Leapfrog Engineering Services Ltd Management Discussions

<dhhead-MANAGEMENT DISCUSSION AND ANALYSIS</dhhead-

The management of the Company is pleased to present its report on the business environment & industry scenario, industry risks and opportunities and Companys performance during the financial year 2025-26.

BUSINESS OVERVIEW

Leapfrog Engineering Services Limited ("hereinafter referred as LESL") is an Engineering, Procurement, Construction and Commissioning (EPCC) company providing integrated engineering solutions across Electrical Engineering, Instrumentation and Automation, Fire Protection and Safety, Modular Substations and Building Automation. The Company serves diversified sectors including Oil and Gas, Metals and Minerals, Infrastructure, Pharmaceuticals, Chemicals and Fertilisers and Renewable Energy through domestic and international operations. Its focus on quality execution, engineering capability and customer satisfaction has helped it build a presence in India and overseas markets, particularly in the Middle East.

This Management Discussion and Analysis presents the Companys sector exposure, operating performance, key risks, financial performance, internal controls, human resources position and forward - looking outlook for the Financial Year 2025-26.

1. Industry Structure and Developments:

Given the diversified nature of the Companys operations across Oil and Gas, Utilities, Metals and Minerals, Pharmaceuticals and Renewable Energy, the following sector-wise overview highlights the key structural and demand trends relevant to the Companys electrical, instrumentation, automation, fire protection and modular substation solutions.

- OIL & GAS SECTOR

• Oil & Gas remains the largest end-market for LESL, contributing approximately 50% of the Companys business, supported by its established capabilities and project execution experience in the sector.

• Continued investments in refineries, petrochemicals, gas infrastructure, upstream facilities and plant modernisation are expected to support demand for electrical, instrumentation, automation, fire protection and integrated EPCC solutions.

• LESLs capabilities in electrical and instrumentation engineering, automation, fire protection and modular/skid-based solutions position it to participate across multiple stages of Oil & Gas and associated industrial projects.

• The Companys international experience, including its Kuwait operations, provides a platform to pursue opportunities in international Oil & Gas markets.

• Going forward, LESL intends to strengthen its position in this core market while maintaining a disciplined approach to order selection, contractual risk, project margins, working capital and execution.

- UTILITIES SECTOR

• Utilities constitute substantial share of the Companys business and represent an important market for LESLs electrical, instrumentation, automation and project execution capabilities.

• Continued investments in power generation, transmission and distribution and associated utility infrastructure continue to create opportunities for integrated electrical and automation solutions.

• LESLs capabilities in electrical systems, automation, protection, fire safety and modular solutions enable it to participate in utility and industrial projects requiring integrated engineering and execution.

• The Company intends to strengthen its presence in this sector through selective order acquisition and development of technically and commercially viable solutions.

- RENEWABLE ENERGY SECTOR

• Renewable Energy represents a strategic growth opportunity for LESL, with the Company intending to increase its focus on the sector going forward.

• The continued expansion of solar, battery energy storage, hybrid renewable projects and associated electrical infrastructure is creating demand for electrical distribution, automation, protection, control and modular solutions.

• LESLs capabilities in electrical engineering, automation, protection systems and modular/skid- based solutions provide a platform to address the evolving requirements of renewable energy and associated infrastructure projects.

• The Company intends to leverage its existing engineering and project execution capabilities to develop sector-specific solutions and customer relationships in Renewable Energy.

• The Company will pursue growth in this sector in a calibrated manner, with emphasis on technical capability, project economics, execution risk and sustainable margins.

- METALS AND MINERALS:

• The Metals sector represents an established industrial market for LESL.

• Investments in capacity expansion, plant modernisation, process automation and energy efficiency across the metals industry create opportunities for electrical, instrumentation, automation and fire protection solutions.

• LESLs experience in executing integrated electrical and automation requirements for industrial facilities provides a foundation to pursue projects in this sector.

• The Company will focus on selective opportunities with appropriate technical complexity, commercial terms and execution margins.

- PHARMACEUTICALS:

• Pharmaceuticals sector continues to invest in manufacturing capacity, process infrastructure and facility modernisation.

• Growing requirements for reliable electrical systems, automation, instrumentation, fire protection and controlled industrial environments create opportunities for specialised engineering and EPCC solutions.

• LESL intends to leverage its engineering and project execution capabilities to selectively participate in pharmaceutical manufacturing and associated infrastructure projects.

• The Company will focus on projects where its integrated engineering capabilities and execution experience provide a competitive advantage.

- CHEMICALS & FERTILIZERS:

• Chemicals & Fertilizers remain important industrial markets for electrical, instrumentation, automation and fire protection solutions.

• Capacity additions, plant modernisation, process improvement and infrastructure investments are expected to support demand for integrated electrical and automation systems.

• LESLs experience in industrial project execution provides opportunities to participate in projects involving electrical distribution, instrumentation, automation, fire protection and modular solutions.

• The Company intends to selectively pursue opportunities in these sectors while maintaining focus on project economics, execution risk and sustainable margins.

2. Opportunities and Threats:

- Opportunities

• As on the date of this report, the Company has a robust order book of ^37,755.00 lakhs, which provides strong revenue visibility.

• Established international presence, particularly in the Middle East, with over 14 projects delivered in Kuwait. We now have active engagements in Oman and Abu Dhabi.

• Diversified end-user industries - Oil & Gas, Metals & Minerals, Pharmaceuticals, Infrastructure, Chemicals & Fertilizers, Renewable Energy.

• Planned assembling unit at Bengaluru (estimated cost ^2,700.36 lakhs) to strengthen manufacturing capability.

• Growing addressable market for electrical equipment and modular substations in India.

- Threats

• High working capital intensive inherent to EPCC contracts.

• Dependency on key suppliers and OEM partners.

• Exposure to changes in government policy, environmental regulation, and geopolitical developments in export geographies.

• Revenue concentration risk from large individual projects/geographies (e.g. Middle East).

3. Segment-wise Performance:

The Company has identified its operating segments based on the nature of its revenue streams and the manner in which the operating performance of the business is monitored by management. The Companys operating segments comprise Contract Revenue, Sale of Products and Sale of Services.

The segment-wise revenue and segment result for the financial years ended 31 March, 2026 and 31 March, 2025 are set out below:

Particulars	FY 2025-26	FY 2024-25	Change	Change %
REVENUE
Contract Revenue	14,370.61	7,093.14	7,277.47	102.63%
Sale of Products	359.26	357.38	1.88	0.53%
Sale of Services	503.90	6,015.72	(5,511.82)	(91.63%)
Total Revenue from Operations	15,233.77	13,466.24	1,767.53	13.13%
SEGMENT RESULT
Contract Revenue	3,819.27	2,059.70	1,759.57	85.43%
Sale of Products	75.11	138.18	(63.07)	(45.64%)
Sale of Services	112.07	1,281.68	(1,169.61)	(91.25%)
Total Segment Result	4,006.46	3,479.56	526.90	15.14%
Unallocated corporate expenses	1750.12	1245.18	504.93	41.00%
Operating Profit	2256.34	2234.38	21.96	1%
Finance Costs	631.49	318.04	313.45	99%
Other Income	-1114.14	-270.45	-843.69	312%
Profit before tax	2738.99	2186.79	552.20	25%
Provision for current tax	785.97	613.87	172.10	28%
Provision for deferred tax	-5.47	-49.52	44.05	-89%
Profit for the period	1958.49	1622.44	336.05	21%

During Financial Year 2025-26, the Companys revenue from operations increased by 13.13%, from ^13,466.24 lakhs in FY 2024-25 to ^15,233.77 lakhs in FY 2025-26. The growth was primarily driven by a significant increase in Contract Revenue, which more than doubled from ^7,093.14 lakhs to ^14,370.61 lakhs, registering a growth of 102.63%. Contract Revenue consequently accounted for approximately 94.34% of the Companys total revenue from operations during FY 2025-26, as compared with approximately 52.68% in FY 2024-25.

The substantial growth in Contract Revenue reflects the Companys increasing focus on engineering, procurement, construction and commissioning (EPCC) and turnkey project execution. The shift in revenue mix towards Contract Revenue is in line with the Companys strategic emphasis on undertaking larger and more integrated project contracts and strengthening its capabilities across the project execution value chain.

The increase in Contract Revenue was also reflected in its contribution to segment profitability. The segment result from Contract Revenue increased from ^2,059.70 lakhs in FY 2024-25 to ^3,819.27 lakhs in FY 2025-26, representing a growth of 85.43%. The segment margin for Contract Revenue was approximately 26.58% during FY 2025-26, compared with 29.04% in the previous year. The moderation in segment margin was primarily attributable to the changing project mix and project execution costs during the year, while the overall contribution from the segment increased substantially due to higher execution volumes.

Revenue from Sale of Products remained broadly stable at ^359.26 lakhs during FY 2025-26 as compared with ^357.38 lakhs in FY 2024-25, registering a marginal growth of 0.53%. However, the corresponding segment result declined from ^138.18 lakhs to ^75.11 lakhs. The Company continues to evaluate product opportunities in line with its overall business strategy and project requirements.

Revenue from Sale of Services declined significantly from ^6,015.72 lakhs in FY 2024-25 to ^503.90 lakhs in FY 2025-26, representing a decline of 91.63%. The reduction was primarily attributable to the Companys changing business mix and increasing emphasis on integrated EPCC and turnkey project execution, wherein activities that may have previously been undertaken as standalone services are increasingly executed as part of integrated project contracts. The segment result from Sale of Services correspondingly declined from ^1,281.68 lakhs to ^112.07 lakhs.

Despite the significant change in the composition of revenue, the Companys Total Segment Result increased by 15.14%, from ^3,479.56 lakhs in FY 2024-25 to ^4,006.46 lakhs in FY 2025-26. The overall segment result margin improved from approximately 25.84% to 26.30% during the year.

Overall, the Companys segment performance demonstrates a significant shift towards integrated EPCC and turnkey project execution, with Contract Revenue emerging as the dominant revenue and profitability contributor during FY 2025-26. The Company remains focused on strengthening its project execution capabilities, securing quality orders, maintaining appropriate project margins, effectively managing project costs and ensuring timely execution and completion of projects.

4. Outlook:

The Company enters Financial Year 2026-27 with an outstanding order book of approximately ^38,403.09 lakhs, comprising both domestic and export orders. The order book provides a healthy base for future project execution and revenue generation, while offering visibility across the Companys key business segments. The Company remains focused on timely execution of its existing order book while continuing to pursue opportunities aligned with its technical capabilities, risk appetite and targeted margins.

The Company is also progressing with its proposed assembly unit at Bengaluru, which is expected to strengthen its manufacturing and assembly capabilities and support the Companys ability to undertake larger and more integrated project requirements. The initiative is intended to enhance operational flexibility, improve execution capabilities and support the Companys growing EPCC and turnkey project portfolio.

The Company expects continued opportunities arising from investments in infrastructure, industrial, energy and other sectors in India and international markets. In line with its growth strategy, the Company intends to further expand its domestic and international presence, develop and introduce modular and skid-based solutions, and strengthen its customer relationships, project execution capabilities and operational processes.

Going forward, the Companys focus will remain on order book growth, disciplined project execution, effective cost and working capital management, margin protection and strengthening its engineering and execution capabilities. The Company believes that these initiatives, together with its existing order book and established project execution experience, will provide a foundation for sustained and profitable growth over the medium to long term.

The Company will, however, continue to monitor market conditions, project execution risks, input cost movements, foreign exchange exposure and other external factors that may affect its business and financial performance.

5. Risks and Concerns:

The Company operates in the Engineering, Procurement, Construction and Commissioning (EPCC) sector, which involves project-based execution, contractual commitments, significant procurement requirements and, in certain cases, operations across international markets. Accordingly, the Company is exposed to various operational, financial, commercial and regulatory risks.

The Company has established a risk management framework for identification, assessment, monitoring and mitigation of key risks. The principal risks and concerns relevant to the Companys business include:

• Project Execution and Contractual Risk: EPCC projects involve multiple activities, contractual milestones, performance obligations, project schedules and coordination with customers, consultants, vendors and subcontractors. Delays in execution, changes in project scope, site conditions, supply-chain disruptions or contractual disputes may adversely affect project timelines, costs and profitability.

• Working Capital and Liquidity Risk: EPCC projects may involve significant upfront procurement and execution costs, while customer payments are generally linked to contractual milestones. Delays in certification, billing or collection may increase working capital requirements and place pressure on liquidity and cash flows.

• Customer and Geographic Concentration Risk: A significant concentration of projects or revenues with particular customers or geographic markets may expose the Company to changes in customer spending, project awards, economic conditions, geopolitical developments and regulatory environments in those markets.

• Foreign Exchange Risk: The Company undertakes international projects and export transactions, which may expose it to fluctuations in foreign exchange rates. Adverse movements in exchange rates may affect project margins, receivables, payables and overall financial performance.

• Procurement and Supply Chain Risk: The Companys project execution is dependent on the timely availability of equipment, materials and other inputs from vendors. Fluctuations in commodity prices, vendor delays, logistics disruptions and supply-chain constraints may affect project costs and execution schedules.

• Regulatory and Compliance Risk: The Companys operations are subject to various statutory, regulatory, taxation, contractual and compliance requirements in India and in jurisdictions where it undertakes projects. Changes in laws, regulations, taxation policies or regulatory requirements may increase compliance costs or affect project execution.

• Credit and Receivables Risk: Delays or defaults in customer payments may adversely affect the Companys cash flows and working capital position, particularly in projects involving extended execution and payment cycles.

• Talent and Human Resource Risk: Successful execution of EPCC projects requires skilled engineering, project management, procurement, finance and site personnel. The Companys ability to attract, retain and develop appropriately skilled personnel is important to maintaining execution capabilities and operational efficiency.

The Company continuously monitors these risks and evaluates appropriate mitigation measures based on their nature and potential impact. Risk identification and mitigation are integrated into the Companys business and project management processes, with significant risks being escalated to the appropriate management and governance forums for review. The Company periodically reviews and updates its risk management framework in line with changes in its business operations, project profile and external environment.

6. Internal Control Systems and their Adequacy:

The Company has established and maintained an adequate internal control framework commensurate with the size, scale, nature and complexity of its business operations. The internal control framework is designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, reliability of financial reporting and compliance with applicable laws, regulations and internal policies.

The Companys internal controls encompass key business processes including tendering and estimation, procurement and vendor management, project execution, inventory and stores, contract management, finance and accounting, payroll, statutory compliances and information systems. Appropriate approval mechanisms, segregation of duties, maker-checker controls and periodic monitoring are implemented across relevant processes.

The Internal Audit function independently reviews the adequacy and effectiveness of internal controls and key business processes on a periodic basis. Internal audit observations and recommendations, together with management responses and corrective action plans, are reviewed by the Audit Committee. The status

of implementation of agreed corrective actions is also monitored by the management and reported to the Audit Committee, wherever applicable.

The Company continuously evaluates and strengthens its internal control environment in line with the evolving scale and complexity of its operations. The Board of Directors, through the Audit Committee, provides oversight over the adequacy and effectiveness of the Companys internal control systems and financial reporting processes.

7. Discussion on Financial Performance with Respect to Operational Performance:

During the financial year ended 31 March 2026, the Company continued to demonstrate healthy growth in its operational and financial performance. The improvement was supported by higher project execution, effective cost management and continued focus on operational efficiencies.

Revenue from operations increased to ^15,233.77 lakhs in FY 2025-26 from ^13,466.24 lakhs in FY 2024-25, registering a growth of 13.12%. Total income increased by 19.01%, from ^13,736.69 lakhs in the previous financial year to ^16,347.91 lakhs during the year under review.

The growth in revenue was accompanied by a stronger improvement in profitability. Profit before tax increased to ^2,738.99 lakhs from ^2,186.78 lakhs, representing a growth of 25.25%, while Profit after tax increased to ^1,958.49 lakhs from ^1,622.44 lakhs, registering a growth of 20.71%. The higher growth in profitability relative to revenue reflects improved operating leverage, better cost management and improved execution of projects during the year.

The Companys PBT margin improved from approximately 16.24% in FY 2024-25 to 17.98% in FY 202526, while the PAT margin improved from approximately 12.05% to 12.86%. This indicates an improvement in the Companys overall profitability despite the increase in the scale of operations.

The Companys financial position also strengthened during the year. Net worth increased from ^5,325.67 lakhs as at 31 March 2025 to ^7,284.16 lakhs as at 31 March 2026, representing an increase of 36.77%, primarily attributable to the increase in reserves and surplus arising from the Companys profitability during the year.

Total assets increased from ^14,917.00 lakhs as at 31 March 2025 to ^16,672.18 lakhs as at 31 March 2026, an increase of 11.77%. The increase in the asset base was primarily attributable to higher levels of inventories and cash and bank balances, in line with the increased scale of operations and the Companys working capital requirements.

Overall, the Companys performance during FY 2025-26 reflects a positive correlation between increased project execution and financial performance. The growth in revenue, improvement in profitability and strengthening of the net worth position demonstrate the Companys ability to scale its operations while maintaining healthy margins and a sound financial position.

8. Key Financial Ratios

In accordance with the requirements of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the following key financial ratios have been disclosed. The Company has provided explanations for significant changes in the ratios, wherever applicable.

Key Financial Ratio	FY 2025-26 (Current)	FY 2024-25 (Previous)	% Change	Explanation if change - 25%
Current Ratio	1.73	1.50	15.31%	Nil
Debt-Equity Ratio	0.44	0.38	15.89%	Nil
Debt Service Coverage Ratio	3.60	4.53	(20.48) %	Nil
Return on Equity Ratio	31.06%	25.31%	22.75%	Nil
Inventory Turnover Ratio	22.63	15.74	43.72%	The increase in the Inventory Turnover Ratio follows the same rationale, on account of higher inventory holding as at the end of the current year compared to the previous year, arising from increased turnover relating to contracts and goods.
Trade Receivables Turnover Ratio	1.42	1.18	20.22%	Nil
Trade Payables Turnover Ratio	1.72	0.60	187.94%	The increase in the Trade Payables Turnover Ratio is attributable to a change in the composition of the entitys revenue - earning activities as compared to the previous year. During the year, the proportion of income from services to total turnover declined substantially, leading to a corresponding increase in external procurement of goods and services. Consequently, total purchases were significantly higher than in the previous year, resulting in the variance in the ratio.
Net Capital Turnover Ratio	2.25	2.82	(20.27)%	Nil
Net Profit Ration (%)	12.86%	12.05%	6.71%	Nil
Return on Capital Employed (ROCE)	32.19%	34.14%	(5.72) %	Nil
Return on investment	185.04%	151.37%	22.24%	Nil

9. Human Resources / Industrial Relations

The Company considers its employees to be one of its key assets and recognises that its continued growth and successful execution of projects are dependent on the capabilities, commitment and performance of its people.

As at 31 March 2026, the Company had 111 employees on roll and 46 contractual personnel, aggregating to a total workforce of 157 personnel across its corporate, project and site operations. The Company continues to focus on attracting, developing and retaining competent talent in areas relevant to project execution, engineering, procurement, finance, administration and other support functions.

The Company encourages continuous learning and skill enhancement through on-the-job development, training and knowledge-sharing initiatives. Emphasis is also placed on maintaining a safe, healthy and inclusive workplace and promoting employee engagement, teamwork and professional growth.

The Company remains committed to employee welfare and maintaining appropriate workplace practices across its project and site locations. During the year under review, industrial relations remained cordial and there were no material industrial disputes or labour-related disruptions affecting the Companys operations.

The Company believes that a motivated, skilled and engaged workforce is essential to sustaining operational efficiency, maintaining quality standards and supporting the Companys future growth.

Particulars	Financial Year 2025-26
Employees on roll as at 31 March 2026	111
Contractual personnel as at 31 March 2026	46
Total workforce as at 31 March 2026	157
Employees added during the year	37
Employees who left during the year	13
Women employees	28
Training / skill-development programmes conducted	31
Employees deployed at project / site locations	70

10.Cautionary Statement

This Management Discussion and Analysis contains statements that may constitute forward-looking statements within the meaning of applicable securities laws and regulations. Such statements are based on the Companys current expectations, assumptions and estimates and are subject to various risks and uncertainties. Actual results, performance or achievements may differ materially from those expressed or implied by such forward-looking statements due to various factors, including changes in economic and business conditions, government policies and regulations, taxation, project execution, availability and cost of materials, foreign exchange fluctuations, competition, natural calamities and other factors beyond the Companys control.

The Company does not undertake to publicly update or revise any forward-looking statements, except as may be required under applicable laws and regulations.