Expleo Solutions Ltd Management Discussions

7 Source: McKinsey, The state of AI in 2025 2

Source: Gartner, Strategic predictions for 2026

This is the year AI stops being an experiment and becomes an enterprise capability. Organizations are moving beyond pilots to operationalize AI at scale with governance, measurable outcomes, and responsible oversight. Enterprises must now decide what kind of AI infrastructure they want to depend on for the next decade. Which is why, they are looking for partners who can bring both technical capability and operational discipline, balance risk with value, and help them integrate AI that is intelligent and trustworthy.

We operate across regions through a best-shoring model, with primary delivery centres in India and supporting offices across the United States of America, Europe, Asia-Pacific, and the Middle East. Weve seen that while the pace of AI adoption varies, the direction is consistent.

In the Americas, enterprises are scaling AI with a strong focus on data governance and cloud infrastructure, alongside growing regulatory oversight. Europe and the UK are adopting a more structured approach, driven by compliance frameworks. The Middle East is emerging as a high-growth region, supported by national digital agendas and our expanding presence, including the Saudi Arabia entity. In Asia-Pacific, including India, adoption is accelerating through expanding digital ecosystems and global capability centres (GCCs).

Indias cost-competitive, high-quality talent pool continues to be a strategic advantage. Regional maturity differs; but the common need is for systems that are intelligent and dependable in real-world operations.

According to IMF projections, global growth is set at 3.1% for 2026, remaining resilient despite geopolitical tensions, trade uncertainties, and uneven regional performance.

India remains one of the faster-growing major economies, with GDP growth projected to reach approximately 7.6% for FY 2025-26. Despite cautious enterprise spending and longer decision cycles in parts of the IT sector, organisations continue to prioritise investments that deliver measurable outcomes while managing risk.

Geopolitical headwinds like supply chain disruptions, energy price volatility, policy uncertainties around tariffs and regulations have further contributed to business uncertainty, particularly in globally integrated industries.

We maintained resilience through geographic diversification, with improved contributions from India, the Middle East, and Asia. Our continued investments in AI-augmented delivery models and outcome-focused client engagements helped counter industry pressures.

AI deployment is outpacing AI governance, and that is the defining opportunity of this period. Enterprises are accelerating use of predictive analytics, automation, and customer experience, while simultaneously facing pressure to ensure accuracy, security, fairness, and compliance. This is driving demand for digital assurance, data governance, and AI validation capabilities.

At the same time, the competitive landscape is intense, with large IT players, AI-native companies, and platform-led ecosystems expanding their capabilities. Additional challenges include rapid technological change, AI-amplified cybersecurity risks, evolving regulations, and competition for specialised talent.

We address these through continued investments in Al-led assurance, proprietary tools and domain-specific delivery models that combine engineering rigour with practical innovation.

In India and APAC, growth in digital payments, open ecosystems, and data protection regulations is creating sustained demand for assurance-led transformation. The expansion of Global Capability Centres further strengthens Indias role as a strategic delivery hub. At the same time, talent availability and retention remain critical challenges. In the Middle East, national transformation programmes under Saudi Vision 2030 along with our expanding regional presence offer attractive growth avenues. Europe and the United States continue to present opportunities in compliance-driven AI adoption.

Challenges across regions include regional economic slowdowns, talent retention, visa and mobility constraints, currency fluctuations and evolving data localisation requirements. We address these through agile, localised delivery models and strong governance practices.

Expleo harnesses its AI-powered platforms, such as Sophia, CodePle, and Quasar to accelerate growth across digital assurance, digital engineering, and automation. We enable complex, enterprise-wide transformations across India, the broader APAC, the Middle East, the UK, Europe, and the USA. With deep domain expertise and an AI assurance framework embedded at the core of every solution, Expleo delivers industry-specific solutions that addresses real business challenges. This positions Expleo to capture rising demand across key areas, including digital payments, regulatory compliance, GCC expansion, and AI-led transformations.

To address talent shortages, economic uncertainty, evolving regulations, and pricing pressures, Expleo will adopt AI-enabled delivery models, strengthen regional delivery capabilities, and accelerate workforce AI upskilling. Combined with strong governance, automation, and compliance-focused services, this approach will enhance productivity, protect margins, improve resilience, and sustain competitive differentiation in regulated industries.

To navigate talent constraints, economic uncertainty, evolving regulations and budget pressures, Expleo adopts a two-pronged approach across every engagement. First, we embed AI-enabled delivery models, leveraging intelligent agents alongside skilled talent to delivery high-value, outcome and impact-based solutions. Second, we are driving a continuous, organisation-wide AI 360 upskilling initiative to strengthen governance, enhance regional execution, and ensure sustained competitiveness for clients across industries.

During FY 26, we continued to see compelling demand for our services across the markets. The opportunity for specialized testing services, automation, and digital services also continues to see traction. Digital services for FY 26 contributed 50.05% of our total business, as against 48.09% for the last year. Our continued investments in artificial intelligence and digital transformation are translating into revenue traction, with AI and AI-enabled services creating scalable growth opportunities across the portfolio.

Utilization remained at optimal levels, project SLAs were consistently met, and cash generation from operations increased. In addition, the AI training initiative launched last quarter has begun to show encouraging results, driving measurable improvements in operational efficiency across multiple teams. We continue to invest in our people, skills, and partnerships.

Revenue from operations grew by 8.1% Y-o-Y. Digitech contributed a growth of 12.8% while Engineering recorded a degrowth of 8.2% as volumes dropped due to headwinds in the Auto industry. Revenue growth was primarily driven by new project wins in the UK region, ramp-up in existing accounts, increased volume in Europe, and new client additions in the Middle East.

We added 42 new customers during fiscal 2026 as compared to 27 new customers during fiscal 2025.

Revenue growth in reported terms includes the impact of currency fluctuations. We, therefore, additionally report the revenue growth in constant currency terms, which represents the real growth in revenue, excluding the impact of currency fluctuations. We calculate constant currency growth by comparing current-period revenues in respective local currencies converted to INR using prior-period exchange rates and comparing the same to our prior-period reported revenues. Our revenues in reported currency terms forfiscal 2026 is Til,080 Mn, a growth of 8.1%. Our revenues for fiscal 2026 in constant currency had a degrowth of (0.4%) primarily due to the slowdown in the Auto industry.

Revenue from Europe region is up by 3% Y-o-C mei nly from volume increase.

Revenue from India region is lower by 1% due to project closure and a one-time license revenue in FY 25.

Revenue from APAC region is lower by 1% due to ramp down in a banking project.

BFSI: Revenue increased by 3%, primarily driven by higher volumes from key accounts in the European region, ramp-up of existing engagements in the Middle East, and onboarding of new clients.

Automotive: Revenue declined by 3% due to lower business volumes across the automotive sector.

Group Business: Revenue from group remained stable at 35% of total revenue, reflecting continued strength in intra-group engagements.

Total expenditure is lower by 2.0% from 86.3% in fiscal 2025 to 84.3% in fiscal 2026, predominantly from G&A which is lower by 1.3% and cost of sales which is lower by 0.7%.

The cost of sales comprises of employee cost and subcontracting cost. The cost of sales is lower by 0.7% primarily due to effective cost management by improved bench utilization, optimized deployment through juniorisation, and conversion of subcontractors to full-time employees, partially offset with wage increments.

The selling and marketing expenses as a percentage of revenue remain stable at 0.2% between the two fiscal years.

The general and administrative expenses as a percentage of revenue have decreased by 1.3% in fiscal year 2026 primarily due to reduction in facilities cost, administrative expenses, and other discretionary expense.

Contribution towards corporate social responsibility (CSR) was ^25.55 Mn and ^24.83 Mn for FY 2026 and FY 2025 respectively.

Other income primarily includes gain/loss on investments, foreign exchange gain/loss on forward contracts, foreign exchange gain/loss on translation of other assets and liabilities and interest on income tax refund. Other income for fiscal 2026 includes interest (pre-tax) on income tax refund of TI2.21 Mn on account of orders received under Section 250 of the Income-tax Act, 1961, from the income tax authorities in India for certain assessment years. Interest income and gain on mutual funds in fiscal 2026 has increased as compared to fiscal 2025 primarily due to increase in investible base and increase in yield on investments. We use foreign exchange forward contracts to hedge our exposure against movements in foreign exchange rates.

Finance cost is on account of leases. The lease payments are discounted using the interest rate implicit in the lease using the incremental borrowing rates in the country of domicile of these leases.

We have provided for tax liability both in India and overseas. The Taxation Laws (Amendment) Act, 2019, has introduced Section 115BAA wherein a domestic company can exercise option for a reduced rate of corporate tax without claim of certain deductions. For the financial year 2025-26, the income tax expense of the Company has been recognized by applying the provisions of Section 115BAA of the Income-tax Act, 1961.

Effective tax rate is generally influenced by various factors including non-deductible expenses, exempt non-operating income, overseas taxes, tax reversals and provisions pertaining to prior periods, changes to tax regulations, and other tax deductions. Advance tax paid during the year is adjusted with Provision for Taxes and the net position is reported in the financials.

During the year 2025-26, the effective tax rate has dropped from 25.4% to 24.6% mainly on account of reversal of tax pertaining to prior years and tax impact of non-deductible expense.

Our principal sources of liquidity are cash and cash equivalents and the cash flow generated from operations. We have no outstanding borrowings. We believe our working capital is sufficient for our requirements.

Our growth has been financed largely through cash generated from operations. Our cash flows are robust. Our operating cash flows have increased in fiscal 2026 as compared to fiscal 2025 mainly on account of increase in net profit adjusted for non-cash items, better working capital management, and lower net income tax payments due to higher tax refunds.

Consolidated cash and investments of ^ 3,757.49 Mn comprise cash and cash equivalents.

These have been discussed in detail in Note 2.24 to the standalone financial statements in this Integrated Annual Report.

There were no significant events that occurred after the Balance Sheet date apart from the ones mentioned in ‘Material changes and commitments affecting financial position between the end of the fiscal and date of the report in the Boards report in this Integrated Annual Report.

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector-specific financial ratios.

Our client-centric approach continues to create high levels of client satisfaction. We, along with our subsidiaries, added 42 new clients in fiscal 2026 compared to 27 new clients in fiscal 2025. Our total client base at the end of the year stood at 203. The client segmentation, based on the last 12 months revenue for the current and previous years, on a consolidated basis, is as follows:

We have one class of shares - equity shares of par value ^10 each. Each holder of an equity share is entitled to one vote per share held. During the year, there is no movement on Share Capital.

The movement in retained earnings was on account of profit earned during the year and payment of dividends.

Additions to gross block were mainly on computer equipment, building, and leasehold improvements.

Deletions to gross block were on account of termination of leasehold properties Right-of-Use (ROU) assets in Coimbatore and Bengaluru office premises.

The change in intangible assets is on account of depreciation.

Days Sales Outstanding (DSO) was 91 days for the year ended March 31, 2026, compared to 96 days in the previous year.

Our cash and cash equivalents comprise deposits with banks with tenure ranging from 7 days to 90 days, and the returns are monitored periodically.

We have not provided any loans in the current year. There was partial repayment of a loan provided to related party in the current year.

Earnest Money Deposit (EMD) made with the buyers against performance security deposit are returned after the contract is signed in the normal course of business. Unbilled revenues are classified as financial assets as right to consideration is unconditional and is due only after passage of time.

Withholding taxes and others represent credits that can be availed against local taxes payable in various countries.

Net deferred tax asset comprises of deferred tax assets less deferred tax liabilities. Deferred tax asset is primarily on account of temporary difference in the lease liabilities, allowances for trade receivables, gratuity, and compensated absences partially offset by Deferred tax liability on property, plant, and equipment.

Our net profit earned from providing software development and other services outside India is subject to tax in the country where we perform the work. Most of our taxes paid in countries other than India can be claimed as credit against our tax liabilities in India.

Liabilities for accrued compensation to employees include the provision for incentives, retention bonus, and long services award payable to the staff. Accrued expenses represent amounts accrued for other operational expenses. Compensated absences are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation.

Withholding and other taxes payable represent local taxes payable in various countries in which we operate. Invoicing in excess of revenues are classified as unearned revenues. The Company operates the defined contribution plan for provident fund and social security schemes, in accordance with local laws. We provide for gratuity, a defined benefit retirement plan ("the Gratuity Plan"), covering eligible employees in I ndia in compliance with the new Labor Code which came into effect from November, 2025. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation, or termination of employment, of an amount based on the respective employees salary and the tenure of employment. The fund is managed by LIC, the fund manager. The Company intends to continue to contribute to the defined benefit plans based on short term expected pay-outs in line with the actuarys recommendations.

Provision for customer contract liability is recognized as a liability on the balance sheet date and reduced (recognized as revenue) as the performance obligations are met. It represents an obligation to fulfil that performance in future.

During the year, the Company closed its leased office premises in Coimbatore and Bengaluru. Consequently, the related lease liabilities and corresponding Right-of-Use (ROU) assets recognized in the books were terminated in accordance with the applicable accounting standards.

Expleo has aligned its current systems of internal financial control with the requirement of Companies Act, 2013, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The Internal Control - Integrated Framework (the 2013 framework) is intended to increase transparency and accountability in an organizations process of designing and implementing a system of internal control. The framework requires a company to identify and analyse risks and manage appropriate responses. Internal financial control systems include the design, implementation, and maintenance of adequate internal financial controls that are operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

In designing and evaluating our disclosure controls and procedures, the Management recognizes that any controls and procedures, no matter how well conceived and operated, can only provide reasonable assurance that the objectives of the disclosure controls and procedures are met. Based on their evaluation as of the end of the period covered by this Annual Report, our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in filings and submissions, is recorded, processed, summarized, and reported within the time periods specified, and that material information related to us and our consolidated subsidiaries is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions about required disclosure.

Deloitte Haskins & Sells LLP, the statutory auditors of Expleo Solutions Limited, has audited the financial statements included in this Annual Report, and as part of their audit, has issued their report on the Companys internal financial controls (as defined in Section 143 of Companies Act, 2013), on the effectiveness of our internal financial controls over Standalone and Consolidated financial statements as of March 31, 2026. Expleo Solutions Limited has appointed Sundaram & Srinivasan to oversee and carry out internal audit of its activities. The audit is based on an internal audit plan, which is reviewed each year and approved by the Audit Committee. The CEO and CFO certification provided in the CEO and CFO Certification section of the Annual Report discusses the adequacy of our internal control systems and procedures.

We operate across multiple geographies and regulated industries, each presenting distinct risks. These include cybersecurity threats, Al-specific issues such as bias, opacity and hallucination, talent attrition, evolving regulations around data privacy and Al ethics, and macroeconomic uncertainties.

We maintain a comprehensive Enterprise Risk Management framework with periodic board-level reviews. Mitigation measures include ISO-certified processes, advanced threat detection, Al upskilling programmes, hedging policies, data governance practices, and portfolio diversification. Internal audits and compliance monitoring ensure proactive risk management.

The details pertaining to Risk and Concern, including the requisite certification, have been outlined in Point No. 39 of the Boards Report of the Company for the financial year 2025-26.

At Expleo, our people continue to be at the core of our growth strategy. We remain focused on building a high-performing, inclusive, and future-ready workforce through targeted investments in capability building, leadership development, and employee experience. As of March 31, 2026, our workforce stood at 4,177 employees with 35% women representation.

Our Human Potential framework is anchored in structured talent practices, including High Potential (HIPOT) identification, succession planning, and targeted development interventions. These initiatives have enabled us to build a strong leadership pipeline aligned with evolving business needs while fostering internal mobility and career progression.

We continue to invest in future-ready skills and leadership capabilities with a clear focus on ensuring that learning interventions translate into measurable on-the-job impact.

Employee engagement remains a key priority driven through continuous listening, leadership connect platforms, and structured recognition initiatives. These efforts have strengthened a culture of ownership, collaboration and performance excellence ensuring employees feel valued and empowered. The Employee Engagement Champions Club, a peer-led initiative, plays a critical role in driving engagement at the grassroots level enabling a more responsive and inclusive workplace culture.

Our Performance and Rewards framework reinforces a high-performance culture by recognizing both outcomes and behaviours aligned to organizational values. During FY 2025-26, 44% of employees were recognized through formal Reward & Recognition programs, reflecting the scale and inclusivity of our approach.

Talent sustainability remained a strategic focus supported by a proactive and data-driven approach to retention.

• Retention Champions program to proactively address attrition risks

• Manager Effectiveness Scorecards to strengthen leadership accountability

• HIPOTS program to identify and develop future leaders

• Insights Exchange Program (IXP) to enhance cross-functional collaboration

We continue to enhance employee experience through flexible work practices supported by digital enablement. Our Employee Assistance Program (EAP) provides confidential counselling and wellbeing support complemented by wellness initiatives and reimbursement programs promoting preventive health and fitness.

A structured communication framework including "Reflections", town halls, and leadership connect sessions, enables open dialogue and transparency. Insights from these forums are systematically translated into actionable improvements, strengthening trust and engagement across the organization.

In 2025, as part of our ongoing commitment to strengthening our workplace practices, we adopted the Incredible Workplaces (IWP) assessment framework which has provided us with deeper insights into employee perspectives on our culture, leadership, ways of working, and overall organizational direction. These insights have helped identify key strengths while also highlighting opportunities for improvement, leading to focused and meaningful actions.

• Incredible Workplaces score for 2025 is 78% with a 95% participation rate.

• 86% of employees have a clear understanding of the organizations mission and vision.

• 85% of employees believe that our organizations core values are communicated clearly and consistently.

• 83% of employees feel supported by their colleagues in their day-to-day work.

• Expleo India is certified as an Incredible Workplace™ for Dec 2025 - Nov 2026.

Expleo upholds the highest standards of ethics, transparency, and professional conduct. Our "Confidentially Speaking" whistleblowing program provides a secure platform to report concerns, reinforcing accountability and governance. We maintain a zero-tolerance approach toward sexual harassment and are fully compliant with the POSH framework. A structured internal committee ensures all cases are handled with confidentiality, fairness, and sensitivity, reinforcing a safe and respectful work environment.

The Whistle Blower and Reports Management Policy of the Company can be accessed through the following link: https://investors.expleo.com/wp-content/documents/Whistle-Blower-and-reports- management-policy.pdf

At Expleo, we remain committed to building a more inclusive, equitable, and supportive workplace for all employees, with a strong focus on gender diversity and employee well-being.

During the year, we strengthened our DE&I efforts through initiatives such as manager sensitization programs, mandatory DE&I learning, women-focused recruitment drives, leadership coaching and mentorship, wellness programs, and regular employee connect sessions. We also continued to promote inclusion through LGBTQ+ awareness initiatives, panel discussions, and inspirational talks by global women leaders.

Our commitment to creating an inclusive culture was further recognized externally through awards including Best Organization for Women by UBS and Economic Times, along with individual recognitions for Woman Icon of the Year and Woman Leader of the Year at the UBS forums.

Expleo also continued to maintain a safe and respectful workplace through regular POSH awareness and training programs conducted in line with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. During FY 2025-26, no complaints related to sexual harassment were reported or pending resolution.

Expleo has strengthened its market presence through focused initiatives around AI, data, and digital assurance. Our branding continues to be guided by the powerful combination of our longstanding ethos "Think Bold, Act Reliable" and the more recent, "The Power of AI" campaign. This positioning cuts through AI hype and focuses on practical outcomes, helping organisations deliver what truly matters to their business and stakeholders by leveraging AI as a multiplier for performance, quality, speed, and resilience. It reinforces our role as a trusted engineering and technology partner that combines innovative thinking with disciplined, reliable execution.

Participation in industry forums, and continued engagement through client roundtables and leadership discussions, consistently highlights how we enable bold ambitions while safeguarding trust through responsible AI and robust assurance practices.

Our focus on managerial capability continues to be validated externally. Expleo has been recognized as a "Company with Great Managers" for four consecutive years, with three managers featured among the Top 100 Great Managers, reflecting the strength and consistency of our leadership practices.

Expleos approach to ESG is grounded in responsible technology adoption and ethical business practices. As AI becomes more central to enterprise systems, we are focused on enabling clients deploy technology in a manner that is secure, transparent, and compliant.

Our responsible AI frameworks and governance-led delivery models support the development of systems that are explainable and auditable. Extending this approach beyond enterprise use cases, we also supported a CSR initiative with IIT Madras focused on sensor-based solutions for urban infrastructure safety, including real-time detection of gas leaks and intrusions in the pipeline.

Investments in talent development and data governance further reinforce a long-term commitment to sustainable and responsible growth. By aligning innovation with accountability, we aim to contribute to a technology ecosystem that is both progressive and trustworthy.

More details on the ESG Vision and Ambition of the Expleo Group can be accessed here:

https://expleo.com/global/en/wp-content/documents/EXPLEO Sustainability Report 2024 EN.pdf

Digital Assurance enables organizations to innovate with confidence by ensuring quality, security, resilience, and compliance across the digital lifecycle. It accelerates transformation initiatives while reducing business risk and improving delivery predictability.

Sophia is Expleos AI-powered Digital Assurance platform that automates quality engineering through intelligent agents. It enables faster releases, higher quality, lower costs, and continuous assurance across the software lifecycle.

Digital Engineering helps organizations modernize software delivery through AI, automation, cloud-native development, and DevSecOps. It accelerates innovation, improves productivity, and enables faster time-to-market.

CodePle is Expleos AI Software Engineering platform that transforms planning, coding, unit testing, documentation, and release management. It enables teams to build better software faster with improved quality and efficiency.

Expleo helps organizations define and execute digital and AI transformation strategies aligned to business goals. We combine consulting, industry expertise, and innovation to accelerate growth and business value realization.

Quasar is Expleos Agentic AI Business Transformation platform that combines AI agents, enterprise knowledge, and intelligent workflows. It enables smarter operations, faster decisions, and scalable Al-driven business transformation.

The details pertaining to Research and Development and Technology Absorption, have been outlined in Point No. 20(b) of the Boards Report of the Company for the financial year 2025-26.

Expleo has established a Compliance Framework that follows a phased approach. It starts with establishing legal, contractual and security requirements to be complied with, internal communication and creating awareness on these requirements, integration of requirements with existing quality, security and process framework for ongoing compliance, monitoring and audit for ensuring compliance, periodic assessment of the maturing level of compliance processes and reporting and improvement of QMS and ISMS. The compliance framework is independently assessed and certified by external certification bodies on an annual basis. Independent assessments are done as part of ISO 9001, ISO 27001, AS 9100, ISO 17025, TISAX, PCI DSS and SSAE 18/ISAE3402 certifications.

The details on Independent Assessment can be referred to point number 39 of Boards Report of the Company for the FY2025-26.