Loyal Equipments Ltd Management Discussions

The Management of the Company is pleased to present its report on the Industry Scenario including on the Companys performance during the financial year 2025-26.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Global Economic Outlook

The global economy continued to demonstrate resilience during 2025 despite heightened geopolitical tensions, evolving trade policies, and persistent macroeconomic uncertainties. Inflationary pressures moderated across several economies, allowing central banks to gradually ease monetary policy; however, policy uncertainty and trade-related disruptions continued to influence global business sentiment and investment decisions.

According to the International Monetary Fund (IMF), global economic growth is projected at 3.0% in 2025 and 3.1% in 2026, reflecting a modest improvement over earlier estimates, supported by stronger-than- expected economic activity in certain regions, improved financial conditions, and resilient consumer demand. Nevertheless, elevated trade tensions, geopolitical risks, supply chain realignments, and volatile commodity prices continue to pose downside risks to the global economic outlook.

Growth in advanced economies is expected to remain moderate amid subdued domestic demand and fiscal consolidation, while emerging market and developing economies are projected to continue driving global economic expansion, supported by domestic consumption, infrastructure investments, and structural reforms. Inflation is expected to continue its gradual decline, although it is likely to remain above central bank targets in several major economies.

Looking ahead, sustained economic growth will depend on stable trade relations, prudent fiscal and monetary policies, continued structural reforms, and improved geopolitical stability. While the global outlook remains cautiously optimistic, businesses are expected to operate in an environment characterized by heightened uncertainty and evolving market dynamics.

SUMMARY OF OUR BUSINESS

Loyal Equipments Limited is a SMERA-certified company and an ASME "U" & "U2" Stamp holder. The company is one of Indias well-known and reputed manufacturers, specializing in the design, manufacturing, supply, and erection/commissioning of process equipment, including Pressure Vessels, Air Cooled Heat Exchangers, Shell & Tube Heat Exchangers, Storage Tanks, Pressure Receivers, Chimneys, Heavy Structural Items, Skids, Base Plates, and other engineered equipment for the Oil & Gas, Petroleum, Chemical, Sugar, Steel, Fertilizer, and Power Plant sectors.

Loyal Equipments Limited follows a robust Quality Management System across the entire business process, from design and engineering through manufacturing/fabrication to installation and commissioning at site. The company has extensive and continuous experience serving prestigious clients such as EIL, GSPC, GAIL, ONGC, Ingersoll Rand, Linde, Dresser Rand, L&T, Reliance, ALSTOM, Kirloskar, Texas Southpiller-USA, and numerous other government and private organizations.

SALIENT FEATURES OF OUR PRODUCTS:

• Produced from the toughest materials like steel, nonferrous materials.

• Compliance to customer Requirements

• Adherence to the Quality standards as required by monitoring agencies

• Timely Delivery

• Customization

• Consignment packaging as per specification of customer.

OUR COMPETITIVE STRENGTHS

We believe that the following are our primary competitive strength:

Customized Product Offering

We believe that our ability to offer customized products tailored to the specific requirements of our customers is one of our key competitive strengths. We work closely with our customers to understand their technical specifications and design products that meet their unique requirements. This customer-centric approach enables us to deliver solutions that align with their expectations, resulting in enhanced customer satisfaction.

Quality Assurance and Standards

We are committed to delivering products that meet the quality expectations of our customers. We have established quality policies and procedures designed to ensure that our products conform to the required specifications and applicable quality standards. Our quality control processes encompass various stages of procurement and production to maintain consistency and reliability.

Strong Customer Relationships

We believe that our long-standing relationships with our customers constitute an important competitive advantage. We continuously strive to understand and address the evolving requirements of our customers by offering a diverse range of products and responsive service. Our focus on customer satisfaction has enabled us to secure repeat business and foster long-term associations with our customers.

Existing Relationship with Suppliers

We have developed long-term relationships with a network of suppliers for the procurement of our raw materials. We believe that these established relationships enable us to source quality raw materials in a timely manner and on competitive terms. We believe that these supplier relationships have contributed to operational efficiency, customer satisfaction, and the generation of repeat business.

OUR BUSINESS STRATEGY

Customer-Centric Approach

We focus on understanding our customers requirements and providing products that meet their specifications. Our emphasis on product customization, quality, and timely delivery helps us enhance customer satisfaction and build long-term relationships.

Continuous Improvement in Manufacturing

We strive to improve our manufacturing capabilities by adopting efficient production processes and modern machinery. Our focus on operational efficiency enables us to maintain product quality and meet customer requirements effectively.

Professional and Transparent Operations

We are committed to conducting our business with transparency and professionalism. Our experienced team, supported by external experts whenever required, helps us manage our operations efficiently and support our business growth.

Efficient Resource Management

We continuously review our production processes, procurement practices, and manufacturing facilities to improve efficiency. Our focus on optimal utilization of resources supports cost efficiency, productivity, and sustainable business operations.

OPPORTUNITIES AND THREATS

Loyal Equipments Limited has strong growth opportunities due to the increasing demand for process equipment across the oil and gas, petrochemical, chemical, fertilizer, power, steel, and other industrial sectors. Its ISO 9001:2015 certification, ASME and IBR accreditations, and expertise in manufacturing customized equipment enhance its credibility and support expansion into new domestic and international markets. Growing investments in industrial infrastructure and strategic collaborations with EPC contractors further strengthen its growth prospects.

However, the company faces intense competition from established domestic and global manufacturers, which may impact its market share and pricing. Fluctuations in raw material prices, changes in government policies and environmental regulations, and economic uncertainties can also affect production costs, project execution, and overall business performance.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Loyal Equipments Limited is an ISO 9001:2015 certified, SMERA certified, and ASME "U" & "U2" Stamp holder company. It is one of the reputed companies in India engaged in the design, manufacturing, supply, and erection/commissioning of process equipment such as pressure vessels, air-cooled heat exchangers, shell & tube heat exchangers, storage tanks, pressure receivers, chimneys, heavy structural items, skids, base plates, and other equipment for the oil & gas, petroleum, chemical, sugar, steel, fertilizer, and power plant sectors.

Loyal Equipments Limited is equipped with modern machinery, advanced tools, skilled manpower, handling equipment, and various in-house facilities to ensure smooth operations and the production of high-quality products. The company has developed a strong infrastructure base, which is regularly upgraded in line with technological advancements and improved working systems to enhance operational efficiency and product quality.

OUTLOOK

The engineering sector continues to play a crucial role in Indias industrial and economic development, supported by increasing investments in infrastructure, manufacturing, energy, and process industries. The sector has witnessed steady growth due to rising demand for capital goods, industrial equipment, and engineering solutions across oil & gas, petrochemicals, power, fertilizers, chemicals, and other core industries. Indias engineering exports have also shown strong growth, reflecting the countrys increasing capabilities in manufacturing and global supply chains.

The Government of India, through initiatives supporting manufacturing, infrastructure development, and exports, continues to promote the growth of the engineering sector. The Engineering Export Promotion Council (EEPC) plays an important role in promoting Indian engineering goods and services in international markets. With its strong technical capabilities, quality certifications, and expertise in manufacturing customized process equipment, Loyal Equipments Limited is well-positioned to benefit from the growing demand in domestic as well as international markets. Indias continued focus on industrial expansion, energy security, and infrastructure development is expected to provide further growth opportunities for engineering companies in the coming years.

THREATS, RISK AND CONCERNS

The Company is concerned about the prevailing exposure norms, its financial position, the entry of new players in the market, rising competition from banks and multilateral agencies, an uncertain business environment, fluctuations in the rupee, and the likely increase in the cost of capital due to volatile market conditions. Further, the business and policy environment in the country has a cascading effect on the interest rate regime, the cost and availability of raw materials, and the gestation period and capital outlays required for procuring raw materials. General economic conditions may also affect the capacity utilisation and production of manufactured products. The Company continues to closely monitor these risks and adopts appropriate measures to mitigate their potential impact on its operations and overall business performance.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has an adequate system of internal controls and monitoring procedures to ensure accurate and timely financial reporting, operational efficiency, and compliance with applicable laws, regulations, and Company policies. Appropriate delegation of powers and accounting guidelines are in place to ensure uniform compliance.

Regular internal audits of the offices and plant are conducted by the in-house Internal Audit Division and an external professional audit firm. The audits cover all major operational and risk areas in accordance with the Annual Internal Audit Programme. The Audit Committee periodically reviews the significant audit findings and the adequacy of the internal control systems in compliance with the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

FINANCIAL AND OPERATIONAL PERFORMANCE

Standalone Revenue from Operations of your Company for the year 2025-26 was Rs.7,897.84 Lakhs, which was 4.88% higher than Rs.7,530.01 Lakhs in the previous year. Profit Before Tax (PBT) for the current year was Rs.873.28 Lakhs as against Rs.1,358.78 Lakhs in the previous year. Total Comprehensive Income for the current year stood at Rs.668.21 Lakhs as against Rs.1,066.00 Lakhs in the previous year.

HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company places utmost importance on the capacity building and well-being of its employees. Industrial relations remained cordial throughout the year, supported by regular interactions between the management and employee representatives on matters relating to employee welfare. The Company continues to foster a culture of trust and cooperation, resulting in a motivated workforce and sustained improvement in performance.

Industrial relations remained cordial throughout the year. As at 31 March 2026, the Company had 112 employees.

ANALYSIS OF SIGNIFICANT CHANGES IN FINANCIAL RATIOS

As per the recent amendments to the SEBI Listing Obligations & Disclosure Requirements (LODR), we give below additional information in respect of financial parameters that are applicable to our company:

Detail of Significant changes (i.e. change of 25% of more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanation therefore as under:

Particular	Numerator	Denominator	31.03.2026	31.03.2025	Movement in %	Reason for Movement if >25%
(a) Current Ratio	Current Assets	Current Liabilities	1.85	2.51	26.26	This Ratio is decreased due to increase in debts
(b) Debt-Equity Ratio	Total Debt	Shareholders Equity	0.39	0.20	-95.42	This ratio is decreased due increase in Debts
(c) Debt Service Coverage Ratio	Net Operating Income	Total Debt Service	-1.03	5.21	119.83	This ratio is decreased due to increase in debts.
(d) Return on Equity Ratio	Profit After Tax	Average Shareholders Equity	12.54	26.50	52.69	This Ratio is decreased due to lower profits during the year
(e) Trade Receivables Turnover Ratio (in times)	Revenue	Average Trade Receivable	3.74	4.28	12.61	Reason is not required to disclose.
(f) Trade Payables Turnover Ratio (in times)	Purchase of Services & other Expenses	Average Trade Payables	7.39	10.80	31.59	This ratio is decreased due to decrease in purchases
(g) Net Capital Turnover Ratio (in times)	Revenue	Net Working Capital	3.27	2.25	-45.51	This ratio is increased due to decrease in working capital
(h) Net Profit Ratio	Net Profit	Revenue	8.53	14.16	39.79	This ratio is decreased due to lower profits during the year
(i) Return on Capital Employed	Operating Profit	Total Capital Employed	21.69	32.23	32.69	This ratio is decreased due to lower profits during the year
(k) Inventory Turnover Ratio	Revenue	Average Inventory	3.48	4.41	21.18	Reason is not required since movement is not more than 25%
(l) Interest Coverage Ratio	Earnings before Interest and Tax (EBIT)	interest Expense / Finance Cost	5.88	16.81	-65.02%	Due to Lower Profit Margin during the year
(m) Operating Profit Margin (%)	Operating Profit	Revenue from Operations	49.21	45.42	+8.34%	-
O Return on Net Worth	Profit After Tax	Average Shareholders Equity / Net Worth	11.91	20.96	-43.18%	Due to Lower Profit Margin during the year

Cautionary Note

Certain statements in "Management Discussion and Analysis" section may be forward looking and are stated as required by applicable laws and regulations. Many factors may affect the actual results, which could be different from what the Management envisages in terms of future performance and outlook.