.39
- % of revenue from operations	38.36%	40.53%
3 Employee Benefit Expense	19,861.65	18,547.87
- % of revenue from operations	4.49%	4.33%
4 Other Expenses	126,965.85	121,504.51
- % of revenue from operations	28.73%	28.34%
5 EBIDTA	174,425.79	149,259.54
- % of revenue from operations	39.46%	34.81%
6 Finance Costs	3,650.72	2,109.13
- % of revenue from operations	0.83%	0.49%
7 Depreciation and Amortisation Expense	11,269.43	10,307.39
- % of revenue from operations	2.55%	2.40%
8 Profit Befor e Tax	159,505.64	136,843.02
- % of revenue from operations	36.09%	31.92%
9 Profit After Tax (Including Other Comprehensive Income and after	1,24,723.83	1,03,829.79
Minority Interest)
- % of revenue from operations	28.22%	24.22%

II Standalone Performance

The analysis of Standalone performance of the Company is given below:

Sales Turnover:

The Comparative position of Sales Turnover achieved by the Company is as under:

Particulars	2025-26	2024-25
Sales in India (40.81%) (P.Y. 41.72%)	150,920.43	142,925.13
Sales Outside India (59.19%) (P.Y. 58.28%)	218,933.60	199,639.28
Total	369,854.03	342,564.41

Key performance indicators:

An analysis of the key indicators as percentage to Revenue is given below:

Particulars	2025-26	2024-25
1 Revenue from Operations	376,285.62	348,644.76
2 Cost of Materials Consumed(including change in inventories and purchase of stock in trade)	163,677.81	157,071.40
- % of revenue from operations	43.50%	45.05%
3 Employee Benefit Expense	13,858.26	12,999.49
- % of revenue from operations	3.68%	3.73%
4 Other Expenses	84,622.10	81,865.34
- % of revenue from operations	22.49%	23.48%
5 EBIDTA	175,582.69	144,216.19
- % of revenue from operations	46.66%	41.36%
6 Finance Costs	3,643.49	2,101.66
- % of revenue from operations	0.97%	0.60%
7 Depreciation and Amortisation Expense	11,039.09	10,068.21
- % of revenue from operations	2.93%	2.89%
8 Profit Before Tax	160,900.11	132,046.32
- % of revenue from operations	42.76%	37.87%
9 Profit After (Including Other Comprehensive Income)	128,592.53	102,093.51
- % of revenue from operations	34.17%	29.28%

DETAILS OF SIGNIFICANT CHANGES IN THE KEY FINANCIAL RATIOS & RETURN ON NET WORTH

Pursuant to amendment made in Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 details of significant changes (i.e. change of 25% or more as compared to the immediately previous Financial Year) in Key

Financial Ratios and any changes in Return on Net Worth of the Company including explanations therefor are given below:

Standalone

Sr. No.	Particulars	2025-26	2024-25	Change	Change in %	Explanations
1	Debtors Turnover (Days)	182.94	145.10	37.84	26.1%	Due to increase in Debtors Outstanding
2	Inventory Turnover (Days)	64.64	69.81	(5.17)	(7.4%)
3	Interest Coverage Ratio	36.15	58.52	(22.37)	(38.20)	Due to Increase in Finance Cost
4	Current Ratio	30.42	9.15	21.27	232.49%	Due to repayment of borrowings
5	Debt Equity Ratio	-	0.07	(0.07)	(100.0%)	Due to repayment of borrowings
6	Operating Profit Margin (%)	32.55%	25.34%	0.07	28.5%	Due to increase in profit
7	Net Profit Margin (%)	34.53%	29.82%	0.05	15.8%
8	Return on Net worth (%)	17.55%	15.52%	0.02	13.1%

Consolidated

Sr. No.	Particulars	2025-26	2024-25	Change	Change in %	Explanations
1	Debtors Turnover (Days)	97.94	71.39	26.55	37.4%	Due to increase in Debtors Outstanding
2	Inventory Turnover (Days)	95.24	95.92	(0.68)	(0.7%)
3	Interest Coverage Ratio	32.92	66.48	(33.56)	(50.5%)	Due to increase in Finance Cost
4	Current Ratio	19.09	8.17	10.92	133.7%	Due to repayment of borrowings
5	Debt Equity Ratio	-	0.07	(0.07)	(100.0%)	Due to repayment of borrowings
6	Operating Profit Margin (%)	30.47%	26.28%	0.04	16.0%
7	Net Profit Margin (%)	29.16%	25.10%	0.04	16.2%
8	Return on Networth (%)	16.99%	15.62%	0.01	8.8%