Desco Infratech Ltd Management Discussions

The Management Discussion and Analysis provides an overview of the economic and industry environment in which Desco Infratech Limited operates, together with managements perspective on the key trends, opportunities, and factors influencing the Companys business. It aims to provide stakeholders with a balanced assessment of the external environment and its implications for the Companys operations and long-term growth.

Global Economic Overview

The global economy demonstrated resilience during FY 2025–26 despite a complex and evolving macroeconomic environment. Economic activity was influenced by moderating inflation, changing monetary policies, geopolitical tensions, supply chain realignments, and fluctuating commodity prices. While growth remained uneven across regions, continued investment in infrastructure, energy security, and industrial development provided support to global economic activity.

Advanced economies witnessed gradual stabilization as inflationary pressures eased and central banks adopted a more measured approach to interest rates. At the same time, several emerging economies continued to benefit from improving domestic demand, infrastructure investment, and expanding manufacturing activity, contributing to overall global growth.

The worldwide transition towards cleaner energy remained a defining trend during the year. Governments and businesses continued to invest in renewable energy, natural gas infrastructure, biofuels, power transmission networks, and energy-efficient technologies to strengthen energy security and accelerate decarbonization. These developments created sustained opportunities across the engineering, procurement, construction (EPC), and utility infrastructure sectors.

Global investments in transportation, urban infrastructure, digital connectivity, and utility modernization also continued to support demand for integrated infrastructure solutions. Increasing emphasis on resilient infrastructure, sustainable development, and technological advancement is expected to remain a key driver of long-term capital investment across developed and emerging markets.

Although geopolitical uncertainties and global economic volatility continue to present challenges, the long-term outlook for infrastructure development remains positive. Growing investments in energy transition, utility expansion, and sustainable infrastructure are expected to create significant opportunities for companies operating across diversified infrastructure and engineering segments.

Indian Economic Overview

India continued to demonstrate strong economic resilience during FY 2025–26, supported by robust domestic demand, sustained public investment, expanding manufacturing activity, and a stable financial system. The countrys economic momentum was underpinned by structural reforms, policy continuity, and increasing private sector participation across key sectors of the economy.

Infrastructure development remained central to Indias growth strategy. Continued investments in roads, railways, airports, urban infrastructure, water supply, energy networks, and industrial corridors are strengthening the countrys productive capacity while generating significant opportunities for engineering and infrastructure companies.

The Governments focus on creating high-quality infrastructure continues to stimulate economic activity and enhance long-term competitiveness.

Manufacturing and industrial activity also witnessed steady progress, supported by initiatives such as Make in India, the Production Linked Incentive (PLI) Scheme, and the continued expansion of industrial and logistics infrastructure. These initiatives are encouraging domestic production, attracting investments, and strengthening Indias position as a global manufacturing hub.

Indias energy landscape is undergoing a significant transformation, driven by rising urbanisation, industrialization, and increasing energy consumption. Continued investments in natural gas infrastructure, renewable energy, power transmission and distribution, bioenergy, and water infrastructure are accelerating the development of a more diversified, efficient, and sustainable infrastructure ecosystem.

The countrys strong demographic profile, rapid urban expansion, growing middle-income population, and ongoing digital transformation continue to support long-term economic growth. Coupled with a stable policy environment and sustained capital expenditure, these structural drivers are expected to create favorable conditions for infrastructure development and provide long-term opportunities across the engineering, utilities, and energy sectors.

SEGMENT-WISE INDUSTRY ANALYSIS

Oil and Gas Infrastructure Industry

Indias oil and gas infrastructure sector continues to play a critical role in ensuring energy security and supporting the countrys growing industrial and urban energy requirements. Rising natural gas consumption, increasing industrial demand, and the expansion of gas-based infrastructure have accelerated investments across pipeline networks, distribution systems, terminals, and associated utility infrastructure.

The Government continues to promote natural gas as a transition fuel through the expansion of pipeline connectivity, development of gas distribution networks, and measures aimed at increasing the share of natural gas in Indias energy mix. These initiatives are creating sustained opportunities for engineering, construction, and infrastructure development across the oil and gas value chain.

Looking ahead, continued policy support, infrastructure investment, and rising demand for cleaner fuels are expected to support the long-term growth of the sector.

City Gas Distribution (CGD) Industry

The City Gas Distribution (CGD) industry has emerged as one of the fastest-growing segments within Indias energy sector. Expansion of authorized Geographical Areas (GAs), increasing household penetration, growing industrial adoption of natural gas, and rising demand for cleaner fuels continue to drive the development of CGD infrastructure.

The expansion of pipeline networks, domestic PNG connections, commercial and industrial gas supply, and CNG infrastructure is expected to remain a key focus area as India advances towards a more gas-based economy. Supportive regulatory policies and continued investments by authorized CGD entities are expected to sustain long-term growth across the sector. With increasing urbanisation and a growing emphasis on cleaner energy solutions, the CGD industry is well positioned to play a significant role in Indias evolving energy landscape.

Power Transmission and Distribution Industry

Indias power transmission and distribution sector continues to expand in response to increasing electricity demand, renewable energy integration, urbanisation, and industrial development. Continuous investments in transmission networks, distribution infrastructure, substations, and grid modernization remain essential to ensuring reliable and efficient power supply across the country.

Government programmes aimed at strengthening power infrastructure, improving network efficiency, reducing transmission losses, and enhancing last-mile connectivity continue to support sectoral growth. The increasing adoption of smart grid technologies and digital monitoring systems is also contributing to improved operational efficiency and network reliability.

Renewable Energy Industry

India continues to strengthen its position as one of the worlds leading renewable energy markets. Strong policy support, increasing investments, declining technology costs, and ambitious national capacity targets continue to drive the expansion of solar, wind, hybrid, and other renewable energy projects.

The growing integration of renewable energy into the national power system has increased the need for supporting infrastructure, including transmission networks, substations, electrical systems, and utility infrastructure. As the country progresses towards its long-term energy transition objectives, investments across the renewable energy value chain are expected to remain robust.

The sector is expected to benefit from sustained government support, technological advancement, and increasing participation from both public and private sector investors.

Compressed Bio Gas (CBG) Industry

Compressed Bio Gas (CBG) is gaining strategic importance within Indias clean energy ecosystem as the country advances towards greater energy security, waste-to-wealth initiatives, and lower carbon emissions. The sector supports the productive utilization of agricultural residues, organic waste, and other biodegradable feedstocks to produce renewable fuel.

Government initiatives promoting biofuels, circular economy practices, and sustainable waste management continue to encourage investments across the CBG value chain. A landmark policy development for FY2025–26 is the implementation of the mandatory CBG Blending Obligation (CBO) for the City Gas Distribution sector.

The mandatory blending roadmap provides for:

Financial Year	Mandatory Blending
FY2025\u201326	1%
FY2026\u201327	3%
FY2027\u201328	4%
FY2028\u201329 onwards	5%

With growing policy support and increasing demand for renewable fuels, the CBG industry is expected to witness sustained long-term growth.

Water Infrastructure Industry

Water infrastructure continues to remain a national priority as India addresses rising urbanisation, population growth, industrial expansion, and increasing demand for reliable water supply systems. Investments in drinking water networks, pipeline infrastructure, distribution systems, wastewater management, and irrigation projects continue to support the development of sustainable water infrastructure.

Government initiatives aimed at improving water accessibility, strengthening urban infrastructure, and enhancing water resource management are driving significant investments across the sector. Modernization of water distribution networks and expansion of utility infrastructure are expected to remain key focus areas in the coming years.

Supported by sustained public investment and increasing infrastructure requirements, the water infrastructure sector is expected to offer long-term opportunities across planning, engineering, construction, and utility development.

INDUSTRY OUTLOOK

Oil and Gas Infrastructure

Indias oil and gas infrastructure sector is expected to witness sustained growth, supported by increasing natural gas consumption, expansion of pipeline networks, and continued investments in energy infrastructure. Government initiatives aimed at strengthening energy security and promoting cleaner fuels are expected to drive long-term demand for engineering and infrastructure services across the oil and gas value chain.

City Gas Distribution (CGD)

The CGD industry is expected to maintain strong growth, driven by the expansion of Geographical Areas (GAs), increasing adoption of PNG and CNG, and continued policy support for cleaner fuels. Rising urbanisation, industrial demand, and network expansion are expected to create sustained opportunities for the sector over the long term.

Compressed Bio Gas (CBG)

The CBG industry is poised for significant growth as India advances its clean energy and circular economy objectives. Policy support, increasing utilization of agricultural and organic waste, and growing demand for renewable fuels are expected to strengthen investment across the CBG ecosystem in the coming years.

Renewable Energy

Indias renewable energy sector is expected to remain one of the fastest-growing segments of the infrastructure industry. Continued investments in solar, wind, hybrid, and emerging clean energy technologies, supported by favorable policy initiatives, are expected to accelerate the countrys transition towards a sustainable and low-carbon energy future.

Power Transmission and Distribution

The power transmission and distribution sector is expected to benefit from rising electricity demand, renewable energy integration, and continued investment in grid modernization. Expansion of transmission networks, distribution infrastructure, and smart grid technologies is likely to support long-term sector growth.

Water Infrastructure

The water infrastructure sector is expected to witness sustained investment, driven by increasing urbanisation, rising water demand, and continued government focus on improving water supply and distribution systems. Modernization of water infrastructure and expansion of utility networks are expected to create long-term opportunities across the sector.

Outlook at a Glance

Industry	Outlook
Oil and Gas Infrastructure	Positive
City Gas Distribution	Strong Growth
Compressed Bio Gas	High Growth Potential
Renewable Energy	High Growth
Power Transmission and Distribution	Positive
Water Infrastructure	Positive

DESCOS OUTLOOK AND GROWTH ROADMAP

Indias infrastructure sector is entering a new phase of growth, driven by sustained public investment, increasing energy demand, rapid urbanization, and the countrys transition towards cleaner sources of energy. These structural trends are expected to create significant long-term opportunities across energy, utilities, and sustainable infrastructure. Desco remains focused on building a resilient and future-ready business through disciplined execution, prudent capital allocation, and continuous capability enhancement. The Company believes that its diversified infrastructure platform and expanding execution capabilities provide a strong foundation to participate in the next phase of Indias infrastructure development.

Scaling High-Growth Infrastructure Segments

The Company will continue to strengthen its presence across high-growth infrastructure sectors by expanding its participation in clean energy, power infrastructure, and utility projects. This balanced approach is expected to diversify revenue streams while enhancing business resilience over the long term.

Strengthening Geographic Presence

Desco remains focused on expanding its operational footprint across high-potential markets in India while leveraging its presence in the United Arab Emirates to explore opportunities across the GCC region. This approach is expected to support long-term business expansion and broaden the Companys market reach.

Driving Operational Excellence

The Company will continue to strengthen its execution capabilities through process improvements, technology adoption, disciplined project management, and efficient resource utilization. These initiatives are aimed at improving operational efficiency, supporting sustainable profitability, and reinforcing long-term competitiveness.

Maintaining Financial Discipline

Desco remains committed to disciplined capital allocation, balanced financial management, and prudent investment decisions. The Company will continue to focus on maintaining a healthy financial position while supporting long-term growth opportunities and creating sustainable value for its stakeholders.

Vision 2030

Guided by a clear long-term strategy and a commitment to responsible growth, Desco aspires to evolve into a leading diversified infrastructure and clean energy Company with a strong presence across India and selected international markets. By strengthening its core capabilities, expanding into future-oriented infrastructure segments, and maintaining operational excellence, the Company remains committed to its long-term aspiration of becoming a 1,000 crore enterprise by FY2030, while creating enduring value for its shareholders, customers, employees, and society.