Prabha Energy Ltd Management Discussions

1. Industry Overview

Indian Oil & Gas Exploration and Production Industry

The Indian oil and gas sector continued to play a pivotal role in supporting the countrys energy security, industrial growth and economic development during FY 2025-26. Rising urbanisation, an expanding manufacturing base, growing transportation demand and increasing per capita energy consumption continued to drive sustained demand for hydrocarbons, even as renewable energy capacity expanded rapidly.

India remained one of the worlds largest consumers and importers of crude oil and petroleum products. Domestic crude oil production continued to face structural challenges from the natural decline of mature fields, rising water cut and the complexity of developing frontier basins, keeping enhanced domestic exploration and production a strategic national priority.

The Government of India continued to pursue a balanced energy strategy, encouraging hydrocarbon exploration and gas infrastructure expansion while accelerating the transition to cleaner fuels. Policy initiatives under the Hydrocarbon Exploration and Licensing Policy (HELP), the Open Acreage Licensing Policy (OALP) and Coal Bed Methane (CBM) development programmes continued to strengthen the investment climate for upstream operators, supported by improved data availability and simplified licensing procedures.

Natural gas assumed a growing role in Indias transition to a lower-carbon economy, supporting investment across exploration, gas gathering, compression, processing, transmission and LNG and city gas distribution infrastructure. Mandatory Compressed Bio-Gas (CBG) blending obligations and continued ethanol blending progress reflected the broader diversification of Indias energy sources.

Exploration activity gathered momentum during the year with additional OALP bidding rounds and Special CBM bidding rounds supported by marketing and pricing freedom, expected to unlock Indias unconventional gas resources and create opportunities for companies with strong technical and execution capabilities.

The sector continued to face structural challenges, including volatility in international crude oil and LNG prices, geopolitical uncertainty, foreign exchange fluctuations, cost inflation, Right of way/Right of use approvals and increasing environmental compliance requirements, alongside long project development cycles and regulatory complexity.

The long-term outlook for Indias upstream industry remains positive, supported by sustained policy backing, rising domestic energy demand and continued emphasis on reducing import dependence, favouring companies with

proven technical expertise and disciplined execution.

2. Opportunities and Threats

Opportunities

• Increasing domestic energy demand driven by industrialisation, urbanisation and rising living standards.

• Continued Government policy support through HELP, OALP and CBM licensing reforms.

• Growing strategic importance of natural gas as a transition fuel, supported by expanding gas grid and CGD infrastructure.

• Significant untapped Coal Bed Methane potential, an area of established Company expertise.

• Ongoing expansion of gas gathering, transmission, processing and LNG infrastructure improving project economics.

• Technology-driven resource optimisation through seismic imaging, digital oilfield tools and AI-based production optimisation.

• The Companys diversified asset base and long-standing relationships with public sector enterprises (ONGC, IOCL, BCCL).

Threats

• Volatility in international crude oil, natural gas and LNG prices affecting project economics.

• High import dependence exposing India to supply disruptions and foreign exchange volatility.

• Inherent geological and exploration uncertainty affecting reserve and production estimates.

• Project execution risk from delays in drilling,

hydrofracturing, approvals and infrastructure completion.

• Cost inflation in steel, drilling services, equipment, logistics and skilled manpower.

• Evolving regulatory, environmental and taxation frameworks.

• Climate change and energy transition pressures influencing long-term investment patterns.

• Health, safety and operational risks inherent to drilling and production activities.

Outlook

The long-term outlook for the Indian oil and gas industry remains

favourable. Companies with strong technical capability, prudent

capital allocation, disciplined execution and effective risk management are well positioned to create sustainable long-term value.

3. Our Business

The Company is an upstream oil and gas exploration and production company engaged in the exploration, development, production and monetisation of conventional

and unconventional hydrocarbon resources, with a diversified portfolio across multiple sedimentary basins in India.

As of March 31, 2026, the Company held interests in five exploration and production assets in various stages of development. The Company holds exploration acreage of approximately 398.05 square kilometres with an estimated in-place prognostic hydrocarbon resource exceeding 273.30 million barrels of oil equivalent (MMBOE).

Asset	Location	Interest / Role	Status
Rajasthan Marginal Gas Fields (3 fields)	Jaisalmer, Rajasthan · 100 sq km	Operator (ONGC service contract, since 2007)	Producing
North Karanpura CBM Block	Hazaribagh & Chatra, Jharkhand · 271.5 sq km	Joint Operator with ONGC & IOCL	Producing (gas sales since Apr 2025)
Jharia CBM Block-I	Damodar Valley, Jharkhand -26.55 Sq Kms	100% PI and Operator (BCCL RSC, 10% revenue share)	Exploration / pilot production

Strategic Position

The Companys balanced portfolio of producing assets, development projects and exploration acreage, combined with integrated technical capability across the upstream value chain, provides multiple avenues for future growth while reducing dependence on any single project or basin.

The Company operates in a single reportable business segment, namely exploration and production of oil and gas. Accordingly, separate segment-wise financial performance is not applicable.

4. Our Strengths

• Diversified upstream asset portfolio across conventional, CBM and marginal field assets.

• Proven technical expertise spanning geology, reservoir engineering, drilling, hydraulic fracturing, gas processing and production optimisation.

• Track record of successful project execution across drilling, gathering infrastructure and processing facilities.

• Long-standing relationships with public sector enterprises · ONGC, IOCL and BCCL.

• Established leadership position in Indias emerging Coal Bed Methane industry.

• Integrated infrastructure capability across gathering, dehydration, compression and pipeline networks.

• Experienced management team with deep upstream sector expertise.

• Continued focus on operational excellence, cost discipline and HSE performance.

• Prudent capital allocation and financial discipline oriented towards long-term shareholder value

5. Our Strategy

Accelerating Commercialisation of Existing Assets

The Companys foremost priority is timely monetisation of existing assets, with particular emphasis on accelerating production from the North Karanpura and Jharia CBM blocks while optimising output from the Rajasthan marginal gas fields.

Expanding the Reserve Base

Continued investment in exploration · geological and geophysical data acquisition, exploratory drilling and reservoir evaluation · together with evaluation of new acreage and discovered small fields, supports long-term reserve replacement.

Strengthening Leadership in Coal Bed Methane

The Company will continue to leverage its CBM expertise to improve well productivity, enhance recovery factors and expedite commercial production through timely completion of surface infrastructure.

Operational Excellence and Cost Optimisation

• Optimisation of drilling programmes and well design.

• Improved reservoir management and production surveillance.

• Enhanced preventive maintenance and efficient procurement.

• Continuous monitoring of capital and operating expenditure.

Technology and Digital Transformation

• Advanced geological and reservoir modelling.

• AI and data analytics for field optimisation.

• Digital production monitoring and predictive

maintenance.

Financial Discipline and ESG

Investment decisions remain guided by rigorous technical and commercial evaluation, controlled leverage and efficient working capital management, alongside strategic priorities around emissions reduction, energy efficiency, water management and corporate governance.

6. Operational Performance Review

The Company continued to make progress across its exploration and production portfolio during FY 2025-26, advancing key development projects, strengthening operational infrastructure and progressing the monetisation of its hydrocarbon assets.

Jaisalmer Marginal Gas Fields

The Company has operated three onshore marginal gas fields in Jaisalmer, Rajasthan, under a service contract awarded by Oil and Natural Gas Corporation Limited (ONGC) since 2007, covering approximately 100 square kilometres with estimated gas reserves of around 1.42 billion cubic metres (BCM). The Company has carried out well intervention jobs across the fields and constructed a Gas Gathering Station (GGS) at Bankia in 2012, incorporating separation, purification, dehydration and compression facilities · the purification and drying unit installed there was the first of its kind for this application. Approximately 15 kilometres of pipeline has been laid connecting producing wells to the GGS. Efforts are being made to sell the gas.

North Karanpura CBM Block · Milestones Achieved

• Development drilling commenced June 2018; 62 wells drilled by March 2022.

• Extensive hydraulic fracturing (HF) completed to maximise gas deliverability.

• Reservoir evaluation confirmed coal seam thickness of ~65 m against ~37 m envisaged in the earlier FDP, approximately doubling estimated reserves.

• High to very high gas potential observed on production testing of southern-part wells.

• Gas sales contract signed for 20,000 SCMD; gas sales commenced April 2025.

• GGS-1 and GGS-2 construction in progress along with interconnecting evacuation pipelines;

• IOCL is laying an gas evacuation pipeline of about 68 Kms from Block to Urja Ganga Pipeline and is expected to be commissioned soon.

Jharia CBM Block · Milestones Achieved

• 5 coreholes drilled and tested during exploration.

• Phase-1 test well drilling in progress; 5 wells drilled to date.

• Hydrofracturing of 5 wells Completed.

• De-watering pump installation will be completed in August 2026.

• PNGRB has authorised a pipeline connecting the block to the Urja Ganga pipeline (~9 km away), enabling access to the national gas grid.

• Infield pipelines and an Early Production System (EPS) are being set up positioning the company to achieve first gas sales imminently.

Future Operational Priorities

• Ramping up gas sales and completing GGS-1/GGS-2 and the IOCL pipeline at North Karanpura CBM

• EPS at Jharia CBM ahead of first gas sales and full development drilling

• Gas sales from the Rajasthan marginal gas fields.

• Strengthening gas evacuation infrastructure and operational efficiency through technology adoption.

7. Financial Performance Review and Management Analysis

During FY 2025-26, the Company continued to invest in the development of its upstream portfolio while progressing key CBM and conventional exploration assets towards commercial production. As is typical for exploration and production companies during the asset development phase, financial performance reflects continued investment in long- gestation projects, while revenue from producing assets remains limited relative to the scale of the asset base.

Income

Particulars (Rs. in lakh)	FY 2025-26	FY 2024-25	% Change
Revenue from Operations	447.12	157.75	+ 183.44%
Other Income	159.82	45.30	+252.80%
Total Income	606.94	203.05	+ 198.91%

Revenue from operations increased to Rs.447.12 lakh during FY 2025-26 from Rs.157.75 lakh in the previous year, an increase of 183.44%, reflecting higher operating activity. Other income increase to Rs.159.82 lakh compared with Rs.45.30 lakh (+252.80%), while total business income increased from Rs.203.05 lakh to Rs.606.94 lakh, an increase of 198.91%, primarily driven by the growth in operating revenue.

Expenditure and Profitability

Particulars (Rs. in lakh)	FY 2025-26	FY 2024-25
Total Income	606.94	203.05
Total Expense	576.75	428.66
of which: Operating Expenses	397.41	149.52
of which: Employee Benefit Expense	99.46	93.43
of which: Other Expenses	63.44	168.59
of which: Finance Costs	9.50	10.18
of which: Depreciation	6.94	6.94
Profit / (Loss) Before Tax	30.19	(225.61)
Profit / (Loss) After Tax	47.32	(156.48)
Earnings Per Share (Rs.)	0.04	(0.11)

Total expenses increased to Rs.576.75 lakh in FY 2025-26 from Rs.428.66 lakh in the previous year. Of this, operating expenses were Rs.397.41 lakh, employee remuneration and benefits were Rs.99.46 lakh, other expenses were Rs.63.44 lakh, finance costs were Rs.9.50 lakh, and depreciation was Rs.6.94 lakh for the year ended March 31,2026.

The Company reported a profit before tax of Rs.30.19 lakh (FY 2024-25: Loss of Rs.225.61 lakh) and a profit after tax of Rs.47.32 lakh (FY 2024-25: Loss of Rs.156.48 lakh), with earnings per share of Rs. 0.04 compared with Rs.(0.11) in the previous year.

These results should be viewed in the context of the Companys current stage of development: exploration and production businesses typically require substantial capital investment over several years before achieving commercial production and stable operating cash flows. With gas sales from North Karanpura CBM having commenced in May 2025 and Jharia CBM progressing towards first gas sales in immediate future, management believes commissioning of these assets is expected to improve operating leverage, revenues and profitability over the medium term.

8. Key Financial Ratios & Return on Net Worth

Pursuant to Schedule V Para B Clause (1) (i) of the Listing Regulations, please find below details of Significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios along with detailed explanation therefore.

Key Ratio	FY 2025-26	FY 2024-25	Change %	Explanation
Debtors Turnover Ratio (times)	29.81	22.09	34.92	Improved due to Increase in Revenue from Operations and due to faster collection of Trade receivable.
Inventory Turnover Ratio (times)	0.11	0.05	114.65%	Inventory Turnover Ratio has Increased due to higher amount of material consumed vis-a-vis average inventory levels.
Interest Coverage Ratio (%)	23.94	-4.73%	-606.53%	Improved profitability enhanced the Companys ability to service its finance costs, resulting in a strong positive Interest Coverage Ratio.
Current Ratio (times)	0.69	0.81	-14.43%	Current Ratio has gone down primarily due to increase in current liabilities in FY 2025-26
Debt-Equity Ratio (times)	0.38	0.29	30.78%	Debt Equity has increased primarily due to increase in Debt.
Operating Profit Margin (%)	-25.32%	-160.88%	-276.21%	The improvement was primarily driven by higher revenue from operations, which enabled better absorption of fixed operating costs and reduced the operating loss margin. Although the margin remains negative, the substantial reduction in losses reflects improved operational performance compared to the previous year.
Net Profit Margin (%)	7.80%	-77.06%	-110.12%	Due to higher Net profits as compared to previous years.
Return on Net Worth (%)	0.11%	-0.36%	-130.41%	RoE has improved during FY 2025-26 owing to profit generated during the year, resulting in a significant improvement in returns to shareholders compared to the previous year.

Disclosure of Accounting Treatment

Standard Accounting procedure has been followed.

9. Risk Management

The Company operates in a technically complex and capitalintensive industry where effective risk management is fundamental to sustainable value creation. An enterprisewide risk management framework identifies, evaluates, monitors and mitigates risks affecting business performance, project execution and strategic objectives, with periodic review by the Board and senior management.

Exploration and Geological Risk

Mitigated through comprehensive geological studies, seismic interpretation, reservoir modelling, technical peer review and phased investment decisions.

Project Execution Risk

Addressed through detailed project planning, experienced project management, contractor performance monitoring and regular milestone review.

Commodity Price Risk

Management continuously monitors market developments and focuses on operational efficiency to enhance resilience against price volatility.

Regulatory Risk

Managed through regular engagement with regulatory authorities and continuous monitoring ofpolicy developments.

Financial Risk

The Company is exposed to liquidity, credit, interest rate and foreign exchange risk, managed through prudent financial policies and efficient capital structure management.

Health, Safety and Environmental Risk

Managed through comprehensive HSE systems, preventive maintenance, training and emergency preparedness.

10. Internal Control Systems and Their Adequacy

The Company has established internal financial controls commensurate with the size, nature and complexity of its business, designed to safeguard assets, ensure reliable financial reporting, promote operational efficiency and ensure regulatory compliance. The framework covers financial reporting, procurement, capital expenditure, operations, inventory, IT controls, statutory compliance and delegation of authority.

Internal audit reviews are conducted periodically to evaluate control effectiveness, with significant matters reported to the Audit Committee of the Board. Management believes the existing internal financial controls are adequate and operated effectively during the year under review.

11. Human Resources

The Company continues to invest in attracting and retaining skilled professionals, technical and leadership development,

succession planning and employee engagement, given the specialised nature of upstream oil and gas operations. Industrial relations remained cordial through the year, supported by constructive employee engagement and a performance-oriented culture.

As on March 31, 2026, the Company had 13 employees on its payroll.

12. Health, Safety and Environment (HSE)

HSE remains integral to the Companys operating philosophy, with a framework focused on zero harm, safe drilling and production operations, process safety management, environmental protection, emergency preparedness and continuous training. Regular audits, inspections and emergency drills are conducted across operating locations.

13. Outlook of the Company

Indias long-term energy outlook remains favourable, supported by sustained economic growth, expanding gas infrastructure and continued Government emphasis on domestic hydrocarbon production. The Companys diversified portfolio, growing CBM business and disciplined execution capability provide a platform for future growth.

• Accelerating commercial production from North Karanpura CBM.

• Commencing gas production from Jharia CBM.

• Exploring sales opportunities from the Rajasthan marginal gas fields.

• Strengthening operational efficiency through digital technologies.

• Maintaining financial discipline and prudent capital allocation.

14. Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may constitute "forward-looking statements" within the meaning of applicable securities laws. These statements are based on managements current assumptions and are subject to risks and uncertainties, many beyond the Companys control, including changes in economic conditions, crude oil and natural gas prices, government policy, regulatory developments, foreign exchange movements, project execution, reservoir performance and other risks inherent in the oil and gas industry.

Actual results may differ materially from those expressed or implied. The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required under applicable laws and regulations.