Kaka Industries Ltd Management Discussions

Economic Overview

Global Economy.

The global economy grew at a stable pace through 2025-26, even as trade tensions, evolving tariff regimes, and geopolitical developments - including instability in parts of the Middle East - continued to inject uncertainty into commodity and energy markets. Emerging markets, supported by domestic consumption, infrastructure investment, and favourable demographics, continued to outpace advanced economies, with India remaining the fastest-growing large economy in the world.

Indian Economy.

Indias economy continued its strong growth trajectory through FY26, supported by resilient domestic demand, sustained public capital expenditure, and a steady recovery in rural consumption. Construction remained one of the strongest contributing sectors, underpinned by continued infrastructure spending, housing activity, and urban development - a direct tailwind for building materials manufacturers such as Kaka Industries. Indias structural growth drivers - rapid urbanisation, rising household incomes, and increasing formalisation of the economy - are expected to continue supporting longterm demand for organised, branded building products.

Industry Overview

Part A - The Indian PVC/WPC/UvPC Market

Indias PVC, WPC, and uPVC building and furniture products industry sits at the intersection of two large, structurally growing markets: housing/construction and the ongoing substitution of traditional wood-based products with engineered polymer alternatives.

Market size.

The Indian uPVC windows and doors market is estimated in the range of USD 1.5-1.6 billion, growing at a CAGR of roughly 7-8.5%, while the WPC boards and frames market (approximately INR 2,400 Cr / USD ~290 million) is growing faster still, at close to 8.7% CAGR, reflecting its earlier stage of adoption. Taken together with PVC profile applications in furniture, panelling, and decorative products, the combined addressable market runs into several thousand crores annually and continues to expand at high-single-digit to low-double-digit rates.

Import dependence and backward integration.

India continues to depend on imports for a meaningful share of its PVC resin requirements, exposing converters to currency and global-price volatility. Manufacturers investing in backward-integrated compounding - as Kaka Industries has done at Lasundra - are better placed to manage this volatility, improve supply security, and support long-term margin stability.

Why the category is growing

Housing and construction momentum - Indias housing shortage, estimated at 18+ million units, alongside PMAY and the Smart Cities Mission, provides a multi-year structural demand floor for doors, window frames, panelling, and fenestration materials.

Material substitution - PVC and WPC products are steadily displacing wood and plywood, and uPVC is displacing wood and aluminium in windows and doors, owing to superior termite resistance, waterproofing, durability and low maintenance.

Organised, branded demand - as construction quality expectations rise, the market is shifting from unbranded, fragmented local supply toward organised players with consistent quality and after-sales reliability.

Competitive landscape.

The industry remains fragmented outside a handful of larger organised players, with significant white space in Tier-2 and Tier-3 markets that remain underserved by national brands. Proximity to Gujarats PVC resin ecosystem is a meaningful cost and logistics advantage for manufacturers based in the region.

Market Performance & Trends

Part B - FY26 in the Indian PVC Furniture Market

Demand trends - the Indian PVC/WPC furniture and building products market continued its steady structural growth through FY26, supported by construction activity, government housing initiatives, and rising preference for low-maintenance alternatives to wood.

Accelerating substitution - FY26 saw the wood-to-polymer substitution trend gather further pace, with PVC and WPC increasingly specified by builders and interior contractors across affordable and premium housing segments.

Category mix shift toward WPC - WPC solid profile and sheet products grew faster than PVC profile products during the year, reflecting earlier-stage penetration and growing acceptance in door, cabinet, and premium furniture applications.

Capacity build-out across the industry - organised players continued investing in integrated, backward-linked manufacturing capacity to improve cost competitiveness and support the shift from unbranded to branded supply.

Rising cost of energy and sustainability focus - several organised manufacturers, including in Gujarats PVC processing hub, have begun investing in captive renewable power to insulate margins from grid tariff volatility.

Brand-building and organised retail - FY26 saw increased marketing investment across the category, including celebrity and film associations, trade exhibitions, and digital/influencer-led campaigns.

Outlook for the market.

The Indian PVC furniture and building products market is expected to sustain high-single-digit to low-double-digit growth into FY27, supported by continuing housing demand, further wood substitution, deeper penetration into Tier-2/Tier-3 markets, and gradual formalisation of a still largely fragmented industry

Performance Review - Kaka Industries Business Segments

PVC Profile.  Our largest and most established category continued to anchor overall performance during the year, supported by steady demand from furniture, wall panelling, ceiling, and decorative-product applications. The commissioning of Lasundras integrated compounding and extrusion capacity improved cost competitiveness and product consistency across this segment during FY26.

WPC Solid Profile.  Our WPC Solid Profile business - spanning doors, wardrobes, door frames, and kitchen cabinets - continued to grow faster than the overall portfolio during the year, in line with the broader industrys shift toward WPC as a premium, durable wood alternative. We continued to invest in this category as one of our key medium-term growth engines.

uPVC Profile.  Our uPVC doors and windows business continued to serve a smaller but strategically important part of the portfolio, benefiting from rising consumer awareness of soundproofing, ventilation, and noise-reduction properties. We see continued long-term potential in this category as uPVC penetration deepens across urban housing.

Outlook.  Kaka Industries expects demand across all three categories to be supported by continued investment in housing and urban development, and by the ongoing shift from unbranded to organised, branded supply. The Companys expanding integrated manufacturing footprint and growing WPC capacity position it well to capture emerging opportunities across both categories and geographies.

Growth Drivers & Tailwinds

Structural Growth Factors - Indian PVC Furniture Market

1. Structural housing demand - Indias estimated shortfall of 18+ million housing units, combined with PMAY and the Smart Cities Mission, provides a multi-year demand floor for doors, window frames, and fenestration products.

2. Material substitution away from wood - PVC and WPC products continue to displace traditional wood and plywood in furniture, doors, cabinets and panelling - a structural, multi-year substitution trend.

3. uPVC displacing wood and aluminium in windows - uPVC continues to gain share in windows and doors on account of sound insulation, thermal efficiency, and low-maintenance properties.

4. Industry-wide backward integration - organised manufacturers are increasingly investing in integrated compounding and extrusion capacity, reducing spillage and wastage and improving cost competitiveness.

5. Renewable energy adoption and cost structure - growing adoption of captive renewable power among organised players is structurally lowering the industrys cost base and improving margin resilience.

6. Multi-brand, multi-price-point strategies - House-of-Brands strategies spanning premium, value, and category-extension offerings let players capture demand across price points and segments.

7. Whitespace in Tier-2/Tier-3 markets - the organised PVC/WPC/uPVC segment remains fragmented outside a small set of national players, leaving significant headroom for branded manufacturers.

8. Rising institutional and organised-retail demand - a growing base of institutional, government, and corporate/developer clients is expanding brand recall and shifting demand toward organised, branded suppliers.

9. Proximity to the Gujarat PVC ecosystem - manufacturers based in and around Gujarats PVC resin and processing ecosystem benefit from logistics and raw-material sourcing advantages.

10. Formalisation and governance - the gradual shift of SME manufacturers toward public listing and formal governance structures is improving access to growth capital across the industry.

KEY HIGHLIGHTS

Ratios	FY 25-26	FY 24-25	Change
Debtors Turnover (in Days)	49 Days	51 Days	2 Days
Inventory Turnover (in Days)	98 Days	114 Days	16 Days
Interest Coverage Ratio	3.08	1.39	1.69
Current Ratio	1.25	1.16	0.09
Debt Equity Ratio	1.25	1.12	0.13
EBITDA Margin	13.67%	13.33%	0.34%
PAT Margin	7.13%	6.50%	0.63%
Return on Capital Employed	16.47%	16.39%	0.08%

KEY FINANCIAL RATIOS

Particulars	25-26	24-25	23-24	22-23	21-22	20-21	19-20
Sales	26,323	19,778	17,022	15,393	11,696	7,875	4,149
Other Income	59	28	19	41	14	4	0
Total Income	26,383	19,806	17,040	15,435	11,710	7,879	4,149
EBITDA	3,599	2,636	2,143	1,386	997	649	233
Interest	637	521	231	248	213	157	34
Profit Before Depreciation and Tax	2,962	2,114	1,912	1,138	784	492	200
Depreciation	472	364	176	136	107	67	2
Profit Before Tax	2,490	1,750	1,735	1,002	677	424	197
Tax	612	464	436	282	173	112	54
Profit After Tax	1,877	1,286	1,300	720	504	312	143
Earning Per Share	13.74	9.42	10.34	7.20	20.14	12.49	1,910.00
Paid up Equity Capital	1,366	1,366	1,366	1,000	250	250	1
Reserve And Surplus	6,946	5,068	3,782	961	1,009	505	143
Shareholders Fund	8,312	6,434	5,148	1,961	1,259	755	144
Loans (Long term)	4,676	2,777	2,352	2,257	1,232	592	387
Deferred Tax Liability (Net)	316	226	70	17	18	13	2
Capital Employed	13,358	9,480	7,611	4,261	2,510	1,360	533
Gross Fixed Assets	9,122	7,825	5,711	1,436	1,119	846	112
Capital Work In Progress	2,611	685	578	799	-	-	-
Net Current Assets	1,854	990	1,243	1,665	1,360	583	423
Book Value Per Equity Share	60.8	47.1	38	20	50	30	1,923

HUMAN RESOURCES

Kaka Industries recognises that its people are central to its continued growth and success. As the Company has scaled - from a single manufacturing facility to a multi-site, fully integrated operation - it has continued to invest in building a capable and engaged workforce across manufacturing, quality control, sales, and distribution functions.

The Companys human resource approach is focused on creating a work environment that supports performance, skill development, and professional growth at all levels of the organisation. With the commissioning of the Lasundra facility, the Company has expanded its manufacturing workforce and continues to invest in training and capability building to support its growing and more complex integrated operations.

Kaka Industries remains committed to fostering a culture of accountability, safety, and continuous improvement, recognising that its employees are a key driver of the Companys operational performance and long-term growth.

INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

Kaka Industries has established an internal control framework designed to ensure the orderly conduct of its business, safeguard its assets, and maintain the integrity of its financial reporting. These controls extend across all functions of the Company - manufacturing, procurement, sales, and finance - and are structured to promote operational efficiency, ensure reliable accounting and financial information, and support compliance with applicable legal and regulatory requirements.

The internal control environment is periodically reviewed and strengthened to reflect the Companys growing scale following the commissioning of the Lasundra facility and its continuing evolution as a listed company. Internal audit processes are conducted independently, with findings reviewed by the Audit Committee of the Board, which monitors the implementation of recommendations and ensures that corrective actions are taken in a timely manner.

The Companys statutory auditors have, as part of their audit procedures, reviewed the adequacy of internal financial controls over financial reporting. This evolving system of internal controls reflects Kaka Industries continued commitment to transparency, good governance, and the long-term confidence of all stakeholders.

CAUTIONARY STATEMENT

This Management Discussion and Analysis contains forward-looking statements that reflect the Companys current expectations regarding future events, business performance, and financial results. These statements are based on certain assumptions and are subject to a range of known and unknown risks and uncertainties.

Words such as will, should, aim, believe, anticipate, intend, estimate and other similar expressions are intended to identify such forward-looking statements. Actual results may differ materially from those expressed or implied due to a variety of factors, including changes in raw-material prices, market conditions, regulatory developments, economic conditions, and business performance.

The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are advised not to place undue reliance on these statements and to refer to the Companys audited financial statements and disclosures for a more comprehensive understanding of the risks and opportunities that may affect performance.

For and on behalf of the Board of Directors for KAKA INDUSTRIES LIMITED

Rajesh Dhirubhai Gondaliya Managing Director & Chairman (DIN:03454540)

Corporate Governance Report (Not Applicable)

2015 read with Regulation 15 of Chapter IV SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, As KAKA INDUSTRIES LIMITED, which has listed its securities on the SME Exchange. Therefore, it is not required to submit Corporate Governance Report for the Year ended on 31/03/2026.

For and on behalf of the Board of Directors for KAKA INDUSTRIES LIMITED

Rajesh Dhirubhai Gondaliya Managing Director & Chairman (DIN:03454540)