Emergent Industrial Solutions Ltd Management Discussions

OVERVIEW

This report sets out the Managements perspective on the external business environment, developments in the global and Indian steel industries, the Companys strategic priorities, operational and financial performance, human resources, industrial relations, risk management framework, and internal control systems during the financial year 2025-26. The report should be read in conjunction with the Companys audited financial statements, schedules, notes thereon, and other information forming part of the Integrated Report and Annual Accounts for FY 2025-26.

The financial statements have been prepared in compliance with the Indian Accounting Standards (Ind AS) notified under the Companies Act, 2013, as amended from time to time, and in accordance with the applicable provisions of the Act and the regulations and guidelines issued by the Securities and Exchange Board of India (SEBI).

The global economy remained resilient during FY 2025-26 despite heightened geopolitical tensions, trade-related uncertainties and volatility in commodity and energy markets. Economic activity was supported by robust investment, particularly in technology and artificial intelligence, resilient domestic demand and gradually easing financial conditions. The International Monetary Fund (IMF) projects global growth at approximately 3.0% in 2025 and 3.1% in 2026. Despite intermittent financial market volatility and elevated sovereign bond yields, overall financial conditions remained relatively accommodative. Regional growth trends continued to diverge, with the United States recording relatively strong growth supported by technology-led investments and resilient consumption, while Europe and China experienced comparatively weaker momentum. Inflationary pressures continued to ease during the period, with both headline and core inflation moderating from earlier peaks, thereby supporting overall macroeconomic stability. Source - IMF, World Economic Outlook, October 2025.

Global growth is projected to remain resilient at 3.1% in 2026 and 3.2% in 2027, broadly in line with 2025 levels, despite moderating momentum in high-tech sectors and lingering trade uncertainties. Inflation is expected to ease from 4.1% in 2025 to 3.4% by 2027. Advanced economies will witness steady but moderate growth, while emerging markets, including India, will continue to drive global expansion, supported by structural strengths and policy support. The situation in West Asia remains dynamic, set against an evolving global economic landscape. Encouragingly, the resilience demonstrated by global markets and economies provides confidence in their ability to adapt and navigate emerging challenges effectively. (source: IMF Data, OECD)

India continues to stand out as one of the worlds fastest-growing major economies with GDP growth for FY 2025-26 was 7.6%, driven by the twin engines of consumption and investment. Strong domestic demand, supported by rising purchasing power, stable employment and healthy rural and urban consumption, remains the cornerstone of growth. Investment activity has also strengthened, reflecting improving business confidence and sustained public capital expenditure. While global uncertainties and trade-related challenges persist, India has demonstrated resilience by advancing structural reforms, enhancing ease of doing business and strengthening economic fundamentals. Inflation remains largely contained, and balance sheets across households, corporates and banks are robust. (Source https://pib. gov. in )

Outlook FY 2026-27 is expected to mark a phase of steady consolidation, supported by resilient domestic demand and strengthening investment momentum. While global uncertainties persist, moderating inflation and more accommodative monetary conditions provide a supportive backdrop. Continued policy reforms, improved ease of doing business and ongoing trade negotiations are likely to ease external pressures. With healthy balance sheets and sustained public investment, the Indian economy remains well-positioned to navigate global volatility, with GDP growth projected at ~7.2%, reflecting a stable and optimistic growth outlook. (Source https://pib.gov.in )

Global Steel Industry Total global crude steel production stood at 1,849.4 MnT in 2025. During 2025, China produced 960.8 MnT, reflecting a decline of around 4% compared to 2024. India recorded production of 164.9 MnT, marking a growth of around 10.1%, while the United States produced 82 MnT, up by approximately 3%. Japans output stood at 80.7 MnT, down by around 4%, and Russia is estimated to have produced 67.8 MnT, a decline of around 5%. South Korea produced 61.9 MnT, down by around 3%, whereas Turkiye and Iran reported strong growth, producing 38.1 MnT and 31.8 MnT, respectively. Germany and Brazil produced 34.1 MnT and 33.3 MnT.

Steel demand remained relatively stable, supported by infrastructure spending and manufacturing investments in several economies. However, Europe continued to face challenges arising from higher energy costs and subdued industrial activity, while Chinas demand was affected by the ongoing adjustment in the real estate sector.

Emerging economies, particularly India, continued to drive incremental steel demand through sustained infrastructure development, urbanisation, and manufacturing expansion. At the same time, the industry remained exposed to challenges such as global overcapacity, trade-related measures, volatility in raw material and energy prices, and increasing decarbonisation requirements. (Source: https://worldsteel.org/media/press-releases)

The global steel industry is expected to witness a gradual and uneven recovery amid a challenging macroeconomic environment. Steel demand is projected to stabilise in the near term, with growth supported by infrastructure spending, manufacturing investments, and resilient demand in emerging economies. While the United States is expected to remain relatively strong, Europe continues to face pressure from high energy costs and weaker industrial activity, and Chinas structural adjustment in the property sector may keep demand subdued.

Emerging economies, particularly India, are expected to remain the key drivers of incremental steel demand, supported by urbanisation, infrastructure development, and manufacturing growth. At the same time, the industry continues to face challenges from global overcapacity, trade-related measures, raw material and energy price volatility, and ongoing decarbonization requirements. Overall, the outlook remains cautiously positive, with growth expected to be led by emerging markets and supported by long-term infrastructure and industrial investments. (Source: https://worldsteel.org/media/press-releases)

Indian Steel Industry Indias steel industry sustained a strong growth trajectory in FY 2025-26, supported by infrastructure-led demand and ongoing capacity additions by major producers. However, demand growth moderated during the year, even as production expanded steadily, resulting in emerging imbalances in the domestic market. Pricing remained under pressure despite improved trade dynamics, reflecting limited absorption of incremental supply. While global conditions continued to influence pricing trends, domestic factors remained the primary driver.

Overall, FY 2025-26 marked a phase where growth persisted, but the divergence between production, demand and pricing became more evident, alongside a rising dependence on imported raw materials. Crude steel production in India grew by 10.5% year-on-year to 168 MnT in FY 2025-26, reflecting continued capacity-led expansion, albeit at a more measured pace than the previous year. This growth was supported by capacity additions and stable utilisation levels across primary producers. However, the gap between production and relatively slower demand growth suggests that part of the incremental output was either exported or absorbed into inventories. Indias finished steel trade dynamics improved notably during FY 2025-26, with exports rising by 28.7% year on-year to 8.24 MnT. Imports declined by 22.8% to 7.8 MnT, driven by the imposition of a 12% safeguard duty on flat steel and a narrowing price differential between imported and domestic products. As a result, India moved closer to a net exporter position, marking a shift from earlier import dependence. This rebalancing supported market stability by absorbing part of the excess supply and reducing competitive pressure from imports. However, despite improved trade flows, broader supply-demand imbalances and weak global pricing trends continued to weigh on domestic steel prices. (Source https://pib.gov.in )

Outlook Domestic steel prices are expected to find some support in the near term, supported by lower finished steel imports and continued policy oversight, although any sharp recovery will depend on the pace of demand absorption. Export prospects are likely to remain stable, backed by competitive pricing, even as weak global demand conditions limit upside potential. On the domestic front, infrastructure-led demand is expected to underpin consumption; however, sustaining utilisation levels amid expanding capacity will depend on the pace of growth. At the same time, ongoing US-Iran tensions pose risks to energy markets, with potential volatility in crude prices likely to increase

input and freight costs for the steel sector. The Government of India has outlined an ambitious vision to achieve 300 million tonnes of steel capacity by 2030 and 500 million tonnes by 2047. (Source https://pib.gov.in )

The Indian steel industry continues to exhibit a favorable medium-term growth outlook, supported by strong domestic consumption, sustained government investment in infrastructure, and policy support through initiatives such as the Production Linked Incentive (PLI) scheme. Against this backdrop, the Company is well-positioned to capitalize on opportunities in steel and allied trading. Indias finished steel consumption is expected to maintain a healthy growth trajectory of around 7-8% per annum, while crude steel production is anticipated to rise steadily in line with ongoing capacity expansions and the broader objectives of the National Steel Policy. In this supportive environment, the Companys diversified product portfolio, strong customer relationships, and extensive trading network provide a solid foundation for sustaining revenue growth and enhancing market presence. However, volatility in raw material prices, global trade measures, and geopolitical uncertainties may pose short-term challenges to margins and operating conditions. By emphasizing operational efficiency, prudent risk management, and customer-centric strategies, the Company aims to sustain its growth momentum and create long-term shareholder value in alignment with the structural growth prospects of the Indian steel sector.

• Strong growth in domestic steel demand, particularly from infrastructure, construction, manufacturing, and engineering sectors, is expected to increase demand for steel-making raw materials and allied products traded by the Company.

• Continued government expenditure on roads, railways, metros, ports, airports, renewable energy, and housing projects is likely to support higher procurement activity across the steel value chain, creating additional trading opportunities for the Company.

• Policy initiatives such as the Production Linked Incentive (PLI) Scheme for Specialty Steel and the National Steel Policy are expected to encourage capacity expansion and higher production by steel manufacturers, thereby increasing the requirement for raw materials and intermediates.

• Rising crude steel production and finished steel consumption are expected to improve market volumes and provide opportunities for expanding the Companys customer base and product portfolio.

• The Companys established sourcing network, diversified trading operations, and long-standing customer relationships position it to benefit from increased industry activity and improve turnover and market presence.

• Growth in value-added and specialty steel production may create opportunities for supplying specialized raw materials and allied products to a wider range of steel producers.

• Volatility in prices of coking coal, iron ore, ferro alloys, freight, and energy may affect trading margins and working capital requirements.

• Global steel overcapacity and fluctuations in steel prices may influence procurement patterns and inventory valuation, creating short-term pressure on profitability.

• Changes in import duties, anti-dumping measures, safeguard duties, and other trade regulations may affect the availability and pricing of imported raw materials.

• Geopolitical tensions and supply-chain disruptions may impact timely sourcing, shipping schedules, and logistics costs.

• Increasing environmental and decarbonization requirements in the steel industry may lead to changes in raw material preferences and require continuous adaptation of the Companys sourcing strategy.

• Any slowdown in infrastructure spending, construction activity, or steel production could adversely affect demand for the raw materials traded by the Company.

The Company is primarily into international trading of Steel, Low ash Metallurgical Coke, carbon, iron-ore, Coal, Coke and Petroleum Coke products, Manganese ore, ferro alloys and other allied products etc, for supply to various steel and ferro alloys industries.

During the year under review, the Company continued to maintain stable operational performance despite a decline in revenue of approximately 46% compared with the previous financial year. The reduction in revenue was primarily attributable to lower trading volumes and prevailing market conditions. Nevertheless, the Company remained focused

on operational efficiency, prudent cost management, and strengthening customer relationships, which helped support its overall business performance during the year:

During the year under review, the revenue declined 46% YoY at Rs. 43185.60 lacs as compared to Rs.79674.15 lacs, due to lower trading volumes and volatile market conditions. EBITDA dropped to ?353.17 lacs against Rs.980.86 lacs of FY 2024-25, similarly PAT decreased to ?138.79 lacs as compared to Rs.396.72 lacs in the previous year. Shareholders funds increased to ?3,109.16 lacs from ?2,966.82 lacs FY 2024-25.

The Company remains optimistic about its business outlook, supported by the positive medium- to long-term prospects of the steel and ferro alloys industries in India and key international markets. As a diversified international trading company engaged in steel, low ash metallurgical coke, carbon, iron ore, coal, coke and petroleum coke products, manganese ore, ferro alloys, and other allied products supplied to various steel and ferro alloy manufacturers, the Company is well positioned to benefit from growing demand arising from infrastructure development, industrial expansion, and manufacturing growth. The continuing focus on capacity additions in the steel sector, increasing demand for raw materials, and the strengthening of global supply chains are expected to create favorable opportunities for the Companys trading operations. The Company will continue to emphasize diversification of sourcing and markets, strengthening customer relationships, efficient logistics management, and prudent risk management to enhance competitiveness and operational resilience. While volatility in commodity prices, freight costs, geopolitical developments, and global trade regulations may pose short-term challenges, the Company believes that its established international network, diversified product portfolio, and customer-centric approach provide a strong foundation for sustaining growth and creating long-term value for stakeholders.

• Trading businesses carry significant risks, particularly in volatile industries like ours where investments and performance are heavily influenced by prevailing mega-trends. Our ability to fulfil commitments hinges on how these factors impact our operations and future prospects. Factors such as adverse regulatory changes or economic fluctuations in the global market can directly impact our revenue streams.

• Internally we view risk management as an ongoing process rather than a one-time activity. Continuous monitoring and regular reviews are essential components of our risk management strategy. This approach ensures thorough identification and assessment of risks, enabling us to implement effective controls. It also serves as a mechanism for learning from past experiences and taking corrective actions.

• The Company has identified several significant risks to its business:

i) Strategic Risk: The trading industry is intensely competitive by nature.

ii) Commercial Risks: The business faces potential risks from customers performance failures.

iii) Financial Risks: Non-payment or delayed payments from customers and increased financial costs pose significant threats to profitability and margins. The Company evaluates profitability on a case- to-case basis but prioritizes credit risk management.

iv) Regulatory Risk: Active monitoring of BIS norms, import/export restrictions, and ESG disclosures.

v) Geopolitical Risks: Cross-border trading exposes the company to political and global economic uncertainties.

• The Company has established a robust strategy and risk management framework to effectively mitigate a broad range of business risks. Management regularly identifies, assesses, and monitors key risk factors and implements appropriate mitigation measures. Periodic reviews of the risk management systems ensure that timely adjustments are made in line with evolving market conditions and business requirements.

The Company has implemented a robust system of internal controls to ensure the safeguarding and protection of all assets against unauthorized use or disposition. Additionally, it ensures that all transactions are properly authorized, recorded and reported. The company maintains an internal audit and control department that oversees, evaluates and updates internal controls regularly. It has established a clear organizational structure, defined authority levels and internal guidelines to govern its business operations effectively. The internal audit and control department conducts audits across all key business areas according to a predefined audit plan, which is approved by the audit committee. This committee regularly reviews compliance with the plan. Audit observations and subsequent actions are reported to the committee, which also periodically reviews audit plans, observations and recommendations related to significant risk areas, ensuring the adequacy and effectiveness of these controls.

Human Resources Department ("HRD") works continuously for maintaining healthy working relationship amongst the staff members. The underlying principle is that staff at all levels are equally instrumental in attaining the Companys goals. Training programmes are conducted to update their skills. Senior management is easily accessible for counselling and redressal of grievances. The HR department continuously strives to maintain and promote harmony and coordination among staff and members of the senior management. The total number of employees of the Company as on 31st March, 2026 is 12 The Company has maintained healthy and cordial industrial relations during the year.

Certain statements in the Management Discussion and Analysis Report describing the Companys objective and predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward-looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates new regulations and government policies that may impact the Companys business as well as its ability to implement the strategy.