Msafe Equipments Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

Indian Economy Overview

India continues to remain one of the fastest-growing major economies globally, supported by strong domestic consumption, favourable demographics, infrastructure investments, and sustained policy reforms. As per IMF projections, Indias GDP is expected to grow by approximately 6.4% in 2026 and 6.7% in 2027, significantly outperforming most major economies despite global geopolitical and economic uncertainties. Over the past decade, Indias nominal GDP has nearly tripled from USD 1.23 trillion in FY15 to an estimated USD 3.82 trillion in FY25, reflecting the increasing scale and resilience of the economy. The country is currently the worlds fourth-largest economy and is expected to become the third-largest by FY2030-31, with GDP projected to reach approximately USD 7.3 trillion. Macroeconomic stability, easing inflation, fiscal consolidation, a resilient external sector, and rising employment opportunities are expected to support the growth momentum. Continued government expenditure on roads, railways, urban infrastructure, housing, manufacturing, and industrial projects is also expected to strengthen construction activity. These developments provide a favourable operating environment for the scaffolding industry, which plays an essential role in ensuring safety, efficiency, and timely execution across infrastructure, commercial, residential and industrial construction projects.

Scaffolding and Ladder Industry Overview

The Indian scaffolding and ladder industry is undergoing a gradual transition from traditional bamboo structures and basic mild-steel pipes to advanced, modular, and safety-certified systems such as cup lock, ring lock, and aluminum stairway towers. This shift is being driven by increasing awareness of workplace safety, faster project execution, and growing adherence to global standards such as EN 12811, EN 131, ANSI and OSHA, particularly among organized developers and Engineering, procurement, and Construction contractors. Aluminum scaffolding is also gaining acceptance due to its lightweight construction, ease of transportation, faster assembly, corrosion resistance, and longer service life. Its recyclability and alignment with circular-economy principles further support its adoption as a sustainable alternative.

The organised rental model is gaining traction as contractors increasingly seek flexible and cost-effective access to scaffolding and ladder systems without incurring substantial expenditure on ownership, maintenance, and storage. This model is particularly relevant for MSMEs and Tier-II contractors undertaking short-duration projects. Organised players are consequently gaining market share from unorganised fabricators by offering certified products, faster deployment, better documentation, regular maintenance and improved safety compliance.

Industry growth is further supported by government-led infrastructure programmes such as the National Infrastructure Pipeline and PM Gati Shakti, which envisage investments of over Rs143 lakh crore across transportation, logistics, housing, energy and urban infrastructure by 2030. The budgetary allocation of approximately Rs11.21 lakh crore for infrastructure in FY2025-26, along with investments in roads, highways, affordable housing, industrial facilities, warehousing and commercial real estate, is expected to generate sustained demand for access and height-safety solutions.

As per industry estimates, the Indian scaffolding market, valued at approximately Rs 7,208.97 crore in 2024, is projected to reach Rs12,811.78 crore by 2030, registering a CAGR of 10.06%. The Indian ladders market is similarly expected to grow from Rs 1,358.27 crore in 2024 to Rs2,233.90 crore by 2030, representing a CAGR of 8.65%.

Indias scaffolding market remains rental-led and highly fragmented, with rentals accounting for nearly 58–59% of the market across steel and aluminium scaffolding in 2024.

The steel scaffolding market is projected to grow from Rs4,620.95 crore in 2024 to Rs8,270.01 crore by 2030, while the aluminium scaffolding market is expected to increase from Rs1,298.48 crore to Rs2,333.80 crore.

Rental is expected to remain the larger segment and increase its share further by 2030, reaching around 59.2% in steel scaffolding and 60.1% in aluminium scaffolding. With organised penetration still relatively low, this creates a meaningful opportunity for scalable, pan-India rental players.

Rental Model Emerging as a Key Business Opportunity

Lower upfront investment: Renting allows contractors to access scaffolding equipment without incurring substantial capital expenditure. A standard aluminium tower set may cost more than Rs1 lakh, excluding maintenance, storage and inspection expenses.

Growing preference among MSMEs: Mid-sized builders, MSMEs and Tier-II contractors increasingly prefer rentals for short-duration and project-specific requirements, particularly in cities such as Indore and Bhubaneswar.

Access to modern equipment: Rental services enable contractors to use modular, BIS-compliant and safety-certified scaffolding systems without blocking working capital in equipment ownership.

Reduced ownership burden: The model transfers responsibilities relating to maintenance, storage, transportation, repairs and compliance documentation to the rental service provider.

Demand from evolving construction practices: Projects such as Mumbai Metro Line 3 have supported the adoption of modular towers, quick-lock systems and equipment that can be reconfigured according to site requirements.

Ownership remains relevant for critical projects: Large EPC contractors working on long-duration projects, such as the Mumbai Coastal Road and Delhi-Meerut Expressway, may purchase aluminium stairway towers to ensure uninterrupted availability during critical construction phases.

Hybrid model gaining acceptance: The industry is gradually moving towards a hybrid structure, with rentals addressing short-term and capital-sensitive requirements, while outright purchases serve large and strategically important infrastructure projects.

Company Overview

Msafe Equipments Limited is one of Indias emerging manufacturers and rental solution providers of scaffolding and access equipment, serving the construction, infrastructure, industrial maintenance, manufacturing, and commercial sectors. The Company delivers safe, reliable, and high-performance access solutions through an integrated business model encompassing product design, manufacturing, sales, and rental services. Headquartered in Delhi with manufacturing operations in Greater Noida, Uttar Pradesh, Msafe has established a strong pan-India presence supported by three manufacturing facilities, 21 strategically located warehouses, and a diversified customer base of over 2,500 customers. This nationwide footprint enables faster product availability, efficient logistics, and superior customer service across key industrial and infrastructure hubs.

Product Portfolio: The Companys portfolio includes Aluminium Scaffolding Systems, Mild Steel Scaffolding, FRP Ladders, and the recently introduced Aluminium Formwork Solutions, addressing a broad spectrum of height-access and structural support requirements. Complementing its manufacturing capabilities is an asset-backed rental business that generates recurring revenue, enhances asset utilisation, and provides customers with flexible, project-based access solutions. FY2025–26 marked a transformational year for Msafe following its successful public listing. During the year, the Company strengthened its operational capabilities through capacity expansion, expanded its rental asset base, entered the aluminium formwork segment, and continued investing in scalable infrastructure to support future growth. These strategic initiatives reinforce Msafes ambition to evolve from a scaffolding manufacturer into an integrated structural equipment solutions provider.

Driven by innovation, operational excellence, and an unwavering commitment to safety, Msafe continues to build long-term partnerships with leading EPC companies, industrial enterprises, and infrastructure developers. With a scalable business model, disciplined execution, and favourable industry tailwinds, the Company is well positioned to capitalize on Indias growing demand for organised scaffolding and access solutions while delivering sustainable value to all stakeholders.

Business Model: MSafe operates an integrated manufacturing, sales and rental model, creating two complementary growth engines — recurring rental income and scalable product sales. The rental business provides a steady and recurring revenue base. Scaffolding assets can be deployed across multiple customer projects over their economic life, supporting attractive rental yields and higher EBITDA margins. Aluminium scaffolding currently offers rental yields of 60–66% p.a., while MS steel scaffolding generates 32–38% p.a. The longer economic life of these assets further strengthens lifecycle returns. Alongside rentals, the sales business enables MSafe to scale volumes through its manufacturing capabilities. Capacity expansion across aluminium scaffolding, MS steel scaffolding and the upcoming aluminium formwork segment is expected to support a larger addressable market and increasing customer requirements. The model also benefits from asset terminal value, as the underlying metal retains recoverable scrap value of up to 50-70% of the manufacturing cost at the end of its economic life. Together, these two engines provide MSafe with a balanced platform — rental income supporting recurring cash flows and margins, while product sales drive scale and market expansion.

Business Model

Key Financial Highlights

FY26 marked another year of strong financial performance for MSafe Equipments, supported by healthy growth across its sales and rental businesses and continued improvement in operating profitability. Revenue from operations increased by 45.1% year-on-year to Rs103.50 crore, compared with Rs71.34 crore in FY25. EBITDA grew faster than revenue, rising 56.7% to Rs40.87 crore from Rs26.08 crore in the previous year. Consequently, the EBITDA margin expanded to 39.49% from 36.55% in FY25, reflecting an improved business mix and operating leverage. Profit after tax increased by 72.3% to Rs22.42 crore, compared with Rs13.01 crore in FY25. The PAT margin improved to 21.66% from 18.24%, demonstrating the Companys ability to translate revenue growth into stronger profitability. The performance during FY26 reflects the strength of MSafes integrated sales and rental model, with the rental business providing recurring revenues and attractive margins, while manufacturing-led sales supported business scale. The Company enters FY27 with a larger operating base and ongoing capacity expansion initiatives aimed at supporting its next phase of growth.

(Amount Rs in Lacs)

Particulars	2025-26	2024-25
Revenue from Operations	10,349.96	7,134.07
Other Income	55.90	28.11
Total Income	10,405.86	7,162.18
Total Expenses	7,409.35	5,419.26
Profit/(Loss) before Interest, Tax, Depreciation & Amortisation (EBITDA)	4,142.64	2,635.86
Profit/(Loss) before Tax (PBT)	2,996.51	1,742.92
Tax Expenses	(754.49)	(441.71)
Profit/(Loss) after Tax (PAT)	2,242.02	1,301.21

Key Financial Ratios

The Ratios as per the latest amendment to Schedule III are as below:

Sr no	Particulars	Numerator	Denominator	For the year ended 31 March 2026	For the year ended 31 March 2025	Variance (%)	Change in ratio in excess of 25% compared to preceding year
1	Current ratio (in times)	Current assets	Current liabilities	2.46	0.77	219.91%	Movement in ratio is due to increase in current assets and decrease in current liabilities as unspent Initial Public Offer proceeds are held as cash and cash equivalents.
2	Debt equity ratio (in times)	Total borrowings	Total equity (equity share capital + other equity)	0.39	1.27	-68.99%	Movement in ratio is due to Total Equity increased as fresh equity issued in Initial Public offer.
3	Debt service coverage ratio (in times)	Profit before tax, exceptional items, depreciation and finance costs	Finance costs + scheduled principal repayments (excluding prepayments) during the period for long term debts	4.82	3.82	26.23%	NA, Being less than 25%
4	Return on equity (%)	Net profit after tax	Average shareholders equity	36.26	68.09	-46.74%	Movement in ratio is due to increase in average shareholders equity as the company has issued fresh equity in Initial Public Offer during the year
5	Inventory turnover ratio (in times)	Cost of goods sold	Average inventories	1.39	2.96	-52.90%	Movement in ratio is due to increase in inventory during the year.
6	Trade receivables turnover ratio (in times)	Revenue from operations	Average account receivables	5.19	5.07	2.31%	NA, Being less than 25%
7	Trade payables turnover ratio (in times)	COGS	Average trade payables	4.27	3.39	25.89%	Movement in ratio is due to trade payable not increasing in proportion to the cost of goods sold
8	Net capital turnover ratio (in times)	Revenue from operations	Working capital	1.79	-7.13	-125.11%	The movement in the ratio is attributable to an increase in working capital, as Initial Public Offer proceeds earmarked for long-term projects have been parked in the bank.
9	Net profit ratio (%)	Net profit after tax	Revenue from operations	22%	18%	20.35%	NA, Being less than 25%
10	Return on capital employed (%)	Profit before tax and finance costs	Tangible net worth + total borrowings + deferred tax liabilities	24%	35%	-30.05%	The movement in the ratio is attributable to an increase in tangible net worth of the company due to Initial Public Offer proceeds.
11	Return on investment (%)	Change in fair value of quoted investment net of cash outflow	Opening value of quoted investment and weight of net cash flow	-	15.61	NA	NA, As the Company does not have any investment during the year.

Business Outlook

MSafe enters FY27 with healthy operating momentum and a clear execution roadmap centred on capacity expansion, scaling the rental business and broadening its structural equipment portfolio.

A key priority remains the expansion of MS scaffolding capacity. Capacity has already been increased through temporary rented facilities, enabling the Company to respond to demand ahead of the commissioning of its owned facility. Civil construction of the integrated manufacturing facility has commenced, with operations targeted to begin by May 2027. The facility is expected to materially strengthen the Companys manufacturing base and support its ambition of building a scalable, rental-led platform across safety equipment and innovative building materials.

The Company is also progressing with its entry into aluminium formwork, with 500 TPA capacity targeted from December 2026. This initiative represents an important step towards evolving MSafe from a scaffolding and access-equipment provider into a broader structural solutions company. Initial customer inquiries and feedback have been encouraging, while the Companys existing relationships provide opportunities for cross-selling the new product category. Rental will continue to remain a key growth engine. The model is expected to support stronger margins, predictable cash flows and improved asset utilisation as the rental portfolio scales.

Going forward, MSafe will focus on commissioning new capacity, scaling rental assets, developing the formwork business, strengthening its pan-India presence and deepening customer relationships. With these initiatives underway, the Company continues to target approximately 50% revenue growth in FY27, while maintaining healthy profitability and disciplined capital allocation. Over the medium term, MSafe aims to build a diversified, scalable and increasingly recurring earnings platform across categories where organised penetration remains relatively low and differentiated solutions continue to be underserved.

Cautionary Statement

A cautionary statement is a disclaimer commonly included in corporate reports, presentations, or public communications to notify stakeholders of potential risks and uncertainties that could influence future outcomes. It underscores that certain forward-looking statements, projections, or expectations are based on assumptions and may be subject to change due to various factors, including market conditions, regulatory developments, economic fluctuations, or unforeseen events. The primary purpose of such a statement is to ensure that investors, analysts, and other stakeholders are aware of the inherent risks and uncertainties related to the provided information, thereby safeguarding the organisation from liability if actual results differ from anticipated outcomes. Focusing on self-reliance, adaptability and global trends, the country is strategically positioned for sustained long-term growth and economic stability. Key government initiatives, including Make in India, infrastructure development and continuous policy reforms, remain central to driving economic progress.