K C P Ltd Management Discussions

(A) Indian Economy overview

The Indian GDP recorded a growth of 8.2% amid challenging Global Geo Political and Macro economic conditions in 2023-2024 and is expected to record a growth rate of 6.4 for FY 2024-2025. The disruptions in the Geo Political condition continued in FY 2024-2025, due to the continuation of Israel Palestine conflict in Middle East and the Russia and Ukraine war. The global political conditions continued to affect the demand supply for commodities and kept the commodity prices buoyant. For the FY 2024-2025, the Indian economy, witnessed inflation at 4.6%, marginally lower than the previous Financial Year. The Interest cost remained at a bench marked Repo rate of 6.5% for most part of the FY 2024-2025. In February 2025, the repo rate was reduced by 25 basis points to close at 6.25 %. The high Repo rate curtailed the capital spend for most of the industries in India.

Index touched a peak of 590 in FY 2022-2023. The imported coal price traded in the range of 95 USD to 115 USD in FY 2024-25 still high as compared to the levels of 60 to 80 USD in 2018 to 2020 period. Geopolitical disruptions continued to keep the international coal prices buoyant. The unrest in the Middle East and Suez Canal region caused due to the Israel Palestine conflict continued to affect the logistics costs adversely, affecting the landed price of coal to the importers. The table below exhibits the movement in the coal price index, with 2016 considered as the index year.

The Indian Rupee also continued to be under pressure against the USD. It started the year with a rate of Rs 83.25 and depreciated to a level of 85.5 INR to USD. The depreciation of INR to the USD continued to impact the landed cost of the imported raw material for the Indian manufacturers.

The Global Coal Price Index softened considerably to a levels of 140 towards the end of the FY 2024-2025, as against a level of 180 at the beginning of the previous Financial Year, based on 2016 as the index base year. It may be recalled that the Coal Price

For the FY 2023-2024 the cement production was about 415 Million Mt recording a growth rate of around 9%-10% over previous years. For the Financials Year 2024-2025 the YoY growth in cement is estimated to be in the range of 5-6%. The FY 2024-2025 witnessed additions of capacity to the extent of 40-42 Million Mts representing 10% of the total volumes sold in FY 2023-2024. The consolidation continued in 2024-2025 with the top 2 players playing a major role of acquisition, particularly in the South Indian Market. The drop in the coal prices benefited the manufacturers, by reducing the cost of production, however the south Indian market witnessed intense competition with the top 5 players pursuing the market aggressively in quest for volumes and market share. This resulted in a slower growth in volumes by south Indian players and subdued selling price.

Indian Cement Industry is expected to grow at a CAGR rate of around 6% for the next 5 year. The FY

2025-2026 is expected to see the demand increase by a couple of percentage more than the average, drawing cues from the spurt in cement sales witnessed towards the fag end of the FY 2024-2025.

Cement production for the FY 2024-2025 is estimated to show an improvement of around 5-6% as compared to the last Financial Year. The Cement market space was characterized by intense competition, particularly in Southern Market. It is estimated that the total Cement manufacturing capacity in India touched around 650 Million Mts. Due to the consolidation of the cement manufacturing in the South Indian Market, The volumes and the selling price of The KCP Ltd also came under pressure. However, due to the strong brand value of The KCP Ltd, the company was able to record its volumes at 2.9 Million Mts for the FY 2024-2025.

The company also recorded an exceptional items of Rs 24 Crores towards the Fuel Power Purchase Cost Adjustment as per the orders of APERC, which forms part of the Profit before Interest and Tax.

Whilst the outlook of the Indian cement industry for FY 2025-2026 looks bullish, the performance of Cement Division of The KCP Ltd, would largely depend on the coal prices sustaining at the current levels, Regional competition and optimal cost management at the unit level. The company has embarked on cost reduction projects, such as WHR, which has progressed substantially and is expected to be on line before the end of FY 2025-2026. The KCP Ltd has also initiated the Railway siding project which may enable the company to participate in markets further away from its manufacturing facility. This project is also underway and is expected to be completed by the end of FY 2025-2026.

The performance of Heavy Engineering Segment was better as compared to FY 2023-2024. The turnover was higher by Rs 37.64 Crores, at Rs. 118.79 Crores, as compared to previous year and the EBIT stood at a positive Rs 2.44 Crores, better than EBIT loss of Rs 19.82 Crores in the previous FY 2023-2024. In the previous FY 2023-2024, the business was affected due to the Michaung floods, the operations were halted in December 2023, for a month and production was at a reduced level for a period of 3 months. The company received an insurance claims of Rs .12.08 Crores against material damage and Rs 2.30 Crores against the Business Interruption Claims. The challenges faced by the unit in the form of competition from unorganised sectors, continued to keep the margins of the unit under pressure. However due to aggressive marketing initiatives taken by the unit the flow of enquiry and the order book as 31^st March 2025 stood at a healthy figure of around Rs 122 Crores. During the FY 2024-2025, KCP fabricated Skid based equipment with connected piping including control & instrumentation 1^st time for the strategic requirement of BARC/Indian Navy. This is being erected and commissioned at PRP, IGCAR Kalpakkam to carry out performance and endurance testing of Indigenously developed PHT pump for the Nuclear-powered ballistic missile submarine (SSBN) before putting into use. The company is in continued pursuit to bag more of such prestigious and strategic projects in the Defense, Nuclear and Aerospace segment. The company is also taking initiative to develop the export to European and African markets.

The competition from the unorganised sectors continued to put pressure on the business margins. Some of the sales enhancement initiative being taken is expected to yield positive result in the FY 2025-

2026.

The Hospitality segment, The KCP Mercure displayed better performance for the FY 2024-2025, as compared to the previous financial year. The Industry also witnessed handsome occupancy in the range of 75%-80%. The Average room rent for the hospitality industry was in the range of 4800 to Rs 5500. for the FY 2024-2025. The KCP Mercure Hotel in Hyderabad, continued to consolidate its position as a preferred business hotel. The KCP Mercure witnessed growth in both topline as well as the margins characterized by better Occupancy as well as improved average daily rentals.

The KCP Mercure Hyderabad occupancy level was retained at 84%, with the average rentals improving by about 10% as compared to the previous Financial Year. The Roof Top restaurant attracted many residents as well as non- resident guests. This gave a boost to the Food and Beverage revenue, along with the Room rent revenue growth. The Hotel also received many accolades and recognition during the year from prestigious institutions.

It received the Travelers Choice Award from Trip Advisor in May 2024, Best Rooftop Restaurant Award from Hybiz TV in August 2024, and Traveller Review Award from Booking.com in Feb 2025.

The Hotel has established itself as a preferred hotel in the segment, and continues to improve its occupancy and Average Room Rent (ARR). However the revenue and bottom line will be affected based on the economic situation in India. The F&B revenues and occupancy shall continue to perform at good level as it did in FY 2024-2025.

The Season for crushing begins in January every year, The 2024 season also began in first week of January 2024 for Son Hua Plant and in the mid of January 2024 for Dong Xuan Plant. The 2024 season, witnessed improved performance on all fronts. The Farming community took additional initiative to expand the area under cultivation in response to the incentive policy announced by The KCP Vietnam Industries Limited. The Sonhua Unit operated at capacity of 10,000 Mts/ Day and Dong Xuan operated at capacity of 1000 Mts/ Day. The total sugar cane crushed was 1,345,955 for the season 2024 which commenced in January 2024 and ended by July 2024. The prices of refined sugar increased by around 9%, in FY 2024-2025 as compared to the previous Financial Year. The average refined sugar realization for the company stood at Rs 71,910/ Mts which was 4.9% better than last year. The total crushing volumes for the FY 2024-2025 which was recorded at 1,320,232 Mts was better by 4.8% as compared to the previous FY 2023-2024. The total volumes of sugar produced for the FY 2024-2025 was lower by about 1.9% as compared to the previous financial year 2023-24, due to lower recovery rate of sugar. The gross margins for FY 2024-2025 was 32.84% better than 28.05% for the previous Financial Year. The increase in the gross margin of current Financial Year was due to increase in sugar price realization. The companys strong investment and purchase policies, favorable weather conditions, strong international sugar prices, trade remedies in place etc. are the major factors for the successful results of The KCP VIL.

Sales during the year under review amounted to Rs 161.2 Crores as against Rs 355.73 Crores during the previous year. The company recorded a PAT of Rs 1.01 Crore during the current Financial Year as compared to a profit of Rs 10.55 Crores in the previous Financial Year.

The Company booked orders worth Rs 98.7 Crores (Exports Rs 72.3 Crores) during the FY 2024-2025 and the order backlog position is Rs 49.5 Crores (Exports Rs 3.03 Crores) as at 31st March 2025 in comparison with a backlog of Rs 95.27 Crores (Exports Rs 20.2 Crores) at the end of the previous Financial Year.

The total revenue for the year is Rs 161.2 Crores as compared to Rs 355.73 Crores in the previous

Financial Year. The Company recorded a profitbefore tax of Rs 1.55 Crores during the year ended 31st March 2025. The sugar production in India has got reduced by 20% as compared to the previous year as the Sugarcane cultivation is reduced due to climatic conditions and other factors. Though the Government of India has achieved the target of 20% blending of ethanol, the contribution from molasses is only about 11%, rest being contributed by Grains. The Sugarcane cultivation is expected to be better and the distilleries are expected to go for expansion in the coming year. This may require enhancement of capacity of incinerators for the supplied ones. The market in India for sugar and incinerator is in the downward trend. We foresee encouraging scenario in sugar and the boiler in international markets especially for Africa and Latin America. The Company has been operating with all safety measures in all its work places.

During the beginning of current Financial Year the company commenced the setting up a 16 MW Waste Heat Recovery (WHR) Plant at its cement production facility at Muktyala, Andhra Pradesh to reduce the fuel cost in production process of Cement. It will also help in the companys efforts in reducing the carbon footprints. The implementation of Waste Heat Recovery Project at Muktyala has progressed well so far. However, there were unexpected delays in the civil construction for some of the foundations due to unprecedented rains in June to August 2024. As a result, the Line 2 of the WHR project is expected to be commissioned in September 2025, and the Line 1 is expected to be commissioned by the December

2025.

Project Cost accrued till 31.03.2025 was Rs.145.08 Crores which was funded by the bank term loan and companys internal accruals.

The company has also embarked on a infrastructure development project of Railway Siding facility at the Muktyala Plant. The facility will enable the company to take its finished products to farther markets to optimize the sales realizations and target volume growth. The total cost of the project is estimated to be around Rs 105 Crores.

The project progress is as per planned timelines, and the project is expected to be commissioned by March, 2026. Project cost incurred till 31.03.2025 was Rs.24.32 Crores.

The Company has Internal Financial Controls backed by proper procedures, delegation of powers. The company has clearly defined reporting system to Chairperson and Managing Director, Joint Managing Director, Technical Director, Heads of the Units and Functional Heads. The Company is ISO certified and has quality and procedure manuals.

Statutory Auditors have further certified on the Internal Financial Controls in their report which is part of this Annual Report.

In the preparation of financial statements, the company followed all laid down guidelines and standards. The company has policies in line with the applicable accounting standards and a few significant policies have been disclosed as part of accounts which are part of the Annual Report. The Company has made all the disclosures in the accounts, as required under new Schedule III of the Companies Act, 2013

Key ratios have been given in note 53 of the Standalone Financial Statements.

Statements in the "Management Discussion and Analysis" describing the Companys forecast or predictions are as perceived currently. Actual results may differ materially from those expressed in this statement. Important factors that could influence the Companys operations include domestic supply and demand conditions affecting selling prices of finished goods, input prices, changes in government regulations, tax laws, economic developments within the country, Global Geo Political factors and other factors such as litigation and industrial relations.

For and on behalf of the Board of Directors

Place: Chennai Dr. V.L. Indira Dutt

Date: May 28, 2025 Chairperson and Managing Director