SAB Industries Ltd Management Discussions

MACRO ECONOMIC REVIEW

Infrastructure is the fundamental backbone of economic development. It drives growth by reducing logistics costs, boosting productivity, creating jobs, and connecting local businesses to global markets. Without robust foundational systems, it is incredibly difficult for industries to scale or for living standards to improve. It has witnessed considerable progress in the past few decades.

India entered FY2025-26 as the fastest-growing major economy, anchored by a Union Budget capital expenditure outlay of 11.11 lakh crore (approximately 3.4% of GDP) and a multi-year infrastructure build-out spanning national highways, urban infrastructure, industrial corridors, and affordable housing. For a civil construction, infrastructure-engineering, and real estate development enterprise such as SAB Industries Limited (SABIL or the Company), this macro environment is structurally favourable - it expands the addressable pipeline of EPC mandates, township and industrial-hub development, and public-utility construction over the medium term.

Construction sector in India is expected to grow by 6.4% in real terms by 2026 driven by substantial investments in transport, infrastructure and energy projects. Looking towards the future, the Indian construction industry is expected to maintain a 6% average annual growth rate from 2027 to 2030. This sustained growth is supported by government initiatives focusing on manufacturing, infrastructure, and energy projects. Notably, the government aims to integrate 500GW of non-fossil fuel electricity generation capacity by 2030 and extend an additional 17,000 km of expressways by 2033. A new high-speed road network, valued at INR11.2 trillion ($124.9 billion), is also planned for completion by 2033, indicating robust investment in transportation infrastructure. West Asian war and disruptions in the Strait of Hormuz, pose major indirect risks to Indias infrastructure sector While the growth rate remained below averages from the previous year, the pickup still reflected some resilience to surging energy costs following the suspension of oil supply from the Middle East. They trigger surging construction costs from expensive crude and bitumen imports, project delays, and cyber threats to critical utilities, though domestic investment demand remains resilient.

Investments

Infrastructure investment has become central to Indias growth strategy in the context of global slowdown, high logistics costs and the need for productivity-led expansion. With the present emphasis on creating physical infrastructure, massive investment is planned in this sector. This requirement is of an immense magnitude. Better construction management is required for optimizing resources and maximizing productivity and efficiency. The outstanding performance under demanding situations in the past will stand in good stead and give confidence to the Indian construction industry to bring about an overall development in the infrastructure of the nation.

Indias infrastructure financing has undergone a major transformation over the past decade, shifting from reliance on budgetary support to a blended model of public and private capital. According to the World Bank, India has emerged as the largest recipient of Private Participation in Infrastructure (PPI) investment in South Asia, accounting for over 90% of the regions total. Institutions like the National Investment and Infrastructure Fund (NIIF) and the National Bank for Financing Infrastructure and Development (NaBFID) have emerged as pivotal anchors, mobilising global and domestic capital and providing long-term development finance to strengthen Indias infrastructure ecosystem. Alongside these institutions, instruments such as Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) have enabled monetisation of completed assets and recycling of funds into new projects.

Govt. Initiatives for the Sector

The Union Budget 2026 27 gives a thrust to Indias infrastructure sector, positioning it as one of the seven strategic and frontier pillars underpinning long-term economic growth. Large-scale government spending builds investor confidence and encourages private participation in infrastructure projects.

Under the Union Budget 2026-27, the Centre has reaffirmed its strategic commitment to infrastructure development by raising public capital expenditure to 12.2 trillion (3.1% of GDP), up from 11.2 trillion in 2025-26 (BE). This enhanced outlay aims to bolster the overall infrastructure.

The US$ 1.3 trillion national master plan for infrastructure, Gati Shakti, which is a 100 lakh-crore project has been a forerunner to bring about systemic and effective reforms in the sector, and has already shown a significant headway. access to relevant data and maps from the PM Gati Shakti portal will be provided to private sector in project planning.

The Indian government has introduced various formats to attract private investments, especially in roads and highways, airports, industrial parks and higher education and skill development sectors. The Second Asset Monetization Plan aims to reinvest 10 lakh crore (US$ 115.34 billion) in capital for new projects over the period 2025-30 to recycle capital and attract private sector participation.

2025-26 is contemplated with a continuation of the 50 year interest free loan to states for capital expenditure and incentives for reforms, with a significantly enhanced outlay of 1.5 lakh crore (US$ 17.30 billion).

OPPORTUNITIES AND STRENGTHS

The Company has a well-diversified business portfolio spread across various business verticals viz., Buildings & Housing, Roads, Water & Environment, Irrigation, Power and Railways. The Company has significant experience in construction sector and is recognized as one of the key construction players in the country. It has carried out variety of projects across the country. Our core strength is our people who carry several years of industry experience in various domains including engineering, design, construction, procurement, planning, etc.

Escalating compliance requirements under RERA, environmental clearances (including NGT directives on construction near sensitive zones), and labour and safety regulation continue to raise the fixed cost of doing business across the sector. Concurrently, volatility in cement, steel, and other key building-material prices compresses fixed-price contract margins. The Company manages these pressures through staged procurement, contractual price-escalation clauses where available, and disciplined project selection.

a) FINANCIAL PERFORMANCE

During the year under review, there is no change in capital of the Company. We are glad to inform that real estate project i.e. Steel Strips Highway Towers has received good response from the home buyers. Encouraged by the interest shown by buyers in this housing project, your Company has made changes in the layout plan of Phase-2 of this project, which will bring in substantial additional saleable area which will result in improved revenues in the current & future years as compared to last year.

The Company owns big chunks of land at prime locations in the State of Punjab and Haryana and intends to use these for following projects: -

Company owns prime piece of land comprising 44 Kille (appox 36 acres) at Village Sarsini near Lalru (Punjab) on Chandigarh-Ambala Highway and intends to develop this land into Mix Use Land Project comprising industrial plots alongwith the residential complex for the users. Company owns another 16 acres of land in Distt Sangrur (Punjab) on State Highway and 11 acres of land at Amloh in Distt. Fatehgarh Sahib (Punjab). Both these lands are situated close to industrial zones and Company intends to develop these lands to be sold as industrial plots of different sizes.

Company also owns premium piece of land at Sohna, Gurgaon (Haryana). Gurgaon is also known as financial and technology hub and is home to many of India s and Fortune 500 companies and is one of the most promising real estate market which has huge demand for Luxury, Ultra Luxury Housing and Farm Houses. Company plans to enter this lucrative market in near future and develop this land for upscale farm houses. This will significantly increase the Company s topline & bottomline in the coming years.

OPERATIONAL PERFORMANCE

During the year under review, the total revenue was 3364.56 lakh as against 4973.95 lakh during the previous year. The Company earned a profit of 819.36 lakh before interest & depreciation as against profit of 825.51 lakh in the previous year. The net profit after tax is 207.16 lakh as compared to net profit of 176.43 lakh in the previous year.

The Company has effective and robust system of internal controls to help management review the effectiveness of the financial and operating controls and assurance about adherence to companys laid down systems and procedures. Proper controls are in place, which are reviewed at regular intervals to ensure that transactions are properly authorized & correctly reported and assets are safeguarded. The Audit Committee periodically reviews the findings and recommendations of the Auditors and takes necessary corrective actions as deemed necessary.

RISKS AND CONCERNS

The Company has a robust Enterprise Risk Management process in place, which is a holistic, integrated and structured approach to manage risks with the objective of maximizing shareholders value.

The risk management process broadly consists of identification, assessment, mitigation, prioritization and monitoring of risks. The ERM process allows the company to

Enhance confidence in achieving its desired goals and objectives

Effectively restrain threats to acceptable levels

Take informed decisions about exploiting opportunities

Owing to the nature of the industry the Company operates in, it is exposed to a variety of risk factors which are broadly categorized into technical, physical, construction, performance and legal risks. A tight risk process is carried out from initial stage to project completion stage to manage, mitigate and monitor these risks by adopting specific risk mitigation measures. During the year, the Board has reviewed the process and the Risks that have been identified for the business. Some of these key risks that the Company faces along with their mitigation strategies adopted are listed below:

Risk Type	Key Risks	Risk Impact	Risk Mitigation Strategy
	Incomplete Design	High	Carrying out extensive due diligence during the project initial phase Bidding for those works which are closely aligned with our core strengths
	Inadequate Specifications	High	Carrying out exhaustive due diligence before and during the bid phase
			Incorporating contingency for inadequate specifications in the price bids
Technical Risks
			Engaging with clients and their representatives on a regular basis
	Insufficient Resources of Construction Materials	Medium	Strong and efficient resources planning, both at the corporate and project levels.
			Strong management of vendors and subcontractors Carrying out due diligence on vendors and sub-contractors before entering into agreements with them
	Equipment Damage/ Failure	Medium	Own a sizeable equipment base, specifically those, which are frequently used in our operations thus reducing dependence on equipment vendors
			Following a strict preventive and corrective maintenance schedule
			Strong relationship with equipment vendors for renting equipment
Physical Risks			Strong management of equipment vendors including rating their performance
	Labor Injuries	Low	Strong implementation and monitoring of health and safety protocols to prevent injuries
			Designated safety personnel at sites.
			Periodical reporting on safety and health issues
			Conducting training programs on health and safety issues
	Labour Productivity	Medium	Ensure safe, clean and hygienic work environment at all work locations.
			Strong track record in maintaining labour.
Construction Risks			Regular monitoring and ensuring strong controls to ensure adherence to timelines and quality
	Theft	Low	Strong monitoring and control to prevent theft Penalizing defaulters without exception
	Achieving Required Quality	Medium	Regular inspection of works and reporting to clients
			Strong adherence to specifications and timelines
			Constant engagement with clients and their representatives
Performance Risks	Meeting Client Expectations	Medium	Reliable Quality assurance programs Experienced workforce, Regular engagement with clients
			Response mechanisms to address issues raised by clients and their representatives
	Claims, Disputes & Litigations	Medium	Engagement with clients to capture and address litigious issues upfront
Legal Risks			Proper and thorough documentation on each project from the pre bid stage
			In-house Contracts and Claims team.
			Legal firm onboard to handle pre-legal claims and/or litigations
			Keeping ourselves abreast on regulatory issues

Cautionary Statement:

Statements in this report on Management Discussion and Analysis describing the Company s Objectives, projections, estimates, expectations or predictions may be forward looking within the meaning of applicable Securities laws and regulations. Actual results could differ materially from those expressed or implied.