Konstelec Engineers Ltd Management Discussions

Global Economic Overview

The global economy continued to operate in an environment shaped by geopolitical tensions, trade fragmentation, fluctuating energy prices and elevated financing costs. While economic activity remained resilient in several major markets, uncertainty surrounding commodity prices, global supply chains and fiscal conditions continued to affect investment decisions.

The International Monetary Fund projected global economic growth of 3.1% in 2026 and 3.2% in 2027. The outlook remains subject to downside risks arising from geopolitical conflict, inflationary pressures, tighter financial conditions, trade-related uncertainty and constrained policy buffers.

Notwithstanding near-term volatility, infrastructure investment continues to be driven by long-duration structural trends. These include the electrification of transportation and industrial processes, renewable-energy integration, grid modernisation, digital infrastructure, data-centre expansion, automation and the localisation of critical supply chains.

These developments are creating sustained demand for technically capable EPC organisations that can manage complex engineering interfaces, meet stringent safety and quality requirements and provide integrated project delivery from design through commissioning and lifecycle maintenance.

Indian Economic Overview

India remained one of the fastest- growing major economies during FY2025-26. According to the provisional estimates released by the Ministry of Statistics and Programme Implementation, real GDP grew by 7.7% during FY2025-26 compared with 7.1% in FY2024- 25. Nominal GDP grew by 8.9%, while real gross value added increased by 7.9%.

The countrys growth remained supported by domestic consumption, manufacturing activity, infrastructure creation and sustained public capital expenditure. The Government of India earmarked capital expenditure of Rs. 11.21 lakh crore for FY2025-26, equivalent to approximately 3.1% of GDP. Effective capital expenditure was budgeted at Rs. 15.48 lakh crore.

The continuing focus on power infrastructure, industrial corridors, railways, defence manufacturing, water systems, urban infrastructure and digital connectivity is expected to support demand for electrical engineering, automation and integrated EPC services.

Global Electrical and Power EPC Industry

The global power sector is entering a period of accelerated electrification. Electricity is becoming an increasingly important energy source for industrial production, transport, buildings, cooling, artificial intelligence and data-centre infrastructure.

The International Energy Agency expects global electricity demand to increase at an average annual rate of 3.6% between 2026 and 2030. The forecast implies that annual electricity- demand additions during the period will be approximately 50% higher than the average of the previous decade.

This rising demand requires corresponding investment in power generation, transmission networks, substations, distribution systems, grid automation, storage and power-management infrastructure. However, grid availability has emerged as a constraint across several markets. More than 2,500 GW of generation, storage and large-load projects are estimated to be waiting in grid-connection queues globally.

The IEA estimates that annual grid investment will need to increase by approximately 50% by 2030 from the present level of around US$400 billion.

These trends create long-term opportunities for EPC companies with capabilities in high- voltage systems, substations, switchyards, cabling, protection systems, industrial electrification, automation and commissioning.

Indian Electrical EPC Industry

Indias Electrical EPC industry operates across power generation, transmission and distribution, industrial projects, transportation infrastructure, commercial facilities, data centres, renewable-energy installations and urban infrastructure.

Demand for Electrical EPC services is linked to three broad investment cycles:

1. Expansion and modernisation of the national electricity system.

2. Creation of industrial and infrastructure capacity.

3. Electrification and automation of existing assets.

Electrical EPC contractors are increasingly required to provide integrated solutions rather than standalone installation services. Clients expect responsibility across engineering, equipment selection, procurement, construction, testing, commissioning, compliance and post-commissioning support.

This evolution favours companies with multidisciplinary capabilities, established vendor relationships, experienced project teams and the ability to manage complex execution schedules.

Power Generation and Renewable-Energy Expansion

Indias electricity sector recorded significant capacity additions during FY2025-26. As of March 31,2026, the country had installed 283.46 GW of non-fossil-fuel-based capacity, comprising 274.68 GW of renewable-energy capacity and 8.78 GW of nuclear capacity. Renewable-energy capacity included 150.26 GW of solar power and 56.09 GW of wind power. India added 55.29 GW of non-fossil capacity during FY2025-26, representing the highest annual addition recorded by the country.

The continued addition of renewable capacity creates parallel requirements for evacuation infrastructure, substations, transmission lines, reactive power management, protection systems, monitoring, SCADA, battery-storage integration and grid-balancing solutions.

For Electrical EPC companies, the opportunity is therefore broader than power-generation construction alone. It extends across the complete electrical infrastructure required to transmit, control, distribute and reliably utilise the additional generation capacity.

Transmission and Distribution Infrastructure

Indias transmission infrastructure will require substantial expansion to absorb increasing electricity demand and integrate large quantities of renewable energy.

Under the National Electricity Plan for 2023- 2032, the Government has envisaged investment of approximately Rs.9.15 lakh crore in central and state transmission systems. The transmission network is expected to expand from approximately 5.04 lakh circuit kilometres in February 2026 to 6.48 lakh circuit kilometres by 2032. Transformation capacity is planned to increase from approximately 1,429 GVA to 2,345 GVA, while inter-regional transfer capacity is expected to rise from 1 20 GW to 1 68 GW.

The scale of this investment is expected to create opportunities across substations, switchyards, transformers, cabling, protection and control systems, distribution automation, smart metering and grid-modernisation projects.

Konstelecs entry into the Transmission and Distribution segment widens its addressable market and allows the Company to apply its industrial electrical and project-execution experience to public power-infrastructure projects.

Industrial and Manufacturing Infrastructure

The Governments emphasis on domestic manufacturing, infrastructure localisation and increased public capital expenditure continues to encourage capacity creation across steel, cement, chemicals, oil and gas, defence, pharmaceuticals and other process industries.

New industrial facilities require electrical power distribution, control systems, substations, instrumentation, plant automation, safety systems and utility infrastructure. Existing plants also require debottlenecking, modernisation, capacity enhancement and energy-efficiency improvements.

Konstelecs longstanding experience across process industries positions the Company to participate in both greenfield and brownfield investment cycles. Its ability to combine electrical EPC, instrumentation, automation and O&M services enables it to address a broader portion of the customers project lifecycle.

Data-Centre Infrastructure

Indias data-centre capacity increased from approximately 375 MW in 2020 to around 1,500 MW by 2025, reflecting the rapid expansion of cloud services, digital payments, artificial intelligence, enterprise data and content consumption.

Data centres are mission-critical facilities requiring uninterrupted and high-quality power. Their electrical infrastructure generally includes redundant incoming power systems, substations, HT/LT distribution, uninterruptible power supply systems, backup generation, building-management systems, monitoring, earthing, lightning protection and advanced automation.

The technical intensity and reliability requirements of data-centre projects create an attractive opportunity for specialised electrical EPC companies. However, entry requires strong prequalification credentials, adherence to stringent safety and uptime standards and the ability to coordinate multiple technical systems.

Konstelec is developing its capabilities and customer relationships within this segment as part of its strategy to increase participation in higher-value, margin-accretive projects.

Defence Infrastructure

Indias defence-sector capital expenditure is supporting the development and modernisation of production facilities, strategic installations, command centres, research infrastructure and mission-critical utilities.

The Ministry of Defence received a budgetary allocation of approximately Rs.6.81 lakh crore for FY2025-26, including Rs.1.80 lakh crore towards capital outlay. Approximately 75% of the modernisation procurement budget was earmarked for domestic sources. The Ministry subsequently reported full utilisation of its revised capital outlay of Rs.1.86 lakh crore for the year.

Defence facilities require secure power- distribution systems, high-reliability backup infrastructure, underground cabling, surveillance integration, control systems and compliance with stringent security and safety standards.

Konstelecs entry into the defence- infrastructure segment during FY26 represents an important strategic diversification. Defense constituted approximately 14.3% of the Companys Rs.550 crore order book as of May 2026.

Defence Infrastructure

Indian Railways achieved electrification of approximately 99.6% of its broad-gauge network by March 2026, covering 69,873 route kilometres.

With core network electrification nearing completion, the addressable opportunity is expected to shift towards network augmentation, substations, station redevelopment, signalling and control systems, renewable-energy integration, metro systems, electrical maintenance and modernisation of existing installations.

The expansion of urban metro networks and the increasing adoption of digitally controlled railway systems are also expected to support demand for electrical, automation and systems- integration capabilities.

Water and Wastewater Infrastructure

Urbanisation , industrial expansion and increasing water stress are driving investment in water supply, wastewater treatment, sewage-treatment plants and recycling infrastructure.

AMRUT 2.0 has a total indicative outlay of approximately Rs.2.77 lakh crore. Approved projects include plans for an additional 11,395 million litres per day of water-treatment capacity across states and union territories.

Water and wastewater facilities require electrical distribution, motor-control centres, instrumentation, pumping systems, PLC and SCADA integration, automation and long-term maintenance. This makes the sector complementary to Konstelecs existing electrical and instrumentation capabilities.

Business Review

During FY26, Konstelec continued to execute projects across industrial and infrastructure segments while strengthening its focus on operational efficiency and profitability.

Revenue from operations grew by 8.61% to Rs. 210.38 crore. EBITDA increased by 49.58% to Rs.19.67 crore and EBITDA margin expanded to 9.35%. PAT grew by 53.47% to Rs.7.29 crore, with PAT margin improving to 3.56%.

The improvement was led by stronger execution discipline and a significant recovery in second-half profitability. H2FY26 EBITDA margin increased to 11.76% from 4.70% in H2FY25, demonstrating the positive impact of project completion, operating leverage and improved cost control.

The Companys order book stood at more than Rs.550 crore as of May 2026, providing project visibility over the following 1 8-24 months. The order book was diversified across refinery, defence, transmission and distribution, steel and mining projects and represented approximately 2.6 times FY26 revenue.

Opportunities

Diversification into Higher-Value Projects

Defence, data centres, renewable energy, water treatment, railways and mission-critical infrastructure generally involve higher technical complexity and more stringent qualification criteria. Greater participation in these segments can support improved project quality, customer diversification and margin expansion.

Increasing Power and Grid Investment

The continued expansion of renewable-energy generation and transmission infrastructure provides a long-term opportunity for substations, switchyards, cabling, grid automation and power-management systems.

Integrated Service Capabilities

Konstelecs ability to provide Electrical EPC, Instrumentation, Automation and O&M services enables the Company to increase the scope of engagement with existing clients and participate across a projects lifecycle.

Established Industrial Client Relationships

The Companys long-standing relationships with major industrial and public-sector customers provide opportunities for repeat orders, brownfield expansion and maintenance contracts.

Growing Automation Requirements

Industrial customers are increasingly investing in process visibility, energy efficiency, safety, predictive maintenance and operating reliability. This supports demand for PLC, SCADA, BMS, instrumentation and control- system integration.

International Expansion

The Companys prior project experience in Nigeria, Central Africa and fhe Middle East provides a foundation for selective international expansion. Overseas projects may offer larger project sizes and improved realisations, although they require disciplined assessment of payment security, foreign exchange, taxation and

execution risks.

Risks and Concerns

Project-Execution Risk

EPC projects are exposed to delays in client approvals, regulatory clearances, site availability, engineering changes and dependency on other contractors. Such delays may extend project timelines, increase overheads and defer revenue recognition.

During FY2024-25, the Company had experienced project disruptions, delays in regulatory and client approvals, the absence of escalation clauses in certain contracts and cost overruns on projects nearing completion. These factors demonstrate the importance of contract selection, planning and active project monitoring.

Working-Capital Risk

EPC execution requires expenditure on materials, manpower, mobilisation and subcontracting before corresponding billing and collection. Delayed certification or retention of project dues may increase receivables and borrowing requirements.

The Company reported working-capital days of 163 days for FY26. Efficient billing, documentation, milestone certification and collection will therefore remain central to cash flow and return-ratio improvement.

Fixed-Price and Cost-Escalation Risk

Contracts without adequate price-escalation clauses expose the Company to volatility in equipment, cable, steel, copper, logistics and manpower costs. Procurement planning, vendor arrangements and appropriate contractual protections are essential for preserving project margins.

Competitive Tendering

Public-sector and large private-sector EPC contracts are generally awarded through competitive tendering. Aggressive bidding by competitors may affect pricing and project returns. The Company seeks to mitigate this risk through selective bidding, technical prequalification and a greater focus on complex, value-added projects.

Customer and Order-Book Concentration

While the order book is spread across multiple sectors and geographies, refinery projects constituted 53.8% of the order book as of May 2026. Project-level or sector-level delays within a large concentration can affect revenue scheduling.

Safety and Regulatory Risk

Higher working-capital borrowing can increase finance costs and reduce profitability. Finance costs increased from Rs.7.31 crore in FY25 to Rs.9.95 crore in FY26. The Company has accordingly identified deleveraging and improvement in return on capital employed as strategic priorities.

Talent Availability

Complex EPC projects require experienced engineers, project managers, supervisors, safety professionals and skilled technicians. Competition for specialised technical personnel may affect execution capacity and employee costs.

Internal Control Systems

The Company has established internal-control systems covering accounting, cost monitoring, operational efficiency, protection of assets, statutory compliance and financial reporting. The control environment is supported by internal audits, statutory audits, management reviews and oversight by the Audit Committee.

The systems are intended to ensure that transactions are appropriately authorised, financial and operational information is accurately recorded and assets are safeguarded against unauthorised use. The adequacy of these controls is periodically reviewed and is expected to be strengthened in line with the scale and complexity of the Companys operations.

The final FY26 wording should be aligned with the FY26 statutory auditors report on internal financial controls before publication.

Human Resources

Konstelecs execution capability is supported by its engineers, project managers, supervisors, technicians, safety professionals and support teams deployed across project locations.

The Company continues to focus on attracting, training and retaining personnel with relevant technical capabilities. Employee development is supported through project-based learning, structured mentoring, safety training, performance evaluation and opportunities for increased responsibility.

Konstelecs manpower base exceeded 900 personnel across projects during FY26, enabling the Company to manage simultaneous assignments across multiple sectors and geographies.

The Company remains committed to maintaining a safe, inclusive and performance- oriented work environment, while strengthening its leadership pipeline and project-management capabilities in line with future growth requirements.

Outlook

The outlook for Indias Electrical EPC sector remains supported by sustained investment in power generation, transmission and distribution, industrial manufacturing, digital infrastructure, defence, transportation and urban utilities.

Konstelec enters the next phase of growth with a diversified Rs.550+ crore order book, established industrial relationships and integrated capabilities across electrical EPC, instrumentation, automation and O&M.

The Companys strategic priorities include:

• Increasing participation in higher-value projects across Data Centres, Defence, Railways, Renewable Energy, Water Treatment and exports.

• Improving project selection and optimising the order-book mix.

• Expanding EBITDA margins towards the mid-teens over the medium term.

• Improving PAT margins through operating leverage, cost efficiency and productivity.

• Deleveraging the balance sheet and improving return on capital employed.

• Maintaining a strong order book through consistent execution and disciplined bidding.

• Expanding recurring and relatively asset- light Operations & Maintenance activities.

These objectives represent managements strategic direction and should not be interpreted as assured financial guidance.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, expectations, estimates or outlook may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied due to economic conditions, changes in government policy, fluctuations in input costs, availability of finance, project delays, competitive conditions, regulatory developments and other factors affecting the Companys operations.