Keerthi Industries Ltd Management Discussions

1. OVERVIEW OF INDUSTRY

Keerthi Industries mainly operates in two business segments; (a) Cement, and (b) Electronics.

(a) CEMENT

We operate one integrated cement plants in the States of Telangana. This segment contributes more than 90% of the total Turnover of the Company vis-?-vis other segments of the Company. We sell cement under the brand "Suvarna Cements", one of the leading brands in South India.

With India embarking on a strong infrastructure and housing-led growth path, the cement sector is poised to play a pivotal role in nation building. The Companys investments in modern equipment such as Vertical Raw Mills efficiency (VRM) have not only enhanced energy but also aligned operations with sustainability goals by reducing carbon footprint and resource intensity. These operational improvements will help us remain competitive as the industry gears up for higher demand driven by government push towards infrastructure, housing for all, and smart cities.

(b) ELECTRONICS

Your Company is one of the few companies specialized in manufacturing flexible Printed Circuit Boards (PCB) in India. The Electronic Industry is looking up and doing well, giving a scope for PCB industry to expand. There appears to be some improvement in the usage of flex circuits in India as new designers have started involving them for prototype manufacturing. The segment has good improvement in its operations during the financial year with strong demand from their regular consumers. Focus on quality and customer service, improved supply chain mechanism is expected to give strong push to companys operations in the upcoming years. The company is investing around 10 crore to modernize its manufacturing unit, having already installed machinery worth 4.5 crore, with the balance equipment currently under procurement. This investment is supported by the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), led by the Ministry of Electronics and Information Technology (MeitY). SPECS provides a financial incentive of 25% on capital expenditure to encourage domestic manufacturing and technological advancement in the electronics components sector, aiding companies like ours in upgrading facilities and enhancing production capabilities while

from government-backed fiscal support.

2. OPPORTUNITIES & OUTLOOK

Indias cement consumption is expected to grow at a CAGR of 6 7% over the next 3 4 years, supported by 11 lakh crore capital expenditure in Union Budget 2024 25, enhanced allocation to PM Awas Yojana, highway development under Bharatmala, and focus on renewable energy-linked industrial clusters. With cement demand projected to exceed 600 MT by FY 2027, South India remains a strong growth corridor. Your Company, with its established brand ‘Suvarna Cements, is strategically positioned to cater to both retail housing and infrastructure demand." "Looking ahead, the pre-election spending cycle, rural housing demand revival, and acceleration in state government infra projects are expected to drive volume growth in FY 2025. Cost competitiveness will remain a key differentiator. The Company is actively pursuing alternative fuels namely waste heat recovery to reduce dependency on volatile fuel costs and enhance long-term sustainability The Government of India is strongly focused on infrastructure development to boost economic growth and is aiming for 100 smart cities. The Government also intends to expand the capacity of railways and the facilities for handling and storage to ease the transportation of cement and reduce transportation cost. These measures would lead to an increased construction activity, thereby boosting cement demand. The cement demand in India is estimated to cross 600 MT by FY 2027. As India has a high quantity and quality of limestone deposits throughout the country, the cement industry promises a high growth potential. The long-term growth drivers of the economy remain intact coupled with a large and fast-growing middle-class driving consumer spending. The rapidly growing domestic consumer market as well as the large industrial sector have made India an important investment destination for a wide range of multinationals across manufacturing, infrastructure, and services. Further, India is fast becoming the start-up capital of the world, attracting sizeable foreign investments, driven by its young population and technology edge. However, a complex interplay of geopolitical events including the neighbouring countries, high inflation and consequently elevated interest rates could pose risks to future economic growth.

(a) CEMENT DIVISION

Industry Structure and Developments:

India is the worlds second-largest cement producer, accounting for over 7% of the global cement installed capacity. The housing sector accounts for majority of Indias cement consumption, followed by the infrastructure sector, and commercial and industrial building constructions.

Outlook for cement sectors is favourable on the back of higher growth opportunities in the housing and infrastructure segments. With a busy construction season ahead with the pre-election spending kicking in, the Industry is expected to see a volume growth of 6-8% going forward and is likley to reach ~390-400 million tonnes.

Opportunities:

Despite mounting inflation and a large number of capital expenditure projects in progress, it expects cement company profits to recover due to slowing increases in energy costs, according to the Press Trust of India. The current prediction for the 2025 financial year follows a growth estimate of 9% in the 2024 financial year.

The primary demand driver for the cement industry will continue to be Indias expanding housing sector, which normally accounts for 65% of the countrys total cement consumption. The Union Budget for the year 2023-24 has an outlay for PM Awas Yojana, which is being enhanced by 66% to over 79,000 Crores (US$ 9.6 billion) to build affordable houses in urban and rural India. India built 12,000 kilometres of roadways in 2022, and this momentum is projected to continue in 2023 and 2024, supported by a number of governments programmes, which would further increase cement demand.

The cement demand in FY2024, though started on a mute note because of the inflationary environment, picked up pace in the second half as global raw material prices stabilised. Cement volumes grew by 8-9% in FY2024 to 380-385 million tonne, driven by housing demand, both rural and urban, and the infrastructure sector. Cement manufacturers are wary of further increasing their prices and this is leading to an impact on their profitability margins. Cost optimisation through tech enablement and innovating manufacturing processes have become extremely important for firms to sustain in the long run.

(b) ELECTRONIC DIVISION:

Industry Structure and Developments:

The global PCB (printed circuit board) market size grew from US $ 62.18 Billion in 2022 to US $ 69.60 Billion in 2023 at a compound annual growth rate is 11.90%. and it is expected to grow to US $ 104.99 Billion in 2027 at a compound annual growth rate is 10.80%.

Electronics industry is one of the largest global industries and form an integral part of several industries including Consumer Electronics, Medical equipment, IT, Telecom, Strategic Electronics (Defense, Space, and Aerospace), Industrial, & Mobility. Indian PCB (Printed Circuit Board) Market:

Indias PCB (Printed Circuit Board) market is rapidly growing, valued at USD 6.3 billion in 2024 and expected to reach USD 24.7 billion by 2033, at a CAGR of approximately 16.4%. This growth is fuelled by expanding domestic electronics manufacturing, surging demand in consumer electronics, telecommunications, automotive, and electric vehicles.

The rising utilization in consumer electronic products, increasing application in electric vehicles (EVs), and favorable government policies represent some of the key factors driving the market. India represents one of the largest and fastest growing consumer electronics market in the Asia Pacific region

The Government of India is strongly encouraging the manufacturing and usage of PCBs in the country. It has launched many initiatives such as ‘Make in India, ‘Digital India Specs Scheme of Meity etc. Under these schemes, the government aims to encourage manufacturers to set up more local plants in the country by easing tax regime, reducing bureaucratic hurdles, etc. This is expected to bring in significant achievement in various end-use industries (automotive, electrical, etc.), thereby creating a positive impact on the overall PCB demand. Government initiatives like Make in India and Production Linked Incentives (PLI) provide strong support for capacity expansion and technological advancement.

Opportunities:

Electronics are a global driver for the worlds economy. They are present in everything from life-saving medical equipment to safety and security systems, telecommunications, and automobiles. Electronics manufacturing involves significant job creation within the industry itself as well as in other industries through improved productivity and constant innovation. Applications such as wearables, augmented and virtual reality, and high-end graphics and video are just a few of the electronics-based innovations coming our way.

Indias major electronics hubs including Bengaluru, Pune, and Hyderabad benefit from favourable policies, skilled labour, and growing industry clusters, making them focal points for PCB innovation and manufacturing. The telecommunication sectors 5G rollout and expanding digital infrastructure drive demand for advanced PCBs, especially high-frequency and multilayer types. The growing electric vehicle market also offers opportunities for specialized automotive-grade PCBs used in battery management and safety systems.

Sustainability and environmental compliance are increasingly important, with manufacturers adopting eco-friendly materials and processes to meet regulatory requirements and customer preferences. Additionally, Indias rising Electronics Manufacturing Services (EMS) sector and attracting global OEMs pave the way for deeper integration into global supply chains.

Challenges such as dependency on imported raw materials and limited large-scale fabs remain but are being addressed through government incentives and industry investment in R&D. Overall, Indias PCB market represents a vibrant opportunity fuelled by technological innovation, strong policy backing, and rising end-use demand, positioning the country as a key global player in PCB manufacturing through the next decade.

3. RISKS, CONCERNS & THREATS:

Risks are unavoidable aspect of doing business. In fact, fructification of certain risks also sometimes presents tactical opportunities. However, with a view to manage its risks appropriately in the long term, the Company actively identify, analyze and address key risks through a robust risk management programme. The Company has a strong risk management framework that enables regular and active monitoring of business activities for identification, assessment and mitigation of potential internal or external risks. Our commitment to strong ethical values and high levels of personal and organizational integrity adds a further layer of risk mitigation to our operations.

Your Company has made various efforts to increase its market presence and market share in its natural markets and in the markets that are more economically beneficial. It is putting all efforts to considerably shrink the lead distances to optimize logistics cost further and increase the share of blended cement in its product portfolio. These measures would provide the Company cushion to absorb the impact of increase in various costs.

(a) CEMENT DIVISION

Concerns of the Cement division are high cost of Power and Coal, high freight cost, inadequate infrastructure, non-availability of Wagons, and poor quality of coal and heavy taxes / royalty levies and heavy finance cost as the cements industry is the capital intensive industry. The Operations of Cement companies in Telangana and Andhra

Pradesh suffer due to availability of Coal, Fuel, lower realizations and lower demand in the state.

Increase in the costs of raw material, power and fuel due to inflation or global price trends may impact profitability.

The Company is employing various means to reduce the impact of rising costs through better fuel sourcing, dynamic fuel mix capabilities to capitalize on changing trends in price and the use of alternative fuels. A focus on achieving better operating efficiencies and reducing coal and power consumption continues as a way of life. The

Company continues to evaluate and assess long term strategic solutions from waste heat recovery systems to solar energy, from alternate fuel to alternate sources, etc. to manage costs in the medium and long term. In addition to conventional risks, the cement sector is under increasing scrutiny for ESG compliance, carbon intensity reduction, and green cement adoption. The Company is proactively exploring opportunities in blended cement, renewable energy sourcing, and digital process optimization to mitigate these risks and remain future-ready. This initiative is subject to companys financial performance will be substantially improved with positive economic growth coupled with market growth.

(b) ELECTRONIC DIVISION

The complexity of the PCB design and manufacturing processes means there are numerous opportunities for PCB failure issues to arise. Some of these failures are a result of design oversights, such as insufficient clearances or incorrect measurements, which can negatively affect the functionality of the finished product. Others may result from problems in the manufacturing process, such as drilling errors or over-etching, which can be equally catastrophic.

There is a threat from major domestic and foreign competitors who, in order to maintain their scale of production, have installed higher production capacity, offer lower prices, better payment terms and other incentives. Due to delay in upgrading our manufacturing facilities because of financial constraints our market share may be affected.

The company is also exposed to risks across its entire range of business operations i.e. Loosing of major customers due to inability to meet the customer demands on time due to lack of modern machinery and equipment.

4. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company believes that a strong Internal Control framework is an important pillar of Corporate Governance. 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. These Internal Control Systems were found to be operating effectively during the year The company is following a proper and adequate system of internal controls in respect of all its activities including safeguarding and protecting its assets against loss from unauthorized use of disposition. Further all transactions entered into by the company are duly authorized and recorded correctly. M/s. Pavuluri & Co., Chartered Accountants,

Hyderabad has been working as the Internal Auditors of the company. The Internal Auditors are submitting reports to the Audit Committee on a Quarterly basis.

The Company also has a robust MIS system and Budgetary Control System under which the operating and financial performances are reviewed on a monthly basis. The variations with the budget are analyzed 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.

5. SEGMENT WISE OR PRODUCT WISE PERFORMANCE

It is discussed in the Directors Report under the head operations in the Directors Report.

6. DETAILS OF SIGNIFICANT CHANGES:

KEY FINANCIAL RATIOS

In accordance with SEBI (Listing Obligations and Disclosure Requirements), Regulations as amended in 2018, following are the details of key financial ratios and significant changes (changes of 25% or more as compared to the immediately previous financial year) in key sector specific financial ratio.

Ratios	Financial Year 2024-25	Financial Year 2023-24	Reason for significant change
Debtors Turnover	22.42	33.8	Note No. (i)
Inventory Turnover	4.74	7.19	Note No. (ii)
Interest Coverage Ratio	(0.48)	(0.26)	Note No. (iii)
Current Ratio	0.52	0.69	Note No. (iv)
Debt Equity Ratio	1.43	0.95	Note No. (v)
Operating Profit Margin (%)	(14.77) %	(1.88) %	Note No. (vi)
Net Profit Margin (%)	(19) %	(7) %	Note No. (vii)
Return on Capital Employed	(26) %	(11) %	Note No. (vii)

Note: The Above Ratios are computed for continuing operations only and previous year ratios were regrouped accordingly.

Brief reasons for significant change in the ratios when compared to previous year are as under:

(i) Due to better credit collections;

(ii) We have optimization inventory levels for better management of working capital;

(iii) Due to losses incurred during the current year;

(iv) Due to losses incurred in the Current year the Current Liabilities have increased more comparative to the Current assets;

(v) Due to incremental losses in the current year, the shareholders funds/ equity has decreased that has resulted into increase in Deb Equity Ratio; (vi) Due to losses incurred during the current year is substantially higher than the previous year. This is on account of decrease in sales volumes as well as decrease in average price per tonne; (vii) Due to increase in losses compared with previous year on account of negative operating margin coupled with incremental finance cost as well as depreciation;

7. HUMAN RESOURCE - "OUR PEOPLE, OUR BIGGEST STRENGTH"

Our people are our biggest strength and the cornerstone of our business which we have always strived and believed to create a work environment of care, trust and respect.

The company enjoys very cordial industrial relations, due to which there is very low employee/ labour turnover in the company. You will be happy to note that ever since the inception of the Company, there were no strikes, lockouts, layoffs, retrenchments, etc.

On the human resources front, our HR policies and guidelines are designed in a way that encourages teamwork and synergistic approach thereby strengthening agility, future readiness and enhancing employee experience. Our inclusive and progressive culture helps to motivate employees, strengthen the leadership pipeline, attract young talent, deliver results, and grow market share and the operating profitability of the company. Company is well prepared digitally to take on the challenges of the new world by enhancing latest digital capability building of our people through trainings and certification programmes. HR processes like Individual Development Plan, Recruitment & E-Joining, Performance Management System, Confirmation and Separation have been digitalized for enhanced productivity and employee experience.

Continuing with the Vision & Mission focused on Human Capital, Customers, Innovation, Technology, the Company has kept pace with competition and exceeded in specific domains. 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 ‘Grow Your

Own Timber approach for leadership roles by rewarding and providing a well-defined growth path.

Millennials are encouraged, prepared, and enabled to manage bigger chunk of areas and markets. It is aligned with assessing expectations of young generation and incorporating in the culture/HR strategy especially career growth strategies, R&R strategy to keep up with ambitions of employees/new age workforce. The details of Number of people employed are given in Annexure - C to Boards Report.

8. CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and international markets in which the Company operates, changes in the Government regulations, tax laws and other statues and another incidental factor.

Your Companys 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.