Hariyana Ship Breakers Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

India is a dominant player in the global ship-breaking industry, with Gujarat being home to some of the largest and most prominent ship-recycling yards. The Alang-Sosiya ship recycling yard in Gujarat is recognized as one of the worlds largest ship recycling centres. Ship breaking, also referred to as ship demolition, ship recycling, or ship cracking, involves the dismantling of retired vessels to recover valuable scrap metal and other reusable materials.

The global trade and shipping industry has witnessed consistent growth in recent years, driven by increasing globalization and industrialization. This growth has resulted in a corresponding increase in shipbuilding activity. However, ships generally have an operational life of around 25 to 30 years, following which they are typically retired due to factors such as age, safety considerations, economic viability, damage, or accidents. Decommissioned vessels are generally auctioned and subsequently sent to ship-recycling yards, where they are dismantled and processed for recovery of scrap metal and other materials. The duration and complexity of the dismantling process depend on the size, type, and condition of the vessel and can be both labour-intensive and time-consuming.

With increasing emphasis on worker safety and environmental protection, the Government of India has introduced various regulatory frameworks to improve practices in the ship-recycling sector. Key regulations include the Ship Breaking Code (Revised) 2013 and the Recycling of Ships Act, 2019, which establish standards relating to safe and environmentally sound ship recycling practices. In line with these regulatory requirements, ship-recycling yards in India are increasingly adopting improved technologies, machinery, and operational practices to enhance safety, efficiency, and environmental compliance. These include the use of advanced cutting equipment, improved waste-management systems, and mechanization of key processes. In addition, enhanced safety protocols, improved personal protective equipment, periodic safety audits, and worker training programmes are increasingly being implemented across the industry.

The ship-recycling industry also has a significant linkage with Indias steel sector, as recovered ferrous scrap and re-rollable steel from dismantled vessels contribute to the domestic availability of steel-making raw materials. Indias steel industry is closely associated with the countrys economic and infrastructural development, with steel consumption serving as an important indicator of industrial growth. Steel is extensively used across sectors such as construction, transportation, power generation, petrochemicals, and fertilizers. Indias position in the global steel market continues to strengthen through the establishment of modern steel mills, expansion of production capacities, modernization of existing facilities, improved energy efficiency, and greater integration with global raw-material markets. These developments reinforce the importance of both the ship-recycling and steel industries to Indias broader industrial and economic growth.

Global Overview:

The global ship recycling industry continued to evolve during FY 2025-26, supported by the ageing global merchant fleet, fleet modernisation and increasing emphasis on environmentally sustainable and responsible recycling practices. The industry, however, remained subject to fluctuations in freight rates, second-hand vessel prices, newbuilding activity, availability of vessels for recycling and prevailing steel prices.

The global maritime sector continued to experience volatility arising from geopolitical developments, changes in trade routes, freight market conditions and supply-chain disruptions. These factors influenced vessel utilisation and, consequently, the timing of vessels entering the recycling market. UNCTADs Review of Maritime Transport highlights the continuing uncertainty and volatility in global maritime transport.

A significant development for the ship recycling industry was the entry into force of the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships on June 26, 2025. The Convention is expected to strengthen standards relating to safe working conditions, hazardous-material management and environmental protection, thereby supporting the transition towards more formalised and sustainable ship recycling practices.

Ship recycling activity remains concentrated in a few major recycling countries. India, Bangladesh and T?rkiye accounted for approximately 80% of global ship recycling in 2025, highlighting the continued importance of these markets in the global recycling ecosystem.

The global steel industry remained challenging during FY 2025-26, with subdued demand in several major economies, excess production capacity, geopolitical uncertainties, trade-related measures and volatility in raw-material and energy costs affecting market conditions.

The World Steel Associations April 2026 outlook projects global steel demand growth of approximately 0.3% in 2026. The subdued global outlook reflects continued weakness in some major markets and a gradual rather than broad-based recovery in steel consumption.

The global steel industry is also undergoing a structural transition towards lower-carbon production, increased scrap utilisation and greater resource efficiency. These developments are expected to increase the importance of recycled steel within the broader circular economy.

Domestic Overview & Market Size:

India continued to strengthen its position as a leading global ship recycling destination during FY 2025-26. According to UNCTAD data, Indias ship recycling volume increased to approximately 2.99 million gross tons in 2025 from 1.86 million gross tons in 2024, representing an increase of nearly 60%. This reflects Indias growing competitiveness and increasing role in the global ship recycling industry.

The Indian ship recycling industry is supported by the countrys established recycling infrastructure, skilled workforce, availability of downstream steel-consuming industries and strong domestic demand for recovered steel. The industry is also undergoing a transition towards higher standards of safety, environmental management and regulatory compliance, particularly following the implementation of the Hong Kong Convention.

Going forward, the Indian ship recycling industry is expected to benefit from the ageing global fleet, increasing fleet replacement requirements and the growing emphasis on circularity and resource efficiency. At the same time, recyclers will need to remain focused on compliance, occupational health and safety, environmental management and efficient utilisation of recycling capacity.

India continued to remain one of the strongest growth markets for steel globally. According to the World Steel Association, Indian steel demand is projected to grow by approximately 7.4% in 2026, significantly higher than the expected global growth rate. Growth is expected to be supported by infrastructure development, construction activity, automotive demand and continued investment in the Indian economy.

The Indian steel industry nevertheless faces challenges arising from fluctuations in raw material prices, imported steel, energy costs, global trade developments and competitive pricing pressures. During FY 2025-26, domestic steel demand remained resilient, although market participants continued to monitor import competition and movements in international steel prices.

For the ship recycling industry, steel prices remain a critical factor as recovered steel represents a significant component of the value derived from recycled vessels. Accordingly, changes in domestic steel prices, vessel acquisition prices, foreign exchange rates and operating costs can have a direct bearing on the profitability of ship recycling operations.

Government Initiatives

The Government of India has undertaken several initiatives aimed at strengthening the ship recycling and steel sectors, with a focus on sustainability, resource efficiency, domestic value addition, occupational safety and environmental protection.

The Recycling of Ships Act, 2019 provides a regulatory framework for the safe and environmentally sound recycling of ships in India. The global entry into force of the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships on June 26, 2025 represents a significant development for the industry and is expected to further strengthen standards relating to hazardous materials management, occupational health and safety and environmental protection.

The Government has also promoted the development of a structured domestic scrap ecosystem through the Steel Scrap Recycling Policy, which seeks to enhance the availability and efficient utilisation of domestically generated steel scrap. This policy is relevant to the ship recycling industry as end-of-life vessels represent an important source of recyclable ferrous and non-ferrous materials.

OPPORTUNITIES AND THREATS

OPPORTUNITIES:

• Ageing Global Fleet and Fleet Renewal: The increasing age of the global merchant fleet and the gradual replacement of older, less efficient vessels are expected to provide a sustainable pipeline of vessels for recycling over the medium to long term.
• Growing Steel Demand in India: Indias strong infrastructure development, construction activity, automotive sector and overall economic growth are expected to support steel demand. This provides a favourable environment for the ship recycling industry, where recovered steel represents a significant component of the value derived from recycled vessels.

• Growth of the Circular Economy: Increasing emphasis on resource efficiency, recycling and sustainable utilisation of raw materials is enhancing the strategic importance of ship recycling. The industry contributes to the circular economy by recovering steel and other materials from end-of-life vessels and reducing the requirement for virgin raw materials.
• Regulatory Developments: The implementation of the Recycling of Ships Act, 2019 and the entry into force of the Hong Kong Convention are expected to encourage higher standards of environmental management, occupational safety and responsible recycling. Companies with compliant infrastructure and established processes may be better positioned to benefit from this transition.
• Indias Global Position: Indias established ship recycling ecosystem, skilled workforce and domestic steel demand provide a strong foundation for maintaining and potentially strengthening its position in the global ship recycling market.

THREATS:

• Volatility in Steel Prices: Ship recycling economics are closely linked to steel prices. Significant fluctuations in domestic and international steel prices can affect vessel acquisition prices, realisations and operating margins.
• Availability and Cost of Vessels: The availability of vessels for recycling is influenced by freight rates, second-hand vessel prices, newbuilding activity and global shipping conditions. Strong freight markets may encourage shipowners to continue operating older vessels, thereby reducing recycling volumes.
• Global Economic and Geopolitical Uncertainty: Changes in global trade, geopolitical tensions, disruptions to shipping routes and fluctuations in freight rates can materially influence vessel deployment and recycling decisions.
• Increasing Regulatory and Environmental Requirements: Compliance with evolving environmental, health and safety regulations may require continued investment in infrastructure, technology, waste management and employee safety, resulting in higher operating and capital expenditure.
• International Competition: Competition from other major ship recycling destinations, particularly Bangladesh, Pakistan and T?rkiye, may affect vessel procurement and pricing.
• Foreign Exchange Fluctuations: Since international vessel transactions may involve foreign currencies, fluctuations in exchange rates can affect acquisition costs and overall profitability.

Management Perspective

The Management believes that the long-term prospects of the ship recycling industry remain favourable, supported by fleet ageing, increasing fleet renewal, Indias growing steel demand and the global transition towards a circular economy. At the same time, the industry remains sensitive to steel prices, vessel availability, freight-market conditions, regulatory requirements and global economic developments. The Company remains focused on prudent procurement, operational efficiency, regulatory compliance, environmental stewardship and occupational health and safety to effectively manage these challenges and capitalise on emerging opportunities.

Segmental Review

The Groups business segments are identified based on the geographic locations of its units and the internal business reporting system as per Ind AS 108. Business segments of the company are primarily categorized as: Mumbai and Bhavnagar.

This Consolidated Segment Information includes Industrial Oxygen & Trading Segment pertains to subsidiary of the company.

Rs. In Lakhs

Particulars	Mumbai	Bhavnagar	Industrial Oxygen & Trading	Total
Segment Assets	15,004.18	522.50	0.98	15,527.67
Segment Liabilities	798.66	19.07	0.05	817.78
Revenue from External Source (Excluding Inter Segment Revenue)	1,428.28	349.92	-	1778.20
Segment Results Before Interest and Taxes	1,743.78	108.81	(0.05)	1,852.54

i. Mumbai:

During the year under review, the Mumbai Unit has performed well in term of net profit margin, this segment has achieved revenue of Rs. 1,428.28/- Lakhs and result achieved Rs. 1,743.78/- Lakhs.

ii. Bhavnagar:

During the financial year 2025-26, ship-breaking unit at Alang Ship Breaking Yard, Bhavnagar has achieved revenue of Rs. 349.92/- Lakhs as compared to 22.76/- Lakhs in the previous year. The result was amounting to Rs. 108.81/- Lakhs in the current year as compared to Rs. (163.43)/- Lakhs in the previous year. Throughout the year, the international market for old ships showed some volatility, but the management navigated these fluctuations carefully. They strategically timed their ship purchases and built up a robust inventory to position the company for better profitability in the future. Additionally, trading activities were conducted in Bhavnagar. Looking ahead, the management anticipates a stable shipbreaking industry, bolstered by an expected economic upturn that should drive higher demand for iron and steel. This positive outlook will support the companys continued growth trajectory.

iii. Industrial Oxygen & Trading:

This segment of the company pertains to the subsidiary of the company. This segment has not achieved revenue during the year and incurred loss of Rs. 0.05 Lakhs during the year under review.

OUTLOOK

India continues to maintain a leading position in the global ship recycling industry, with the Alang-Sosiya ship recycling cluster in Gujarat being one of the worlds largest ship recycling destinations. The industry plays an important role in Indias circular economy by facilitating the recovery and reuse of steel and other materials from end-of-life vessels, thereby contributing to domestic raw material availability and generating significant direct and indirect employment opportunities.

The Government of India continues to place emphasis on strengthening the sustainability, safety and environmental standards of the ship recycling industry. The implementation of the Recycling of Ships Act, 2019 and Indias alignment with the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, which entered into force on June 26, 2025, are important steps towards establishing safer, more environmentally responsible and internationally compliant ship recycling practices.

The industry is undergoing a gradual transformation, with increasing focus on modernisation of recycling facilities, environmental compliance, occupational health and safety, hazardous waste management and resource efficiency. Adoption of internationally recognised standards and best practices is expected to enhance the competitiveness and long-term sustainability of Indian ship recycling facilities.

At the same time, the sector continues to face challenges arising from fluctuations in vessel prices, steel prices, freight rates, availability of vessels for recycling, regulatory requirements and increasing environmental compliance costs. Investments in infrastructure, technology and specialised waste-management facilities will be important in addressing these challenges and improving operational efficiency.

The ship recycling industry also presents significant opportunities for India, particularly in view of the countrys growing steel demand and increasing emphasis on resource efficiency and circular economy principles. Strengthening collaboration among regulatory authorities, recycling yards, technical experts and other industry stakeholders can further support the development of a safe, efficient and globally competitive ship recycling ecosystem.

The Management remains positive about the long-term prospects of the industry, supported by Indias infrastructure development, increasing steel demand and the gradual transition towards more sustainable recycling practices. While near-term market conditions may remain influenced by vessel availability, steel prices and global economic developments, the underlying fundamentals of the industry remain favourable. The Company remains committed to operational efficiency, responsible recycling practices, regulatory compliance and sustainable growth, with a view to strengthening its position and creating long-term value for its stakeholders.

RISK AND CONCERN

Over and above the economic risks the shipping industry is impacted by numerous short term and regional factors, like weather changes, Oxygen Supply problems etc. This results in great amount of volatility in the freight market, which in turn impacts the Companys earnings. The global economy is in uncertain territory, and not showing signs of picking up sharply in shorter span of time.

Indias economy has also felt the impact of global economic uncertainties. Key risks for the industry include the global recessionary trend, economic slowdown, rising financial costs, and fluctuations in the availability and cost of raw materials like steel and labor.

The Company does not apprehend any inherent risk in the long run, with the exception of certain primary concerns that have afflicted the progress of our industry in general, like:

Shortage of Labour
Rising manpower and material costs,
Approvals and procedural difficulties.
Lack of adequate sources of finance.

The Companys risks are rooted in the shipbuilding industrys inherent dependence on global trade and the cyclical nature of related sectors like oil, natural gas, shipping, and transportation. Offshore Industry continues to be in the trough.

Macroeconomic Risks

Overcapacity and oversupply in the global steel industry as well as increased levels of imports may adversely affect steel prices, impacting profitability.

Operational Risks

The steel industry is capital-intensive and relies heavily on maintaining critical assets. It faces high fixed costs and price volatility in raw materials and energy. Disruptions in raw material supply can negatively impact profitability. Additionally, failures in critical information systems or servers could disrupt operations, and conventional maintenance practices may not ensure optimal equipment reliability, leading to unplanned operational interruptions.

Supply Chain Risk

The supply chain network is susceptible to physical and environmental damage, trade restrictions due to geopolitical tensions, and supplier disruptions. Ongoing infrastructure development and dependence on outsourced partners may also cause operational issues.

Safety Risk

Non-adherence to process and workforce safety requirements, safety laws and regulations may impact business continuity and reputation.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Internal financial control systems of the Company are commensurate with its size and nature of its operations. These have been designed to provide reasonable assurance with regard to 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 and disclosures.

Systems and procedures are periodically reviewed and these are routinely tested by Statutory as well as Internal Auditors and cover all functions and business areas. The Audit Committee reviews adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Companys risk management policies and systems. During the year under review, no material or serious observation has been received from the Statutory Auditors and the Internal Auditors of the Company on the inefficiency or inadequacy of such controls.

FINANCIAL PERFORMANCE & ANALYSIS

The Companys financial performance for the year ended March 31, 2026 is summarized below:

Standalone & Consolidated Ind AS Financial Results: Review and Analysis

Particular	Standalone FY 2025-26	Standalone FY 2024-25	Consolidated FY 2025-26	Consolidated FY 2024-25
Revenue from operations	349.61	22.45	349.61	22.45
Other Income	1856.98	817.55	1385.25	817.55
Total Revenue	2206.59	839.99	1734.86	839.99
Cost of raw materials consumed	-	-	-	-
Purchase of Stock-in-trade	-	-	-	-
Changes in inventories of finished goods, stock-in-trade, work-in-process	82.86	0.23	82.86	0.23
Manufacturing Expenses	41.71	35.76	41.71	35.76
Employee benefits expenses	29.16	34.80	29.16	34.80
Finance costs	248.29	278.85	248.30	278.85
Excise Duty	-	-	-	-
Depreciation and amortization expenses	109.46	111.08	109.46	111.08
Other expenses	90.87	140.95	90.92	82.93
Total Expenses	602.34	601.66	602.40	543.65
Exceptional Items (Provision for Doubtful Loans & Advances)	(1319.00)	-	(1319.00)	-
Profit / (Loss) before tax	285.25	238.33	(186.54)	296.34
Less: Current Tax	242.52	87.32	242.52	87.30
Less: Tax of earlier year	15.33	0.45	15.36	0.49
Less: Deferred Tax	(12.01)	(9.92)	(12.01)	(9.92)
Profit/(Loss) after tax before Share of Profit/(Loss) of Associates	39.40	160.47	(432.41)	218.47
Share of profit/(loss) from associates	-	-	471.78	(58.02)
Profit / (Loss) after tax	39.40	160.47	39.37	160.46
Other Comprehensive Income	0.76	11.41	0.76	11.41
Total Comprehensive Income for the year	40.16	171.88	40.13	171.87
Earnings Per Share (Face Value of Rs. 10/- each) - Basic	0.64	2.60	(7.01)	3.54
Earnings Per Share (Face Value of Rs. 10/- each) - Diluted	0.64	2.60	(7.01)	-

• Basic
• Diluted

Standalone Cash Flow Analysis

(Rs. In Lakhs)

Particular	FY 2025-26	FY 2024-25
Net Cash Flow from Operating Activities	(153.33)	(155.94)
Net Cash Outflow from Investing Activities	1547.15	322.46
Net Cash Outflow from Financing Activities	(203.31)	(454.92)
Net Cash Inflow/(Outflow)	79.24	(1,111.27)

Business Overview

The company is in the business of ship breaking, trading and investment activities. During the financial year 2025-26, the sales turnover of the company was Rs. 349.61/- Lakhs as compared to previous year Rs. 22.45/- Lakhs. The prices in Iron and steel industry are gradually getting stabilized, but foreign currency and fluctuations in value of Indian Rupee vis-a-vis US Dollar remains a concerning area for the company even in the current year.

Surplus funds are also invested in new avenues of earnings in the form of partnership with other entities like in Real Estate and Redeveloping firms. At present the Company has partnership in Hariyana Air Products with 95% share, Orchid Lakeview Developers with 33.33% share, Goyal Hariyana Realty with 50% share, Whitefield Projects with 40% share and Swastik Developers with 33.33% share. The management is hopeful that the Company can earn reasonable return on these investments.

Standalone

F.Y 25-26 closed with Revenues of Rs. 2,206.59/- lakhs, PBT Rs. 285.25/- lakhs and PAT of Rs 39.40/- lakhs.

Consolidated

F.Y 25-26 closed with Revenues of Rs. 1,734.86/- lakhs, PBT Rs. (186.54)/- lakhs and PAT of Rs. 39.37/- lakhs.

Revenue

Your Company reported Revenue of Rs. 2,206.59/- lakhs during the year as compared to Rs. 839.99/- lakhs of the previous year. Revenue of current year has increased by 162.69% as compared to previous year.

Finance Cost

Finance cost has decreased from Rs. 278.85/- lakhs in the previous year to Rs. 248.29/- lakhs.

Depreciation

Depreciation during the year decreased to Rs. 109.46/- lakhs from Rs. 111.08/- lakhs in previous year.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

Your Company treats its "human resources" as one of its most important assets. We continuously invest in attraction, retention and development of talent on an ongoing basis. Our thrust is on the promotion of talent internally through job rotation and job enlargement. We believe in harnessing its leadership and people capabilities through sharp focus and initiatives on talent development. The total number of permanent employees as on March 31, 2026 were 8.

We review our talent based on their performance and potential to assess their readiness for future roles of higher scale and complexity. We believe in developing our employees through multiple experiences requiring them to handle scale and complexity. We have instituted this through varied job rotation and project roles. We have put in place various recognition initiatives for our employees to reward them on their noteworthy performance and contribution. Social awareness and cultural/sports programs are arranged regularly to create interest in living a meaningful life and release tensions.

Our Company is committed to providing work environment that ensures every employee is treated with dignity and respect and afforded equitable treatment. The Company is also dedicated at promoting a work environment that is conducive to the professional growth of its employees and encourages equality of opportunity. To foster a positive workplace environment, free from harassment of any nature, we have institutionalized the Anti-Sexual Harassment Framework through which we address complaints of sexual harassment at the workplace. We follow a gender-neutral approach in handling complaints of sexual harassment and we are compliant with the law of the land where we operate. We have also constituted Complaints Committee to consider and address sexual harassment complaints in accordance with Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

SIGNIFICANT KEY FINANCIAL INDICATORS

For changes in 25% or more in key financial indicators as compared to the immediately previous financial year, refer note no. 5.14 to the Financial Statement for the year ended March 31, 2026.

CHANGE IN NET WORTH

The Companys Net worth stood at Rs. 13,827.94 Lakhs for the financial year 2025-26 as compared to Net worth of Rs. 13,788.54 Lakhs for the previous financial year 2024-25. In the current year, the Company earned a profit and hence change in return on Net worth of Company is 0.29% compared to previous financial year.

CAUTIONARY STATEMENT

Certain statements contained in the Boards Report and the Management Discussion and Analysis may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations. These statements reflect the Companys current objectives, projections, estimates, expectations and predictions and are based on assumptions and information available as on the date of this Report.

Actual results may differ materially from those expressed or implied in such forward-looking statements due to various factors, including changes in global and Indian demand and supply conditions, prices of finished goods, availability and prices of feedstock, cyclical demand and pricing in the Companys principal markets, changes in Government policies, laws and regulations, taxation regimes, economic developments in India and other countries where the Company operates, litigation and other business, economic or regulatory factors.

The Company does not undertake any obligation to publicly update, amend, modify or revise any forward-looking statements as a result of subsequent developments, information, events or otherwise.

The Management Discussion and Analysis contained herein does not constitute a prospectus, offering circular, offering memorandum or an offer or invitation to acquire or subscribe for any shares or securities of the Company, nor should it be construed as a recommendation to any investor to subscribe for, purchase or otherwise deal in the Companys securities.

CONCLUSION

At Hariyana Ship-Breakers Limited, innovation, sustainability and responsible business practices remain at the core of our efforts to build a resilient and sustainable enterprise. We continuously explore new opportunities and adopt the best available technologies and processes to enhance resource efficiency and develop materials that are sustainable, superior in quality and cost-effective.

Our focus remains on strengthening the Companys financial position, maintaining the highest standards of ethical and responsible business conduct, and creating long-term value for all stakeholders. Through these efforts, we remain committed to building a sustainable business and contributing towards a shared future of inclusive growth and prosperity.

On behalf of the Board of Directors For Hariyana Ship-Breakers Limited

Rakesh Reniwal Managing Director (DIN: 00029332)

Date: May 29, 2026 Place: Mumbai

Unnati Reniwal Director (DIN: 00041306)