Qualitek Labs Ltd Management Discussions

A. INDUSTRY STRUCTURE & DEVELOPMENTS

The Testing, Inspection and Certification ("TIC") industry plays an important role in supporting quality, safety, regulatory compliance and market access across a wide range of industries. In India, the sector continues to witness structural growth, supported by increasing industrialization, rising quality consciousness, stricter regulatory standards, expansion of manufacturing capabilities, growth in exports and the increasing need for independent and accredited testing and certification services.

The growing adoption of electric vehicles, development of renewable and alternative energy infrastructure, expansion of pharmaceutical and life sciences industries, increasing focus on food safety, growth in electronics and electrical manufacturing, infrastructure development, defense indigenization and increased environmental monitoring are creating sustained demand for specialized testing, inspection and certification services.

The TIC industry is also evolving from conventional laboratory testing towards integrated, technology-enabled and multi-disciplinary solutions. Customers increasingly seek reliable service providers capable of offering multiple testing and inspection requirements through a single platform, supported by accreditation, technical expertise, geographical reach, faster turnaround times and digital traceability.

Against this backdrop, Qualitek Labs Limited ("Qualitek", "the Company" or "QLL") has continued to strengthen its position as an independent Indian TIC service provider. The Company has progressively diversified its capabilities beyond its traditional automotive testing base and now serves a broad range of sectors including automotive, electric vehicles, defense, electrical and electronics, mines and minerals, pharmaceuticals, food and feed, cosmetics, medical devices, environment and water, infrastructure and building materials.

During FY 2025-26, the Company significantly strengthened its operating platform through organic expansion as well as strategic acquisitions and integration of businesses. The consolidation of Interstellar Testing Centre Private Limited ("ITCPL") from FY26 onwards substantially enhanced the Companys presence in life sciences, food and related testing services and expanded its geographic and customer reach.

The Company also expanded its laboratory footprint through the acquisition of a food testing laboratory in Mumbai and a USFDA-approved pharmaceutical laboratory in Bengaluru. In addition, the Company commissioned a second laboratory at Bhubaneswar and expanded capacity at existing locations including Panchkula and Chennai. These initiatives have increased the Companys ability to serve customers across multiple industry verticals and geographical markets.

As at March 31, 2026, the Company had a network comprising 10 owned laboratories and 6 laboratories operated under Public-Private Partnership ("PPP") arrangements, supported by more than 1,200 employees and an installed testing capability of more than 5 million tests annually.

The Companys digital and laboratory information systems facilitate process traceability, workflow management, sample tracking, reporting and customer communication. The continued adoption of technology, automation and data-driven processes is expected to improve operational efficiency, transparency and scalability.

The Companys laboratories and technical teams operate across multiple testing disciplines and work towards compliance with applicable national and international standards and regulatory requirements. The Companys accreditations and approvals across various technical domains provide an important foundation for serving customers operating in regulated and quality-sensitive industries.

The Company believes that the long-term fundamentals of the Indian TIC industry remain favourable. Increasing regulatory requirements, formalization of manufacturing and supply chains, export-oriented production, localization of critical industries and the increasing importance of product quality and safety are expected to continue supporting demand for professional TIC services.

B. OPPORTUNITIES AND THREATS

GROWTH OPPORTUNITIES

1. INCREASING REGULATORY & QUALITY REQUIREMENTS

- Rising standards across industries & safety testing

2. GROWTH OF EVs & ADVANCED MOBILITY

- Rising standards across industries & safety testing

3. EXPANSION OF PHARMA & LIFE SCIENCES

- Lab compliance, Bengaluru, Bengaluru lab

4. FOOD SAFETY & QUALITY ASSURANCE

- Food supply chains, Mumbai labs, Bhubaneswar, Panchkula, Chennai labs

5. DEFENCE & STRATEGIC SECTORS

- Indigenization, specialized validation

6. ELECTRICAL & ELECTRONICS & EMERGING TECHNOLOGIES

- Connected products, EMC testing

7. GEOGRAPHIC EXPANSION

- Network of labs closer to customers

8. CROSS-SELLING & INTEGRATED TIC SOLUTIONS

- Diversified capabilities, higher wallet share

9. CROSS-SELLING & INTEGRATED TIC SOLUTIONS

- Diversified capabilities

INDIAN TIC SECTOR OVERVIEW

CHALLENGES & MITIGATIONS (RISKS)

1. COMPETITIVE INTENSITY

- Pricing pressure

2. SKILLED MANPOWER AVAILABILITY

- Qualified personnel

3. REGULATORY & ACCREDITATION REQUIREMENTS

- Changing standards

4. INTEGRATION & EXECUTION RISKS

- New facilities

5. TECHNOLOGY & CYBERSECURITY RISKS

- Data protection

6. ECONOMIC & INDUSTRY CYCLES

- Industry performance

7. CAPITAL & WORKING CAPITAL REQUIREMENTS

- Funding expansion

The Indian TIC sector continues to offer significant growth opportunities, supported by industrial expansion, evolving regulatory requirements, technological advancement and increasing demand for quality, safety and compliance. At the same time, the industry remains competitive and exposed to regulatory, operational and market-related risks.

Opportunities	Threats
Regulatory & Quality Requirements: Increasing regulatory standards across pharmaceuticals, food, automotive, electrical & electronics, environment and other sectors are driving demand for accredited testing and certification services.	Competition: Intense competition from domestic, international and regional TIC service providers may impact pricing and customer retention.
EVs & Emerging Technologies: Growth in electric vehicles, batteries, electronics and energy systems is creating opportunities for specialised testing services.	Skilled Manpower: Dependence on specialised technical and scientific personnel creates risks relating to availability and attrition.
Pharmaceuticals & Food Testing: Expansion of pharmaceutical, life sciences, food and feed industries, along with stricter safety and compliance standards, offers significant growth potential.	Regulatory & Accreditation Risks: Changes in regulations or delays in obtaining or maintaining required accreditations may affect operations.
Defense & Infrastructure: Increasing focus on indigenous defense manufacturing and infrastructure development is expected to support demand for specialised testing and validation services.	Integration & Execution Risks: Acquisitions and new facilities require effective integration and timely ramp-up of utilisation.
Geographic Expansion: The Companys expanding laboratory network provides opportunities to access new markets, customers and industrial clusters.	Technology & Cybersecurity: Increasing digitalisation exposes the Company to cybersecurity and data-related risks.
Digitalisation: Adoption of automation, digital reporting and laboratory information systems can enhance efficiency, traceability and customer experience.	Economic Conditions: Changes in economic conditions and investment cycles across key customer industries may affect demand.
Integrated TIC Services: The Companys diversified capabilities provide opportunities for cross-selling and offering integrated testing solutions to customers.	Capital Requirements: Expansion and acquisitions may increase capital and working capital requirements, requiring disciplined financial management.

The Company continuously monitors these factors and seeks to mitigate associated risks through strong quality systems, internal controls, operational processes, diversification, employee development and prudent financial management.

C. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Companys principal business activity is providing Testing, Inspection, Certification and related technical services.

During FY 2025-26, the Company continued to diversify its service portfolio and customer base. The Companys operations now cover multiple industry verticals, including:

- Automotive and Electric Vehicles;

- Defense;

- Electricals and Electronics;

- Minerals and Natural Resources;

- Pharmaceuticals and Life Sciences;

- Food and Feed;

- Nutraceuticals

- Environment and Sustainability;

- Cosmetics and Ayurvedic;

- Medical Devices;

- Infrastructure and Building Materials; and

- Related inspection, certification and technical services.

The Companys geographic footprint also expanded during the year. The laboratory network covers key industrial and commercial locations including Pune, Noida, Bhubaneswar, Paradip, Panchkula, Chennai, Baddi, Bengaluru and Mumbai, together with laboratories operated under PPP arrangements.

The acquisition and integration of ITCPL materially strengthened the Companys presence in pharmaceuticals, food and feed, nutraceuticals, cosmetics and related life sciences segments. The acquisition of food testing laboratory in Mumbai further expanded the Companys capabilities in food and life sciences, while the Bengaluru pharmaceutical laboratory enhanced its capabilities in regulated pharmaceutical and cosmetics testing.

The Company believes that this diversification reduces dependence on any single industry and provides opportunities for more balanced and sustainable growth.

For financial reporting purposes, the Company considers its principal business activity to constitute a single reportable operating segment, namely Testing Services, and accordingly does not report separate operating segments for financial reporting purposes.

Key Operational Footprint as at March 31, 2026

Location	Principal capabilities
Pune – Unit I & II	Automotive, EV battery and electrical systems, vibration, durability, corrosion and emission testing; Defense; Electrical & Electronics; Metals & Metallurgy; Pharma Packaging and Medical Devices Safety Testing
Noida	Automotive, Electrical & Electronics, VOC and Analytical Testing
Bhubaneswar – Unit I & II	Minerals & Natural Resources, Food, Environment & Water, Drugs & Pharmaceuticals, Infrastructure & Building Materials Testing
Paradip	Minerals & Natural Resources, including onsite and port-based testing facilities
Panchkula	Drugs & Pharmaceuticals, Ayurvedic & Herbal, Food, Cattle Feed, Environment & Water, Infrastructure, Cosmetics and Medical Equipment Testing
Chennai	Food, Environment & Water and Cattle Feed Testing
Bengaluru	Pharmaceuticals and Cosmetics testing for regulated international markets
Mumbai	Food, Cattle Feed, Environment & Water and related testing services

D. OUTLOOK

The outlook for the Indian TIC industry remains positive, supported by Indias expanding manufacturing base, infrastructure development, increasing regulatory requirements, export orientation, quality consciousness and the growing complexity of products and supply chains.

The Companys strategic focus is to build a diversified, scalable and technology-enabled TIC platform capable of servicing customers across multiple industry verticals and geographical markets.

Having completed a significant phase of capacity creation and business diversification during FY 2025-26, the Company intends to focus on improving utilization of its expanded laboratory network, integrating acquired businesses, increasing customer penetration and enhancing operating efficiency.

For FY 2026-27, the Company has indicated an aspiration for consolidated revenue growth of approximately 35%-40% over the FY26 base, with consolidated EBITDA margin in the range of 25%–27% and PAT margin in the range of 14%–15%. These are management expectations and are subject to business, economic, regulatory and other risks and uncertainties.

The Companys growth priorities include:

- increasing utilisation of existing laboratory capacity;

- strengthening its presence in automotive, defense and mechanical testing;

- expanding food and life sciences testing capabilities;

- scaling pharmaceutical and cosmetics testing;

- developing electrical, electronics and EMI/EMC testing capabilities;

- expanding inspection, audit, certification and related services;

- increasing presence in key industrial clusters;

- pursuing selective strategic acquisitions and partnerships; and

- leveraging technology and automation to improve productivity and customer experience.

- Unlocking potential in asset-light business model such as inspection, audits, training, consultancy & certifications.

- Outsourcing business related to lab management, operation and maintenance

The Company remains focused on disciplined capital allocation and believes that its diversified service portfolio, expanding laboratory network, technical capabilities and growing customer base provide a strong platform for long-term growth.

E. RISKS AND CONCERNS

Qualitek operates in a dynamic and regulated environment and is exposed to various business and operational risks. The Company has appropriate systems and controls to identify, monitor and mitigate these risks.

- Operational & Quality Risk: Maintained through quality systems, SOPs, trained personnel, internal checks and equipment calibration.

- Regulatory & Accreditation Risk: Managed through continuous monitoring of regulatory requirements and maintenance of applicable accreditations.

- Human Capital Risk: Addressed through employee training, development, engagement and retention initiatives.

- Integration Risk: Mitigated through structured integration plans, management oversight and standardized processes for acquired businesses and new facilities.

- Cybersecurity Risk: Managed through access controls, security measures, backups and periodic IT monitoring.

- Financial Risk: Monitored through prudent management of liquidity, leverage, working capital and capital expenditure.

- Market & Competition Risk: Addressed through service diversification, quality, technical capabilities and customer-centric approach.

- Business Continuity Risk: Mitigated through contingency planning and appropriate business continuity measures.

The Company remains committed to proactive risk management and continuously strengthens its systems and controls to support sustainable growth.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established an internal control framework commensurate with the size, scale and complexity of its operations. The framework is designed to provide reasonable assurance regarding the reliability of financial reporting, safeguarding of assets, operational efficiency, prevention and detection of errors and fraud, and compliance with applicable laws, regulations and internal policies.

The Companys operational processes, including sample receipt, testing, quality review, report generation, billing and related activities, are supported by defined procedures, approval mechanisms and technology-enabled controls.

The Companys Laboratory Information Management System ("LIMS") facilitates traceability of samples and testing processes and supports effective monitoring of operational workflows.

Financial and operational controls include defined authority matrices, segregation of duties, approval mechanisms, reconciliations, periodic reviews and monitoring of key business processes.

The internal audit function reviews various operational and financial processes on a periodic basis. Significant observations and recommendations arising from internal audits are placed before the Audit Committee and appropriate corrective actions are undertaken by the management.

The Audit Committee periodically reviews the adequacy and effectiveness of internal controls and monitors the implementation of recommendations.

Based on the assessments carried out during the year, the management is of the view that the Companys internal control systems are adequate and operating effectively, commensurate with the nature, size and complexity of its business.

The Company continues to strengthen its internal control environment in line with its expanding geographical footprint, acquisitions, increasing employee base, digital systems and evolving business requirements.

G. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

FY 2025-26 was a significant year in the Companys growth journey. The Company strengthened its operating platform through a combination of organic expansion, capacity creation and strategic acquisitions, resulting in substantial growth in revenue and profitability.

Consolidated Financial Performance

The Company reported consolidated Revenue from Operations of Rs. 12,452 Lakh for FY 2025-26 as compared with Rs. 7,023 Lakh in FY 2024-25, representing a growth of approximately 77%.

Consolidated EBITDA increased to Rs. 2,928 Lakh from Rs. 1,625 Lakh in the previous year, representing growth of approximately 80%. Consolidated EBITDA margin improved to approximately 24% from approximately 23% in previous year.

Consolidated Profit After Tax increased to Rs. 1,460 Lakh, compared with Rs. 768 Lakh in FY 2024-25, representing growth of approximately 90%. Consolidated PAT margin improved to approximately 12% from approximately 11%.

The improvement in consolidated performance was supported by the consolidation of ITCPL, expansion of laboratory capabilities, increased testing volumes, diversification into higher-value testing categories and operating leverage arising from a larger business base.

The Company also witnessed stronger performance during the second half of FY26. Consolidated revenue from operations during H2 FY26 was approximately Rs. 7,027 lakhs, while consolidated EBITDA was approximately Rs. 1,805 lakhs and consolidated PAT was approximately Rs. 983 lakhs.

The improvement in H2 operating margins reflects increasing utilization of the Companys expanded laboratory infrastructure and initial benefits from integration and operating leverage.

Standalone Financial Performance

On a standalone basis, Revenue from Operations increased to Rs. 6,762 Lakh in FY 2025-26 from Rs. 4,586 Lakh in FY 2024-25, representing growth of approximately 47%.

Standalone EBITDA increased to Rs. 1,656 Lakh from Rs. 1,170 Lakh, representing growth of approximately 42%.

Standalone Profit After Tax increased to Rs. 796 Lakh from Rs. 528 Lakh, representing growth of approximately 51%.

The standalone performance demonstrates continued organic growth of the Companys existing platform, notwithstanding investments and pre-operative expenditure associated with capacity expansion and new facilities.

Operational Performance

The Companys operational performance during FY26 was supported by:

- expansion of laboratory capacity across multiple locations;

- integration and consolidation of ITCPL;

- acquisition of food testing capabilities in Mumbai;

- acquisition of a pharmaceutical laboratory in Bengaluru;

- commissioning of the second Bhubaneswar laboratory;

- expansion of existing capacity at Panchkula and Chennai;

- continued growth in automotive, defense and electrical and electronics testing;

- increased presence in food, pharmaceuticals and life sciences testing; and

- increasing geographical diversification.

The Company believes that the expanded platform provides a stronger foundation for future growth and improved operating leverage as the newly established and acquired facilities mature and achieve higher utilization levels.

H. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

Human capital continues to be one of the Companys key strategic assets. The Companys operations require a combination of scientific knowledge, technical expertise, laboratory experience, regulatory understanding and customer service capabilities.

During FY 2025-26, the Companys workforce expanded substantially in line with its laboratory network, acquisitions and diversification into new business verticals.

As at March 31, 2026, the Company and its operating platform had more than 1,200 employees, including scientists, technical personnel, field staff and support functions.

The Companys workforce includes professionals across testing and laboratory operations, quality assurance, research and development, finance, human resources, sales and marketing, information technology, administration and other corporate functions.

The Company continues to focus on:

- technical and functional training;

- structured onboarding;

- employee development;

- laboratory and quality-related training;

- leadership development;

- cross-functional learning;

- employee engagement and retention; and

- building a performance-oriented and collaborative work culture.

The Company recognizes that maintaining technical competence is critical to the quality and credibility of its services. Accordingly, continuous learning and skill development remain important components of its human resource strategy.

During FY 2025-26, there were no material adverse developments reported on the industrial relations front. The Company continues to endeavour to maintain a professional, inclusive and performance-driven working environment.

I. RELATED PARTY DISCLOSURE

The disclosures relating to transactions with related parties, including particulars of material transactions and balances, are contained in the notes forming part of the financial statements and the relevant sections of the Annual Report.

The Company has appropriate policies and procedures for identification, approval, monitoring and disclosure of related party transactions in accordance with the Companies Act, 2013 and applicable SEBI LODR requirements.

All related party transactions are undertaken in accordance with the applicable statutory and regulatory framework and are subject to the requisite approvals and disclosures.

Where applicable, details of loans, advances, guarantees, investments and other transactions with related parties are provided in the financial statements and other relevant disclosures forming part of the Annual Report.

J. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

In accordance with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the following key financial ratios are disclosed along with explanations for significant changes, wherever applicable. The ratios have been computed based on the audited financial statements and the accounting policies consistently applied by the Company.

Particulars	As at March 31, 2026	As at March 31, 2025	Variance (%)	Explanation for Significant Change
Current Ratio	0.92	0.96	(4%)	No significant change.
Debt-Equity Ratio	0.45	0.33	36%	The increase is primarily attributable to an increase in long-term borrowings during the year.
Debt Service Coverage Ratio	1.92	2.21	(13%)	No significant change.
Return on Net Worth	6.9%	8.9%	(23%)	No significant change.
Inventory Turnover Ratio	379.62	N/A	N/A	The ratio is not comparable with the previous year due to non-availability of comparable inventory figures.
Trade Receivables Turnover Ratio	4.29	4.67	(8%)	No significant change.
Trade Payables Turnover Ratio	6.40	5.93	8%	No significant change.
Net Capital Turnover Ratio	(42.99)	22.37	292%	The change is primarily attributable to the movement in average working capital from a positive balance in the previous year to a negative balance during the current year, along with an increase in net sales.
Net Profit Ratio	11.8%	11.5%	2%	No significant change.
Return on Capital Employed	7.4%	10.7%	(31%)	The decrease is primarily attributable to an increase in average capital employed during the year, including the impact of issue of equity shares and incremental borrowings.
Return on Investment	4.0%	3.0%	34%	The increase is primarily attributable to an improvement in the effective yield from investments during the year.

Note: For the purpose of this disclosure, a change of 25% or more in a ratio compared with the immediately preceding financial year is considered significant. The explanations above have been provided for significant changes, wherever applicable.

K. DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements of the Company have been prepared in accordance with the applicable Accounting Standards ("AS") prescribed under Section 133 of the Companies Act, 2013, read with the relevant rules and other applicable provisions of the Companies Act, 2013.

The Company has followed the accounting policies and treatments consistently applied in the preparation of its financial statements, except where changes are required in accordance with applicable accounting standards or statutory requirements.

During the year, no accounting treatment different from that prescribed under the applicable Accounting Standards has been followed which would require a separate disclosure under the applicable provisions of the SEBI LODR Regulations.

L. SUBSEQUENT DEVELOPMENTS AND BUSINESS UPDATE

The Company continues to strengthen its business platform subsequent to the close of FY 2025-26.

During the period following March 31, 2026, the Company and its subsidiaries continued to secure business opportunities from established institutional customers, expand laboratory capabilities and strengthen its presence across key TIC verticals.

Among the notable developments, the Company secured a work order from Quality Council of India for 3rd party testing, inspection and analysis of coal samples at the loading points of Western Coalfield Limited (WCL), a subsidiary of Coal India Limited. Interstellar Testing Centre Private Limited, wholly-owned subsidiary of the Company, received work orders from Indian Oil Corporation Limited for laboratory operation and management of their 2G Ethanol Quality Control Laboratory and for testing of water/waste-water, ethanol and processed chemicals.

These assignments further demonstrate the Companys ability to participate in specialized testing and laboratory management opportunities in the energy and industrial sectors. The Company remains focused on integrating its expanded laboratory network, improving capacity utilization and building sustainable customer relationships across its diversified service portfolio.

M. CAUTIONARY STATEMENT

This Management Discussion and Analysis contains forward-looking statements relating to the Companys business prospects, growth plans, financial performance and objectives. Such statements are based on current expectations and assumptions and are subject to risks and uncertainties.

Actual results may differ materially due to changes in economic and business conditions, regulatory requirements, competition, demand, availability of skilled manpower, technology, execution and integration risks, and other factors beyond the Companys control. The Company undertakes no obligation to update such statements except as required under applicable laws and regulations.

For & on behalf of the Board

For Qualitek Labs Limited

Sd/-

Antaryami Nayak

Managing Director

DIN No. 07232463

Sd/-

Kamal Grover

Whole Time Director

DIN No. 07429267

Place:- Noida

Date:- 29th August, 2026