Harsha Engineers International Ltd Management Discussions

ECONOMIC OVERVIEW

Global Economic Overview

The global economy remained resilient in 2025, supported by easing inflation, gradual monetary policy normalisation and sustained investment momentum. According to the International Monetary Funds April 2026 World Economic Outlook, global real GDP growth was registered at 3.4% in 2025 and is projected at 3.1% in 2026 and 3.2% in 2027, reflecting a modest deceleration and a more fragile growth trajectory.

Despite this relative stability, underlying risks have intensified. Rising geopolitical tensions, including the ongoing conflict in the Middle East, along with evolving trade policies and supply chain realignments, are contributing to fragmentation and uncertainty across global markets. These developments are affecting sentiment, disrupting trade flows and complicating long-term investment decisions.

At the same time, a strong investment cycle continues to provide support, led by technology-driven capital expenditure. Investment in AI, semiconductors and digital infrastructure remains robust, supporting trade and production, particularly in Asia. Technology-related exports and supply chain diversification are reshaping global trade patterns, with countries repositioning themselves within new production networks.

Regional growth trends reflect these mixed dynamics. Emerging market and developing economies are projected to grow at 3.9% in 2026, before recovering to 4.2% in 2027, with emerging and developing Asia remaining the primary growth engine despite a gradual moderation. The Middle East and Central Asia are expected to experience volatility due to conflict-related disruptions, while Sub-Saharan Africa continues to demonstrate relatively steady expansion supported by structural reforms and investment flows.

In contrast, growth in advanced economies is expected to remain moderate, reflecting weaker momentum, demographic constraints and ongoing policy adjustments. While technology investment supports activity in select markets, broader industrial recovery remains gradual.

Looking ahead, the global outlook remains increasingly uncertain despite signs of resilience in certain regions. Growth dispersion across regions, elevated geopolitical risks, and persistent geoeconomic fragmentation are expected to weigh on medium-term prospects. However, continued investment in technology, supply chain realignment and gradual recovery in industrial demand are expected to support a more resilient and broad-based global expansion over time.

Indian Economic Overview

In 2025-26, the Indian economy sustained strong macroeconomic momentum despite an unsettled global environment. Growth remained anchored in domestic demand, infrastructure expansion and improving manufacturing activity, even as geopolitical tensions and commodity price volatility posed external risks.

Real GDP growth is estimated at 7.6%, reflecting resilience across services, steady consumption and continued investment momentum.

Real GDP Growth Projections (in %)

Continued policy emphasis on manufacturing scale-up, import substitution and supply chain localisation is reinforcing Indias position as a key global manufacturing destination.

Inflation during the year reflected a mixed trajectory. While earlier moderation was supported by improved supply conditions, renewed pressures emerged from firming energy and commodity prices. The Reserve Bank of India maintained a calibrated approach, balancing inflation control with growth support. Inflation is expected to remain within a manageable range, albeit sensitive to crude oil movements and global conditions.

Indias external sector remained broadly stable, supported by strong services exports and resilient remittance inflows. However, rising crude prices and global uncertainty are expected to exert pressure on the current account and currency stability. Nevertheless, India continues to attract steady foreign investment, supported by its growth outlook, expanding industrial base and improving the ease of doing business.

Economic progress remained broad-based. Services continued to expand, while manufacturing strengthened, supported by policy incentives and rising private participation. Increasing focus on energy transition, circular economy solutions and supply chain modernisation is creating new demand across industrial and engineering segments.

Looking ahead, GDP growth is projected at around 6.9% for 2026-27. While near-term risks remain, strong domestic fundamentals, sustained infrastructure investment and continued policy support position India to maintain stable, long-term growth.

Domestic demand remained the principal driver of growth. Private consumption held firm, supported by stable income levels and moderating inflation in the earlier part of the year, while sustained public capital expenditure continued to accelerate infrastructure creation and industrial activity. Government-led investments in logistics corridors, industrial clusters and urban infrastructure are strengthening demand across metals, mobility and engineering value chains.

INDUSTRY OVERVIEW

Global Bearings Market

The global bearings market continued to demonstrate steady growth, supported by expanding industrial activity, increasing automation, rapid technological advancement, and the growing adoption of electric vehicles and renewable energy systems. According to Bonafide Researchs Global Bearing Market Outlook, 2030, the market was valued at over USD 120.51 billion in 2024 and is projected to reach USD 179.34 billion by 2030, at a CAGR of 6.9% between 2025 and 2030.

Growth Drivers

Rising demand from the food processing and medical equipment sectors is becoming a significant driver of market growth. Expanding packaged food and beverage consumption is accelerating investment in processing and packaging machinery, where bearings are critical for hygiene, operational efficiency, and reliable performance. Food-grade stainless steel bearings are therefore increasingly preferred to meet stringent safety and regulatory standards.

The medical equipment segment is also contributing to sustained demand growth. Bearings perform a vital function in diagnostic systems, surgical power tools and other precision devices. Miniature bearings engineered for low noise, minimal friction, high accuracy and longer service life are especially important in medical applications, supporting steady growth across this segment.

(Source. https://www.precedenc eresearch.com/bearing-market)

Key Trends

Automotive Recovery with EV Shift

Global vehicle production is approaching 90 million units, with EVs accounting for roughly 25% of sales in 2025. While EVs require specialised insulated bearings, they reduce certain engine-related applications, tempering overall bearing demand during the transition phase.

Wind Energy Expansion

Rising onshore and offshore wind installations are driving demand for large- diameter, corrosion-resistant and sealed-for-life bearing solutions designed for harsh operating environments.

Raw Material Volatility

Fluctuations in alloy and energy prices continue to impact margins, making multi-sourcing and supply-chain resilience increasingly critical.

Smart and Predictive Bearings

Sensor-integrated bearings with real-time monitoring capabilities are gaining commercial traction. Predictive maintenance solutions improve uptime, lower inspection costs and create recurring service revenue opportunities.

Reshoring of Manufacturing

Industrial localisation across North America and Europe is supporting regional bearing demand, although steel supply constraints and skilled labour shortages continue to pose challenges.

Indian Bearings Market

The Indian bearings market continues to expand steadily, supported by increasing industrialisation, infrastructure development, manufacturing growth, and rising adoption of automation across industries. According to industry estimates, the market is expected to grow by approximately USD 853.9 million between 2024 and 2029, registering a CAGR of 3.2% during the period.

Key Market Trends

Rising demand I 1 for bearings with higher load capacity, lower friction and longer service life, supported by growth in automotive, EVs and industrial automation.

Initiatives such as Make in India are encouraging domestic production, reducing import dependence, and strengthening supply chains.

Increasing use of sensor-enabled bearings for realtime monitoring and predictive maintenance, particularly in automotive, railways, and heavy machinery.

Outlook

The medium-term outlook remains positive, supported by sustained growth in EVs, renewable energy, railways and industrial automation. Increasing adoption of advanced materials, smart technologies and application-specific designs is expected to enhance value addition and improve margins. Although raw material price volatility and cost pressures continue, India remains well positioned to strengthen its role as a global hub for bearing manufacturing over the coming decade.

(Source. https.//www.imarcgroup.com/india-bearings-market)

Global Stamping Market

The global metal stamping market was valued at USD 259.35 billion in 2025 and is projected to reach USD 377.45 billion by 2034, reflecting a CAGR of 4.26%. Growth is supported by sustained demand from automotive, medical devices, aerospace and consumer electronics, alongside increasing adoption of automation and advanced manufacturing technologies.

Growth is being driven by rising demand across the automotive sector, electric vehicles, medical devices, aerospace and consumer electronics. Expansion in the automotive and EV segments is increasing demand for stamped components used in structural and powertrain applications. Advancements in automation and CNC-enabled manufacturing are improving precision, productivity and scalability, while continued growth in consumer electronics is driving demand for lightweight, high-precision parts. Concurrently, the shift towards aluminium and advanced alloys in automotive and aerospace applications, combined with Industry 4.0 adoption such as IoT-based monitoring and predictive maintenance, is reinforcing overall market momentum.

Outlook

The metal stamping market is expected to register steady growth, driven by high-volume manufacturing demand and expanding applications in medical devices and lightweight components.

Raw material price volatility, environmental compliance costs and competition from additive manufacturing remain challenges; however, metal stamping is expected to retain its position as a cost- efficient solution for large- scale production.

indian Stamping Market

The Indian metal stamping market generated revenues of USD 5.2 billion in 2025 and is projected to reach USD 8.2 billion by 2033, registering a CAGR of 6.3% during 2026-2033.

Growth is driven by rising manufacturing activity, infrastructure expansion and increasing demand from automotive, industrial equipment and engineering sectors. By process, blanking was the largest segment in 2025, accounting for 38.46% of total revenues, reflecting its extensive use in high-volume component production.

Outlook

Indias metal stamping market outlook remains favourable, supported by policy initiatives such as Make in India and Atmanirbhar Bharat, which promote domestic manufacturing, infrastructure development and foreign investment. Increasing localisation,

a skilled workforce and regulatory reforms, including higher FDI limits in aerospace and defence, are expected to strengthen global partnerships and support sustained long-term growth.

Global Solar Market

The global solar market has expanded steadily in recent years, reflecting the accelerating shift towards renewable energy. The market was valued at

USD 282.25 billion in 2025 and is expected to reach USD 295.65 billion in 2026 and USD 342.55 billion by 2030, representing a CAGR of 3.7%. This growth is supported by favourable renewable energy policies, declining photovoltaic module costs, rising electricity demand, early adoption of grid-connected systems and continued expansion of utility-scale projects.

Outlook

The solar market is expected to maintain steady growth over the medium term. Expansion will be supported by rising net-zero commitments, increased investment in energy storage integration and wider adoption of bifacial and high- efficiency modules. The sector should also benefit from growing emphasis on decentralized generation, rooftop solar and smart grid infrastructure. Strong global demand for renewable energy, driven by decarbonisation goals, energy security considerations and cost competitiveness, reinforces solar powers long-term role within the global energy transition.

Indian Solar Market

Indias solar energy market is poised for strong growth, expanding from USD 30.03 billion in 2025 to USD 63.70 billion by 2031, registering a CAGR of 13.35% between 2025 and 2031. This growth is driven by Indias commitment to expanding renewable capacity, reducing carbon emissions and strengthening energy security. Abundant solar resources, particularly across arid and semi-arid regions, provide a clear structural advantage.

Key Government Solar Initiatives in India

National Solar Mission and 100 GW Solar Target by 2030

Providing long-term policy direction and accelerating investments in solar parks and rooftop installations.

Rooftop Solar Programme and

Solar Parks

Supporting decentralised installations and large utility- scale projects, enabling steady capacity additions.

PM Surya Ghar Muft Bijli Yojana

Accelerating residential rooftop adoption, targeting 1 crore households and expanding distributed solar capacity.

PLI Scheme for High-efficiency

Solar PV Modules

Building domestic manufacturing capacity and strengthening supply security.

PM-KUSUM:

Driving solar adoption in agriculture through pump solarisation and decentralised plants.

^CPSU Scheme and Grid Support Measures

Supporting utility-scale deployment, domestic content and solar integration.

Declining photovoltaic module costs and ongoing technology improvements continue to support adoption.

Market Outlook

The outlook for Indias solar energy market remains positive, supported by policy continuity, rising electricity demand and long-term decarbonisation commitments under the Paris Agreement.

Continued investment in grid modernisation, energy storage and transmission infrastructure is expected to enhance integration and system reliability. Challenges such as land acquisition, financing constraints and intermittency management persist; however, advances in storage technologies and hybrid models should help address these limitations. Solar power is expected to remain central to Indias energy transition and sustainable growth over the medium to long term.

(Source. https://www.datainsightsmarket.com/reports /india-solar-energy-market-3254)

Company Overview

Harsha Engineers International Limited HEIL, Harsha Engineers, or The Company is a global precision engineering company with a leadership position in bearing cage manufacturing.

As Indias largest bearing cage producer, the Company supplies all six leading global bearing manufacturers and serves diverse industrial and mobility applications.

The Company offers over 7,500 bearing cage designs, spanning diameters from 20 mm to 2,000 mm. Its manufacturing footprint comprises five facilities in India, Romania and China, supported by a global logistics and distribution network with more than 16 warehouses across over 25 countries.

Beyond its core bearing cage operations, HEIL has expanded into adjacent precision engineering segments.

Its precision stamping business manufactures complex components for automotive, electrical and industrial applications. The Company has also established meaningful scale in the bushing segment, which reported around 25% year-on-year growth during 2025-26 and surpassed 127 crores in annual revenue. This segment focuses on specialised, high-precision components designed for demanding operating conditions, particularly within the wind energy value chain.

HEIL also operates in renewable energy through its solar EPC vertical, delivering end-to-end solutions for rooftop and ground-mounted solar photovoltaic projects. Supported by in-house tooling, automation and product development capabilities, the Company continues to strengthen its position as a trusted engineering partner to global OEMs and Tier-1 suppliers, supporting long-term programmes across geographies.

Strengths

a Leadership position in bearing cages with deep engineering expertise.

a Strong and long-standing relationships with global bearing OEMs.

a Diversified precision engineering portfolio across cages, bushings, stampings, and solar EPC.

a In-house tooling, automation, and application-led product development capabilities.

Challenges

c Near-term margin pressure due to capacity ramp- up and fixed cost absorption at new facilities.

a Subdued demand in select end markets such as wind and parts of automotive.

a Volatility in raw material prices impacting short-term margins.

c Execution and turnaround efforts still underway at overseas operations, particularly Romania.

Opportunities

a Early recovery in global industrial demand, especially in Europe.

a Strong growth momentum in the bushing and largesized cage segments.

a Rising outsourcing of precision-engineered components by global OEMs.

a Capacity expansion at Bhayla enabling participation in higher-value and complex applications.

a Long-term potential in EV- adjacent, industrial, and energy- linked applications.

Threats

Prolonged global macroeconomic uncertainty affecting customer demand visibility.

Currency volatility and trade-related policy changes impacting export competitiveness.

Delays in customer capex cycles affecting order flows.

Competitive intensity in global precision engineering markets.

Inflation-driven volatility in steel and other key raw material prices affecting input cost stability.

Persistent inflationary pressures on wages, energy, freight, and operating expenses impacting overall cost structures and margins.

Operational Overview

HEIL operated through 2025-26 within an evolving environment marked by early demand recovery and continued investment for future growth. Near-term profitability was impacted by capacity ramp- up at new facilities, though operating performance strengthened across core businesses, supported by improving exports, disciplined cost management and sharper focus on high-value segments. Strategic investments in automation, capacity expansion and product development positioned the Company to capture emerging opportunities as market conditions stabilise.

*Capital additions during the year stood at 28,814 lakhs. However, net capital expenditure was 14,669 lakhs after accounting for a downward adjustment of 14,145 lakhs arising from negative movement in capital work-in-progress (CWIP).

Total Capacity Installed and Commissioned (in MW)

Segment	Capacity
Rooftop Solar	1.98
Ground Mounted Solar	12.41
Wind	3.95
Total	18.35

Outlook

The Company remains optimistic about the growth outlook for the bearing cages and precision engineering industry, supported by rising outsourcing opportunities, improving industrial demand, increasing localisation, and continued investments across automotive, industrial and renewable energy sectors. India Engineering business is expected to maintain healthy growth momentum, driven by strong domestic demand, improving export traction from Europe and the US, higher wallet share with existing customers, and continued expansion across large-size cages, bushings, stamping components and Japanese customer business.

Harsha Engineers Advantek Limited (HEAL) is expected to witness significant improvement in capacity utilisation and revenue contribution in 2026-27, while the Company is also progressing with the second

phase of expansion to support future growth. The China brownfield expansion project is expected to become operational in the second half of 2027-28 and is expected to strengthen the Companys long-term manufacturing capabilities in the region. At the same time, management continues to focus on improving profitability in Romania through better product mix, higher cage contribution and cost optimisation initiatives.

The Solar EPC and O&M business is also expected to continue benefiting from favourable policy support and rising renewable energy adoption trends. Overall, the Company remains confident of delivering double-digit revenue growth in 2026-27, with the India Engineering business expected to achieve mid-teen growth while maintaining healthy margins through operational efficiencies, improved product mix and disciplined cost management.

Financial Overview

Particulars	Standalone			Consolidated
	2025-26	2024-25	2023-24	2025-26	2024-25	2023-24
Revenue from Operations	122,820	108,930	108,094	162,679	140,765	139,230
Profit before Exceptional Items, Depreciation and Tax	26,701	20,345	19,450	26,191	20,390	19,007
Less: Depreciation	2,994	2,867	2,685	4,666	4,054	3,932
FT>Profit before Exceptional Items and Tax	23,707	17,478	16,765	21,525	16,336	15,075
Exceptional Items	-	9,501	-	-	2,768	-
Profit before Taxation	23,707	7,977	16,765	21,525	13,568	15,075
Less: Current Tax	5,930	4,079	3,771	6,085	4,120	3,797
Less: Deferred Tax	97	362	303	(80)	517	135
Profit after Taxation	17,680	3,536	12,691	15,520	8,931	11,143
Other Comprehensive Income	(759)	(228)	400	(745)	(229)	400
Total Comprehensive Income	16,921	3,308	13,091	14,775	8,702	11,543

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013 and Indian Accounting Standards (ind AS). There has been no deviation in the accounting treatment adopted by the Company.

Segment-wise Revenue and EBITDA - Consolidated Financials (in lakhs)

Segment	Revenue	Revenue	Revenue	EBITDA	EBITDA
	2023-24	2024-25	2025-26	2024-25*	2025-26*
Engineering and Others	122,684	126,855	144,356	26,385	19,914
Solar EPC and O&M	16,546	13,880	18,323	1,432	1,415

EBITDA represents Profit Before Finance Cost, Tax, Depreciation and Amortisation "Total Profit Before Finance Cost, Tax, Depreciation & Amortisation

The Company delivered a strong recovery in 2025-26, supported by improved export demand, better overseas subsidiary performance, and growth across bushings and large-sized cage businesses.

> Revenue from Operations

Revenue from operations increased to 122,820 lakhs on a standalone basis and 162,679 lakhs on a consolidated basis in 2025-26, compared to 108,930 lakhs and 140,765 lakhs respectively in 2024-25. Growth was supported by improving industrial demand in Europe, stronger export momentum, growing traction in the bushings segment, recovery in demand for large-sized cages, and sustained strength in the Indian market across product lines.

Profit before Exceptional Items, Depreciation and Tax improved to 26,701 lakhs (standalone) and 26,191 lakhs (consolidated) in 2025-26, compared to 20,345 lakhs and 20,390 lakhs respectively in 2024-25. The improvement reflects operating leverage, better product mix, and recovery in overseas operations, partly offset by ramp-up costs associated with the new Bhayla greenfield facility.

> Overall Trend

2025-26 reflected strong profitability and stable operations. 2024-25 was impacted by exceptional impairment charges and weaker overseas performance. 2025-26 marked a strong recovery phase driven by operational improvement, export revival, better product mix, and capacity-led growth initiatives.

> Profit after Tax

Profit after Tax increased significantly to 17,680 lakhs on a standalone basis and 15,520 lakhs on a consolidated basis in 2025-26, compared to 3,536 lakhs and 8,931 lakhs respectively in 2024-25. The previous years performance was impacted by exceptional impairment charges, whereas 2025-26 benefited from earnings normalisation, improved operational performance, recovery in subsidiary operations, and the absence of major exceptional losses. Harsha Advantek reported a loss during the year, primarily due to interest costs and depreciation associated with ongoing capacity expansion and commissioning activities.

Key Financial Ratios
Particulars	2025-26*	2024-25*	2023-24
Current Ratio (times)	2.60	3.27	2.91
Debt-to-Equity Ratio (times)	0.27	0.16	0.15
Debt Service Coverage Ratio (times)	5.33	10.55	7.69
Return on Equity Ratio (%)	11.69	7.35	9.92
Inventory Turnover Ratio (times)	4.44	4.07	3.78
Return on Capital Employed (%)	14.24	10.22	12.33
Net Profit Ratio (%)	9.54	6.34	8.00

*Inclusive exceptional Items and bad debt in 2024-25

The current ratio moderated during 2025-26 due to increased working capital deployment and higher current liabilities associated with expansion activities and business growth. The debt-to-equity ratio increased primarily on account of borrowings undertaken towards capacity expansion and capital expenditure initiatives, including the Bhayla facility, which also led to moderation in the debt service coverage ratio owing to higher debt servicing obligations.

Return on equity, return on capital employed, inventory turnover ratio, and net profit ratio improved during the year, supported by stronger profitability, improved operational performance, better inventory management, recovery in overseas operations, and absence of major exceptional losses compared to the previous year.

Risk Management

HEIL has adopted a structured and proactive risk management approach, embedded within strategic planning and operational decision-making. Key risks are reviewed regularly by the Risk Management Committee and the Board to ensure alignment with business priorities and evolving external conditions.

The framework spans major businesses, including bearing cages, precision stampings, bushings and solar EPC, supported by defined processes for risk identification, monitoring and escalation. This enables timely responses to emerging risks while safeguarding business continuity and long-term value creation.

Risk Management
Risk Type	Impact	Mitigation Strategy
Market Concentration	A significant portion of the Companys revenue is derived from a limited number of large bearing manufacturers. Any reduction in demand, change in sourcing strategy, or consolidation among key customers could adversely affect revenues.	a Diversifying the revenue mix through expansion into adjacent segments such as precision stampings, bushings, and solar EPC. a Strengthening new product development and expanding presence in emerging and non-automotive markets.
Raw Material Price Volatility	Volatility in prices of brass, steel, and other metals may impact margins in a competitive and cost-sensitive global market.	a Adopting a multi-supplier sourcing strategy and flexible procurement contracts. a Implementing pass-through pricing mechanisms with customers to offset material cost fluctuations.
Sectoral Transition (EV Shift)	The transition from internal combustion engine vehicles to electric vehicles may reduce demand for certain conventional automotive components.	a Leveraging stamping capabilities to supply components for EV and new-age mobility applications. a Continued investment in product development aligned with evolving vehicle platforms.
Foreign Exchange Fluctuations	As a significant exporter, the Company is exposed to currency fluctuations that could impact profitability and cash flows.	a Using hedging instruments, including forward contracts, to manage foreign exchange exposure. a Maintaining a geographically diversified revenue base to reduce currency concentration risk. a Coordinating closely with customers, vendors, and contractors to ensure timely and cost-effective execution.
Execution Challenges in EPC Business	Delays, cost overruns, or execution challenges in solar EPC projects could affect margins and customer relationships.	a Following a structured project management framework with defined controls.
Supply Chain Disruptions	Disruptions in supply chains, logistics constraints, or supplier- related issues may impact production schedules and customer commitments.	a Maintaining alternate sourcing options and supplier diversification. a Continuous monitoring of supply chains and proactive engagement with critical vendors.
Regulatory and Compliance Risks	Non-compliance with applicable laws, regulations, or contractual obligations could result in penalties, operational disruptions, or reputational impact.	a Strengthening internal compliance systems and regular monitoring of regulatory developments. a Conducting periodic internal audits and compliance reporting to ensure adherence to applicable requirements.
Cybersecurity and Data Protection	Cyber incidents or data breaches could disrupt operations, compromise sensitive information, and impact stakeholder confidence.	a Strengthening IT security infrastructure and access controls. a Ensuring regular monitoring, system audits, and employee awareness initiatives on information security.
Competitive Intensity	Increased competition may exert pressure on pricing, margins, and market share across business segments.	a Focusing on design capability, quality, cost competitiveness, and timely delivery. a Strengthening customer relationships and expanding value-added offerings.
Climate and Environmental Risks	Regulatory changes or physical risks related to climate change may impact manufacturing operations and EPC activities.	a Adopting energy-efficient and environmentally responsible practices. a Supporting the clean energy transition through the Companys solar EPC business.

Human Resources

At HEIL, people remain central to operational excellence and long-term growth. During 2025-26, the Company continued to strengthen its people practices through capability-building initiatives, safety programmes, employee engagement, skill development, and operational excellence initiatives across locations.

As of March 31, 2026, the Company employed 3,284 individuals, including 232 qualified engineers. The Company continued to focus on building a skilled, safe, inclusive, and performance-driven workplace aligned with evolving business requirements and future growth aspirations.

Capability development remained a key focus area during the year through structured training programmes covering technical skills, health and safety, POSH, business code of conduct, whistle blower policy, social accountability, and continuous improvement practices. HEIL also continued to strengthen its culture of operational excellence through TPM, Kaizen, sustainability, and process improvement initiatives across manufacturing operations.

The Company further strengthened its safety culture through structured Occupational Health and Safety Management Systems, HIRA-based risk assessment practices, safety patrolling, near-miss reporting, workstation mapping, and regular awareness programmes. Reflecting the effectiveness of these initiatives, the Company reported zero fatalities, zero lost-time injuries, and zero high-consequence work-related injuries during the year.

Employee wellbeing continued to remain a priority through accident insurance coverage, statutory benefits, occupational health centres, ambulance support, and tie-ups with nearby hospitals for emergency healthcare services. The Company also continued to focus on employee engagement, workforce stability, and creating a supportive and collaborative workplace culture.

The industrial relations during the year under review remained cordial and harmonious at all manufacturing locations.

More details on the Companys human capital initiatives, employee wellbeing, safety practices, diversity, training, and workplace development programmes are covered in the Human Capital chapter of this Report at pages 54-59

Sustainability

Sustainability remains a core focus for Harsha Engineers, with environmental, social and governance (esg) principles embedded in business operations and decisionmaking.

During 2025-26, the Company continued to strengthen its environmental performance through focused initiatives across renewable energy adoption, energy optimisation, water conservation, waste management and responsible supply chain practices.

Renewable energy contributed approximately 65% of the Companys overall energy consumption during the year, supported by investments across rooftop solar, ground- mounted solar and wind energy infrastructure. The Company also expanded its renewable energy footprint during the year through additional commissioned solar capacity.

Multiple energy optimisation initiatives were undertaken across facilities to improve operational efficiency and reduce greenhouse gas emissions. These included installation of PLC-based auto idle stop systems, deployment of IE4 energy-efficient motors, transformer control systems and induction mould heating systems to replace conventional PNG-based heating processes. These interventions contributed towards lower electricity consumption, improved process efficiency and reduced Scope 1 and Scope 2 emissions. During 2025-26, the Company reported Scope 1 and Scope 2 emission intensity of 0.98 metric tonnes of CO₂ equivalent per metric tonne of production.

The Company also continued to strengthen water conservation and reuse practices across locations through rainwater recharge systems, ETPs and STPs. Rainwater recharge initiatives at the Changodar and Moraiya facilities contributed meaningfully towards reducing freshwater dependency and improving water sustainability across operations.

Circularity and responsible waste management remained another important focus area during the year. The Company maintained its zero-landfill approach towards waste disposal while continuing to improve recycling and material recovery practices. Returnable packaging systems were also used across operations to reduce packaging waste and associated Scope 3 emissions.

As part of its biodiversity and environmental stewardship efforts, the Company undertook plantation activities during the year to support greener manufacturing ecosystems and environmental awareness.

Harsha Engineers also expanded sustainability engagement across its supply chain. During 2025-26, the Company organised a Supplier Quality Meet to communicate sustainability expectations and responsible sourcing requirements to key suppliers. Supplier sustainability assessments were initiated as part of strengthening ESG integration across the value chain.

Through these initiatives, the Company continues to progress its sustainability agenda in line with regulatory expectations and stakeholder priorities, while reinforcing long-term value creation.

Detailed ESG performance data, including energy consumption, GHG emissions, water usage, waste management metrics and social impact indicators, are disclosed in the Business Responsibility and Sustainability Report (BRSR) forming part of this Annual Report.

Corporate Social Responsibility (CSR)

HEIL integrates Corporate Social Responsibility (CSR) into its broader business philosophy, focusing on inclusive development and long-term community wellbeing. The Companys CSR approach is anchored in a formal CSR Policy and governed by a Board-level CSR Committee, ensuring structured oversight, transparency and effective implementation.

The Companys CSR initiatives are aligned with its objective of enabling meaningful socio-economic development and creating an environment where communities can lead dignified and self-reliant lives. Key focus areas include welfare of persons with intellectual and developmental disabilities, education and skill development, healthcare access, environmental sustainability and disaster response.

A flagship initiative is Anand Dham, a residential community developed in partnership with Aastha Charitable Trust for Welfare of the Mentally Challenged. Located in Ahmedabad, this ongoing project (24-month duration) is designed to provide a safe, clean and supportive environment for individuals with intellectual disabilities, particularly those with ageing or no surviving parents. The facility offers medical care, skill development opportunities and a family-like ecosystem, reinforcing HEILs commitment to long-term care solutions.

During 2025-26, the Companys prescribed CSR obligation stood at 341 lakhs. HEIL spent 200 lakhs on CSR initiatives during the year, including 150 lakhs towards ongoing projects and 50 lakhs towards other initiatives. An additional 141 lakhs was transferred to the Unspent CSR Account for ongoing projects. Administrative overheads remained nil, ensuring that the majority of funds were directed towards onground impact.

CSR activities were implemented through credible partner organisations and institutions. Key initiatives included support for education and welfare of underprivileged students, animal welfare programmes, and skill development initiatives in collaboration with institutions such as Make A Difference Education & Medical Welfare Foundation, Sant Vinoba Gram Swarajya Ashram and Institute Management Committee (IMC) of ITI Bavla.

The CSR Committee, comprising Mr. Rajendra Shah (Chairman), Mr. Harish Rangwala and Dr. Bhushan Punani, met twice during the year to review progress and guide implementation.

Through sustained and structured CSR efforts, HEIL continues to create meaningful social impact while reinforcing its commitment to responsible and inclusive growth.

internal Control Systems and Their Adequacy

HEIL maintains internal control systems that are commensurate with the size, scale, and complexity of its operations. The Company has established a robust internal control framework aligned with the geographic spread and operational diversity of its businesses. The Company continues to strengthen its internal audit function, expanding its scope to cover corporate governance, risk management, information technology controls, policy compliance and statutory requirements. The internal control systems are designed to safeguard assets, ensure accurate transaction recording, maintain compliance with applicable laws and policies,

and support the timely preparation of reliable financial information. These controls enable effective operational oversight and informed decision-making across the organisation.

Periodic reviews are undertaken to assess the adequacy and effectiveness of internal controls, ensuring alignment with regulatory requirements and evolving business needs. The Audit Committee of the Board oversees the control environment, reviews internal audit observations, and monitors the implementation of corrective and improvement measures to enhance operational discipline and risk governance.

Cautionary Statement

The Management Discussion and Analysis may contain forward-looking statements based on the Companys current expectations, assumptions, and projections regarding future events. These statements involve inherent risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those expressed or implied. Key factors that could influence outcomes include changes in macroeconomic conditions, regulatory developments, geopolitical events, and other global disruptions, including pandemics. The Company undertakes no obligation to revise or update any forward-looking statements to reflect subsequent events or circumstances, except as required by applicable law.