Chemtech Industrial Valves Ltd Management Discussions

Reporting basis

This Management Discussion and Analysis (MD&A) relates to Chemtech Industrial Valves Limited (Chemtech or the Company) for the financial year ended March 31, 2026. It should be read with the audited financial statements, the Boards

Report, the Corporate Governance Report and the notes forming part of the annual report. Amounts are in Rs. lakh unless otherwise stated. Percentage movements are calculated from the audited comparatives and may differ slightly because of rounding.

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

Industrial valves are flow-control components used to isolate, regulate and protect process systems. Demand is linked to new project capital expenditure, maintenance and replacement cycles, safety requirements, automation and the operating intensity of customer industries. Chemtechs stated addressable industries include steel and metals, power, oil and gas, fertilisers, chemicals and water-related applications. Order timing can be uneven because engineered products are frequently specification-driven and linked to customer project schedules.

Indias real GDP grew by 7.7% in FY 2025 26 on the provisional official estimate, compared with 7.1% in FY 2024 25. The domestic steel industry Chemtechs principal stated end market also expanded: crude-steel production reached 169.20 million tonnes, up 11.18%; finished-steel production reached 161.70 million tonnes, up 10.23%; and finished-steel consumption reached 164.20 million tonnes, up 7.93%. The National Steel Policy continues to envisage 300 million tonnes of crude-steel capacity and 255 million tonnes of production by 2030 31.

Power-capacity additions and planned refining and pipeline expansion broaden the longer-term opportunity set for engineered flow-control products. At the same time, global steel demand remains subdued and project-led demand is exposed to commodity prices, financing conditions, approvals and execution delays. Industry expansion therefore provides an addressable opportunity but does not by itself assure orders, revenue or margin for the Company.

2. COMPANY AND BUSINESS OVERVIEW

Chemtech is engaged in the business of manufacturing engineered industrial valves and undertaking project sales, catering to the requirements of critical process industries. The Company operates its manufacturing facility at Wada, Maharashtra, where it develops and supplies customised, heavy-duty and import-substitute valve solutions designed for diverse industrial applications.

The Companys product portfolio comprises a comprehensive range of industrial valves, including gate, butterfly, ball, globe, check, plug, goggle and line-blind valves, along with strainers and other application-specific flow-control solutions. Its products are primarily designed to meet the demanding requirements of the steel and metals industry, while also serving customers across the power, oil and gas, fertiliser, chemical and water sectors.

During the first half of FY 2025 26, the Company expanded its patented Line Blind product range and reported select supplies and orders across its business segments. These developments reflected the Companys continued focus on product development, customised engineering solutions and strengthening its presence across key industrial applications.

For FY 2025 26, the Company has presented its operating performance under the segments of Manufacturing and Project Sales. This segmental presentation provides an appropriate basis for evaluating the Companys business performance during the year. The Company continues to focus on strengthening its manufacturing capabilities, enhancing its engineered product offerings and pursuing project opportunities across its target industries.

The Company remains committed to leveraging its engineering expertise, manufacturing capabilities and industry-specific product solutions to address the evolving requirements of its customers and create sustainable value for its stakeholders.

3. OPPORTUNITIES

Domestic steel capacity additions, modernisation and maintenance activity can support demand for engineered isolation and flow-control products, subject to customer approvals and project execution.

Power, refining, pipelines, chemicals, fertilisers, water treatment and other process industries provide avenues for customer and sector diversification.

Import substitution and specialised products may create opportunities where design capability, shorter lead times, service support and application knowledge are differentiators.

Project Sales provides an additional route to participate in customer projects, although its risk, margin and working-capital profile must be monitored separately.

The Companys stated product-development programme, including Line Blind and other application-specific valves, may support portfolio expansion if technical validation and commercial adoption continue.

4. THREATS

Cyclicality and customer concentration in steel and project-linked industries can create uneven order inflow, dispatches and revenue recognition.

Competitive pricing, imports, qualification requirements and rapid changes in automation or customer specifications may affect win rates and margins.

Raw-material, energy, freight and foreign-exchange volatility may affect cost and delivery, particularly where contract escalation protections are limited.

Long approval, inspection and execution cycles can delay billing and collection; customer project deferrals can increase inventory and working-capital requirements.

Quality failures, warranty claims, safety incidents, cyber events or supply-chain disruptions could impair operations, reputation and customer relationships.

5. SEGMENT-WISE PERFORMANCE

The audited FY 2025 26 segment schedule identifies Manufacturing and Project Sales, with other income and treasury-related items shown as unallocated. Manufacturing remained the larger operating segment, accounting for 82.61% of revenue from operations; Project Sales contributed 17.39%.

These segments are aligned with our internal organizational structure and reporting practices. Both segments have performed in line with expectations in FY 2025 26, and the Company continues to focus on enhancing market share and profitability.

6. OUTLOOK

The medium-term opportunity environment is supported by planned investment in domestic steel, power, refining, pipelines, chemicals, water and other process industries. The Company has publicly described priorities to broaden its end-market presence and product portfolio. Its H1 FY 2025 26 presentations also stated an aspiration to reach Rs. 250 crore of revenue by FY 2029 30 through organic and inorganic growth.

That aspiration predates the full-year revenue and manufacturing decline and is not a forecast for this report. The near-term outcome will depend on verified order conversion, manufacturing and project execution, customer schedules, pricing and product mix, collection discipline, working-capital management, product qualification and the Companys ability to diversify without weakening returns. Management therefore presents the outlook as an opportunity framework rather than an assurance of growth.

Our product portfolio has been realigned to meet the evolving needs of the steel industry, including large-diameter and critical application valves. The Company is well-positioned to cater to this segment, with long-standing relationships with clients such as JSW Steel, Jindal Steel & Power, SAIL, ArcelorMittal Nippon Steel India, and Tata Steel.

7. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established a robust and comprehensive internal control framework commensurate with the size, scale and nature of its operations. The internal control systems are designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, safeguarding of assets, reliability of financial reporting and compliance with applicable laws, regulations and internal policies.

The Internal Audit function provides an independent and systematic review of the Companys processes, systems and controls. The observations and reports arising from the Internal Audit are periodically reviewed and discussed with the concerned professionals and the members of the Audit Committee. Appropriate corrective and preventive measures are undertaken based on the recommendations and observations, wherever considered necessary, and the implementation of such measures is monitored by the management and the Audit Committee.

The Company believes that transparency, accountability, disciplined processes and effective internal controls form the foundation for sustainable growth and long-term success. Accordingly, the Company continues to strengthen its systems and control mechanisms in line with the evolving requirements of its business and regulatory environment.

8. FINANCIAL PERFORMANCE IN RELATION TO OPERATIONAL PERFORMANCE

Particulars (Rs. lakh)	FY 2025 26	FY 2024 25
Revenue from operations	3,017.21	4,003.91
Other income	538.29	263.27
Total income	3,555.50	4,267.18
Materials consumed	1,786.34	1,838.01
Changes in inventories	(261.20)	228.23
Employee benefits	300.78	223.47
Finance cost	21.79	35.40
Depreciation / amortisation	115.65	94.57
Other expenses	822.42	923.18
Total expenses	2,785.78	3,342.86
Profit before tax	769.72	924.32
Total tax expense	268.03	222.64
Profit after tax	501.69	701.68

Revenue and PAT contracted, while other income increased to 15.14% of total income from 6.17% in the prior year and partly cushioned the decline.

9. BALANCE SHEET, LIQUIDITY AND CAPITAL RESOURCES

Metric (Rs. lakh)	Mar 31, 2026	Mar 31, 2025	Movement
Non-current assets	2,681.24	1,445.40	+85.50%
Current assets	8,894.42	8,968.99	0.83%
Inventory	511.50	242.48	+110.95%
Current trade receivables	1,050.42	1,131.82	7.19%
Cash and bank balances	6,093.87	6,487.55	6.07%
Total assets	11,575.66	10,414.39	+11.15%
Total equity	10,787.32	9,583.05	+12.57%
Current liabilities	590.00	775.26	23.90%
Total liabilities	788.34	831.34	5.17%
Net current assets	8,304.42	8,193.73	+1.35%

10. KEY FINANCIAL RATIOS AND RETURN ON NET WORTH

The key financial ratios of the Company for the Financial Year 2025 26, along with the corresponding changes vis-?-vis the previous financial year, are set out below:

Ratio	Working formula	FY26	FY25	Change	Rationale
Debtors / trade receivables turnover	Revenue from operations ? average current trade receivables	2.76?	4.65?	40.63%	This reflecting a strategic extension of credit terms to tier- one enterprise clients, successfully securing long-term orders and expanding market share.
Inventory turnover	Revenue from operations ? average inventory (same method as prior published value)	8.00?	10.88?	26.45%	This movement driven by proactive buffer-stocking of critical raw materials to protect against price volatility and ensure full readiness for FY27 order execution.
Interest coverage	EBIT (PBT + finance cost) ? finance cost	64.31?	23.07x	+178.74%	This is highlighting exceptional debt-servicing capability, superior operational earnings growth, and prudent cost control.
Current ratio	Current assets ? current liabilities	15.08?	11.57?	+30.31%	The liquidity enhancement was driven by a healthy accumulation of current assets including higher cash reserves, bank balances, and short-term liquid investments outstripping the growth in current operational liabilities.
Debt-equity	Borrowings ? total equity	0.00?	0.00?	Not meaningful	-
Operating profit margin	Operating Profit ? Net Sales	26%	17%	+49%	This is driven by enhanced scale economies, operational efficiencies, and a favorable shift toward higher-margin offerings.
Net profit margin	Net Profit ? Sales	14.11%	16.44%	14.19%
Return on Net Worth	PAT ? closing total equity (same method as prior published value)	4.65%	7.32%	36.48%	The reduction was primarily due to a significantly expanded equity base from retained earnings, positioned to fund high-yielding future growth initiatives.

11. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company firmly believes that its people are its most valuable asset and a key driver of its sustained growth and success. The commitment, collective efforts and expertise of our employees have contributed significantly to fostering a work culture built on transparency, integrity, accountability, collaboration and a continuous pursuit of excellence.

The Company encourages an environment where employees are empowered to take ownership of their responsibilities, set meaningful goals and pursue them with confidence and initiative. This culture of empowerment fosters a strong sense of responsibility and motivates employees to contribute effectively towards the achievement of organisational objectives.

Recognising that continuous learning and capability development are essential in a dynamic business environment, the Company places due emphasis on enhancing the skills and competencies of its workforce. Employees are encouraged to participate in relevant training programmes, workshops, seminars and knowledge-sharing initiatives, enabling them to broaden their expertise, remain abreast of emerging developments and strengthen their professional capabilities.

Annual Report 2025-26

The Company also promotes collaboration and the exchange of ideas across functions and locations. Such interactions provide employees with opportunities to share experiences, discuss challenges, explore innovative approaches and contribute towards process improvements and operational excellence.

The Company remains committed to the overall well-being, professional development and growth of its employees. These efforts have helped nurture a workplace characterised by mutual respect, trust and a strong sense of belonging. The Company believes that an engaged and motivated workforce will continue to be instrumental in strengthening organisational capabilities and creating sustainable value for all stakeholders.

During the year under review, industrial relations remained cordial and harmonious, reflecting the Companys continued focus on maintaining a positive, inclusive and productive work environment.

12. ACCOUNTING TREATMENT

The financial statements of the Company have been prepared in accordance with the applicable provisions of the Companies Act, 2013 and the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Companies Act, 2013, read with the relevant rules and amendments issued thereunder.

The Company has consistently applied the applicable accounting principles and policies in the preparation and presentation of its financial statements. There has been no deviation from the prescribed accounting treatment under the applicable Ind AS during the year under review.

Accordingly, no additional disclosure is required in respect of any alternative accounting treatment or departure from the applicable accounting standards.

13. CAUTIONARY STATEMENT

Statements in this MD&A describing objectives, strategies, estimates, expectations, outlook, opportunities or anticipated results may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results may differ materially because of changes in economic and market conditions, customer projects and orders, raw-material and other input costs, competition, technology, regulation, litigation, financing, foreign exchange, supply chains, execution, workforce and other risks described in this report. The Company undertakes no obligation to update such statements except as required by law. Nothing in this MD&A is an offer, assurance or guarantee of future performance.