EKI Energy Services Ltd Management Discussions

MACROECONOMIC DISCUSSION

Overview of Global Economy

As per the International Monetary Funds (IMF) October 2025 World Economic Outlook, titled "Global Economy in Flux, Prospects Remain Dim", global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026. This marks an upward revision from the April 2025 projections, reflecting the resilience of the global economy to tariff-related shocks, lower-than-feared effective tariff rates, fiscal stimulus in the United States and easing financial conditions, though the outlook continues to mark a downward revision relative to pre-tariff-shock forecasts.

Advanced economies are expected to grow at around 1.5% to 1.6% in 2025 and 2026, with the United States projected at approximately 1.9% in 2025 amid continuing policy unpredictability, while the Euro Area is expected to grow modestly at around 1.2% in 2025, moderating slightly to 1.1% in 2026. Emerging market and developing economies are projected to grow just above 4%, moderating from 4.3% in 2024 to around 4.2% in 2025 and 4.0% in 2026, with Chinas growth projected at 4.8% in 2025 supported by front-loaded trade activity and resilient domestic consumption.

Global headline inflation continues its declining trajectory, supported by tighter monetary policy and easing supply- chain pressures, though it remains above target in the United States with risks tilted to the upside, while remaining subdued in most other regions. The IMF cautions that risks to the outlook remain tilted to the downside, citing prolonged trade policy uncertainty, escalating protectionism, fiscal vulnerabilities, potential financial market corrections and the risk of an abrupt repricing of technology stocks that could threaten macro-financial stability.

Subsequent to the October 2025 update, the IMFs January 2026 WEO update indicated that global growth remained resilient at an estimated 3.3% in 2025, with growth projected at 3.3% in 2026 and 3.2% in 2027 — a modest upward revision driven by stronger-than-expected activity in the United States, supported by fiscal policy, lower policy rates and the gradually waning impact of higher trade barriers.

Despite these headwinds, voluntary carbon market participants and global fund managers continue to anticipate a soft-landing scenario for the global economy, with oil demand expected to remain broadly stable and providing macroeconomic support to commodity-exporting nations. Looking ahead, the trajectory of global growth will continue to depend on countries ability to invest in infrastructure, adapt to climate imperatives and harness technological advancements — particularly artificial intelligence and digital innovation.

As we reflect on these evolving dynamics in our Annual Report, EKI Energy Services Limited remains committed to playing a pivotal role in the transition to a low-carbon, resilient global economy. Through our climate-focused solutions and innovative market mechanisms, we continue to support stakeholders in seizing opportunities for sustainable growth in an increasingly uncertain world.

An Overview of the Indian Economy: Growth, Challenges and the Road Ahead

Indias economy delivered a strong and broad-based performance in FY 2025-26, with real GDP (at constant prices, base year 2022-23) reaching ^323.12 lakh crore, against ^299.89 lakh crore in FY 2024-25, reflecting a provisional growth rate of 7.7% — an acceleration from 7.1% in the prior year (Source: MoSPI Provisional Estimates, June 5, 2026). At current prices, nominal GDP is estimated at ^346.36 lakh crore, reflecting a nominal growth of 8.9%.

The quarterly real GDP performance was consistent and above market expectations throughout the year:

Quarter	Period	Real GDP (Rs. Lakh Crore)	Growth (YoY)
Q1 FY26	Apr-Jun 2025	Rs. 47.89 lakh crore	7.8%
Q2 FY26	Jul-Sep 2025	Rs. 48.63 lakh crore	8.2%
Q3 FY26	Oct-Dec 2025	Rs. 84.54 lakh crore	7.8%
Q4 FY26	Jan-Mar 2026	Rs. 87.77 lakh crore	7.8%
Full Year FY26	Apr 2025-Mar 2026	Rs. 23.12 lakh crore	7.7%

These outcomes materially surpassed all advance projections. The Reserve Bank of India, which had revised its FY26 growth forecast upward to 7.3% (from 6.8%), projecting Q3 at 7.0% and Q4 at 6.5%, saw the actual outturn exceed its estimate by approximately 40 basis points. International agencies had similarly projected conservative figures — the IMF at 6.6%, World Bank at 6.5%, OECD at 6.7%, and S&P Global at 6.5% — all of which were surpassed by the provisional 7.7% outturn. Indias Economic Survey had projected FY26 growth in the range of 6.3% to 6.8%; the actual performance exceeded even the upper bound of this range, affirming Indias position as the worlds fastest-growing major economy for the fourth consecutive year.

Geopolitical Headwinds: Q4 FY26 and Beyond

While the full-year FY26 performance was strong, the final quarter of FY 2025-26 (January-March 2026) witnessed the beginning of a significant global geopolitical shock that would carry material consequences into FY 2026-27.

A more structurally significant geopolitical development began in the closing weeks of Q4 FY26. On February 28, 2026, the West Asia conflict escalated sharply, with Brent crude oil prices surging 10-13% to around $80-82 per barrel by early March 2026. Irans closure of the Strait of Hormuz disrupted approximately 20% of global oil supplies and significant liquefied natural gas (LNG) volumes — with China, India, Japan and South Korea accounting for 75% of oil and 59% of LNG exports through the Strait.

Indias vulnerability was particularly acute given that the West Asia region accounts for approximately 40% of Indias crude oil imports and 80% of its gas imports. Benchmark Brent crude rose nearly 60% in about a month, crossing the $117 per barrel mark. The rupee came under pressure, touching record lows of ^93.94 against the US dollar, while FPI outflows compounded macro headwinds. Indias retail inflation rose to 3.93% in May 2026 from 3.48% in April, driven largely by higher food and fuel prices, while wholesale price inflation (WPI) accelerated to 9.68% in May from 8.3% in April. State-run oil marketing companies under recovery on fuel and LPG swelled to approximately ^30,000 crore per month as global crude remained above $100 per barrel.

For most of FY26, Indias macro story was strong — growth was accelerating, inflation was at multi-year lows, the RBI was cutting rates, and the Union Budget delivered income tax relief. The last quarter, however, saw a West Asia conflict send crude above $110 per barrel, the rupee hit multi-year lows, and cumulative FPI outflows of Rs.1.17 lakh crore in March alone.

Headline retail inflation eased significantly through FY 2025-26, with CPI inflation declining to historic lows of around 0.25% in October 2025 before edging up modestly to about 0.71% by November 2025, comfortably within the RBIs tolerance band and supported by the GST rationalisation and softer food prices. The RBI accordingly lowered its FY26 CPI inflation forecast to around 2.0%, while the IMF projects average inflation of 2.8% for FY 2025-26.

Indias macroeconomic fundamentals remained robust through the year. S&P Global Ratings upgraded Indias longterm sovereign credit rating to BBB from BBB- (with the short-term rating upgraded to A-2), recognising the countrys growing fiscal and external resilience. Government capital expenditure continued its multi-year uptrend, supporting infrastructure-led growth, while the GST reform — effective from September 2025 — reduced the effective tax rate and supported consumption, helping cushion the adverse impact of the prolonged 50% U.S. tariffs on Indian exports.

The IMFs November 2025 Article IV consultation noted that Indias financial and corporate sectors remained resilient, supported by adequate capital buffers and multi-year low non-performing assets, and that fiscal consolidation had advanced while the current account deficit remained contained on the back of resilient services exports. Under the baseline assumption of prolonged U.S. tariffs, the IMF projects growth to moderate to 6.2% in FY 2026-27, with growth returning towards its medium-term potential of around 6.5% thereafter, and could be more favourable should tariff tensions be resolved.

On the climate and trade front, the European Unions Carbon Border Adjustment Mechanism (CBAM) moved from its transitional phase towards definitive implementation through 2026, continuing to pose a potential compliance- cost challenge for Indian exporters in carbon-intensive sectors such as steel, aluminium and cement, reinforcing the urgency for Indian industry to decarbonise manufacturing processes, align emission reporting standards and engage actively with domestic and international carbon markets.

Indias commitment to sustainable development remains central to its long-term economic vision, with the nation continuing to pursue its Panchamrit climate agenda — targeting 500 GW of non-fossil fuel capacity by 2030 and net-zero emissions by 2070. The entrepreneurial and innovation landscape continues to flourish, with flagship initiatives such as Startup India, Make in India and Digital India driving job creation, while structural reforms in

labour markets, exports diversification and skilling remain critical to sustaining Indias ambition of achieving high middle-income status by 2047.

In conclusion, Indias economic outlook for FY 2025-26 remains strong and resilient, underpinned by robust domestic consumption, tax reforms, easing inflation and prudent fiscal management, even as external headwinds from global trade tensions persist. By continuing to embrace inclusive growth, deepen trade integration and accelerate its climate-resilient development agenda, India remains well positioned to strengthen its position among the worlds leading economies.

2025: A YEAR OF GLOBAL CLIMATE ACTION

The year 2025 marked a pivotal phase in global climate action, culminating in COP30 — the 30th session of the UN Climate Change Conference — held in Belem, Brazil from 10 to 21 November 2025, marking the tenth anniversary of the Paris Agreement. Hosted for the first time in a tropical rainforest region, COP30 produced a "mutirao" (collective effort) decision package that advanced both the technical and political dimensions of carbon markets and carbon removals, while drawing criticism for the absence of binding language on fossil-fuel phase-out.

On Article 6 of the Paris Agreement, COP30 delivered further technical guidance on initial reports and review processes for cooperative approaches under Article 6.2, and operationalised the Paris Agreement Crediting Mechanism (PACM) under Article 6.4 by adopting standards on baselines, additionality, and — following an October 2025 decision by the PACM Supervisory Body — a finalised non-permanence and reversals standard that will shape the role of nature-based removals in carbon markets going forward.

A significant outcome was the launch of the Coalition to Grow Carbon Markets, a first-of-its-kind government-led initiative co-chaired by Kenya, Singapore and the United Kingdom (with France and Panama as founding members), aimed at building confidence in voluntary carbon markets and promoting interoperability between compliance markets. COP30 also saw the launch of the Belem Action Mechanism, the Tropical Forests Forever Initiative (which raised approximately $5.5 billion of an envisaged $25 billion target from 53 participating countries to protect tropical forests), and a renewed Forest and Land Tenure pledge of $1.8 billion, alongside additional financing of $26.8 million secured for Article 6.4 capacity building for 2026-27.

While the political outcomes drew mixed reactions, the broader trajectory of 2025 reaffirmed the centrality of carbon markets and climate finance to global decarbonisation efforts. Climate finance institutions continued to scale up commitments, voluntary carbon markets continued their "flight to quality" towards higher-integrity credits, and the growing number of bilateral Article 6 agreements and updated Nationally Determined Contributions submitted ahead of COP30 underscored the deepening institutionalisation of market-based climate mechanisms.

Though meaningful progress was achieved through 2025, the urgency for accelerated, large-scale emission reductions remains undiminished. Transitioning to renewable energy, phasing out fossil fuels, improving energy efficiency, and scaling high-integrity carbon markets remain critical to bridging the gap between current trajectories and the goals of the Paris Agreement. The time for decisive, collaborative action continues to be now.

CLIMATE ACTION IN INDIA: PROGRESS AND PROSPECTS

Indias climate action gathered significant momentum during FY 2025-26. According to the Ministry of New and Renewable Energy and the Press Information Bureau, Indias total non-fossil fuel-based installed capacity reached 283.46 GW as on 31st March 2026, comprising 274.68 GW of renewable energy capacity and 8.78 GW of nuclear capacity. Non-fossil capacity addition during FY 2025-26 stood at a record 55.29 GW — nearly double the previous years record addition of 29.52 GW — enabling India to move ahead of Brazil to rank third globally in renewable energy installed capacity, as per IRENAs Renewable Energy Statistics 2026.

Solar energy remained the principal driver of this growth, with India crossing the 150 GW cumulative installed solar capacity milestone (150.26 GW as on 31st March 2026, comprising 110.43 GW utility-scale, 25.73 GW rooftop and 14.10 GW under PM-KUSUM and off-grid projects), representing approximately 44.6 GW of solar additions during the year — an increase of over 87% compared to the previous year. Wind energy also recorded its highest-ever annual addition of 6.05 GW during FY 2025-26, taking cumulative wind capacity past 56 GW, as India continues working towards its 100 GW wind target by 2030.

In July 2025, India achieved its highest-ever renewable energy share in electricity generation, with renewables meeting 51.5% of the countrys total electricity demand. Policy interventions during the year included a reduction in GST on renewable energy devices and components from 12% to 5% (effective September 2025), and an extension of the Basic Customs Duty exemption on capital goods for lithium-ion cell manufacturing (effective February 2026 to March 2028), both aimed at accelerating cost reduction, domestic manufacturing and grid integration.

Indias electric mobility transition also continued to gather pace, with EV penetration reaching approximately 8.5% in FY 2025-26, supported by continued expansion of charging infrastructure and policy support under the National Green Hydrogen Mission, which remains on track towards its target of producing 5 million metric tonnes of green hydrogen annually by 2030, supported by 125 GW of dedicated renewable energy capacity.

On the climate adaptation front, India continued to face significant climate-related challenges, including recurrent heatwaves and intense monsoon-driven flooding and landslides across several states. The government continued to strengthen adaptation strategies under the National Action Plan on Climate Change, with continued emphasis on climate-resilient agriculture, early warning systems, urban climate resilience initiatives such as the Alliance for City Transformation, and the mobilisation of international climate finance to support adaptation measures, as highlighted in successive Economic Surveys.

In conclusion, Indias climate action during FY 2025-26 reflects an accelerating, broad-based transition — marked by record renewable capacity additions, supportive fiscal and regulatory measures, and continued progress on green hydrogen and electric mobility — even as adaptation to increasingly frequent climate shocks remains a continuing priority for sustainable and resilient development.

THE ADVENT OF THE INDIAN CARBON MARKET

Indias Carbon Credit Trading Scheme (CCTS) moved decisively from policy design to implementation during FY 2025-26. Building on the regulatory groundwork laid by the Energy Conservation (Amendment) Act, 2022 and the CCTS notified in 2023, the Ministry of Environment, Forest and Climate Change (MoEFCC) notified final greenhouse gas (GHG) emission intensity targets for the first four energy-intensive sectors — aluminium, cement, chlor-alkali, and pulp & paper — in October 2025, followed by petroleum refining, petrochemicals, textiles and secondary aluminium in January 2026.

As a result, compliance obligations under the CCTS are now in force for approximately 490 entities across seven energy-intensive sectors for the compliance years FY 2025-26 and FY 2026-27, using FY 2023-24 as the baseline year, with final targets for the iron & steel and fertilizer sectors still pending notification. Once all nine sectors are notified, the CCTS compliance mechanism is expected to cover over 700 million tonnes of CO2 equivalent, placing India among the worlds largest emissions trading systems. The first compliance date for FY 2025-26 falls on 31st July 2026, by which date covered entities must submit third-party verified emissions data to the Bureau of Energy Efficiency (BEE).

In March 2026, the Central Electricity Regulatory Commission (CERC) notified the CERC (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2026 — the final regulatory piece governing the trading of Carbon Credit Certificates (CCCs) on Indias power exchanges, with the Grid Controller of India (Grid- India) operationalizing the national registry. The first official trading of compliance-based CCCs is expected to commence by mid-to-late 2026, marking the formal launch of the compliance segment of the Indian Carbon Market.

On the voluntary side, BEE released Version 1 of the Detailed Procedure for the Offset Mechanism in March 2025, formally opening the voluntary segment of the Indian Carbon Market to non-obligated entities, with registrations for non-obligated entities opening from June 2025. India also continued to strengthen its international carbon market linkages, including a Memorandum of Cooperation signed with Japan in August 2025 under Article 6 of the Paris Agreement, and continued progress on bilateral/cooperative approaches under Article 6.2 covering renewable energy with storage, green hydrogen, and carbon capture, utilisation and storage.

Indias establishment of the Carbon Credit Trading Scheme and the Green Credit Programme marks a significant milestone in its journey towards a low-carbon economy. With the compliance mechanism now operational for the majority of covered sectors, the voluntary offset mechanism open for registrations, and the trading regulations finalised, India is well-positioned to operationalise a credible, large-scale national carbon market during calendar year 2026, supporting its updated NDC target of reducing emissions intensity by 45% below 2005 levels by 2030.

IMPORTANCE OF NATIONAL EMISSIONS TRADING SYSTEM

Carbon markets, also known as emissions trading systems or cap-and-trade systems, are mechanisms that allow the buying and selling of carbon credits. These credits represent a reduction in greenhouse gas emissions and can be traded between entities to help achieve emission reduction targets.

Establishing a carbon market can have several advantages for a country like India. A carbon market provides economic incentives for businesses and industries to reduce their carbon emissions — entities that reduce emissions below a certain level can sell their excess credits to those who have not met their targets, thereby incentivising emission reductions and the adoption of cleaner technologies and practices.

Carbon markets offer a cost-effective, market-based approach to achieving emission reduction targets, allowing for flexibility and innovation while minimising the overall cost of achieving climate goals. A well-functioning carbon market can also attract domestic and international investment in clean technologies and low-carbon projects, driving innovation, creating green jobs and contributing to sustainable economic growth, while fostering international cooperation through participation in cross-border carbon trading.

EVOLUTION OF THE GLOBAL CARBON MARKET

Carbon markets have evolved over the decades as key policy instruments to address climate change. The concept emerged with the United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol, which introduced the Clean Development Mechanism (CDM) and Joint Implementation (JI) as market-based mechanisms to promote emission reduction projects in developing and transitioning countries.

A landmark milestone was the establishment of the European Union Emissions Trading Scheme (EU ETS) in 2005, the first large-scale international carbon market. Subsequently, several other jurisdictions implemented their own carbon markets, including the Regional Greenhouse Gas Initiative and California Cap-and-Trade Program in the United States, the New Zealand Emissions Trading Scheme, and Chinas national ETS launched in 2017, which has become the worlds largest carbon market by emissions coverage. The Paris Agreement, adopted in 2015, introduced provisions for international cooperation through internationally transferred mitigation outcomes (ITMOs) under Article 6, with the rulebook finalised at COP29 in 2024 and progressed further at COP30 in 2025.

Sunset of the Clean Development Mechanism — A Mechanism Wound Down in Disrepute

The CDM, once envisioned as the cornerstone of global carbon finance for developing countries, is now being formally discontinued — a closure that underscores two decades of structural underperformance. The CDM failed to produce high-quality carbon credits, with the vast majority of emission reductions credited under the mechanism unlikely to have resulted in genuinely additional reductions — and in some cases, the CDM may have led to countries generating more emissions than would have occurred had targets been met through other means.

At COP30 in Brazil in November 2025, parties finally decided that the CDM would be wound up by the end of 2026, with its residual trust fund of USD 26.8 million transferred to the Paris Agreement Crediting Mechanism (PACM) — a modest sum that reflects the mechanisms depleted state after years of declining relevance.

The wind-down follows a structured but already-lapsing timeline. The CDM registry was disconnected from the International Transaction Log on 31 March 2026, new CER issuance requests were discontinued on 30 June 2026, and all remaining CER transfers and transactions in the CDM registry will cease on 31 December 2026, with the registry itself closing permanently on 2 July 2027.

The transition to the successor PACM framework has been slow and fraught. As of early 2026, only approximately 128 million CERs — representing a mere 13% of credits requesting transition — had received host-country approval, with the remainder still pending or stalled. China and India, hosting 36% and 33% respectively of projects requesting transition, had not approved any transitions as at the date of reporting — a significant bottleneck given that India is the second-largest CDM host country globally and a core geography for EKIs project portfolio. Nearly 80% of CDM activities eligible to transition utilise grid-connected renewable energy methodologies — the very categories that major registries including Verra and Gold Standard stopped accepting as early as 2019 on grounds of additionality, and which were subsequently rejected by the ICVCM — raising serious concerns about the environmental integrity of the credits expected to emerge from the CDM-to-PACM transition pipeline.

For the Company, the CDMs discontinuation removes a long-established project development and credit supply pathway. While EKI is actively repositioning its capabilities under the new PACM architecture and Article 6.4 framework, the absence of finalized PACM methodologies, incomplete registry operationalization, and Indias pending transition approvals introduce near-term execution risk and potential revenue disruption to the Companys international credit supply chain.

In recent years, voluntary carbon markets have gained renewed momentum, allowing organisations and individuals to offset emissions by purchasing credits from verified projects, governed by standards such as Gold Standard, Verras Verified Carbon Standard, the Clean Development Mechanism and the Global Carbon Council, among others. Challenges around environmental integrity, market manipulation and social equity continue to shape the ongoing evolution of carbon markets globally.

CURRENT STATE OF CARBON MARKET AND PROSPECTS

The global carbon market continues to mature, characterised by growing regulatory coverage and expanding participation, even as price levels for most instruments remain well below those needed to drive the scale of

decarbonisation required to limit global warming to below 2?C. Middle-income nations such as India, Brazil, Chile, Colombia and Turkiye continue to make significant headway in establishing carbon pricing frameworks, while sectors beyond power and heavy industry — including aviation, maritime transport and waste management — are increasingly integrating carbon pricing mechanisms.

The European Unions Carbon Border Adjustment Mechanism (CBAM) continued its progression towards definitive implementation in 2026, applying carbon costs to imports of steel, aluminium, cement, fertilisers, hydrogen and electricity, with the dual objectives of avoiding carbon leakage and incentivising trading partners — including India — to strengthen their own carbon pricing systems.

Voluntary carbon markets (VCMs) experienced a continued "flight to quality" through 2025 and into 2026, with buyers increasingly prioritising credits aligned with the Integrity Council for the Voluntary Carbon Markets (ICVCM) Core Carbon Principles and the Voluntary Carbon Markets Integrity (VCMI) Claims Code. The outcomes of COP30 — including the launch of the Coalition to Grow Carbon Markets and the operationalisation of the Paris Agreement Crediting Mechanism (PACM) under Article 6.4 — are expected to gradually improve interoperability between compliance and voluntary markets, supporting renewed capital inflows into high-integrity projects over the medium term.

Digital technologies continue to be leveraged to enhance monitoring, reporting and verification (MRV) processes, with blockchain, remote sensing and AI-driven analytics increasingly used to improve accuracy, traceability and fraud prevention in carbon transactions. While near-term price levels and demand for VCM credits have remained subdued amid the ongoing transition to higher-integrity standards and the pending operationalisation of compliance markets such as Indias CCTS, the structural direction of travel — towards larger, better-regulated and more integrated carbon markets — remains intact, positioning the sector for renewed growth as compliance markets come online through 2026 and beyond.

IMPACT OF CLIMATE CHANGE ON GLOBAL ECONOMY

According to the Swiss Re Institutes report "The Economics of Climate Change: No Action Not an Option," the global economy could forfeit up to 10% of its total economic value by 2050 due to climate change, with the potential loss rising to as much as 18% of global GDP by mid-century under a high-warming (3.2?C) scenario. Leading multilateral institutions continue to scale up climate finance commitments — the World Bank Group delivered a record $42.6 billion in climate finance in FY2024, a 10% year-on-year increase — reflecting the growing centrality of climate finance to global economic resilience and the broader case for high-integrity carbon markets as a channel for mobilising private capital towards mitigation and adaptation.

OPPORTUNITIES IN THE CARBON MARKET

As global climate commitments translate into operational compliance frameworks — most notably Indias CCTS, the EUs CBAM and the operationalisation of Article 6 following COP30 — carbon markets are entering a phase of structural realignment that presents significant medium-term opportunities for established players with strong project pipelines, verification capabilities and regulatory expertise.

Key opportunity areas include: the emergence of compliance demand from Indias CCTS-covered entities as the scheme transitions from target-setting to active trading during 2026; continued growth in demand for high-integrity voluntary credits aligned with ICVCM Core Carbon Principles as buyers consolidate around quality; the expansion of nature-based and removal-based credits under the newly operationalised PACM; growing demand for Digital MRV solutions as registries and regulators seek tamper-proof, real-time verification; and the convergence of carbon valuation with mainstream ESG and BRSR disclosure frameworks, creating sustained advisory demand from corporates seeking to internalise carbon costs into their risk and valuation models.

LOOKING AHEAD

Looking ahead, the carbon market ecosystem is expected to remain in a transitional phase through the remainder of calendar year 2026, as Indias CCTS compliance trading commences, the EUs CBAM moves to definitive implementation, and the Article 6 architecture agreed at COP29 and refined at COP30 is operationalised across jurisdictions. While near-term demand and pricing in the voluntary segment may remain subdued as buyers and registries adjust to tightening integrity standards, the structural direction is towards larger, better-regulated and more interoperable carbon markets, which is expected to support a recovery in transaction volumes and pricing over the medium term.

CHALLENGES

The global and Indian carbon markets continue to face a range of structural challenges, including continued price volatility and oversupply of lower-quality credits, the gradual and uneven pace of compliance-market operationalisation (including the phased rollout of Indias CCTS and the pending notification of remaining sectors), heightened scrutiny of credit integrity and greenwashing risk, regulatory fragmentation across voluntary and compliance segments, and the broader macroeconomic uncertainty arising from elevated global trade tensions and tariff policies that continue to weigh on investment sentiment and capital flows into emerging-market climate projects.

EKI IN 2025-26

Financial year 2025-26 was a challenging and transitional year for EKI Energy Services Limited, as the Company continued to navigate an extended period of subdued pricing and demand in the global voluntary carbon market, alongside the prolonged delay in the operationalisation of Indias compliance carbon market under the CCTS. On a consolidated basis, revenue from operations for FY 2025-26 stood at ^8,651.92 lakhs, compared to ^40,637.41 lakhs in FY 2024-25, with the Trading & Other Business Segment contributing ^5,988.51 lakhs and the Generation Segment contributing ^2,663.41 lakhs. The Company recorded a consolidated net loss of ^1,658.19 lakhs for the year, compared to a near-breakeven net loss of ^84.21 lakhs in FY 2024-25, reflecting the continued compression in carbon credit prices and transaction volumes across the industry.

Despite the difficult trading environment, EKI continued to focus on business consolidation, cost optimisation and liquidity preservation. The Company maintained a near-debt-free balance sheet at consolidated level , with total borrowings of ^540.91 lakhs against total equity of ^38,248.27 lakhs as at 31st March 2026, and continued to hold significant liquid resources in the form of bank deposits and current investments. The Company continued to advance its diversification strategy across renewable energy consulting, power trading, sustainability advisory, and clean technology ventures — including clean cookstove initiatives — aimed at reducing dependence on carbon credit trading revenue over time.

On the policy front, the year saw significant tailwinds for the Companys core business, with the Government of India notifying final GHG emission intensity targets for seven of the nine CCTS-covered sectors and the CERC notifying the regulations governing the trading of Carbon Credit Certificates in March 2026. With the compliance segment of the Indian Carbon Market expected to commence trading during 2026, EKI believes it is well positioned — given its established project portfolio, verification expertise and market relationships — to participate meaningfully in both the compliance and voluntary segments of the Indian and global carbon markets as they mature.

EKI also continued to strengthen its governance and compliance framework during the year, including continued alignment with mandatory BRSR (Business Responsibility and Sustainability Reporting) requirements, ongoing engagement with the Integrity Council for the Voluntary Carbon Market (ICVCM) on methodology approvals, and continued evaluation of its investment. i. The Company remains committed to prudent capital allocation and to positioning itself for a recovery in carbon market activity as compliance demand from Indias CCTS and global Article 6 mechanisms begins to materialise through 2026 and beyond.

OUTLOOK

• Navigating Market Transition Towards Compliance-Led Demand: With Indias CCTS compliance obligations now in force for approximately 490 entities across seven sectors and CCC trading regulations notified by CERC in March 2026, the Company expects the emergence of a domestic compliance market to be a key structural driver of demand over the coming year, complementing its existing voluntary market portfolio.

• Continued Focus on High-Integrity Carbon Finance: The Company will continue to implement enhanced due-diligence and screening protocols for carbon offset projects, aligning with ICVCM Core Carbon Principles and the VCMI Claims Code, to position its project portfolio favourably as global buyers continue their "flight to quality".

• Diversification Across Climate Solutions: EKI will continue to scale its diversification across renewable energy consulting, power trading, biomass briquetting, biochar and clean cooking technologies, reducing dependence on carbon credit trading revenue and building resilient, recurring revenue streams.

• Advancing Digital MRV and Methodology Innovation: The Company will continue to integrate Digital MRV (DMRV) systems into its project monitoring and verification processes, in line with the broader industry shift towards real-time, tamper-proof emissions tracking following the operationalisation of the Paris Agreement Crediting Mechanism.

• Prudent Liquidity and Cost Management: Given the prolonged downturn in carbon credit pricing, the Company will continue to prioritise cost optimisation, working capital discipline and prudent capital allocation, while maintaining its near-debt-free balance sheet and readiness to scale operations as compliance-driven demand materialises.

• ESG and Regulatory Alignment: The Company will continue to strengthen its ESG disclosures under the BRSR framework and align its advisory offerings with the evolving regulatory landscape across Indias CCTS, the EUs CBAM, and international Article 6 mechanisms, positioning itself to assist corporates in internalising carbon costs into their risk and valuation frameworks.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company is into climate change & sustainability advisory and carbon offsetting, along with business excellence services which includes ISO certification, management training on JIT / Kaizen etc., and electrical safety audits. The Board of Directors of the Company have identified the Managing Director as being the chief operating decision maker (CODM), who evaluates the Companys performance and allocates resources based on the analysis of various performance indicators of the Company. As per the requirements of Ind AS 108 - "Operating Segments", the Company has two reportable segments as under:

(i) Trading & Other Business Segment: where the carbon credits are purchased from various vendors and are sold to customers, among other ancillary activities.

(ii) Generation Segment: where the carbon credits are issued from the projects implemented, developed and owned by the Company.

The revenue of both these segments is earned majorly from the sale of carbon credits; however, the decision of the CODM is derived separately for both segments considering the variable outcomes of the respective segments. Details of the reportable operating segments of the Company (consolidated) for the year ended 31st March 2026 are as under:

Particulars (Rs. in lakhs)	FY 2025-26	FY 2024-25
Segment Revenue - Trading & Other Business	5,988.51	36,397.44
Segment Revenue - Generation	2,663.41	4,239.97
Total Segment Revenue	8,651.92	40,637.41
Segment Result - Trading & Other Business (PBIT)	(3,308.12)	(4,419.36)
Segment Result - Generation (PBIT)	(59.93)	2,767.20
Total Segment Result	(3,368.06)	(1,652.16)
Net Profit / (Loss) for the period	(1,577.68)	19.48
Capital Employed - Trading & Other Business	24,424.77	25,241.83
Capital Employed - Generation	13,823.50	14,845.93
Total Capital Employed	38,248.27	40,087.75

The decline in segment revenue across both segments during FY 2025-26 was primarily on account of the continued softness in global voluntary carbon market prices and transaction volumes, compounded by the deferral of buyer commitments pending greater clarity on Article 6 implementation and the operationalisation of compliance markets such as Indias CCTS. The Generation Segment, in particular, moved from a positive segment result in FY 2024-25 to a marginal loss in FY 2025-26, reflecting the impact of lower realisations on credits issued from the Companys own projects.

RISK AND CONCERN

The global carbon credit market is undergoing rapid transformation amid intensifying climate action, regulatory reform, and growing scrutiny over environmental integrity. While the market offers significant potential for financing decarbonisation and nature-based solutions, it also faces evolving risks that may impact its credibility, functionality, and long-term stability.

Risk Category	Description	Mitigation Measure
Regulatory Uncertainty	Phased and delayed implementation of CCTS sectoral notifications and CCC trading timelines in India; uneven harmonisation between voluntary and compliance markets globally following Article 6 outcomes at COP29/COP30.	Active monitoring of CCTS, CERC and MoEFCC notifications; engagement with regulators and industry bodies; flexible project design aligned with evolving rules and recognised standards.
Market Oversupply & Price Volatility / Revenue Concentration	Continued oversupply of, and demand softness for, voluntary carbon credits has led to a significant decline in revenue and segment results across both Trading and Generation segments in FY 2025-26.	Diversification across project types, geographies and registries; prioritisation of high-integrity credits with strong co-benefits; diversification of revenue streams into renewable energy consulting, power trading and clean-technology ventures.
Credit Integrity & Greenwashing Risk	Continued public and stakeholder scrutiny over methodologies, vintage credits and exaggerated climate claims, including under the VCMI Claims Code.	Enhanced due diligence; use of verified standards (Verra, Gold Standard, ART); alignment with ICVCM Core Carbon Principles and VCMI Claims Code.
Reputational & ESG Exposure	Increased scrutiny from investors and civil society regarding the legitimacy of offsetting versus actual emissions reductions.	Transparent ESG and BRSR reporting; third- party audits; integration of credits into broader net-zero strategies emphasising real emission cuts.
Technological & MRV Limitations	Lack of standardisation in Digital MRV tools; potential errors in remote data collection or blockchain-based credit issuance, including under newly operationalised Article 6.4 standards.	Investment in vetted Digital MRV platforms; partnerships with technology providers; adherence to credible, peer-reviewed measurement methodologies.
Geopolitical & Legal Risk / Trade Policy	Political instability, unclear land tenure and cross-border enforceability concerns in project host countries; elevated global trade tensions and tariff policies affecting investment sentiment.	Legal risk assessments; clear contractual terms; delivery guarantees; engagement with local authorities and communities for project legitimacy; continued monitoring of global trade developments.

INTERNAL CONTROL SYSTEM

The Company has implemented a robust internal control framework designed to ensure the accuracy and reliability of financial reporting, promote operational efficiency, ensure compliance with applicable policies and procedures, safeguard assets, and support the effective utilisation of resources.

These controls are subject to continuous monitoring and periodic review to ensure their ongoing effectiveness and adequacy. The Companys accounting policies are in full compliance with the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules, 2015.

To evaluate the efficiency and adequacy of its internal control mechanisms, the Company engages reputed external audit firms to conduct internal audits at regular intervals. The observations and recommendations arising from these audits are carefully reviewed by the Audit Committee, and necessary corrective measures are implemented promptly. The Board of Directors also periodically reviews Internal Audit Reports to ensure alignment with corporate governance objectives.

During the year, no significant weaknesses were identified in the design or operation of the Companys internal control systems.

Furthermore, both the Standalone and Consolidated Financial Statements were subjected to quarterly reviews and an annual audit by the Companys Statutory Auditors, reinforcing its commitment to transparency, accountability, and regulatory compliance.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES/ INDUSTRIAL RELATION FRONT

At EKI, our employees are regarded as our most valuable asset and a cornerstone of our continued success. Guided by an employee-centric philosophy, the Company is committed to fostering a safe, inclusive, and motivating work environment that promotes both individual productivity and collective performance.

To support the professional growth of its workforce, EKI actively invests in skill development, capability enhancement, and leadership training through customised learning and development programs. The Company recognises the importance of diversity and is dedicated to building a team that reflects a broad spectrum of backgrounds and perspectives — strengthening its organisational capabilities in the process.

Teamwork, self-motivation, and continuous learning are strongly encouraged across all levels of the organisation. The Companys human resource policies are thoughtfully designed to attract, retain, and reward top talent while nurturing a positive and empowering workplace culture. In line with its continued focus on cost optimisation amid the prolonged downturn in carbon market activity, the Company continued its measured approach to manpower planning during FY 2025-26.

As of March 31, 2026, EKI employed 60 permanent staff members.

Industrial relations remained cordial throughout the year, with no material disputes reported.

KEY FINANCIAL RATIOS & DETAILS OF SIGNIFICANT CHANGES

The ratios below are computed on the basis of the Companys audited Standalone Financial Results for the year ended 31st March 2026, on the same basis as adopted for FY 2024-25.

Ratio	2025-26	2024-25	% Change	Explanation (where change exceeds 25%)
Debtors Turnover (in times)	3.80	4.56	-16.67%	— (change below 25% threshold)
Inventory Turnover (in times)	0.58	1.58	-63.29%	The sharp decline in inventory turnover is on account of the steep fall in revenue from operations (down 49% YoY) amid continued softness in global carbon credit prices and demand, while inventory levels of carbon credits held remained relatively high, resulting in slower throughput of inventory during the year.
Interest Coverage Ratio (in times)	0.00	0.03	-100%	Finance costs reduced to nil in FY 2025-26 as against Rs.0.03 lakhs in the previous year. Accordingly, the Interest Coverage Ratio is not meaningful for either year given the negligible debt burden of the Company.
Current Ratio (in times)	17.28	9.21	+87.62%	The increase in the current ratio is primarily attributable to a sharp reduction in current liabilities (trade payables and other current liabilities) during the year, alongside maintenance of a substantial base of current assets including bank deposits and current investments, reflecting the Companys continued conservative liquidity management amid the carbon market downturn.
Debt Equity Ratio (in times)	0.01	0.00	N/A	The Company continues to remain virtually debt-free; the marginal increase from negligible levels reflects a small increase in current borrowings during the year and is not material in absolute terms.
Operating Profit Margin (%)	48.65%	44.71%	+8.81%	— (change below 25% threshold)
Net Profit Margin (%)	(9.31%)	9.29%	-200.2%	The Company moved from a net profit to a net loss position in FY 2025-26. This reversal is primarily on account of the continued, prolonged downturn in global carbon credit prices and transaction volumes, which led to a significant decline in revenue from operations (down 49% YoY) while fixed costs, including depreciation and amortisation on intangible carbon assets, remained relatively elevated, resulting in a net loss for the year as against a net profit in the previous year.
Return on Capital Employed (%)	(1.62%)	4.05%	-140.0%	The decline reflects the Companys shift from a profit before interest and tax position in FY 2024- 25 to a loss before interest and tax in FY 2025- 26, driven by the continued downturn in carbon credit prices and volumes discussed above, against a broadly stable capital employed base.
Return on Net Worth (%)	(1.85%)	3.58%	-151.7%	The decline mirrors the movement in Net Profit Margin and Return on Capital Employed above, reflecting the net loss reported by the Company in FY 2025-26 as against a net profit in FY 202425, on a broadly stable net worth base.

Note on overall financial performance: The carbon market continues to be highly volatile, and the Companys profitability and key financial ratios remain significantly impacted by fluctuations in carbon credit prices and demand globally, including cost uncertainty in compliance and hedging, pass-through and margin pressure on operational costs, revenue volatility linked to carbon credit pricing, the impact on investor sentiment and market valuation, and the resulting implications for long-term strategic and regulatory planning. Owing to these factors, the Companys profits, ratios and overall financial trends continue to be materially affected, as reflected in the movements set out above.