Kapston Services Ltd Management Discussions

COMPANY OVERVIEW

Kapston Services Limited (Kapston) is an end-to-end manpower solutions provider offering staffing, integrated facility management, security and allied workforce services across India.

Kapston has built its operating model around workforce deployment, training, compliance, technology-enabled attendance and employee-management systems, and multi-location service delivery. As of FY 2025-26, the Company reported more than 30,000 people employed and over 800 clients served. Its service portfolio and geographic presence provide a platform for continued expansion across both traditional enterprise services and emerging technology-enabled service categories.

During FY 2025-26, Kapston also entered the Business-to-Consumer home-services market through the incorporation of Kapston Home Services Private Limited (KHSPL). The new subsidiary is intended to provide cleaning, beauty and spa services, electrical, plumbing and carpentry services, air-conditioner repairs, painting and other allied household services. This initiative represents a strategic extension of Kapstons existing capabilities in recruitment, verification, training, supervision and service execution into the consumer market.

Economic Environment Global Economy

The global economy in 2026-27 is projected to grow at 3.0% in 2026 and recover to 3.4% in 2027, as per the IMFs July 2026 World Economic Outlook Update, continuing its cautious recovery from recent geopolitical, macroeconomic, and climate-linked challenges, including the ongoing conflict in West Asia. However, this recovery is unbalanced. Advanced economies are expected to grow at a modest 1.7% in 2026 and 1.8% in 2027, constrained by demographic shifts, supply chain recalibration, and cautious fiscal spending. Meanwhile, emerging market and developing economies, projected to grow at 3.8% in 2026 and accelerate to 4.5% in 2027, and particularly those in Asia, remain global growth engines, benefiting from industrial expansion, digital transformation, and improved consumption.

Trade diversification, the rise of green technology, and resilient infrastructure investment are shaping future economic priorities. Businesses worldwide are adapting to energy transition, and Al-led productivity enhancements. Global economies are continue to be benefiting from strong domestic demand, improved export performance and targeted government support measures aimed at sustaining economic momentum. Asian economies continue to outperform the global average with growth driven by robust domestic demand, industrial expansion and technological advancements. Conversely, emerging markets?particularly in Asia?remain the primary global growth engines, expanding rapidly fueled by industrial expansion, digital adoption, and vibrant domestic consumption. Trade diversification, green tech investments, and resilient urban infrastructure remain pivotal priorities. Across all markets, enterprise adoption, clean energy transitions, and Al-led operational efficiency continues to define the commercial ecosystem.

For Kapston, the principal implication is the need to maintain sectoral diversification, control operating costs, improve workforce productivity and expand into segments where demand is supported by structural factors.

Indian Economy

India remains a beacon of growth in the global landscape, solidifying its position as one of the fastest- growing economies in the world. In FY 2026-27, Indias GDP is estimated at approximately $4.1-4.2 trillion, keeping it firmly on track toward the $5 Trillion milestone. GDP growth is forecasted at more than 6.4%, with estimates from the IMF, RBI and World Bank clustering in the 6.4%-6.6% range, underpinned by sustained domestic demand, robust infrastructure spending, and improved ease of doing business. Key drivers include:

• Retail inflation, projected by the RBI at around 5.1% for FY 2026-27 and remaining comfortably within the RBIs 2-6% tolerance band, maintained through calibrated monetary policy actions.

• Sectoral Synergies: Strong momentum across manufacturing and services sectors, amplified by the Make- in-India and Digital India frameworks.

• Foreign Direct Investment (FDI): Robust private equity and FDI inflows into logistics, renewable energy, fintech, and tech-enabled service platforms. Surge in FDI and private equity interest in sectors like logistics, clean energy, and fintech.

• Demographic Capital: A rising working-age population coupled with rapid urban household formation, accelerating demand for tech-integrated business and home services.

• Manufacturing & Service Sector: Strong performance across manufacturing and services.

Indias demographic dividend, combined with its vibrant startup ecosystem and structural reforms, places it at the heart of the next global economic shift. Indias large working-age population provides a substantial labour pool, although skill gaps, attrition, migration and the need for continuous training remain important challenges. Investment in infrastructure continues to be a major driver of Indias economic growth. The Central Governments ongoing reforms to improve the ease of doing business alongside a stable macroeconomic environment, have made India an attractive destination for investments.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Staffing Services

Indias staffing services sector continues to grow at an impressive pace, with the organized staffing market projected to maintain a CAGR of over 13.2%. This growth is driven by structural economic changes, increased formalization of employment, and the rising need for flexible workforce solutions across industries such as e-com/Q-com, healthcare, logistics, manufacturing, retail, BFSI/NBFC services and other services. Staffing companies are rapidly evolving into tech-enabled platforms. Automation, applicant tracking systems (ATS), predictive analytics, and AI-powered talent acquisition tools are becoming the norm. These innovations help organizations in precise candidate matching, improved hiring speed, and reduced onboarding costs. Meanwhile, the rise of the gig economy and freelance platforms in white-collar and skilled services is expanding the workforce supply chain beyond traditional boundaries.

While the IT staffing segment faced a temporary slowdown due to global economic uncertainties and reduced discretionary tech spending from Western economies, the industry is now witnessing a renewed wave of demand across sectors. Additionally, demand for niche tech talent in areas such as generative AI, blockchain, and digital finance is reshaping the recruitment landscape. However, the rapid digitalization is also pushing traditional staffing firms to reinvent their business models. Success in this sector will now depend on agility, scalability, tech-integration, and the ability to offer end-to-end workforce lifecycle management solutions.

Facility Management Services (FMS)

The Integrated Facility Management (IFM) industry in India is undergoing a strategic transformation, evolving from a cost-center utility service to a strategic enabler of workplace efficiency, sustainability, and employee experience. Valued at over ?50,000 crores in the organized sector alone, the fM industry is projected to grow at a CAGR of 7.37% -9.3% between 2025 and 2030, Key growth drivers including the rise of smart and green buildings across metro and Tier 1 cities. ESG-driven operations, mandating energy-efficient, zero-carbon, and health-compliant infrastructure. Integration of IoT, Building Management Systems (BMS), AI/ML, and robotics for predictive maintenance and real-time operations. Last but not the least Increased demand from SEZs, data centers, retail chains, and hospitality segments for integrated, multi-location service delivery.

Workplace dynamics have also shifted dramatically with hybrid and flexible work models, leading to demand for agile space management, workplace experience platforms, and tech-driven compliance solutions. Global clients increasingly prefer end-to-end FM partners capable of providing bundled services covering housekeeping, MEP, horticulture, and utility management.

Security Services

Indias private security industry, already the largest in the world with over 11 million guards, continues to expand at a steady CAGR of 4.8%, buoyed by increasing demand across commercial, industrial, residential, and infrastructure sectors. New trends defining the future of security services include: Deployment of AI- powered surveillance, facial recognition, and integrated control rooms. Increasing need for specialized security for sectors like logistics hubs, SEZs, manufacturing plants, gated communities, and critical infrastructure.

Growing awareness around data privacy, and cyber-physical security convergence. Client expectations are evolving from simple manpower-based guarding to outcome-based and technology-integrated solutions. There is a strong push towards skill standardization, professional training, and adherence to PSARA norms. Security companies are also investing in command-and-control platforms, incident response systems, and real- time patrol analytics, offering clients better visibility and risk mitigation. Organized security service providers with capabilities in technology, and training are expected to lead the consolidation phase over the coming years.

Tech-Based Home Services Platform

The home-services market is gradually moving from an unorganised, referral-based model toward a structured and technology-enabled ecosystem. Urban consumers increasingly seek convenience, transparent pricing, verified service professionals, digital bookings, cashless payments and quality assurance.

Indias home services industry, valued at approximately ^5,100-5,210 billion (~US$60 billion) in FY 2024-25, is undergoing a structural shift from an overwhelmingly unorganized, referral-driven market to a technology- enabled ecosystem. The overall market is projected to grow at a 18% - 22% CAGR to reach approximately ?8,500-8,800 billion (~US$90 billion) by FY 2030. Within this, online full-stack platforms, though still a small fraction of the overall market, are the fastest-growing segment, expanding at an 18-22% CAGR as urban consumers increasingly value verified, on-demand, and subscription-based services over unorganized local providers.

The Indian home services market is witnessing a period of rapid formalization and transformation, driven by growing urbanization, lifestyle shifts, and increasing digital adoption. With urban consumers seeking convenience, hygiene, and trust, the market is evolving from an unorganized sector dominated by local service providers to a structured, technology-led ecosystem. The size of the addressable market is projected to grow to ?8,800 billion by 2030, fuelled by:

• Urbanisation and increasing household formation.

• Growth in dual-income and nuclear households.

• Rising demand for professional cleaning and maintenance.

• Greater awareness of safety, hygiene and verification.

• Increasing smartphone and digital-payment adoption.

• Under-penetration of organised services in Tier 2 and Tier 3 cities.

High-frequency category (Cleaning + InstaAssist + Beauty): These are daily to monthly repeat services, forming the backbone of household needs. Their high usage frequency ensures consistent demand, strong customer stickiness, and predictable revenue streams. The rapid shift in urban lifestyles, rising dual-income households, and increasing preference for convenience-led solutions have created a strong demand for "instant home services" and "Quick maid support" in the B2C segment. Customers today seek reliable, professionally man- aged assistance that can be accessed within minutes, driving the emergence of hyperlocal, on-demand service models. Instant services, typically delivered within 15-30 minutes, cater to urgent needs such as emergen- cy cleaning, kitchen reset, basic home assistance, offering a premium, time-saving alternative to traditional arrangements.

Kapston Home Services Private Limited can potentially leverage the Groups recruitment, background-verifica- tion, training and workforce-management capabilities. However, the business will require disciplined customer acquisition, reliable service fulfilment, technology investment and strong quality-control systems.

OPPORTUNITIES AND THREATS PRODUCT - WISE

TYPE OF SERVICE	OPPORTUNITIES	THREATS
Staffing Services	Expansion in logistics, e-commerce, healthcare, manufacturing, retail, BFSI/NBFC and skilled staffing; rising formalisation; technology-enabled workforce management.	Competition from traditional and digital staffing platforms; talent shortages; candidate dropouts; margin pressure.
Facility Management Services	Growth in integrated contracts; commercial real estate, hospitals, logistics parks, data centres and residential communities; demand for technology- enabled and ESG-aligned operations.	Fragmented competition; pricing pressure from unorganised players; technical-skill shortages; high front-line attrition; increasing compliance expectations.
Security Services	Demand from infrastructure, logistics, residential, industrial and institutional clients; opportunities in surveillance, access control, specialised guarding and command-centre services.	Pricing competition; training and skill gaps; high attrition; need for continuous technology investment and upskilling.
Tech-Based Home Services Platform	Large unorganised market; growing urban demand; cross-utilisation of verified manpower; opportunities in cleaning, repair, maintenance, beauty and allied services; expansion into smaller cities.	Strong competition from established platforms; high customer acquisition cost; service quality inconsistency; technology and cybersecurity risk; price competition from local providers.

SEGMENT - WISE/PRODUCT - WISE PERFORMANCE - 2025-26 Staffing Services

The staffing business continued to benefit from demand across manufacturing, healthcare, e-commerce, logistics, FMCG, BFSI/NBFC and other service sectors. The shift toward flexible workforce models supported demand for contract staffing and outsourced manpower.

Key operational priorities during the year included:

• Digital employee onboarding and KYC-based registration.

• Mobile attendance with geo-tagging and geo-fencing.

• Employee self-service applications.

• Workforce deployment and attendance visibility.

• Sector-specific recruitment and training.

• Expansion of the client and candidate network.

Facility Management Services (FMS)

TThe facility-management business continued to operate in an environment where customers increasingly sought integrated and measurable service delivery. Opportunities remained available in commercial buildings, residential communities, healthcare, education, logistics, manufacturing and other institutional segments.

The key focus areas were:

• Service-quality monitoring.

• Workforce attendance and deployment control.

• Preventive maintenance and technical support.

• Integrated service delivery.

• Digital communication and reporting.

Security Services

Security services remained an important part of Kapstons end-to-end manpower offering. The Company continued to focus on trained personnel, client-specific deployment and operational supervision.

The segments development priorities include:

• Training and skill enhancement.

• Background verification.

• Access-control and surveillance support.

• Digital incident and patrol reporting.

• Deployment of personnel suited to sector-specific requirements.

• Improved welfare and compliance processes.

Home Services Technology Platform

Kapston Home Services Private Limited is incorporated as a new subsidiary and strategic B2C initiative. Its proposed service categories include cleaning, beauty and spa services, electrical, plumbing and carpentry services, air-conditioner repairs, painting and other allied home services.

The platform is expected to be developed around the following principles:

• Start with selected service categories and pilot markets.

• Use trained and verified service professionals.

• Introduce digital booking and scheduling.

• Provide transparent pricing and customer feedback.

• Monitor service quality and complaint resolution.

• Test unit economics before large-scale expansion.

• Use Kapstons existing manpower and operating capabilities wherever practical.

As this is an early-stage vertical, management should monitor customer acquisition cost, repeat-booking rate, contribution margin, fulfilment time, cancellation rate, professional utilisation and customer satisfaction.

Risks and Mitigation Staffing Services - Risks

Shortage of personnel with emerging technical and digital skills.

• Candidate dropouts before joining.

• High attrition in certain workforce categories.

• Competition from digital recruitment and staffing platforms.

• Margin pressure in price-sensitive contracts.

Mitigation

Kapston intends to reduce concentration risk through sectoral diversification, strengthen candidate engagement, use digital onboarding and attendance tools, improve training, and maintain close client coordination regarding workforce requirements.

Facility Management Services - Risks

• Shortage of technical personnel in MEP, HVAC and automation.

• High front-line workforce attrition.

• Price competition from unorganised service providers.

• Increasing customer demand for measurable ESG and service outcomes.

Mitigation

The Companys mitigation priorities include skill development, site-level supervision, preventive maintenance, documented compliance, digital reporting, service-quality audits and selective focus on integrated contracts where it can provide greater value than single-service competitors.

Security Services - Risks

• Training and standardisation gaps.

• Wage and welfare risks.

• High attrition in urban locations.

• Technology-adoption requirements.

• Reputational damage arising from operational incidents.

Mitigation

Kapston can mitigate these risks through structured recruitment, background verification, induction and refresher training, supervisory checks, digital incident reporting, operational monitoring and adoption of suitable surveillance and communication tools.

INDUSTRY OUTLOOK Staffing Services

The outlook for staffing remains positive because businesses increasingly value workforce flexibility and faster deployment. Demand is expected to broaden beyond traditional logistics and e-commerce into manufacturing, healthcare, retail, BFSI/NBFC, EV services, tourism and technology-enabled operations and other industries. Staffing companies that combine scale with digital tools, sector expertise, training and compliance are likely to be better positioned than purely transactional recruitment agencies.

Facility Management Services (FM)

Facility management is expected to benefit from infrastructure development, commercial real estate, hospitals, data centres, logistics parks, residential communities and other institutional expansion. Customers are likely to prefer integrated contracts supported by technology, measurable service levels and compliance capabilities. The sectors profitability will depend on disciplined bidding, manpower productivity, retention, contract execution and the ability to differentiate on service quality rather than price alone.

Security Services

Security demand should remain supported by the growth of industrial, commercial, residential, logistics and institutional infrastructure. The industry is gradually shifting toward a combined model of trained manpower, technology support, real-time monitoring and incident management.

Training, technology integration, compliance and the ability to deliver specialised services will remain key competitive factors.

Tech-Based Home Services Platform

The home-services market provides a long-term growth opportunity, but the path to profitability may require measured expansion. The market remains fragmented, and organised platforms must establish trust, repeat usage and reliable service fulfilment.

Kapstons potential differentiation lies in combining an app-led consumer interface with its established capabilities in workforce sourcing, verification, training, supervision and compliance. The Company should nevertheless scale the business only after validating customer retention, professional utilisation and contribution economics.

The Indian online home services category is expected to remain one of the fastest-growing consumer-internet segments over the next five years, with online full-stack platforms growing at an 18-22% CAGR against 10-11% for the overall home services market.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The management of the company has established a robust framework of internal financial controls to ensure smooth and efficient operation of the business. These controls are designed to safeguard the companys assets, prevent and detect fraud & errors, and ensure the accuracy & completeness of financial records. The system also supports the timely preparation of reliable financial disclosures, ensuring that the companys reporting is transparent and compliant with applicable laws and regulations. The company has implemented a set of policies and procedures that guide the orderly conduct of business activities. These policies ensure adherence to the companys standards and provide clear directives on operational processes. Measures have been put in place to protect the companys assets from unauthorized access, loss or damage. Regular audits and checks are conducted to ensure that assets are managed effectively and are accounted for accurately. The internal control system includes mechanisms for the early detection of fraud and errors. These mechanisms are designed to identify irregularities in operations or financial reporting promptly, enabling timely corrective action.

The company maintains detailed and precise accounting records that reflect all financial transactions accurately. This ensures that the financial statements present a true and fair view of the companys financial position. The internal controls are aligned with the objective of ensuring that all financial disclosures are reliable and are prepared in a timely manner. This helps in maintaining the trust of stakeholders and complying with regulatory requirements. The Audit Committee of the Board plays a crucial role in overseeing the internal audit function. Regular updates and presentations from internal auditors keep the committee informed about the effectiveness of the internal controls. This ongoing oversight ensures that any risks are managed pro- actively and that the internal control system remains effective in achieving the companys objectives. The companys internal control system is designed to be commensurate with the nature, size and complexity of its operations. It provides reasonable assurance that the companys objectives, in terms of operational efficiency, financial reporting reliability and compliance with laws & regulations are being met. The internal audit function, under the guidance of the Audit Committee, provides further assurance that these controls are effective and that key business risks are being managed appropriately.

MATERIAL DEVELOPMENTS ON HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT

Growth in Workforce: As of March 2026 the total number of personnel, including trainees and apprentices are more than 30,000 This marks a significant increase from 28,000 personnel recorded in March 2025. This growth reflects the companys expanding operations and its workforce to meet increasing business demands. Also the number of back office staff was 452 as of March 2026, showing a slight increase from 372 in March 2025. This stability in the back office workforce indicates the companys efforts to maintain operational efficiency, while managing administrative functions effectively.

The significant increase in personnel, including trainees and apprentices, underscores the companys focus on training and development. By investing in the growth of its workforce, the company ensures that its employees are well-equipped to meet the challenges of the evolving business landscape. The company continues to maintain harmonious industrial relations, fostering a positive working environment that supports employee engagement and productivity. The proactive management of industrial relations ensures that any potential issues are addressed promptly, contributing to the overall stability and growth of the organization.

The companys human resources strategy remains focused on building a skilled, motivated and efficient workforce, which is crucial for sustaining growth and achieving business objectives in the coming years.

FINANCIAL PERFORMANCE (Standalone)

(INR in Lakhs)

Particulars	2025-26	2024-25
Revenue from operations	83032.35	68870.17
EBITDA	4567.79	3175.04
Less: Finance Costs	1429.78	1221.55
Less: Depreciation and amortization expenses	402.52	449.47
Profit before prior period items	2735.49	1504.02
Prior period items	0	0
Profit before tax	2735.49	1504.02
Less: Current Tax	253.16	0
Deferred Tax	(320.07)	(279.36)
Profit available for appropriations/Loss	2802.40	1783.38
Basic Earnings per Share (Rs.)	9.21	5.86
Diluted Earnings per Share (Rs.)	9.21	5.86
Paid up share capital	1521.61	1014.41
(Face value of INR 5 each)

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE (STANDALONE)

Revenue Growth: The company achieved a Excellent revenue growth of 20.67%, reaching INR 83,206.73 Lakhs in FY 2025-26 compared to the previous financial year. This significant increase in revenue reflects the com- panys continued operational performance and its ability to capitalize on growth opportunities across various business segments.

EBITDA: The Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) increased by 43.87%, rising from INR 3,175.04 Lakhs in FY 2024-25 to INR 4,567.79 Lakhs in FY 2025-26. This improvement in EBITDA is a positive sign of the companys ability to enhance profitability through increased scale and efficiency.

Finance Costs: Finance costs saw an increase to INR 1,429.78 Lakhs from INR 1,221.55 Lakhs, primarily due to higher working capital utilization driven by business growth. While the increase in finance costs reflects the need for additional resources to support expanding operations, it also highlights the importance of managing working capital effectively to ensure sustainable financial performance.

Depreciation: Depreciation costs increased by INR 46.95 Lakhs on account of management estimates of the future useful lives of certain class of property, plant and equipment .

Taxation: As per Section 80JJAA of the Income Tax Act, 1961, the company has recognized a Deferred Tax Asset due to timing differences between the Income Tax Act and the Companies Act. As a result, the company recorded a tax income of INR 320.07 Lakhs in FY 2025-26, compared to a tax income of INR 279.36 Lakhs in fY 2024-25.

The companys financial performance in FY 2025-26 demonstrates robust growth and effective management of resources. The significant increase in revenue and EBITDA, coupled with prudent management of finance costs and depreciation, has positioned the company well for continued success. The positive tax outcome further enhances the financial results, contributing to overall profitability. The alignment between operational achievements and financial outcomes underscores the companys strategic focus on sustainable growth and value creation for its stakeholders.

RATIO ANALYSIS FOR FY 2025-2026

In accordance with Schedule V(B) of the Securities and Exchange Board of India (Listing Obligations and Dis- closure Requirements) Regulations, 2015, the following is an analysis of the financial ratios for the fiscal year 2025-2026:

Particulars	2025-26	2024-25
Debtors Turnover (No. of Times)	4.51	4.74
Inventory Turnover (No. of Times)	1.58	1.57
Interest Coverage Ratio (No. of Times)	2.91	2.23
Current Ratio (No. of Times)	1.44	1.36
Debt Equity Ratio	1.50	1.81
Operating Profit Margin (%)	5.02	3.96
Net Profit Margin (%)	3.38	2.59
Return on Net Worth (%)	27.33	22.23