BIGBLOC Construction Ltd Management Discussions

Economy Overview

Indian Economy

The Indian economy sustained its growth momentum through FY26 and retained its position as the fastest-growing major economy in the world for a fourth consecutive year.

Real GDP is estimated to have expanded by 74% in FY26, with Gross Value Added growing 73%. Growth for FY27 is projected in the range of 6.8% to 72%, supported by a broad consumption base, a sustained investment cycle, low inflation and continued policy focus on macroeconomic stability. Medium-term potential growth has been reassessed to around 7%, reflecting steadier reform delivery and a stronger economic base.

Growth was driven mainly by domestic demand. Private Final Consumption Expenditure grew 7.0% and reached 61.5% of GDP, its highest share since 2012, aided by low inflation, stable employment, rising real incomes and the rationalisation of direct and indirect taxes. Investment held firm, with Gross Fixed Capital Formation growing 7.6% in the first half of the year and sustaining a 30% share of GDP, supported by public capital expenditure and a revival in private investment.

Sectoral performance was balanced across agriculture, industry and services. Agriculture and allied activities are estimated to have grown 3.1% in FY26, aided by a favourable monsoon and record foodgrain and horticulture output. The industrial sector, comprising manufacturing and construction, is estimated to have expanded 6.2%, with manufacturing growing 7.0% on improved capacity utilisation and the governments Production Linked Incentive schemes. Services once again led the economy, with projected growth of 9.1% and a record GVA share of 56.4%, gains being widespread across financial, real estate, professional, trade and transport services.

Inflation moderated markedly. Headline CPI inflation averaged 1.7% during April to December 2025, the lowest reading in the current series, led by disinflation in food and fuel. The Reserve Bank of India reduced the policy repo rate by a cumulative 100 basis points over the same period, to 5.25%, while supporting liquidity through cash reserve ratio cuts.

The banking sector remained well capitalised: gross non-performing assets declined to a multi-decade low of 2.2% as at September 2025 and net NPAs to 0.5%, while non-food bank credit grew 14.4% year on year in December 2025, indicating improved financial health and credit discipline.

On the external front, the current account deficit narrowed to 0.8% of GDP in the first half of FY26, supported by strong services exports and steady remittance inflows. Foreign exchange reserves crossed USD 701.4 billion, equivalent to about eleven months of import cover, and foreign direct investment of USD 64.7 billion was received between April and November 2025. Public finances stayed on the consolidation path, with the fiscal deficit expected to meet the FY26 target of 4.4% of GDP even as budgeted capital expenditure was sustained at around 3.1% of GDP.

Looking ahead, Indias medium-term prospects remain favourable, provided macroeconomic stability is preserved and structural reforms continue to stimulate private investment and job creation. The principal risks are external: the West Asia conflict during the closing months of FY26 lifted energy prices and disrupted LPG availability, and tariff actions by major trading partners, slower growth among key export destinations and volatility in capital flows remain live concerns. With healthier household, corporate and bank balance sheets, sustained public investment and steady consumption, the economy retains a reasonable margin of safety and remains on course towards its longer-term development goals.

Indian Construction Industry

Construction remained one of Indias largest employers and a direct beneficiary of the public capital expenditure cycle through FY26. The industry is estimated to have reached about USD 1.2 trillion in 2025 and is projected to grow at a compound annual growth rate of 12.1% to around USD 2.1 trillion by 2031, driven by government initiatives, infrastructure projects and rising real estate investment. Indias real estate sector is expected to reach USD 5.8 trillion by 2047, contributing 15.5% of total economic output. Real growth in construction output is estimated at about 6% a year over the medium term as transport, energy and industrial projects are progressively implemented.

Demand Scenario Across Segments

Residential Construction

Housing demand stayed firm across affordable, mid-income and premium categories. Residential work accounted for close to 45% of total construction value in 2025. Tier-2 and tier-3 cities absorbed a larger share of new launches, and completion timelines improved as approval processes were streamlined.

Commercial and Institutional Buildings

Office leasing held at record levels, led by global capability centres in Bengaluru, Hyderabad, Pune and the National Capital Region. Data centre capacity additions accelerated, with roughly uSd 70 billion of investment already committed and a further USD 90 billion announced. Underwriting for both segments increasingly turns on power, fibre and transit readiness.

Infrastructure

Transport continued to anchor public spending. Seven new high-speed rail corridors totalling about 4,000 km were announced in the FY27 Budget, alongside new dedicated freight corridors and the operationalisation of 20 national waterways over five years. Energy infrastructure is dominated by renewables, storage and the 500 GW non-fossil capacity target for 2030.

The West Asia conflict and its consequences

The outbreak of conflict in West Asia late in FY26 triggered an energy shock across Asia. Infrastructure output contracted 0.4% in March 2026, the first decline in five months, as fertiliser and refinery production fell. Construction inputs held up better than the headline number suggested: cement output grew 4.0% and steel 2.2% in March 2026, and cement accelerated to 9.4% growth by April 2026. Labour availability, however, tightened materially across western India through March and April 2026 as LPG shortages, higher fuel prices, an early Holi and state elections drew workers back to their home districts. Site mobilisation slowed and price increases proved difficult to pass through. Activity had begun to normalise by the first quarter of FY27 as workers returned and input availability improved.

Growth Drivers and Policy Framework

Government Capital Expenditure

The FY27 Union Budget raised central capital expenditure to Rs.12.2 lakh crore, an increase of 11.5% over the revised estimate for FY26 and equal to 3.1% of GDP. Effective capital expenditure, which includes grants for creating capital assets, is placed at 4.4% of GDP. States received a further Rs.1.85 lakh crore in interest- free capital expenditure loans.

Housing and Urban Development

Allocation to the Ministry of Housing and Urban Affairs rose 49.5% to Rs.85,522 crore in FY27, with the increase concentrated in PMAY-Urban and PMAY-Urban 2.0. Rural housing under PMAY- Gramin continued to receive a large allocation, at about Rs.54,800 crore on a revised basis in FY26. Both programmes specify cost-effective, low-emission walling materials, which works directly in favour of AAC.

Urbanisation and Demography

More than two-thirds of Indias incremental GDP this decade is expected to come from urban areas. A young workforce and rising middle-income households sustain demand for housing, retail, logistics and social infrastructure, while land constraints in metropolitan centres push construction upwards rather than outwards.

^ Financing and Delivery Models

A three-year public-private partnership pipeline of 852 projects worth Rs.17 lakh crore was announced in January 2026. The FY27 Budget proposed an Infrastructure Risk Guarantee Fund to help private developers absorb construction- stage risk, while REITs and InvITs continue to recycle operating assets into fresh projects.

^ Sustainability and Green Construction

Use of fly ash is mandatory for construction within a 100 km radius of thermal power plants, and several states require fly ash based products in government buildings. Red clay bricks are banned in specific jurisdictions and require environmental and pollution control clearances to operate kilns. The Energy Conservation Building Code continues to raise efficiency benchmarks, and green certification under IGBC and LEED is increasingly written into tender conditions.

^ Technology Adoption

Contractors are extending the use of Building Information Modelling, drone surveying, precast and formwork systems, and digital quality control to compress cycle times and manage labour constraints in high-rise markets.

Future Outlook and Strategic Directions

Execution Pipeline

Policy continuity, a funded capital expenditure programme and a visible project pipeline give the sector a multi-year runway. The FY27 Budget raised central capital expenditure to Rs.12.2 lakh crore, alongside a public-private partnership pipeline of 852 projects worth Rs.17 lakh crore announced in January 2026. Raw material cost volatility and skilled-labour shortages, both evident in the closing quarter of FY26, remain the constraints most likely to compress contractor margins.

Technology and Innovation

Prefabrication is moving from pilot to standard specification, with precast, modular and panelised systems increasingly written into warehousing, data centre and large residential projects to compress cycle times and reduce dependence on site labour. Digital tools, from Building Information Modelling to digital twins, are being deployed more widely to manage cost and quality. These formats favour lightweight, dimensionally accurate walling materials over conventional masonry.

Sustainability

India rose to second place globally, behind mainland China, in the U.S. Green Building Councils 2025 ranking of countries for LEED-certified space, recording more than 16 million gross square metres across 611 projects, up from third a year earlier. Warehousing and industrial manufacturing were the fastest-growing certified categories, the same segments now specifying panelised and lightweight walling. Embodied carbon in building materials is increasingly a specification criterion, which favours fly ash based products.

Risk Landscape

The principal vulnerabilities are commodity price surges, energy supply disruption of the kind seen after the West Asia conflict, tighter global liquidity, climate-related delays and state-level permitting bottlenecks. Mitigation lies in hedging key inputs, diversifying funding, and rationalising approvals through single-window and Gati Shakti systems.

(Rs.) Sources: U.S. Green Building Council and GBCI,

Top 10 Countries and Regions for LEED 2025;

PRS Legislative Research, Union Budget 2026-27 Analysis; IBEF

Conclusion

The long-term fundamentals shaping the sector continue to remain favourable. Sustained public investment in infrastructure, steady urbanisation and a young demographic profile are expected to support strong demand for housing and construction, providing a broad-based growth foundation that is not dependent on any single economic cycle. At the same time, the increasing emphasis on green building standards and low-carbon procurement is steadily accelerating the shift away from conventional building materials towards more sustainable alternatives.

The disruption witnessed during the fourth quarter of FY26, driven by an energy shock and a temporary shortage of labour, primarily affected input costs and site productivity rather than underlying demand, with conditions beginning to normalise at the start of FY27. While input cost volatility, the availability of skilled labour and the pace of regulatory approvals continue to pose challenges, the long-term outlook for manufacturers of sustainable walling materials remains positive. A robust public infrastructure pipeline, rising demand supported by green building certifications and the continued substitution of traditional red bricks with AAC blocks are expected to drive sustained growth, supported by disciplined capacity expansion, cost management and an optimised product mix.

Industry Overview

Indian AAC Market

The Indian autoclaved aerated concrete block market carried its structural shift forward through FY26. Having grown from around Rs.50 crore in 2008 to roughly Rs.4,000 crore in 2023, the market is projected to reach about Rs.10,000 crore by 2028, a compound annual growth rate of close to 20%. Installed capacity now stands at around 12 million cubic metres a year across more than 150 plants, a base that remains modest relative to demand and leaves considerable headroom for the category to expand.

The defining feature of the market is how little of the walling opportunity AAC has captured so far. Blocks account for roughly 10% of walling material volumes in India, with red bricks still close to 80%. In mature markets such as Turkey, Poland and China, AAC holds 30% to 40% of the walling mix, which frames the runway available domestically. During the year, conversion continued to broaden beyond the metros, where developer adoption in cities such as Ahmedabad, Vadodara, Mumbai and Pune already exceeds 80%, into smaller towns and, increasingly, the industrial segment supplying solar, chemical and manufacturing facilities.

FY26 sharpened the cost case for the category. As fuel and freight costs rose across the building materials sector following the West Asia conflict, the relative economics of AAC improved: because red brick is around three times denser, freight increases weigh more heavily on clay brick, while AACs lighter

weight and faster installation, one block replacing roughly nine red bricks, reduces the labour a given wall requires. That advantage told during the acute labour shortage of the fourth quarter, when the organised, less labour-intensive segment was better placed to keep sites moving.

Policy continued to support the transition. Fly ash utilisation mandates around thermal power plants, restrictions on clay brick kilns, the withdrawal of the GST exemption on red bricks in 2022, and the specification of green materials under PMAY-Urban 2.0 and PMAY-Gramin, allocated Rs.85,522 crore and Rs.54,232 crore respectively, together narrowed the cost and compliance gap against traditional materials.

Global AAC Market

The global market for autoclaved aerated concrete blocks and panels was valued at USD 19.0 billion in 2021 and is projected to reach USD 34.4 billion by 2031, a compound annual growth rate of 6.2%. The two forces behind this expansion, rising urbanisation that enlarges the building stock and tightening energy and emissions rules that change how it is built, both remain firmly in place.

Scale is the sharpest contrast with the Indian industry. Around 4,500 AAC plants operate worldwide with combined capacity of 650 million cubic metres a year, against about 150 plants and 12 million cubic metres in India, a differential that indicates the headroom still available to Indian producers. Blocks remain the dominant product form at 57% of the market by product type in 2024, ahead of panels, lintels and other formats, with residential construction the largest end use. Asia-Pacific holds more than two-fifths of global demand and is also the fastest-growing region, led by China and India, followed by Europe, the Middle East and parts of Africa and Latin America; China, Germany, the United Arab Emirates, Vietnam and Thailand are significant producers as well as consumers.

Green building certification under programmes such as LEED, BREEAM and IGBC has made AACs environmental profile commercially relevant, since its production

consumes industrial residues and its thermal, acoustic and fire performance translates into measurable operating savings over a buildings life. The industry nonetheless contends with high set-up costs, product fragility in transit, the need for trained installation labour, and uneven regional availability of fly ash, lime and aluminium powder. A further shift is under way as countries that once imported AAC build domestic capacity, strengthening local supply chains while intensifying competition for established exporters.

Prefabrication is now the clearest source of incremental demand. As modular and panelised construction enters mainstream specification for warehousing, industrial buildings and mid-rise housing, demand moves towards materials that arrive dimensionally accurate and install quickly, and reinforced AAC panels sit naturally in that supply chain. This is why the panels segment is growing faster than the market as a whole even as blocks retain the larger share, and why product development, through reinforced panels, pre-coated blocks and integrated insulation systems, has become the principal avenue for differentiation.

For companies seeking to consolidate or expand, disciplined investment in capacity, innovation and regional adaptation will remain decisive.

Company Overview

BigBloc Construction Limited ranks among Indias leading manufacturers of AAC blocks and allied building materials. The Company operates four manufacturing facilities, at Umargaon (Vapi), Kapadvanj (Ahmedabad), Wada (Palghar) and Ramosadi (Kheda, through its joint venture entity), with aggregate installed capacity of 13 lakh cubic metres per annum, serving nine cities across four states.

AAC blocks are marketed under the NXTBLOC brand. Over the years, the Company has broadened its portfolio into adjacent categories, adding AAC wall panels, marketed as ZMARTBUILD WALL through the joint venture with SCG International, and construction chemicals in the form of NXTFIX block jointing mortar and NXTPLAST ready-mix plaster, with NXTGRIP tile adhesive to follow. This positions BigBloc as an integrated supplier of walling and allied solutions rather than a single-product Company. During FY26, dealers and distributors accounted for 57% of revenue, with builders, contractors, individual customers and industrial corporates making up the balance.

The Company remains the only participant in the Indian AAC industry to generate carbon credits. Through steady emphasis on product quality, operating efficiency and customer service, BigBloc remains committed to advancing green and sustainable practices across the construction and infrastructure sectors.

FY26 Performance Overview

FY26 was a year of volume-led growth, accompanied by pressure on realisations and costs. Revenue from Operations stood at Rs.283.4 Crores, against Rs.224.6 Crores in Fy25, a growth of 26%, on sales volume of 8,26,904 cubic metres, higher by 37%. Capacity utilisation improved from 53% in the first quarter to 78% in the fourth, averaging around 65%.

EBITDA declined 40% to Rs.17.6 Crores from Rs.29.2 Crores, with margins narrowing to 6.21% from 13.00%. A significant part of the decline came from lower realisations and followed by the impact from higher operating costs, amid a 5% to 15% rise in input prices, tighter labour availability and slower panel adoption. Subsequently, with higher depreciation and finance costs on recent capacity additions, the Company reported a net loss of Rs.8.5 Crores, against a profit of Rs.3.2 Crores in FY25.

Financial Ratios

Outlook

The Company enters FY27 with improving operating conditions, following a year in which cost inflation and labour disruption weighed on profitability. Capacity utilisation is expected to rise from around 65% to between 75% and 80%, sales volume to grow by 10% to 20%, and realisations to recover as cost increases are passed on. Demand momentum has carried into FY27, with early volumes tracking around 20% above the corresponding period of the previous year.

Our newer verticals are expected to contribute more meaningfully. Commercial production has commenced at the construction chemicals facility at Umargaon, the wall panel business has secured supply orders for bullet train station projects, and the block business received a purchase order from Larson & Toubro. These verticals carry considerably higher gross margins than blocks, and their growing share should support consolidated EBITDA margins.

Planning for the next phase of capacity is under way. Land admeasuring 57,500 square metres has been acquired in Madhya Pradesh for a facility of 2,00,000 to 2,50,000 cubic metres, at an estimated Rs.75 Crores to Rs.80 Crores over the next financial year, while an expansion at the joint venture is under evaluation. With approximately 1,50,000 carbon credits also awaiting issuance, the Company expects to return to profitability in FY27.

Risk and Concerns

Risk management forms an integral part of the Companys business strategy and governance framework. While several business risks can be identified, assessed and mitigated through proactive planning and effective controls, certain external risks arising from changing macroeconomic and market conditions remain

beyond the Companys direct control. The Company has established a comprehensive risk management framework to identify, evaluate and monitor key risks, enabling informed decision-making and safeguarding the interests of all stakeholders.

Macroeconomic Risk

Demand for the Companys products tracks construction activity, which in turn tracks the wider economy. A slowdown in India, or a global disruption that transmits through energy and commodity markets, would reduce order flow and affect business performance.

Inflation and Production Cost Risk

Construction materials manufacture is energy-intensive. Modest increases in the cost of cement, lime, aluminium powder, fuel or power translate quickly into margin pressure, particularly where competitive conditions delay recovery through pricing. Continuous monitoring and control of these lines is therefore central to profitability.

Financial Risk

Movements in interest rates, foreign exchange rates and commodity prices introduce uncertainty into earnings and cash flow. Sharp shifts in any of these variables may weigh on profitability and the strength of the balance sheet.

Credit Risk

Failure by a counterparty to honour its contractual obligations would result in financial loss. Disciplined evaluation of customer credit, supported by active monitoring of receivables, protects both liquidity and the quality of the balance sheet.

Legal and Regulatory Risk

Compliance is treated as a first-order obligation. Lapses, whether deliberate or inadvertent, expose the Company to

penalties, litigation and damage to reputation. Efforts to strengthen a culture of compliance across the organisation are continuous.

Human Resource Risk

The Companys progress depends on the capability and commitment of its people. Difficulty in attracting or retaining talent, underperformance, or disruption to the workforce would impair operations. A constructive working environment and focused recruitment of skilled professionals are the primary responses.

Internal Control Systems and Their Adequacy

The Company has established a well- structured internal control framework to safeguard its assets and ensure the accurate authorisation, recording and reporting of all business transactions. The framework is supported by well-defined policies, procedures and operating guidelines, which are periodically reviewed to ensure their continued effectiveness. Regular internal audits are conducted to assess the adequacy of internal controls and identify opportunities for further improvement. The Audit Committee provides oversight of the internal audit process and reviews the effectiveness of the Companys internal control systems on a periodic basis. The Company remains committed to maintaining high standards of financial integrity, transparency and accountability across all its operations.

Environment, Health, and Safety (EHS)

Protecting the health and safety of employees while safeguarding the environment in which the Company operates remains integral to BigBlocs approach to responsible manufacturing. The Company has established

policies covering quality, health and safety that guide operational decision-making and are continually reviewed and refined in line with evolving business needs and stakeholder expectations. Employees actively contribute to the development of these policies, while regular communication, training and development programmes help strengthen awareness and reinforce a culture of safety across the organisation. Renewable energy continues to account for a growing share of the Companys power requirements, supported by a cumulative rooftop solar capacity of 3.3 MW installed across BigBloc and its subsidiaries.

As at 31 March 2026, the Companys workforce comprised 400+ employees, whose collective efforts continue to advance its EHS objectives and broader organisational progress.

Cautionary Statement

The statements contained in the Management Discussion and Analysis and other sections of this Annual Report describing the Companys objectives, projections, estimates, expectations or outlook may constitute forward-looking statements. These statements are based on assumptions and expectations of future events and are subject to various risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Factors that may impact the Companys performance include changes in economic conditions, government policies and regulations, taxation, interest rates, market conditions and other factors affecting the industries and markets in which the Company operates. The Company undertakes no obligation to update or revise any forward-looking statements except as required under applicable laws.