Nilkamal Ltd Management Discussions

INDUSTRY STRUCTURE, DEVELOPMENT, OPPORTUNITIES, THREATS, RISKS, CONCERNS AND OUTLOOK

The financial year under review was one of strong growth and steady progress, achieved against a backdrop of increasing macroeconomic uncertainty.

For the first eleven months of the year, the Indian economy remained among the fastest growing major economies globally, with healthy GDP growth of approximately 7%. However, since March 2026, the global environment has become increasingly volatile, with escalating geopolitical conflicts. These developments present challenges for India, particularly given our dependence on imported energy.

A notable inflection point was the blockade of the Strait of Hormuz on 28 th February 2026, which led to a sharp escalation in raw material prices. Key inputs such as polypropylene and polyethylene witnessed price increases of up to 45% within a span of three weeks. This has necessitated calibrated price adjustments across our product portfolio and has had a temporary impact on demand. Additionally, the recent introduction of the Wage Code is expected to further elevate cost structures across industries.

Over the past few years, Nilkamal has made significant strategic investments across its businesses, many of which have now commenced production. In the Furniture segment, we have undertaken meaningful backward integration, including the establishment of a highly automated ready-to-assemble furniture line, as well as in-house polyurethane foam manufacturing for mattresses, sofas, and chairs. These initiatives are expected to drive improved material yields, enhanced product quality, higher throughput, optimized inventory levels, and overall cost efficiencies.

Against this backdrop, we are pleased to share that the Company delivered strong double-digit growth during the year, adding over Rs. 447 crores making a 18% growth in revenue, driven by robust performance across all key product verticals.

Key Operational Highlights

As our business continues to scale and diversify, we have realigned our operations into two focused verticals Business to Business (B2B) and Business to Consumer (B2C). This strategic pivot is more than a structural change; it is a deliberate move to sharpen execution, deepen customer engagement, and unlock greater value through integrated, cross-channel capabilities.

Our sustained investments over the past two years in capacity expansion are now translating into tangible outcomes. We are witnessing a meaningful step-up in both scale and efficiency across operations. During the year, we processed over 360,000 boards in our ready furniture segment, delivering 20% growth. Our newly commissioned foam manufacturing facility ramped up strongly, reaching production of nearly 4,000 tonnes, while our metal racking solutions business recorded an impressive 22% growth. These achievements reflect our growing strength in building a diversified, future- ready portfolio that extends well beyond our legacy plastic offerings into advanced materials and engineered solutions.

A pivotal milestone in this journey is the shift in our revenue mix. For the first time, non-plastic home furniture, mattress and foam products, have surpassed plastic furniture in their contribution to overall sales. This transition represents a structural evolution towards higher-value, design-led offerings, while also enhancing resilience by reducing exposure to raw material volatility.

Both B2B and B2C verticals delivered on their growth ambitions for the year, driven by disciplined geographic expansion and a steadily widening customer base. In our B2C business, we introduced innovative, customizable furniture solutions an industry-first in India unveiled at the ACEtech fair. This reflects our commitment to reimagining the consumer experience by combining design flexibility with manufacturing excellence. Our continued focus on innovation, backed by strong in-house capabilities, has positioned this segment as a key engine of growth, and it will remain central to our strategy in the years ahead.

Material Handling Business

The Material Handling business is Nilkamal s largest established business, and is focused on maintaining its standing of being a One-stop shop for Material handling solutions at scale .

The division offers a comprehensive portfolio that includes bins and crates, pallets, material handling equipment, shelving and racking systems, insulated boxes, waste management solutions, road safety barriers for infrastructure management, hospitality sector products for commercial food preparation and service. These solutions are designed to ensure efficient storage, protection, retrieval and movement of goods in industrial and warehousing environments. The portfolio caters to a wide array of industries including food and beverages, logistics, retail, automotive, e-commerce and quick commerce, pharmaceuticals, construction, electronics, chemicals, engineering, hospitality, and waste management.

The Material Handling Division demonstrated a resilient performance in FY 2025-26, achieving approximately 11% volume growth and 13% value growth. This was accomplished despite a subdued performance in March 2026, which was impacted by the Iran conflict. The growth reflects accelerating penetration across industry verticals, disciplined pricing execution, growing contribution of value-added products, and strong focus on cost efficiency. The steel racking business recorded a 22% increase in value, though certain logistics and retail project deferrals impacted overall volumes. Several concurrent investment themes are expected to sustain strong demand across all product categories. These are:

- PLI-driven manufacturing capacity additions across key customer verticals

- Huge surge in commissioning of Grade A warehouse space for organised commerce

- Rapid expansion of quick-commerce dark-store networks

The division enters FY 2026-27 with cautious optimism. Despite the durable long cycle growth vectors, the operating environment remains uncertain amid risks of demand moderation, cost pressures, and currency volatility. Management remains focused on organisational agility and execution discipline. Near-term input cost headwinds will be managed through calibrated price revisions and inventory discipline. Key priorities include prudent cash and liquidity management, selective review of project timelines, and an increased emphasis on advancing the digital transformation agenda to strengthen operational resilience and customer engagement.

Hospitality

The Companys hospitality joint venture, Cambro Nilkamal Private Limited, offers a comprehensive range of food storage and handling, preparation, transportation, and sanitising solutions to commercial kitchen operators across quick service restaurants, cloud kitchens, institutional catering, and hotel and hospital food service. The business reported marginal revenue growth of 4.6% in FY 2025-26.

For FY 2026-27, the division is focused on broadening its customer base, deepening penetration in underpenetrated Tier-2 markets, and expanding its premium product range to return to meaningful revenue growth.

Rigid Plastic Packaging

Nilkamal has diversified into primary rigid plastic packaging, offering containers, bottles, jars, and custom-moulded solutions. Operations are gradually scaling up at Puducherry with capacity utilization surpassing 60%. Several new products were jointly developed and customers onboarded. Further, the Company has also commenced production of rigid packaging product at its Nodia unit.

Key demand drivers are:

- Expanding packaged food demand

- PLI schemes for food processing and pharmaceuticals.

The business is well-positioned to scale from FY 2026-27.

Moulded Furniture

The Moulded Furniture business of Nilkamal Limited delivered a steady performance in FY 2025-26, achieving an overall growth of 1% over the previous year, while continuing to strengthen its market leadership and brand equity.

The business also witnessed multiple new product launches, with a strong focus on design innovation and premiumization. Among these, the Aspire Sofa stands out as a flagship introduction a uniquely designed moulded product that offers the aesthetic appeal of wood with the durability and practicality of plastic, catering to evolving consumer preferences.

Strategically, the company sharpened its focus on the premium plastics segment, aligning with changing market demand for higher-quality, design-led furniture solutions. This shift is expected to drive improved margins and brand perception over time.

Further strengthening its Moulded Furniture Premium portfolio, the company has launched - Nilkamal Select Stores as a concept, marking a strategic step towards building an exclusive, experience-driven retail footprint for premium offerings.

On the Channel front, Nilkamal achieved a significant milestone by expanding its Distribution channel by 5%, enhancing reach and strengthening last mile connectivity across markets. This robust expansion supports long-term scalability and improved customer accessibility. The channel has achieved 1% growth in moulded furniture business and 19% growth in non-mounded furniture business.

Overall, the year reflects consistent growth, strategic premiumization and a stronger distribution ecosystem, positioning the Furniture Division for sustained long-term growth.

Nilkamal Sleep

The financial year marks a defining phase in our mattress journey, with the Trade Division delivering a strong 53% year- on-year growth, reinforcing our emergence as a serious and scalable player in the category. With the addition of 820+ new channel partners, expansion to 2000+ direct partners, and a presence across 3500+ retail counters, we have built a robust and future-ready distribution ecosystem.

In an increasingly competitive and price-sensitive market, challenged by strong local players and aggressive moves from established brands, we have not only sustained but accelerated our growth trajectory. This has been driven by our clear strategic focus delivering superior value through the right combination of quality, pricing, and seamless business experience.

Nilkamal Sleep Solutions portfolio is steadily evolving into a comprehensive and aspirational offering, addressing the full spectrum of consumer needs across economy to premium segments. With brands such as Luxuria, Couple Pro, Health Pro, Deep Sleep, and Comfort, we are shaping a strong product narrative centred on comfort, innovation, and accessibility. For instance, the successful launch of Comfi Spine and Ortho Rest reflects our ability to identify market gaps and translate them into high-impact offerings. These products are not just additions to our portfolio but represent our commitment to innovation-led growth and consumer-centric design.

As we look ahead to FY 2026-27, our ambition is clear to scale aggressively while building a sustainable and leadership- driven mattress business. We will leverage our core strengths brand credibility, experienced leadership, sharp portfolio strategy, world-class manufacturing footprint, and a strong logistics backbone to unlock the next phase of growth.

To support this vision, we are undertaking strategic capacity expansion through investments in advanced machinery and infrastructure across all four manufacturing units. In parallel, the rollout of a Transport Management System (TMS) across our 29 depots and 5 regional warehouses will significantly enhance supply chain agility, improve service levels, and enable faster market response.

Our focus going forward is not just growth but disciplined and scalable while strengthening our position as a trusted and preferred brand in the sleep solutions category.

Foam

India slab stock foam market is growing at 8-10 % CAGR with south India contributing 30 % share and growing slightly above national average due to strong manufacturing ecosystem, higher organised mattress penetration & furniture clusters. NILKAMAL - PUF business focusses mainly on comfort segment (sofa/mattress). Our business runs purely on B2B model (distribution network & OEM). Our network presence is approx. 100 channel partners consisting of distributors/ dealers/OEM. Currently our business operation is limited to south India only. Our core strength is market trust on brand NILKAMAL which is known for superior quality products.

Our revenue in FY2025-26 was Rs. 38 crores with 198 % growth YoY. Growth was led by volume scale up, channel expansion, steady offtake from mattress/ furniture OEMs. We also launched new products like Rebonded Foam, Commercial Grade- MS, Rolled peeled foams etc which helped us in strengthening our product portfolio. We received overwhelmingly positive response from the market. Despite a challenging competitive environment, we kept on growing our PUF business month on month in 2025-26.

Building on this momentum we will continue to expand our product portfolio by launching more premium range of foams. We are investing in new technology and machines to strengthen our operation infra in Hosur. We also have a plan in place to build a robust distribution set up (in trade & OEMs). Demand expected to remain stable and moderately positive.

We operate in commodity slab stock segment with high exposure to TDI/POLYOL price movements. Price competition from regional/unorganised players also increasing day by day. The ongoing geopolitical tensions has direct impact on petrochemical prices & input cost volatility. It also has indirect impact like pressure on consumer demand, supply chain disruption/freight cost increase etc. Margins may face short term pressure.

Overall FY 25-26 was a scale up year; FY 26-27 will be a consolidation and margin discipline year under volatile input conditions.

EDGE

Another important growth driver for the Company has been its B2B professional furniture brand, Nilkamal EDGE. Operating in a significantly underserved segment, the business is well positioned to deliver comprehensive furniture solutions across offices, educational institutions, and healthcare facilities, catering to both large private enterprises and government organizations.

During the year, the business delivered a strong performance with 14% growth, supported by continued portfolio expansion and deeper market penetration. Recent capital investments have further improved quick product development capabilities across key segments, including workplace solutions, education infrastructure, and precision engineering plastic components for defence applications.

At the start of FY 2025-26, EDGE expanded its presence in the healthcare segment through the acquisition of a healthcare furniture startup. This strategic move has enabled the business to rapidly build a comprehensive offering for hospital chains, clinics, and day care centres. In its first year of operations, the business successfully executed multiple projects, delivering and installing over 2,500 beds, while also onboarding several prestigious clients and securing multi-year rate contracts. This early traction reflects strong market acceptance and provides a solid foundation for future growth. EDGE is well positioned to meet evolving client expectations through its focus on quality, a broad product portfolio, and a reliable pan-India service network.

The business also strengthened its presence in large-scale institutional projects, having successfully supplied and installed over 9,000 seats across two major stadiums in Assam. Building on this momentum, EDGE is sharpening its focus on delivering end-to-end furniture solutions for large sporting and infrastructure projects, which represent a meaningful long-term opportunity.

Looking ahead, the outlook for FY 2026-27 remains strong, supported by a robust and expanding order book. The business has also refined its strategic focus towards private institutions, which is expected to improve working capital cycles, reduce business volatility, and enhance execution visibility compared to traditional government-led projects. With strengthened capabilities, a more focused go-to-market approach, and an expanding client base, EDGE is well positioned to deliver sustained and profitable growth over the medium term.

Nilkamal BubbleGUARD

Nilkamal BubbleGUARD delivered a strong performance during the financial year, achieving growth of over 26%, primarily driven by higher volumes supported by expanded production capacity. The business continued to benefit from its ability to offer integrated, end-to-end solutions and customized fabrication capabilities, strengthening its value proposition across customer segments.

Raw material prices remained largely stable through most of the year; however, the recent increase in input costs may have a short-term impact on customer demand, particularly in the first quarter of FY27. Despite this near-term headwind, the overall outlook remains positive. Demand for sustainable and cost-efficient packaging solutions continues to be robust, positioning the business well for future growth.

Looking ahead, the Company expects to sustain both value and volume growth, supported by expansion into new geographies and the addition of new customer segments, while remaining mindful of cost pressures and evolving market dynamics.

Nilkamal Homes

Nilkamal Homes, the Companys furniture and decor retail brand, completed its first full year of operations, marking an important milestone in its growth journey. During the year, the brand expanded its footprint with the addition of 8 new FOFO stores and plans to further strengthen its presence with 23 new stores in the coming year across a mix of COCO and FOFO formats. Presently operating through 101 Stores.

The business delivered strong same-store year-on-year growth, supported by sustained brand-building initiatives and innovative product launches. The introduction of customizable offerings has enhanced customer choice across materials and colours, reinforcing the brands value proposition. Continued investments in both digital and physical channels are expected to further build awareness across product categories. The brand remains focused on a mass-premium positioning, emphasizing design and quality differentiation while maintaining a disciplined approach to pricing.

While in-house manufacturing provides a competitive advantage, evolving BIS norms for imports present both challenges and opportunities. The Company is strengthening its capabilities to develop these products domestically, positioning itself to navigate supply constraints and capture emerging demand.

E-commerce

Nilkamal E-commerce sustained its robust growth trajectory by successfully developing a Direct-to-Consumer (D2C) channel and strategic partnerships across major marketplaces. In financial year 2025-26, the e-commerce business grew by 18.5% over the previous year. This success was primarily driven by enhanced customer acquisition through targeted marketing initiatives and a substantial expansion of the delivery network, which now provides comprehensive coverage across 19,500 PIN codes throughout India.

The Company further leveraged technology to establish clear business differentiators, notably by enabling conversational commerce in collaboration with Microsoft and launching WhatsApp-based product discovery. This digital evolution is set to accelerate with the implementation of advanced AI tools designed to optimize customer acquisition costs and refine content for superior engagement. Through these innovations, your Company remains firmly committed to building a truly sustainable and scalable digital business model.

Financial Review

Key Financial Ratios	Particulars	Financial Year 2025-26	Financial Year 2024-25	Variance (%)	Reason for Variance for more than 25%
Interest Coverage Ratio	Standalone	10.17	9.79	4%	-
	Consolidated	10.66	11.67	-9%	-
Debt-Equity Ratio	Standalone	0.17	0.27	-35%	Due to decrease in Debt
	Consolidated	0.16	0.25	-35%
Current Ratio	Standalone	2.24	2.23	1%	-
	Consolidated	2.33	2.29	1%	-
Debtors Turnover (days)	Standalone	38.27	43.40	-12%	-
	Consolidated	38.44	43.95	-13%	-
Inventory Turnover (days)	Standalone	65.72	71.90	-9%	-
	Consolidated	65.56	71.84	-9%	-
Operating Profit Margin (%)	Standalone	7.94%	8.22%	-3%	-
	Consolidated	8.56%	8.75%	-2%	-
Net Profit Margin (%)	Standalone	2.85%	2.83%	1%	-
	Consolidated	3.07%	3.22%	-5%	-
Return on Capital Employed (%)	Standalone	9.10	8.51	7%	-
	Consolidated	9.49	9.21	3%	-
Return on Net Worth (%)	Standalone	7.36	6.71	10%	-
	Consolidated	7.58	7.37	3%	-

ESG and Sustainability

Sustainability continues to be a core pillar of our long-term strategy, with focused efforts across energy, materials, and community engagement.

During the year, our renewable energy consumption (wind and solar) increased by 15% over the previous year, reaching a total of 55,703.9 gigajoules (1.55 crore kWh). The renewable energy consumption contributes 16% of total energy consumption. Building on this momentum, we have secured additional renewable energy contracts of 95 lakh kWh for FY 2026-27, further strengthening our transition towards cleaner energy sources.

We have also made significant progress in advancing circularity within our operations. The Company recycled and reused 1,900 tonnes of polypropylene (PP) and polyethylene (PE), substantially exceeding our target of 1,300 tonnes. This was enabled by the standardization of recycling processes and the seamless integration of recycled materials back into our production cycle. Our in-house recycling facility was further upgraded during the year, resulting in an 85% increase in recycled waste utilization without compromising product quality. We expect the share of recycled materials in our overall consumption to increase further in the coming year.

Our commitment to environmental stewardship extends beyond operations into community engagement. The tree plantation initiative launched last year was expanded meaningfully, with over 1,000 trees planted during the year. Encouragingly, participation extended beyond employees and their families to include local communities, fostering a shared sense of responsibility towards environmental conservation.

Our panel board products continue to meet globally recognized sustainability and safety standards, reflecting our commitment to responsible manufacturing and healthier indoor environments. These include certifications such as

- GreenGuard by UL Laboratories (USA) for low VOC emissions

- GreenPro by the Confederation of Indian Industry (CII)

- GRIHA V 2019 certification for sustainable material usage across the product lifecycle

- Indoor Air Quality (IAQ) certification by SCS Global Services (USA)

In addition, the Company received several recognitions during the year:

- India Design Mark from the India Design Council for excellence in design and innovation

- BIS certifications across IS 17631, IS 17632, IS 17633, IS 17634, IS 17635 & IS 13713

- CII Design Excellence award for our innovative Returnable Pack-Guard solution.

These certifications and recognitions underscore our continued commitment to developing products with low emissions and improved indoor air quality. As an active member of the Indian Green Building Council (IGBC), we remain engaged in advancing sustainable building practices. Several of our products continue to be included under GRIHA certifications, reflecting our ongoing contribution to building a more sustainable ecosystem.

Risk Management

Risk management is an integral part of the Companys governance framework and business strategy. The Company operates in an environment where risks are inherent and continuously evolving. Accordingly, it has adopted a structured and proactive risk management approach to identify, assess, monitor and mitigate risks across its operations. Risk assessments are periodically carried out considering both internal and external factors across all locations and functional areas to ensure business continuity, operational resilience and sustainable value creation.

Key risks faced by the Company include product quality and service delivery, health, safety and security of human and other critical resources, technological risks, environmental and regulatory risks, and risks arising from operations across diverse geographical locations. Mitigation plans are implemented through continuous monitoring, defined control mechanisms and timely corrective actions, thereby enabling effective risk response and long-term sustainability.

Reputation, Product Quality and Safety

The Company accords high priority to maintaining consistent product quality and customer safety. Products are subject to stringent quality checks, certifications, ISO compliant processes, and adherence to applicable national and international standards. An effective customer grievance redressal mechanism ensures prompt resolution of complaints, thereby enhancing customer confidence and safeguarding the Companys brand reputation.

Raw Material Price Risk

The Companys operations are exposed to fluctuations in raw material prices, with plastic being the primary raw material, along with the usage of steel and wood. Plastic polymer prices are closely linked to crude oil prices and are vulnerable to supply demand imbalances and geopolitical developments in key oil producing regions, including the Middle East. Prices of steel and wood are influenced by global commodity cycles, regulatory and environmental factors, logistics constraints, and market dynamics.

Volatility in raw material prices may impact the Companys cost structure and margins. To mitigate this risk, the Company adopts a multipronged approach comprising supplier diversification, strategic sourcing, continuous monitoring of commodity markets, inventory optimisation, and focused operational efficiency initiatives. Wherever feasible, timely pricing actions are undertaken to partially offset adverse movements in raw material costs.

Geographical Risk

To minimise the risks associated with geographical concentration, the Company has diversified its manufacturing footprint across multiple locations. This strategy enhances operational flexibility, reduces dependence on a single region and mitigates the impact of region-specific disruptions or logistics constraints.

Human Resource Risk

The Companys ability to attract, develop and retain talent is critical to its performance. A structured leadership development and succession planning process has been implemented to identify and groom talent for key and leadership roles, ensuring continuity and organisational stability. The Company follows a balanced approach towards talent acquisition, capability development and employee retention to mitigate people-related risks and strengthen its human capital base.

Technology Risk

The Company continues to invest in appropriate and scalable technology infrastructure to support operational efficiency and safeguard against technological risks. It has implemented information security controls, system safeguards and monitoring mechanisms. Additionally, a Disaster Recovery and Business Continuity Plan is in place to minimise the impact of unforeseen system failures or cyber-related disruptions on business operations.

Foreign Exchange Risk and Hedging Activities

The Companys operations expose it to foreign exchange risks arising from fluctuations in currency rates. To manage this exposure, the Company has established a comprehensive risk management framework for monitoring and mitigating foreign exchange risks in accordance with its Risk Management Policy. Exchange rate movements are regularly reviewed, and appropriate hedging strategies are adopted. The Company enters into forward foreign exchange contracts to hedge underlying exposures and does not engage in derivative instruments for trading or speculative purposes.

Internal Control System and their Adequacy

The Company has designed and implemented internal financial control systems aimed at ensuring orderly and efficient conduct of its business. These systems, which include clearly defined processes, policies, ERP controls, and IT systems, provide reasonable assurance regarding the reliability of financial reporting and safeguarding of assets. The control environment is aligned with the Companys operational requirements and business scale.

The Internal Audit Plan, approved by the Audit Committee, focuses on key risk areas and evaluates the effectiveness of internal controls and compliance requirements across the Companys operations. The Internal Audit Department, with support from external experts, executes the audit programme. Audit observations are reviewed and appropriate corrective measures are implemented to mitigate identified risks.

No significant adverse comments on the adequacy or effectiveness of internal controls were noted during the year. Human Resources and Industrial Relations

The Company continues to maintain cordial and harmonious industrial relations across all its operations. Constructive engagement with employees and a focus on employee well-being have contributed to a stable and productive work environment during the year under review. As on date, the total employee strength of the Company stands at 3524.

Cautionary Statement

The Management Discussions and Analysis Statement made above are on the basis of available data as well as certain assumptions as to the economic conditions, various factors affecting raw material prices, selling prices, trend and consumer demand and preference, governing and applicable laws and other economic and political factors. The management cannot guarantee the accuracy of the assumptions and projected performance of the Company in future. It is therefore, cautioned that the actual results may differ from those expressed and implied therein.