Patel Engineering Ltd Management Discussions

Management Discussion and Analysis Report

Global Economic Context

The Global Economy in FY2025-26:

Resilience Tested Anew

The IMFs January 2026 World Economic Outlook Update had originally projected global growth at 3.3% for calendar year 2026, broadly unchanged from 2025. supported by technology investment, accommodative financial conditions, and private sector adaptability. This picture changed materially in the second half of the last financial year, as a new conflict in the Middle East introduced a significant exogenous shock to the global outlook. The IMFs April 2026 World Economic Outlook, titled Global Economy in the Shadow of War, revised the global growth projection downward to 3.1% for 2026. Global headline inflation was simultaneously revised upward to 4.4% for 2026. a departure from the declining trajectory that had characterized the preceding two years.

The impact of the conflict has been uneven across geographies. Advanced economies face comparatively moderate effects. Emerging market and developing economies, particularly commodity-importing nations with pre-existing fiscal vulnerabilities, face more pronounced headwinds through three transmission channels: higher energy and food prices, persistence in wage and price inflation, and a confidence shock weighing on investment and consumption. As the IMF Chief Economist noted at the April 2026 Spring Meetings, downside risks to the outlook remain decisively dominant, with a broader or prolonged conflict, renewed trade tensions, or a reassessment of Al-driven productivity gains each capable of weakening global growth materially further.

For India, and for companies operating in the infrastructure sector domestically, this global backdrop is important to contextualize but does not fundamentally alter the domestic investment cycle. Indias economy remains substantially driven by public capital expenditure, domestic consumption, and structural reform momentum, factors that are largely insulated from the external shocks now weighing on commodity-import dependent emerging markets. If anything, energy price volatility reinforces the strategic imperative for India and for other large developing nations to accelerate the build-out of domestic renewable energy capacity and reduce dependence on imported fossil fuels, a dynamic that directly benefits the infrastructure construction sector.

Infrastructure: A Global Structural Super cycle

Notwithstanding near-term macroeconomic uncertainty, the structural outlook for global infrastructure investment remains compelling and historically unprecedented in scale. According to PwCs Global Infrastructure Outlook 2025-50, published in April 2026. annual global infrastructure spending is forecast to rise from approximately US$4.4 trillion in 2024 to US$6.9 trillion by 2050, with cumulative investment over the 25-year period reaching US$151.1 trillion. In real terms, this represents roughly double the infrastructure investment of the preceding two decades. The study covers nine sectors, 20 subsectors and 45 countries representing 88% of global economic output, making it the most comprehensive long-term forecast available.

McKinseys 2026 Global Infrastructure Report independently estimates that a cumulative US$106 trillion in infrastructure investment will be required through 2040 alone with energy and digital infrastructure accounting for approximately 40% of the total. Private capitals role in bridging this gap is expanding rapidly: global infrastructure fundraising reached a record of nearly US$200 billion in 2025, surpassing the previous high of US$180 billion in 2022. The scale of capital being mobilized reflects institutional recognition that infrastructure investment, across its expanding range of asset types, offers durable and differentiated returns.

Critically for the water and energy infrastructure segments in which our company operates, the growing integration of variable renewable energy into global power grids is creating structural and accelerating demand for storage and balancing infrastructure. Pumped storage hydropower is central to this dynamic. Globally, according to the lEAs Renewables 2025 report, annual additions of pumped storage hydropower capacity are forecast to double to 16.5 GW per year by 2030, driven by the need for grid flexibility as variable renewables scale rapidly. The IEA additionally forecasts that renewables will surpass coal to become the largest single source of global electricity generation by mid-2026. As of end-2025, global renewable power capacity stood at 5,149 GW, having grown by 692 GW, or 15.5%, in 2025 alone, according to International Renewable Energy Agency (IRENAs) Renewable Capacity Statistics 2026. This acceleration underscores the scale of the energy transition underway and its downstream demand for hydropower and tunneling-intensive construction capability of the kind PEL specializes in.

Global Outlook

Looking ahead, the global economy is expected to continue expanding at a moderate pace, supported by easing inflation, gradual monetary policy normalization and sustained public investment in infrastructure. While risks associated with geopolitical tensions, trade fragmentation, sovereign debt and climate change remain, long-term structural drivers- including urbanization, energy transition, digitalization and water security-are expected to underpin continued demand for infrastructure development.

For the engineering and construction sector, these trends reinforce the importance of specialized capabilities in hydropower, water infrastructure, tunneling and climate- resilient assets. Companies with strong technical expertise, disciplined execution, sound balance sheets and the ability to deliver complex EPC projects are expected to be well positioned to benefit from the expanding global infrastructure pipeline.

Relevance for Patel Engineering

The global context is relevant to PELS business through two primary pathways. First, the energy transition super cycle creates enduring demand for hydropower and pumped storage construction segments in which PEL holds a leadership position in India, and the Company has also started entering into international markets in Nepal and Bhutan as both these regions hold immense untapped hydropower potential. Second, the premium being placed globally on energy security heightened further by Middle East conflict risks, reinforces political commitment across South and Southeast Asia to accelerate domestic energy capacity addition, particularly from renewable and storage-based sources.

Indias hydropower ambitions, discussed in the following section, are being pursued within this global context of energy security imperatives and climate commitments, giving the policy support behind domestic infrastructure investment a structural durability that transcends any individual budget cycle.

Cumulative global infrastructure investment of US$151.1 trillion is forecast over 2024-2050.

Indian Economy & Infrastructure Policy

Indias Macroeconomic Resilience in FY2025-26

Indias economy delivered a robust performance in FY2025- 26, reinforcing its position as the worlds fastest-growing major economy against a backdrop of global uncertainty. According to Provisional Estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) in June 2026, real GDP grew at 7.7% for the full year, an acceleration from the 7.1% recorded in FY2024-25.

Unlike many developed economies that continued to grapple with subdued growth and investment moderation, India benefited from a diversified growth model anchored by resilient domestic consumption, robust government capital expenditure, increasing private sector investments, expanding manufacturing capabilities and a thriving services sector.

This broad-based economic momentum enabled the country to maintain macroeconomic stability while simultaneously accelerating its long-term development agenda.

This performance was broad-based across key demand and supply indicators. Gross Fixed Capital Formation, the primary measure of domestic investment grew at 8.2%, signaling continued expansion in both public and private investment activity. The Construction sector, which directly encompasses the infrastructure EPC segment, also recorded healthy growth as public capital expenditure maintained its record trajectory.

Indias growth story is increasingly underpinned by structural reforms undertaken over the past decade. Fandmark initiatives focused on improving ease of doing business, strengthening the financial sector, enhancing digital governance, modernizing logistics infrastructure and promoting domestic manufacturing have significantly improved the countrys competitiveness and investment attractiveness. These reforms have not only strengthened economic resilience but have also laid the foundation for sustained medium-term growth.

The Governments continued emphasis on infrastructure-led development has emerged as one of the defining pillars of Indias economic strategy. Record public capital expenditure, coupled with an expanding pipeline of transportation, energy, water, irrigation and urban infrastructure projects, is creating a virtuous investment cycle that is stimulating employment, enhancing productivity and crowding in private sector participation.

India also continues to benefit from favorable demographic fundamentals. With one of the worlds youngest populations, rising urbanization, expanding middle-income households and increasing formalization of the economy, domestic demand remains a significant engine of growth. Growing disposable incomes, rapid digital adoption and rising aspirations are further supporting consumption across multiple sectors while encouraging investments in housing, transportation, utilities and public infrastructure.

At the same time, Indias emergence as a strategic global manufacturing destination is reshaping the countrys economic landscape. Global supply chain diversification, supportive industrial policies and Production Finked Incentive (PFI) schemes have encouraged investments across electronics, semiconductors, defense manufacturing, renewable energy equipment, automotive components and advanced manufacturing. These developments are strengthening industrial output while creating additional demand for industrial corridors, logistics infrastructure, power generation and water resources.

Macroeconomic stability has remained another cornerstone of Indias growth trajectory. Inflationary pressures moderated during the year, supported by prudent monetary policy, easing commodity prices and improved supply chain conditions.

The Reserve Bank of India continued to maintain a balanced policy approach, safeguarding price stability while supporting economic growth. Simultaneously, Indias strong foreign exchange reserves, stable banking system and improving corporate balance sheets enhanced the economys resilience against external shocks.

The countrys fiscal strategy has increasingly shifted towards productive capital formation rather than consumption-led expenditure. Government investments in roads, railways, metro systems, airports, ports, renewable energy, water supply, irrigation networks, urban development and digital infrastructure continue to generate significant multiplier effects across the economy. Such investments not only improve national competitiveness but also stimulate demand across core industries including steel, cement, engineering, construction equipment and heavy civil construction.

Indias infrastructure ambitions have become increasingly aligned with its broader developmental priorities.

Programmes such as PM Gati Shakti. the National Infrastructure Pipeline. Bharatmala Pariyojana. Sagarmala. Dedicated Freight Corridors. Jal Jeevan Mission. Smart Cities Mission and large-scale renewable energy initiatives collectively represent one of the worlds most comprehensive public investment programmes. These initiatives are transforming connectivity, improving logistics efficiency, strengthening water security and enhancing energy resilience while generating substantial opportunities for engineering and construction companies.

The energy transition is also emerging as a significant driver of infrastructure investment. As India advances towards its long-term decarbonization objectives, investments in renewable energy generation, hydropower, pumped storage projects, transmission networks and grid modernization are expected to accelerate substantially. Plydropower. in particular, is gaining renewed strategic importance owing to its ability to provide clean, flexible and reliable power that complements the rapid expansion of solar and wind energy. This evolving energy landscape presents significant longterm opportunities for specialized engineering companies possessing expertise in complex hydropower works.

Underground tunneling and dam construction.

Water security has likewise become a national priority in response to increasing urbanization, climate variability and rising agricultural demand. Large-scale investments in irrigation systems, reservoirs, river-linking projects, urban water supply, wastewater treatment and flood management infrastructure are expected to remain integral to Indias longterm development strategy. These investments are expected to strengthen agricultural productivity, improve climate resilience and ensure sustainable management of water resources while creating sustained demand for specialized civil engineering capabilities.

Outlook

Looking ahead, the Economic Survey 2025-26 projects real GDP growth in FY27 in the range of 6.8% to 7.2%, reflecting continued strong momentum while accounting for some moderation given the global headwinds from the Middle East conflict and associated energy price volatility. Indias macroeconomic fundamentals, anchored by fiscal discipline, a declining current account deficit, moderating inflation, and a structural reform programme provide a stable environment for continued infrastructure investment at scale.

The Union Budget 2026-27:

Deepening Infrastructure Commitment

The Union Budget for FY2026-27, reaffirmed the Government of Indias foundational commitment to infrastructure-led growth, while marking a meaningful evolution in approach, shifting from pure asset creation toward building a comprehensive ecosystem for infrastructure financing, de- risking, and monetization.

Public capital expenditure for FY27 was raised to 12.2 trillion equivalent to approximately 3.1% of GDP, representing an 11.5% increase from the revised estimate of 11 trillion for FY26. This continues an extraordinary multi-year trajectory: public capital expenditure has grown from approximately 2 trillion in FY2014-15 to 12.2 trillion in FY27, a six-fold increase over a decade. Effective capital expenditure, which includes grants for capital asset creation by states, reaches 17.15 trillion, or approximately 4.4% of GDP.

Several infrastructure-specific announcements in the Budget are of direct relevance to our operating environment

• The Infrastructure Risk Guarantee Fund-a new instrument announced in the Budget which is designed to provide partial credit guarantees to private infrastructure developers, reducing risk exposure during the construction phase and crowding in private capital. This structural de- risking of the infrastructure sector is expected to increase project viability and accelerate tendering activity across segments including hydropower, tunneling, and urban water infrastructure.

• The announcement of seven High-Speed Rail Corridors

- spanning routes including Mumbai-Pune, Hyderabad- Bengaluru, Chennai-Bengaluru, Delhi-Varanasi, and Varanasi-Siliguri. represents a major new pipeline of complex civil infrastructure requiring tunneling, elevated structures, and underground engineering of the kind PEL has demonstrated expertise in.

• The Ministry of Road Transport and Highways received an allocation of 3.09 trillion-an 8% increase, while the National Highways Authority of Indias allocation rose to 1.87 trillion, sustaining the momentum in road and connected infrastructure.

• The Ministry of New and Renewable Energy received an allocation of 3,29,140 MN, up from 2,65.490 MN in FY26. reinforcing the Governments commitment to renewable energy capacity addition, particularly relevant for the hydropower and pumped storage projects in which PEL is involved.

• Restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) as long-term infrastructure financiers for the power sector-alongside the Infrastructure Risk Guarantee Fund signals a maturing institutional framework for infrastructure project financing, improving the long-term bankability of complex hydropower and energy storage projects.

Beyond the headline capex number, it is the policy architecture that defines FY27s significance for infrastructure EPC companies: the combination of institutional de-risking through the Infrastructure Risk Guarantee Fund, and the renewed push for urban mobility through metro, RRTS.and high-speed rail together create an investment environment of exceptional depth and durability. What binds these allocations together is a coherent strategic vision of a nation building simultaneously for energy security, urban mobility, water sufficiency, and border connectivity. For specialist infrastructure contractors operating across these segments, the Budgets import is less about any single line item and more about the sustained, broad-based commitment to capital formation that underpins order visibility across a multi-year horizon. Regional Rapid Transit Systems received a specific boost in the Union Budget 2026-27. with 80,000 Mn allocated for expanding the Delhi-Meerut model and conducting feasibility studies for corridors such as Bengaluru-Mysuru and Hyderabad-Warangal.

The Budget also sanctioned 22.000 million as grants to the National Capital Region Transport Corporation for implementation of RRTS projects in NCR. The governments metro push has already seen 38 metro rail projects sanctioned covering 1,051 km with an estimated cost of 3.44 trillion, and Indias metro network has grown to cover 26 cities crossing 1,000 km-the third largest in the world. Together, the metro and RRTS programmes represent a substantial and growing pipeline of tunneling-intensive civil construction of the kind Patel Engineering specializes in-a theme developed further in the Transportation & Urban Infrastructure segment outlook.

Patel Engineering

FY 2025-26 At A Glance

FY 2025-26 was a year of disciplined execution, meaningful balance sheet improvement, and strategic consolidation for Patel Engineering Limited. While revenue growth was broadly flat relative to FY25, a year in which the Company surpassed the Rs.50,000 million milestone for the first time in its history, FY26 was defined by material progress on profitability, a sharp reduction in financial leverage, landmark operational achievements, and a purposeful expansion of the Companys strategic footprint. The year reinforced PELS standing as Indias foremost specialist infrastructure contractor in high-complexity, high-entry-barrier segments.

Revenue and Profitability - Consolidated revenue from operations for FY26 stood at Rs.51,027 million, a marginal increase of 0.18% over Rs.50,934 million in FY25. While topline growth was muted, reflecting the natural progression of an order book where several large projects are still ramping up, the more significant story was one of improving profitability quality. Net profit attributable to the owners of the parent grew by 21.61% year-on-year to Rs.2,945 million, with the PAT margin improving by 102 basis points to 5.77%. This improvement was driven in substantial part by an 8.1% reduction in finance costs to Rs.2,964 million, a direct outcome of the sustained debt reduction programme that has been underway since the last few years. The full-year EBITDA margin stood at 13.40%, demonstrating the underlying operational efficiency of the business as execution intensity rises across the portfolio.

Strengthening the Balance Sheet-A defining theme of FY26 was continued and accelerating deleveraging. Consolidated gross debt reduced to Rs.11,870 million at year end, down from Rs.16,025 million in FY25 -a reduction of approximately Rs.4,155 million within the year alone, and a decline of over 48% in the last five years from Rs.22,664 million in FY21.

The debt-to-equity ratio improved markedly to 0.27xfrom 0.43x in FY25, reflecting both debt reduction and equity expansion from the rights issue completed during Q3 FY26, which raised approximately Rs.4,000 million and demonstrated strong shareholder confidence in the Companys trajectory. Additionally, approximately Rs.1,850 million was generated through the monetization of non-core assets during the year. The Companys credit rating was further upgraded to A post year-end, consistent with the multi-year upgrade journey from B+ in FY21 - a testament to the structural improvement in financial health. The Company also carries a robust book-to- biII ratio of 2.96x, reflecting strong revenue visibility relative to annual throughput.

Order Book and Inflows - The Company ended FY26 with a total order book of Rs.1.51.193 million across 53 ongoing projects spread across 14 states domestically and international presence in Nepal and Bhutan. During FY26, the Company achieved order inflows of Rs.44.009 million, a dramatic recovery from the Rs.1,112 million recorded in FY25, which was heavily impacted by the general elections. The FY26 order intake was diversified across hydropower (47.5%), urban infrastructure (30%), irrigation (4.4%.). and others (18.1%). The order book composition at year-end reflects the Companys core strengths, with hydropower projects accounting for 62.7%. followed by irrigation at 16.2%), urban infrastructure and others at 15.0%. tunneling at 4.8%), and roads at 1.3%. Over 92%, of the order book is from Central Government/ PSU and State Government clients, providing high payment security.

Execution Excellence - FY26 was marked by a series of landmark site-level achievements that reinforced PELS reputation for complex, precision execution. At the Subansiri Lower Hydropower Project-one of Indias largest hydropower endeavors at 2,000 MW-4 of the 8 units were successfully commissioned and are now supplying 1,000 MW of clean energy to the national grid, with civil works completed up to unit 6. At the CIDCO Treated Water Tunnel project in Maharashtra, PEL set a new national benchmark in TBM tunneling, completing 812 meters of tunneling in a single month in January 2026, with the TBM breakthrough achieved more than 3 months ahead of schedule. Across the broader portfolio, meaningful progress was recorded at the Kiru HEP (68% complete), Shongtong HEP (73%.), Kwar HEP (37%), Arun-lll HEP (98%,), Kundah PSP (83%,), Sleemanabad Irrigation Project (95%), and multiple other ongoingsites-reflecting the depth and consistency of execution across diverse geographies and project types.

Strategic Initiatives - The year saw PEL take deliberate steps to build for the longterm. A Memorandum of Agreement was signed with the Government of Arunachal Pradesh for the development of the 144 MW Gongri Hydropower Project on a BOOT (Build-Own-Operate-Transfer) basis with a 40-year concession-a measured entry into asset ownership in a segment where the Company has unmatched construction expertise. The Company also expanded its international geographic footprint meaningfully, securing the Dorjilung Hydropower Power Project in Bhutan (Rs.2,307 million) during Q4 FY26. adding to its existing project in Nepal and establishing active construction operations across two international markets. Post year-end. the Company was declared lowest bidder (LI) for the Lower Arun Hydropower Project in Nepal valued at Rs.15,931 million, which, once awarded, would represent a significant expansion of the international portfolio.

Recognition-During the year. Patel Engineering received external validation of its operational and institutional progress through multiple industry recognitions, including being named the Fastest Growing Construction Company (Medium Category) at the 23rd Construction Times Global Awards 2025, receiving the Quality Innovation Award 2025 from the Institution of Engineers (India) Safety & Quality Forum, and being recognized as the Best Emerging Economy

- Infrastructure Enterprise of India at the 10th Shastra MarkEnomy Awards 2025.

Outlook - The Company enters FY27 with a robust order book providing strong revenue visibility, a significantly improved balance sheet with debt-to-equity at 0.27x and finance costs on a declining trajectory, and Indias infrastructure investment cycle at record scale with the Union Budget 2026-27 allocating Rs.12.2 trillion for capital expenditure. The near-term pipeline across hydropower, pumped storage, tunneling, and urban water infrastructure, all segments in which PEL holds deep technical expertise and an established competitive position, is amongst the most favorable in the Companys history.

Sector Deep Dives

Industry Outlook By Segment

PARTI

Hydropower & Pumped Storage

Projects Infrastructure

Sector Positioning and Strategic Importance

Hydropower occupies a uniquely privileged position in Indias energy transition narrative. Unlike solar and wind which have achieved dramatic scale in recent years but remain intermittent and non-dispatchable hydropower offers clean, controllable, and flexible electricity generation that can ramp up or down within minutes to meet peak demand and counterbalance grid variability. It carries no fuel cost, has negligible long-term operating expenditure, and is not exposed to commodity price inflation. These structural advantages have translated into decisive policy support, making hydropower both conventional run-of-river and reservoir-based, and the rapidly growing pumped storage variant the single most important growth segment in Indias infrastructure investment pipeline over the next decade.

For Patel Engineering, this is the home ground. With more than 75 years of specialized experience, over 87 dams constructed, involvement in more than 15,000 MW of hydropower project capacity, and a demonstrated track record across some of Indias most complex underground powerhouses and high-altitude tunneling environments, the Company is structurally positioned to benefit from what is, by any measure, the most favorable macro environment for hydropower EPC work in a generation.

Indias Hydropower Installed Base and National Capacity Trajectory

Indias hydropower installed base has grown steadily, with large hydro capacity reaching approximately 51 GW as of January 2026, according to the CEAs Long-Term National Resource Adequacy Plan published in March 2026. Indias total installed electricity generation capacity crossed 513 GW by end-2025, with renewable sources including large hydro accounting for nearly half the total, as per the latest Central Electricity Authority data. FY26saw meaningful new capacity enter commercial operation: the CEAs January 2026 Executive Summary confirms commissioning of Pa rbati 11 HPS Unit 4 (200 MW), Tehri PSP Units 1 and 3 (250 MW each), multiple units of Pinnapuram pumped storage project (totaling 1,200 MW), and Kutehr Hydropower Project Units 1-3 (240 MW combined). The CEAs adequacy plan further projects large hydro capacity growing from approximately 51 GW currently to nearly 78 GW by 2035-36, underscoring the scale of construction work that lies ahead.

The most symbolically significant commissioning of FY26 and one in which Patel Engineering has been a core civil construction partner was the phased commissioning of the Subansiri Lower Hydropower Project, Indias largest hydropower facility. NHPCs Subansiri Lower HEP Unit 1 to 4 (250 MW each) was added to the grid, bringing the projects total operational capacity to 1,000 MW half of its planned 2.000 MW capacity, with Units 5 through 8 all in advanced stages of construction scheduled to be commissioned in phases by the end of this year. Upon full commissioning, the

2.000 MW Subansiri Lower project will make a significant contribution to Indias renewable energy capacity and enhance national grid resilience. Patel Engineering, as the civil construction partner for the projects power-house and associated works, has participated directly in this milestone, one of the most consequential in Indias hydropower history.

The Near-Term Tendering Pipeline: An Unprecedented Opportunity

Beyond the projects currently under construction, the near-term bidding pipeline for large hydropower EPC work is of an unprecedented scale. Several major projects are expected to come up for competitive tendering in the near term, including Upper Karnali (900 MW), Kalai-ll (1,200 MW). Kamala (1,720 MW), Sawalkote (1,856 MW), Subansiri Upper (-1,600 MW), Kirthai II (820 MW), and Etalin (3,097 MW)

- representing a combined capacity of over 11,000 MW of new projects requiring specialist EPC capability. Each of these projects involves complex geology, high-altitude construction environments, large underground powerhouse caverns and pressure shafts, and multi-year execution timelines, the precise project characteristics in which PEL has accumulated unmatched depth of experience.

For Sawalkote specifically a 1,856 MW project on the Chenab in J&K, the project received long-awaited environmental clearance in October 2025 and a renewed budget of Rs.3,13,800 Mn, having been stalled for years prior. This is emblematic of a broader acceleration: the suspension of the Indus Waters Treaty with Pakistan in April 2025, following the Pahalgam terrorist attack, has fundamentally changed the regulatory and strategic environment for hydropower development in Jammu & Kashmir.

The Indus Waters Treaty: A Structural Inflection for J&K Hydropower

- The Union Territory of J&K has an estimated hydropower potential of approximately 18,000 MW, of which only about 3,000-3,500 MW has been developed so far. Of the 18,000 MW total, approximately 14,867 MW has been identified, comprising 11,283 MW in the Chenab basin, 3,084 MW in the Jhelum basin, and 500 MW in the Ravi basin. The Chief Minister further stated that with planned additions, total generation is expected to rise to nearly 7,000 MW, and detailed project reports for harnessing the remaining 11,000 MW would be prepared in coordination with the Central Government over the next 10 years or so.

Patel Engineerings current order book includes ~ Rs.31,000 million of project value in J&K-the largest state-level concentration in the Companys portfolio-spanning three major ongoing hydropower projects: the Kiru HEP (624 MW), the Kwar HEP (540 MW), and the Parnai HEP (37.5 MW).

The post-Indus Water Treaty acceleration in J&K thus directly benefits execution timelines, regulatory clearance speeds, and the forward tendering pipeline from which PEL is well- positioned to benefit.

Arunachal Pradesh: Indias Hydropower Capital

Arunachal Pradesh has been formally designated the hydropower capital of India, with an estimated potential of 56,000 MW -the highest of any state in the country.

The Government has declared 2025-35 the "Decade of Hydropower" for the state, with an explicit aim of harnessing this potential at scale. Patel Engineering has meaningful and growing project presence in Arunachal Pradesh, with four ongoing projects in the state. The major projects include the 240 MW HE0 Hydropower Project, awarded by North Eastern Electric Power Corporation (NEEPC0) for Rs.7,113 million and located in the Shi Yomi district-a project that, per NEEPCO, is expected to generate 1,000 million units of energy annually. The second project is the Dibang Multipurpose project (2.880 MW) being developed by NHPC Ltd. and the third project in the state is the Subansiri Lower HEP civil works package (2,000 MW) located on the Arunachal Pradesh-Assam border. Additionally, the Company has entered into a Memorandum of Agreement with the Government of Arunachal Pradesh for the 144 MW Gongri Hydropower Project in West Kameng district on a BOOT basis with a 40-year concession-a measured entry into asset ownership in a state where the Company has unmatched construction experience and where the Governments designation of a Decade of Hydropower points to a multidecade opportunity pipeline.

Pumped Hydropower Storage: The Defining Growth Frontier

Within the broader hydropower segment, pumped storage has emerged as the single fastest-growing sub-segment-driven by the structural necessity of providing long-duration, dispatchable storage as Indias grid becomes increasingly dominated by variable solar and wind generation. Indias non-fossil installed capacity crossed 50% of total installed capacity in 2025, five years ahead of schedule, creating a structural and accelerating demand for storage-based balancing infrastructure that neither batteries-suitable for 2-4 hours of storage-nor gas peakers can adequately address at the scale and duration required.

The Central Electricity Authoritys January 2026 roadmap targets 100 GW of pumped storage capacity by 2035-36, requiring estimated investment of Rs. 5-6 trillion (approximately US$60-72 billion). Thirty-nine projects totaling 50.67 GW have already been allocated by states for commissioning by 2032, while a further 131 projects totaling 154.9 GW are in the environmental clearance pipeline.

As of December 2025, 10 PSPs with a combined capacity of 6,195.6 MW are operational, eight with a combined capacity of 8.500 MW are under construction, five totaling 5,780 MW have been accorded CEA concurrence, and two with a combined capacity of 2.240 MW are under examination.

Target Investment Rs. 5.8 trillion; ~9 GW annual additions

The pumped-storage pipeline far exceeds installed capacity, against a 100 GW target by 2035-36.

The strategic shift in Indias PSP programme toward off- stream, closed-loop projects -which operate independently of river flows, carry shorter construction timelines of approximately four years, and face lower environmental and land acquisition complexity-is expanding the geographic spread of viable PSP sites beyond the traditional Himalayan belt into peninsular states including Andhra Pradesh, Maharashtra, Karnataka, and Gujarat. Indias total assessed pumped storage potential has grown to approximately 267 GW, with off-stream closed-loop projects now representing more than three-quarters of the national potential.

Pumped storage EPC work is technically aligned with conventional hydropower construction-requiring the same underground engineering, cavern excavation, pressure shaft, and dam construction capabilities that define PELS core competency. PELS ongoing Kundah Pumped Storage Project (500 MW, now 83% complete) in Tamil Nadu is the Companys live reference project in this emerging sub-segment.

PELS credentials in pumped storage construction extend well beyond Kundah. The Company has previously executed two landmark PSP projects that together constitute some of Indias most technically demanding underground construction achievements. At the Srisailam Left Bank Hydropower Project in Andhra Pradesh-a pumped storage scheme installed with six reversible pump-turbine units-PEL executed Asias largest underground cavern at the time, measuring 236 meters by 25 meters by 53 meters, along with 9,614 meters of pressure tunnels ranging from 6 to 16 meters in diameter, a surge cavern, and a transformer cavern. At the Ghatghar Pumped Storage Scheme in Maharashtra-the first Roller Compacted Concrete (RCC) dam in Asia-PEL executed a 250 MW underground powerhouse with two reversible pump- turbine units, an 86-metre lower dam, upper and saddle dams, and a 696-metre pressure shaft, with a vertical head of over 400 meters between the upper and lower reservoirs. These executed projects demonstrate that PELs capabilities in pumped storage EPC are not aspirational-they are proven at scale, and position the Company as one of the most credible domestic bidders for the extensive PSP pipeline that will reach tendering stage over FY27-FY32.

Competitive Dynamics and PELS Positioning

The hydropower EPC segment is characterized by high entry barriers. Qualifyingfor large hydropower tenders requires demonstrable prior experience in underground powerhouses, high-head tunneling, and large dam construction-project types that take decades to accumulate and cannot be replicated quickly by generalist contractors. The pool of credible bidders for projects above Rs.10,000 Mn in value is narrow, providing a structural advantage to established specialists and supporting rational pricing discipline in competitive bidding.

PELs order book composition-with 18 hydropower projects carrying a combined backlog of Rs.94,730 million majorly across J&K, Arunachal Pradesh, Himachal Pradesh. Sikkim, Bhutan and Nepal-is the direct expression of this competitive positioning. The Companys track record across landmark national projects including the Subansiri Lower HEP (2,000 MW), Kiru HEP (624 MW), Kwar HEP (540 MW), Shongtong HEP (450 MW), and Arun-lll HEP (900 MW in Nepal) provides the qualification credentials that are prerequisite to bidding on the next generation of large-scale hydropower work. As the Government of Indias pipeline from survey and investigation into tendering and award accelerates through FY27 and FY28. Patel Engineering is among the most qualified and best-positioned domestic contractors to capture a meaningful share of what will be one of the largest EPC opportunities sets in Indian infrastructure history.

PART II

Irrigation & Water Infrastructure

Sector Context: Water Security as a National Imperative

Indias irrigation and water infrastructure sector occupies a foundational position in the countrys development agenda, sitting at the intersection of agricultural productivity, rural livelihoods, drinking water security, and climate resilience. Unlike hydropower, where the investment case is driven primarily by energy transition economics, irrigation infrastructure investment is driven by a more fundamental imperative: nearly half of Indias net sown area remains dependent on rainfall rather than assured irrigation, leaving farm incomes and food security exposed to monsoon variability. Closing this gap has been a sustained, multidecade policy priority, executed primarily through the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) and a series of large state-level canal, lift irrigation, and dam projects of the kind in which Patel Engineering has built a seven-decade track record.

PMKSY and the Modernization Agenda

The Union Budget allocated Rs.65,870 Mn to PMKSY in 2026- 27. reinforcing the Governments commitment to enhancing irrigation facilities and improving water-use efficiency across Indias agriculture sector. Beyond headline allocations, the programmes emphasis has shifted meaningfully in recent years from pure asset creation toward modernization and efficiency. In April 2025. the Union Cabinet approved the Modernization of Command Area Development and Water Management (M-CADWM) aimed at delivering water from existing canals and other sources directly to farm gates through underground pressurized piped irrigation, supported by SCADA and Internet of Things-based water accounting systems. Based on learnings from these pilot projects, a comprehensive National Plan for Command Area Development and Water Management is scheduled to launch from April 2026. covering the 16th Finance Commission period.

The Union Budget 2026-27 reflects a maturing of the PMKSY agenda. As the India Water Portals budget analysis notes, irrigation policy in the 2026-27 budget is shaped less by entirely new canal projects and more by the link between energy, water, and agriculture, with large and medium irrigation projects continuing under existing commitments mainly through PMKSY. This represents an important nuance for EPC contractors in the segment: the pipeline of large greenfield canal and dam projects is moderating somewhat in favor of completing and modernizing the substantial base of projects already underway-a dynamic visible directly in PELs own order book, where several large legacy irrigation projects are now in their final stages of completion.

River Interlinking: A Multi-Decade Construction Opportunity

Among the most consequential long-term developments in Indias water infrastructure landscape is the renewed momentum behind the National Perspective Plan (NPP) for the Interlinking of Rivers (ILR)-a programme to transfer water from surplus river basins to water-deficient regions, and one that represents what is likely the single largest civil construction opportunity in Indian water infrastructure history once it moves to scale.

A total of 30 ILR projects have been identified under the NPP, comprising 14 link projects under the Himalayan Component and 16 under the Peninsular Component. As of July 2025, Pre-Feasibility Reports had been completed for all 30 projects, Feasibility Reports for 26 projects, and Detailed Project Reports for 11 link projects. The programme, in aggregate, aims to transfer water from surplus to deficit regions, with the potential to irrigate up to 30 million hectares and generate 20,000-25,000 MW of additional hydropower capacity-a scale of ambition that, if realized even partially, would generate sustained EPC demand across dam construction, tunneling, and canal works for decades.

The Ken-Betwa Link Project (KBLP) is the first and furthest- advanced project under the NPP, and offers a useful template for how subsequent links are likely to be executed. The project, approved at an estimated cost of Rs.4.46.050 Mn with Rs.3,93,170 Mn of central support through the Ken-Betwa Link Project Authority, is scheduled for completion by 2030.

Its main component, the Daudhan Dam. has already been awarded for construction, and the project envisages irrigation for 0.63 Mn hectares annually, drinking water supply for 6.2 Mn people, and 100 MW of hydropower generation alongside 27 MW of solar capacity. Out of the budgetary provision of Rs.44,694 Mn allocated for KBLP. actual expenditure over the preceding three financial years has reached Rs.39.698 Mn. reflecting steady, if measured, progress on execution.

Beyond Ken-Betwa, several other priority links are progressing through pre-construction stages, including the Godavari- Krishna, Krishna-Pennar. and Pennar-Cauvery links in the Peninsular Component, and the Modified Parbati-Kalisindh- Chambal link integrated with the Eastern Rajasthan Canal Project. While inter-state water-sharing consensus and environmental clearances remain the principal bottlenecks to faster execution-a recurring theme across nearly all 30 identified links-the steady progression of DPRs and the precedent being established at Ken-Betwa suggest that the 2027-2032 period is likely to see additional river-linking projects move from planning into active construction.

For a specialist contractor such as Patel Engineering, with demonstrated capability across large dams, long-distance tunneling, and canal construction-the precise mix of works that river-linking projects demand-this programme represents a structural, multi-decade pipeline opportunity.

Jal Jeevan Mission (JJM): Transforming Rural Water Infrastructure

Among Indias most transformative infrastructure programmes, the Jal Jeevan Mission (JJM) has fundamentally reshaped rural drinking water infrastructure by shifting the focus from community-based water sources to universal household tap water connectivity.

Launched in August 2019 under the Ministry of Jal Shakti. the Mission seeks to provide every rural household with a Functional Household Tap Connection (FHTC) delivering 55 litres per capita per day (LPCD) of potable water conforming to national drinking water quality standards. Beyond infrastructure creation, the Mission also emphasizes long-term sustainability through source strengthening, groundwater recharge, rainwater harvesting, greywater management, community participation and water quality surveillance.

The programme has delivered one of the fastest expansions of rural water infrastructure globally. At its launch in August 2019. only 32.3 Mn rural households (approximately 16.7%) had access to functional tap water connections. By March 2026, more than 158.2 Mn rural households, representing over 81.7% of all rural households in India, had been provided with tap water connections, reflecting an increase of nearly 126 Mn additional households within six years.

The scale of Implementation has been equally significant at the village level. As of the latest official updates, over 0.25 Mn villages and 189 districts have achieved "Har Ghar Jal" status, indicating that every rural household within these administrative units has access to a functional household tap connection following prescribed verification procedures.

Recognizing the substantial progress achieved and the need to complete remaining works while ensuring long-term service sustainability, the Government has extended the Mission through 2028 under a restructured implementation framework. The extension places greater emphasis on operational sustainability, source augmentation, village-level operation and maintenance systems, water quality monitoring and asset lifecycle management in addition to creating new infrastructure.

From an infrastructure perspective, the Jal Jeevan Mission represents far more than a household water connection programme. It has created one of the countrys largest rural engineering initiatives, involving the construction of intake wells, water treatment plants, clear water reservoirs, elevated service reservoirs, pumping stations, transmission mains, distribution pipelines, village storage facilities, pumping machinery, electrical infrastructure, automation systems and extensive underground pipeline networks.

The programme has also accelerated the adoption of smart monitoring systems. SCADA-based control mechanisms. GIS mapping and digital asset management to improve operational efficiency and service reliability.

For engineering and EPC companies, the Mission has generated a substantial pipeline of opportunities spanning design, procurement, construction, commissioning and long-term operation of rural water supply infrastructure. Increasingly, projects are evolving from standalone village schemes towards integrated regional and multi-village water supply systems capable of serving larger populations with enhanced operational efficiency.

Beyond infrastructure development, the Mission is expected to generate significant socio-economic benefits. Improved access to safe drinking water contributes to better public health outcomes, reduces the incidence of water-borne diseases, lowers healthcare expenditure and significantly decreases the time spent-particularly by women and children-in collecting water from distant sources. The availability of reliable household water supply is also expected to enhance educational outcomes, improve workforce productivity and strengthen rural livelihoods, thereby contributing to inclusive economic development.

Looking ahead, Indias continued emphasis on drinking water security, coupled with increasing investments in integrated water resource management, urban water supply, wastewater treatment and climate-resilient infrastructure, is expected to sustain long-term demand for specialized water infrastructure projects. For companies with demonstrated expertise in complex hydraulic structures, dams, tunnels, pumping systems and integrated water supply schemes, these structural trends present a significant and enduring growth opportunity.

The Sleemanabad Carrier Canal: A Defining Engineering Legacy

No project better illustrates Patel Engineerings depth of capability in complex water infrastructure than the Sleemanabad Carrier Canal-a project the Company has now been associated for a while is finally nearing completion.

The Sleemanabad Carrier Canal forms part of the Bargi Diversion Project for the Narmada Valley Development Authority, designed to transfer water from the Bargi Dam on the Narmada River across a 197 km trans-valley canal to the drought-prone districts of Jabalpur. Katni, Panna. Satna, Maihar and Rewa in Madhya Pradesh, ultimately irrigating over 2.45.000 hectares of land. The scheme will also supply 284 million litres of domestic and industrial water per day to the city of Jabalpur and the town of Katni. At the heart of the project lies a 12 km tunnel-breakthrough of which has already been achieved, and now stands as the countrys first water tunnel of this length and diameter-being constructed by a Patel Engineering-led consortium.

The technical difficulty of this tunnel can scarcely be overstated, and is itself an instructive case study of PELS engineering depth. The geology along the tunnel alignment changes frequently, comprising compact residual soils, silts, alluvium, highly weathered limestone and dolomite, with stretches of slate, massive crystalline limestone, and fresh marble-with rock strength reaching unconfined compressive strength values as high as 180 MPa. A highly permeable boulder horizon acts as a conduit for groundwater located just 2-3 meters above the tunnel crown for the initial 2.7 km of the alignment, with the water table remaining above the tunnel for the entire length of the drive. Initial project execution featured the deployment of a 10-metre diameter Plybrid EPB Tunnel Boring Machine, from the down-stream end. When the project subsequently encountered highly complex geological and hydrogeological conditions, a second similar TBM was brought in to overcome the challenges, deployed from the up-stream end. Working in tandem, both machines possess the capability to operate as a hard rock Single Shield TBM or a pressurised soft-ground EPB machine, adapting dynamically to changing ground conditions in real time.

The projects difficulty translated directly into an arduous construction timeline and the project has come on the verge of completion by deploying 2 TBMs from both downstream and upstream and multiple changes in strategy with cut and cover procedures as well- a sobering illustration of how mixed-face geology, with frequent transitions between soft and hard material, can defeat conventional tunneling assumptions and demands continuous engineering adaptation.

This long and difficult history makes the projects current status all the more significant. The Sleemanabad Irrigation Project is now 95% complete, with the connection of downstream tunnel and canal sections using the cut-and-cover technique (spanning 750 meters) completed, and 12 km tunnel alignment finished. The project stands on the threshold of delivering, after long sustained effort through extraordinarily difficult ground conditions, water security to a region of Madhya Pradesh that has waited for it across multiple election cycles.

For Patel Engineering, Sleemanabad is more than a single project nearing completion-it is a living demonstration of the Companys ability to sustain technical commitment and engineering ingenuity through some of the most geologically hostile tunneling conditions encountered anywhere in Indian infrastructure, and it directly underpins the credibility the Company brings to bidding on the next generation of large-diameter water transfer tunnels that programmes like river interlinking will require.

PELS Irrigation Order Book and Positioning

Patel Engineerings irrigation and water infrastructure order book stood at Rs.24.485 million across 21 ongoing projects as of March 31. 2026. with revenue from the segment at Rs.11,387 million in FY26. The segments portfolio mix-64.4% executed and 35.6% unexecuted-reflects a base of mature projects, including Sleemanabad. now moving toward completion, alongside newer wins such as the Nira Deoghar Right Bank Main Canal in Maharashtra (awarded in FY26) and the Tasgaon Lift Irrigation project for the Krishna Valley

Development Corporation. The Companys demonstrated capability across canal construction, lift irrigation, large- diameter tunneling, and mass-scale earthwork-validated over decades at projects including Sleemanabad, the Jigaon Lift Irrigation Scheme, and the Rihand Micro Irrigation Project

- positions it credibly to participate in both the continuing PMKSY-driven project pipeline and, over the coming decade, the river interlinking programme as individual links progress from planning into construction.

PART III

Tunneling Infrastructure: Enabling Indias Next Phase of Development

Sector Overview: From Specialized Domain to Mainstream Infrastructure

What was once a specialized engineering domain limited largely to hydropower headrace tunnels and select mountain road projects has, over the past decade, become a mainstream infrastructure solution at the heart of Indias expansion. Underground construction now serves as a critical enabler across five end-markets simultaneously-hydropower, urban water supply, metro rail, high-speed rail, and strategic road and railway connectivity-creating a breadth and depth of demand with no precedent in Indias construction history.

As of mid-2025, Indias tunneling pipeline across projects at planning and bidding stages exceeded 1,840 km spanning more than 1,350 projects. Hydropower leads with approximately 790 km or roughly 40% of the total, metro and rail represent approximately 30%, roads approximately 20%, and water supply and sewerage approximately 10%. More than 100 km of tunnels were completed across sectors in the twelve months between June 2024 and May 2025 alone. India currently has over 480 km of operational road tunnels, 300 km of metro tunnels, and 2,300 km of completed hydro tunnels-with over 85 Tunnel Boring Machines active simultaneously.

The tunneling segment features entry barriers that are among the highest in Indian infrastructure construction. Qualifying for large tunneling contracts requires demonstrable prior experience across multiple tunneling methods-Drill-and- Blast NATM, hard rock single-shield TBM, soft-ground Earth Pressure Balance TBM, and hybrid mixed-face machines

- in addition to proven capability across complex ground conditions including high water pressure, mixed geological profiles, fault zones, and squeezing rock. These qualifications take decades to accumulate, translate directly into rational pricing discipline and stronger margins relative to surface civil works, and mean that the pool of credible domestic bidders for large-diameter tunneling contracts above Rs.5,000 Mn is narrow.

PELS Tunneling Track Record: Depth Across Methods and Environments

Patel Engineering has accumulated over 300 km of completed tunnel construction across its project history-a body of experience spanning every major tunneling method, a wide range of geologies, and some of the most operationally demanding environments in which tunneling has ever been attempted in India.

In the cf rill ancJ blast NATM domain, PELS executed portfolio spans both Himalayan and peninsular geologies. In the Himalayas, the Companys track record includes underground powerhouses and headrace tunnels at the Subansiri Lower HEP in Arunachal Pradesh and Rampur HEP in Himachal Pradesh-the latter featuring one of Asias largest surge shaft with a 38 meters diameter. In the peninsular domain, the Srisailam Left Bank Hydropower Project in Telangana

- a landmark pumped storage project on the Krishna River

- stands as one of PELS most technically distinguished executed works. The Company constructed one of Asias largest man-made underground powerhouse cavern at Srisailam, measuring 236 meters in length, 25 meters in width, and 53 meters in height, along with 9,614 meters of pressure tunnels ranging from 6 to 16 meters in diameter, a surge cavern, and a transformer cavern-an underground complex of exceptional scale and engineering ambition.

In strategic railway tunneling, PEL has delivered two projects of historic significance. On the Udhampur-Srinagar- Baramulla Rail Link (USBRL)-declared a National Project in 2002 and one of the most challenging railway construction endeavors ever undertaken in the subcontinent, given the unpredictable geology of the young Himalayas-PEL executed two critical packages: Tunnel T-2 on the Udhampur- Katra section, where the Company set a national record of 775 meters of arch lining in a single month, and Tunnel T-15 and Part Tunnel T-14 on the Katra-Banihal section, involving a 14.3 km main tunnel and a parallel 14.3 km escape tunnel. The USBRL, now fully operational as of June 2025. has reduced travel time between Jammu and Srinagar from seven hours to three and carries major geostrategic significance for the Indian armed forces logistics along the Line of Control.

On the Sivok-Rangpo Railway Project-the 44.96 km broad- gauge line that will bring rail connectivity to Sikkim for the first time, running through the foothills of the Kanchenjunga range along the Teesta river valley- PEL is executing works for Tunnel T-7, a 3,082-meters main tunnel. Within this tunnel lies a milestone of national significance: the Teesta Bazar underground railway station-Indias first underground station on the broad-gauge rail network -featuring a 650-meters cavern with a single platform, six cross-passages, 800 meters of adit, and integrated ventilation systems.

In urban soft-ground and mixed-face TBM tunneling, PELS benchmarks include the national record of 812 meters of TBM tunneling in a single month at the CIDCO Treated Water Tunnel in January 2026, with the TBM breakthrough achieved three months ahead of schedule. The PGRW Tunnel has seen breakthroughs across both NATM and TBM sections totaling approximately 3.2 km.

Order Book and Positioning

As of March 31, 2026, PELS Tunneling & Underground Engineering order book stood at Rs.7,202 million across 4 ongoing projects, with FY26 segment revenue of Rs.8,384 million-the strongest year in the four-year period since FY23, and a sharp recovery from the FY25 revenue of Rs.5,351 million. This order book deliberately understates PELS practical tunneling capacity: it captures only contracts where tunneling is the primary scope, without reflecting the significant underground engineering content-headrace tunnels, pressure shafts, underground powerhouses, surge chambers-embedded within hydropower contracts, and the large-diameter water transfer tunnels within urban infrastructure projects.

As the national tunneling pipeline of 1,840 km at planning and bidding stages advances toward construction and competitive tendering -across metro, RRTS, high-speed rail, hydropower, and urban water programmes-PELS proven, multi-method, multi-environment tunneling expertise positions it as one of the most credible and technically qualified contractors to capture a meaningful share of this expanding opportunity.

Sizing the Opportunity

The metro, RRTS, and high-speed rail pipeline translates into a substantial underground construction opportunity. Indias metro network has grown to cover 26 cities and cross 1.000 km of route length-the third largest in the world-with 38 metro rail projects sanctioned covering 1.051 km at an estimated cost of Rs.3.44 trillion. A meaningful and growing share of this expansion is now underground, driven by urban density constraints in city cores. The Regional Rapid Transit System programme, with W80.000 Mn allocated in the Union Budget 2026-27 to expand the Delhi-Meerut model and fund feasibility studies for new corridors, adds a further category of tunneling-intensive opportunity, particularly at interchange stations and city-center alignments where elevated viaducts are not feasible.

Most significant in scale, however, is the High-Speed Rail programme. On the Mumbai-Ahmedabad corridor, the single most technically demanding segment is a 21-kilometre tunnel between Bandra-Kurla Complex and Shilphata, including Indias first undersea rail tunnel beneath Thane Creek, with geology descending 25 to 65 meters below ground and combining soft soil, basalt, and high-water pressure within a single alignment. With the Union Budget 2026-27 announcing seven new High-Speed Rail corridors- spanning Mumbai-Pune, Hyderabad-Bengaluru, Chennai-Bengaluru, Delhi-Varanasi, and Varanasi-Siliguri-the cumulative tunneling content embedded across these corridors as they progress from planning into construction represents a substantial opportunity set over FY28-FY35, as competitive tendering for underground packages begins.

Technological Advancements Transforming Tunnel Construction

Rapid technological advancements are reshaping tunnel engineering globally. Mechanized excavation methods, Tunnel Boring Machines (TBMs), New Austrian Tunneling Method (NATM), drill-and-blast techniques, digital geological mapping, Building Information Modelling (BIM), laser scanning, drone- based monitoring and artificial intelligence are significantly improving construction efficiency, safety and quality.

Real-time geotechnical instrumentation, remote monitoring systems, digital twins and predictive analytics are enabling proactive risk management and more effective decisionmaking throughout project execution.

The increasing adoption of these technologies is helping optimize excavation rates, improve worker safety, reduce construction timelines and enhance lifecycle performance of underground assets.

PART IV

Roads & Urban Infrastructure: Building for Inclusive, Sustainable Growth

Indias roads and urban infrastructure sectors continue to serve as the backbone of the countrys economic transformation, enabling improved connectivity, enhanced productivity, regional integration and sustainable urban development. As one of the worlds fastest urbanizing economies. India is witnessing unprecedented investments in highways, expressways, urban mobility, smart cities, water supply, sewerage, stormwater drainage and integrated urban infrastructure. These investments are not only strengthening the countrys logistics ecosystem but are also improving the quality of life for millions of citizens while supporting longterm economic competitiveness.

The Government of Indias continued emphasis on infrastructure-led growth has positioned roads and urban development among the largest recipients of public capital expenditure. Supported by flagship programmes such as Bharatmala Pariyojana. PM Gati Shakti National Master Plan, Smart Cities Mission. AMRUT (Atal Mission for Rejuvenation and Urban Transformation), metro rail expansion and various state-level urban infrastructure initiatives, India is creating a modern, integrated and resilient infrastructure network capable of supporting future economic growth.

Road Infrastructure: Enhancing National Connectivity

India possesses one of the worlds largest road networks, spanning over 6.7 million kilometers, carrying nearly 64% of freight traffic and approximately 90% of passenger traffic across the country. Roads continue to remain the primary mode of transportation, facilitating movement of goods, improving market accessibility, strengthening supply chains and supporting regional economic integration.

Recognizing the strategic importance of road connectivity, the Government has significantly increased investments in the development of national highways, economic corridors, greenfield expressways, border roads, coastal roads and multi-modal logistics corridors. The expansion of high-speed corridors is improving travel efficiency, reducing logistics costs and enhancing connectivity between manufacturing centers, ports, airports and industrial clusters.

The Bharatmala Pariyojana programme remains one of Indias largest highway development initiatives, focusing on the creation of economic corridors, feeder routes, border connectivity roads, coastal roads and port connectivity infrastructure. The programme aims to optimize freight movement, reduce logistics costs and improve last-mile connectivity, thereby supporting industrial growth and enhancing Indias global competitiveness.

Complementing these initiatives is the PM Gati Shakti National Master Plan, which integrates planning across multiple infrastructure ministries through a GIS-enabled digital platform. By enabling coordinated planning of roads, railways, ports, airports, logistics parks and industrial corridors, the programme seeks to eliminate infrastructure bottlenecks, improve project execution and maximize the economic impact of public investments.

Simultaneously, state governments continue to invest substantially in rural roads, district roads, urban road widening, flyovers, grade separators, ring roads and bridge infrastructure. These investments are improving accessibility, reducing travel time and facilitating balanced regional development.

The road construction ecosystem is also undergoing rapid technological transformation. Digital surveying, Building Information Modelling (BIM). drone-based monitoring, intelligent construction equipment, automated quality control systems and advanced pavement technologies are increasingly being deployed to improve construction efficiency, optimize project management and enhance lifecycle performance of road assets.

Urban Water Infrastructure: A Deepening and Widening Opportunity

Urban water infrastructure is emerging as one of the most significant and sustained growth drivers in Indias construction sector. Indias per capita water availability has declined from approximately 1.800 cubic meters in 2001 to nearly 1,400 cubic meters in 2025, and is projected to decline further to 1,200 cubic meters by 2050. At the same time, rapid urbanization is concentrating water demand in cities that are already managing ageing distribution networks and widening demand-supply gaps. Non-revenue water-the proportion of water lost to leakage, theft, and metering inefficiencies-is estimated at 35-40% in many Indian cities, compounding the supply challenge.

The response is a multi-front investment programme spanning new source development, raw water conveyance, treatment capacity, and distribution network modernization. AMRUT 2.0, with a comprehensive outlay of Rs.2.99 trillion over its five-year programme period through FY26, has approved as of August 2025 a total of 586 sewerage projects with 6,964 million liters per day of sewage treatment capacity and 3,571 water supply projects. The programme is complemented by the Jal Jeevan Missions extension to 2028 and a quadrupled budget allocation in FY27 against FY26s revised estimates-placing emphasis on functionality, source sustainability, and quality of supply rather than merely connection count.

Critically for PEL, the most capital-intensive and technically demanding component of urban water infrastructure is the large-diameter raw water and treated water tunnel-the underground conveyance system that carries water from source to treatment plant, or from treatment plant to city distribution networks, across urban and peri-urban geographies where surface alignment is infeasible. CIDCOs water supply programme for Navi Mumbai-with projected demand of 1,257 million liters per day by 2050-illustrates the scale and continuity of this opportunity. Beyond the CIDCO Treated Water Tunnel (TWT-II) where PEL has set a national benchmark in execution. CIDCO has simultaneously launched other packages indicating that the agencys water infrastructure investment programme will generate multiple successive tunneling packages over the next four to five years. The Kondhane Dam itself, which will ultimately supply 350 MLD to Navi Mumbai, has been awarded to our Company for civil construction (Rs.13.189 million, awarded in FY26)-making our Companya participant at multiple nodes of the same integrated water supply system, a position that demonstrates the value of deep client relationships and established technical credentials.

Water supply and wastewater management remain integral components of urban infrastructure development. Rising urban populations and increasing industrial activity are driving investments in water treatment plants, transmission pipelines, underground reservoirs, pumping stations, sewerage systems, wastewater recycling facilities and stormwater drainage networks. These projects are critical for ensuring reliable water supply, improving sanitation and enhancing climate resilience.

Climate-Resilient and Sustainable Urban Development

Sustainability has become a defining principle of Indias urban infrastructure strategy. Cities are increasingly integrating green infrastructure, renewable energy, water conservation, flood management and climate adaptation measures into urban planning frameworks. Investments in permeable pavements, rainwater harvesting, green buildings, urban forests and energy-efficient public infrastructure are helping improve environmental performance while enhancing resilience against climate-related risks.

The increasing frequency of extreme weather events has also accelerated investments in flood mitigation, drainage modernization, riverfront development and resilient urban utilities. Infrastructure planning is progressively incorporating climate risk assessments to ensure long-term sustainability and operational reliability.

Opportunities for Engineering and Infrastructure Companies

Indias sustained focus on roads and urban infrastructure presents significant long-term opportunities for engineering and construction companies. The scale of planned investments across highways, bridges, tunnels, elevated corridors, metro systems, water supply, sewerage, drainage, riverfront development and urban utilities is expected to generate a robust pipeline of EPC projects over the coming decade.

Increasing project complexity, coupled with higher quality standards and greater emphasis on timely execution, is driving demand for contractors with proven engineering capabilities, advanced mechanization, integrated project management expertise and strong execution track records.

Furthermore, the convergence of transportation infrastructure with urban development, digital technologies and sustainability objectives is expanding opportunities for companies capable of delivering multidisciplinary infrastructure solutions.

Outlook

Indias roads and urban infrastructure sectors are expected to remain among the principal drivers of the countrys infrastructure investment cycle. Continued policy support, increasing public capital expenditure, expanding private sector participation and long-term urbanization trends provide a favorable outlook for sustained infrastructure development.

As India progresses towards becoming a developed economy, investments in integrated transportation networks, modern urban utilities, climate-resilient infrastructure and smart city solutions will continue to play a pivotal role in enhancing productivity, improving quality of life and supporting inclusive economic growth. For engineering companies with expertise in complex civil construction, underground infrastructure, bridges, tunnels, water systems and integrated EPC execution, the evolving infrastructure landscape presents substantial opportunities to participate in the countrys next phase of development.

Roads: A Smaller Footprint for PEL, Anchored in Tunneling- Enabled Connectivity

Roads is not expected to be a primary growth driver for Patel Engineering going forward, reflected in the segments modest 1.42% share of the Companys current order book. Where PEL has historically engaged with the roads sector, it has done so not as a generalist highway EPC contractor competing on flat, low-complexity terrain, but at the specific intersection of roads and tunneling-in projects where conventional highway construction is not feasible due to extreme terrain, altitude, or strategic considerations, and where the Companys underground engineering capability becomes the differentiating factor.

The defining example of this positioning is the Sela Tunnel Project in Arunachal Pradesh. Sela Tunnel is a road tunnel on NEI-13 at 13,000 ft. altitude that ensures all-weather connectivity between Guwahati in Assam and Tawang in Arunachal Pradesh, and stands as the longest bi-lane tunnel in the world at 13,000 feet, situated 400 meters below the Sela Pass. Constructed under Project VARTAK by the Border Roads Organisation, the project was executed by Patel Engineering and comprises main tunnel T1 spanning 1,003.34 meters, main tunnel T2 spanning 1,594.38 meters, an escape tunnel of 1,584.38 meters, and approximately 8.7 km of connecting road.

The execution conditions were extraordinarily demanding. Weather in the region was severe enough that temperatures plummeted to as low as -20?C, causingdiesel to freeze, while heavy snowfall and landslides on the Balipara-Chariduar- Tawang Road posed additional challenges throughout construction.

The strategic significance of the completed project extends well beyond its engineering achievement. The tunnel bolsters all-weather connectivity and enables swift troop movement along the Line of Actual Control with China, while also ending the historic isolation of local communities in Arunachal Pradesh during winter months, when the region was previously cut off from the rest of India. The completed tunnel reduces travel time by one hour and travel distance by at least 10 km between Bomdila and Tawang. while bypassing the treacherous hairpin bends and high-altitude conditions of the original Sela Pass route. Inaugurated by the Prime Minister in March 2024, Sela stands as a powerful reference project for PELS capability to execute nationally significant, technically extreme infrastructure in Indias most strategically sensitive border regions-capability that remains directly relevant as Indias Elimalayan frontier infrastructure programme continues in the years ahead.

PELS Transportation & Urban Infrastructure Order Book and Positioning

The Transportation, Urban Infrastructure & Others segment carried an order book of Rs.24,776 million across 10 ongoing projects as of March 31, 2026, with FY26 segment revenue of Rs.3,111 million. The revenue figure-lower than the segments FY23-FY25 trajectory of Rs.5,486 million, Rs.6,372 million, and Rs.7,739 million respectively-reflects the completion of several legacy road and transportation projects and the early-stage ramp-up of newly awarded urban infrastructure work rather than any structural weakening. Notably, the Kondhane Dam project (Rs.13,189 million)-an urban water supply project of significant scale and complexity

- was awarded in FY26 and will be a primary driver of segment revenue growth in FY27 and FY28. The segments project portfolio shows 57.6% unexecuted backlog, indicating a healthy forward revenue runway.

The PEL urban infrastructure portfolio today is anchored at the intersection of water infrastructure and tunneling

- precisely the segment of urban construction that is technically most demanding, most competitively defensible, and most aligned with the Governments investment priorities as AMRUT 2.0 reaches its final phase and a new urban infrastructure programme takes shape. As the urban water tunnel model pioneered at CIDCOs TWT-II expands to other cities-Mumbai, Pune. Hyderabad. Bengaluru, and Chennai all have identified large-diameter water tunnel requirements in their 20-year water master plans-PELS national-record execution credentials at CIDCO position the Company as

the benchmark contractor for the next generation of urban water tunnels, a market that does not yet fully appear in the Companys current order book but will become a meaningful source of order inflows through FY27 and beyond.

The Companys Financial Performance Review-FY26

FY2025-26 was a year defined not by headline revenue growth, but by the quality of earnings and the strength of the balance sheet. Following a landmark FY25 in which the Company surpassed the Rs.50,000 million revenue milestone for the first time in its history, FY26 consolidated the gains of that breakthrough year: revenue was sustained at record levels, profitability improved materially, finance costs continued their multi-year decline, and the Company closed the year a structurally stronger and more financially resilient enterprise than at any point in the preceding decade.

Revenue from Operations

Having crossed the Rs.50,000 million threshold for the first time in FY25, the Company held its revenue at that record level through FY26 despite a demanding execution environment. On a consolidated basis, revenue from operations stood at Rs.51,027.42 million in FY26. marginally higher than Rs.50,933.59 million in FY25. On a standalone basis, revenue from operations was approximately Rs.50.666 million, compared with Rs.50,076 million in FY25.

The broadly flat topline is best understood as a function of order-book phasing rather than any weakening of underlying activity. Several large projects awarded during FY26-most notably the Kondhane Dam project (Rs.13.189 million) and the 240 MW HEO Hydropower Project (Rs.7,113 million)-are in their early mobilisation and ramp-up stages and will contribute meaningfully to revenue only from FY27 onwards. At the same time, several mature, high-revenue legacy projects, including the Sleemanabad Irrigation Project (now 95% complete) and the Subansiri Lower civil works package (99% complete), moved into their final stages of execution during the year. The combination of maturing legacy revenue and early-stage new awards produced a natural, temporary plateau in reported revenue-one that the Companys book- to-bill ratio of 2.96x indicates is set to give way to renewed growth as the newer projects scale.

Operating EBITDA

On a consolidated basis, Operating EBITDA for FY26 was Rs.6,840.3 million, at a margin of 13.40%. The full-year margin reflects the mix of projects executed during the year and the earlier-stage nature of several newly mobilized sites, where margins typically build as execution intensity rises. The trajectory through the year was firmly positive, demonstrating the underlying operational efficiency of the business as project execution gathered pace toward the close of the year. We believe we would continue achieving a blended EBITDA margin in the 13-14% range, consistent with the Companys disciplined, margin-led approach to bidding on complex, high- entry-barrier work.

Profit Before Tax and Finance Costs

The most significant driver of FY26s improved profitability was the sustained reduction in finance costs, the direct outcome of a multi-year deleveraging programme underway since FY22. Consolidated finance costs declined by approximately 8.1% to Rs.2,964 million during the year, easing the burden on the Companys bottom line and translating operational performance more fully into profit. This reduction reflects both the lower absolute quantum of debt outstanding and the improved cost of borrowing that has accompanied the Companys steadily rising credit rating. With gross debt reduced to Rs.11,870 million at year-end and the credit rating upgraded to ‘A post year-end, the finance-cost tailwind is expected to persist into FY27, providing continued support to pre-tax profitability.

Net Profit

On a consolidated basis, profit after tax attributable to the owners of the parent grew by 21.6% to Rs.2,945 million, up from Rs.2,421.74 million in FY25. The net profit margin improved by approximately 102 basis points to 5.77%, from 4.75% in the prior year.

Segment-Wise Revenue Composition

Consistent with the Companys strategic positioning as a specialist in high-complexity, high-entry-barrier segments, FY26 revenue remained anchored by the hydropower business. On the basis of segment revenue reported through the year, hydropower remained the dominant contributor at approximately 55% of revenue, followed by irrigation at approximately 22%, tunneling at approximately 17%, and roads and urban infrastructure and others at approximately 6% combined.

The revenue mix reinforces the deliberate portfolio shift the Company has pursued in recent years-toward technologyintensive segments where the pool of credible bidders is narrow, pricing discipline is stronger, and the Companys seven-decade track record confers a durable competitive advantage. The order-book composition at year-end, weighted still more heavily toward hydropower at 62.7%, indicates that this segment mix will persist and. if anything, deepen over the coming execution cycle as the large hydropower and pumped- storage awards in the pipeline convert into revenue.

Financial Strategies Implemented By The Company In FY26

FY26 marked another year of deliberate and disciplined balance-sheet strengthening. Building on the transformational financial actions of FY25-which included a QIP, large-scale arbitration settlements, and the first breach of the Rs.50.000 million revenue mark-the Company in FY26 sustained its multi-pronged strategy of deleveraging, capital raising, and non-core asset monetization. The cumulative effect was a materially stronger capital structure, a lower cost of capital, and a further upgrade in the Companys credit rating.

Asset Monetization via Sale of Non-Core Assets

The Company continued its programme of monetizing noncore assets to release capital and strengthen liquidity. During FY26, approximately Rs.1,850 million was generated through the monetization of non-core assets, the proceeds from which are being deployed toward debt reduction and to support execution across the Companys active project portfolio, consistent with the strategy pursued in prior years.

Raising of Funds via Rights Issue

During FY26, the Company raised approximately Rs.4,000 million (Rs.3,989.68 million) through a Rights Issue, which was oversubscribed at 1.15 times-a clear reaffirmation of shareholder confidence in the Companys trajectory and strategic direction. By directing the majority of proceeds to debt reduction, the Rights Issue directly reinforced the Companys deleveraging objective and further improved the equity base, contributing to the sharp improvement in the debt-to-equity ratio during the year.

Continued Reduction in Debt

The Company sustained its multi-year deleveraging programme through FY26. As of March 31. 2026. consolidated gross debt stood at Rs.11.870 million, down from Rs.16,025 million as of March 31. 2025-a reduction of approximately Rs.4,155 million, or about 26%. within the year alone, and a decline of over 48⁽% in the last five years from Rs.22,962 million in FY21. This reduction was achieved through a combination of equity, non-core asset monetization, and surplus generated from operations.

As a direct consequence of lower debt and an expanded equity base, the debt-to-equity ratio improved markedly to 0.27x as of March 31, 2026, from 0.43x a year earlier.

The Companys deleveraging also translated into a tangible reduction in interest outflow: consolidated finance costs declined by approximately 8.1% to Rs.2,964 million in FY26, from Rs.3.224.18 million in FY25-a reduction of roughly Rs.260 million that flowed directly to the bottom line. The residual term debt is expected to be settled progressively over the next two to three years through a combination of continued non-core asset monetization and surplus generated from operations.

Credit Rating Update

The sustained improvement in the Companys financial health received external validation during the year through a further credit-rating upgrade. Infomerics Valuation and Rating upgraded the Companys long-term rating to ‘IVR A / Stable from ‘IVR A-, and its short-term rating to ‘IVR Al from ‘IVR A2+, with effect from June 2026, on the basis of the audited FY26 performance. This upgrade continues the Companys multi-year rating journey-from ‘B+ in FY21to ‘A post- FY26-and reflects the Companys consistent operational execution, disciplined financial management, improved liquidity profile, and strengthened balance sheet. A higher rating is expected to further reduce the Companys cost of borrowing, enhance access to capital markets, and provide greater financial flexibility to pursue larger infrastructure projects.

Key Financial Ratios

In compliance with the requirements of the Listing Regulations, the key financial ratios on a consolidated basis are provided below.

Ratio	FY26	FY25	Change (%)
Debtor Turnover (Times)	7.55	7.79	-3.08%
Interest Coverage Ratio (Times)	1.97	2.01	-1.99%
Current Ratio (Times)	1.45	1.36	6.62%
Debt to Equity Ratio (Times)	0.27	0.43	37.21%
Debt to Operating EBITDA (Times)	1.74	2.19	20.55%
Operating Profit Margin (%)	13.41	14.40	-6.88%
Net Profit Margin (%)	5.27	4.87	8.21%

 

Ratio	FY26	FY25	Change (%)
Return on Equity - ROE (%)	6.06	6.55	-7.48%
Return on Capital Employed - ROCE (%)	13.25	14.94	-11.31%

Note: Considering the nature of industry in which the Group is operating, Inventory turnover ratio is not material. The explanation for significant change along with reasons have been captured in the notes to financial statements.

Risks, Concerns & Risk Management

Patel Engineering Limited operates at the intersection of large-scale, technically complex infrastructure and a dynamic macroeconomic and regulatory environment. With over seven decades of domain expertise and a geographically diverse portfolio spanning the Flimalayan frontier, peninsular India, and international markets in Nepal and Bhutan, the Company is well-versed in the risk landscape that accompanies its business. The Company recognizes that sustained, longterm value creation depends not merely on capturing opportunity, but on the disciplined anticipation, assessment, and mitigation of a broad spectrum of strategic, operational, financial, environmental, and technological risks.

The Company has instituted a comprehensive, board- overseen risk management framework that is embedded across the entire project lifecycle-from the pre-bid evaluation stage, through mobilization and execution, to project closure and defect-liability. This framework operates through clearly defined escalation protocols, structured compliance oversight, and robust internal control systems, enabling the Company to respond with agility to emerging challenges while safeguarding stakeholder interests. The principal risks identified by management, together with the corresponding mitigation strategies, are set out below.

Principal Risks at a Glance

Risk Area	Nature of Exposure	Mitigation Posture
Project Execution	Geological uncertainty, adverse weather, equipment breakdown, and unforeseen site conditions across 53 concurrent projects in challenging geographies-particularly high-altitude Flimalayan and underground environments - can affect timelines, costs, and delivery quality.	75+ years of complex project experience: dedicated on-site project management teams: contractual price escalation, force majeure. and extension-of-time protections: advanced equipment investment: proactive site-level engineering adaptation validated by the 11 million safe man-hours milestone at Parnai FIEP.
Order Inflow and Revenue Concentration	Dependence on government tendering cycles creates lumpiness in order inflows-evidenced by FY25s collapse to Rs.1.112 million due to the election-year freeze. Over 62% of the order book is concentrated in hydropower, a single government- funded segment susceptible to policy and clearance delays.	Order book of Rs. 1.51.193 million provides a 2.96x book-to-bill revenue coverage: segment diversification across four verticals: geographic spread across 14 states and 2 countries: Central Government/PSU client concentration of 61.7%, by value ensures payment security: near-term bidding pipeline of f6.00,000+ million provides FY27 inflow visibility. FY25 was one off due to Election year and Company saw f44.000 million order inflow in FY26.
Financial and Liquidity	Working-capital-intensive business model with multi-year project timelines creates potential for billing-collection mismatches and liquidity pressure. Adjusted net working capital stood at 106 days in FY26.	Working capital is actively managed and remains within the normal operating range of approximately 3-4 months for large infrastructure EPC projects, where the initial mobilization phase of 6-8 months typically precedes milestone-based billing and cash inflows. The Company maintains a -95% receivables collection efficiency against revenue, reflecting disciplined execution and strong client collections.
		During FY26, the balance sheet strengthened significantly with gross debt reducing to Rs.11,870 million, debt-to-equity improving to a five-year low of 0.27x, cash and cash equivalents of Rs.3,796 million, and f 4,000 million of equity capital raised through the Rights Issue. The Companys A (Stable) credit rating which was recently upgraded, diversified banking relationships and adequate working capital facilities further provide financial flexibility and support liquidity requirements across the project lifecycle.
Commodity and Input Cost	Infrastructure EPC projects consume significant cement, steel, fuel, and explosives-commodities exposed to global price volatility. Under fixed-price contracts, unexpected cost increases compress margins. Fleightened Middle East conflict risk adds energy price uncertainty through FY27.	Most of the Companys projects include contractual price escalation clauses, allowing fluctuations in key commodity and input costs to be passed through to clients. This, together with prudent procurement and project-specific sourcing strategies, significantly mitigates the impact of input cost inflation on profitability.
Regulatory, Environmental and Clearance	Large hydropower and tunneling projects in ecologically sensitive Flimalayan and river-valley geographies require complex multi-stage statutory clearances. Midconstruction policy changes, forest rights issues, or judicial intervention can stall projects and increase costs.	Clearance risk sits primarily with Government/PSU project developers (NHPC, SJVN, CVPPL, etc.) rather than PEL as EPC contractor; contractual extension-of-time and cost-variation provisions protect against clearance- driven delays; Gati Shakti framework expected to reduce clearance timelines for new projects going forward. Increasingly, projects are being awarded only after the requisite major clearances are in place, reducing execution risk compared with earlier years.
Geological and Ground	Underground and tunneling projects carry inherent risk of actual ground conditions differing from design assumptions - particularly in young Himalayan geology characterized by complex faulting, high water inflows, and squeezing rock. Sleemanabad Carrier Canals near two- decade construction history illustrates the extreme impact of adverse geological conditions.	300+ km of completed tunnels across NATM. TBM. EPB. and hybrid mixed-face methods in Himalayan, peninsular, and urban geologies: state-of-the-art equipment including hybrid EPB machines and multi- mode TBMs: institutional knowledge base for recognizing and adapting to adverse conditions that is unmatched among domestic EPC contractors.
Competitive Intensity	The infrastructure EPC sector is characterized by competitive bidding, particularly in irrigation and other conventional civil infrastructure projects, which may exert pressure on order inflows and margins.	The Company maintains a strong competitive position in specialized segments such as hydropower and complex tunneling, where technical expertise, execution capability and qualification requirements limit the competitive landscape. While competition is relatively higher in the irrigation segment, the Companys disciplined bidding approach, established execution track record and long-standing client relationships support healthy win rates and sustainable margins. With the vast opportunity of infrastructure works in the pipeline in each segment, Company expects to meet its order inflow target with ease without major competition impact.
International Operations	Active projects in Nepal and Bhutan (f4.002 million. 2.6% of order book) expose the Company to cross-border currency, geopolitical, regulatory, and logistical risks distinct from the domestic portfolio. Post-year-end LI declaration on Lower Arun HEP in Nepal (Rs. 15.931 million), once formalized, would materially increase international exposure.	Geographic and operational familiarity with Himalayan terrain adjoining Nepal and Bhutan: international contracts benchmarked to hard currencies with exchange rate adjustment mechanisms; Government- backed PSU client profiles in all current international markets; disciplined approach to international bidding maintained consistent with overall risk appetite.

Outlook

As Indias infrastructure investment cycle continues to accelerate, project complexity and stakeholder expectations are expected to increase simultaneously. The Company remains committed to maintaining a proactive risk management culture supported by robust governance, technical excellence, financial discipline and operational agility.

By continuously strengthening its project management capabilities, investing in advanced technologies, enhancing safety standards, improving financial resilience and maintaining strong customer relationships, Patel Engineering is well positioned to effectively manage evolving business risks while creating sustainable long-term value for its shareholders and other stakeholders.

Asset Ownership & Strategic Investments

Beyond its core Engineering & Construction (EPC) business, the Company holds a portfolio of strategic assets and equity investments accumulated over its operating history. Consistent with its stated strategy of sharpening focus on the high-return, high-entry-barrier EPC business, the Company continues to evaluate each of these holdings on the twin criteria of strategic fit and monetization potential-retaining those that generate stable, predictable cash flows and progressively monetizing those that are non-core.

Hydropower Assets

The Company holds a limited number of hydropower development licenses, principally in Arunachal Pradesh-a state designated the "hydropower capital of India" with an estimated 56,000 MW of potential and a Government of Arunachal-declared "Decade of Elydropower" spanning 2025- 35. Government policy toward hydropower development in the state continues to evolve, and the Company is evaluating the revised policy conditions before determining the future of the licenses obtained in the past. During FY26, the Company took a measured, capital-light step into asset ownership by signing a Memorandum of Agreement with the Government of Arunachal Pradesh for the 144 MW Gongri Elydropower Project in West Kameng district, to be developed on a Build-Own-Operate-Transfer (BOOT) basis under a 40-year concession-a project valued at approximately Rs.17,000 Mn with expected revenue of the order of Rs.30,000 Mn per annum post-commissioning. Development activities, including statutory approvals, detailed investigations, design and preconstruction works, are expected to commence during the current financial year, marking the initial phase of project implementation.

Thermal Power Assets

Through its subsidiaries, the Company had, in an earlier phase, acquired land in Tamil Nadu for the proposed development of a thermal power plant. In line with the structural shift in Indias energy market toward renewable and storage-based generation, and in view of evolving environmental considerations, the project has been placed on hold, and there are currently no active development activities associated with these assets. The Company is actively evaluating multiple options to monetize the land parcel acquired for the project, consistent with its broader programme of releasing capital from non-core holdings.

Road BOT Projects

The Company holds strategic equity interests in three road- infrastructure projects developed on Build-Operate-Transfer (BOT) annuity and toll models. These investments have historically provided stable and predictable revenue streams that complement the Companys EPC execution portfolio. Details of the three projects are set out below.

Project (SPV)	Stake	Scope & Corridor	Model / Revenue
Patel KNR Infrastructures Ltd. (PKIL)	60.00%	60.40 km, NH-7 Karnataka (KNT-1); with KNR Constructions: commenced Dec 2009	Annuity- fixed semiannual payments from NHAI aggregating Rs.658.80 Mn p.a.
Patel KNR Heavy Infrastructures Ltd. (PKHIL)	42.00%	53.02 km four-laning. Nagpur-Hyderabad NH-7 (Islam Nagar-Kadtal), Andhra Pradesh; commenced Jun 2010	Annuity- fixed annual annuity of Rs.887.40 Mn from NHAI
ACP Tollways Pvt. Ltd. (ATPL)	32.00%	Toll road. Varanasi-Shakti Nagar. Uttar Pradesh: operational since Oct 2015	Toll-revenue from vehicular movement

In line with its non-core monetization strategy, the Board during FY26 approved the sale of the Companys entire 32% stake in ACP Tollways Pvt. Ltd. The two annuity-based road SPVs- PKIL and PKHIL-continue to provide the Company with stable, NHAI- backed semi-annual and annual cash flows that complement the project-linked revenues of the core EPC business.

Real Estate

The Company continues to hold a portfolio of strategically located land parcels, concentrated principally in and around major metropolitan regions including Mumbai, Hyderabad and Bengaluru. These assets were originally earmarked for residential development and continue to represent meaningful monetization potential, whether through outright sale or through strategic development partnerships. The Companys stated approach is to monetize these holdings in a phased and value-maximizing manner, releasing capital to support the core Engineering & Construction business while avoiding distressed or hurried disposals.

During FY2025-26, the Company successfully completed the sale of one of its land parcels in Chennai, realizing approximately Rs.1,350 million. The proceeds from the monetization of land bank have further strengthened the Companys liquidity position, supported ongoing debt optimization efforts and enhanced financial flexibility, enabling greater capital allocation towards its growing EPC order book and core infrastructure business. In Hyderabad, the Companys residential project, Smondo Gachibowli, handover of possession to homeowners substantially concluded. Going forward, the Company will continue to evaluate monetization opportunities across its land bank, while maintaining its strategic focus on the core EPC business.

Corporate Social Responsibility

During the financial year, the Company remained committed to its Corporate Social Responsibility (CSR) objectives by undertaking initiatives that create sustainable value for communities while supporting inclusive development.

Our CSR programmes were focused on key areas such as education, healthcare, rural development, sanitation, environmental sustainability, disaster preparedness, and community welfare across the Companys project locations.

The Company implemented a wide range of CSR initiatives across project sites viz Subansiri Lower HEP, Shongtong Karcham HEP, Kiru HEP, Kwar HEP. Parnai HEP. CIDCO Water Tunnel Project, Powai-Ghatkopar Tunnel Project, and through educational and livelihood enhancement initiatives under the Kai Laxmanrao Mankar Smruti programme.

Key Projects conducted at Companys Project sites:

Subansiri Lower HEP-Arunachal Pradesh

• Supported the construction of an astronomy laboratory along with repair and renovation works at Government Higher Secondary Schools in Dhemaji district to strengthen educational infrastructure.

• Promoted and preserved local culture through support to the Boori Boot Cultural Festival in Arunachal Pradesh.

Shongtong Karcham HEP - Himachal Pradesh

• Installed drinking water facilities in the villages to promote hygiene and public health.

Kiru HEP - Jammu and Kashmir

• Established fabricated halls for Kendriya Vidyalaya to improve educational facilities in Kishtwar district.

• Continued ambulance services for local villagers residing near the project area.

• Supported the Red Cross Society by providing disaster relief tents to strengthen emergency preparedness.

• Installed mobile toilet facilities for devotees during the Annual Shri Machail Mata Yatra.

Kwar HEP - Jammu and Kashmir

• Continued ambulance services for neighbouring communities.

• Improved infrastructure at Government Higher Secondary School, Nagseni district.

• Supported disaster preparedness through provision of relief tents to the Red Cross Society.

• Installed RO water purifiers, water coolers, and other facilities in schools.

Parnai HEP- Jammu and Kashmir

• Undertook rural development works for the benefit of local communities, including construction and improvement of road crossings, footpaths, and other essential public infrastructure to enhance connectivity, accessibility, and safety for residents in the project vicinity.

• Arranged water tanker services to address drinking water requirements of local villagers.

CIDCO Water Tunnel Project - Maharashtra

• Undertook rural development initiatives including water pipeline works and internal road development.

• Supported schools by providing interactive panels, LED screens, and water purification systems.

Powai-Ghatkopar Tunnel Project- Maharashtra

• Contributed towards disaster management, relief, rehabilitation, and reconstruction activities for affected communities.

Kai Laxmanrao Mankar Smruti

• Supported educational, skill development, livelihood enhancement, and empowerment initiatives for children, women, senior citizens, and differently abled persons.

All CSR activities were undertaken in accordance with Section 135 of the Companies Act, 2013 and the Companys CSR Policy approved by the Board. Our CSR initiatives reflect the Companys commitment to creating a positive social impact, strengthening relationships with local communities, and contributing to sustainable and inclusive development.

You can read more about Patels CSR initiatives on page 77 of the Annual Report 2026.

Governance, Systems & People

Internal Financial Controls

The Company has established a robust framework of internal financial controls, commensurate with the scale, complexity, and geographic spread of its operations, with particular reference to the preparation and presentation of its financial statements. These controls are designed to provide reasonable assurance regarding the reliability of financial reporting, the safeguarding of assets, the prevention and detection of fraud and error, the accuracy and completeness of accounting records, and the timely preparation of reliable financial information. During the year under review, the effectiveness of these controls are evaluated by experts and no reportable material weaknesses in their design or operation were identified.

Management Systems

During FY 2025-26. the Company reinforced its commitment to operational excellence by accelerating its transformation into a performance-driven organization. Building upon the strong foundation established in previous years, we strengthened our Integrated Management System (IMS), enhanced digital capabilities, and promoted a culture of continuous improvement across quality, environment, occupational health & safety, engineering, project controls, and project execution.

Our Integrated Management System (IMS), aligned with internationally recognized ISO standards, continued to serve as the cornerstone of our governance framework.

Digital document management, workflow automation, and centralized information systems implemented enabled faster decision-making and seamless collaboration across project sites and corporate functions.

The Company made significant progress in strengthening its digital project management ecosystem through real-time project monitoring tools, and integrated reporting platforms providing management with timely visibility into project progress, productivity, cost performance, resource utilization, procurement status, equipment deployment, thereby enabling informed and proactive decision-making.

A major focus during the year was enhancing project financial governance through structured budget monitoring and cost control mechanisms. Standardized budget tracking systems, periodic cost reviews, variance analysis, and forecasting processes were further strengthened to improve financial discipline and early identification of cost deviations, improved profitability and commercial performance.

Quality management remained a strategic priority, with greater emphasis on preventive quality assurance, digital inspection records, structured non-conformance management, and data-driven root cause analysis. These initiatives strengthened audit preparedness, improved process consistency, and enhanced customer confidence across ongoing projects.

Safety continued to remain our foremost operational value. The Company further strengthened its proactive safety culture through risk-based planning, behavioral safety initiatives, enhanced site surveillance, periodic emergency preparedness drills, and competency-based training programmes.

Environmental stewardship continued to be integrated into project planning and execution. The Company expanded its focus on sustainable construction practices through efficient resource utilization, waste minimization, energy conservation initiatives, environmental monitoring, and awareness programmes to support regulatory compliance while reinforcing our commitment to responsible infrastructure development.

Digital transformation gained further momentum through the adoption of loT-enabled monitoring systems for fleet movement, equipment utilization, fuel consumption, and selected project operations, providing real-time visibility for improved planning, productivity, and cost optimization.

Looking ahead, the Company will continue to accelerate the adoption of predictive project controls, digital engineering, SAP-driven enterprise integration, and intelligent project monitoring systems to enhance operational efficiency, improve decision-making capabilities, strengthen governance, and support the delivery of sustainable, high-quality infrastructure projects.

Through these initiatives, the Company remains committed to building a future-ready organization that combines technological innovation, operational excellence, financial discipline, sustainability, and strong governance to create long-term value for customers, employees, shareholders, and the communities we serve.

Information Technology

Digital Transformation: Rewiring Our Operating Model for the Intelligence Age

As society rapidly digitalizes, the demand to process, analyse, and secure data is accelerating. We are living through a pivotal turning point as the world moves deeper into the Intelligence Age, where advances in data and artificial intelligence are fundamentally shifting how value is created.

At PEL, smart technologies are redefining every stage of our business-from project planning, safety, and compliance through to operations and financial disclosure. By bringing together multidisciplinary perspectives and next-level digital tools, we are enabling our teams to navigate complexity and create sustainable value across all our projects.

A key cornerstone of our digital strategy is the significant enhancement of our Information and Communications Technology (ICT) infrastructure, even in our most remote and challenging environments. We have successfully extended robust connectivity deep into underground tunnels and isolated project sites, facilitating live data transmission and continuous digital monitoring. Deploying these digital tools during the design and planning phases allows us to capture critical insights into material allocation, energy usage, transport, and equipment needs, fundamentally boosting productivity, enhancing cost efficiency, and elevating safety standard on the ground.

At the same time, our Al initiatives are actively underway as we embed artificial intelligence into our core operating model. We are currently developing and piloting targeted digital solutions across Al. loT. and HR systems to drive immediate efficiency and transform the employee experience. These forward-looking efforts are balanced with disciplined governance. Major technology implementations, such as Enterprise Resource Planning (ERP) systems, are meticulously planned to minimize risk. Governed by our Information Technology Policy and backed by regularly tested Business Continuity Plans, we ensure robust system stability and seamless operations, capturing the opportunities of innovation while protecting what matters most.

Looking ahead, we are cementing this momentum by placing innovation and digital transformation under the remit of a newly established corporate department. This dedicated function is charged with modernizing our enterprise infrastructure, developing custom Al solutions, and driving lasting efficiency gains across the business to create a fully connected, future-proof organization. As our network expands across mobile platforms, cloud services, and ecosystem partners, securing our infrastructure remains paramount.

By combining rigorous cybersecurity with advanced tech capabilities, we are building measurable digital trust with our clients and stakeholders-protecting our operations today while powering the growth of tomorrow.

Human Resources

Empowering People, Driving Purpose, and Shaping the Future

At PEL, our people are our most vital asset. The expertise, dedication, and ingenuity of our workforce form the cornerstone of our business success and power our overarching corporate strategy. In an increasingly competitive labour market, PEL continues to successfully meet its demand for highly qualified professionals by fostering an environment where talent can thrive, innovate, and make a lasting difference. Our human resources strategy is anchored around three primary pillars: attracting top talent, investing in continuous training, and systematically retaining key expertise.

To drive continuous reinvention and market leadership, we actively recruit both rising young professionals and seasoned industry experts. We are committed to building a strong, inclusive employer brand that resonates across diverse candidate profiles and technical backgrounds. Combined with a culture rooted in active caring and inclusion, we offer a dynamic working environment where engineers and specialists are empowered to contribute meaningfully from day one.

Unlocking the full potential of our workforce requires an ecosystem built for continuous learning and modern ways of working. We are optimizing our core HR platforms and talent management systems to enable smarter, more efficient digital solutions across the enterprise. Furthermore, as part of our strategic focus on driving reinvention with Artificial Intelligence, we are launching an integrated, central learning initiative that combines cutting-edge tools, platforms, and role-based learning pathways. By promoting shared expertise and internal talent mobility, we operate as one cohesive organization, consistently enhancing the quality and impact of our work.

Long-term organizational growth relies heavily on our ability to nurture and retain critical leadership and specialized technical capabilities. We actively focus on identifying and developing high-potential leaders-particularly in high- demand roles with limited talent pools-to ensure seamless business continuity and strong institutional capability. By supporting our people in achieving both their personal and professional aspirations, we build a resilient workforce capable of adapting to evolving market needs. Together as one unified team, backed by strong core values and a clear purpose, we look to the future with confidence, resilience, and dynamism.

Cautionary Statement

This Management Discussion and Analysis contains certain forward-looking statements-including managements objectives, estimates, expectations, and projections-intended to help investors understand the Companys future prospects and make informed decisions. These statements, whether written or oral, are based on managements current assumptions and plans. Wherever possible, such statements are identified bywords such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes," and other expressions of similar meaning. While these forward-looking statements reflect prudent assumptions, actual outcomes may differ materially owing to a range of risks and uncertainties-including changes in political or economic conditions, fluctuations in exchange rates or tax laws, litigation, labour dynamics, interest-rate movements, and sector- specific developments in infrastructure. Accordingly, the Company makes no assurance regarding the realisation of these statements and undertakes no obligation to publicly update any forward-looking information in light of new data, future events, or otherwise.