K C P Ltd Management Discussions

(A) Indian Economy overview

The Indian GDP recorded a growth of 7.4% amid challenging Global Geo Political and Macro economic conditions in 2025-26 and is expected to record a growth rate of 6.4 for FY 2026-27. The disruptions in the Geo Political condition continued in FY 2025-26 due to the continuation of Israel Palestine conflict in Middle East and the continuation of the Russia and Ukraine war.

The global political conditions continued to affecl the demand supply for commodities and kept the commodity prices buoyant.

For the Financial Year 2025-2026, the Indian economy, witnessed inflation at 3.7%, marginally lower than the previous Financial Year. The Interesl cost was lowered in April 2025 to 6% from 6.25% level. It was further reduced to 5.25% in Decembei 2025. Whilst the high Repo rate curtailed the capita spend for most of the industries in India in FY 202425, the reduction in the repo rates gave some breather to the industrial capex spend in FY 2025-26.

The Indian Rupee also continued to be under pressure against the USD. It started the year with a rate ol Rs 85.60 and depreciated to a level of 94.65 INR to USD by 31 March 2026. The depreciation of INR tc the USD continued to impact the landed cost of the imported raw material for the Indian manufacturers.

Coal price movement

The Global Coal Price witnessed an increase during the FY 2025-26. The prices averaged USD 85-90 in the beginning of the financial year in April 2025. The prices of Imported coal went up to levels ol USD 120-125 /Mts. These price range was 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 due to the Israel Palestine conflict continued to affect the logistics costs adversely, affecting the landed price ol coal to the importers. The situation was aggravated further by the US/Israel and Iran conflict in the region.

Cement Industry in India

For the Financial Year 2025-26 the cement industry recorded a production figure of 490 Million Mts_; Growth of 8% YoY. The growth in cement is estimated to be in the range of 6-8% in the financial year

2026-27. The Financial Year 2025-26 witnessed additions of capacity to the extent of 43-45 Million Mts representing 10% of the total volumes sold in FY 2024-25. The consolidation drive continued in FY 2025-26 with the top 2 players playing a major role . Beside this, the Indias cement sector is set for a sharp capacity expansion, with 160-170 MT of grinding capacity expected to be added between financial year 2025-26 (FY26) and FY28, marking a 75 per cent rise over the 95 MT added in the past three years, as quoted by one of the research papers of CRISIL Ratings on cement sector. The drop in the coal prices benefited the manufacturers, by reducing the cost of production in the initial part of the year however towards the end of the FY 2026, the coal prices firmed up affecting the cost of production and impacting the margins. The Aggressive consolidation that was witnessed particularly in the south Indian market in the FY 2023 to 25 showed it effect, with national players being very aggressive in getting the volumes in the southern part of India. This impacted the price realization, more so in the southern markets of India.

Outlook of Cement Industry

Indian Cement Industry is expected to grow at a CAGR rate of around 6%-8% for the next 5 year. The FY 2025-2026 saw volumes growth a couple of percentage more than the estimates, and the impact of geopolitical climate on the Indian economy would determine the growth for FY 2026-27.

(B) KCP Performance By Segment

(1) Cement

During the year, the Companys Cement Business recorded improved performance in terms of sales growth and profitability. The growth drivers during the year are (1) Demand in rural and semi-urban markets strengthened due to favourable monsoons (2) Sustained infrastructure push by the Government (3) Geographical expansion efforts for long term by the Company in view of operational and cost efficiency improvement programs undertaken. The company was able to record its volumes at 3.1 Million Mts for the Financial Year 2025-26 as against 2.9 Million Mts last year, with growth rate of 7%.

In the first half of the year, sales price realisation increased by about 6% and coal and other input

prices remained steady helping the Company to post profits. However, towards the end of financial year, due to geo-political tensions caused by US-Iran war and subsequent disruptions to global supply chains, the prices of most of the key raw materials, including coal and packing bags, shot up. This has adversely affected the profits of the Business in the last quarter.

Cement

The company also recorded an exceptional Item of true-down charges gain of Rs. 1.87 crores towards Fuel and Power Purchase Cost Adjustment (FPPCA) notified by APERC for financial year 2024-25. Correspondingly in previous Year, exceptional item of Rs.24.39 Crores of trueup charges was provided towards FPPCA notified by APERC for financial years 2022-23 & 2023-24.

Risks

Whilst the outlook of the Indian cement industry for FY 2026-27 looks bullish, the performance of Cement Division of The KCP Ltd, would largely depend on the coal prices softening, 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 in the first quarter of FY 2627. 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 first half of the Financial Year 202627. The initial completion was estimated for end of FY 2025-26 , however due to shortage of manpower from the contractors and untimely excessive rainfall. The project is delayed marginally

(2) Heavy Engineering

The Performance of Heavy Engineering Segment in FY 2025-26 was affected by low margin in the orders. Revenue from Sales was marginally lower at Rs.111.56 crores as compared to Rs.118.79 crores in previous year and the EBIT stood at a negative Rs.4.66 crores as compared to positive EBIT of Rs.2.44 crores in previous year.

The challenges faced by the unit in the form of competition from unorganised sectors, continued to

keep the margins of the unit under pressure. The unit is taking measures to increase its products in the existing segment both in domestic and international markets, along with exploring possibilities of offering an integrated after sales services to its existing customers in the Cement Sector. The flow of enquiry and the order book as on the 31st March 2026 stood at around Rs 118 Crs approx.

Heavy Engineering

Way Forward and Risks:

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 20262027.

(3) Hospitality

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.

Hotel

The KCP Mercure Hyderabad occupancy level was marginally lower by 2%, but the average rentals improved by about 9% as compared to the previous Financial Year.

The Roof Top restaurant attracted many residents as well as non- resident guests. Last financial year the roof top restaurant received the best Roof Top Restaurant award from Hybiz TV. The management has further invested in covering the roof to enhance the appeal and invite guests during rainy season to keep the revenue steady.

Way forward and Risks.

The Hotel has established itself as a preferred hotel in the segment, and continues to improve its occupancy and ARR. However the revenue and bottom line will

be affected based on the economic situation in India. The management also expect the F&B revenues and occupancy to perform at good level.

(C) Subsidiary & Associates

(i) KCP Vietnam Industries Limited (Subisidiary)

During the financial year 2025-26 key factors of subsidiary company KCP Vietnam Industries Limited compared to 2024-25 are as follows.

Cane crushing increased by 8.54 % due to high Cane Prices in the previous years. Sugar Production increased by 7.56% due to higher raw material availability. Recovery rate decreased by 0.10% due to climate impact. Average sales realization decreased by 12.99% due to lower sugar prices in line with trend in the international sugar market. Turnover decreased by 8.32% impact lower sales realization

Profit volume decreased by 25.92% due to increase in the raw material price which impact the cost of production and simultaneously decrease in sales realization.

Power sold to National Grid increased to 10.19%, since the plant was operated up to second week of August 2025 due to surplus bagasse out of higher cane crush.

(Ii) Fives Cail KCP Limited (Joint Venture)

Sales during the year under review amounted to INR 61.11 crores as against INR 161.22 crores during the previous year. The Company recorded a loss from continuing operations of INR 0.25 crore during the year under report as compared to a profit of INR 1 crore in the previous year.

Operations

The Company booked orders worth INR 101.3 crores (Exports INR 77.6 crores) during the year under report and the order backlog position is INR 81.6 crores (Exports INR 68.4 crores) as at 31st March 2026 in comparison with a backlog of INR 98.7 crores (Exports INR 72.3 crores) at the end of the previous year.

Business Review

The total revenue for the year is INR 61.11 crores as compared to INR 161.22 crores in the previous year. The Company recorded a profit before tax of INR 0.17 crores during the year ended 31st March 2026.

Due to geo-political reasons, the sugar export is banned by Government of India and it is expected that sugar juice will be directly converted to ethanol for blending with fuel, to reduce the import bill of crude oil. This will lead to a reduced market for products such as incinerators. The sugar factories may review the scope to convert juice to ethanol in their existing distilleries.

The market in India for sugar and incinerator is in the downward trend. We foresee little encouraging scenario in sugar and the boiler in international markets especially for Africa. However, decisions are getting delayed due to geo-political reasons.

The Company has been operating fully compliant with full safety measures in all our workplaces.

The company carries an order backlog of INR 81.6 crores as at 1st April 2026 and the current year revenue appears to be moderate.

(D) New Projects Update

Waste Heat Recovery Project :

During the beginning of FY 2024-25 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 reached the final stages with trial runs completed by end of the current financial year. The project is expected to be running in full scale by the beginning of first quarter of FY 26-27.

(E) Railway Siding Project:

The company has also embarked on a infrastructure development project of installing a 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 140 Crs.

Project completion Status

The majority of the work is in advanced status of completion. The total project is expected to be completed by the first half of FY 2026-27.

(F) Internal control systems and their adequacy:

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, 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.

(G) Accounting Policies and Procedures:

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

(H) Key Ratios

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

Cautionary Statement:

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.