Patels Airtemp India Ltd Management Discussions

The Managements perspective on performance of the Company for the financial year 2025-26 is given in this report. This report should be read along with the Companys financial statements, the schedules and notes thereto and other information included in this Annual Report for the financial year 2025-26. The Company financial statements have been prepared in accordance with Indian Accounting Standards ("Ind AS") complying with requirements of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations) as amended from time to time.

ECONOMIC OUTLOOK Economic Outlook - 2025-26

Indias real Gross Domestic Product (GDP) was estimated to grow by 7.6% for the financial year 202526 (FY26) and actually grew by 7.7%. GDP grew at 7.9% during last Quarter ended 31^st March, 2026 as compared with 7.1% in the same Quarter of 2024-25. Supported by a "double engine" of strong domestic consumption and robust public infrastructure investments, India successfully cemented its position as the fastest-growing major global economy for the fourth consecutive year.

The primary economic metrics tracking Indias fiscal landscape show significant stability. Real GDP Growth is 7.7% (up from 7.1% in the prior fiscal year). Headline CPI Inflation is Moderated sharply to an average of 2.1% for FY26, aided by easing food prices, healthy agricultural outputs, and global disinflationary trends. Foreign Exchange Reserves rose to a historic $701.4 billion (as of January 2026), providing an 11-month import cushion and shielding the rupee against external market shocks.

Core Structural Drivers

Consumption Recovery: Private Final Consumption Expenditure (PFCE) climbed to 61.5% of GDP, hitting its highest market share since 2011-12. Consumption expanded on the back of rising real incomes, lower structural rural stress, and middle-income direct tax exemptions rolled out in the Union Budget.

Public Capex & Investment: Investment activity stayed aggressive. Gross Fixed Capital Formation (GFCF) expanded by 7.8%, maintaining a robust 30% share of total GDP. Central government capital expenditure scaled near 4% of GDP, which successfully crowded in private investment across infrastructure, logistics, and manufacturing channels.

Financial Sector Health: The Indian banking system reported multi-decadal strengths. Gross NonPerforming Assets (GNPAs) plummeted to a record low of 2.2% as of late 2025. Backed by strong capital adequacy buffers, overall banking credit growth surged by 14.5% year-on-year.

Economic Outlook - 2026-27 Emerging Headwinds and Future Risks

Indias real GDP growth for the financial year 2026-27 (FY27) is projected to stay resilient within a 6.2% to 7.2% range, positioning it as the fastest-growing major economy despite a moderation from the 7.4%-7.6% growth recorded in FY26. According to the governments Economic Survey, the baseline growth estimate stands between 6.8% and 7.2%, while the Reserve Bank of India (RBI) pegs growth at 6.9%. The growth narrative is supported by a stable domestic economy but tempered by energy shocks arising from the prolonged conflict in West Asia.

The primary macro risks entering the picture include:

Geopolitical Disruption: Intensifying conflicts in West Asia and trade route disruptions in the Strait of Hormuz are posing logistics delays and threatening global energy cost increases.

The West Asia Conflict and Energy Shocks: Because India imports over 85% of its crude requirements, disruptions in the Strait of Hormuz have pushed oil averages up to roughly $95 per barrel. Fuel-saving diversions and gas rationing are placing elevated burdens on industrial production and transport logistics.

Protectionist Trade Policies: Inward-looking policies and unexpected tariff updates from advanced Western economies are squeezing external demand for merchandise exports.

Volatile Commodity Trends: Recent spikes in energy pricing and structural wholesale inflation pressures require careful monetary monitoring to prevent a rebound in domestic core inflation.

Resurgent Inflation and Policy Tightening: After a historic drop to ~2.1% in FY26, consumer inflation is projected to climb to 4.6% - 4.8% in FY27 due to imported fuel costs and global commodity volatility. To counter this, market experts expect the RBI to adjust repo rates defensively to keep inflation firmly anchored.

Currency Depreciation and FPI Outflows: The combination of elevated import bills (energy and fertilizers) and global capital reallocation has triggered rupee depreciation, widening the current account deficit slightly.

INDUSTRY STRUCTURE & DEVELOPMENT

The Engineering sector is the largest industrial segment in India, accounting for nearly 27% of all industrial factories and contributing approximately 3% to 4% of the countrys overall Gross Domestic Product (GDP) and serves as the primary backbone for core user industries like infrastructure, power, automotive, and mining.

The Indian Engineering industry is highly diversified and is broadly classified into two primary operational segments:

1. Heavy Engineering Segment

This capital-intensive segment accounts for more than 80% of the sectors total output. It is heavily driven by large public sector undertakings (PSUs) and major private corporations.

2. Light Engineering Segment

This segment is highly fragmented and predominantly driven by Micro, Small, and Medium Enterprises (MSMEs).

Sector Growth & Development Drivers

The modern development of Indias engineering domain relies on technological evolution, export growth, and massive domestic infrastructural overhauls. Engineering goods consistently rank as the largest contributor to Indias total merchandise export basket. The sector accounts for roughly 20% to 24% of Indias aggregate goods exports. India retains a massive competitive edge over global peers due to low manufacturing overheads, strong technical design capabilities, and high innovation capacity.

India has quickly shifted from a low-cost manufacturing hub to a sophisticated global center for engineering design. Favorable government policies have deregulated and accelerated industrial development across the country. The engineering sector has been completely de-licensed, allowing 100% Foreign Direct Investment (FDI) via the automatic route. This has allowed multinational firms to seamlessly set up wholly- owned local manufacturing bases.

The manufacturing facilities of your Company are located in Gujarat at Rakanpur, Dist: Gandhinagar and Dudhai, Dist: Kadi. Despite of mixed bag of opportunities and challenges, strong domestic demand and global geopolitical uncertainty, the Company able to achieve turnover of Rs. 25293.47 Lakhs even in highly cut-thought competition and the prevailing market conditions.

The Company is operating in single segment business namely Engineering. the Company is engaged in the manufacture and sale of extensive range of Heat Exchangers such as Shell & Tube Type, Finned Tube

Type and Air Cooled Heat Exchangers, Pressure Vessels, Air-conditioning and Refrigeration Equipments and Turnkey HVAC Projects in India & marketing of Equipments in India and outside India. All these products are supplied to leading Industrial Sections like Power Projects, Refineries, Fertilizers, Cements, Petrochemicals, Pharmaceuticals, Textile and Chemical Industries make them a single window option for multiple products. With their design to delivery ability, The Company could always offer and deliver something extra to their clients, including ease of one-stop solutions.

EXPANSION, CAPITAL EXPENDITURE & FUTURE OUTLOOK

During the Financial Year 2025-26, the Company initiated the construction of an additional bay (shed) at the Dudhai Unit with a capacity of 350 MT, which will enhance the manufacturing capacity for Vessels and Heat Exchangers from 200 MT to 350 MT. The piling work for the said bay (shed) has been completed. Further, the Company has increased the lifting capacity in one of the existing bays (sheds) at the Dudhai Unit to support higher operational efficiency and handling capabilities.

At the Rakanpur Unit, the Company has replaced all existing cement roofing with GI-coated roofing sheets, thereby improving the infrastructure, safety, and durability of the facility.

During the financial year 2025-26, the Company has incurred total capital expenditure to the extent of Rs. 4.67 Crores towards Buildings, Plant & Equipment, Electricals Installation, Furniture & Fixtures, Vehicles, Office Equipments and Computers.

Your Company is having confirmed orders of about Rs. 295 Crores on hand as on 1^st August, 2026.

FINANCIAL AND OPERATIONAL PERFORMANCE

The Company operates in a single business segment, namely engineering. Since its inception, it has steadily strengthened its position through its expertise in the design and manufacturing of process equipment.

This discussion covers the Companys financial performance and key operational developments for the financial year from April 2025 to March 2026.

Despite continued global economic uncertainties and market volatility, supported by the resilience of the domestic economy, the Company delivered a healthy performance during the year. The Company recorded steady growth across its operations and continued to strengthen its presence in domestic and international markets through its focus on quality, customer satisfaction, and operational excellence.

This performance reflects the Companys ability to adapt to changing market conditions while maintaining operational efficiency and pursuing sustainable long-term growth.

The Company has earned total revenue from operations of Rs. 25293.47 Lakhs during the year ended on 31^st March, 2026 as against Rs. 38781.63 Lakhs earned during the previous year ended on 31^st March, 2025. The Company has also earned other income of Rs. 404.30 Lakhs during the year under review as against Rs. 154.98 Lakhs earned during the previous year.

Out of revenue from operations of Rs. 25293.47 Lakhs earned by the Company during the year under review, Rs. 25003.97 Lakhs represents Sale of Products (Domestic Rs. 24215.11 Lakhs & Export Rs. 788.86 Lakhs), Rs. 171.09 Lakhs represents Sale of Services (Processing Charges) and Rs. 118.41 Lakhs represents other operating revenue including export incentives.

The Company has earned the Profit before Tax of Rs. 1389.87 Lakhs during the year ended on 31^st March, 2026 as compared to Rs. 2187.88 Lakhs earned during the previous year ended on 31^st March, 2025.

The Company has earned Net Profit of Rs. 1027.43 Lakhs for the year ended on 31^st March, 2026 after making Provision for Tax Expenses of Rs. 362.44 Lakhs and other adjustments, as compared to Net Profit of Rs. 1651.01 Lakhs earned by the Company during the previous year ended on 31^st March, 2025.

Product wise bifurcation of total revenue of the Company during the financial year 2025-26:

Sr. No. Description	% as on 31/03/2026	% as on 31/03/2025
1 Air Cooled Heat Exchanger & Accessories	60.74	59.87
2 Heat Exchanger & Accessories	35.20	32.82
3 Other Products	4.06	7.31

FINANCIAL RATIOS

Pursuant to Regulation 34 of SEBI Listing Regulations, the details of Key Financial Ratios of the Company, Analysis and Variances and Reason as on 31^st March, 2026 compared with 31^st March, 2025 have been provided in Note No. 60 to the Audited Financial Statements of the Company for the year ended 31^st March, 2026.

RECOGNITION OR AWARDS

Along with development of product design and product manufacturing application, the Company in its tenure of 53+ years continuously upgraded quality and product system by acquiring worlds most recognized system like ISO 9001:2015, ISO 14001:2015, ISO 45001:2018 and ASME (U2, U, S-Stamps).

The Company is having Quality Management System as per ISO 9001-2015 certification from TUV-SUD and Certificate for Environment Management System as per ISO 14001:2015 and Occupational Health and Safety (OH&S) Management System as per ISO 45001:2018 from TUV-NORD.

The Companys products have ASME (American Society of Mechanical Engineers-USA) "U", "U2" and "S" Stamp authorization. The Company is also having "NB" and "R" Stamp.

The Company is also a member of HTRI (Heat Transfer Research, Inc, U.S.A.) for updating Heat Transfer Technology.

Due to "U"/ "U2"/ "S" Stamp authorization, it is expected to improve the Quality of the products/equipment of the Company and to achieve higher growth and profitability of the Company in future.

The Company has also licensed software of ANSYS, CREO, PVelite, Nozzle Pro, Stadd Pro and TEKLA for product development.

OPPORTUNITIES

The Indian engineering sector continues to offer significant growth opportunities, driven by increasing investments in infrastructure development, industrial expansion, urbanization, and the Governments focus on manufacturing and self-reliance initiatives. Programs such as Make in India, Production Linked Incentive (PLI) schemes, Smart Cities Mission, renewable energy expansion, and modernization of transportation infrastructure are expected to create substantial demand for engineering products and services.

The growing emphasis on energy efficiency, automation, digitalization, and Industry 4.0 technologies presents new opportunities for engineering companies to enhance operational capabilities and develop innovative solutions. Increasing investments in sectors such as power, oil & gas, railways, defense, water management, and renewable energy are expected to generate sustained business prospects.

The Companys strong technical expertise, established customer relationships, quality-focused approach, and commitment to innovation position it well to capitalize on emerging market opportunities. Further, increasing export potential, diversification of customer industries, and adoption of advanced manufacturing technologies are expected to support long-term growth and strengthen the Companys competitive position.

The Company remains focused on expanding its market presence, improving operational efficiencies, and leveraging technological advancements to create sustainable value for all stakeholders.

Patels Airtemp (India) Limited

With the expansion of infrastructure in Dudhai Unit, there are number of new opportunities are available to the Company to enhance its various products, enter into new market and industry sectors both in the domestic and international market through Export. Export in the developed countries like UK, USA, Canada & Singapore and other countries like Nigeria, Indonesia, Zambia etc. is to be developed and it is expected to provide large impetus to engineering exports to these countries after obtaining the ASME "U"/ "U2"/ "S" Stamp Authorization. Your company is preparing itself to meet the increased demand in the years to come through efficient production management system which will enable to minimize the risk of raw materials price fluctuations.

RISK FACTORS

The Company faces several risk factors that can impact production efficiency, product quality, and overall business operations. One of the primary risks is supply chain disruption, which can delay the availability of essential components and raw materials. Key concern of risk is design and engineering errors, where inaccuracies in blueprints or simulations can lead to costly rework or malfunctioning machinery. Additionally concern which are workplace safety hazards, Regulatory compliance to meet strict industry standards and environmental regulations, market volatility, such as fluctuations in demand or raw material prices, can affect profitability and planning, making risk management a vital part of the industry.

In addition to the risks mentioned above and given the nature of its business, the Company faces intense competition from large-scale manufacturers who benefit from economies of scale and cost advantages. It also encounters challenges from low-cost imports and competition from the unorganized sector, particularly in the marketing of air-conditioning and refrigeration components within the state and neighboring regions. Despite these pressures, the Company remains confident due to its strong focus on quality, superior product offerings, and prompt after-sales service.

QUALITY CONTROL

Quality Control (QC) refers to the systematic processes used to ensure that products, components, and services meet specified standards and customer requirements. In Indian engineering companies, QC plays a critical role in improving product reliability, reducing defects, ensuring safety, and maintaining competitiveness in domestic and international markets.

The Company features its achievements to adherence to strict quality standards. This has been achieved through our efforts to strike the balance between resources and technology to develop products at same level in excellence with international standards. The quality standard is taken care from the initial stage of production to ensure high end product quality.

Objective of Quality Control is to ensure products conform to design specifications, minimize defects, rework, and wastage, improve customer satisfaction, maintain compliance with industry standards and regulations and enhance productivity and profitability.

INTERNAL CONTROL SYSTEM

The Company has established a comprehensive internal control system commensurate with the size, scale, and complexity of its operations. The internal control framework is designed to ensure the orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information.

The Company has implemented appropriate policies and procedures covering key business processes, including procurement, project execution, inventory management, finance, and statutory compliance. Adequate segregation of duties, authorization controls, and periodic reviews are in place to ensure operational effectiveness and compliance with applicable laws and regulations.

The Company has established an adequate and effective Internal Control System (ICS), commensurate with the size and nature of its business, to ensure operational efficiency and safeguard the Companys assets.

The Board of Directors is responsible for overseeing the implementation and maintenance of the ICS. The control framework is designed to ensure timely recording of all business transactions, optimal utilization of resources, protection of assets against unauthorized use, and adherence to applicable laws and regulations. The ICS is developed in compliance with the provisions of the Companies Act, 2013.

In addition, the Company has implemented a robust Whistleblower/Vigil Mechanism, which enables employees and business partners to report unethical or illegal activities, misconduct, or fraud. This mechanism ensures that concerns can be raised in a secure and confidential manner, free from the risk of retaliation, thereby fostering a culture of transparency, accountability, and integrity.

The internal control framework is further supported by well-documented policies, guidelines, and procedures that monitor business and operational performance with the objective of ensuring business integrity and promoting operational efficiency.

Internal audits are conducted by experienced Chartered Accountants in coordination with the Accounts and other departments of the Company. The Audit Committee, constituted by the Board, periodically reviews compliance with internal policies, procedures, and applicable legal requirements.

INDUSTRIAL RELATION & HUMAN RESOURCES

The Company firmly believes that its employees are its most valuable asset and key contributors to its sustained growth and success. The Company remains committed to fostering a positive work environment that promotes employee engagement, skill development, safety, diversity, and continuous improvement.

During the year under review, industrial relations across operational locations remained cordial and harmonious. The Company maintained constructive dialogue and healthy relationships with employees and workmen, which contributed to smooth operations and improved productivity. No industrial disputes affecting the Companys operations were reported during the year. The manpower is internal customer of the Company. If they are not happy, survival would be difficult. No employee union has ever been formed in the Company since inception which is a testament of how we keep each employee and their family member happy in the Company.

The Company continues to invest in the development of its human resources through various training and skill enhancement programs aimed at improving technical competencies, leadership capabilities, quality consciousness, and workplace safety. To praise the sophisticated production process, we have a team of experienced workers who are skilled and trained to get best out of it. Regular orientation programs are being conducted by the Company wherein workers are directly exposed to the experts, which keep them with the latest technology and development.

The Companys philosophy is to provide to its employees friendly working environment and a performance oriented work culture. To enrich the skills of employees and enrich their experience, the Company arranges, Practical Training Courses by Internal and External Faculties. The Company organizes regular medical camps, awareness sessions, and life skills workshops for employees and works. These initiatives are aimed at fostering a healthy work life balance and nurturing an open and caring culture within the organization. The Company extending best possible medical facilities like health check-ups for employees and workers, regular Health Camps, Awareness Talks, Immunization camps at units.

Due to the employees friendly working environment, performance oriented work and performance appraisal on yearly basses, it attract and retain the best employees in the Company. As on 31^st March, 2026, the Company has total 223 employees and workers on the roll of the Company.

HEALTH, SAFETY & ENVIRONMENT

The Company remains committed to maintaining the highest standards of Health, Safety, and Environment (HSE) across all its operations. The safety and well-being of employees, contractors, visitors, and other stakeholders continue to be a key priority and are integral to the Companys business philosophy and operational practices.

The Company has established appropriate HSE policies, procedures, and systems aimed at providing a safe and healthy work environment, preventing occupational injuries and illnesses, and minimizing environmental impact. Regular safety inspections, risk assessments, hazard identification exercises, and preventive maintenance activities are undertaken to strengthen workplace safety and operational reliability.

During the year under review, the Company conducted various safety awareness programs, employee training sessions, emergency preparedness drills, and toolbox talks to reinforce a culture of safety and compliance. Continuous efforts were made to enhance employee awareness regarding safe work practices and adherence to statutory safety requirements.

The Company is committed to environmental sustainability and undertakes measures to optimize resource utilization, conserve energy, reduce waste generation, and promote environmentally responsible operations. Environmental considerations are integrated into business processes with a focus on regulatory compliance and sustainable growth.

The Company continuously monitors its HSE performance and strives for continual improvement through employee participation, management commitment, and adoption of best industry practices. The management remains dedicated to achieving excellence in health, safety, and environmental performance while supporting sustainable business operations.

The Company complied with all applicable health, safety, and environmental regulations during the year and continues to strengthen its HSE management systems to meet evolving business and regulatory requirements.

We at Patels Airtemp (India) Limited (the Company) are fully committed to provide Quality services with safe working place and clean environment to our employees, subcontractors, suppliers, and any other stakeholder involved as an integral part of our business philosophy and value system. We recognize that providing and integrating a sound environmental, health and safety program into our business is the key to our success.

The well - experienced members of our HSE segment are constantly and tirelessly working towards making our organization Accident - free. Some of the HSE protocols and procedures that are included in the system;

- Comply with all pertinent environmental and safety laws, rules and regulations, not just because it is

legally required, but also because we believe it is the responsible way to conduct our business.

- Set HSE targets and goals annually to measure our performance and identify areas for improvement.

- Conducting regular audits to identify potential workplace risks and hazards and its preventive measures.

- Employees and workers working at shop floor are provided with Personal Protective Equipments (PPEs) to protect themselves from potential hazards.

- Provide education and training to our employees and contractors to enhance their knowledge, skills and understanding to perform their responsibilities and duties safely.

- Prevent environmental pollution and impact by conserving natural resources, improving efficiency and reducing wastages in our processes.

- Conducting regular meetings with workers across the organization to ensure their consultation and participation is effectively done.

- Ensure continual improvement of business processes through motivation and empowerment of employees.

CAUTIONARY STATEMENT

The Indian engineering industry faces critical risks: rapid skill mismatches due to outdated curricula, vulnerabilities to climate disruptions, and pressures to dilute safety codes. Firms must prioritize strict ethical compliance and robust R&D to avoid compromising public trust, project delays, and financial liability.

The statement given in this report, describing the Companys objectives, estimates and expectations and future plans may contribute towards forward looking statement within the meaning of applicable laws and / or regulations. Actual performance may differ materially from those either expressed or implied. Some statements in this discussion describing the projections, estimates, expectations or outlook may be forward looking. Actual results may, however, differ materially from those stated on account of various factors such as changes in government regulations, tax regimes, economic developments, exchange rates and interest rates fluctuations, impact of competition, demand and supply constraints.