Pradeep Metals Ltd Management Discussions

1. Global outlook

The global economic outlook for 2026-27 presents a mixed picture, characterized by moderate growth, easing but still elevated inflationary pressures, and heightened policy uncertainty.

According to the OECD, global GDP growth is projected to moderate from 3.2% in 2025 to 2.9% in 2026 before recovering to 3.1% in 2027. Near-term activity is expected to soften as higher tariff rates weigh on investment and trade amid persistent geopolitical and policy uncertainty, with emerging Asian economies remaining the primary drivers of global growth.

The IMF projects global growth of 3.3% in 2026 and 3.2% in 2027, reflecting resilience despite ongoing trade and geopolitical challenges.

Meanwhile, the World Bank expects growth in low-income countries to rise to 5.7% in 2026 and 5.6% in 2027, supported by stronger domestic demand, improving security conditions in several fragile states, recovering exports and continued easing of inflation.

2. Indian economy

India is expected to remain one of the worlds fastest-growing major economies in FY 2026-27, supported by strong domestic fundamentals despite continued global economic uncertainty. Economic growth is expected to be driven primarily by resilient domestic demand, sustained public capital expenditure, improving private investment sentiment, and a stable

macroeconomic environment.

As per the Economic Survey 2025-26, Indias real GDP growth is projected in the range of 6.8% to 7.2% during FY 2026-27, reflecting the economys resilience amid global headwinds. Growth is expected to be supported by robust domestic consumption, ongoing infrastructure development, sustained investment activity, and the cumulative benefits of policy reforms undertaken in recent years.

The growth outlook underscores Indias structural strengths, including favourable demographics, rapid digitalisation, improving productivity, and continued reforms aimed at enhancing the ease of doing business. Nevertheless, risks arising from geopolitical tensions, global trade disruptions, commodity price volatility, and fluctuations in international capital flows may pose challenges to the external environment.

& ANALYSIS

Overall, the Indian economy is expected to maintain a stable growth trajectory in FY 2026-27, supported by moderate inflation, continued infrastructure spending, healthy financial sector fundamentals, and resilient domestic demand. Continued progress in structural reforms, export competitiveness, and investment-led growth will remain critical for sustaining long-term economic expansion and strengthening Indias role as a key contributor to global growth.

3. Business environment The Indian metal forging industry continues to demonstrate steady growth, supported by expanding demand from the automotive, infrastructure, railways, defense, industrial machinery, and renewable energy sectors. Published market estimates vary by source; however, recent industry research indicates that the India metal forging market is expected to grow steadily over the next decade, supported by technological advancements and rising demand from key end-use industries.

Growth in the forging industry remains closely linked to developments in the steel and manufacturing sectors. Indias steel demand is projected to grow by around 9% in 2026, driven by robust activity in infrastructure, construction, automotive, railways, and capital goods industries. Domestic crude steel production and steel consumption continue to expand, supported by capacity additions, increasing industrial activity, and strong policy support for manufacturing and infrastructure development.

Government initiatives such as the National Infrastructure Pipeline (NIP), the Production Linked Incentive (PLI) Scheme for Specialty Steel, and continued investments in transportation, energy, and urban infrastructure are expected to support higher steel consumption and create sustained demand for forged components across automotive, heavy engineering, railways, defense, and renewable energy sectors.

At the same time, the industry faces challenges arising from global price volatility, fluctuations in raw material costs, increasing import competition, geopolitical uncertainties, and evolving environmental regulations.

Overall, the Indian economy is expected to maintain a stable growth trajectory in FY 2026-27, supported by moderate inflation, continued infrastructure spending, healthy financial sector fundamentals, and resilient domestic demand. Continued progress in structural reforms, export competitiveness, and investment-led growth will remain critical for sustaining long-term economic expansion and strengthening Indias role as a key contributor to global growth.

3. Business environment

The Indian metal forging industry continues to demonstrate steady growth, supported by expanding demand from the automotive, infrastructure, railways, defense, industrial machinery, and renewable energy sectors. Published market estimates vary by source; however, recent industry research indicates that the India metal forging market is expected to grow steadily over the next decade, supported by technological

advancements and rising demand from key end-use industries.

Growth in the forging industry remains closely linked to developments in the steel and manufacturing sectors. Indias steel demand is projected to grow by around 9% in 2026, driven by robust activity in infrastructure, construction, automotive, railways, and capital goods industries. Domestic crude steel production and steel consumption continue to expand, supported by capacity additions, increasing industrial activity, and strong policy support for manufacturing and infrastructure development.

Government initiatives such as the National Infrastructure Pipeline (NIP), the Production Linked Incentive (PLI)

Scheme for Specialty Steel, and continued investments in transportation, energy, and urban infrastructure are expected to support higher steel consumption and create sustained demand for forged components across automotive, heavy engineering, railways, defense, and renewable energy sectors.

At the same time, the industry faces challenges arising from global price volatility, fluctuations in raw material costs, increasing import competition, geopolitical uncertainties, and evolving environmental regulations.

Nevertheless, the long-term outlook for Indias steel and forging industries remains positive. Strong domestic demand, increasing investments in infrastructure and manufacturing, technological advancements in forging processes, and supportive government policies are expected to drive sustained growth in the sector over the coming years.

4. Business snapshot

Pradeep Metals Limited (PML) showed growth and generated Rs. 32,784.87 Lakhs in annual sales through its products ranging from intricate closed die stainless, alloy, carbon and Nickel Alloy steel forgings as finished and semi-finished machined components. The strategy of specialization in catering to custom-made and small quantity orders continues to pay dividends and has made the Company the preferred supplier to its customers. The Companys expertise in making deliveries in short lead times, sometimes even 2 days, helps the

5. Discussion on financial performance with respect to operational performance Standalone financial performance of the Company is summarized below: -

			(Rupees in Lakhs)
Particulars	FY 2025-26	FY 2024-25	Change in %
Exports	15,531.57	14,784.26	5.05
Domestic Sales	16,723.62	13,898.96	20.42*
Export Incentives	324.35	558.49	-41.92 **
Income from Windmill	205.33	197.38	4.03
Other Income	245.92	514.31	-52.18***
Total Income	33,030.79	29,953.39	10.27
EBITDA	4,965.37	4,546.95	9.20
Profit before Taxes	3,435.53	3,066.83	12.02
Profit after Taxes
(before Other Comprehensive income)	2,532.74	2,314.57	9.43
Total Comprehensive Income	2,525.14	2,272.08	11.14

* Domestic sales increased by 20.42% from FY 2024-25, due to demand and price increase.

**The export incentive dropped by 41.92% in FY 2025-26 as incentive for imported machinery was accounted in FY 2024-25.

***Other income includes Rs. 148 lakhs profit on sale of machinery in FY 2024-25.

6. Segment wise or product wise performance

Business verticals such as Valves, General Engineering, Instrumentation & Flanges and Defense contributed 30%, 34%, 33% and 3% respectively, to the total sales of the Company.

7. Key financial ratios Standalone.

Particular	2025-26 (Audited)	2024-25 (Audited)	Variance
Debtors turnover ratio	3.61	3.66	-1.30
Inventory turnover ratio	5.39	6.14	-12.21
Interest coverage ratio*	6.26	5.53	13.20
Current Ratio	1.37:1	1.39:1	-1.43
Debt Equity Ratio	0.42:1	0.45:1	-6.67
Operating Profit Margin	12.47%	12.72%	-1.97
Net Profit Margin@	7.73%	7.86%	-1.65
Return on Net worth	17.31%	17.78%	-2.64

* Interest includes fi

8. Future outlook

The Management is planning to expand machining capacity further to meet increased customer demand. The company is also installing a rooftop solar plant of 600 KW at the existing factory. The power generated through solar plants is substantially economical when compared with the MSEBs tariff. The pay-back period for the plant is expected to be 4 years, whereas the plant is expected to generate power for 25 years with annual degradation of approximately 0.5%.

The Board has recently approved an investment of up to Rs. 250 Crores for setting up a Greenfield Manufacturing Facility at Butibori, Nagpur, aimed at catering to the rapidly growing global demand for defense equipment arising from evolving geopolitical dynamics(with a particular focus on

precision-engineered defense components such as artillery shell casings that require high-quality forging).

Europes decision to materially enhance defense spending, coupled with Indias expanding defense cooperation arrangements with European nations, is expected to create sustained export opportunities for Indian manufacturers. In this context, Indias emergence as a reliable, cost-competitive, and strategically aligned manufacturing base, particularly as global supply chains diversify, positions the Company favourably.

Leveraging its metallurgical expertise and precision manufacturing capabilities, the Company seeks to develop a scalable, export-oriented defense platform that supports sustainable long-term growth and delivers enduring value to shareholders.

9. Opportunities and threats

Following new opportunities have emerged to develop new overseas Customers:

Developing trend among Countries of decreasing the dependence on China in the Post-Covid Scenario; and

Signing of Free Trade Agreements (FTA) between India and various Countries

. New product and customer development is a focus area, which helps us to mitigate the risk of obsolete product range.

The companys ability to support customer demand within the shortest possible lead time helps us to meet the ever-shrinking expected lead time due to the uncertain market conditions.

Threats:

Emergence of EV market which may reduce demand for forged components.

. Labour intensive process, which can get hit during pandemics like Covid-19 and availability of skilled labour.

15. Tariffs war impacting international trade.

Hike in the prices of Steel, Consumables, Freight, etc.