HP Telecom India Ltd Management Discussions

This chapter on Managements Discussion and Analysis (“MD&A”) is to provide the stakeholders with a greater understanding of the Companys business, the Companys business strategy and performance, as well as how it manages risk and capital.

The following management discussion and analysis is intended to help the reader to understand the results of operation, financial conditions of HP Telecom India Limited

(1) ECONOMIC OVERVIEW, INDUSTRY STRUCTURE AND DEVELOPMENTS:

The Indian economy continues to demonstrate resilience and steady growth, supported by strong domestic demand, rising disposable incomes, favourable demographics, and increasing digital adoption. The demand for a wide range of consumer durable goods has remained robust, driven by urbanization and continuous technological advancements. This has intensified competition among domestic as well as global brands, positioning India as one of the most attractive markets for future growth.

India has further strengthened its position as a global manufacturing hub, particularly in the electronics sector, supported by government initiatives such as Production Linked Incentive (PLI) schemes, infrastructure development, and ease of doing business reforms. The continued focus on “Make in India” and localization of supply chains has encouraged significant investments in electronics manufacturing and allied sectors.

During FY 2026, Indias electronics exports are expected to maintain a strong growth trajectory, building upon the momentum of previous years. The country continues to progress towards its target of achieving electronics manufacturing output of approximately US$ 300 billion and exports of US$ 120 billion in the near term. Capacity expansion, supply chain diversification, and increasing global demand remain key growth drivers.

Indias Consumer Electronics and Appliances (ACE) industry continues to be one of the fastest- growing sectors globally. The industry is expected to further strengthen its global position, driven by increasing penetration in rural and semi-urban markets, rising replacement demand, and the rapid expansion of e-commerce platforms.

The Indian appliances and consumer electronics market is estimated to surpass ?1.6-L7 lakh crore (approximately US$ 19-21 billion) by FY 2026. Growth is being driven by strong demand across product categories such as smartphones, smart televisions, wearables, and home appliances. Additionally, electronics hardware production in India is expected to cross US$ 100 billion, reflecting the countrys expanding manufacturing capabilities and improving ecosystem.

The global economic environment continues to be influenced by ongoing geopolitical tensions and conflicts in certain regions, which have led to volatility in commodity prices, logistics costs, and supply chains. While these developments pose short-term uncertainties, Indias consumption-driven economy and proactive policy measures have helped mitigate significant adverse impacts. The Company continues to closely monitor such developments and remains focused on enhancing supply chain resilience, cost optimization, and operational efficiency.

Overall, the sector is expected to witness sustained growth, supported by favourable government policies, rising consumer aspirations, and continuous innovation in technology and product offerings.

INDIAN ECONOMY:

The Indian electronics and telecom ecosystem continues to evolve rapidly, driven by strong consumer demand, faster technology adoption, and expanding digital infrastructure. Smartphones and connected devices have become central to daily life, leading to sustained demand across both urban and semi-urban markets. Increasing data consumption, affordability of devices, and wider 4G/5G penetration have further strengthened the growth outlook of the sector.

The Indian market is witnessing a clear shift towards premiumization, with consumers increasingly opting for higher-value smartphones and smart devices. At the same time, deeper penetration into Tier II and Tier III cities is expanding the overall addressable market, supported by rising disposable incomes and improved financing options. These trends are creating significant opportunities for organized distribution players with strong channel networks.

The distribution landscape is also undergoing transformation, with a growing share of organized retail and e-commerce platforms. However, offline retail continues to play a critical role, particularly in smaller towns, where assisted selling and after-sales support remain key decision factors. This has led to the emergence of hybrid distribution models, where companies are required to maintain strong relationships across both online and offline channels.

On the supply side, India is gradually strengthening its electronics manufacturing ecosystem. While large-scale manufacturing has gained momentum under government initiatives, the industry continues to rely on imports for certain components, making it sensitive to global supply chain dynamics and currency fluctuations. Ongoing efforts towards localization and backward integration are expected to improve long-term resilience.

Global geopolitical developments and trade realignments have prompted companies to diversify supply chains, positioning India as an emerging alternative manufacturing and sourcing destination. However, these factors have also resulted in periodic volatility in product availability, input costs, and logistics, requiring companies to adopt agile procurement and inventory management strategies.

The sector also continues to benefit from policy support aimed at boosting manufacturing, exports, and digital adoption. Increasing internet penetration, rising usage of digital services, and the expansion of 5G networks are expected to further drive demand for smartphones and related devices.

Overall, the Indian electronics and telecom sector presents strong growth potential, supported by favourable demographics, evolving consumption patterns, and ongoing digital transformation. For distribution-led businesses, the ability to manage scale, optimize supply chains, and maintain strong brand and channel relationships will be critical in sustaining growth and competitiveness.

BUSINESS OVERVIEW:

HP Telecom India Limited commenced its operations with a focus on the distribution of mobile phones, accessories, and telecom-related products. Over the years, the Company has evolved into a diversified distribution enterprise with a strong presence in the consumer electronics and smartphone ecosystem.

The Company has consistently expanded its business by associating with reputed national and international brands and strengthening its channel partner network across multiple regions. Its growth strategy has been centered on identifying high-growth product categories, expanding geographical reach, and building long-term relationships with leading technology brands.

A major turning point in the Companys growth journey came with its association with Apple Inc., which enabled the Company to establish a strong presence in the premium smartphone and consumer electronics segment. The Company currently operates as an exclusive distributor for Apple products across key territories including Madhya Pradesh & Chhattisgarh, selected cities in Uttar Pradesh, and prominent markets in Gujarat. Through this association, the Company offers a wide range of Apple products including iPhone, iPad, Mac, Apple Watch, and accessories.

Over the years, the Company has also expanded its portfolio beyond smartphones by participating in the distribution of telecom products, consumer electronics, and allied technology products. The Company continues to maintain business relationships with various brands, enabling it to cater to diverse consumer preferences and market segments.

In recent years, the Company has focused on strengthening its market position by expanding into new territories and improving operational efficiencies. The addition of Nothing Technology Limited products in Gujarat and expansion of trading operations in Delhi marked important steps towards broadening the Companys regional presence and product offerings.

The business environment for smartphones and connected devices continued to remain favorable during FY 2025-26, supported by increasing digital adoption, rising demand for premium devices, and expansion of organized retail channels. The Company continued to capitalize on these opportunities by enhancing its distribution capabilities, optimizing supply chain operations, and strengthening relationships with retailers and channel partners.

While revenue contribution from Apple products continues to remain significant, the Company also derives business from other brands and telecom-related products, including offerings associated with Reliance Jio Infocomm Limited and other mobile device brands. The Company remains focused on expanding its presence in high-growth markets and strengthening its position within the rapidly evolving electronics and telecom distribution industry.

Going forward, the Company intends to continue leveraging its established distribution network, market experience, and brand partnerships to drive sustainable growth and operational efficiency. The Product wise bifurcation of Revenue is as follows:

(2) OPPORTUNITY AND THREATS:

Opportunities:

The Indian electronics and smartphone industry continues to present significant growth opportunities, driven by favourable demographics, increasing digital adoption, and rising consumer aspirations. The shift towards premium smartphones and smart devices is gaining momentum, supported by higher disposable incomes, improved financing options, and increased consumer preference for advanced features and brand value.

India is also emerging as a key beneficiary of the global “China+1” supply chain strategy, with leading global players expanding their manufacturing footprint in the country. Increased localization, coupled with government incentives, is expected to enhance domestic production and improve product availability, thereby supporting growth in the distribution ecosystem.

The rapid rollout and adoption of 5G technology is expected to act as a major demand driver, accelerating replacement cycles and boosting sales of compatible devices. Additionally, deeper penetration into Tier II and Tier III markets, along with increasing internet usage and digital payments, is expanding the overall addressable market for smartphones and allied products.

The continued growth of organized retail and e-commerce platforms is also creating new avenues for distribution-led businesses. Companies with strong channel networks, diversified brand partnerships, and efficient logistics capabilities are well-positioned to capitalize on these opportunities.

Threats:

The Companys performance remains exposed to global and domestic macroeconomic conditions. Ongoing geopolitical tensions and evolving global trade dynamics may lead to volatility in supply chains, increased logistics costs, and fluctuations in input prices, which could impact product availability and margins.

The industry is characterized by intense competition, rapid technological changes, and evolving consumer preferences. Frequent product launches and shorter product life cycles require efficient inventory management, as any mismatch may lead to obsolescence risks and pricing pressures.

Further, dependence on imports for certain components exposes the business to foreign exchange fluctuations and regulatory changes, including changes in import duties or government policies. Any adverse movement in currency or policy framework may impact cost structures and profitability.

The sector is also sensitive to changes in interest rates, inflationary pressures, and overall consumer spending patterns, which may affect demand, particularly in price-sensitive segments. Additionally, increased competition from both organized and unorganized players, along with pricing pressures from online platforms, may impact margins.

The Company continues to closely monitor these risks and is focused on strengthening its supply chain, optimizing inventory levels, and maintaining strong relationships with brands and channel partners to mitigate potential adverse impacts.

(3) OUTLOOK ON RISK AND CONCERNS:

The Company operates in a dynamic and competitive business environment, where evolving consumer preferences, technological advancements, and global economic developments continue to influence performance. While the overall outlook for the electronics and telecom sector remains positive, certain risks and concerns require continuous monitoring and proactive management.

The Company believes that policy stability, including the continued rationalization of indirect taxes and supportive government initiatives for manufacturing and digital growth, will provide a conducive long-term environment for the industry. However, short-term uncertainties arising from global and domestic factors may impact business performance.

Key risks and concerns impacting the Company are as follows:

• Execution Risk: The Companys ability to effectively scale operations, manage distribution networks, and maintain strong relationships with brands and channel partners remains critical to its growth strategy.

• Demand and Consumer Sentiment Risk: The business is closely linked to consumer spending patterns, which may be affected by inflationary pressures, interest rates, and overall economic conditions.

• Inventory and Obsolescence Risk: Rapid technological changes and frequent product launches in the smartphone and electronics segment may lead to inventory holding risks, price erosion, and obsolescence if not managed efficiently.

• Supply Chain Risk: Dependence on global supply chains and imports for certain products exposes the Company to disruptions, delays, and cost fluctuations arising from geopolitical tensions and logistics challenges.

• Foreign Exchange Risk: Currency fluctuations may impact procurement costs and margins, particularly in a business with significant import components.

• Competitive Intensity: The industry is highly competitive with the presence of multiple organized and unorganized players, as well as pricing pressures from online platforms, which may affect margins.

• Regulatory and Compliance Risk: Changes in government policies, taxation, import duties, and compliance requirements may have an impact on operations and profitability.

• Credit and Counterparty Risk: The Company is exposed to risks related to receivables from channel partners, requiring strong credit assessment and collection mechanisms.

The Company continues to strengthen its risk management framework by focusing on efficient inventory planning, diversification of supply sources, prudent credit policies, and cost optimization measures. It also maintains a robust internal control system to monitor and mitigate risks on an ongoing basis.

Overall, despite the presence of these risks, the Company remains confident of leveraging growth opportunities in the sector through disciplined execution, strong partnerships, and a resilient business model.

(4) INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has a proper and adequate system of internal controls. This ensures that all transactions are authorized, recorded and reported correctly, and assets are safeguarded and protected against loss from unauthorized use or disposition. In addition, there are operational controls and fraud risk controls, covering the entire spectrum of internal financial controls. An extensive programme of internal audits and management reviews supplements the process of internal financial control framework. Properly documented policies, guidelines and procedures are laid down for this purpose. The internal financial control framework has been designed to ensure that the financial and other records are reliable for preparing financial and other statements and for maintaining accountability of assets.

In addition, the Company has identified and documented the risks and controls for each process that has a relationship to the financial operations and reporting. The Company also has an Audit Committee to interact with the Statutory Auditors, Internal Auditors and Management in dealing with matters within its terms of reference. This Committee mainly deals with accounting matters, financial reporting and internal controls.

> Discussion on financial performance with respect to operational performance

The Income from Operation of your Company for the year 2025-26 was increased to Rs 2,39,168.63 lacs as against Income from operation of Rs 1,59,615.81 lacs of the previous year. Accordingly, the

Net Profit after tax of the Company was increased to Rs 2,548.80 lacs for the current year as against the Net Profit after tax of Rs 1,257.84 lacs of the previous year.

(5) HUMAN RESOURCES & INDUSTRIAL RELATIONS:

The Companys human resources philosophy is to establish and build a strong performance and competency driven culture with greater sense of accountability and responsibility. The Company acknowledges that its principal asset is its employees. The expertise of the management team, the professional training provided to the staff, their personal commitment and their spirit of teamwork together enhance the Companys net worth. The Company has taken various steps for strengthening organizational competency through the involvement and development of employees as well as installing effective systems for improving their productivity and accountability at functional levels. Ongoing in-house and external training is provided to employees at all levels to update their knowledge and upgrade their skills and abilities. The effort to rationalize and streamline the workforce is a continuous process. The industrial relations scenario has remained harmonious throughout the year.

(6) DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIO:

(7) CAUTIONARY STATEMENT:

Statement in this management analysis detailing the Companys objectives, projections, estimates, expectations, or predictions may be “forward looking” statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that may influence your Companys operations include Global and domestic supply and demand conditions affecting selling prices, input availability and prices, changes in Government policies, regulations, tax regimes, economic development within and outside the country and other allied factors. The Company assumes no responsibility to publicly amend, modify or revise the forward-looking statement on the basis of subsequent developments, information or events.