Hind Rectifiers Ltd Management Discussions

Global Economic Overview

Economic activity through CY 2025 and into early CY 2026 was underpinned by resilient consumer spending and the initial easing of inflationary pressures. This recovery however, unfolded unevenly shaped by rising geopolitical divisions, evolving trade dynamics, and heightened volatility in commodity markets. The intensification of tensions in the Middle East, coupled with reciprocal trade actions, disrupted the nascent recovery and reintroduced pressures on supply chains and input costs. Global headline inflation expectations have consequently been revised upward, with levels projected at 4.4% in 2026 before gradually easing thereafter. The IMFs World Economic Outlook reflects this altered landscape, forecasting a moderation in global growth to 3.1% in 2026, followed by a modest uptick to 3.2% in 2027.

Growth momentum in advanced economies is expected to remain subdued, weighed down by tighter fiscal conditions and gradually weakening labor markets. The United States is projected to expand by 2.3% in 2026, while Europe is likely to grow at a slower pace of 1.1 %, constrained by persistently high natural gas prices and residual energy market disruptions.

Emerging Markets and Developing Economies (EMDEs) are set to remain the primary drivers of global expansion, though growth disparities are widening, particularly among highly leveraged economies. While countries such as China and Saudi Arabia are expected to experience moderated growth, India continues to distinguish itself as a high-growth outlier amid broader structural deceleration across major Asian economies.

Indian Economic Overview

India continues to solidify its position as the primary engine of global economic growth, demonstrating remarkable resilience against broader global volatility. The country maintained strong growth momentum through 2025-2026, with GDP estimated at 7.4% in 2025-2026, supported by robust domestic demand, favorable demographics, and consistent policy backing, reaffirming its standing as the fastest-growing major economy globally.

Public capital expenditure remained a key stabilizing force within this growth story. The Union Budget 2026-27 earmarked Rs12.2 lakh crore for infrastructure investments, reinforcing the governments continued emphasis on sectors such as logistics, railways, defence manufacturing, and digital infrastructure. These investments are driving supply-side improvements, lowering logistics costs, and enhancing the competitiveness of domestic manufacturing across sectors.

The manufacturing sector added further momentum during the year, piggybacking on robust export demand, particularly in engineering goods and consumer products, as global supply chain realignments continue positioning India as an increasingly attractive manufacturing hub.

Indian Railway Sector Overview I

As one of the largest rail networks on the planet, Indian Railways (IR) is integral to the nations economic growth and connectivity. The network is currently undergoing a substantial modernization and capacity augmentation program, guided by the National Rail Plan (NRP) for 2030, a blueprint designed to create a future-ready railway system capable of meeting demand up to 2050, with a critical strategic focus on increasing the modal share of railway freight to 45%. The Union Budget 2026-2027 reinforced this momentum with a record capital expenditure allocation of T2.93 lakh croretothe rail sector, representing a fundamental reimagining of Indias mobility backbone to meet the logistical demands of a rapidly expanding economy.

The sectors pursuit of Scope 1 Net Zero emissions by 2025 and Scope 2 Net

Zero by 2030 has accelerated a decisive shift toward 100% route electrification and high-efficiency mobility solutions. The development of seven high-speed rail corridors, the nationwide rollout of semi-high-speed Vande Bharat trainsets, and massive investments in dedicated freight corridors are collectively . strengthening Indias transport capacity to rank among the top three global freight movers alongside China and the United States For specialized domestic equipment manufacturers, this scale and velocity of expansion creates a highly predictable, high-visibility demand environment that few sectors can match.

Government Initiatives for Railway Development

To achieve its dual mandate of exponential capacity growth and strict decarbonization, Indian Railways is channeling its substantial investments into flagship national initiatives. Supported by a historic capital expenditure allocation of T2.93 lakh crore in the Union Budget 2026-2027, with over Rs52,108 crore specifically earmarked for rolling stock, these strategic programs translate directly into a surging, multi-dimensional demand ecosystem for advanced power electronics:

(The landmark announcement of seven new high-speed rail corridors spanning nearly 4,000 kilometers, with an estimated investment of Rs16 lakh crore, represents a transformational growth frontier. With the governments strong emphasis on indigenous technology and self-reliance for these new routes, this massive infrastructure push directly expands the addressable market for our core products, including traction transformers, advanced propulsion systems, communication systems and trackside substation rectifiers required for high-speed operations.

(The aggressive national mission to electrify all broad-gauge routes is a cornerstone of Indias target to achieve Net Zero carbon emissions by 2030. With over 99.5% electrification of the broad-gauge network successfully achieved by early 2026, the focus has shifted toward modernization and high-density grid stability, driving massive, sustained demand for traction transformers and substation rectifiers.

I The rapid introduction of modern passenger trainsets requires localized, high-efficiency propulsion systems and I advanced battery chargers. By December 2025, Indian Railways operationalized 164 Vande Bharat Chair Car I services and launched the first 2 Vande Bharat Sleeper services. This momentum is set to accelerate significantly I with the Ministrys stated goal of scaling the fleet to 800 Vande Bharat trainsets by 2030. Furthermore, the I operationalization of 54 Amrit Bharat services and a mandate to manufacture 17,000 new coaches over the next five years present an unprecedented growth avenue.

(Backed by a massive safety budget allocation of Rs1,20,389 crore for 2026-27, the mandate to rapidly deploy this indigenous automatic train protection system creates a critical need for robust and reliable electronic sub-assemblies. Trackside implementation of Kavach has already been commissioned on over 3,100 route kilometers with implementation underway on another 24,400 kilometers covering high-density networks.

(This initiative for multi-modal connectivity is accelerating the modernization of lineside power infrastructure. With the Eastern and Western Dedicated Freight Corridors (EDFC and WDFC) now facilitating 400 trains daily, and the budget announcement of a new 2,052 km East-West freight corridor linking Dankuni to Surat, there is a critical need for automated monitoring systems and robust power components to handle heavier freight hauls and ensure grid stability.

(Sources: https://www.pib.gov.in/PressReleasePage.aspxRsPRID=2248001 &reg=3&lang=2, https://pragativadi.com/indian-railways-gets-rs-2-93-lakh-crore-boost-in-union-budget-2026-27/ ,

https://www.financialexpress.com/business/railways-vande-bharat-to-bullet-trains-how-a-rs-2-78-lakh-crore-budget-is-rebuilding-indian-railways-4209345/ )

Company Overview

Hind Rectifiers Limited (also referred to as HIRECT or the Company) was established in 1958 in technical collaboration with Westinghouse Brake & Signal Company Limited, of the United Kingdom, and has since grown into one of Indias premier manufacturers of power electronics and railway transportation systems. The Company began its journey in Colaba, Mumbai, manufacturing small semiconductors and rectifiers, and over the following decades steadily built a comprehensive portfolio of complex electrical and electronic components. This expansion of capability has been matched by a corresponding growth in physical footprint, with advanced manufacturing facilities operating at Sinnar and Satpur in Nashik and an R&D Center in Bhandup, Mumbai with 200 engineers.

2025-2026 marked a shift from consolidation to scale and global capability building. The Company advanced its move up the value chain, strengthened operational self-reliance, and expanded its international presence. Evolving from a traditional component supplier into a deeply integrated power electronics enterprise, HIRECT is positioning itself for long-term growth across mobility, energy, and industrial sectors.

Building on this foundation, HIRECT is steadily moving up the value chain to become a comprehensive system-level solutions provider, covering propulsion systems, brake systems, communication systems, HVAC, and advanced power electronics. This strategic shift allows the Company to capture a significantly larger share of the railway opportunity and maximize its revenue potential, even within a stable underlying market.

A primary driver of this system-level expansion is the Companys entry into the propulsion systems segment.

As a key milestone this year, field trials for the Companys indigenous propulsion system were officially conducted at Western Railway. The commercialization process is currently underway, and the Company has already secured initial orders for these systems valued at approximately Rs50 crore, establishing propulsion as a core growth engine going forward.

To support this expanded product portfolio and improve operational self-reliance, backward integration has been a key focus. To manage supply chain risks, we commissioned a copper conductor production facility at our Sinnar plant.

This facility manufactures specialized copper conductors, including Continuously Transposed Conductors (CTC), Enameled Paper Insulated Copper Conductors (EPICC), and Paper Insulated Copper Conductors (PICC). In addition to copper conductors, we are investing in the in-house development of critical subsystems such as IGBT gate drivers, PCB assemblies, and power electronics. Together, these initiatives mitigate exposure to global supply chain volatility, ensure uninterrupted production, and are intended to improve cost efficiency and margin stability.

Complementing our domestic integration is our expansion into international markets through the acquisition of France-based Belink Solutions (now ELVENTIVE FRANCE SAS). Acquired debt-free, Belink brings established expertise in Electronic Manufacturing Services (EMS), including SMT lines, printed electronics, and robotics-led manufacturing. Beyond adding advanced manufacturing capabilities and access to defense and aerospace-certified markets, Belink provides a strategic European base. Moving forward, the facility will serve both as a local manufacturing and sales hub for the European market and as a launchpad for introducing HIRECTs products to a broader global customer base.

Further validating our global capability building, this year marked a milestone for HIRECT in the international railway market. We successfully dispatched a traction transformer to Germany. Exporting railway equipment to highly regulated, developed markets enhances our global technological credibility and paves the way for broader international engagements, demonstrating the world-class quality of our engineering capabilities.

Alongside our manufacturing advancement, HIRECTs R&D operations spread across technology hubs in Mumbai and Hyderabad moved well beyond incremental product updates into a period of substantive innovations, with approximately 40 new products currently in advanced stages of development. Recognizing that the future of power electronics lies at the intersection of hardware and software, the Company is making a strategic Rs100 lakhs investment into its wholly owned subsidiary Coincade Studios Private Limited, equipping it to develop advanced predictive algorithms and digital twin capabilities for industrial systems. This investment ensures that HIRECTs hardware innovations are underpinned by equally advanced digital intelligence.

Product Portfolio

HIRECTs product strategy is anchored to one overarching direction: continuous value addition. The Company is strategically moving its operational focus away from standalone, commoditized components toward comprehensive, highly engineered, and deeply integrated sub-systems for the railways, defence, and heavy industrial sectors.

Railway Systems

The railway vertical, which currently contributes approximately 90% of the Companys revenue, is undergoing a significant and transformative transition. HIRECT is rapidly evolving from a traditional component supplier into a premier provider of complex, indigenously developed systems and is deeply embedded in the ongoing modernization of Indian Railways, the expansion of metro networks, and the development of emerging high-speed rail projects. The Companys portfolio represents the critical power and nervous system of modern rolling stock.

The commercialization of indigenous propulsion systems is a primary strategic focus this year. After several months of preparation, official field trials for the 6,000 HP propulsion systems have commenced at Western Railway, involving a demanding 50,000-kilometer run expected to be completed within the next three to four months. Initial propulsion system orders valued at approximately Rs50 crore have already been secured. HIRECT is targeting further quantities from the forthcoming tenders to scale this business further. A development order has also been received for advanced propulsion systems (Composite Convertor) designed specifically for passenger locomotives.

HIRECT holds an undisputed position as the market leader in traction transformers, commanding a 40%+ market share. These systems step down 25 kV OHE into reliable onboard traction power, delivering up to 7,775 kVA for locomotives and 3,000 kVA for EMUs and trainsets. To protect margins and eliminate supply chain risks, the Company completed its backward integration project at the Sinnar plant and has already begun deploying in-house manufactured specialized copper conductors, including CTC, EPICC, and PICC, directly into the transformers supplied to Indian Railways. Supported by this operational efficiency, HIRECTs goal is to further scale up the production capacity.

Engineered for extreme mechanical endurance and thermal stability, the Companys traction motors deliver massive torque and power outputs of up to 1,150 kW, capable of driving both heavy-haul freight trains and rapid-acceleration high-speed passenger EMUs.

Functioning as the intelligent brain of the locomotive, the Companys VCUs feature redundant, multi-processor architectures that guarantee secure, real-time communication, fault logging, and seamless subsystem coordination across the entire trainset.

These systems provide DC power to railway and metro networks, with outputs up to 3,000 kW and 1,500 V. Designed to handle massive, instantaneous current surges, they play a critical role in ensuring a steady and seamless flow of power across the electrified grid.

HIRECTs customized HVAC solutions cater to all types of rolling stock, providing air-conditioning, heating, and ventilation systems ranging from 1.5 TR to 20 TR. These systems are engineered to maximize passenger comfort while ensuring energy efficiency, directly capitalizing on Indian Railways increasing focus on upgrading the passenger experience.

HIRECT currently serves as a trusted Tier-2 supplier for the flagship Vande Bharat trains, providing vital battery chargers through various OEMs. Intensive R&D efforts are underway to expand this footprint further by developing tailored HVAC systems and specialized transformers specifically for Vande Bharat and other semi-high-speed trains.

I Indian Traction Transformers Market

The traction transformer market in India is experiencing robust growth, driven by the rapid electrification of railway networks, expansion of high-speed rail projects, and significant investments in modernizing urban transit systems. As India accelerates its railway modernization initiatives and urban infrastructure development, demand for traction transformers, which convert high-voltage grid power to the lower voltages required by electric locomotives and metros, is rising sharply. The rollout of high-speed trains, metro systems, and dedicated freight corridors is a primary driver of this demand, while the governments focus on sustainable transportation and the integration of renewable energy into rail infrastructure further supports the adoption of advanced, energy-efficient transformer technologies.

I Indian HVAC Systems Market

The overall Indian HVAC systems market, valued at nearly USD 13.6 billion in 2025, is projected to expand at a CAGR of 14.89% from 2026 to 2034, representing a substantial and largely untapped opportunity. HIRECT has translated its deep engineering prowess from core power electronics into this adjacent space, gaining strong traction for its specialized railway rolling stock air-conditioning units. Building on this progress, the Company is actively exploring applications for off-road and heavy-duty industrial vehicles.

HIRECTs Strategy for the Railway Market

With an addressable market of approximately Rs11,000 crore within the domestic railway sector alone, the available headroom for growth is immense. The strategy to capture it is straightforward: systematically increase the Companys share of wallet per locomotive manufactured. By supplying the main transformer, auxiliary converter systems, traction motors and passenger HVAC units, and now targeting a 10% market share in propulsion systems, HIRECT is positioning itself as an indispensable, end-to-end strategic partner for Indian Railways and all major global rolling stock OEMs operating in India.

Industrial Power Solutions

HIRECT is actively expanding its Industrial Power Solutions vertical as a central pillar of its broader strategy to diversify revenue streams and reduce its historical ~90% reliance on Indian Railways.

Operating in a highly specialized Rs2,000 crore addressable market, the Companys solutions are engineered for absolute reliability in the harshest industrial environments, serving heavy, energy-intensive industries such as cement, steel, mining, and thermal power through its critical industrial rectifiers, specialized power supply solutions, and electrostatic precipitators for pollution control:

d) Single and Three-Phase ESP Power Supply:

Precision SCR-controlled, ultra-high-efficiency systems scaling up to 750 kVA, these are vital components for powering Electrostatic Precipitators used in industrial air pollution control and emissions reduction.

Mid- and High-Frequency Power Supplies:

IGBT-controlled units featuring Active Front End (AFE) topology deliver precision high-frequency switching with capacities of up to 500 kVA and power solutions reaching 300 kW, making them well-suited for complex metallurgical and induction heating applications.

Thyristor-Controlled Rectifiers:

- These are heavy-duty DC power sources engineered for continuous operation in demanding electrochemical processes, delivering a stable low-voltage, high-current supply. Air-cooled and oil-cooled transformer-rectifier configurations offer outputs of up to 1,000 V and 20 kA, available in both 6-pulse and 12-pulse configurations to serve a wide range of energy-intensive industrial applications.

Water-Cooled Rectifiers:

- Purpose-built for high-power DC requirements in heavy manufacturing and smelting operations, these ultra-high-power rectifiers leverage advanced 6-pulse, 12-pulse, and 24-pulse configurations. Equipped with OFWF (Oil Forced Water Forced) transformers, they deliver efficient water cooling and superior thermal performance, supporting outputs of up to 1,500 V and currents reaching 80 kA.

SMPS Rectifiers:

- Compact, modular, and stackable high-frequency DC power sources, these units offer unparalleled footprint efficiency for modern control rooms. Controlled by high-frequency switching inverters, they deliver precise and reliable output with capacities of up to 35 V and 3,000 A.

Financial Performance

Performance Review
Standalone Financials	2025-2026	2024-2025
Revenue from operations (Rs in millions)	9,492.12	6,553.67
EBITDA (Rs in millions)	1,034.66	719.5
EBITDA Margins (%)	10.90	10.98
PAT (Rs in millions)	576.71	372.71
EPS (Rs) before Exceptional Item	17.37	10.87
EPS (Rs) after Exceptional Item	16.79	10.87
Working Capital Days	84	97

Key Ratios

Particulars	As of March 31,2026	As of March 31,2025	Change (%)	Reasons for Change in Ratios More than 25%
(a) Current Ratio (in Times)	1.17	1.21	(3.16)	-
(b) Debt-Equity Ratio (in Times)	1.02	1.03	(0.83)	-
(c) Debt Service Coverage Ratio (in Times)	2.97	2.49	19.31	-
(d) Return on Equity Ratio (in %)	30.25	26.20	15.46	-
(e) Inventory Turnover Ratio (No. of Days)	65	83	(21.53)	-
(f) Trade Receivables Turnover Ratio (No. of Days)	55	47	16.27	-
(g) Trade Payables Turnover Ratio (No. of Days)	36	33	10.33	-
(h) Net Capital Turnover Ratio (in Times)	15.98	14.50	10.23	-
(i) Net Profit Ratio (in %)	6.08	5.69	6.78	-
? Return on Capital Employed (in %)	24.21	23.36	3.63	-

Risk Management

HIRECTs philosophy toward enterprise risk is grounded in a proactive discipline: the Company systemically identifies operational vulnerabilities and works to convert them into structural, long-term competitive advantages.

V Risk Category	Risk Description	Mitigation Strategy
Industry and Market Risks	Demand fluctuations due to over-reliance on domestic, government-driven spending cycles, particularly within Indian Railways.	Actively diversifying the revenue base across multiple geographies and sectors through the acquisition of Belink Solutions, expanding further into the defence, aerospace and renewables sectors.
Operational and Supply Chain Risks	Volatility in raw material availability and pricing, particularly high premiums on specialized copper, leading to margin pressures and production delays.	Commissioned the captive CTC plant at Sinnar for in-house manufacturing of specialized copper conductors, insulating core production lines from import delays and unpredictable global price variations. Long term supplier agreements for critical components.
Technological and Innovation Risks	The constant threat of technological obsolescence and the rapid pace of progress in the fast-moving electronics landscape.	Treating R&D as a primary growth engine with approximately 40 new advanced products in the pipeline. Appointed a global CEO to spearhead the adoption of next-generation wide bandgap technology and leverage European R&D capabilities.
Regulatory and Compliance Risks	The fluid nature of statutory requirements, shifting compliance landscapes, and complex international trade laws.	Management oversight, comprehensive compliance education programs, and robust, third-party compliance audits across both domestic facilities and newly acquired international entities.
Financial and Credit Risks	Exposure to adverse currency fluctuations, interest rate volatility, and inefficient working capital allocation.	Maintained rigorous financial discipline, and prudent use of internally generated cash accruals to fund growth projects without overleveraging the balance sheet.
Competition Risk	The continuous influx of larger, heavily capitalized, and globally backed multinational competitors challenging market position.	Aggressively backward-integrating manufacturing to become the lowest-cost, highest-quality producer, while acquiring advanced European IP via Belink to match the technological prowess of global multinationals.
Cybersecurity and Data Risks	Escalating vulnerabilities and threats of digital breaches or unauthorized access in enterprise digital platforms.	Implementing and continuously upgrading resilient IT cybersecurity frameworks to protect digital and intellectual assets, accompanied by periodic network evaluations.
Environmental and Sustainability Risks	Stricter environmental mandates, climate change impacts, and the urgent need to transition to green technologies.	Prioritizing a strategic shift toward engineering energy-saving, sustainable innovations across all new product designs and venturing into green energy ecosystems like electrolyzer power supplies.

Internal Control System and its Adequacy

As HIRECT extends its operational footprint across geographies and absorbs new international subsidiaries into its fold, the integrity of its internal governance framework becomes an increasingly consequential responsibility. The Companys internal control system is designed to meet this responsibility on three fronts simultaneously: ensuring absolute precision in financial reporting, protecting intellectual property and physical assets from both digital and operational risk, and enforcing rigorous adherence to domestic regulatory mandates alongside complex international compliance frameworks.

At the heart of this system sits an independent internal audit function that reports directly to the Boards Audit Committee, operating on a detailed, risk-based annual audit plan. This function casts an equal and unsparing eye over

the Companys established domestic facilities and its newly acquired international operations, ensuring that governance standards travel seamlessly across every entity under the HIRECT umbrella. Underpinning this audit architecture are clearly articulated, highly digitized operating policies that guide day-to-day functions across all geographies, holding unit heads to a consistent standard of transparency and accountability regardless of where they operate. Regular and in-depth management reviews then close the loop, ensuring the control environment functions as a living, dynamic framework that actively enhances operational efficiency and eliminates redundancies, rather than serving as a passive compliance mechanism. Together, these interlocking layers of oversight are calibrated to grow alongside the Companys multinational ambitions and sustain them with equal rigor.

Opportunities and Threats

The prevailing macroeconomic and policy environment presents a generational window of opportunity for HIRECT. The Indian governments heavily funded push for railway modernization, backed by a massive budget allocation, has created a highly visible, multi-year demand cycle that aligns precisely with the Companys core competencies. Within this ecosystem, HIRECT stands on the verge of unlocking an entirely new and high-value vertical: the successful commencement of field trials for the indigenous 6,000 HP propulsion system marks the Companys transition from component supplier to full-system integrator, a shift with significant long-term revenue implications.

The market HIRECT operates in, however, carries equally real threats. Increased domestic and international competition, aggressive pricing pressures from new entrants, and the rapid pace of technological change together create an environment where historical strengths alone cannot guarantee future positions.

The need to accelerate new product development is particularly pressing, given that larger players frequently benefit from technological advantages rooted in their global linkages and R&D networks.

HIRECT has responded to these pressures through two decisive moves. The backward integration into in-house CTC manufacturing secures the supply chain against raw material volatility and protects operating margins at their foundation. The acquisition of Belink Solutions enhances the technical strength and capabilities, equipping the Company with advanced European R&D and electronics manufacturing that bring it onto a comparable footing with the global players it competes against.

I The period ahead holds three distinct growth catalysts for HIRECT, each maturing in close succession. The commercialization and ramp-up of the propulsion systems, the monetization of in-house copper conductor manufacturing capacity to the external market in 2026-2027, and the scaling of the newly acquired European operations will together serve as powerful, margin-accretive engines over the long term. The Company is systematically building a future-ready, globally competitive power electronics enterprise, and the value creation journey that this represents has onlyjust begun.

Human Resources

Behind every transformer shipped, every field trial cleared, and every new product that moves from the laboratory to the production line, there are people. HIRECTs engineers, technicians, researchers, and shop floor teams are the living engine of everything the Company has built and everything it is reaching toward, and this is a truth the Company holds at the center of every strategic decision it makes.

HIRECT has deliberately nurtured a culture where merit is the only currency, where breakthrough thinking is celebrated rather than merely tolerated, and where willingness to take a well-reasoned risk is seen as a professional strength. Continuous learning is not a program here; it is a way of working. Targeted skill-building workshops keep the workforce fluent in next-generation technologies, while global exposure and exchange programs, given new depth by the European acquisition, are broadening the horizons of teams across every level of the organization. Rigorous safety standards, maintained without compromise across all manufacturing sites, reflect the Companys belief that a workplace worthy of its people is the starting point for everything else.

As HIRECT grows its international footprint and welcomes new teams into its fold, the commitment to building an inclusive, diverse, and collaborative environment only deepens. Every employee, wherever they work within the HIRECT family, is seen as a future leader in the making.

The Management Discussion and Analysis Report contain statements regarding the Companys objectives, projections, estimates, expectations, or predictions, which may be considered as forward-looking statements according to the applicable laws and regulations. It should be noted that actual results may differ significantly from those expressed or implied in these statements.

The Company is under no obligation to publicly amend, modify, or revise any forward-looking statement, whether due to subsequent developments, new information, events, or any other reason.