Bharat Bijlee Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS, OPPORTUNITIES AND THREATS

Over the past year, headwinds from higher trade barriers and elevated uncertainty have been offset by tailwinds from technology-related investment, accommodative financial conditions, a weaker US dollar, and fiscal and monetary policy support. The Middle East conflict presents a significant counterforce to these tailwinds through its impact on commodity markets, inflation expectations, and financial conditions.

In the recent World Economic Outlook Report by International Monetary Fund, global growth has been projected at 3.1% in 2026 and 3.2 percent in 2027. This is slower than the growth of 3.4% in 2025 and slower than historical average (2000-19) of 3.7%. The forecast, in absence of the Middle East War, would have been revised upward, as per the Report. A severe damage to energy infrastructure in the conflict region may cause persistent increase in energy prices and higher cost push inflation pulling down the global growth down further. Is it predicted that the impact on emerging markets and developing economies would be almost twice that on advanced economies. Scaling up of defence spending prompted by a rise in geopolitical tensions could boost economic activity in the short term but also bring about inflationary pressures, weaken fiscal and external sustainability, and risk crowding out social spending. Larger fiscal deficits and increasing public debt, starting from a position where fiscal buffers are already eroded, could put pressure on long-term interest rates and, in turn, on broader financial conditions.

Indias total installed power generation capacity has surged to 525 GW as of March 31, 2026. Government of India has finalised National Electricity Plan from 2023 to 2032 for Central and State transmission systems to meet a peak demand of 458 GW by 2032 at an outlay of Rs. 9.16 lakh_Cr. expanding transmission network in the country from 4.98 lakh_ ckm (cable kilo-meters) in Nov2025 to 6.48 lakh ckm in 2032 and the transformation capacity from 1,398 GVA (Giga Volt Ampere) to 2,345 GVA. As stated in the last Annual Report as well, large renewable-energy capacity addition, industrial expansion, public infrastructure development projects such as metro lines, electrification of the railways, EV charging stations, data centers, and overall grid strengthening, continue to drive growth for the transformer industry. The Indian electric motors market is projected to maintain a decent growth rate. Stricter government regulations and ESG related compliances are driving industries to replace older, inefficient motors with high-efficiency alternatives. Increasing manufacturing automation and government initiatives to boost manufacturing output (e.g., Make in India, PLI) are increasing demand for AC motors. High-demand areas include HVAC, home appliances, automotive, mining, water and power generation.

OPERATIONAL AND FINANCIAL PERFORMANCE OF SEGMENTS

The Company operates in two business segments, viz. Power Systems and Industrial Systems.

Power Systems:

This segment comprises the design, manufacture, commissioning and marketing of power transformers; EPC projects for electrical substations including delivery, rectification, commissioning and servicing of transformers; and marketing of maintenance products.

The Projects business continues with its strategy to focus on selection of quality projects and execution excellence leveraging its capability to deliver complex, high-voltage projects with precision, speed and reliability. A few of notable projects commissioned during the year are : • a 132kV/11kV 20MVA power transformer project at an industrial facility in Nashik for one of Indias largest automobile manufacturers • a 220kV AIS switchyard project for a greenfield cement plant in Andhra Pradesh • a 220kV PSS switchyard at a solar and wind farm in Gadag, Karnataka, for a leading global renewable energy company The Transformer business continues to focus on diversifying and widening its customer base across the national geographies to complement the strong base in public electricity utilities. As intimated in the last Annual Report, your Company had embarked on capacity expansion of transformer manufacturing facility at its Airoli works to increase the current capacity of 18000 MVA to 28000 MVA at a capital outlay of about Rs. 170 Crores, to be funded out of internal accruals. Subsequently considering the conducive market conditions and its strategy, the Management has revised the plan to increase the capacity to 35000 MVA at a total outlay of 235 Crores, to be funded out of internal accruals. During the year, you Company successfully entered into manufacturing of 400kv class of transformers. Not only orders for 440kv class transformers were secured, but your Company started execution of these orders and few units were successfully commissioned as well.

The revenue of the Power Systems segment increased by 25.95% compared to the previous year. However, the segmental profit declined by 3.80% to Rs. 165.68 Crores from Rs. 172.22 Crores in the previous year.

Industrial Systems:

This segment comprises the development, marketing and manufacture of a wide range of standard and customized electric motors, magnet technology machines and the engineering and supply of drives and automation solutions.

The electrical motors business continued to face severe headwinds of intense competition. In spite of volume growth, the competitive intensity kept prices depressed, adversely affecting segmental margins. The focus continues to be on widening market reach, refining the supply chain, and on developing energy-efficient and economical products. During the year, your Company launched a new series of Smoke Extraction Motors suitable for temperature of 300?C. These motors are certified in accordance with BS EN 12101-3:2015 standard and covers both single speed and multi-speed motors. The Smoke Extraction Motors cover a range of frame sizes - from 71 to 200L, in 2, 4, 6 and 8 Pole. These motors will be part of smoke and heat control ventilation systems, which create a smoke-free layer above the floor by removing smoke, thus improving the conditions for safe escape and rescue of people, as well as protection of property.

Also, your Company supplied some of our largest MV motors, 1250kW 4 P TEFC motors, to Madhya Pradesh

Jal Nigam (MPJN), an agency that implements group water supply schemes for rural areas across the state for a project under the MPJNs mandate that focuses on providing water supply including intake wells and water treatment plants. These high-performance motors offer superior efficiency levels, and a lower-than-committed temperature rise, proving to be a great choice for this critical infrastructure project.

Though the Magnet Technology Machines (MTM) business continues to face headwinds in_ux of various imported brands, which has caused severe price competition adversely affecting profitability. Your Company continues to expand basket of Synchronous AC Servo motors manufactured in-house by the MTM business.

The revenue of the Industrial Systems segment increased by 10.83% compared to the previous year. The segmental profit declined by 6.55% to 58.78 Crores from 62.90 Crores in the previous year.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

Key Financial Ratio	FY 2025-26	FY 2024-25	Change (%)	Reason for Variance Greater than 25%
Debtors Turnover Ratio1	4.77	5.03	(5.17%)	N. A.
Inventory Turnover Ratio2	5.92	6.84	(13.45%)	N. A.
Interest Coverage Ratio3	10.28	14.36	(28.41%)	Decreased due to higher borrowing cost and decline in the performance of the Company in current financial year.
Current Ratio4	1.46	2.19	(33.33%)	Changed due to higher working capital to support increase in business coupled with inflation in commodities.
Debt Equity Ratio5	0.15	0.04	275.00%	Due to higher working capital borrowings and lower operating profits in the current financial year.
Return on Net Worth6	6.05%	7.02%	(13.85%)	N. A.
Operating Profit Margin7	7.04%	9.41%	(25.19%)	Due to decline in the performance of the Company in current financial year.
Net Profit Margin8	5.28%	7.03%	(24.85%)	N. A.

1 Turnover (net) / Average Trade Receivables

2 Turnover (net) / Average Inventory

3 (Profit before Tax + Finance Cost + Depreciation + Loss on sale of Fixed Assets (net)) / (Finance Cost + Lease payments)

4 Current Assets / Current Liabilities

5 Total debt / Shareholders equity

6 Profit After Tax / Average of (Equity Capital + Other Equity)

7 (Profit before Tax - Exceptional Income) / Turnover

8 Profit after Tax / Turnover

RISKS AND CONCERNS

The surge in global crude oil prices since the West Asia conflict, exacerbated by significant supply disruptions, have tilted risks to inflation on the upside and growth on the downside. Geopolitical tensions, volatility in global financial markets, uncertainty surrounding global trade policies and weather-related disruptions could pose headwinds to growth and inflation.

The ongoing West Asia conflict can impact global economic growth and inflation through the financial channels as well. Rising financial uncertainty may prompt investors to move towards safe-haven assets leading to higher borrowing costs, hinder private investment and lower overall economic growth. Further widening of the current account deficit and capital outflows may lead to currency depreciation adding to inflationary pressures through higher import prices. The global demand for power transformers continues to be strong, thereby driving demand for requisite raw materials exponentially. Certain critical inputs may face supply constraints for these reasons or may become costlier. Since most domestic manufacturers are expanding transformer capacity, such expanded capacity, in absence of sustained demand, may exacerbate price competition in the Industry.

INTERNAL CONTROLS AND RISK MANAGEMENT

Most internal controls of the Company have been automated through the SAP ERP system. System-driven controls ensure consistency, continuous monitoring and compliance. Internal controls have been designed to mitigate financial and operational risks and to ensure that transactions are made within the authority delegated by top management, properly recorded, and correctly reported. Internal controls across the Company are periodically reviewed and tested to assess their adequacy and effectiveness both by the Companys Internal Audit team and the Statutory Auditors. The Management and Audit Committee are apprised of the outcome of such reviews. Internal controls are further reinforced based on such reviews as required. The Company has defined a framework for Risk Management that is reviewed regularly and updated for all businesses of the Company.

OUTLOOK

Manufacturing sector has been the major driver in contributing to the resilient performance of the Indian economy in consecutive 3 financial years. On the

References:

1. Press Note on First Advance Estimates of Annual GDP 2025-26, Ministry of Statistics & Programme Implementation

2. Press Note on Second Advance Estimates of Annual GDP 2025-26, Ministry of Statistics & Programme Implementation

3. Monetary Policy Report, April 2026, Reserve Bank of India

4. Annual Report 2025, Central Electricity Authority,

5. Installed Capacity Report, March 2026, Central Electricity Authority

6. National Power Portal

7. World Economic Outlook Updates, International Monetary Fund

Consumption side, both the Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) have exhibited more than 7.0% growth rate in FY_2025-26.

Despite elevated geopolitical tensions and lingering global trade frictions, Indias macroeconomic outlook remains resilient Strong fundamentals, including sustained growth, low inflation, and fiscal consolidation, provide India the wherewithal to withstand the adverse impact of heightened global uncertainties.

The global and the local demand for power transformers continues to be strong. Demand supply situation still remains favourable to the players in the sector. Various programs by the Indian Government such as upgradation of inter-regional transmission grid, substantial addition of transmission line capacity and transformation capacity, the National Green Hydrogen Mission, power storage systems such as BESS (Battery Energy Storage System) & PSPs (Pumped Storage Plants), the Revamped Distribution Sector Schemes are driving upgradation of power network across country driving demand for power equipment.

The motors market has witnessed growth in H2FY26 better than earlier quarters and also price increases across players to pass on commodity inflation.

Your Company is continuously investing resources in enlarging its technologically advanced, superior, and sustainable product offerings and in augmenting its facilities to capitalise on emerging opportunities.

For Bharat Bijlee Limited

Nikhil J. Danani

Vice Chairman & Managing Director