Palco Metals Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS:

India is the second-largest producer of aluminium globally. The production of primary aluminium reached 7.07 lakh ton (LT) in FY26 (April-May 2025) from 6.98 LT in FY25 (April-May 2024). Iron Ore production for the month of October 2025 is 24.8 million tonnes, as compared to 22.9 million tonnes for October 2024. The cumulative production of Iron Ore for FY26 (April-October 2025) is 156.6 million tonnes as compared to 158.4 million tonnes in FY25 (April-October 2024).The Aluminum market size is expected to grow from 76.47 million tons in 2025 to 78.99 million tons in 2026 and is forecast to reach 92.87 million tons by 2031 at 3.29% CAGR over 2026-2031. Robust growth follows aluminums position as the second most used metal, its unbeatable strength-to-weight ratio, and a closed-loop recyclability profile that keeps 75% of all metal ever produced in circulation. Rapid electrification, renewable-energy build-outs, and sustainable packaging mandates are converging to lift demand even as producers confront decarbonization targets, volatile power prices, and trade policy shifts. Top players are channeling capital toward green smelting and scrap recovery, while downstream customers lock in long-run supply to shield themselves from raw material shocks. Asia-Pacific dominates current volumes and retains the fastest trajectory, yet regional capacity ceilings, geopolitical risks, and carbon-border fees are driving fresh investments in North America and the Gulf. Integrated operators with low- carbon billet, recycling depth, and multi-process flexibility stand to capture a growing share of the aluminum industry.

OPPORTUNITIES AND THREATS:

Global aluminium demand (primary and secondary) will increase by almost 40% by 2030. The aluminium sector will need to produce an additional 33.3 Million Tonnes to meet demand growth in all industrial sectors - from 86.2 Million Tonnes in 2020 to 119.5 Million Tonnes in 2030. Transportation, construction, packaging and electrical sectors are four key sectors that will drive demand, accounting for 75% of the total metal required. 37% of this growth is expected to come from China, which will require 12.3 Million Tonnes, the rest of Asia adding a further 8.6 Million Tonnes, North America 5.1 Million Tonnes and Europe 4.8 Million Tonnes. Together, these four regions alone will account for more than 90 per cent of the additional aluminium required globally. The highest growth in terms of absolute demand is expected to come from the transportation sector which, driven by decarbonization policies and the shift from vehicles powered by traditional fossil fuels to Electric Vehicles (EVs), is expected to go from consuming about 19.9 Million Tonnes of aluminium in 2020 to 31.7 Million Tonnes in 2030. As countries transit to clean technologies, in response to the urgent need for climate action and sustainable lifestyles, the shift to a ‘Net Zero economy is expected to be metal-intensive and aluminium has been identified as one of the critical metals that will aid this transition, catering to the emerging demand for clean energy solutions, green technologies and sustainable systems. Aluminium is a lightweight material, which is ideal for use in EVs, ‘Green Buildings and power cabling. Based on the International Energy Agencys projections for a sub-two degrees global warming scenario, consistent with the Paris Agreement (Beyond 2?C Scenario or B2DS), demand (including recycled aluminium and scrap) could increase from the present level by 80% to around 170 Million Tonnes by 2050. It is estimated, in this context, that to cater to this huge spurt in demand, up to 28.5% increase in global primary aluminium production shall be required (from around 70 Million Tonnes in 2023 to 90 Million Tonnes in 2050), while the rest may be met from secondary sources and scrap.In FY 2022-23, the Subsidiary of the company Palco Recycle Industries Limited (PRIL) operating in Aluminium ingots, wire rods, cubes, delivered a strong performance despite Forex and raw material price volatility.

The PRIL has achieved sales of worth Rs. 15967.63 Lacs. The PRIL is planning to expand the Operating capacity of the company and has plan to achieve the same in the current fiscal year.

We remain committed to make an even bigger difference by reimagining and improving our work, investing in our people and welding a sustainable future. We recognise the value of a diverse workforce.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:

The company is working in single segment further no Operating income was reported during the year by the company on standalone basis. On Consolidated basis it has Operating Income of Rs. 29318.14 Lacs.

OUTLOOK:

By processing type, extrusions captured 35.05% of the Aluminum market share in 2025, while castings are projected to advance at a 3.5% CAGR through 2031.

By end-user industry, building and construction accounted for 25.62% of the Aluminum market size in 2025 and is growing at a 4.39% CAGR toward 2031.

By geography, Asia-Pacific held 69.58% share of the Aluminum market share in 2025, and is advancing at a CAGR of 3.51%.

RISK AND CONCERNS:

Risk may be defined as the possibilities that an event (anticipated or unanticipated) can adversely affect the business objective and goals. At Palco Metals Ltd, risk governance reconciles estimation, control and quantification through an institutionalized approach, which include consistence implementation and monitoring, supplemented by audits. The management conducts regular to arrest the abnormalities. Currency exchange rates could undergo changes with the Indian rupee turning volatile for most part of the year. This could have a potential impact on the export earning of the company. The company is conscious of the impact of the volatile movement. Hedging is done wherever is necessary and forward cover are taken to mitigate probable risks. The company has adopted conservative policy in booking the unfavorable impact of exchange fluctuation. Prudential accounting norms are followed in line with the accounting standard.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has adequate internal control system in operation commensurate with the size and nature of its business for enduring efficiency of operation and protection of Companys assets. The Audit Committee formed by the company review on periodical basis the compliance with the companys policies, procedures and prevailing laws. Audit findings are closely reviewed by audit committee along with management response. The committee also reviews the effectiveness of companys internal control and their effectiveness on actual operation and regularly monitors implementation of audit recommendation. The system ensures effective utilization of company resource and protections of assets from loss, theft, misappropriation and relevant risks. Further company has approved the Nomination and Remuneration policy for paying remuneration to Board of Directors and KMP.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The Company has not reported any operational income during the year. The salary and other administrative expenses were met from the other income generated during the year. The company is looking for different avenues and opportunity for generating operating revenue.

HUMAN RESOURCES:

The Companys philosophy is to provide to its employees friendly working environment and a performance-oriented work culture. The company believes that human resources are important asset for giving Company a competitive edge in a competitive environment.

Additional Information pursuant to recent Changes in Management Discussion & Analysis Report:

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS of PALCO RECYCLE INDUSTRIES LIMITED, OUR SUBSIDIARY COMPANY ALONG WITH DETAILED EXPLANATIONS THEREFOR, INCLUDING:

Debtors Turnover	Not Applicable as Company is inoperative
Inventory Turnover	Not Applicable as Company is inoperative
Interest Coverage Ratio	Not Applicable as Company is inoperative
Current Ratio	Not Applicable as Company is inoperative
Debt Equity Ratio	0.44
Net Profit Margin (%)	NA

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF.