Defrail Technologies Ltd Management Discussions

1. Overview.

The financial year 2025 26 was a significant milestone in the journey of Defrail Technologies Limited, marked by the successful listing of the Companys equity shares on the BSE SME Platform. The listing not only enhanced the Companys corporate profile but also strengthened its governance framework, financial flexibility, and visibility among investors, customers, and other stakeholders. The Company continued to build on its legacy of engineering excellence by manufacturing high-quality rubber and polymer components catering to diversified industries including Automotive, Railways, Industrial Engineering, Defence, Infrastructure, and Allied Sectors. With a customer-centric approach, continuous investments in technology, and a strong emphasis on quality, the Company delivered healthy operational and financial performance during the year.

The Management remains focused on creating sustainable long-term value by strengthening manufacturing capabilities, expanding into export markets, improving operational efficiencies, and developing innovative engineering solutions aligned with the evolving needs of customers.

2. Global Economic Overview.

The global economy demonstrated resilience during 2025 despite persistent geopolitical uncertainties, supply chain disruptions, inflationary pressures, and fluctuating commodity prices. While economic growth moderated across several developed economies, manufacturing activity gradually improved as global supply chains continued to stabilize.

Several multinational corporations accelerated their supply chain diversification strategies by reducing dependency on concentrated sourcing locations and exploring alternative manufacturing destinations. This structural shift continues to create long-term opportunities for manufacturing companies capable of delivering quality, reliability, and competitive pricing.

Technological advancement, automation, sustainability, and digital transformation remained key priorities across manufacturing industries worldwide. Companies investing in innovation, operational excellence, and responsible manufacturing practices are expected to remain better positioned for sustainable growth.

3. Indian Economic Overview.

India continued to remain one of the fastest-growing major economies globally, supported by robust domestic demand, government-led infrastructure development, favourable demographic trends, and continued policy support for manufacturing.

Government initiatives such as Make in India, Atmanirbhar Bharat, Production Linked Incentive (PLI) Schemes, increased capital expenditure on infrastructure, railway modernization, and defence indigenization have significantly strengthened Indias manufacturing ecosystem.

The continued focus on industrial development, logistics infrastructure, and export promotion is expected to create substantial opportunities for domestic engineering and component manufacturers over the medium to long term. Indias growing reputation as a reliable global manufacturing hub, coupled with increasing foreign investments and expanding industrial capacity, provides a favourable business environment for companies such as Defrail Technologies Limited.

4. Industry Structure & Developments.

Rubber and Polymer Industry

The Indian rubber and polymer components industry plays a vital role in supporting multiple sectors including Automotive, Railways, Industrial Machinery, Defence, Construction Equipment, Oil & Gas, and Infrastructure. Increasing industrialization, vehicle production, railway expansion, urban infrastructure development, and rising investments in manufacturing continue to drive demand for high-performance rubber engineering products.

Customers are increasingly demanding products offering higher durability, improved safety, enhanced performance, and compliance with stringent quality standards. Consequently, manufacturers are focusing on technological advancements, process automation, product innovation, and quality assurance.

Automotive Industry

India continues to rank among the worlds largest automobile markets. Growing domestic demand, increasing vehicle exports, transition towards cleaner mobility, and expanding OEM manufacturing capacities are expected to support long-term demand for precision rubber components.

As vehicle technology evolves, the need for high-performance sealing systems, hoses, rubber components, and engineered rubber solutions is expected to increase significantly.

Railway Sector

Indian Railways continues to be one of the largest infrastructure investment areas for the Government of India. Modernization of rolling stock, expansion of railway networks, implementation of dedicated freight corridors, station redevelopment, and increasing investments in passenger safety are expected to generate sustained demand for specialized railway components.

Being associated with the railway sector provides long-term growth opportunities for engineering companies capable of consistently meeting stringent quality and performance standards.

Defence Manufacturing

Indias continued emphasis on self-reliance in defence manufacturing under the Atmanirbhar Bharat initiative has created significant opportunities for domestic manufacturers supplying engineering products and components.

Increasing localization, indigenous manufacturing, and strategic procurement policies are expected to support long-term growth in this segment.

Export Market

Global supply chain realignment has created substantial opportunities for Indian manufacturers. International customers increasingly seek reliable suppliers capable of delivering quality products, competitive pricing, and timely delivery.

Recognizing this opportunity, the Company has identified exports as a strategic growth pillar and has established a long-term objective of generating 30% of its total revenue from exports by 2030.

5. Business Overview.

Defrail Technologies Limited is engaged in the manufacturing of high-quality rubber and polymer engineering products catering to diverse industrial applications.

The Companys product portfolio includes: Rubber Hoses Railway Air Brake Hoses Silicone Hoses Hydraulic Hoses

Rubber Profiles Rubber Extrusions

Precision Rubber Components

Industrial Rubber Products

The Company primarily serves customers operating in:

Automotive Railways

Defence

Industrial Engineering

Infrastructure

Petrochemical and Allied Industries

The Companys competitive advantage lies in its engineering expertise, customer-focused approach, strong quality systems, manufacturing capabilities, and experienced leadership.

6. Financial Performance.

During FY 2025 26, the Company delivered another year of healthy growth supported by improved operational efficiencies and increased business volumes.

Standalone Performance

Particulars	FY 2025 26	FY 2024 25
Revenue from Operations	80.04 Crore	61.76 Crore
Profit Before Tax	5.92 Crore	3.87 Crore
Profit After Tax	4.00 Crore	3.51 Crore

The Company recorded revenue growth of approximately 30%, while Profit Before Tax increased by over 53% compared to the previous financial year.

The financial performance reflects disciplined cost management, operational efficiency, improved production utilization, and continued customer confidence. The Company remains committed to maintaining healthy profitability while investing in future growth initiatives.

7. Operational Performance.

During the financial year under review, Defrail Technologies Limited continued to strengthen its operational capabilities by focusing on manufacturing excellence, quality enhancement, process optimisation, and customer satisfaction. The Companys emphasis on operational discipline enabled it to meet increasing customer requirements while maintaining consistent product quality and delivery performance.

The Company undertook various initiatives aimed at improving production efficiency, optimising resource utilisation, reducing process losses, and enhancing productivity across its manufacturing operations. Continuous monitoring of key operational parameters and implementation of best manufacturing practices contributed towards improved operational performance during the year.

Defrails manufacturing facility is equipped with modern machinery and testing infrastructure capable of producing a diversified range of rubber and polymer engineering products for critical applications. The Companys focus on preventive maintenance, quality assurance, and process standardisation continues to support operational reliability and customer confidence.

Quality remains one of the Companys strongest competitive differentiators. Every product is manufactured in accordance with stringent quality standards and undergoes rigorous testing before dispatch. Continuous investment in quality systems and manufacturing processes enables the Company to consistently meet customer expectations across diverse industry segments. The Company also continued strengthening its relationships with existing customers while expanding its presence across multiple sectors including Automotive, Railways, Industrial Engineering and Defence, thereby reducing dependence on any single customer or industry.

8. Opportunities & Growth Drivers.

The Management believes that the Company is well positioned to capitalise on several long-term structural growth opportunities.

Infrastructure Development

The Government of Indias continued emphasis on infrastructure development, industrial expansion, logistics, and transportation is expected to drive sustained demand for engineering products and industrial components.

Railway Modernisation

Indian Railways continues to undertake significant investments in rolling stock, safety systems, network expansion and station redevelopment. Increasing localisation of railway components presents attractive business opportunities for domestic manufacturers possessing strong engineering capabilities and quality systems.

Automotive Industry Growth

Growing vehicle production, increasing localisation by OEMs, rising demand for commercial vehicles and technological advancements in the automotive sector are expected to generate higher demand for specialised rubber components.

Defence Manufacturing

The Governments focus on indigenous defence manufacturing under the Atmanirbhar Bharat initiative continues to create long-term opportunities for Indian engineering companies supplying quality products to the defence ecosystem.

Export Opportunities

Global supply chain diversification presents one of the most significant growth opportunities for Indian manufacturers.

Defrail Technologies has identified exports as a strategic priority and intends to progressively increase its international presence through customer acquisition, product development and adherence to international quality standards.

The Companys Vision 2030 of generating 30% of total revenue from exports reflects its commitment to becoming a globally recognised engineering solutions provider.

Product Diversification

Continuous product innovation and expansion into adjacent industrial applications will enable the Company to strengthen customer relationships and diversify revenue streams.

9. Threats & Challenges.

While the long-term outlook remains positive, the Company continues to monitor various external and internal challenges that could impact business performance.

Major challenges include:

Volatility in raw material prices, particularly natural rubber, synthetic rubber and petrochemical derivatives.

Intense competition from organised and unorganised manufacturers.

Global geopolitical uncertainties affecting supply chains.

Fluctuations in foreign exchange rates.

Rising logistics and transportation costs.

Increasing customer expectations regarding quality, delivery and pricing. Availability and retention of skilled technical manpower.

The Company continuously reviews these challenges and adopts proactive strategies to minimise their impact on business operations.

10. Risk Management.

Risk management forms an integral part of the Companys overall business strategy and corporate governance framework.

The Company has established systems and processes to identify, assess, monitor and mitigate various business risks that may affect operational performance or long-term sustainability.

Major Business Risks

Raw Material Risk

Rubber and polymer-based raw materials constitute a significant portion of manufacturing costs. Price fluctuations arising from global supply-demand dynamics may impact profitability.

Mitigation

Multiple approved suppliers Long-term supplier relationships Inventory planning Cost optimisation initiatives

Customer Concentration Risk

Dependence on a limited number of customers may impact revenues. Mitigation Customer diversification Expansion into new industries Export market development

Continuous business development initiatives Market Competition

The engineering products industry remains highly competitive. Mitigation Focus on quality Product innovation

Customer service Operational efficiency

Value-added engineering solutions

Technology Risk

Rapid technological changes require continuous upgradation.

Mitigation

Investment in modern manufacturing equipment Process automation

Employee training

Continuous improvement initiatives

Regulatory Risk

The Company operates within various statutory and regulatory frameworks. Mitigation Strong compliance culture Regular legal reviews Internal monitoring systems

Independent professional advice wherever necessary Foreign Exchange Risk

Future export expansion may expose the Company to currency fluctuations. Mitigation Natural hedging Appropriate treasury management

Continuous monitoring of currency movements

11. Internal Control Systems & Their Adequacy.

The Company has established adequate internal control systems commensurate with the size, scale and complexity of its operations.

These controls are designed to ensure: Protection of Company assets

Accuracy and reliability of financial reporting Compliance with applicable laws and regulations Operational efficiency Prevention and detection of frauds and errors

Proper authorisation of business transactions

The Company has implemented standard operating procedures across key business functions including procurement, production, inventory management, finance, sales and human resources.

Internal audits are conducted periodically by independent professionals covering operational, financial and compliance areas. The observations and recommendations arising from internal audits are reviewed by the Audit Committee and corrective actions are implemented wherever necessary.

The Audit Committee regularly reviews the effectiveness of internal control systems and provides guidance for continuous strengthening of governance practices.

12. Financial Risk Management.

The Companys financial management framework focuses on maintaining liquidity, prudent capital allocation and effective working capital management.

Management continuously monitors: Cash flow position Working capital requirements Credit exposure

Inventory levels

Receivable management

Capital expenditure

The objective is to ensure financial stability while supporting future business expansion.

13. Human Resources.

The Company firmly believes that its employees are its most valuable asset and the cornerstone of its sustained growth and success. Defrail Technologies Limited is committed to fostering a workplace culture built on integrity, mutual respect, collaboration, innovation and continuous learning.

During the year, the Company continued to focus on strengthening its human capital by attracting skilled talent, enhancing employee capabilities and promoting a performance-driven work environment. Various initiatives were undertaken to improve employee engagement, technical competency and leadership development across functions.

The Company encourages continuous learning through structured training programmes, on-the-job skill enhancement and knowledge sharing. Employees are provided opportunities to upgrade their technical and managerial capabilities to meet evolving business requirements and technological advancements.

Employee health, safety and well-being remain integral to the Companys people strategy. The Company is committed to providing a safe, inclusive and respectful workplace while ensuring compliance with all applicable labour laws and statutory requirements.

Industrial relations remained cordial throughout the financial year, reflecting the strong commitment and cooperation between employees and the management.

As on 31 March 2026, the Company had around 400-500 employees.

The Management places significant emphasis on building a culture that rewards performance, encourages innovation and nurtures future leaders capable of driving the Companys long-term growth.

14. Health, Safety & Environment (HSE).

Defrail Technologies Limited recognises that sustainable business growth can only be achieved by ensuring the highest standards of health, safety and environmental responsibility.

The Company continues to implement appropriate systems, processes and operating practices aimed at providing a safe working environment for all employees, contractors and visitors.

Key focus areas include:

Compliance with applicable health and safety regulations.

Periodic safety inspections and workplace audits. Preventive maintenance of machinery and equipment.

Employee awareness programmes on workplace safety. Use of appropriate personal protective equipment (PPE). Emergency preparedness and response mechanisms.

Continuous monitoring of environmental compliance.

The Company remains committed to minimising its environmental footprint through efficient utilisation of natural resources, responsible waste management, energy conservation and continuous improvement in manufacturing practices.

Going forward, environmental sustainability will remain an integral component of the Companys growth strategy.

15. Information Technology & Digital Transformation.

Technology continues to play an increasingly important role in improving operational efficiency, business continuity and decision-making.

The Company continues to strengthen its digital capabilities across various business functions including finance, procurement, inventory management, production planning, customer servicing and management reporting.

The Company also focuses on improving data security, system reliability and business process automation to support future business growth.

As the Company expands its operations and export footprint, digital transformation initiatives will continue to receive greater attention to improve productivity, transparency and customer responsiveness.

16. ESG & Sustainability.

Defrail Technologies Limited believes that responsible business practices are fundamental to sustainable long-term value creation.

The Companys approach towards sustainability is guided by three core principles:

Environmental Responsibility

The Company continuously strives to optimise resource utilisation, minimise waste generation and improve operational efficiency through responsible manufacturing practices.

Social Responsibility

The Company remains committed to employee welfare, workplace safety, diversity, skill development and contributing positively to the communities in which it operates.

Strong Governance

The Company maintains high standards of corporate governance, ethical business conduct, transparency and regulatory compliance.

As a listed entity, Defrail Technologies is committed to continuously strengthening its ESG framework in line with evolving stakeholder expectations and regulatory developments.

17. Outlook.

The long-term outlook for Defrail Technologies Limited remains positive. Indias growing manufacturing sector, increasing investments in infrastructure, railway modernisation, industrial development and defence manufacturing are expected to create significant opportunities for engineering companies over the coming years.

In addition, global supply chain diversification continues to position India as a preferred manufacturing destination, creating attractive opportunities for export-oriented businesses.

The Company intends to leverage these opportunities by: Expanding manufacturing capabilities.

Strengthening customer relationships.

Increasing operational efficiencies.

Investing in technology and automation. Developing innovative engineering products.

Enhancing quality standards.

Expanding exports across strategic international markets.

The Company has adopted a clear Vision 2030 to generate 30% of its total revenue through exports, reflecting its commitment towards becoming a globally recognised engineering solutions provider.

While short-term market uncertainties may continue to exist, the Management remains confident that the Companys strong manufacturing capabilities, experienced leadership, customer-centric approach and disciplined execution will enable it to deliver sustainable long-term growth.

18. Key Financial Ratios & Analytical Review.

The Company continuously monitors various financial and operational parameters to assess business performance and ensure efficient utilisation of resources.

Key performance indicators during FY 2025 26 demonstrate the Companys continued focus on improving operational efficiency, profitability and capital utilisation.

Management remains committed to maintaining prudent financial discipline while investing strategically in future growth initiatives.

(Insert the table below after audit confirmation.)

Ratio	FY 2025 26	FY 2024 25
Debtors Turnover	6.17	8.04
Inventory Turnover	3.42	5.96
Interest Coverage Ratio	7.57	4.73
Current Ratio	1.82	1.04
Debt Equity Ratio	0.28	1.12
Operating Profit Margin	8.52	7.95
Net Profit Margin	5.00	5.70

19. Future Strategy.

The Companys long-term strategy is built around six key pillars:

Manufacturing Excellence

Enhancing productivity through process optimisation, quality improvement and automation.

Export Expansion

Strengthening global presence with a target of generating 30% of revenue from exports by 2030.

Product Innovation

Developing high-performance rubber and polymer engineering solutions aligned with evolving customer needs.

Customer Diversification

Expanding presence across Automotive, Railways, Defence, Industrial and emerging engineering sectors while broadening the customer base.

Operational Efficiency

Maintaining disciplined cost management, improving asset utilisation and driving continuous improvement initiatives.

Governance & Sustainability

Embedding strong corporate governance, ethical business conduct and sustainable manufacturing practices into every aspect of operations.

20. Cautionary Statement.

Statements made in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations.

Actual results may differ materially from those expressed or implied due to various factors including changes in economic conditions, government policies, market demand, raw material prices, foreign exchange fluctuations, technological developments, competitive pressures and other risks beyond the Companys control.

The Company undertakes no obligation to publicly update or revise any forward-looking statements based on subsequent developments, information or events except as required under applicable laws.