JK Lakshmi Cement Ltd Management Discussions

OUTLOOK FOR INDIAN ECONOMY, INDUSTRY STRUCTURE & DEVELOPMENTS

During the fiscal year 2024-25, IndiaRs.s economy grew by 6.5%, maintaining its position as the worldRs.s fastest-growing major economy, although this marked its slowest pace in four years. The slowdown from the post-pandemic recovery peak of 9.2% in FY 2023-24 was primarily driven by a moderation in manufacturing, which expanded by just 4.5-5% compared to double-digit growth in the previous year. In contrast, agriculture rebounded with 4-4.6% growth, and construction surged nearly 9-10%, supported by both rural demand and infrastructure activity.

A strong fourth-quarter performance, with GDP rising by 7.4% (January - March 2025), highlighted a robust close to the fiscal year, driven by gains in agriculture, construction, and public sector spending. However, headline growth was partly buoyed by a statistical boost from net tax and subsidy effects, suggesting that underlying economic activity- reflected in Gross Value Added (GVA) - grew at a more moderate rate of around 6.4-6.8%.

Private consumption remained a key driver of growth, increasing by approximately 7.2%, supported by demand from rural areas and festive spending, while urban consumption was comparatively subdued. Gross fixed capital formation (investment) grew at a slower pace of 6-7%, indicating weakening momentum in private investment, despite higher government capital expenditure.

Monetary policy during this period was expansionary. The Reserve Bank of India cut the repo rate by 25 basis points in April and 50 basis points in June, reduced the cash reserve ratio (CRR), and shifted from a neutral to an accommodative stance to cushion against global risks, including U.S. tariff measures. Inflation remained benign-ranging between 2.8% and 3.6%- helped by food price stability and a favourable monsoon.

Export performance was resilient, with total exports increasing by around 5-6% and services exports growing by more than 11% during the first three quarters. Nonetheless, global uncertainties-including geopolitical tensions, supply chain disruptions, and evolving trade policies-posed downside risks.

In summary, FY 2024-25 was a year of moderated but sustained growth for India. While structural issues such as weak private investment, subdued manufacturing activity, and uneven consumption persisted, strong performance in agriculture, robust public investment, and supportive monetary policy helped maintain economic momentum. The key challenge ahead lies in revitalising private sector engagement and diversifying growth drivers.

Looking forward, India is projected to remain the fastest- growing major economy in the world, with GDP growth expected to range between 6.3% and 6.5% in FY 2025-26. This outlook is supported by sustained public investment in infrastructure, a healthy and early monsoon aiding agriculture, and positive trends in high-frequency indicators, including GST collections, manufacturing and services PMIs, and digital payments. The Reserve Bank of India has supported this growth with an accommodative policy stance, including a 50-basis-point repo rate cut and a 100-basis- point CRR reduction earlier in the year. However, it has now adopted a neutral stance, signalling a pause in further monetary stimulus as the economy stabilises.

Despite the positive outlook, key structural challenges remain. Private sector investment remains weak, with businesses exhibiting caution amid global uncertainties and uneven domestic demand. Employment growth has lagged behind economic expansion, particularly in the formal sector, resulting in underemployment and increasing concerns over youth unemployment. In addition, household debt has been growing, as families borrow to maintain consumption, which may limit future spending capacity. External risks-such as trade tensions with the U.S. and the EU, geopolitical instability in West Asia, and fluctuations in global oil prices- also pose a threat to economic stability. While IndiaRs.s macroeconomic fundamentals remain strong, sustaining long-term, inclusive growth will depend on deeper reforms in labour markets, education, and investment, along with increased private sector participation.

The Indian cement industry, the worldRs.s second largest after China, remains a vital pillar of the nationRs.s infrastructure and construction sectors. As of 2025, the industry is witnessing robust growth, with cement demand rising at an annual rate of 6-8%. This demand is primarily driven by major government-led initiatives, such as PM Gati Shakti, Bharatmala, the Smart Cities Mission, and the Pradhan Mantri Awas Yojana (PMAY), as well as rising urbanisation and increased housing demand in rural and semi-urban areas.

The industry remains focused on leveraging the emerging growth opportunities across the country. The financial year 2024-25 ended with a total installed capacity of about 667 million tonnes, up from 631 million tonnes, with more than half of the new capacity being added by the industry leader. The top two players have continued their aggressive capacity expansion strategies, both organically and through acquisitions. An annualised capacity addition of 4% to 6% is not expected to upset the demand-supply balance, as demand is projected to exceed capacity additions. This, coupled with ongoing industry consolidation, is expected to improve the business environment over the medium and long term.

Sustainability has become a central focus for the Indian cement industry. Companies are significantly increasing their blended cement portfolio, which now accounts for over 70% of total production. There is growing investment in low- carbon technologies, including waste heat recovery systems (WHRS), the use of alternative fuels, low-clinker cements, and exploratory carbon capture initiatives. The introduction of innovative materials, such as Limestone Calcined Clay Cement (LC³), further demonstrates the industryRs.s commitment to aligning with IndiaRs.s net-zero emissions goal by 2070.

However, the industry continues to face several challenges. High logistics costs remain a key concern, given the bulk nature of the commodity and the need for efficient transport networks. Dependence on coal, pet coke, and electricity exposes companies to volatility in input costs. Additionally,

regional price competition stemming from uneven capacity distribution and tightening environmental regulations is exerting pressure on margins. On the positive side, companies are increasingly adopting digital technologies such as predictive maintenance, real-time process monitoring, and AI-driven optimisation to improve operational efficiency and control costs.

The Indian cement industry is well-positioned for long-term growth, supported by strong domestic demand and sustained government investment in infrastructure. However, navigating the twin challenges of sustainability and cost efficiency will be critical. Companies that can innovate, reduce their carbon footprint, and embrace digital transformation are likely to emerge as the industry leaders in a more competitive and environmentally responsible landscape.

At JK Lakshmi Cement Ltd. (JKLC), we are strategically positioning ourselves to leverage emerging growth opportunities in the cement sector. Our robust capacity expansion plan is progressing as scheduled, with the intention of increasing our production capacity to 30 million tonnes by 2030. As part of this journey, our Surat Grinding Unit is undergoing a capacity addition of 1.35 million tons, which is expected to be commissioned shortly, further enhancing our market presence and service capabilities. In parallel, we are implementing a comprehensive efficiency enhancement program aimed at achieving cost savings of Rs. 200 per tonne. Focused initiatives across plant operations, logistics optimisation, discount rationalisation, and geo-mix improvements are driving this. Notably, in FY 2024-25, we successfully maintained tight control over fuel costs, reinforcing our commitment to operational excellence and disciplined cost management.

JKLC is firmly committed to sustainability, embedding resource efficiency, circularity, and environmental

stewardship across its operations. In alignment with global frameworks such as UNGC, RE100, and GCCA, JKLC has charted a clear path to achieving net-zero emissions by 2047. The CompanyRs.s decarbonization strategy focuses on transitioning to green energy, adopting non-fossil fuels, manufacturing low-carbon products like LC3 cement, and enhancing supply chain sustainability. As of FY 2024-25, renewable energy accounts for 48.57% of its total power consumption, with a target of reaching 100% by 2040. Water conservation remains a priority, with the company currently 4.49 times water positive and aiming for 7 times by FY 2029-30. JKLC continues to implement circular economy practices, reduce landfill dependency, and promote the use of alternative fuels. Over 75% of its value chain partners have undergone ESG assessments, supported by capacity-building initiatives. Through impactful CSR programs in education, healthcare, livelihood, and rural development, the company has positively touched the lives of over 325,000 individuals. With innovations such as LNG-fueled logistics and IndiaRs.s first floating solar panels in the cement sector, JKLC reinforces its leadership in building a sustainable and inclusive future.

FINANCIAL PERFORMANCE

During the Financial Year 2024-25, the CompanyRs.s Cement Production was higher by 2.5% at 114.21 lac tonnes as against 111.43 lac tonnes achieved during the last Financial Year. The CompanyRs.s Sales during the Financial Year ended 31^st March 2025 were up by 1.17% at 121.29 lac tonnes against 119.89 lac tonnes logged in the last Financial Year.

The Company recorded revenue from operation of Rs. 6,192.62 Crore during the year under review as compared to the revenue of Rs. 6,788.47 Crores in the Financial Year 2023-24. Profit before Tax stood at Rs. 402.90 Crore in FY 2024-25 as compared to Rs. 732.92 Crore in Financial Year 2023-24. Profit after Tax stood at Rs. 282.72 Crores in FY 2024-25 as compared to Rs. 488.23 Crores in Financial Year 2023-24.

KEY CHANGES IN FINANCIAL INDICATORS

The various Financial Ratios for the year under review as compared to the same of the previous Financial Year are given hereunder:

OPPORTUNITIES

(a) Strong Demand Outlook Driven by Infrastructure and Housing

IndiaRs.s cement demand is projected to grow at a 7-8% CAGR over the medium term, supported by robust investments in infrastructure and the housing sector. The GovernmentRs.s increased allocation of Rs.11 lakh crore for capital expenditure in FY 2025-26, a 10% rise over the previous year, will drive large-scale construction across expressways, metros, and urban infrastructure.

(b) Urbanisation, Real Estate, and Affordable Housing

Urbanisation is expected to rise from 35.4% in FY 2023-24 to 37% by FY 2029-30, accompanied by a decline in household size (nuclearization), creating sustained demand for housing. The governmentRs.s renewed focus on affordable housing-targeting 3 crore new houses over the next 5-7 years-particularly in rural and semi-urban areas, will act as a strong demand catalyst for cement.

(c) Industrial and Logistics Expansion under the Production Linked Incentive (PLI) Scheme

India is witnessing a renewed push to boost manufacturing, logistics, and warehousing infrastructure. FY 2024-25 saw the highest-ever warehousing transactions across Tier 1 and 2 cities, directly benefiting the cement sector due to increased commercial construction.

(d) Technological and Sustainability-Driven Growth

The industry-wide adoption of Waste Heat Recovery Systems (WHRS), alternate fuels, and green cement technologies is enabling operational efficiencies and alignment with ESG norms. JK Lakshmi CementRs.s WHRS capacity reached 48 MW, and the Company continues to increase its share of renewable energy and AFR usage in line with sustainability goals and global climate commitments.

(e) Smart City and Multimodal Connectivity Programs

Initiatives such as PM Gati Shakti, Smart Cities Mission, and the expansion of dedicated freight corridors and industrial corridors are driving infrastructure-led cement demand. The National Infrastructure Pipeline (NIP) now includes over 13,000 projects with a cumulative investment outlay of Rs.185 lakh crore, significantly up from initial estimates, reaffirming the governmentRs.s long-term commitment to infrastructure- led growth.

(f) Rising Per Capita Income and Urban Construction Activity

With IndiaRs.s estimated GDP growth of 6.4% in FY 2024-25, increasing disposable incomes are spurring growth in both residential and commercial construction. This socio-economic trend is particularly strong in urban and semi-urban markets.

THREATS

(a) Volatility in Raw Material and Energy Costs

The cement industry continues to face headwinds from fluctuating prices of key inputs such as coal, pet coke, gypsum, and freight costs. While companies have partially offset these through efficiency initiatives, unpredictability in global energy markets remains a concern.

(b) Economic and Geopolitical Uncertainty

Macroeconomic slowdowns or trade disruptions- whether domestic or global-could delay construction activity and infrastructure execution. Geopolitical tensions and volatile crude oil prices increase operational risks, especially in transport and procurement logistics.

(c) Environmental and Regulatory Pressures

The sector faces increasing regulatory scrutiny regarding carbon emissions and environmental impact, including preparation for the EURs.s Carbon Border Adjustment Mechanism (CBAM) and tightening domestic norms. Compliance may necessitate higher capital expenditure and can impact margin sustainability.

(d) Technological Substitution and Changing Construction Practices

While innovation in cement production is a key enabler, emerging technologies such as modular construction, 3D printing, and low-carbon building materials may gradually reduce traditional cement usage if not embraced adaptively.

(e) Competitive Intensity in the Cement Sector

The Indian cement industry is witnessing significant capacity additions by major players, leading to an increasingly price-sensitive and volume-driven market. While long-term demand is intact, regional oversupply could create near-term pricing pressure.

RISKS AND CONCERNS

JK Lakshmi Cement operates in a complex macroeconomic and regulatory landscape that presents a wide spectrum of internal and external risks. Recognising these challenges, the Company has embedded an enterprise-wide risk assessment framework that continuously monitors the evolving business environment. Key risks and concerns for FY 2024-25 are outlined below:

(a) Macroeconomic and Market Risk

Cement demand is strongly correlated with GDP growth, infrastructure investments, and real estate development. Any slowdown in economic activity, reduced government capital expenditure, or weak consumer sentiment could directly impact sales volumes and pricing power. Additionally, regional demand disparities and seasonal fluctuations can intensify volatility.

(b) Input Cost and Raw Material Risk

Cement manufacturing is energy-intensive and highly dependent on raw materials like pet coke, coal, gypsum, and fly ash. Volatility in global energy prices, disruptions in import logistics, and scarcity of fly ash or slag due to supply constraints can significantly affect cost structures and profitability. Geo-political tensions further exacerbate price and availability risks.

(c) Environmental, Social and Governance (ESG) Risk

As a carbon-intensive sector, cement is increasingly under scrutiny from regulators, investors, and the public regarding its environmental footprint. Climate change, water scarcity, occupational health and safety, and community relations pose reputational and operational risks. Stricter compliance expectations from domestic and global stakeholders heighten pressure on transparency, ethical conduct, and long-term sustainability alignment.

(d) Regulatory and Policy Risk

The industry continues to face challenges from high indirect taxation, particularly with cement remaining in the 28% GST bracket. Frequent changes in mining regulations, royalty structures, increases compliance burden, etc. Additionally, environmental clearance processes and land acquisition delays can hinder capacity expansions and project execution.

(e) Operational and Production Risk

Risks related to equipment failure, power outages, industrial accidents, and plant downtime can result in production losses. Dependence on uninterrupted mining operations and the timely renewal of key leases (e.g., limestone mining) are critical to continuity. Infrastructure constraints and transportation bottlenecks, such as driver shortages and union-related disruptions, also pose operational vulnerabilities.

(f) IT and Cybersecurity Risk

As the Company increases reliance on digital technologies across operations, dealer management, logistics, and CRM platforms, the threat of cyberattacks, data breaches, and system outages has grown. These risks can lead to operational disruptions, financial losses, and reputational damage.

(g) Human Resource and Industrial Relations Risk

Attracting and retaining skilled talent is vital for sustaining operational excellence and driving digital transformation. Disruptions arising from labour unrest, lack of succession planning, or gaps in workforce skilling can impact productivity and project execution timelines.

(h) Market Competition and Dealer Retention Risk

The Indian cement sector is witnessing intense competition due to aggressive capacity additions, regional price wars, and consolidation among top players. Retaining dealer loyalty and managing channel profitability are critical challenges amid shifting demand dynamics and evolving customer expectations.

(i) Legal, Compliance and Taxation Risk

Pending litigations, regulatory inquiries, or legacy tax liabilities can result in financial exposure and reputational harm. Frequent audits and policy shifts at central or state levels demand continuous vigilance and adherence.

(j) Climate and Transition Risk

Cement manufacturing is directly exposed to both physical climate risks (e.g., extreme weather events, water stress) and transition risks (e.g., carbon pricing, shift to low-carbon technologies). Non-alignment with decarbonisation pathways may affect access to capital, investor perception, and business continuity.

(k) Financial Risk

Fluctuations in interest rates, foreign exchange rates, and credit ratings may impact financing costs and liquidity. Delayed receivables from institutional buyers or public sector contracts can strain working capital cycles. Rising energy and logistics costs also pose challenges to maintaining margin stability.

(l) Reputational and Fraud Risk

Instances of non-compliance, ethical lapses, environmental violations, or industrial mishaps may adversely affect stakeholder trust, investor confidence, and brand equity.

INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

The internal control systems includes the policies, processes, tasks, behaviors and other aspects of the Company, which when combined, facilitate effective and efficient operation, quality of internal and external reporting and compliance with applicable laws & regulations. The CompanyRs.s objectives, its internal organisation and the environment in which it operates are constantly evolving and as a result, the risks it faces are continuously changing as well. To make its internal controls effective and sound, the Company thoroughly and regularly evaluates the nature and extent of such risks to which the Company is exposed.

The Company has a well-defined Internal Control System commensurate with the size, scale and complexities of the operations to support the Business Operations and also to ensure Statutory Compliances. These Internal Control Systems are periodically tested for their effectiveness by the Management and by the Statutory & Internal Auditors of the Company and were found to be operating effectively during the year.

The Company has retained the services of our past Statutory Auditors to conduct internal audit for its all-integrated plants and also some of the split location Grinding Units. In addition, the Company also has an Independent In-house Internal Audit Department which is manned by Experienced Professionals. This Internal Audit Department carries out the Internal Audit based on a Systematic Audit Plan covering all key functions and aspects of the Business. This Audit Plan is approved by the Audit Committee at the start of the Financial Year. The Company has also engaged services of certain External Audit Firms for conducting Audit of its key Regional Offices & Depots. The Internal Audit Reports, of the External as well as In-house Audit Teams, are reviewed by the Top

Management and are placed before the Audit Committee of Directors. The Audit Committee undertakes a total review of the audit observations and the actions taken by the Management on all the findings of the Internal Auditors. The implementation of the recommendations of the Internal Auditors is regularly reviewed and monitored by the Senior Management and the Action Taken Report is placed periodically before the Audit Committee. The Company also has an Internal Risk Management Committee headed by President & Director and comprising of Functional Heads. This Committee meets on a quarterly basis to evaluate the risk as also the mitigation plan put in place to minimise the impact of various internal and external risks to the CompanyRs.s business. In addition, there is a Risk Management Committee at the Board Level to review the various risks which impact the CompanyRs.s operations and the management plan to meet those risks.

The Company also has a robust MIS and Budgetary Control System under which the operating and financial performances are reviewed on a monthly basis. The variations with the Budget are analysed and corrective actions are taken to minimize the variations with the Budget wherever shortfalls are noticed. Further, the Company has also put in place Legal Compliance Monitoring Tool to ensure timely compliance of all the applicable Statutes at its different locations.

HUMAN RESOURCE - "OUR PEOPLE, OUR BIGGEST STRENGTH"

Our people are the greatest asset and the very foundation of our business. We have consistently dedicated ourselves to cultivating a workplace culture built on care, trust, and mutual respect, recognizing that these values are essential to our collective success and growth.

The Human Resource policies and guidelines at your Company are thoughtfully crafted to foster teamwork, encourage a synergistic approach, and cultivate agility and future readiness, all while enhancing the overall employee experience. These frameworks play a pivotal role in strengthening the leadership pipeline, attracting dynamic young talent, driving measurable results, expanding market share, and boosting the CompanyRs.s operational profitability.

Moreover, the CompanyRs.s inclusive and forward-thinking culture serves as a vital catalyst in motivating employees and nurturing a positive, collaborative work environment. This culture not only attracts but also retains a diverse pool of skilled professionals, equipping the organization with the

varied competencies essential for sustained growth and longterm success.

The Company has undertaken significant initiatives to accelerate its digital transformation, aiming to stay ahead in a competitive landscape by strengthening the digital capabilities of its workforce through targeted initiatives along with training sessions and awareness programmes. As part of this journey, several key HR processes-most notably through initiation of "Darwin Box" platform-to enhance efficiency and employee experience.This comprehensive platform will encompass multiple critical employee-related functions, including Core, Talent Acquisition, Onboarding, Attendance & Leave management, Tour & Travel, Performance Management System (PMS), Rewards & Recognition (R&R), Payroll Processing, and more. This digital transformation journey is aimed at enhancing employee engagement, operational efficiency, and data-driven HR management.

Your CompanyRs.s unwavering commitment to Excellence and Sustainable Growth, Purpose, Vision, and Mission embodies the core of collective action towards strategic goals. Continued focus on Growth, Empowered Human Capital, Enriched Customer Experience, and Innovative streak are the epicenter of companyRs.s success.

On Employee Engagement front, key initiatives taken are Sharing of Success Stories - To boost up morale and motivation of the best performer and to motivate other Team Members, Har Ghar Tiranga (Tricolour in every household) Programme on the occasion of IndiaRs.s 78^th Independence Day, SANGAM - Interzone Quiz competition to create feeling of One Team One Family, Skip - Level meetings, BANDHAN - an employee connect initiative, UDAAN Competition, Leadership & Personality Development, etc.

The journey of nurturing, grooming and preparing internal talents with the development opportunities, Company organized Development Centre in partnership with world leaders across the levels with post assessment support through world renowned assessment development centre agency for talent management to build a pipeline of young leaders for future readiness and strengthen its Rs.Grow Your Own TimberRs. approach for leadership roles by rewarding and providing a well-defined growth path.

Innovations in information and communication technologies have changed the way of working like Chairperson & Managing DirectorRs.s Communication Meeting across all locations with all levels and of Top Leaders with the team members and other work groups using virtual platform, transition towards a more digital working, etc.

Millennials are actively encouraged, equipped, and empowered to manage a bigger chunk of areas and markets. This approach aligns with the evolving expectations of the younger generation and is thoughtfully integrated into the CompanyRs.s culture / HR strategies-particularly in areas such as structured interaction with President & Director, Career Development and Rewards & Recognition. These efforts aim to support the aspirations of the new-age workforce, fostering engagement, motivation, and long-term retention.

Augmenting our human capital and investing in our people towards their all-round development has always been a passion at JK Lakshmi Cement Ltd. In line with the same, Outbound Skill Development & Customer Orientation Programme, Technical & Behavioral trainings (Internal & external), Physical & Mental Well Being sessions with CompanyRs.s Doctors, Safety & Health and family-oriented subjects with employees as well as Dealers / Channel partners including their family members have created a win-win work environment.

By thoughtfully understanding the evolving aspirations of the surrounding community through a strategic partnership between HR and CSR, the Company has been able to proactively prepare for the future while fostering a deep, long-term commitment to mutual growth and benefit. This inclusive and forward-looking approach has been instrumental in achieving a high level of talent retention and maintaining harmonious industrial relations for over 26 + years. The details of Number of people employed are given in Annexure - E to BoardRs.s Report.

CAUTIONARY STATEMENT

The Management Discussion and Analysis contains forwardlooking statements, which may be identified by the use of words in that direction or connoting the same. All statements that address expectations or projections about the future including but not limited to statements about your CompanyRs.s strategy for growth, product development, market positions, expenditures and financial results are forward looking statements.

Your CompanyRs.s actual results, performance and achievements could thus differ materially from those projected in such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent development, information or events.