Filtron Engineers Ltd Management Discussions

INTRODUCTION:

Filtron Engineers Limited (Filtron or the Company) was, for over four decades, an established name in the process and plant equipment industry, providing quality equipment and turnkey systems to the Dairy, Food, Beverage and other processing industries from its facility at Chakan, Pune. Following a period of suspended trading, the Companys equity shares were revived for trading on BSE Limited with effect from January 08, 2025, and the Company thereafter recommended business operations.

The financial year under review, 2025-26, has been transformational for the Company. Pursuant to a Share Purchase Agreement, Mr. Tarak Bipinchandra Gor and Mr. Jayesh Sheshmal Rawal (the Acquirers) acquired control of the Company, followed by a preferential allotment of equity shares and an open offer to public shareholders in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. Concurrently, the Company diversified its business objects into the construction and infrastructure sector through the acquisition of the entire issued and paid-up share capital of Gabrielle Infra Speciality Private Limited (GISPL), which became a wholly-owned (and, given its scale, material) subsidiary of the Company with effect from December 17, 2025.

As a result, the Company today operates as a two-vertical group: (i) its legacy, standalone process and plant equipment business, which is at a nascent stage of revival; and (ii) a construction and infrastructure business carried out through GISPL, which has emerged as the dominant contributor to the Companys consolidated performance for FY 2025-26. This Report discusses both verticals, with emphasis on the construction and infrastructure business given its materiality to the Companys consolidated results.

INDUSTRY STRUCTURE AND DEVELOPMENT

Plant Equipment Industry

The process and plant equipment industry, in which the Companys standalone business has historically operated, continues to be driven by demand from the Dairy, Food and Beverage processing sectors for engineered equipment in stainless steel and other specialised metals. This industry rewards design capability, process technology, quality and consistency of performance, and remains an industry the Company intends to revive on a calibrated basis alongside its larger construction and infrastructure vertical.

Construction and Infrastructure Sector

The Indian construction and infrastructure sector sustained healthy momentum during FY 2025-26, aided by continued Government thrust on roads, urban infrastructure, industrial corridors, data centres and other core-sector assets, and by steady private capital expenditure in commercial, industrial and institutional construction. Growth in this segment continues to be underpinned by rapid urbanisation, expansion of the digital economy (which is driving strong demand for data centre construction), and Government programmes aimed at expanding housing, healthcare and education infrastructure. The sector remains competitively fragmented, working-capital intensive and sensitive to input costs, execution timelines and interest rate cycles, factors that are discussed further under Risks and Concerns below.

Opportunities

Potential synergies between the Companys legacy process-equipment expertise (Dairy, Food and Beverage sector) and its new construction capabilities, particularly in industrial/factory construction for processing-sector clients.

Revival of trading in the Companys shares and the change in management have improved investor visibility and market capitalisation, which can aid future fund-raising for growth.

The substantially enlarged capital base following the preferential allotments improves the Companys net worth and, in turn, its eligibility to bid for larger-tender contracts and to access institutional and bank funding.

Sustained Government thrust on infrastructure capital expenditure and Indias continuing urbanisation are expected to keep demand strong for general contracting, EPC and PMC services.

Threats

Integration risk in aligning with subsidiary, internal controls and financial reporting, within compressed timelines.

The construction and infrastructure sector is cyclical and sensitive to interest rates, input costs (steel, cement, labour) and the pace of Government capital expenditure.

The construction business is working-capital intensive; delays in client approvals/payments, cost overruns or project delays can adversely affect margins and cash flows.

SEGMENTWISE OPERATIONAL PERFORMANCE

During FY 2025-26, the Companys standalone business remained largely confined to its legacy process and plant equipment activity, which is at an early stage of revival and did not make a material contribution to profitability on a standalone basis. The Companys consolidated performance, by contrast, was overwhelmingly driven by the construction and infrastructure business carried out through Gabrielle Infra Speciality Private Limited (GISPL), which accounted for substantially all of consolidated revenue for the period following its consolidation. Formal Ind AS 108 operating-segment disclosures, where applicable, are provided in the Notes to the Financial Statements forming part of this Annual Report.

OUTLOOK

With GISPL now fully consolidated, the Company expects FY 2026-27 to be the first year in which the construction and infrastructure business contributes for a full twelve-month period, which should provide a more representative picture of the enlarged groups earnings capacity. The Company intends to leverage Indias continuing infrastructure capital expenditure cycle and the growing data centre and industrial construction opportunity to build GISPLs order book, while using the proceeds of its recent capital raise to strengthen its balance sheet and working capital position. The Company will also continue to evaluate a calibrated revival of its legacy process and plant equipment business as a complementary, if smaller, vertical. The Board and management remain focused on strengthening the enlarged groups governance, internal control and financial reporting framework to match its increased scale.

RISK AND CONCERNS

The Company remains exposed to a range of risks that could affect its operating and financial performance, which could be macro-economic, sector-specific, integration-related or operational in nature. The principal risks identified, together with the Companys mitigation approach, are set out below:

Type of Risk	Risk Particulars	Mitigation Strategy
Post-Acquisition Integration Risk	Integrating GISPLs operations, accounting systems, internal controls and reporting processes with those of a listed parent company, within a compressed timeline, carries execution risk.	The Board and Audit Committee are overseeing a structured integration process, including alignment of internal financial controls, and GISPLs financial statements are placed before and reviewed by the Audit Committee as a material subsidiary.
Project Execution and Working Capital Risk	Project delays, cost overruns and delays in client approvals/payments in the construction business can increase working capital requirements and pressure margins.	Close monitoring of project progress and client receivables, disciplined bid evaluation, and proactive follow-up on approvals and payments are used to manage cash flow.
Regulatory and Compliance Risk	The change in control, open offer, preferential allotments and new business objects have significantly increased the Companys regulatory compliance obligations under the Companies Act, 2013 and SEBI Listing Regulations.	The Company has reconstituted its Board and Committees, strengthened its compliance calendar, and engaged Statutory, Secretarial and Internal Auditors to support compliance across the enlarged group.
Macroeconomic and Sector Cyclicality Risk	Demand for construction and infrastructure services is sensitive to interest rate cycles, input cost inflation (steel, cement, labour) and the pace of Government capital expenditure.	The Company monitors macroeconomic and sector indicators and maintains flexibility in project selection to manage exposure to cyclical downturns.
Health, Safety and Site Risk	Construction sites carry inherent risks of accidents that could result in injury, reputational harm or financial loss.	GISPL follows a zero accident safety philosophy supported by ISO-certified processes, safety equipment and standard operating procedures at project sites.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place an internal financial control system commensurate with the size, scale and complexity of its operations, covering adherence to policies, safeguarding of assets, prevention and detection of fraud and error, and the accuracy and completeness of accounting records. The Companys Code of Conduct and Whistle-blower/Vigil Mechanism policies form an integral part of this control environment. Internal controls are tested for effectiveness by the Internal Auditor, and findings are reviewed by management and reported to the Audit Committee periodically. Following the acquisition of GISPL, the Company has commenced extending its internal financial control framework to the enlarged group, and GISPLs financial statements are reviewed by the Audit Committee in its capacity as a material subsidiary. The Board is of the opinion that, based on the assessment carried out during the year, the Companys internal financial controls were adequate and operating effectively during FY 2025-26.

OPERATIONAL AND FINANCIAL PERFORMANCE

A summary of the Companys standalone and consolidated financial performance for FY 2025-26, as compared to FY 2024-25, is set out below (Rs. in Lakhs, except per-share data):

Particulars	Standalone FY 2025-26	Standalone FY 2024-25	Consolidated FY 2025-26	Consolidated FY 2024-25
Total Revenue	72.01	47.65	7,679.08	47.65
Profit / (Loss) Before Tax and Exceptional Item	20.77	(29.96)	415.36	(29.96)
Profit / (Loss) for the year	20.77	(29.96)	415.36	(29.96)
Basic Earnings Per Share (Rs.)	0.10	(1.14)	2.06	(1.14)
Diluted Earnings Per Share (Rs.)	0.10	(1.14)	2.06	(1.14)

Standalone performance: On a standalone basis, total revenue increased to Rs. 72.01 lakh for FY 2025-26 from Rs. 47.65 lakh in FY 2024-25, and the Company reported a standalone profit before tax and exceptional items of Rs. 20.77 lakh, as against a loss of Rs. 29.96 lakh in the previous year, reflecting the early benefits of the Companys revived operations.

Standalone Financial Performance (Chart):

	Total Revenue	Profit / (Loss) for the year
FY 2024-25	47.65	-29.96
FY 2025-26	72.01	20.77

Consolidated performance: On a consolidated basis, total revenue increased significantly to Rs. 7,679.08 lakh for FY 2025-26, as against Rs. 47.65 lakh in the previous year (when the Company had no subsidiary), primarily reflecting the consolidation of GISPL. Consolidated profit before tax and exceptional items and consolidated profit for the year both stood at Rs. 415.36 lakh, as against a loss of Rs. 29.96 lakh in the previous year. This turnaround was driven entirely by the newly acquired construction and infrastructure business; publicly available quarterly disclosures indicate that the

Consolidated Financial Performance: FY 2024-25 vs FY 2025-26 (Chart):

	Consolidated Revenue	Consolidated Profit / (Loss)
FY 2024-25	47.65	-29.96
FY 2025-26	7,679.08	415.36

Capital structure: To fund and effect the GISPL acquisition and to raise fresh growth capital, the Company, during the year, increased its Authorised Share Capital from Rs. 3.50 crore to Rs. 85.00 crore and undertook preferential allotments comprising equity shares issued for consideration other than cash (as part-consideration for the GISPL acquisition), 0.5% Non-Convertible Compulsorily Redeemable Preference Shares issued similarly, and equity shares issued for cash to non-promoter investors. Full particulars of the allotments and the resultant issued, subscribed and paid-up capital are set out in the Boards Report and Notes to the Financial Statements.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Companys workforce has grown in FY 2025-26 following the consolidation of GISPLs construction personnel and project teams, in addition to the Companys existing standalone employees. The Company recognises that both the construction and process-equipment industries are labour- and skill-intensive, and that its people are central to executing projects safely and to the required quality standards. The Company is committed to fostering a safe, merit-based and collaborative work environment across its enlarged workforce, and continued to maintain cordial industrial relations throughout the year, with no material industrial disputes reported.

KEY FINANCIAL RATIOS

The key financial ratios for the financial year 2025-26 and comparison thereof with the financial year 2024-25 has been stated in the financial statement for the period ended March 31, 2026

DETAILS OF CHANGE IN RETURN ON NETWORTH

The Companys net worth changed materially during FY 2025-26, both due to the swing from a net loss in FY 2024-25 to a net profit in FY 2025-26, and, more significantly, due to the substantial infusion of equity capital through preferential allotments made during the year (including consideration-other-than-cash allotments made towards the GISPL acquisition and cash allotments to non-promoter investors).

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations or outlook may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied, whether as a result of new information, future events, changes in Government regulations, tax laws, economic and business conditions, competitive pressures, the pace of integration of the Companys newly acquired subsidiary, or other factors. The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by applicable law.

For and on behalf of the Board of Directors of Filtrons Engineers Limited

Sd/- Jayesh Sheshmal Rawal Managing Director DIN: 00464313 Place: Pune Date: September 08, 2026 C/o: Plot No.36, WMDC Industrial Area, Ambethan Road, Chakan, Pune-410501, Maharashtra, India