Coromandel Engineering Company Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Indian Construction Sector - Overview and Way Forward

Indias construction sector, valued at approximately USD 1.4 trillion, is set to maintain strong momentum, fuelled by steady economic growth and sustained infrastructure investments. With real GDP projected to grow at 6.4% in FY 2026-27 and 6.7% in FY 2027-28, the sector will benefit from rising real incomes, moderate inflation, and an improving labour market, all of which support robust demand for housing, commercial spaces, and infrastructure.

Fiscal consolidation, with the budget deficit expected to narrow to 4.0 %- 4.2% of GDP in FY 2026-27, combined with improved tax administration and streamlined regulatory processes, will strengthen investor confidence in the domestic market.

The sectors way forward lies in leveraging opportunities in urban and semi-urban housing, expansion of logistics and the adoption of green and sustainable building practices. Policy reforms in land management, faster project approvals, and enhanced execution capabilities will be critical to unlocking its next phase of growth within the Indian market.

Industry Overview

The construction industry is a cornerstone of Indias development agenda, providing the physical framework for economic activity and social progress. It spans a wide spectrum of activities, from large-scale infrastructure such as highways, ports, and industrial corridors to residential, commercial, and institutional buildings. With urbanisation accelerating and cities expanding, the demand for housing, public utilities, and transport connectivity continues to grow steadily.

The industry also benefits from the increasing participation of private developers in industrial and warehousing facilities, educational and healthcare infrastructure, and renewable energy projects. At the same time, competition remains high, especially in the institutional and government contracting space, where pricing pressures can be significant. The sector faces operational challenges such as raw material cost swings, skilled manpower gaps, and the need for faster adoption of mechanisation to meet tight deadlines.

Despite these challenges, the medium- to longterm outlook is favourable, with infrastructure development remaining a policy priority and urban expansion ensuring a steady flow of opportunities for capable and well-managed construction companies.

Company Overview - Legacy of 79 Years

Founded in 1947, Coromandel Engineering Company Limited (CECL) is one of Indias oldest and most respected construction companies, with a track record that spans more than seven decades. From its early beginnings in post-independence India to its current role in delivering complex, large- scale projects, CECL has consistently demonstrated engineering excellence, timely execution, and an unwavering commitment to quality.

Over the years, the Company has successfully executed a diverse project portfolio covering residential developments, commercial complexes, industrial plants, institutional buildings, and specialised infrastructure works. Many of these projects have become recognisable landmarks, reflecting CECLs ability to adapt designs and construction methods to client needs while maintaining the highest standards of safety and durability.

CECLs operations are strongly supported by:

• Strong project management capabilities, ensuring efficient coordination across design, procurement, and site execution.

• An experienced leadership team supported by a skilled and safety-conscious workforce.

• Integration of modern construction technologies such as mechanised equipment, prefabrication methods, and sustainable building practices.

• Long-standing client relationships, with a significant share of business coming from repeat customers in both public and private sectors.

The Companys reputation is built not only on its technical capabilities but also on its ability to foster trust — delivering projects on schedule and within budget, even in challenging operating environments. With a blend of legacy strengths and a forward-looking approach, CECL is well- positioned to capitalise on emerging opportunities in Indias rapidly evolving construction landscape.

CECLs Core Services & Offerings

CECL operates across a wide spectrum of construction and infrastructure domains, including:

Residential Flats & Joint Venture Projects

We design and develop high-quality residential flats, blending modern amenities with optimal space utilisation. Our joint venture projects bring together strategic partnerships to create premium housing solutions that align with evolving lifestyle needs.

Rural Housing Solutions

CECL provides durable and cost-effective housing tailored to rural communities, focusing on accessibility, climate resilience, and cultural relevance. Our designs aim to uplift living standards while maintaining affordability.

Urban Infrastructure Projects

From roads and drainage systems to public utilities, we deliver critical urban infrastructure that improves mobility, safety, and sustainability. These projects address the growing needs of expanding cities and contribute to long-term urban planning.

Industrial Infrastructure & Factory Spaces

We construct robust industrial units and factory spaces equipped for large-scale production and logistics. These facilities are built to comply with industry standards, ensuring operational efficiency and worker safety.

Commercial Building Structures

Our commercial projects include office complexes, retail outlets, and mixed-use developments designed for functionality and aesthetic appeal. We focus on energy efficiency and modern architectural trends to attract and retain businesses.

Machinery Rental Services

CECL offers a comprehensive fleet of construction machinery and equipment on a rental basis, ensuring timely project execution. This service supports both internal operations and external clients seeking reliable, well-maintained machinery.

With a strong project management backbone, our operations focus on delivering sustainable, customer-centric, and cost-effective solutions tailored to the specific needs of urban and rural communities.

Market & Industry Drivers

Government Initiatives

The initiatives undertaken by CECL (Coromandel Engineering Company Limited) are closely aligned with several key government programs that are shaping Indias infrastructure and urban development landscape.

• Pradhan Mantri Awas Yojana (PMAY) - expanding affordable housing

• Bharatmala & Sagarmala Projects -accelerating road and port connectivity

• Smart Cities Mission - enabling next- generation urban development

Opportunities

Several factors are acting as strong growth catalysts for CECLs operations. The ongoing trend of rapid urbanization is significantly increasing the demand for both residential and commercial spaces, providing a robust pipeline of opportunities for the construction sector. The adoption of modern technologies such as Building Information Modelling (BIM) and prefabrication techniques is also enhancing project speed, accuracy, and cost efficiency. Moreover, there is a growing emphasis on green buildings and sustainable construction practices, which aligns with CECLs commitment to environmentally responsible development. These combined factors position CECL as a forwardthinking player in Indias infrastructure and real estate growth story.

Risks and Threats

1. Raw Material Price Volatility - Fluctuations in the prices of cement, steel, and other construction materials can significantly affect project costs and profitability.

2. Labour Availability and Productivity -

Shortages of skilled and semi-skilled manpower, particularly during peak demand, may cause execution delays.

3. Regulatory and Approval Delays-Delays in obtaining statutory clearances can disrupt timelines and increase project costs.

4. Execution Delays and Cost Overruns-Site- specific challenges, design modifications, or unforeseen conditions may result in extended schedules and budget overruns.

5. Market Demand Fluctuations - Economic slowdowns or shifts in real estate demand patterns can affect the pipeline of new projects.

6. Environmental, Health and Safety (EHS) Risks

- Construction activities carry inherent safety hazards and environmental impact risks.

7. Competition and Pricing Pressure - Intense competition, especially in tender-based projects, can lead to margin compression.

Mitigation Measures

The mitigation measures outlined correspond to the specific risks identified, addressing their potential impact effectively.

1. Strategic Procurement-Entering into longterm supply contracts, maintaining a diversified supplier base, and applying value engineering to optimise material usage.

2. Workforce Development-Retaining a trained in-house team, partnering with multiple labour contractors, and investing in skill enhancement programs.

3. Proactive Compliance Management -

Maintaining strong relationships with regulatory bodies, ensuring timely submissions, and incorporating realistic approval timelines in project plans.

4. Robust Project Management-Using detailed scheduling, technology-enabled monitoring, and contingency planning to control delays and cost overruns.

5. Portfolio Diversification-Balancing exposure across residential, commercial, and industrial segments and targeting both private and public sector projects.

6. Environmental, Health and Safety Protocols

- Enforcing strict safety and environmental standards, conducting regular training, and complying with statutory norms.

7. Value-Based Differentiation-Focusing on quality execution, adherence to deadlines, and relationship-driven client engagement to secure repeat orders.

Segment or product wise performance for the financial year 2025-2026::

		(in lakhs)
Sales	GM	GM%
4250.80	87.03	20.47

Status of Order Book:

		(in lakhs)
Estimated Contract Value	Executed as on 31/03/2026	Order Book - 01/04/2026
22588	2118	20470

Internal Control & Governance

CECL maintains a robust internal control system supported by a dedicated Audit Committee that ensures:

• Compliance with statutory obligations

• Periodic review of audit reports and control mechanisms

• Timely updates on regulatory changes

Additionally, the Audit Committee ensures that the organization stays well-informed and responsive to changes in the regulatory landscape, enabling swift adaptation to new legal and compliance requirements. CECLs governance structure is built on the core principles of transparency, financial prudence, and operational efficiency. These values are deeply embedded in the companys decisionmaking processes and day-to-day operations, fostering a culture of integrity and trust.

Outlook - CECLs Strategic Direction

• With Indias construction market projected to reach an estimated $1.4 trillion by 2026, CECL is strategically positioned to harness this unprecedented growth potential. The company has laid out a clear and ambitious roadmap to expand its capabilities and market presence.

Expansion into EPC services with integrated Architecture, Structural, HVAC, Electrical & Sanitary Solutions

• Investment in BIM and Prefab technologies to improve turnaround and efficiency

• Targeting a turnover of Rs.90 Crores by March 2027

Looking ahead, CECL envisions transforming itself into a comprehensive one-stop construction solutions provider, catering to diverse client needs across the residential, commercial, and industrial sectors. By strengthening its footprint both within India and in select international markets, CECL is committed to delivering innovation, quality, and excellence at every stage of the construction lifecycle.

Discussion on financial performance with respect to operations Income from operations:

During the year, FY 2025-26 witnessed a robust expansion in the Companys revenue base, with revenue growing by 37.68% reflecting the revenue at Rs.4,308.00 lakhs. While the Company successfully strengthened its market presence and business volumes, net profit moderated to Rs.16.88 lakhs from Rs.41.49 lakhs in the previous year, leading to a contraction in Net Profit Margin from 1.33% to 0.39%.

The margin compression primarily reflects increased cost pressures associated with business growth and prevailing market conditions. The Company continues to pursue strategic initiatives aimed at enhancing operational leverage, improving cost efficiencies, and delivering sustainable long-term value to shareholders.

Summary of Financial Results:

				Rs. in lakhs
	FY 2025-26	%	FY 2024-25	%
Revenue from Operations	4308.84	100.00	3128.89	100
Materials consumed and Sub contract Expenses	3250.44	75.43	1505.20	48.11
Salaries & Other Benefits	367.89	8.53	690.56	22.07
Other Expenses	245.09	5.68	622.92	19.90
Finance Cost	308.02	7.15	299.07	9.56
Depreciation	136.82	3.21	108.99	3.48
Total Costs	4308.26	100	3,226.74	103.12

Net Profit/(Loss)

		Rs. in lakhs
	2025-26	2024-25
Total revenue	4325.14	3130.77
Profit/(Loss) before interest and tax (PBIT)	324.9	203.09
Profit/(loss) before tax (PBT)	16.88	-95.98
PBT as % of revenue	0.39%	-3.07%

Key Financial Ratios

Parameter	2025-26	2024-25	Change (%)	Comments
Debtors Turnover days	32	281	88%	Collection of receivables faster. The decrease in Debtors Turnover days by 88% is attributable to stringently enforced credit policies, a robust recovery mechanism, and faster realization of outstanding dues during FY 2025-26 as compared to the previous year
Inventory Turnover times	4	3.1	29%	The 29% increase in inventory turnover frequency indicates improved operational efficiency, optimal inventory management, and faster liquidation of stock relative to sales volume
Interest Coverage Ratio	Negative	Negative	-	Financial woes Ratio remained subdued during the year; however, focused efforts towards operational optimization & financial restructuring
Current Ratio	1.1	1	8	This improvement indicates a strengthening of the Companys shortterm liquidity position and reflects managements continued focus on maintaining adequate working capital to meet operational and financial obligations. A current ratio above 1 demonstrates that the Companys current assets are sufficient to cover its current liabilities, thereby enhancing financial stability and operational resilience.
Debt Equity Ratio	6.3	11.19	-43.78	43.79% reduction in financial leverage, underscoring the Companys efforts towards strengthening its capital base and reducing reliance on borrowed funds. The improvement in the leverage profile, coupled with the significant growth in net worth, reflects enhanced financial stability
Operating Profit Margin (%)	3.6%	0.40%	0.40%	Operating profit margin is positive because of Cost management efforts
Net Profit Margin (%)	0.4%	1.30%	70%	Net profit margin is positive Net Profit Margin declined by 0.94%, representing a reduction of approximately 70.7% compared to the previous year. Even though revenue increased by 37.68% but Net Profit decreased by 59.31% during FY 2025-26. During FY 2025-26 decline in profitability, despite strong top-line growth, indicates pressure on operating costs and margins during the year. The management remains focused on improving operational efficiencies, optimizing cost structures, and enhancing profitability while sustaining revenue growth.

Net Worth

The Companys net worth witnessed a robust and transformative growth during FY 2025-26, increasing from Rs.625.17 lakhs as at 31^st March 2025 to Rs.1,330.80 lakhs as at 31^st March 2026. Companys net worth recorded an impressive 112.87% significant accretion in Networth. This substantial accretion to shareholders funds reflects the Companys enhanced financial position, improved value creation initiatives, and continued focus on strengthening its capital base. It indicates managements commitment to sustainable growth, operational efficiency, and long-term wealth creation for all stakeholders.

Human Resources

The company believes that human capital is the key contributor for business growth and competitiveness. This includes not only the employees of the Company, but the skilled labour engaged at project sites, through sub-contracting.

During the year, the Company achieved higher turnover with an employee strength of 40 as on year-end, comprising 40 permanent employees and no non-permanent employees, compared to 2 employees in the previous year. The Company retained its skilled workforce and effectively redeployed them to meet the requirements of orders under execution and projects in the pipeline.

	FOR & ON BEHALF OF THE BOARD OF DIRECTORS
Place: Chennai	G V MANIMARAN
Date: 12th August, 2026	CHAIRMAN & MANAGING DIRECTOR
	DIN: 09707546