PG Electroplast Ltd Management Discussions

Economy Overview

Global Economy

Overview¹

The global economy expanded by 3.4% in calendar year 2025, demonstrating resilience amid heightened geopolitical uncertainty, trade disruptions and changing supply-chain dynamics. Growth was supported by sustained demand for services, continued expansion in technology-related trade and relatively stable conditions across key commodity markets.

Governments and businesses responded to the evolving geopolitical landscape by strengthening energy security, pursuing trade partnerships and optimising cost structures. However, supply-chain constraints continued across certain industries, affecting production planning, logistics and the availability of critical inputs. Global inflation averaged 4.1% during CY2025, supported by relatively stable commodity prices and gradual improvement in supply-chain conditions. While global trade volumes remained broadly stable, trade flows continued to be reshaped by geopolitical fragmentation, shifting sourcing strategies and the growing focus on regionalisation and supply-chain resilience.

Growth remained uneven across regions. Emerging market and developing economies expanded by 4.4%, compared with growth of 1.9% in advanced economies. In this environment, businesses increasingly focused on improving manufacturing efficiency, diversifying sourcing networks and strengthening

supply-chain visibility. These measures helped improve operational resilience, support the availability of raw materials and mitigate the impact of external disruptions.

Outlook²

Global economic growth is projected at 3.1% in CY2026 and 3.2% in CY2027. The outlook remains subject to geopolitical tensions, particularly developments in the Middle East, volatility in energy markets and changes in global trade policies. Lower tariff barriers and continued efforts to normalise trade relations may provide partial support to economic activity and cross-border commerce.

Global inflation is expected to increase to approximately 4.4% in CY2026. Central banks are therefore likely to remain cautious in calibrating monetary policy, with a continued focus on inflation management and financial stability. Energy- market conditions, logistics networks and major trade routes are expected to improve gradually, although the pace of normalisation will depend on geopolitical developments and the resolution of supply-side disruptions.

Inflationary pressures, commodity-price volatility and uncertainty regarding the timing and extent of monetary-policy easing remain key risks to global growth. These factors may influence consumer demand, investment decisions, financing costs and global trade flows. In response, manufacturers are expected to continue strengthening supply-chain resilience through supplier diversification, localisation, operational efficiency and more disciplined inventory management.

Indian Economy

Overview

India remained one of the worlds fastest-growing major economies during FY2025-26, supported by resilient domestic demand, sustained public investment and a broadly stable macroeconomic environment. Real GDP expanded by 7.7%, driven

by healthy private consumption, improving investment activity and continued policy support. Government capital expenditure of Rs.11.2 lakh crore accelerated infrastructure development across transportation, logistics and urban infrastructure, creating positive multiplier effects for manufacturing and allied sectors. Stable commodity prices and prudent fiscal management further supported economic resilience and long-term growth.

Retail inflation moderated to 3.93% during FY2025-26 and remained within the Reserve Bank of Indias target range, supporting household purchasing power across urban and rural markets. The relatively benign inflation environment, together with improving liquidity conditions, facilitated credit growth and encouraged both consumer spending and private-sector investment.

Manufacturing continued to be an important driver of economic activity, with manufacturing Gross Value Added (GVA) expanding by 9.3%. Government initiatives such as Make in India and the Production Linked Incentive (PLI) scheme continued to support domestic manufacturing, investment in capacity creation and the development of local supply chains.

Demand conditions for electronics and consumer appliances also remained constructive. The consumer-durables category recorded growth of 5.3% in March 2026, reflecting sustained demand for home appliances and electronic products. Continued investment in domestic electronics supply chains, increasing localisation and rising adoption of smart and connected devices are strengthening Indias position as a competitive manufacturing destination.³

Outlook

Indias economic outlook remains favourable, supported by resilient domestic demand, continued policy support and sustained public investment. The monetary authority projects GDP growth of 6.6% in FY2026-27, with higher disposable incomes, supported by revised income tax exemptions, expected to strengthen consumption across key sectors.⁴ Moderate inflation, adequate liquidity and a supportive interest rate environment are expected to encourage private investment, sustain credit growth and reinforce overall economic activity.

Government capital expenditure of Rs.12.2 lakh crore for FY2026-27 is expected to accelerate infrastructure creation and strengthen the manufacturing ecosystem. Rising industrial investments, continued emphasis on domestic production and import substitution, along with healthy foreign exchange reserves, are expected to enhance Indias economic resilience and competitiveness. These structural drivers are likely to support manufacturing expansion, deepen supply chain localisation and create a favourable operating environment for the electronics manufacturing and consumer durables ecosystem over the medium to long term.

Indias GDP Growth Trend

Industry Overview

Indian EMS and Contract Manufacturing Industry

Indias electronics manufacturing sector continued to demonstrate strong growth momentum, with domestic electronics production reaching Rs.11.3 lakh crore in FY2024- 25. The Electronics Manufacturing Services (EMS) industry has emerged as a key contributor to this expansion, growing nearly four-fold from an estimated USD 10-12 billion in FY2020 to approximately USD 40-45 billion in FY2024-25.

The sectors export performance has strengthened materially, with domestic electronics exports increasing approximately eight-fold to Rs.3.27 lakh crore. Mobile-phone production reached Rs.5.45 lakh crore during the year, reinforcing Indias position as the worlds second-largest mobile-phone manufacturer. Continued localisation, Production Linked Incentive (PLI) support and increasing integration with global value chains are strengthening Indias competitiveness as an electronics-manufacturing destination.

Government policy remains focused on expanding domestic value addition and developing a more comprehensive electronics ecosystem. India has set an objective of building a USD 500-billion electronics-manufacturing ecosystem by FY2030-31. In support of this objective, the Union Budget for FY2026-27 increased the outlay for the Electronics Components Manufacturing Scheme to Rs.40,000 crore. As of December 2025, the scheme had secured investment commitments of Rs.1.15 lakh crore, with the potential to generate component production valued at Rs.10.34 lakh crore and create approximately 1.41 lakh direct employment opportunities.

The Government has further reinforced its commitment to building a resilient domestic semiconductor and component ecosystem through India Semiconductor Mission 2.0, for which Rs.1,000 crore was allocated in FY2026-27. The initiative is intended to strengthen supply-chain resilience, promote indigenous chip- design capabilities and support the development of domestic semiconductor-manufacturing infrastructure. Collectively, these initiatives are expected to accelerate localisation, deepen the domestic value chain and strengthen the long-term competitiveness of Indias electronics-manufacturing ecosystem.⁵

Indian Consumer Durable Market

The Indian consumer-durables market continues to present a significant long-term growth opportunity, supported by rising disposable incomes, increasing urbanisation, changing consumer preferences and growing demand for smart, energy-efficient appliances. The market is projected to reach approximately Rs.3 trillion by FY2028-29, expanding at an estimated CAGR of 11% between FY2024-25 and FY2028-29. India is consequently expected to emerge as one of the worlds largest consumer-durables markets.

The sectors growth is being supported by increased digital adoption, improving access to consumer finance, wider

e-commerce penetration and continued investments by domestic and multinational manufacturers. These factors are broadening product accessibility, accelerating premiumisation and supporting the adoption of technologically advanced appliances across urban as well as emerging markets.

A strengthening domestic manufacturing ecosystem is further reinforcing the sectors prospects. Industrial production grew by 4.9% in April 2026, led by manufacturing growth of 6.2%, while the electrical-equipment segment expanded by 19.2%. This reflects continued momentum across consumer-facing manufacturing categories and the increasing importance of domestic production capabilities. Localisation, technology adoption and investments across the value chain are enabling manufacturers to respond more effectively to demand for connected, energy-efficient and premium appliances.

The long-term outlook for the sector remains favourable, underpinned by improving consumer confidence, continued expansion of e-commerce, increasing product penetration and supportive government initiatives, including the Production Linked Incentive (PLI) scheme for white goods. While inflationary trends, commodity-price movements and evolving global trade dynamics may create near-term challenges, sustained domestic consumption, product innovation and ongoing manufacturing investments are expected to support the sectors long-term growth trajectory.

Key Growth Drivers

Government ECMS (Rs.40,000 crore outlay), India

Policy Semiconductor Mission 2.0 and PLI

schemes continue to strengthen domestic electronics manufacturing and investment.

Domestic Rising household consumption and

Demand Growth higher private consumption expenditure

continue to support demand across consumer durable categories.

Manufacturing Expansion of domestic electronics

Ecosystem manufacturing and higher domestic

value addition are strengthening Indias manufacturing ecosystem.

Component and Investments in PCB, display module

Semiconductor and passive electronic component

Ecosystem manufacturing are strengthening the

domestic component ecosystem.

Technology Growing adoption of smart and

Adoption connected devices is driving innovation

and demand across the consumer durables market.

Supply Chain Increasing domestic component sourcing

Localisation and reduced import dependence are

improving supply chain resilience.

Export Growth in electronics exports and

Competitiveness stronger integration with global value

chains are enhancing Indias export competitiveness.

Workforce and Skill India Digital Hub (SIDH)

Skilling and industry-led apprenticeship

programmes are strengthening the skilled manufacturing workforce.

Company Overview

PG Electroplast Limited (PGEL) is a leading Electronic Manufacturing Services (EMS) and integrated manufacturing company serving the consumer durables and electronics industries. The Company provides end-to-end manufacturing solutions across Original Design Manufacturing (ODM), Original Equipment Manufacturing (OEM) and contract manufacturing models. Its capabilities span product design and engineering, tool development, plastic processing, component manufacturing and final-product assembly.

PGEL serves leading domestic and global brands across a diversified portfolio of consumer-durables and electronics categories, including room air conditioners, washing machines, air coolers, televisions, LED lighting products and other electronic devices. The Companys multi-product capabilities enable it to address a broad range of customer requirements while enhancing its share of business with existing clients.

The PGELs manufacturing network, engineering expertise and integrated operating model enable efficient, scalable and responsive production. By combining product-development capability with component manufacturing and final assembly, PGEL offers customers a differentiated value proposition centred on quality, cost competitiveness, flexibility, timely delivery and supply-chain reliability.

PGEL has established a strong presence in Indias consumer- durables and electronics-manufacturing ecosystem. Its focus on execution excellence, progressive backward integration, multi-location operations and long-standing customer relationships positions the Company to benefit from the increasing trend towards outsourcing and localisation in India.

Key Highlights of FY 2025-26

• Crossed the W5,288 crore revenue milestone, reflecting strong growth across key product categories.

• PG Technoplast, the Companys wholly owned subsidiary, recorded revenue exceeding W3,942 crore during the year.

• Product Business contributed over 76.2% of total revenue, led by Room Air Conditioners and Washing Machines.

• Room Air Conditioner business achieved healthy growth despite demand moderation, commodity inflation and supply chain challenges.

• The washing machine business delivered strong year-on- year growth, supported by increasing customer traction and capacity utilisation.

• Continued investments in capacity expansion, backward integration and product development strengthened manufacturing capabilities.

• Robust order book across product categories provided strong business visibility and supported sustained operational momentum.

Room Air Conditioner (RAC)

The RAC business continued to anchor PGELs product portfolio during FY2025-26, with revenue exceeding W 3,200 crores. Supported by a growing ODM business, expanding customer relationships and an integrated manufacturing ecosystem, the segment remained the Companys primary growth driver.

Product Wise Performance

Segment	FY 2025-26 Revenue (WCrores)	Highlights
Room Air Conditioner (RAC)	3,288	- Expanded ODM business
		- Capacity addition
Washing Machine	679	- Product portfolio expansion
		- Rising consumer demand
Air Cooler	63	- Seasonal demand
		- Wide consumer base
Electronics (Ex-LED TV)	367	- Electronics other than LED TV, gaining Scale in PGEL
Plastic Moulding & Others	891	- Higher localisation and backward integration initiatives

Washing Machine

The Washing Machine business sustained its growth with a revenue of W 679 crores during FY2025-26, recording 51.5% year-on-year growth. A broader product portfolio and increasing customer engagement strengthened the business, reinforcing its position as one of the companys fastest- growing product categories.

Air Coolers

Air Coolers remained an important seasonal offering, with a revenue of W 63 crores within PGELs consumer durables portfolio. The business continued to benefit from established manufacturing capabilities and customer demand, while complementing the companys broader product portfolio across cooling appliances.

I Electronics

The Electronics business earned a revenue of W 367 crores during FY2025-26, supported by the Companys entry into solutions for TV boards, AC controllers and CCTV camera. Consumer electronics, the segment contributed to further diversification of PGELs manufacturing portfolio.

Refrigerators

FY2025-26 marked PGELs planned entry into the refrigerator segment, extending its presence across major white goods categories. The proposed manufacturing facility is expected to broaden the companys product portfolio and support its longterm growth strategy.

Tool Manufacturing

Tool Manufacturing, with a revenue of W 14 crores remained a key enabler of PGELs integrated manufacturing model. By supporting in-house tooling requirements across product categories, the business enhances manufacturing flexibility, faster product development and operational efficiency.

Plastic Molding and Components

Plastic Molding and Components stood at a revenue of W 878 crores and continued to strengthen PGELs backward integration strategy by supplying critical components across multiple product lines. The segment supports localization efforts while improving manufacturing efficiencies and supply chain resilience.

Financial Overview Consolidated

Particulars	FY 2025-26	FY 2024-25	% Change
Operating Revenues	5,288.0	4,869.5	8.6
EBITDA	441.8	519.2	(14.9)
PBIT	353.6	453.6	(22.0)
PAT	193.6	290.9	(33.5)

Key Financial Ratios

Ratios	FY 2025-26	FY 2024-25	Change %
Debt Turnover	4.39	6.35	(23.1)
Inventory Turnover	3.00	4.19	(28.8)
Interest Coverage	3.48	5.10	(31.9)
Current Ratio	1.46	1.90	(23.0)
Debt Equity	0.16	0.11	53.5%
Operating Profit Margin (%)	7.32%	9.90%	(26.4)
Net Profit Margin (%)	3.66%	5.79%	(36.8)
Return on Net Worth	6.59%	15.05%	(56.2)

Debtors turnover has decreased due to low growth in Sales of only 8.6% for FY2026 while debtors remained high and grew 20.8% mainly due to slower sales of Room AC business which also suffered due to gas supply disruption in 4Q2026, due to Iran war. The debtors remained high as collections were slow due to strain in the whole forward channel in Room AC business.

Inventory turnover declined due to low growth in Sales of only 8.6% for FY2026 while Inventory remained high and grew 21.7% mainly due to sluggish Room AC business, which got impacted due to early rains in May 2025 and then GST cut announcement in August 2025 led to postponement of demand for Room AC business in off season. Also, the high channel Inventory led to slower primary sales and that lead to company saddled with high raw material inventory for Room AC business for the whole year. Also elevated raw material prices led to higher inventory value during the year.

Interest coverage ratio has decreased due to sharp decline in the PBIT to W 353.6 crores in FY2026 from W 453.6 in FY2025, while the Interest expense grew in FY2026 to W 101.7crores from W 88.9 crores in FY2025. The PBIT decline was due to negative operating leverage in Room AC business, which suffered on account of several factors. While Interest cost was high due to the higher working capital deployment during the year due to high inventory and delayed collections leading to higher usage of the bank limits.

Current ratio decreased due to sharp decline in cash balances (part of Current assets) by W 590 crores during the financial year, which was largely used for capex of over W 780 crores that company undertook during the year. While the increase in other current assets like Inventory and receivables was largely funded by increased short term debt (part of current liabilities) and payables. This led to deterioration in the current ratio.

Debt to equity ratio increased due to the fact that gross borrowing increased from W 301.9 crores to W 499.7 crores, which is a growth of 65.5%, and this was largely to fund the capex and the increased working capital requirement. On the hand the Net worth increased by just 7.8% during the year to W 3048.6 crores and thus impacting the D/E ratio negatively.

Operating profit declined during the year due to the negative operating leverage in the Room AC business as the monsoon arrived earlier and during the year company faced other challenges leading to lower capacity utilisation than previous year and that impacted the operating profit for the year.

Net profit margin declined as operating profits declined during the year due to the operational challenges of the Room AC business and over that the higher interest cost and depreciation also impacted the net profit, thus impacting the net profit margins further.

Return on Net Worth declined as net profit declined versus previous year due year due to the operational challenges of the Room AC business and higher depreciation and Interest cost while the Net worth increased during the year.

Human Resource

PG Electroplast Limited recognises its people as a key driver of sustainable growth. As the Company expanded operations during FY2025-26, it remained focused on attracting, developing and retaining skilled talent. This approach supports its integrated EMS business and long-term growth strategy. A diverse and inclusive workplace promotes collaboration, innovation and operational excellence.

The Companys talent strategy focuses on merit-based recruitment, structured onboarding and capability development. Employees receive regular learning and training opportunities to strengthen technical, functional and leadership skills. These initiatives support the evolving requirements of ODM, OEM and integrated manufacturing operations. Skill development remains integral to the Companys long-term workforce strategy.

The Company promotes a collaborative workplace that encourages employee engagement, open communication and professional growth. The Company also supports work-life balance and employee well-being. Its focus on talent retention, leadership development and organisational capability strengthens workforce readiness and supports sustained business growth.

The Company also focuses on improving resource efficiency by encouraging responsible use of energy and natural resources across its operations. The Company integrates sustainable manufacturing practices into its long-term business strategy. It continues to improve environmental and safety performance through operational improvements and effective governance.

Risks and Mitigation Measures

PG Electroplast Limited follows an enterprise-wide risk management approach to identify, asses and mitigate business risks. Risk management remains embedded within strategic planning, capital allocation and day-to-day business operations as the Company expands its manufacturing footprint and product portfolio.

The Companys risk oversight covers operational, financial, regulatory and strategic domains. Key focus areas include supply chain disruptions, raw material price volatility, foreign exchange fluctuations, regulatory compliance, quality standards, cybersecurity, information security and changing customer demand. The Company also evaluates risks associated with capacity expansion, technology adoption and execution of new business initiatives to strengthen business continuity and operational resilience.

The Risk Management Committee periodically review the Companys risk profile, internal controls and mitigation measures. Periodic risk assessments, governance practices and continuous monitoring strengthen organisational resilience and support sustainable long-term growth.

Risk Management Committee

Environmental, Health and Safety

PG Electroplast Limited integrates Environment, Health and Safety (EHS) principles across its manufacturing operations. The Company focuses on responsible growth, operational excellence and regulatory compliance. During FY2025-26, it expanded its manufacturing footprint while maintaining safe workplaces and reducing environmental impact across its facilities.

The Companys EHS practices include structured safety protocols, periodic risk assessments, preventive maintenance and employee awareness programmes. Regular safety reviews, process standardisation and continuous monitoring enhance workplace safety and reinforce a safety-first culture.

Risk	1	^Description	Mitigation Strategy
n	Economic Risk	Inflation, interest rates and changing consumer demand may impact business performance and profitability.	The Company maintains a diversified product portfolio, broad customer base, and continues to improve operational efficiency and cost optimization.
	Supply Chain and Procurement Risk	Disruptions in component availability, logistics or raw material prices may affect production and costs.	PGEL strengthens localization, backward integration, supplier diversification and inventory planning to improve supply chain resilience.
	Regulatory and Compliance Risk	Evolving product standards and statutory requirements may require operational and product-level changes.	The Company continuously monitors regulatory developments and strengthens compliance, quality systems and internal controls.
	Technology and Information Security Risk	Technology advancements and cybersecurity threats may affect business continuity and information security.	PGEL invests in technology, automation and information security to enhance operational efficiency and protect critical business systems.
	Employee Risk	Availability and retention of skilled talent may impact operational efficiency and business expansion.	PGEL focuses on talent acquisition, continuous training, employee engagement and capability development to build a skilled and future-ready workforce.
3	Foreign Exchange Risk	Currency fluctuations may increase procurement costs and impact profitability due to imported components.	Foreign currency exposures are regularly monitored, with procurement strategies aligned to mitigate exchange rate volatility.
B	Project Execution Risk	Delays in capacity expansion or new projects may impact planned operational and financial outcomes.	Projects are executed through phased implementation, regular reviews and disciplined capital allocation.

Company Outlook

The Company enters FY2026-27 with a clearer focus on operational execution, cost leadership, working-capital normalisation and the phased commissioning of strategic growth platforms. Channel inventory in RACs has reduced materially from FY2025-26 peak levels, and the Company has observed improved sell-out momentum during April and May compared with the corresponding period of the previous year.

The Company expects to pursue growth ahead of the industry while improving operating efficiency and capital discipline. Management is targeting an improvement in EBITDA margin toward 8%, supported by normalising operating leverage, cost-management initiatives, better inventory and receivable cycles, and moderation in input-cost pressures. Actual outcomes will depend on demand conditions, weather patterns, commodity prices, exchange rates, customer schedules and the pace of project ramp-up.

Over the medium term, the Companys investment in washing machines, refrigerators, compressors, moulding consolidation, systems and workforce capability is intended to enhance its role as an integrated, multi-product manufacturing partner. PGEL remains focused on building durable customer relationships, increasing value addition, strengthening supply resilience and creating sustainable long-term value for stakeholders.

Internal Control System and Their Adequacy

The Company has established a robust internal control framework designed to support its operational structure. The Company has put in place a comprehensive system covering governance, compliance, auditing, monitoring and reporting functions. This system ensures adherence to regulatory

requirements, promotes efficient and orderly business operations, safeguards Company assets and helps in the prevention and detection of fraud and errors. It also ensures the accuracy and completeness of accounting records and supports the timely preparation of reliable financial reports. The internal controls cover operations, financial reporting, compliance with applicable laws and regulations, safeguarding assets from unauthorized use and ensure compliance of corporate policies. Internal auditors validate the effectiveness of the control mechanisms, which are further reviewed by the management. The Audit Committee oversees the financial reporting process, ensuring transparency, accuracy and integrity in disclosures. Additionally, the Committee regularly assesses the adequacy and efficiency of internal controls and suggests improvements wherever necessary.

Cautionary Statement

This reports Management Discussion and Analysis section, which includes the Companys objectives, projections, estimates and anticipations, may be considered forwardlooking statements under applicable laws and regulations. These claims rely on certain assumptions and predictions about future events. External and internal variables outside the Companys control may cause significant deviations from indicated or implied results. The Company expressly disclaims any duty to publicly change, update, or revise any forward-looking statements in light of new developments, information or events. Individuals are advised to exercise their own discretion when considering the risks connected with the Company, since the list provided is not complete.