Harrisons Malayalam Ltd Management Discussions

(ANNEXURE-B TO THE DIRECTORS REPORT)

OVERVIEW TEA

The tea production in India for the period 2025-26 stood at 1,357.59 million kilograms. Within the total output, the Crush, Tear, Curl (CTC) segment remained the dominant category, contributing 1193.64 million kilograms (87.92%) of the overall production. The Orthodox variety accounted for 145.64 million kilograms (10.73%), while Green Tea production stood at 18.31 million kilograms (1.35%).

This production trend reflects the continued predominance of CTC teas in the Indian tea industry, catering primarily to the domestic market, which has a strong preference for this category. Orthodox tea, although smaller in volume, holds strategic importance due to its demand in traditional export markets such as West Asia, Russia, and parts of Europe. Green tea, though contributing a relatively minor share, has been witnessing steady growth owing to rising health consciousness and increasing demand in both domestic and international markets.

The production mix underscores Indias ability to serve diverse consumer segments, balancing the mass-market demand for CTC teas with niche and premium categories like Orthodox and Green teas. (Source: Tea Board Website)

Outlook

The tea sector in India is expected to remain resilient in FY 2026–27, supported by stable domestic consumption and steady demand in key international markets. The production profile for 2025-26, with CTC teas comprising nearly 87.92% of the output, highlights the strong dependence on domestic consumption patterns, which continue to favor this category. This trend is likely to persist, with CTC production remaining the backbone of Indias tea industry. The Orthodox tea segment, while accounting for a smaller but growing share (now crossing 10%), will continue to play a critical role in sustaining export revenues. Traditional overseas markets such as West Asia, Russia, and parts of Europe are expected to drive demand, although global geopolitical and economic uncertainties may influence trade flows. Strategic initiatives to diversify into newer geographies, coupled with quality improvement measures, could provide further growth opportunities in this segment. The Green tea segment is anticipated to witness gradual expansion, fuelled by increasing health awareness and lifestyle changes among urban consumers in India, along with rising acceptance in export markets. Although its contribution to overall production is still modest, the long-term potential of this category remains significant.

Overall, FY 2026–27 is expected to be a period of cautious optimism for the Indian tea industry. While challenges remain in terms of costs and global market volatility, Indias diversified production portfolio highlighted by the uptick in both overall volume and the Orthodox segment during the last fiscal year and strong domestic consumption base provide a solid foundation for sustained growth.

OVERVIEW Rubber

The production of Natural Rubber (NR) in India during 2025 26 was 9,05,000 tonnes, compared to 8,75,000 tonnes in 2024 25, reflecting a 3.4% year-on-year increase. The domestic consumption of NR during 2025–26 stood at 14,27,000 tonnes, higher than the 14,10,000 tonnes recorded in the previous year. This indicates a stable yet high level of demand; notably, while the auto tyre sector experienced a 4% decline, this was offset by robust growth in the general rubber goods sector.

To meet this demand, imports of NR fell significantly to 4,59,000 tonnes in 2025 26, down 16.7% from 5,51,000 tonnes in 2024 25. With the rise in local output, domestic production successfully met approximately 63.4% of total consumption requirements. On the export side, while the Rubber Boards latest provisional panel data has not yet published the finalized indicate exports remain highly restricted due to the domestic shortfall and limited surplus availability. It is also important to note that while NR imports dropped, imports of compounded rubber increased sharply during this period. Overall, the industry continues to face the challenge of bridging the production–consumption imbalance, though favorable climatic conditions, stronger domestic prices, and improved scientific farming practices have helped push production upward and narrow the gap. (Source: Rubber Board, Provisional Figures, May 2026)

Outlook

The outlook for 2026–27 indicates that the Indian rubber sector is likely to continue its upward trajectory in output, heavily supported by state-backed incentives and strategic expansion. The concerted push to develop rubber plantations in non-traditional areas, particularly in the Northeastern states—which now account for over 1.8 lakh hectares of cultivation—is expected to further strengthen domestic resilience and systematically reduce reliance on imports.

Despite these positive production gains, India will continue to rely on imports to bridge the overarching structural demand supply gap. The consumption pattern is expected to remain firm, with the tyre industry continuing to anchor the majority (approximately 64%) of demand, alongside steady requirements from industrial and general rubber goods sectors. Risks for FY 2026–27 remain closely tied to climate variations in major traditional producing regions like Kerala, shifting global market prices, and the capacity utilization of the automotive manufacturing sector. However, the recent stabilization of domestic prices and a narrowing gap with international rates provide a cautiously optimistic and stable foundation for the coming financial year.

Risk and Concern

Inherent Vulnerabilities & Operational Complexities

The cultivation of tea and rubber remains fundamentally exposed to the unpredictable elements of nature and the accelerating impacts of climate change, making the continuous evolution of our harvesting and cultivation practices a core necessity. Both sectors are exceptionally labor-intensive and governed by stringent regulatory frameworks, which inherently complicate daily operations. As we move through FY 2025–26, our primary margin pressures continue to stem from escalating labour expenses, mandatory social welfare and infrastructure investments, and inflationary energy and raw material costs. Furthermore, acute seasonal labour deficits in specific geographies remain a persistent threat, often disrupting operational momentum during our most critical harvest windows.

Competitive Pressures from the Unorganized Sector

A major structural challenge for the organized plantation industry is the formidable footprint of the unorganized sector, which currently of the market. These small-scale growers operate with a substantial cost advantage, primarily because they accounts forasignificant fall outside the purview of the statutory social security and welfare mandates enforced by the Plantation Labour Act. As a fully compliant player in the organized sector, we face relentless cost-competitiveness pressures from these entities. This is further compounded by broader macroeconomic risks, including volatile global markets and aggressive competition from rival exporting nations.

Strategic Mitigation Priorities

To proactively navigate these structural headwinds and build robust resilience for FY 2025–26 and beyond, our strategic roadmap focuses on six key pillars:

Driving Labor Productivity: Deploying targeted mechanization and advanced agricultural technologies to offset labour shortages and optimize workforce efficiency.

Fostering R&D and Innovation: Investing in research to create differentiated, value-added tea and rubber products that elevate our brand positioning and capture higher margins across the value chain.

Championing Sustainable Agriculture: Scaling eco-friendly farming practices that reduce our environmental footprint while concurrently optimizing crop yields and maintaining uncompromising product quality.

Achieving Economies of Scale: Expanding both our proprietary and newly acquired plantation assets to drive operational synergies and improve overall cost efficiencies.

Securing the Supply Chain: Diversifying our supply networks and utilizing advanced forecasting models to better anticipate and absorb climatic or labour-driven operational shocks.

Accelerating Digitalization: Integrating robust data analytics and digital farm management tools to optimize resource allocation and empower real-time, data-driven decision-making across our estates.

Forward-Looking Outlook

Looking ahead, we anticipate a stabilization in global rubber prices. This, coupled with projected volume growth in both our tea and rubber yields from existing and newly integrated operations, positions us for strengthened financial performance. By anchoring our strategy in sustainability, digital innovation, operational excellence and shared happiness, we are fully equipped to navigate industry complexities. We remain confident in our trajectory to deliver sustainable growth, robust profitability, and continued socio-economic upliftment across the regions where we operate.

Human Resources

HML employs a total of 6,731 employees, as detailed in the table below:

Category	No. of Employees
Executive	180
Staff	296
Workers	6,255
Total	6,731

across its tea and rubber plantations. During the year under review, Harrisons Malayalam Limited received distinguished recognition through a series of prestigious awards and rankings, underscoring its commitment to excellence and sustainability.

Great Place to Work Recognition: Harrisons Malayalam Limited (HML) was ranked 21^st in "Indias Best Companies to Work For 2026" by the Great Place to Work Institute, in collaboration with The Economic Times. The company was also recognized among the Best Workplaces in the Agri Industry, underscoring its commitment to employee well-being.

In 2025, HML was recognized among the Top 10 Best Workplaces for Women, reflecting its strong commitment to providing a safe, secure, and inclusive environment for its women employees. The Company was also ranked among the Top 50 Best Workplaces for Millennials, underscoring its focus on fostering a supportive, engaging, and growth-oriented workplace culture for the younger workforce.

HML was honoured with the National Award for Outstanding Industrial Relations for the year 2024–25 by the All India Organisation of Employers (AIOE), an allied body of FICCI on December 12, 2025, in recognition of its exemplary industrial relations practices and sustained excellence in workforce management.

LEGENDS: In 2026, HML was also recognized as "Legends - Indias Best Companies To Work For 2026" Celebrating those who have ranked in "Indias Best Companies To Work For" for 10 or more years. This distinguished recognition made HML the first South Indian company to achieve this status in the category.

Industrial Excellence: Harrisons Malayalam Limiteds Arrapetta Factory was honoured with the Kerala State Industrial Safety Award 2025-26, marking the fourth consecutive year that the HML Tea factory has received this distinction.

The Company also received the First Place at the North American Gold Medal & Sustainability Awards 2025 for its Arrapetta GFBOP grade, marking the first time the Company has earned international recognition.

In addition, Harrisons Malayalam Limited won the prestigious Golden Leaf India Award (TGLIA) for its Arrapetta, Chundale, Achoor, Wallardie, Wentworth and Lockhart Tea Factory at the Southern Tea Competition—an award jointly organized by the Tea Board of India and the United

Planters Association of Southern India (UPASI), recognizing the finest quality South Indian teas. These recognitions collectively reflect

Harrisons Malayalam Limiteds unwavering focus on employee well-being, workplace excellence, and sustained operational performance.

This prestigious recognition reflects HMLs unwavering dedication to fostering a harmonious, respectful, and progressive workplace built on mutual trust, constructive employee engagement, and responsible employment practices.

The achievement reaffirms HMLs commitment to leading with care, innovation, and integrity while strengthening its legacy of excellence in industrial relations and sustainable business practices.

Internal Control System

HML has in place an adequate Internal Control system commensurate to its size and nature of operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding the assets from unauthorized use or loss, extending transactions with proper operation and ensuring compliance of corporate policies. Internal Control is supplemented by regular management review, documented policies and procedures, as also internal audits. The Company has an Audit Committee, details of which have been provided in the Corporate Governance Report. The Audit Committee reviews Audit Reports submitted by Internal Auditors. Suggestions for improvement are considered, and the Audit Committee follows up implementation of corrective actions. The Committee also meets the Companys statutory auditors to ascertain their views on the adequacy of internal control systems in the Company and keeps the Board informed of its major observations from time to time.

Finance

During the year under review, the Company has recorded revenue of Rs 539.08 crores from its operations as compared to Rs 513.91 crores for the previous year. The total revenue, including other income for the FY 2025-26 was Rs 562.93 crores as compared to Rs 525.73 crores for the previous year. The profit made by the Company for the FY 2025- 26 was Rs 24.50 crores as compared to Rs 10.26 crores for the previous year.

Key financial Ratios	As on March 31, 2026	As on March 31, 2025
Debtors Turnover	25.27	22.52
Current ratio	0.45	0.41
Debt-Equity Ratio,	0.60	0.65
Debt Service Coverage Ratio	1.18	0.74
Inventory turnover ratio	4.69	4.98
Net profit ratio	5.18	2.83
Trade payables turnover ratio	5.48	4.76
Net capital turnover ratio	(4.51)	(3.80)
Return on equity ratio	17.51	10.00
Return on capital employed (%)	14.59	11.03
Return on investment (%)	16.31	9.66
Return on Networth (%)	16.58	9.85
Operating Profit Margin (%)	7.38	5.38

The Performance of tea and rubber is detailed below.

Tea:

The Tea harvested from own gardens during FY 2025-26 is at 10,070 MT (9,824 MT in the FY 2024-25). Bought leaf operations in tea for FY 2025-26 is at 3,637 MT (2,095 MT in FY 2024-25). For the year ended March 31, 2026, the average price realized per kg of tea was Rs 172.44 as against Rs 168.55 realized during the Previous Year.

Rubber:

The Rubber harvested from own gardens stood at 4,341 MT during FY 2025-26 and is lower than 4,800 MT achieved during FY 2024-25. Bought operations in Rubber for the FY 2025-26 is at 4020 MT which is higher than the 3062 MT of FY 2024- 25. For the year ended March 31, 2026, the average price realized per kg of rubber was Rs 214.84 as against Rs 216.19 realized during the previous year. 140 hectares in Kumbazha Rubber Estate encroached by trespassers, continue to remain untapped.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations are "forward looking statements" within the meaning of applicable securities laws and regulations. Actual result could defer materially from those factors that could make a difference to the Companys operations include domestic and internal economic expressedorimplied.Significant conditions affecting demand and supply, commodity prices, changes in Government regulations, tax regimes and other statutes. Market data and product information contained in this Report have been based on information gathered from various published and unpublished reports and their accuracy, reliability and completeness cannot always be assured.