Artson Ltd Management Discussions

FORWARD-LOOKING STATEMENTS

The MD&A contains forward-looking statements based on current beliefs, assumptions, expectations and projections of the Management of Artson Limited. These statements, including projections of revenue, profitability, market opportunities and strategic initiatives, are based on information available as of the date of this report.

By their nature, forward-looking statements involve risks, uncertainties and assumptions. Actual results, performance, achievements may differ materially from those expressed or implied including due to changes in economic, regulatory, competitive, geopolitical or market conditions, commodity and labour cost inflation, execution risks, changes in customer demand; supply chain disruptions; and other factors beyond the Companys control.

The Company undertakes no obligation to publicly update, revise, or publicly amend any forward-looking statements to reflect subsequent events, new information, or future developments, except as may be required by applicable laws and regulations.

A LETTER TO OUR SHAREHOLDERS

"The ability to sleep soundly at night is a benefit that does not show up on anyones financial statement—but its more valuable than the cash in the bank."
— Warren Buffett

Fiscal year 2025-26 was a year of deliberate restructuring, honest reckoning, and strategic repositioning. We settled our past, rebuilt our factories, and set the foundations for a business built on repetitive, scalable manufacturing rather than bespoke, project-dependent engineering.

Our revenue grew by 44% to 163.58 crore. Our loss before tax was 16.19 crore. These numbers sit side by side deliberately. The loss reflects two things: the cost of settling legacy projects carried forward from our pre-2023 operations, and the investment we made in emptying our factories to rebuild them.

This year, we ask for your patience. The patient capital of Artsons shareholders—and the steadfast support of our promoter, Tata Projects—has allowed us to invest in the right capabilities at the right time. That investment is about to bear fruit.

THE WORLD WE SEE: MACRO BACKDROP AND SECTORAL DRIVERS

India is moving at a pace that confounds sceptics. Our nominal GDP stands at $4.15 trillion (4th globally). Our PPP GDP exceeds $18.9 trillion (3rd globally). More importantly, real capital expenditure—not consumption—is driving growth. The Government of India is investing in infrastructure, manufacturing, clean energy, and maritime development with unprecedented vigour.

The fiscal year 2025-26 saw the announcement of the ?69,725-crore Maritime Comprehensive Package, the ?25,000-crore Maritime Development Fund, and sustained commitments to the National Infrastructure Pipeline, PM GatiShakti, and renewable energy targets. These are not aspirational statements. They are commitments backed by budgeted funds and legislative action.

For companies like Artson, this creates a three-decade opportunity—provided we are positioned, qualified, and ready.

SECTOR-BY-SECTOR ANALYSIS

1. Manufacturing & Process Equipment: Green Hydrogen, Steel, Refining, and Specialized Vessels

Market Opportunity: Indias National Green Hydrogen Mission targets 5 MMT of green hydrogen production annually by 2030. The estimated total available market for electrolyzers and associated equipment is ?50,000+ crores. Cryogenic and non-cryogenic storage vessels represent a ?3,000-5,000 crore subset of this market.

Our Position: Our Nashik facility, with ASME U Stamp and CCOE/PESO certifications, is one of only 12 approved vendors in India for cryogenic vessel manufacturing. We can process plates exceeding 100 mm thickness and handle exotic metallurgy that most Indian fabricators cannot. We are actively pursuing electrolyzer and storage vessel orders.

Growth drivers in this space include:

• Expansion of Indias steel sector: Approximately 10 mega-scale integrated steel plants under development or expansion, creating an estimated ?200-300 crore opportunity from blast furnace components, hot stove modules, and buffer vessels.
• Refining capacity growth: National refining capacity expanding from 258 MMT to 309 MMT by 2028-30, creating an estimated ?500+ crore opportunity for pressure vessels, storage equipment, and process vessel supply.
• Pumped Storage Hydro (PSH) Projects: India targeting 50-70 GW of PSH capacity. Nashiks capability for large-diameter, high-thickness penstock piping represents an estimated ?1,000+ crore market opportunity over the next 5 years.

Our strategy: Move from project-specific orders to master-supplier status with key engineering houses and multinational equipment manufacturers seeking India footprints. We are qualifying for their vendor programmes and positioning Nashik as a preferred partner for complex, high-margin fabrication work.

2. Structural Fabrication: Data Centers, Airports, Infrastructure, and Industrial Projects

Market Opportunity: Indias data centre buildout is accelerating (estimated 10-15 GW of capacity needed by 2028). The organized sectors market for structural fabrication is estimated at ?8,000-10,000 crores annually, growing at 15-18% CAGR. Yet organized competitors represent less than 20% of this fragmented market.

Our Position: Parlis multimodal facility has scaled to 1,000 MT/month throughput. In FY 2025-26, we executed complex fabrication for Air India MRO, Agratas, AMNS Odisha, and Noida International Airport. Our reputation for managing intricate site fabrication and erection work has opened doors with Tier-1 customers.

Growth drivers:

• Data centre expansion: Amazon, Google, Microsoft, and domestic players investing ?50,000+ crores in data centre infrastructure. Estimated ?3,000-5,000 crore opportunity for structural fabrication.
• Airport modernization: Terminal expansions and ground infrastructure at 50+ airports. Estimated ?2,000+ crore market for heavy structural work.
• Industrial and logistics parks: 500+ million sq. ft. of industrial space planned. Heavy structural fabrication demand estimated at ?4,000+ crores.

Our strategy: Consolidate Parlis position as a preferred vendor for Tier-1 EPC contractors. Expand capacity through selective facility enhancements. Explore selective capacity additions at new geographic locations.

3. Shipbuilding & Maritime: Urban Mobility, Defence, and Commercial Vessels

Market Opportunity: India currently ranks 16th globally in shipbuilding (0.06% of global merchant output). Government initiatives target top 10 by 2030 and top 5 by 2047. The total addressable market for shipbuilding and ship repair is projected to exceed ?20 lakh crores by 2047. Near-term opportunity (3-5 years) is estimated at ?5,000-7,000 crores.

Key near-term segments:

• Urban Mobility and Metro Systems: 15-20 Water Metro projects planned across coastal and riverine cities. Each requires 20-50 ferries and support vessels. Estimated market: ?1,500-2,000 crores.
• River Cruise and Tourism Vessels: Rapidly growing market estimated at ?400-600 crores.
• Defence and Coast Guard: Ongoing procurement estimated at ?2,000-3,000 crores over 5 years.
• Commercial Vessels: Multi-purpose vessels, bulk carriers, tankers with estimated market of ?1,000+ crores.

Our Position: We operate at multiple strategic locations: GRSE (Kolkata) as a subcontractor primarily for defence vessel fabrication; shipyard at Kochi through our joint venture with Malabar Cements will commence operations later this year; Konkan Barges (Alibaug) for floating dry dock and barge fabrication; Parli for block prefabrication and Nashik for specialized components for MDL/Naval dockyard. Through ECHT Marine, we access design and market reach in small commercial and recreational craft and also tap into their marketing expertise.

4. Container Fabrication: The Localization Imperative

Our strategy: Position Artson as a quality conscious & trusted partner for the niche segment of small-medium vessels, especially in the green and hybrid segment. Be a part of the solution for Indias urban mobility challenge through Water Metros, River Cruises, Ferries. Develop repeat business with defence and coast guard. Pursue recreational and entertainment vessel co-design and launch trusted B2C products. Develop affordable green fishing boats in partnership with state governments. Leverage track record of the 3000+ Ton, 130m ? 31m Floating dry dock construction at highly competitive pricing and tight schedule to target local and global market for repeat orders. Secure yard access at additional locations. Ensure profitability through efficient, scalable execution and leverage government assistance schemes to the maximum extent possible.

Container Fabrication: The Localization Imperative

Market Opportunity & Current State: India currently consumes approximately 600,000-700,000 TEUs (twenty-foot equivalent units) of shipping containers annually. Current localized production capacity is negligible estimated at less than 50,000 containers per annum. The gap is filled by imports from China, where sourced containers are priced at approximately USD 2,000 per TEU (roughly 165,000 at current exchange rates).

Annual Import Burden: India imports approximately 500,000-600,000 containers annually, representing an annual import bill exceeding ?2,000 crores. This exposes Indias logistics infrastructure to supply chain vulnerability and represents a significant opportunity for localized manufacturing.

Global Shipping Lines Localization Aspirations: Major global shipping lines, including Maersk and CMA CGM, have publicly stated their intention to de-risk supply chain concentration in China. Maersk has committed to sourcing 10-15% of its container fleet from non-China suppliers by 2030. For Maersk alone, this represents an order book of 200,000+ containers over 5 years. When extended across the Maersk consortium and peer shipping lines (CMA CGM, COSCO, Evergreen, and others), the potential addressable market for localized container manufacturing from global shipping lines exceeds 500,000 containers annually.

Government of Indias Localization Target: The Government of India has announced an aspiration to localize container manufacturing under Make in India and Atmanirbhar Bharat initiatives. The target is to achieve domestic manufacturing of 8 lakh (800,000) TEU containers per annum by 2030-31. This would represent a localization rate of approximately 40-45% of Indias then-projected domestic consumption and export-driven demand.

Policy Support Measures: To achieve this target, the Government of India is considering multiple policy levers:

• Mandatory sourcing requirements: Government and PSU logistics contracts to source from domestic manufacturers where capacity exists
• Capital subsidies: 20-25% subsidy on capital investments in container manufacturing capacity (under consideration, similar to PLI schemes)
• Tariff protection: 15-20% import tariff on Chinese containers to create price parity with domestic manufacturing
• GST rationalization: Reduced GST rate for domestically manufactured containers to enhance competitiveness

State-Level Competition and Incentives: Beyond national government support, individual states are competing aggressively to attract container manufacturing investments. We have identified the following state-specific incentive packages currently available:

• Maharashtra: 8-10% capital subsidy on manufacturing equipment, stamp duty waiver on land purchases, electricity subsidy (?0.50/kWh for manufacturing units) for 5 years
• Gujarat: 10-15% capital subsidy for manufacturing units in designated industrial zones, long-term land lease at concessional rates, full GST reimbursement for first 3 years
• Odisha: 15-20% capital subsidy, free land allocation in industrial zones for large manufacturing units, port-linked logistics cost subsidy (containers manufactured in Odisha get ?50/TEU subsidy for port-based logistics)
• Tamil Nadu: 12-15% capital subsidy, training incentives for workforce development (Government funds 50% of training cost), integrated logistics support through state ports

Our Position & Strategy: We are in advanced-stage discussions with Tier-1 logistics operators and global shipping lines for pilot container production.

Our Competitive Advantages:

• Strategic tie-up with group Company Tata Steel for Corten steel supply at preferential pricing and volume certainty: establishing the much needed supply chain resilience
• Technology tie-up with international partners for advanced Board specifications and fibre reinforcement, creating differentiation from Chinese competitors by replacing steel with bamboo Boards for two out of six walls
• Established outreach with Maersk and other Indian logistics aggregators actively seeking reliable domestic suppliers
• Track record of having built containerized skids through Nashik, reputation for manufacturing quality and best in class QHSE

Our strategy: Secure anchor customer contracts for meaningful container volumes. Establish dedicated container manufacturing capability. Leverage available government and state subsidies. Design one, build many. Scale up gradually from pilot to trial order to a phased ramp up that targets a meaningful participation in Indias container localization opportunity.

MANUFACTURING LICENSING AGREEMENTS

We are in advanced-stage negotiations for licensing agreements to manufacture specialized equipment categories in India—primarily high-value industrial products currently imported from Europe/North America. These agreements would provide immediate market access, established customer bases, and technology without organic R&D cycles. We expect to announce some licensing agreements within 6-9 months.

OUR STRATEGIC STRUCTURE: THREE EMPOWERED SBUs

MANUFACTURING STRATEGIC BUSINESS UNIT

Scope: Consolidated operations of Nashik (process equipment, cryogenic vessels, specialized storage) and Parli multimodal facility (structural fabrication, heavy engineering components, container manufacturing).

Business Model: High-volume, repetitive manufacturing with design-once-build-many capability. Move from bespoke, margin-variable project work to structured products.

Growth Levers:

• Scale: Expand manufacturing capacity through selective investments at existing and new geographic locations
• Scope: Increase wallet share from existing customer base through key account Management and exclusive supplier agreements with Tier-1 manufacturers
• New Products: Container manufacturing, specialized vessels, licensed equipment manufacturing

Medium-Term Outlook: We expect meaningful expansion in Nashik capacity utilization through green hydrogen and steel sector opportunities. We plan to scale Parlis throughput substantially. We will launch container manufacturing capabilities. We target sustainable operating margins through scale and operational excellence.

SHIPBUILDING STRATEGIC BUSINESS UNIT

Scope: Consolidated operations across GRSE (Kolkata), Shipyard (Kochi), Konkan Barges (Alibaug), and future yard partnerships.

Business Model: Modular vessel fabrication with block manufacturing at Parli and partner facilities, assembly at operating yards. Branded boats and marine products.

Growth Levers:

• Urban Mobility: Position as preferred supplier
• Defence & Coast Guard: Expand supply partnerships with defence shipyards
• Commercial Vessels: Small to medium Multi-purpose vessels, bulk carriers, tanker construction
• Recreational & Entertainment: Co-design and manufacture through ECHT

Medium-Term Outlook: We plan to operationalize additional yards and establish meaningful operational presence. We expect substantial contracts across multiple segments. We target operating margins reflecting modular manufacturing efficiency.

PROJECTS, TANKAGE & EPC STRATEGIC BUSINESS UNIT

Scope: Selective turnkey EPC projects and project-specific manufacturing work where we mobilize, execute, and demobilize.

Business Model: Core expertise in tankage design, fuel farm systems, and industrial storage.

Selection Criteria: Cash-flow positive execution, substantial scope within our core competence, predictable timelines.

Growth Levers:

• Aviation Infrastructure: Airport fuel farms and infrastructure expansion
• Green Hydrogen Infrastructure: Storage and supply chain infrastructure
• Sustainable Aviation Fuel & Biofuels Infrastructure
• Petrochemical & Refining EPC

Medium-Term Outlook: We expect to maintain a selective pipeline of meaningful projects. We target strong operating margins through disciplined project selection.

OUTLOOK FOR FISCAL YEAR 2026-27

Indias capital expenditure cycle remains strong, underpinned by continued investment in infrastructure, manufacturing, energy, and maritime development. We expect:

• Double digit Revenue growth comparable to FY 2025-26
• Expansion in gross margins through manufacturing scale and operating leverage
• Continued path toward profitability with meaningful operating margins
• Disciplined capital allocation focused on capacity and strategic partnerships
• Disciplined pursuit of claims in legacy projects to generate free cash and additional profitability

These assume continued Government support, absence of major external shocks, and successful execution. We remain disciplined on project selection and margin protection.

RISK MANAGEMENT AND GOVERNANCE

We manage material risk categories through structured governance: commodity and input cost volatility, execution risk, market and sectoral risk, geopolitical and supply chain risk, and working capital and financing risk. Our mitigation strategies include long-term supply agreements, disciplined project assessment, diversification across sectors, preference for domestic inputs, and robust cash flow forecasting.

ENVIRONMENTAL PROTECTION AND SUSTAINABILITY

The Company remains committed to conducting its operations in an environmentally responsible and sustainable manner. Guided by its Corporate Environment, Health, Safety and Quality (EHSQ) Policy, the Company continues to adopt an integrated approach towards achieving its environmental, health, safety, and quality objectives while ensuring compliance with all applicable statutory and regulatory requirements.

The Companys certified Management systems enable systematic monitoring and effective Management of operations in a safe, environmentally responsible, and sustainable manner. Continuous emphasis is placed on environmental compliance, pollution prevention, and fostering awareness among employees and business partners to minimize environmental impact.

During FY 26, the Company continued to promote environmental awareness and green initiatives across its project locations. As part of its commitment towards environmental conservation, approximately 200 saplings were planted across various project sites & plant during the year to enhance green cover and support ecological sustainability.

The Company also reinforced its commitment to occupational health and safety through proactive risk Management, regular safety inspections, behavioural safety initiatives, competency development programmes, and continuous monitoring of workplace hazards. These initiatives have strengthened the Companys safety culture and contributed to improved operational excellence. We are developing an ESG strategy that focuses on key areas such as emissions reduction, energy management, waste, and water management.

During the year under review, the Company achieved significant safety milestones across its projects and manufacturing facility, including 5 million safe man-hours at the GRSE Project, Kolkata; 2 million safe man-hours at the Nashik Manufacturing Plant; 1.5 million safe man-hours at the P2 Project; 1 million safe man-hours at the FDD Project; 0.5 million safe man-hours at the GIAL Project, Guwahati.

The Company recorded Zero Lost Time Injuries (LTIs) and Zero Fatalities during FY26, reaffirming its unwavering commitment to maintaining the highest standards of health, safety, and environmental performance while creating a safe and healthy workplace for all employees, contractors, and stakeholders.

	2025-26	2024-25
Gross Turnover (including Other Income)	16369.32	13301.89
Profit before Interest and Depreciation (EBIDTA)	(539.95)	1697.34
Finance Charges	827.33	977.66
Depreciation and Amortization	251.89	239.90
Total Expenditure	17988.49	12822.11
Net Profit/(Loss) Before Tax (PBT)	(1619.17)	479.78
Less: Tax expense	(530.80)	131.35
Net Profit/(Loss) After Tax (PAT)	(1088.37)	348.43
Other Comprehensive Income	2.02	-9.63
Total Comprehensive income	(1086.35)	338.80
Balance of Profit brought forward	99.16	(277.68)
Balance available for appropriation	(330.26)	99.16
Surplus/(deficit) carried to Balance Sheet	(330.26)	99.16
Total Income	16369.32	13301.89
EBITDA	(539.95)	1697.34
EBITDA as % of total Income	-3.30%	12.76%
PAT	(1088.37)	348.43
PAT as % of total Income	-6.65%	2.62%

In FY 2026, Company registered a total revenue from operation of Rs. 16,358.35 lakhs (FY 2025: Rs. 11355.34 lakhs), reflecting an increase over the previous year.

INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

The Company has an adequate and effective internal control system commensurate with the nature, size, and complexity of its operations. The internal control framework provides reasonable assurance regarding the reliability of financial reporting, safeguarding of assets, compliance with applicable laws and regulations, and adherence to established policies and procedures.

The internal control system is continuously monitored through a risk-based internal audit conducted by independent professionals. The scope of the audit is reviewed by the Audit Committee, which periodically evaluates the adequacy and effectiveness of internal controls and reviews significant audit observations, corrective actions, and the views of the Statutory Auditors on financial reporting and internal financial controls. Key observations and implementation status are also placed before the Board of Directors. The Company has documented policies and standard operating procedures covering major business processes, including procurement, contract Management, finance, treasury, payroll, human resources, fixed assets, inventory, and statutory compliance, thereby strengthening governance and operational effectiveness.

HUMAN RESOURCES & INDUSTRIAL RELATIONS

The Companys Human Resources (HR) strategy is focused on fostering a high-performance culture that encourages innovation, recognizes merit, and aligns individual aspirations with the Companys strategic objectives. In partnership with the Senior Management and the Board, the HR function drives people-centric initiatives aimed at attracting, developing, and retaining talent while strengthening organizational capabilities. The HR team continues to support the evolving business needs by enabling a skilled, engaged, and future-ready workforce that contributes to the Companys sustainable growth.

TALENT DEVELOPMENT AND EMPLOYEE ENGAGEMENT

At the organizational level, 20 training programmes were conducted, covering 159 employees and accounting for 357 training man-days. These programmes focused on key operational, technical, and safety-related areas, including Financial Acumen, Introduction to Project Management and Microsoft Project, Effective Communication Skills, OneDrive Usage and Best Practices, SAP Support, Fire and Safety Training (Agnisuraksha), Introduction to OISD117, Defensive Driving, Growth Mindset, Phishing Protection, and Behaviour-Based Safety.

In addition to technical and functional training, the Company continued to focus on employee wellbeing through 13 awareness webinars covering important health and wellness topics such as Healthy Balanced Life, Chronic Fatigue Syndrome, Obesity and Metabolism, Mental Well-being in the Workplace - Managing Anxiety and Emotions at Work, Prioritising Womens Health - Awareness, Prevention and Care, and Online Desk Yoga Sessions, among others.

Beyond these organization-wide initiatives, regular location-specific training programmes were conducted by the HSE team across various sites and facilities. These sessions were customised to address site-specific operational risks, reinforce safety practices, and promote a culture of proactive compliance and awareness.

This comprehensive and multi-tiered approach to learning, safety, and employee engagement ensured that employees across locations remained aligned with the Companys safety standards, enhanced their technical capabilities, and supported the Companys commitment towards employee wellbeing.

TALENT DIVERSITY

The Company is committed to fostering a healthy talent pool and promoting gender diversity across its workforce. The Companys human capital comprises 159 employees, including 21 women, deployed across its manufacturing units and various project sites. Approximately 49% of the workforce is below 35 years of age, reflecting a relatively young and dynamic employee base.

The Company maintains an average employee tenure of 4.6 years, with an overall average work experience of 10.38 years. The annual attrition rate during FY 2025-26 stood at 26.6%. The Company continues to strengthen its technical capabilities, with over 62.5% of its workforce comprising technically qualified professionals.