Naksh Precious Metals Ltd Management Discussions

Naksh Precious Metals Limited stands at the forefront of both the jewelry and base metals industries, renowned for its exceptional craftsmanship and comprehensive product range. As a prominent manufacturer and distributor, Naksh Precious Metals Ltd. excels in creating and supplying exquisite jewelry products crafted from gold, silver, and diamonds. Our extensive jewelry collection includes necklaces, bangles, rings, chains, earrings, and more, each meticulously designed to embody elegance and luxury.

In addition to our prowess in jewelry manufacturing, Naksh Precious Metals Ltd. is actively involved in the production and trading of base metals and steel products. Our offerings encompass a wide spectrum, ranging from roofing sheets, nails, nut bolts, squares and rounded pipes, springs, CRC and SRC coils, billets, angles, ball bearings, to essential metals like zinc and nickel. This diversified portfolio ensures that we cater comprehensively to the needs of diverse industries and markets.

INDUSTRY OVERVIEW

The Gems and Jewellery ("G&J") industry is a broad-spectrum industry consisting of varied activities, such as processing of rough diamonds to create cut and polished diamonds, and the manufacture of jewellery consisting of gold jewellery (with varied purities of 22 kt, 18 kt and 14 kt) and diamond and gemstone studded jewellery. In India, certain varieties of traditional jewellery such as Polki and Kundan continue to be worn on special occasions, mainly weddings. In addition, silver jewellery has gained much popularity in recent times due to its variety of designs as well as its affordability.

The G&J industry plays a vital role in the Indian economy. It is one of the largest export segments of the country and provides employment to a very large number of artisans. As per rough estimates there are almost half a million jewellery retail outlets across the country, present in every part of India. The majority of these outlets remain in the unorganised segment, though the share of branded jewellers is increasing steadily. Many organised jewellers are now expanding their operations from a single store to become multi-store chains, and the franchisee model is gaining acceptance as it allows brands to expand in an asset-light manner.

The stronger domestic chains are also opening stores overseas, especially in the Middle East, which has a sizeable Indian diaspora as well as substantial demand for gold jewellery from the local population. In addition, there is continuing demand for traditional Indian jewellery from non-resident Indians across the world, which is met through exports.

THE GLOBAL ECONOMY

The global economy demonstrated resilience through the year under review. In its January 2026 World Economic Outlook Update, the International Monetary Fund projected global growth to hold steady at 3.3% in 2026 and 3.2% in 2027, broadly in line with the estimated outturn of 3.3% for 2025. The Fund observed that this apparent steadiness reflects the balancing of divergent forces: headwinds arising from shifting trade policies are being offset by a surge in investment linked to technology and artificial intelligence, particularly in North America and Asia, together with accommodative financial conditions and the adaptability of the private sector. Global headline inflation is expected to continue easing from the level of approximately 4.1% estimated for 2025.

The year was nonetheless marked by considerable uncertainty. The evolving tariff regime of the United States, the redrawing of global trade routes and emerging tensions in West Asia towards the close of the financial year all weighed on sentiment and on discretionary spending in the Companys end markets. Volatility in precious metal and base metal prices remained elevated throughout the period.

INDIAN ECONOMY

India retained its position as the fastest growing major economy during the year under review. The National Statistics

Office revised its estimate of growth for the year ended 31st March, 2026 to 7.4%, materially above the Governments initial projection of 6.3% to 6.8%. Reflecting this momentum, the International Monetary Fund raised its growth estimate for the Indian economy for the fiscal year to 7.3% in its January 2026 World Economic Outlook Update, an upward revision of 0.7 percentage point, citing better than expected outturns in the third quarter and strong momentum in the fourth quarter. Growth of 8.2% year-on-year was recorded in the third quarter, the sharpest annual rate since the March 2024 quarter.

Growth is expected to moderate as cyclical factors fade, with the International Monetary Fund projecting expansion of approximately 6.4% for the fiscal year 2026-27 and 6.7% for the following year. Inflation in India is expected to return to near target levels following a marked decline, driven by subdued food prices, which should provide additional support to domestic demand. The growth trajectory continues to be reinforced by structural reforms, resilient fundamentals, sustained government capital expenditure and a favourable demographic profile.

OPPURTUNITIES

The traditional demand for jewellery for special occasions such as weddings and festivals continues to remain strong. India not only has a large population in absolute numbers but also a high proportion of population in the younger age group, which ensures that a large number of marriages continue to take place every year. As per rough estimates approximately 10 million marriages take place annually in India, which ensures substantial expenditure on jewellery and related items.

In addition to conventional purchases at the time of weddings and festivals, jewellery has become a lifestyle and fashion accessory, especially among urban working women, and demand is increasing among younger consumers. Even conventional mens accessories such as cuff links and tie pins are now becoming bejewelled. Rising quality awareness among customers has also provided a fillip to the organised retail segment, which competes against the highly fragmented unorganised trade on the strength of reliability and quality.

Two further developments during the year under review are of particular relevance:

The framework of the India-United States trade agreement announced during the year, providing for a revised tariff of 18% on jewellery and nil duty on diamonds and coloured gemstones, is expected to place Indian exporters in a structurally superior position relative to key competing countries and to help recover ground lost in the United States market.

Free trade agreements with the UAE and Australia have supported export diversification, with exports to Australia growing by 38.33% during the year. The anticipated implementation of agreements with the United Kingdom and the European Union is expected to provide further support.

The Department of Commerce has set a target of US$ 75 billion for Indias gem and jewellery exports by 2030, with a longer term aspiration of US$ 100 billion by 2047, supported by a trade-friendly policy environment.

THREATS

Raw materials play a major role in the Indian gems and jewellery industry. India imports nearly 90% of its raw materials, especially rough diamonds and gold bars. The industry is therefore vulnerable to any adverse regulation that may limit the supply of raw material for diamond and gold jewellery. Excess imports can also be a matter of concern when exports generate lower foreign exchange earnings.

Concentration risk in export markets was starkly demonstrated during the year under review. Shipments to the United

States, historically the industrys largest destination, contracted by 44.92% to US$ 5.09 billion from US$ 9.24 billion, the sharpest single-market decline in the sectors recent memory, on account of elevated tariffs and pricing dislocation. Lab-grown diamond prices continued to correct, with polished lab-grown diamond exports declining by 10.55% in dollar terms even as volumes increased.

Elevated and volatile gold prices continued to affect consumer buying behaviour and to raise the working capital intensity of the business. Persistent cost-of-living pressures have weighed on consumer sentiment and on spending on luxury and jewellery products. The Indian gems and jewellery industry also remains highly fragmented and largely unorganised, dominated by small family-run jewellery shops which are often able to price more keenly than the organised trade.

SEGMENT-WISE/PRODUCT-WISE PERFORMANCE

Indias gem and jewellery exports for the financial year April 2025 to March 2026 stood at Rs. 2,44,827.26 crore, a growth of 0.93% in rupee terms compared with Rs. 2,42,559.39 crore in the previous financial year. In dollar terms, exports were recorded at US$ 27.72 billion, reflecting a moderate decline of 3.32% year-on-year.

Cut and polished diamonds remained the largest product category, contributing 43.9% of total exports at US$ 12.16 billion (Rs. 1,07,461.34 crore), a decline of 8.52% in dollar terms. This contraction was primarily influenced by the impact of tariff increases in the United States, global inventory corrections, structural headwinds in key markets, subdued discretionary spending and increasing competition from alternative luxury segments. Gold jewellery exports, comprising both plain and studded segments, remained largely stable at US$ 11.36 billion (Rs. 1,00,277.64 crore), with studded gold jewellery exports growing by 6.27% to US$ 6.52 billion.

The most consequential development of the year was geographic. The UAE overtook the United States to become the largest destination for Indian gem and jewellery exports, with shipments of US$ 8.70 billion, a growth of 10.52% for the full year. Region-wise, the Western Region comprising Mumbai and its suburbs continued to lead with exports of US$ 18,579.41 million, while the Gujarat Region recorded exports of US$ 2,400.61 million.

The Company operates in the jewellery and base metals and steel segments. Segment-wise revenue, results, assets and liabilities of the Company for the year under review are disclosed in the notes to the financial statements forming part of this Annual Report and are to be summarised here.

OUTLOOK

The Company, like any other enterprise, is exposed to business risks which can be internal as well as external. Any unexpected change in the regulatory framework pertaining to fiscal benefits and other related matters can affect our operations and profitability. A key factor in determining a companys performance is its capacity to take risks and to manage them effectively and efficiently. The Company is well aware of the risks to which it is exposed and, as part of its business strategy, has put in place a mechanism to ensure that these are mitigated by timely action.

The principal risks identified for the year under review include volatility in gold, silver and base metal prices, concentration of demand in a small number of markets, the evolving international tariff environment, credit risk on trade receivables, and the risk of obsolescence and valuation loss in inventory. The Company has an elaborate Risk Management Framework designed to enable risks to be identified, assessed and mitigated appropriately. The Board of Directors oversees the implementation and monitoring of the Risk Management Plan and Policy, and continually obtains reasonable assurance from management that all known and emerging risks have been identified and mitigated or managed. In the opinion of the Board of Directors, none of these risks affect and/or threaten the existence of the Company.

RISKS MANAGEMENT:

The Company, like any other enterprise, is exposed to business risk which can be internal risks as well as external risks. Any unexpected changes in regulatory framework pertaining to fiscal benefits and other related issues can affect our operations and profitability. A key factor in determining a Companys capacity to the Company to take risks and manage them effectively and efficiently. However, the Company is well aware of the above risks and as part of business strategy has put in a mechanism to ensure that they are mitigated with timely action.

The Company has an elaborate Risk Management Framework, which is designed to enable risks to be identified, assessed and mitigated appropriately. The Board of Directors of the Company has entrusted to oversee implementation/ monitoring of Risk Management Plan and Policy; and continually obtaining reasonable assurance from management that all known and emerging risks have been identified and mitigated or managed. In the opinion of the Board of Directors, none of these risks affect and/or threaten the existence of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of operations. The comprehensive system enables efficient operations, optimal resource utilization, safeguard of assets and compliance with applicable laws and regulations. These control measures strengthen the Company and protect it from loss or unauthorized use of assets by way of adequate checks and balances. The Company authorizes records and reports all transactions.

The scope and authority of the Internal Audit function is well defined, and an independent firm of Chartered Accountants serves as the internal auditor to execute the internal audit function. The management and audit committee of the Board observe and then recommend corrective measures, based on such audits to improve operations.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Companys financial performance for the year ended March 31, 2026, is summarized below.

(Amount in Lakhs)

Particulars	31.03.2026	31.03.2025
Revenue from operations	134.24	235.14
Other income	9.59	0.04
Total Income	143.83	235.18
	(50.87)	46.01
Profit Before Interest, Depreciation & Tax
Interest	-	-
Depreciation	3.10	3.81
Profit before Tax	(53.97)	42.20
Current Tax	(5.20)	-
Deferred Tax	(21.59)	(3.05)
Total Tax Expenses	(26.79)	(3.05)
	(37.58)	45.25
Net Profit for the period after tax
Earnings per share	(0.36)	0.43

REVIEW OF OPERATIONS:

The turnover for the year was Rs. 134.24 lakhs on a standalone basis as compared to Rs. 235.14 lakhs in the previous year. The Company recorded a loss before interest, depreciation and tax of Rs. 50.87 lakhs during the year under review, as against earnings of Rs. 46.01 lakhs in the previous year, and a net loss after tax of Rs. 37.58 lakhs as compared to a net profit of Rs. 45.25 lakhs in the previous year.

The decline in performance is attributable principally to lower trading volumes across the metals and jewellery segments during the year, compressed realisations in an environment of elevated and volatile precious metal prices, and the contraction in export demand described above. A significant part of the loss for the year arose in the fourth quarter, in which provisions and write-offs were recognised. The Company repaid its outstanding borrowings during the year and was debt free as at 31st March, 2026.

The reasons for the fourth quarter charge, the nature of the provisions and write-offs recognised, and any exceptional items are to be described here in the terms set out in the audited financial statements and the notes thereto.

HUMAN RESOURCES:

Your Company considers its Human Resources as the key to achieving its objectives. Keeping this in view, your Company takes utmost care to attract and retain quality employees. The employees are sufficiently empowered, and such a work environment propels them to achieve higher levels of performance. The unflinching commitment of the employees is the driving force behind the Companys vision. Your Company appreciates the spirit of its dedicated employees.

DETAILS ON SIGNIFICANT CHANGES

Ratio Analysis	Ratio		Difference (in %)	Reasons for Differences, if Difference is More than 25%.
	31-Mar-26	31-Mar-25
1 Debt Service Coverage Ratio	2.53	2.45	203.24%	Due to negative EBITDA
2 Trade Receivables Turnover Ratio	40.43	9.73	315.56%	Faster collection from the debtors
3 Trade Payables Turnover Ratio	18.29	7.39	147.52%	Due to decrease in average trade payables
4 Net Capital Turnover Ratio	0.23	0.43	45.99%	Due to decrease in working capital
5 Net Profit Ratio	27.99	19.00	247.34%	Due to net loss in current financial year
6 Return on Equity Ratio	0.06	0.07	185.98%	Due to net loss in current financial year
7 Return on Capital Employed	8.43	7.00	220.42%	Due To operating losses during the year
8 Current Ratio	42.70	67.28	36.53%	Increase in other current liabilities
9 Debt Equity Ratio	0.00	0.03	100.00%	Decrease in debts
10 Inventory Turnover	17.85	35.67	49.95%	Due to decrease in COGS

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking statements within the meaning of applicable laws and regulations. These statements have been based on current expectations and projections about future events. Wherever possible, all precautions have been taken to identify such statements by using words such as ‘anticipate, ‘estimate, ‘expect, ‘project, ‘intend, ‘plan, ‘believe and words of similar substance in connection with any discussion of future performance. Such statements, however, involve known and unknown risks, significant changes in the political and economic environment in India or in key markets abroad, tax laws, litigation, labour relations, exchange rate fluctuations, interest and other costs, and may cause actual results to differ materially. There is no certainty that these forward-looking statements will be realised, although due care has been taken in making these assumptions. There is no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.