Raunaq International Ltd Management Discussions

Indian Economy

The Asian Development Bank (ADB) projects Indias gross domestic product growth to ease to 6.9% in fiscal year 2026

(FY 2026, ending 31 March 2027)-from 7.6% in FY 2025- before accelerating to 7.3% in FY 2027.

The forecasts are informed by assumptions finalized on 10 March under exceptionally high uncertainty envisaging an early stabilization scenario for the conflict in the Middle East. Evidence since then points to a higher likelihood of more persistent disruptions.

The moderation in growth in FY 2026 is due mainly to heightened global uncertainty, due to the Middle East conflict, higher energy prices, and volatile trade and financial conditions. These external pressures are likely to weigh on exports, inflation, and capital flows in the near term. Growth is expected to pick up in FY 2027, supported by strong domestic demand, continued public investment, and an improving external environment.

A senior official of ADB said "Despite external challenges, Indias growth outlook remains resilient, aided by supportive fiscal and monetary policies and regulatory reforms aimed at enhancing labor flexibility and integration with global value chains. Over the medium term, investments in clean energy, power sector reforms, and measures to boost manufacturing competitiveness and attract investment will sustain growth."

Domestic demand will remain the main driver of growth during FY 2026 and FY 2027. Private consumption is likely to remain strong in FY 2026, supported by rising real incomes, steady rural demand, and easing monetary conditions, although the waning impact of earlier tax cuts and increasing inflation could moderate its pace. It is expected to strengthen in FY 2027, aided by an expected once-in-a- decade revision to government salaries and pensions.

Investment is projected to remain robust. Central government capital expenditure is budgeted to rise by 11.5% in FY 2026, reinforcing Indias investment-led growth strategy. Supportive monetary policy, regulatory reforms, improved logistics, and healthier corporate and banking sector balance sheets are expected to foster private investment momentum.

Inflation is projected to rise to 4.5% in FY 2026, reflecting higher food and energy prices, before moderating to 4.0% in FY 2027 as supply conditions improve. The current account deficit is expected to widen in FY 2026 due to higher imports, particularly crude oil, before narrowing in FY 2027, due to an expected normalization of global energy markets and strengthened exports reflecting recent trade agreements with key partners, including the European Union, the United States, and New Zealand.

On the supply side, manufacturing and services growth is expected to remain strong. Manufacturing will benefit from

recent trade agreements as well as key support measures outlined in the budget for semiconductors, electronic components, and rare earth. Services will also continue to be supported by the expansion of global capability centers and robust demand for high-value business services.

INDUSTRY OVERVIEW

Infrastructure Sector Introduction

Infrastructure is a key enabler in helping India become a US$ 26 trillion economy. Investments in building and upgrading physical infrastructure, especially in synergy with the ease of doing business initiatives, remain pivotal to increase efficiency and costs. Prime Minister Mr. Narendra Modi also recently reiterated that infrastructure is a crucial pillar to ensure good governance across sectors.

The governments focus on building infrastructure of the future has been evident given the slew of initiatives launched recently. The US$ 1.3 trillion national master plan for infrastructure, Gati Shakti, has been a forerunner to bring about systemic and effective reforms in the sector, and has already shown a significant headway.

Infrastructure support to the nations manufacturers also remains one of the top agendas as it will significantly transform goods and exports movement making freight delivery effective and economical.

The infrastructure sector is a key driver of the Indian economy. The sector is highly responsible for propelling Indias overall development and enjoys intense focus from the Government for initiating policies that would ensure the time-bound creation of world-class infrastructure in the country. The infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. In other words, the infrastructure sector acts as a catalyst for Indias economic growth as it drives the growth of the allied sectors like townships, housing, built-up infrastructure, and construction development projects.

To meet Indias aim of reaching a US$ 5 trillion economy by 2025, infrastructure development is the need of the hour. The government has launched the National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India and the production-linked incentives (PLI) scheme to augment the growth of the infrastructure sector. Historically, more than 80% of the countrys infrastructure spending has gone toward funding for transportation, electricity, and water, and irrigation.

While these sectors still remain the key focus, the government has also started to focus on other sectors as Indias environment and demographics are evolving. There is a compelling need for enhanced and improved delivery across the whole infrastructure spectrum, from housing provision to water and sanitation services to digital and transportation demands, which will assure economic growth, increase quality of life, and boost sectoral competitiveness.

Robust Demand

• India intends to enhance its infrastructure to reach its 2025 economic growth target of US$ 5 trillion.

• Cement demand in India is projected to remain robust in the coming years, with a compound annual growth rate (CAGR) of 7-8% over FY25-27, according to a report by JM Financial.

• Indian REITs deliver 6-7.5% yields, have reached Rs. 1,54,242 crore (US$ 18 billion) market as of August 2025 and are projected to surpass Rs. 2,14,225 crore (US$ 25 billion) by 2029 with expansion into retail, logistics and new-age assets.

Attractive Opportunities

• Infrastructure development boosts transport efficiency, demand, and commercial opportunities.

• In March 2024, Prime Minister Mr. Narendra Modi inaugurated connectivity projects worth US$ 1.8 billion in Kolkata.

• In the Union Budget 2025-26, Union Minister for Finance & Corporate Affairs, Ms. Nirmala Sitharaman announced plans to connect 120 new airports in 10 years, targeting four crore additional passengers.

• Morgan Stanley projects Indias infrastructure investment to rise from 5.3% of GDP in FY24 to 6.5% by FY29.

• In January 2025, the government approved 56 Watershed Development Projects in 10 high- performing states with a budget of Rs. 700 crore (US$ 80.9 million)

Policy Support

• Union Budget 2025-26 includes continuation of a 50- year interest-free loan for states capital expenditure, with an enhanced outlay of Rs. 1.5 lakh crore (US$ 17.30 billion).

• In line with PM Gati-Shakti National Master Plan, eight key infrastructure projects have been shortlisted: seven by the Ministry of Railways and one by the Ministry of Road Transport and Highways to improve efficiency in challenging terrains.

• Private sector access to relevant data and maps from the PM Gati Shakti portal will be provided for better project planning.

• Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) aims to modernize infrastructure and supply chains in the food processing sector.

• PMKSY focuses on reducing agricultural wastage, increasing processing levels, improving farmers income, and generating rural employment.

Increasing Investments

• In the Union Budget 2025-26, capital investment outlay for infrastructure has been increased to Rs. 11.21 lakh crore (US$ 128.64 billion), which would be 3.1% of GDP.

• According to CRISILs Infrastructure yearbook 2023, India will spend nearly Rs. 143 lakh crore (US$ 1,727.05 billion) on infrastructure in seven fiscals through 2030, more than twice the near Rs. 67 lakh crore (US$ 912.81 billion) spent in the previous seven years.

• As of October 14, 2025, London-based infrastructure investor Actis said India is one of the most attractive infrastructure markets globally and plans to explore ways to double its existing Rs. 17,500 crore (US$ 2 billion) investment in energy, roads, transportation and digital infrastructure over the next three to four years.

The Road Ahead

With a 37% increase in the current fiscal year, capital expenditures (CAPEX) are on the rise, which bolsters ongoing infrastructure development and fits with 2027 goals for Indias economic growth to become a US$ 5 trillion economy. In order to anticipate private sector investment and to address employment and consumption in rural India, the budget places a strong emphasis on the development of roads, shipping, and railways.

Global investment and partnerships in infrastructure, such as the India-Japan forum for development in the Northeast are also indicative of more investments. These initiatives come at a momentous juncture as the country aims for self-reliance in future-ready and sustainable critical infrastructure.

India, it is estimated, needs to invest US$ 840 billion over the next 15 years into urban infrastructure to meet the needs of its fast-growing population. This investment will only be rational as well as sustainable, if we additionally focus on long-term maintenance and strength of our buildings, bridges, ports, and airports.

As a result of digitalisation and opportunities that tier II and III cities present for economic growth, the divide between metro and non-metros is blurring, moving to the new era of infrastructure growth. Commercial real estate properties have witnessed exponential growth in demand across Tier II & III cities as Information technology and Information technology enabled services and banking financial services and insurance focused organizations are increasingly decentralizing their operations to adapt to the new normal.

Civil Aviation Ministrys "Vision 2040" report states that there will be 190-200 functioning airports in India by 2040. Delhi and Mumbai will have three international airports each, while top 31 Indian cities will have two operational airports each.

220 destinations (airports/heliports/water aerodromes) under UDAN are targeted to be completed by 2026 with 1000 routes to provide air connectivity to unconnected destinations in India.

Indias Infrastructure forms an integral part of the countrys economic ecosystem. There has been a significant shift in the industry that is leading to the development of world-class facilities across the country in the areas of roads, waterways, railways, airports, and ports, among others. The country-wide smart cities programmes have proven to be industry game-changers. Given its critical role in the growth of the nation, the infrastructure sector has experienced a tremendous boom because of Indias necessity and desire for rapid development. The expansion has been aided by urbanisation and an increase in foreign investment in the sector.

The infrastructure sector has become the biggest focus area for the Government of India. Indias GDP is expected to grow exponentially over the next three fiscal years, with one of the quickest rates among major, developing economies, according to S&P Global Ratings. India and Japan have joined hands for infrastructure development in Indias Northeast states and are also setting up an India- Japan Coordination Forum for development of Northeast to undertake strategic infrastructure projects for the region.

India being a developing nation is set to take full advantage of the opportunity for the expansion of the infrastructure sector, and it is reasonable to conclude that Indias infrastructure has a bright future ahead of it.

POWER SECTOR

Introduction

Power is one of the most critical components of infrastructure, playing a central role in economic

COMPANY REVIEW

Business Performance and Outlook

During the Financial Year 2025-26, the Company witnessed a significant turnaround in its financial performance. Total revenue increased sharply from R2206.43 Lakhs in the previous year to R3689.37 Lakhs in FY 2025-26, reflecting the successful execution of strategic initiatives and operational focus.

Despite facing constraints in obtaining Bank Guarantees due to tightened norms in the banking sector particularly affecting the EPC industry the Company continued to actively pursue select, high-value tenders. As a result, the Company was awarded a prestigious work order by Mahan Emergen Limited for the 2x800 MW Ultra Supercritical Thermal Power Plant (Phase-III) project, located at Village Bandhaura, PO: Karsualal, Tehsil: Mada, Dist.: Singrauli, Madhya Pradesh . This contract, valued at R15.40 Crores, was secured during the year under review.

Further reinforcing its market presence, the Company has also secured two orders in the current Financial Year 2026-27 from Adani Cement Limited AT & PO: Uparwahi, Taluka: Korpana Chandrapen, Maharashtra, amounting to R1085.00 Lakhs for supply of materials for raw water piping and R725.00 Lakhs for erection works.

In addition to EPC activities, the Company recorded a revenue of R1839.33 Lakhs (inclusive of the total revenue) from its trading operations in alloy steel for auto components. This segment has demonstrated promising growth potential and is expected to contribute meaningfully alongside the EPC business in the coming years.

With this improved financial and operational performance, the Company is optimistic about obtaining the necessary banking facilities, which will further enhance its ability to

bid for additional EPC contracts and strengthen working capital for its trading operations. The management remains confident that the Company will continue to improve its performance and achieve progressive growth in both revenue and profitability across its core business segments.

Significant Changes in Key Financial Ratios during the Financial Year 2025-26

OUTLOOK:

Going forward, having successfully transitioned from a loss-making to a profit-generating entity, the Company is now strategically positioned to pursue new EPC tenders. The Company plans to leverage its extensive industry experience while actively exploring opportunities to enhance bank guarantee limits, supported by its improved financial credentials. The Company also seeks to explore opportunities within the trading and machining sectors, particularly in the auto component industry. Our commitment lies in timely project execution, fueled by top-notch engineering capabilities. We are equally dedicated to advancing our trading and machining activities alongside our EPC projects, all within the confines of our available banking facilities.

Risk and Concerns

Some of the possible key risks for the Company are given below with corresponding mitigation measures.

Macroeconomic risk:

A downturn in the macroeconomic scenario along with unfavorable regulatory policies can negatively impact on business.

Mitigation: The Company not only applying for new jobs in thermal power cautiously and obtaining EPC contracts but also doing a sizeable growth in the steel trading.

Competition risk:

The increasing competition within the EPC space may coerce the Company to tender at lower prices leading to compressed margins.

Mitigation: The Companys focus on quality, timely delivery, projects brand value and successful track record give a competitive edge over others. Further, its vast experience, technology investments and competent work force enable to manage the project costs allowing it to provide customers the most competitive rates.

Project execution risk:

Inability of the Company to effectively manage projects may lead to cost/time overruns and reputation loss.

Mitigation: The Company has arranged adequate modern equipments and experienced manpower which leads to high productivity at project sites.

Liquidity risk:

Inability of the Company to recover payments in time may hamper its working capital which in turn may impact funding of other on-going projects. Further banks/Financial Institutions adopts strict guidelines to extend credit limits to the Companies in EPC and Power Business due to the prolong downturn in the sector for quiet sometime.

Mitigation: The Company conducts a judicious risk-return evaluation of each project and rigorous follow up for the outstanding balances over 180 days. The Company with improved performance both in EPC contracts and auto components trading business the Company is confident of the Bankers support with extended credit facilities.

Fraud risk:

RIL cannot eliminate fraud entirely however, the Company is trying to prevent some things from happening to lessen the financial impact to it.

Mitigation: We have put in place and strengthen anti-fraud measures. The Company has adopted following measures to tranquillize the risk:

• Carry out fraud risk assessment including results from past reviews and audits.

• Improve controls.

• An effective governance structure including appropriate lines of authority and Board oversight.

• Independent check on performance and compliance.

• Segregation of duties so that no employee has control over whole process.

Legal risk:

The traditional mechanisms for project risk allocation that are available in other countries are not suitable in India due to differences in legal systems. Moreover we strive upon to develop a compliance structure which can be carefully studied and processed.

Mitigation: The management has a team of advisors for deep study of contractual terms and access the risk associated with it and make out strategies accordingly and provide legal proactive support and contingency planning.

Information risk:

Information risk is the probability that the information circulated by the company can be leaked or destroyed. This may affect the companys ongoing and upcoming operations.

Mitigation: The information risk mitigation process developed by our company includes:

• Establishing information risk management practices that will help to make the organization successful.

• Regular re-evaluation of the nature and extent of the risks to which the organization is exposed, plus periodic adjustment to ensure that the company continues to steer the line between allowing risks to grow out of hand and constraining operational effectiveness.

Natural calamity/crisis risks:

Natural calamities or any global/national crises such as a pandemic, cyclones, major earthquakes, political upheavals, wars, etc. would not only disrupt the Companys operations at various sites.

Mitigation: The Companys focus in such scenarios is to do everything to first ensure business survival and protection of life and limbs of its stakeholder community. It would then focus on adopting strategies to revive business fortunes under the new circumstances. Some of the survival strategies that RIL has adopted in the past during such a crisis include deferring capex, liquidity management and cutting costs.

Internal Control Systems and their Adequacy

Every successful Company needs to have certain controls in place for function effectively. Raunaq as well has sufficient

internal controls in accordance with the nature and magnanimity of its business. These have been designed to ensure that:

• Assets of the Company are acquired in an economical manner and safeguards are in place for their upkeep and to ensure their protection against any damage or destruction.

• Controls relating to the financial and operational aspects of the business remain in place and are working satisfactorily to detect exceptions and raise alerts.

• The Company enforces stringent compliance with all applicable laws and internal policies.

The internal auditor of the Company regularly carry out reviews of the internal control system to detect deviations. The report of the internal auditor is submitted to the management on a quarterly basis and is helpful in

the prevention and detection of fraud and to report any discrepancies in the day-today activities of the Company. Further, internal control systems are periodically review by the Audit Committee and are kept updated and consistent with the requirements of the organization.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the infrastructure sector, significant changes in Indias political and economic environment, exchange rate fluctuations, tax laws, litigation, labour relations, and interest costs.