Lexus Granito India Ltd Management Discussions

<dhhead-MANAGEMENT DISCUSSION AND ANALYSIS REPORT</dhhead-

A. Overview of the Global Economy:

The global economy during F.Y. 2025-26 continued to operate in an uncertain and challenging environment, characterized by geopolitical tensions, evolving trade policies, inflationary pressures, financial market volatility, and disruptions to global supply chains. These factors continued to influence business confidence, consumer demand, operating costs and investment decisions across major economies. The global economy remained resilient during calendar year 2025, with technology-related investment, particularly in artificial intelligence and related industries, providing support to economic activity despite trade policy uncertainty and geopolitical tensions. Global headline inflation stood at approximately 4.1% in 2025, while global economic growth was estimated at 3.5%. However, this aggregate performance concealed notable regional differences. Advanced economies recorded growth of 1.9%, with the United States expanding by 2.1%, supported by continued investment and resilient domestic demand. The euro area grew by 1.4%, while Japan registered growth of 1.1%. Emerging market and developing economies expanded by 4.5%, led by China at 5.0% and India at 7.7%. Looking ahead, the global economic outlook remains resilient but uneven.

Against this backdrop, advanced economies are expected to experience relatively moderate growth, while emerging market and developing economies are expected to demonstrate comparatively stronger growth, although growth prospects remain uneven across regions. The global economic outlook continues to be influenced by geopolitical developments, commodity price movements, monetary and fiscal policies, financial market conditions and evolving international trade dynamics.

Global trade tensions eased during the year following several significant policy developments. A temporary agreement between the United States and China lowered bilateral tariff rates through November 2026 and suspended export restrictions on semiconductors and rare earth minerals. Additionally, the United States removed tariffs on selected agricultural imports applicable across all trading partners, while maintaining its overall effective tariff rate broadly unchanged. Although policy uncertainty moderated from the elevated levels witnessed in October 2025, it remained above the levels observed a year earlier. Financial conditions continued to be generally supportive, notwithstanding intermittent volatility in sovereign bond yields. High-growth technology companies, particularly the group of seven leading firms collectively referred to as the "Magnificent 7," continued to generate returns that exceeded those of the broader equity market.

Global trade volumes remained resilient, supported by strong technology exports from Asian economies, which helped offset slower activity in other sectors. Central banks continued to balance inflation management with economic growth through calibrated monetary policy actions. The United States and the United Kingdom initiated gradual interest rate reductions, while the euro area maintained its policy stance and Japan implemented modest rate increases. Collectively, these policy measures supported favourable financial conditions despite persistent risks associated with global trade and geopolitical developments.

B. Overview of the Indian Economy:

The Indian economy exhibited resilience in FY 2025-26 amid global trade uncertainties and market fluctuations. First Advance Estimates indicate real GDP growth of 7.4% alongside Gross

Value Added at 7.3%. These figures underscore the strength of a domestic demand-led growth trajectory. Robust agricultural performance bolstered rural earnings. Urban consumption gained momentum from stable jobs and easing inflation.

India achieved a landmark by overtaking Japan to rank as the worlds fourth-largest economy. Current GDP stands at USD 4.18 trillion. Projections position the country to claim third place by 2030 with a USD 7.3 trillion economy. This trajectory reaffirms Indias status as the fastest- expanding major economy. Domestic demand, durability and structural reforms provide firm backing.

The Union Budget 2026-27 reinforces commitment to balanced growth and fiscal prudence. Emphasis persists on infrastructure and manufacturing investments. This aligns with aspirations for a developed India. Priorities include energy transition, digital progress, and aid for small and medium enterprises. Steps to streamline regulations and expand credit access promise to lift industrial output and lay the groundwork for enduring expansion.

C. Indian Industry Outlook:

The Indian ceramic tiles industry continues to maintain a strong long-term growth trajectory, supported by urbanization, growth in residential and commercial construction, increasing renovation and replacement activity, rising disposable incomes and changing consumer preferences towards aesthetically appealing and technologically advanced surfaces. India is among the worlds leading ceramic tile producers and has developed a significant manufacturing and export ecosystem, with Gujarats Morbi cluster being a major production center.

Recent industry estimates indicate that the Indian ceramic tiles market was approximately US$10.45 billion in 2025 and is expected to reach approximately US$16.70 billion by 2031, representing a projected CAGR of around 8.1% during 2026-2031. Another independent industry assessment estimates the market at approximately US$22.8 billion in 2025, with a projected CAGR of about 7.2% during 2026-2033. Differences in market estimates arise from variations in market definition, product coverage and methodology; nevertheless, both indicate a healthy medium-to-long-term growth outlook.

(Source: Mordor Intelligence)

Domestic consumption remains the principal growth engine for the Indian tile industry. ICRA estimates that approximately 75% of industry revenues are derived from the domestic market, with demand supported by residential construction, real estate activity, housing programs, renovation and replacement expenditure. Real estate launches have recorded strong growth over the past several years, providing a continuing pipeline for tile consumption.

D. Opportunities and Threats:

Opportunities:

- Growth in Domestic Real Estate and Housing: Continued growth in residential construction, urbanization, housing development and real estate completions is expected to support demand for ceramic and vitrified tiles. Domestic demand accounts for a substantial share of industry revenues and remains the key stabilizing factor for the sector.

- Increasing Demand for Premium Products: Changing consumer preferences are creating opportunities for premium and value-added products such as glazed vitrified tiles, polished vitrified tiles, large-format tiles, designer tiles and digitally printed products.

- Renovation and Replacement Market: Apart from new construction, increasing expenditure on renovation, refurbishment and replacement of flooring and wall surfaces provides a recurring demand opportunity. This market is supported by rising consumer aspirations and increasing preference for modern, durable and aesthetically attractive surfaces.

- Commercial and Institutional Construction: Growth in hotels, offices, retail spaces, hospitals, educational institutions, airports and other infrastructure projects provides opportunities beyond traditional residential demand. Large-format and technically advanced tiles can particularly benefit from this segment.

- Export Market Diversification: Indias established manufacturing base and competitive production capabilities provide opportunities to expand exports into new geographies. Recent and concluded Free Trade Agreements could also provide additional opportunities for Indian ceramic tile exporters, although the benefits will depend on market-specific trade conditions.

Threats:

- Intense Competition and Pricing Pressure: The ceramic tile industry remains highly competitive, with organized manufacturers competing alongside a large regional manufacturing base. Excess supply and aggressive pricing can adversely affect selling prices, dealer margins and profitability.

- Export and Geopolitical Risks: International operations are exposed to geopolitical tensions, trade restrictions, tariffs, anti-dumping measures, sanctions, freight disruptions and changes in import regulations. Such developments can adversely affect export volumes, realisations and profitability.

- Volatility in Natural Gas and Energy Costs: Ceramic tile manufacturing is energyintensive and highly dependent on fuel availability and prices. Recent disruptions in LNG and propane supplies demonstrated the vulnerability of the industry to geopolitical developments and energy-supply disruptions.

- Dependence on Real Estate and Construction Activity: Demand for tiles is closely linked to residential construction and real estate completion cycles. Any slowdown in housing sales, project launches, construction activity or consumer spending could affect industry demand.

E. Segment-wise or Product-wise performance:

The Company is primarily engaged in business activities across geographical segments, namely India and Overseas.

The total turnover of the Company during the Financial Year 2025-26 amounted to Rs. 6,187.56 Lakhs, out of which Rs. 6,056.65 Lakhs was generated from the Indian and Rs. 130.91 Lakhs from the Overseas.

F. Future Outlook:

The Company remains cautiously optimistic about its future growth prospects, supported by favourable long-term demand fundamentals in the Indian ceramic tile industry. The Companys immediate focus will remain on strengthening its domestic and international presence, expanding its product portfolio, improving operational efficiencies and enhancing customer and market reach.

G. Risks and concerns:

The ceramic tile industry operates in a dynamic and competitive business environment characterised by changing consumer preferences, evolving market conditions and fluctuations in input costs. Volatility in the prices and availability of key raw materials, fuel and energy costs may impact manufacturing costs and operating margins. Intense competition within the industry, pricing pressures and changes in demand from the real estate and construction sectors may also affect the Companys business performance.

The Companys domestic and international operations are exposed to risks relating to supply chain and logistics disruptions, foreign exchange fluctuations, changes in international trade policies, tariffs and regulatory requirements in export markets. Further, the continuous evolution of product designs, formats, finishes and manufacturing technologies requires ongoing focus on product innovation and operational efficiency.

The Companys ability to effectively manage these operational, market, financial, supply chain and regulatory risks through prudent cost management, product and market diversification, efficient working capital management, quality enhancement and continuous process improvement will remain critical to sustaining long-term growth and creating value for stakeholders.

H. Internal control systems and their adequacy:

The Company has established adequate internal control systems commensurate with the size, scale and nature of its operations. The internal control framework is designed to safeguard the Companys assets, ensure accuracy and reliability of financial and operational information, promote operational efficiency, ensure compliance with applicable laws and regulations, and support effective risk management.

Regular audits and assessments are essential to evaluate the adequacy of these controls, identify any weaknesses, and ensure they adapt to evolving industry conditions and project demands. This ongoing review helps maintain operational integrity and financial stability.

Additionally, the following measures are taken to ensure proper control:

• Regular internal and external audits.

• Implementation of standardized operating procedures.

• Comprehensive risk management framework.

• Quality control measures across manufacturing and product handling processes.

I. Key Financial Ratios:

In accordance with the SEBI (Listing Obligations and Disclosures Requirements) Regulations 2018 (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in Key sector specific financial ratios. In this regard, the Company has significant changes in key sector specific financial ratios is described in the Financial Statement of this Annual Report.

J. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2025-26 is described in the Directors Report of the Company.

K. Material developments in Human Resources / Industrial Relations front including number of people employed:

The cordial employer - employee relationship also continued during the year under the review. The Company has continued to give special attention to human resources.

L. Caution Statement:

Statements made in the Management Discussion and Analysis describing the various parts may be "forward looking statement" within the meaning of applicable securities laws and regulations. The actual results may differ from those expectations depending upon the economic conditions, changes in Govt. Regulations and amendments in tax laws and other internal and external factors.