Mahindra EPC Irrigation Ltd Management Discussions

Mahindra EPC Irrigation Limited, one of the pioneers of Micro Irrigation in India, In the year 2026 the Company is completing its 40 years of operations. The Company enables farmers to Rise through Sustainable Precision Farming Solutions in the space of Micro Irrigation, Water Management, Automation, Community Irrigation and Protected Cultivation.

Mahindra EPC Irrigation Limited (Mahindra EPC), is a part of Mahindra Agriculture Business. This brings in lot of synergies and strategic support.

Mahindra EPC responsibly carries the legacy of over 75-Year-old Diverse Mahindra Group. We work for ‘Driving Positive Change in the lives of our community and believe in ‘Only when we enable others to Rise will we Rise #TogetherWeRise.

Mahindra EPC provides customized end to end Irrigation and Water Management solutions to individual farmers as well as communities and stands out for superior quality. This is made possible through the Companys Pan India presence, Technical Expertise, Superior Manufacturing Facilities, Wide range of Quality Products as well as Highly Qualified and Capable team. To get closer to the point of consumption in the recent past the Company has set up multi-locational manufacturing facilities in India. Further the Company is also known for its Quality Services in the space of Irrigation Planning, Design, Installation, Agronomy, After sales Services - In person as well as through Digital delivery.

Over the past few years, we have successfully proved application of Drip Technology on even Non-Traditional Crops such as Paddy. It is our constant endeavour to innovate our products, services as well as solution delivery approach.

Mahindra EPC is registered in all major states of India under the Per Drop More Crop scheme (PDMC) of the Government of India (GoI) for subsidy program, which is ably supported by respective State Governments. To deliver on various solutions under this program, Mahindra EPC has a strong network of over 1000 channel partners which is supported by its branch offices across India. The Company also has developed expertise in addressing needs of urban customers such as landscaping and other irrigation needs.

In recent years Mahindra EPC has moved beyond India to the African Continent through its channel partners and have executed a few irrigation projects in international markets.

Further, in India the Company has conceptualised, designed and executed many Community irrigation projects enabling communities to improve water use efficiency and improve farm productivity.

In our Protected Cultivation Solutions business, we have conceptualised, designed, and delivered, innovative and profitable solutions to hundreds of small and marginal farmers in addition to our core competency of High-end Technology Solutions.

As a responsible corporate, we are aligned to Sustainability Commitments, have signed up for Science Based Targets and are committed to a Carbon Neutrality Road map.

Overview:

With about 65 percent of the people in India engaged in agriculture and allied activities directly and about 55 percent of the workforce engaged in agriculture and allied activities, agriculture continues to be a critical sector to the sustenance and progress of the country. As per the Ministry of Statistics and Programme Implementation (MoSPI), first advanced estimates of the GVA for 2024-25 the agriculture sector GVA contributes to 18% to Indias nominal GVA. Whereas the real GVA of Agriculture and allied sector has been estimated to grow by 3.8% during 2024-25 as compared to the growth of 1.4% witnessed during the last year, i.e., 2023-24. Apart from meeting domestic requirements, India has also rapidly emerged as the net exporter of agricultural products in recent years in last couple of years the exports of agricultural products from India have been in the range of $48-53 Bn.

Other than the likely growth of 3.8% in Agriculture and allied sectors India is likely to see faster growth rates in the secondary (Manufacturing, Construction, Electricity, Utilities etc.) and tertiary (mainly services) sectors of 6.5% and 7.2% respectively. Further rightly there is a focus on ‘Atmanirbhar Bharat and thus ‘Make in India. Which means a further required push for the secondary sectors while balancing the growths in Primary sector. With this background the availability of Fresh water and its criticality to various sectors becomes very important.

India has 1 8% of the worlds population and freshwater availability is merely about 4% of worlds water resources. The agriculture sector accounts for 70% of freshwater withdrawals as per World Resources Institute (WRI) whereas as per Central Water Commission, in India, the figure is a whopping 80% for the agriculture sector with just 7% for industries and power generation, 6% for domestic use and 7% for other use. As per United Nations criteria, a region with an annual water supply of less than 1700 cubic meter per individual is categorized as being under ‘water stress. When annual water supplies drop below 1,000 cubic meter per person, the population faces ‘water scarcity. The per capita water availability in India is relatively low at around 1,545 cubic meters per person per year in 2011. This is expected to decrease further to 1340 cubic meter in 2025 and 1140 cubic meter in 2050 with increasing population growth and urbanization.

With this background and considering the required and actual rates of growth in Manufacturing, Construction as well as Services, larger share of water needs to be made available for these sectors. With a natural limit on sources of water, it needs to come from a reduced water consumption in Agriculture. Other than the surface/ ground water conservation/ recharge/ projects ‘On Farm Water Management and efficiency improvement is necessarily the way ahead.

Thus, the sustenance and growth story of Indian economy in general and Agriculture in particular will remain a challenge without Micro Irrigation.

Micro Irrigation addresses issues such as Water use efficiency, Productivity and Farmer income improvement, which aligns with Hon. Prime Ministers vision of doubling farmer income. Various studies have proved that Micro irrigation benefits the farmer by saving cost such as Fertiliser, Labour and Electricity in the range of 20-30% while improving the productivity by 30-40%.

Referring to a recent address by the Hon. Agriculture Minister to the Parliament 9.7 Mn Ha has been covered under Micro Irrigation so far. Which is about 14-15% of the total identified current potential for Micro Irrigation in India. The potential is based mostly on ground water availability and some portion of surface water. As there have been efforts to improve water use efficiency of surface water too, in case all the surface water irrigated land is considered the potential for Micro Irrigation just doubles.

Recognizing the importance of Micro Irrigation and its ability to save water as well as improve productivity, the Government of India (GoI) identifies Micro Irrigation as one of the key tools to improve water use efficiency and double farmer Income.

Though this is very encouraging, the funding from State Governments is equally important. As major part of the subsidy and execution is controlled by state, various critical aspects of the scheme such as pricing decision, are taken by state Governments whereas, GoI issues guidelines and defines boundary conditions such as the Unit cost norms.

Industry Structure and Developments

The Micro Irrigation System (MIS) Industry in India has been broadly segmented based on types of micro irrigation systems (drip and sprinkler irrigation systems), applications of micro irrigation systems and with or without subsidy assistance. The subsidy business has been further segmented basis the approach of solution delivery and subsidy disbursement into the project market and open market. Project markets being the ones where the Company directly supplies and installs the solution at Farmers field against the work orders received from the State Nodal Agency, whereas open markets are the states in which the Companys solutions reach to farmers through its dealers and farmer claims the subsidy directly.

In the recent past the Industry has been subdued with a steep drop in F21 v/s F20 and then a slow revival in F22, F23 and a 3.7% growth in F24 V/s F23, industry stood at 11.4 Lakh Ha V/s a 11.74 Lakh Ha of F20 which is a -ve CAGR of 0.7% for F20 to F24 (All growth number are based on Industry Coverage data in Hectares published on official portal). F25 was a mixed bag, the industry faced strong head winds in the first half on account of General Elections and incessant and extended rainfall up to October 2024 end, and a better second half of the year with states like AP and TG supporting the operations. Industry kept surprisingly low in the major states of Maharashtra and Karnataka on account of fund availability and thus No/ Low farmer pre-sanctions and workorders respectively.

Over last couple of years and based on the coverage in Hectares published by the GoI, industry is witnessing a higher rate of industry growth in some Northern and Eastern states compared to traditional states in Central and South India. This trend continued for few states in the year F25.

Considering growth in the major states like AP and TG as well as few northern states, a likely degrowth in some other critical states, the industry is likely to hold on to previous year number of 11.4 lakh HA+/-5%, but it is likely to get updated further.

Although the Government of India disbursed more funds as Central share compared to F24, the matching state share were delayed.

This has led to challenges of delayed collection from certain major contributing states, making it a play of individual Companys risk appetite, resulting in increased receivable days for many players.

As discussed in earlier years too, the profitability of the industry is primarily driven by the Prices from State Governments and the Raw Material Prices which is the largest contributor to input costs. This year the state Government prices remained unchanged, and the Raw Material Prices remained stable for a significant part of the year.

Further, as we look at the various key states, states like AP, TG and Gujarat have clarified their intent through improved budget allocations for F26 and directionally looking positive on the implementation, states like Maharashtra may possibly come to normalcy towards second half of F26, stable state TN is likely to continue its support to the scheme. Also, few critical northern states will continue their growth trend.

The Government of India (GoI) strongly believes in Micro Irrigation as one of the key tools to save water as well as double farmer Income and thus Hon Prime Minister has been pushing for 20 Lakh Ha a year target for Micro Irrigation.

Though this is very encouraging, the buy-in, funding and Priorities of State Governments is equally important. States play a vital role in controlling Funds, Pricing as well as administrative aspects. Also, for Micro Irrigation industry the raw material prices play a critical role, presently though the prices of polymers look stable, the changes in the Geopolitical conditions could impact this key cost.

With prices stabilised, range bound RM, key states getting active and new states emerging, various Industry players expect a reasonable growth in the coming years.

Opportunities and Outlook

Micro-irrigation being a proven solution to improve water use efficiency, productivity improvement and improving farmer income, stands as a compulsive tool to ‘Double Farmer Income, ‘Water conservation and support the ‘Growth of Sectors other than Agriculture.

Further we are experiencing few tends such as:

Stable RM price environment, though these are not enough to take us to FY20 material cost levels they have been softer in recent past. Only caveat here is that Geopolitical events may have some impact on it; successive years of good monsoons and a prediction of a normal one this year too; increased number of farmers are getting aware of the benefits of Micro Irrigation which may lead to improved demand; increasing ‘Sustainability awareness in urban regions may lead to improved usage of Micro irrigation and is likely to improve demand in retail markets too.

Most importantly the supportive policy environment:

Hon. PM is pushing for 1 Cr Ha to be covered in next five years, this translates to an Avg. of 2 Mn Ha a year v/s 1.1 Mn Ha of FY24; Key states such as AP is aiming to cover 3 Lakh Ha a year over next four years; Few critical states have approved improved allocations for F26 in their recent budget sessions; In F26 several current active states are expected to remain active giving a positive push to the industry; As mentioned earlier, few states in the north are showing growth for last couple of years e.g., Uttar Pradesh, with processes becoming more and more transparent these states are likely to contribute to the overall Industry; Multiple Ministries are actively working on laying a roadmap and also looking at convergence of schemes and policies e.g. ‘Atal Bhu Jal Yojana for groundwater use efficiency, Developing projects around identified clusters - connecting major irrigation to Micro Irrigation, Inclusion of pressurized piping systems in the detailed project reports (DPR) for Irrigation Infrastructure.

Further there are efforts being put by the GoI to improve/ modernize the irrigation infrastructure, though it currently is aimed at the major irrigation projects, eventually in few years this will help improve Micro Irrigation potential.

These are early signs of a positive environment. These indicators will help both in the micro irrigation business as well as community irrigation projects business. The Company will focus on small, faster cycle projects for which some early success is seen.

However, to unlock opportunity we also need strong coordination between Central and State governments and regularizing of fund disbursement. This is critical for the positive signs to convert into steady and healthy industry growth in the long term.

The overall Agriculture Space is experiencing a lot of technological interventions in precision agriculture, leaving possible opportunities for adoption, convergence, and collaboration.

Operations and Financial Performance

In F25 the Q1 performance remained subdued in line with the industry on account of low activities levels due to General Elections, and in Q2 due to incessant rains. This resulted in a degrowth of 12.6% for the first half of the year compared to the same period in F24. Throughout this year major markets like Maharashtra remained subdued and the state like Karnataka did not pick the usual way in second half of the year. This was compensated to some extent through active states like AP and TG which supported overall operations. Along with these, continued actions in the areas of developing new states, Irrigation Projects and overall non-subsidy focus resulted in improvement in overall business performance.

Overall, during the year, the RM prices remained range bound.

During the year F25, the Company achieved a Sales Turnover of Rs. 272.67 crores as compared to Rs. 262.5 crores in the preceding year, a growth of about 4%.

The Company continued its focus on debtor management and processes.

The Company consciously controlled the operations in certain states of strength to strengthen processes including Revenue Recognition, Debtor reduction etc. as well as for mitigating business concentration risks.

While doing so the Company worked on improving the product mix, state mix and segment mix. During this period Company achieved its highest ever Non-Subsidy Revenue. With continued efforts, the Company has developed a strong work order pipeline for irrigation projects.

As a result, in F25, the Company has registered 33.4% of its revenue from non-subsidy segments, a stride towards reducing dependence on subsidy.

The strategic actions taken by the Company are in the areas of: Focus on few critical markets, strengthening new geographies, explore non-subsidy business avenues, optimize product mix, improve working capital efficiency, optimizing costs.

The Company continued its focus on serving the Customers needs resulting in lower Customer complaints, Lower rejections across all production locations.

The Company further continued efforts on asset efficiency improvement and frugal engineering as well as the action on working capital to reduce the impact on the external changes impacting bottom line. The Companys commitment to sustainability (SBTi), social responsibility and delivering quality services to the farming community will strengthen further in times to come, as an acknowledgement of this Mahindra EPC, retained its grading to ‘Stage 5 in ‘The Mahindra Way (TMW) assessments.

During the year under review Company received prestigious ‘Product Innovation Platinum category award in the ‘Times Now Global Sustainability Alliance Event. This endorses our commitment to sustainability.

The Company continued its focus on Total Productive Maintenance (TPM), Total Quality Management (TQM) Continuous Improvement Team (CIT), Mahindra Yellow Belt Programme, Kaizen, Quality Parameters on all machines and Service Quality Index. These measures have resulted in improvements in production efficiencies, improving asset life, reduction in rejections and improvement in customer satisfaction levels.

The Company continues to provide support to farmers by way of the Agri Helpline for online support besides undertaking initiatives such as supporting farmers for productivity improvement through our Demo Plots and creating success stories for horizontal deployment of Drip Irrigation technology, organizing farmer meetings and agronomy services for farmers.

Key Financial Ratios

The Key Financial Ratios of the Company are given below:

			Standalone
Ratio	Numerator	Denominator	FY 2025	FY 2024	% Change
Debtors Turnover (Days)	Average Debtors	Net Sales	263	239	9.96%
Inventory Turnover (Times)	COGS	Average Inventory	2.91	3.29	-11.47%
Debt Service Coverage Ratio	Earnings available for debt service	Debt Service	8.20	7.53	8.82%
Current Ratio (Times)	Total Current Assets	Total Current Liabilities	2.13	2.35	-9.23%
Debt Equity Ratio (Times)	Debt	Shareholders Equity	0.15	0.09	56.47%
Net Profit Margin (%)	PAT	Net Sales	2.64%	0.64%	315.55%
Return on Equity (%)	PAT	Net Worth	4.27%	1.02%	319.98%
Trade Payable Turnover (Days)	Average Trade Payables	Net Purchases	201	152	32.36%
Return on Capital employed	EBIT	Capital Employed	6.57%	3.11%	111.15%
Working Capital Turnover Ratio	Net Sales	Average Working Capital	2.04	2.14	-4.60%
Return on Investments	Income generated from invested fund	Average invested funds in treasury investment	6.21%	7.42%	-16.33%

F25 was a peculiar year with many business factors, external as well as internal impacting the working capital.

The first and the foremost, delayed collections from key states, some these have still a pendency of receivables from F23 and F24. The Company has worked on its part of the responsibility to ensure clearance of inspections and completeness of documents and with this most of the receivables falling in these buckets for these states are at ‘Final Payment stage i.e., as and when the states Governments release the funds the Company will receive the same.

Further there was a delay in collections at an overall level due to changes in the Central Government payment administrative processes and the states coping up with the same.

In the year F25 the first half was subdued and thus the revenue was skewed towards the year end, considering even the normal collection cycle i.e., Supply-Installation-Inspection- Collection, most of the revenue in Q4 for project markets is in queue for inspections and will be released in the F26. As a result, the debtor days for the Company have increased by 24 days of sales. The impact to working capital to some extent got compensated by efficiently managing inventory and payables.

Thus, Company has managed the cash well with small change in the operating cash flow compared to F24. During this period as a result of cautious fund planning, the interest cost also is lesser than F24.

With continued efforts, improvement in the collection process, as well as expected normalcy at the nodal agencies, we expect an improved performance in F26.

The Company has done a detailed review of old receivables and taken actions to recover the same. Further as a measure of abundant caution have provided sufficiently for receivables that have been due for a longer period.

The Company in its efforts to optimise costs has managed to keep the fixed costs such as Employee Cost at a reasonable level compared to F24 which is only 2.5% increase and an increase of only 6% over F20 reflects the efficiency of cost optimization despite the inflations, salary increase every year. Further, over last three years the revenue has increased by a CAGR of 9% whereas the fixed costs went up by a CAGR of 1.2%.

Risks, Concerns and Threats

The major concerns faced by the industry are, absence of all year round working of the scheme in many states, delayed Opening of the scheme even in key states, though not a major concern in immediate future, lack of implementation of dynamic price revision and delayed funds release by certain State Governments. Though the intent of the GoI as well as State Governments is to increase the speed of MI coverage, these concerns presently remain.

There are many deliberations and representations taking place through the competent Industry bodies and the importance of the same has been conveyed to the relevant authorities. With improving transparency of the State Nodal Agency Portals and GoI Fund disbursement process, the industry is assured that in the future consistent and cohesive Central and State policies will bring in effective solutions on the same. Till then tighter internal controls have been exercised for debtor monitoring along with rigorous cost controls.

In order to shock proof the Company, in the subsidy business Company has reduced business concentration risks in terms of specific states or geographies, and has strengthened processes and defined a tighter commercial policy towards balancing growth, profitability and working capital. Company has continued to improve efficiencies and has kept a tight control on manpower costs and manufacturing efficiency. The Company has started improving coverage in emerging markets such as the North India.

Keeping in view a possible restriction on spending by the Government in the Subsidy business, the Company has undertaken initiatives to reduce dependence on subsidy markets. This has and will lead to maintaining sustainable business activity levels as well as improve on working capital.

Additionally, uneven distribution of rainfall, increasing presence of unorganized sector and high dependence on polymer prices are a few more risks. The risks due to seasonality and distribution of monsoon are mitigated with Companys diversified operations across different States.

Considering the impact and ever staring water crisis Micro Irrigation creates a strong case to address the key challenges surrounding the agriculture sector which include, innovation in technology and mechanisation with increased penetration. The Company has identified a latent need for technology intervention which possibly will become the order of the industry. In order to safeguard the Company from possible disruptions due technology play, the Company is working on technology solutions for the farmers through its collaborations and tie-ups with various partners in this space.

With only 14-15% penetration of Micro Irrigation, Surface irrigation will still dominate as the primary irrigation method for some years, the efforts of the Government agencies to create policies that include connection of surface water to on-farm water management will further improve the scope for Micro Irrigation, and the area under micro-irrigation will continue to expand. The Company is continuously contributing in the policy advocacy for bringing more area under micro irrigation on its own as well as through various industry bodies. Thus, to prepare itself for such situations Company has initiated developing Projects Business for last couple of years. So far, the Company has developed capability to conceptualise, design and execute small/ medium size community irrigation projects which include the connect between major and micro irrigation.

Internal Control Systems

The Company has an effective and reliable internal financial control system commensurate with the nature of its business, the size, and the complexity of its operations. The internal financial control system provides for well-documented policies and procedures, that are aligned with Mahindra Groups standards, processes, and policies; and enable the Company to adhere to statutory requirements for the orderly and efficient conduct of business, safeguarding of assets, detection and prevention of frauds and errors, adequacy and completeness of accounting records and timely preparation of reliable financial information.

The Company uses an ERP System as a business enabler and to maintain its books of accounts. The transactional controls built in the ERP System provide segregation of duties and appropriate levels of approval mechanism and maintenance of audit trail. The ERP system and the Standard Operating Procedures are reviewed by the management and strengthened wherever required. These systems and controls are audited by the Internal Auditors and their findings and recommendations are reviewed by the Audit Committee. The Action Plan is prepared by the management for all the Audit findings and recommendations and is continuously monitored on monthly basis, while the action taken report is reviewed by the Audit Committee every quarter. The Company continuously makes efforts to automate its processes to enhance the controls.

The internal control framework covers all major business processes and the risks therein, bringing control and integrity. These are tested by the management based on the Risk Control Matrix, the same is reviewed by an external audit firm. The results of the same are shared with the audit committee.

Based on managements assessment and testing of controls, it is concluded that the Company has proper internal financial controls which are considered adequate and are operating effectively.

Human Resources and Industrial Relations

In line with its commitment to deliver superior performance through its dedicated, capable, and agile workforce in all spheres of business, the Company has focused on Collaboration at work, capability enhancement systems, new ways of Learning & Development and Work-Life Balance to ensure higher productivity.

With the core purpose of Together We Rise philosophy, the introduction of Refresh Rise has shown the new path towards “Rise for a More equal world”, “Rise to be Future-Ready”, and “Rise to create Value” in the life of our communities.

Given the challenging environment and in line with Mahindra FES philosophy the Company has made changes to its performance management system and has brought in weightages to ECAB behaviours i.e., Ethical, Collaborative,

Agile and Bold Behaviours, the employees would be assessed twice a year during the performance appraisal period. The process of performance assessment both for business as well as the employees covers all four aspects - financial perspective, customer perspective, and Internal business process. This also aligns with the long-term strategic initiatives of the Company. This practice ensures balance across multiple dimensions of the performance of employees.

Human resources initiatives such as skill level upgradation, online training courses, re-deployment of manpower for better utilization, productivity improvement of sales force through building crop-specific capability, appropriate reward and recognition systems and productivity improvement are the key focus areas for the development of the employees of the Company. In past two years there have been number of instances wherein the senior positions have been filled through internal talent, which is in line with our strong succession planning policy. This gives opportunities for individuals for job rotation, learning and strengthening the capabilities. As we look ahead, we are confident that our strong, positive people philosophy and practices will make us a preferred organization for talent.

In line with Mahindra culture of promoting ‘Speak up and ‘Zero Tolerance on Ethics and Governance, the Company has a ‘Ethics help line which is promoted through all communications by senior management. The events reported are addressed by the Ethics Committee through a laid down process.

Further, in line with the Mahindra Auto Farm Sectors the Company has implemented ‘Safe2Express drive which ensures progress towards an organization open to listen, understand and address the issues. This further ensures ‘Emotional Safety. The senior Management is assessed on the same through various surveys and in the due course this will be cascaded down the line.

The organisation has established a proactive Grievance handling mechanism and addressed issues at the very initial stage, to ensure industrial peace and higher productivity. The organisation engages with the union and opinion makers to ensure better engagement of the workforce leading to better productivity. In line with the wage settlement in force, the organisation has ensured to comply with long term settlement (LTS) with union to ensure harmony at the workplace. In the year under review the management has successfully closed the Long-Term Wage settlement for the period of F25 to F28.

The Companys employees proactively participate in ‘Employee Social Options and the Company is experiencing an overwhelming response by the employees to selflessly participate in ‘Mahindra Volunteers Day, which coincides with ‘World Volunteer Day.

The Company is also sensitizing its people to maintain all-around wellness to ensure the safety of themselves, their families and society at large. To note the Company has over 1930 days of ‘Zero Accident Days. In the assessment of Safety processes, the Company was adjudged at ‘Stage 4 a step improvement from F24 in the Mahindra Group Safety Assessment.

As of 31^st March 2025, the total number of employees in our Company was 387.

Cautionary Note

This report contains forward-looking statements based on certain assumptions and expectations of future events. Actual performance, results or achievements and risks and opportunities may differ from those expressed or implied in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, based on any subsequent developments, information, or events.

ANNEXURE VI TO DIRECTORS REPORT