Revathi Equipment India Ltd Management Discussions

THE COMPANY

Revathi Equipment India Limited (REIL) manufactures blast hole drills and exploratory drills for construction and mining applications as well as water well drills. Pursuant to the Scheme of Arrangement approved by the NCLT by its order dated 14th June 2023, the drilling equipment business of Revathi Equipment Limited was demerged to a new company formed for this purpose, by name Revathi Equipment India Limited, whose shares were listed on BSE and NSE with effect from 11th September 2024.

The Companys revenue is derived principally from the sale of drills and spares, supported by maintenance and after-sales service. Our drills have been sold in Africa, Australia, Europe, Indonesia, the Middle East, the USA and of course India.

FINANCIAL RESULTS

Reserves and surplus comprise Capital Reserve of Rs. 0.01 crore, General Reserve of Rs. 46.00 crore and Capital Reserve on business combination of Rs. (131.53) crore on both a standalone and a consolidated basis. Retained Earnings stood at Rs. 222.58 crore on a standalone basis and Rs. 223.05 crore on a consolidated basis, against Rs. 209.21 crore in the previous year. The Capital Reserve on business combination arose on the demerger, being the differencebetween the book value of the assets and liabilities transferred to the Company under the Scheme of Arrangement; it is an accounting adjustment and does not represent a loss or any movement of cash.

PERFORMANCE REVIEW

Revenue from operations declined by 21.90% to Rs. 139.44 crore from Rs. 178.53 crore. EBITDA was Rs. 30.78 crore against

Rs. 39.44 crore and profit after tax Rs. 13.37 crore against Rs. 20.18 crore, being 9.59% of revenue from operations against 11.30% in the previous year. Total expenditure was Rs. 135.47 crore against Rs. 161.09 crore, including finance cost of Rs. 10.10 crore. EBITDA has been calculated as the sum of profit before tax, finance costs and depreciation and amortisation.

(Rs. in crores)

Domestic sales were Rs. 92.11 crore against Rs. 110.47 crore, a decline of 17%, and export sales were Rs. 47.33 crore against Rs. 68.06 crore, a decline of 30%. Exports accounted for 33.9% of revenue from operations against 38.1% in the previous year. The volatile geopolitical environment during the year left customers wary of committing to fresh capital expenditure, and order intake and dispatches were deferred accordingly. The lower volume reduced the absorption of fixed manufacturing and operating overheads, and profitability was partially protected through cost control and process efficiencies.

(Rs. in crores)

(Rs. in crores)

Segment-wise Position of Business and its Operations

Manufacture of drill equipment is the only segment of the Company; its financial performance is set out in the audited standalone financial statements. Revenue is disaggregated by product and service category and by customer geography, as discussed above.

KEY FINANCIAL RATIOS:

Business Environment and Prospects for FY 2026-27

Your Companys business runs in tandem with the mining industry. Emerging markets in Africa, Asia and South America remain substantially untapped by the Company. Your Company has sufficient reserves and surplus to fund expansion domestic and export markets, and a recovery in order inflow would improve capacity utilisation, absorption of fixed cost and operating margin.

The industry is sensitive to commodity price cycles, geopolitical developments which lead to deferment of customer capital expenditure, and delays in statutory approvals for mine development and operation, which delay order booking. Dependence on imported components exposes the Company to exchange rate movement and margin pressure under

Company expects order inflow and revenues to improve in the next fixed-price financial year.

Risks and Concerns of revenue is derived from a limited Customerconcentration.Asignificant number of customers, whose order volumes vary from year to year.

Working capital and receivables. Long manufacturing cycles and high-value inventory make the business working capital intensive. Delays in customer payments, site readiness, clearances or commissioning may defer revenue recognition and raise financing cost, and adverse credit conditions could cause customers to delay payment, seek modified terms or default.

Corporate guarantee. The Company has provided a corporate guarantee in favour of a lending institution for credit facilities availed by a promoter group company. Any deterioration in that companys financial position or repayment capacity could lead to invocation of the guarantee, with consequent financial liability and pressure on liquidity, leverage and cash flows. The Company monitors its financial performance and debt servicing capability and has established oversight mechanisms in this regard.

Raw material and component cost. Raw materials are sourced domestically and globally and are subject to price volatility, duties, foreign exchange rates and trade restrictions.

Quality, warranty and product liability. Defects in products, components or after-sales services may result in downtime, injury or property damage, exposing the Company to warranty claims, product liability and reputational damage.

New product development. Delay in the launch of new models, or lower-than-anticipated market acceptance, may adversely affect results of operations.

Single manufacturing location. Operations are concentrated at Coimbatore, Tamil Nadu, exposing the Company to regional natural disasters, changes in state policy and political or civil disruption.

Energy transition. Investment in renewable and nuclear generation, including under the SHANTI Act, 2025, may gradually reduce dependence on coal for power generation and moderate coal demand growth beyond 2035. Coal is expected to remain critical for grid stability and for the steel and cement industries, so the impact should be gradual. The Company continues to evaluate other avenues for diversification and growth.

Customer financing. Heavy equipment is sometimes purchased through third-party financing, particularly in export markets, and higher interest rates or reduced credit availability may reduce sales.

External conditions. Results depend on economic and political conditions in India and the markets served, including inflation, interest and exchange rates, commodity price volatility, changes in taxation and regulation, and force majeure events.

Risk Management

Your Company has implemented a Risk Management framework to identify, evaluate and address strategic, reputational, operational, financial and compliance risks. Risk assessments are embedded in the annual Internal Audit programme and the mitigation status of risks is reported to the Audit Committee. The Board is regularly updated on significant risks and the measures undertaken to mitigate them.

Internal Control Systems and their Adequacy

The Company has an internal control system that is adequate and commensurate with the size and magnitude of its operations and provides reasonable assurance on the recording and reporting of reliable financial and operational information. The

Internal Audit function operates directly under the Audit Committee, whose decisions on internal auditors reports are tracked through action taken reports. Internal controls were assessed during the year having regard to the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI, and no reportable material weakness or significant deficiency was observed.

Material Developments in Human Resources and Industrial Relations

Your Company is taking steps to retain its talent pool, enhance the skills of existing people and recruit the most suited talent to spearhead its growth initiatives. Training and development opportunities are provided at all levels, and medical camps, health check-ups and safety awareness programmes were held during the year. Employee strength as on 31st March 2026 was 222, comprising 209 male and 13 female employees.

The Company has in place a policy under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, with an Internal Complaints Committee constituted to redress complaints. It has complied with the

Maternity Benefit Act, 1961, and has in place a womens travel safety policy and a maternity support policy. The effective date of the four Labour Codes is yet to be notified; the Company does not expect any material adverse impact on its operations and will evaluate their implications upon notification.

Industrial relations continue to be cordial and harmonious. The participative way of functioning of the management facilitates the amicable settlement of disputes and grievances through discussion, which has helped maintain industrial peace in the Company.

CAUTIONARY NOTE

Certain statements in the "Management Discussion and Analysis" section may be forward-looking and are stated as required by law and regulations. Many factors, both external and internal, may affectthe actual results, which could be differentfrom what the Directors envisage in terms of performance and outlook.